Ita/819/2007 Of The Commissioner Of Income Tax v. M/S Elsamex- Tws-Snc Jc

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 1/ DAY OF OCTOBBR 2014 PRESENT THER HON BLE MR.JUSTICE N. KUMAR AND THRE HON BLE MR.JUSTICE B. MANOHAR I.T.A. NO.819/2007 C/W ITA.NO.9 /200 IN ITA.NO.819/2007: BRHITIWH 1. THE COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, ~ C R BUILDING,QUEENS ROAD, BANGALORE 2. THERE ASSISTANT COMMISSIONER O INCOME TAX. CIRCLE 1(1), | C R BUILDING, © QUEENS ROAD, BANGALORE | . APPKBLLANTS (BY SRI.K.V.ARAVIND, ADV.) ANT) M/S. ELSAMEX-TWS-SNC JV,No.29/2, 12[TH.]FLOOR,s.N. TOWERS, M.G.ROAD,BANGALORE-560 OO]. ... RESPONDENT (BY SRIL.A.SHANKAR & SRI.M.LAVA, ADVS.) THIS INCOME TAX APPEAL IS UNDER SEC.260-A OF.INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED|26/6/2007 PASSED IN ITA NO.1420/BANG/2005 FOR THE|ASSESSMENT YEAR 2002-2003, PRAYING THIS HON'’BLECOURTTO:1.KORMULATETHE.SUBSTANTIALQUESTIONS OF LAW STATE THEREIN 2. ALLOW THE|APPEAL AND SET ASIDE THE ORDER DATED 26/06/2007|PASSED BY THE INCOME TAX APPELLATE TRIBUNAL,|BANGALORE, IN ITA NO. 1420/BANG/2005 CONFIRMING|THR ORDERS OF THE APPELLATE COMMISSIONER AND|CONFIRM.THE.ORDERPASSEDBY|ASSISTANT.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE — 1(1),BANGALORE. IN ITA.NO.9/2009: BHIWEHEN M/S HIMACHAL JOINT VENTUREREP BY ITS MEMBER |AOP SRI MANOHAR SHETTY, |NO.25/2, 12TH FLOOR,S N TOWERS|M G ROAD,BANGALORE 1._. APPKLLANT | (BY SRI. A SHANKAR & SRI.M LAVA, ADVS.) AND: THER ASSISTANT COMMISIONER OF [INCOME TACIRCLE 1(1),HMT BHAVAN,|GANGANAGAR,BELLARY ROAD,BANGALORE 32. |... RESPONDENT|(BY SRI.K V ARAVIND, ADV.) THIS ITA IS FILED U/S.2600-A OF I.T.ACT, 1961ARISING OUT OF ORDER DATED 12/09/2008 PASSED INITA NO. 344 & 345/BNG/2006, FOR THE ASSESSMENTYEAR 2003-2004 & 2004-05, PRAYING THAT THIS HON BLECOURT MAY BR PLBKEASKED TO: 1. FORMULATBRKSUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, 2. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSEDBY|THE.ITATBANGALOREIN-[TA|NO..344|&%3495/BNG/2006, DATED 12/09/2008 (ANNEXURE-A) INTHE INTKBEREST OF JUSTICE THESE APPEALS COMING ON FOR FINAL HEARING,THIS DAY,N.ARUMAR, J.DELIVERED THERE FOLLOWING: JU DBGMENT Both|theseappeals.ale€taken|up{Orconsideration together as a common question of law is"involved though the Tribunal has given divergentfindings. 2. The assessee in ITA.No.1420/BANG/2005 is.a Contractor carrying on the work of NationalHighways Authority of India and in terms of thecontract, a sum of Rs.29,98,50,937/- was paid asmobilizationadvance. TheNationalHighways Authority of India by virtue of Section 194C of theIncome Tax Act, 1961 (hereinafter referred to as “theAct” tor brevity), deducted a sum of Rs.99,12,958/-towards TDS after obtaining Bank guarantee from theContractor and credited the said amount to the.account of the contractor with the Department. The.assessee filed his returns for the assessment year2002-2003 deciaring a loss of Rs.1,00,95,230/-. Inthe said returns, he has shown total receipts under.the contract as Rs./,32,14,129/-. In fact, heapproached the Assessing Authority and sought for acertificate under Section 197 of the Act on the groundthat there will be no income for the said assessment.year which certificate was granted. In the returns, asthere was no income for the said assessment year, hesought for refund of the entire TDS amount depositedby.theNationalHighwaysAuthorityotIndia.However, the Assessing Authority granted a sum of Rs.14,93,568/- as the TDS by the assessee for thereceipt of Rs.7,32,14,129/- shown by the assessee inthe returns and declined to pay the balance amount.Agegrieved by the said order, the assessee preferred anappeal to the Commissioner of Income Tax (Appeals)who alifirmed the said tinding. Aggrieved by the saidorder, the assessee preferred second appeal to the.Tribunal. Rs.14,93,568/- as the TDS by the assessee for thereceipt of Rs.7,32,14,129/- shown by the assessee inthe returns and declined to pay the balance amount.Agegrieved by the said order, the assessee preferred anappeal to the Commissioner of Income Tax (Appeals)who alifirmed the said tinding. Aggrieved by the saidorder, the assessee preferred second appeal to the.Tribunal. 3. The Tribunal held that the amount received|by the assessee as advance could be said to be part ofrelease of Bank guarantee, but for the provisioncontained under Section 194C of the Act, thecontractee would not have deducted tax on the.advance payment since there is clear understandingbetween the contractee and the contractor that the.amount so paid is only an advance in regard to theservices to be rendered by the assessee which would be shown in the shape of the bills raised on the basisof the works completed. Till such time the bills areactually raised after the work is carried out, thenature of the amount received in advance remains as.advance only. This instance would be an exception tothe provision under Section 199 of the Act, whichstates that the amount on which TDS is deducted, theincome would have to be shown in the same year.Since the amount received as advance is not income.of the assessee but the amount deducted is with.reference to the amount that is paid to the assessee_which is the same as the assessee paying advancetax, the provisions of Section 237 of the Act would.come into operation and the assessee would be.entitled to all the benefits ensured in that Section and.the assessee would be entitled to interest also.Accordingly, the appeal was allowed. Aggrieved by the saidorder, theTEVENUE1S1n|appealITA.No.819/2007. 