Ma/632/2013 Of Bank Of Baroda v. Commissioner Of Income Tax, Tds

IN THE HIGH COURT OF JUDICATURE AT PATNAMiscellaneous Appeal No.632 of 2013 ====================================================== Bank Of Baroda, Having its Office at Fraser Road, P.O. G.P.O., P.S. Kotwali,Patna through its Asst. General Manager, Lalit K Joshi, Son of Shri KarunaShanker Joshi. Resident of Shanti Vihar Apartments, Fraser Road Patna, P.O.-G.P.O., P.S.- Kotwali, District - Patna. ... ... Appellant Versus 1.Commissioner of Income Tax, TDS having its Office at 6[th] Floor, CentralRevenue Building (Annexe), Beerchand Patel Marg, Patna Revenue Building (Annexe), Beerchand Patel Marg, Patna 2.Addl. Commissioner of Income Tax, TDS Range, Patna having its office at6th Floor, Central Revenue Building (Annexe), Beerchand Patel Marg, Patna6th Floor, Central Revenue Building (Annexe), Beerchand Patel Marg, Patna 3.Asstt. Commissioner of Income Tax, TDS Circle having its office at 6thFloor, Central Revenue Building (Annexe), Beerchand Patel Marg, Patna Floor, Central Revenue Building (Annexe), Beerchand Patel Marg, Patna ... ... Respondents ====================================================== Appearance :For the Appellant/s: Mr. D.V.Pathy, Adv. Ms. Manju Jha, Adv. For the Respondent/s: Ms. Archana Sinha, Sr.S.C. Mr. Alok Kumar, Jr. S.C. ====================================================== CORAM: HONOURABLE MR. JUSTICE JYOTI SARAN and and HONOURABLE MR. JUSTICE ANJANI KUMAR SHARANCAV JUDGMENT (Per: HONOURABLE MR. JUSTICE JYOTI SARAN) Date : 14-08-2019 This appeal filed under Section 260A of the Income TaxTax, 1961 (hereinafter referred to as ‘the Act’) is directed against theorder dated 24.2.2012 passed by the Income Tax Appellate Tribunal,Patna Bench, Patna (hereinafter referred to as ‘the Tribunal’) in ITANo. 48 (Pat) of 2011 for the assessment year 2008-09, whereby ‘theTribunal’ has dismissed the appeal of the appellant to confirm theorder passed by the Commissioner of Income Tax (Appeals) dated3.3.2011 who in turn has confirmed the order passed by theAssessing Officer for levy of interest on the default by the appellantin deduction of tax at source on the interest paid by the appellant on the deposits made by the Official Liquidator appointed by the PatnaHigh Court on behalf of the Company in liquidation, namely, RohtasIndustries Limited in exercise of powers vested under Section 201 of‘the Act’. The appellant is a nationalized Bank whose businesspremises was surveyed by the respondent authorities under Section133 of ‘the Act’ on 18.12.2007 and in which course documentsrelating to Tax Deducted at Source (hereinafter referred to as ‘theTDS’) were examined. It is in course of survey of such documentsthat it transpired that the appellant Bank had failed to deduct tax atsource in respect of interest generated on the deposits made by theBihar Industrial Area Development Authority (BIADA), theInfrastructure Development Authority (IDA), the Bihar StateHousing Board and the Official Liquidator of Patna High Court. Ademand was raised which was inclusive of tax as well as interestpayable thereon to the tune of Rs.48,89,749/- which demand wassubsequently modified on an application filed under Section 154 of‘the Act’ to exclude such demand in respect of ‘the BIADA’ and‘IDA’. A copy of the order is at Annexure 1 to the appeal. Therespondent Assessing Authority, however, confirmed the demand inrespect of the Bihar State Housing Board as well as the OfficialLiquidator of Patna High Court by the order dated 9.11.2010, a copyof which is at Annexure 2 to the appeal. It is feeling aggrieved by the order dated 9.11.2010 of the Assessing Officer that the appellant filedan appeal before the Commissioner of Income Tax (Appeals) who onconsideration of facts accompanying the appeal, allowed the same tothe extent of the liabilities attributable to the Bihar State HousingBoard. However, in so far as non-deduction of tax at source oninterest generated on the deposits made by the Official Liquidator ofPatna High Court is concerned, the order of the Assessing Officerwas upheld. The appeal was allowed in part by the order passed on3.3.2011 enclosed at Annexure 3. In view of the position so settled under the orders of thestatutory authorities referred to above that a demand forRs.12,63,589/- was raised which was inclusive of the