1 | 4. Learned counsel for the revenue assailing theimpugned order contends that by virtue of Section199 of the Act, the TDS has to be adjusted only inrespect of the amount offered to tax in the particular.assessment year. In respect of the remaining amountreceived as advance and it the said amount is offered the tax in the subsequent years, proportionate theTDS would be adjusted. In those circumstances, thequestion of refunding the amount would not arise andsection 237 of the Act is not attracted and therefore,he submits that the impugned order requires to be setaside. >. Per contra, learned counsel for the assessee_supported the impugned order. 6. Therefore, the substantial question of law that arises for our consideration is as under: “Whether the Tribunal was right inholding that the receipts of amounts by theassessee from National Highways Authorityof India (NHAI) could be treated as part of|release of bank guarantee and the amountso received by the assessee should be|treated as an advance and can it be an'exception to the provisions of Section 199 ofthe Income Tax Act by availing all thebenefits under Section 237 of the ActP” /. From the material on record, it is clear that.the assessee iS a contractor who has been paid a sum.of Rs.29,28,59,937/- as mobilization advance which.is not an income. But by virtue of Section 194C, TDSof Rs.99,12,958/- was deducted and credited to theaccount of the assessee in part. For the assessmentyear 2002-2003, the assessee has suffered loss. arises for our consideration is as under: “Whether the Tribunal was right inholding that the receipts of amounts by theassessee from National Highways Authorityof India (NHAI) could be treated as part of|release of bank guarantee and the amountso received by the assessee should be|treated as an advance and can it be an'exception to the provisions of Section 199 ofthe Income Tax Act by availing all thebenefits under Section 237 of the ActP” /. From the material on record, it is clear that.the assessee iS a contractor who has been paid a sum.of Rs.29,28,59,937/- as mobilization advance which.is not an income. But by virtue of Section 194C, TDSof Rs.99,12,958/- was deducted and credited to theaccount of the assessee in part. For the assessmentyear 2002-2003, the assessee has suffered loss. Consequently, there was no income. In the returnsfiled, the assessee sought for refund of the entireamount. The Assessing Authority treated the receiptof Rs.7,32,14,128/- as income and granted a refundof Rs.14,93,568/- out of the TDS amount. Hedeclined to pay the balance amount on the groundthat it is adjustable in the future years as and whenthe assessee otters to tax. If the amount otRs.29,98,90,937/- 1s a mobilisation advance and not.an income at all, the question of paying income taxwould not arise. When the gross receipts ofRs.7,32,14,128/- 1s offered and in that assessmentyear he has sufttfered loss, the question of paying antax on the said amount also does not arise. He haspassed an order for refund of Rs.14,93,568/-accepting the loss returns of the assessee. But hewas in error in not refunding the balance amount onaccount on the ground that it is hable to be adjusted in future years. If Rs.14,93,5608/- was refundable asthe assessee had no income for the assessment year2002-2003, the balance amount could not have beenretained when there was no income which is liable to.tax at the hands of the assessee. I[n fact the advance.has been given alter taking bank guarantees. It 1shere Section 237 of the Act comes into operation. As_rightly held by the Tribunal, the said amount is alsorefundable. A conjoint reading of Sections 194C, 199°& 237 ot the Act makes it clear that if there was no.hlability to pay tax, the IDS paid is hable to berefunded and that is absolutely what the Tribunal hasstated. Therefore, we do not see any justification tointerfere with the orders passed. Hence, the appeal.filed by the revenue is liable to be dismissed. 8. In ITA.No.9/09, strangely the Tribunal has|declined to follow the judgment of the co-ordinate Bench though one of the member is common in boththe judgments. Here, the Tribunal has declined toorder for refund. Therefore, the said order, for thereasons assigned by us, as above, is unsustainableand the order passed by the Tribunal is set aside andthe order passed by the First Appellate Authority isrestored. Thus the substantial question of law is.answered in favour of the assessee and against therevenue in both the appeals. Accordingly, we pass thefollowing: ORD BR ITA.No.819/07 is dismissed and ITA.No.9/0O9 is allowed. RS /* sD/- | JUDGE SD/- | JUDGE