element of taxas well as interest, a copy of which is at Annexure 5 to the appeal.The appellant feeling aggrieved moved in second appeal before theIncome Tax Appellate Tribunal which appeal has been dismissed bythe judgment and order impugned dated 24.2.2012 confirming theorder passed by the Commissioner of Income Tax (Appeals) andfeeling aggrieved the appellant is before this Court. By the order dated 24.2.2014 a Co-ordinate Bench allowedthe petition filed for condonation of delay bearing I.A.No. 6504 of2013 and the appeal was put for admission hearing. The appeal withthe consent of the parties has been heard for final disposal at theadmission stage on the following substantial question of law: “Whether the appellant is an assessee in default in termsof Section 201 of the Income Tax Act, 1961 on itsfailure to deduct TDS in respect of a company inliquidation.” Mr. D.V.Pathy, learned counsel for the appellant, hasargued at length and has also filed his written submissions to canvassthe case of the appellant whether the interest generated on the fixeddeposits made by the Official Liquidator appointed by the HighCourt was liable for deduction of tax at source and whether there is afailure on the part of the appellant in discharge of such obligation.Although exhaustive arguments have been advanced by Mr. Pathy,learned counsel appearing for the appellant, who has also filedwritten submissions in support of his contentions and in whichprocess he has referred to the provisions of Section 194A of ‘the Act’which deals with the issue of interest other than the interest onsecurities as well as definition of ‘income’ present at Section 2(24) of‘the Act’ to persuade this Court that since there was no commercialtransaction in the process rather the Official Liquidator had only soldsome of the assets of the company in liquidation for its distributionpari passu amongst the creditors, the company in liquidation runninghuge losses was not liable to tax. According to learned counsel, evenif the interest earned on the fixed deposit was to be included in theincome of the company in liquidation, there yet would be no liability to pay tax as the interest element would be set off with the lossespresent and carried forward. to pay tax as the interest element would be set off with the lossespresent and carried forward. In this context learned counsel has referred to theprovisions of Section 197A of ‘the Act’ to submit that a person wouldnot be liable to tax if his total income is NIL. Learned counsel insupport of his submissions has relied upon the judgment of AllahabadHigh Court rendered in the case of Commissioner of Income Tax(TDS) Lucknow vs. M/s Sahara India Commercial Corpn. Ltd.(Income Tax Appeal No. 58 of 2015) to submit that if there is noliability of payment of tax by the recipient assessee, the question ofdeduction of tax by the assessee in default would not arise and thequestion of payment of tax by such recipient assessee also would notarise and thus the interest also could not have been charged.According to Mr. Pathy, since the appellant Bank had taken notice offact that the money deposited by the Official Liquidator on behalf ofthe Company in liquidation which had run into losses, had nopositive income, it was of the view that no tax was deductable onsuch interest generated on deposits which was a bona fide belief andneither wilful nor deliberate. According to Mr. Pathy, since no taxwas payable on such interest generated, the revenue had no reason tocomplain. The argument of Mr. Pathy has been contested by Ms.Sinha in reference to the judgment reported in (1991) 191 ITR 641 (Vijaya Laxmi Sugar Mills Ltd. vs. Commissioner of Income Tax). Ms. Sinha while accepting the fact that the money in fixeddeposits was of a Company in liquidation submitted that it was noconcern of the appellant Bank to adjudicate whether or not theCompany was in losses or had an income in positive rather if an onuswas cast on the Bank of deducting the tax on the interest generatedon the fixed deposits, the Bank had to discharge this obligationinstead of examining the liability at their level and their failure to doso has classified them as assessee in default to face the consequencesas present in Section 201 of ‘the Act’. In reference to the judgment ofthe Supreme Court in the case of Vijaya Laxmi Sugar Mills Ltd.(supra) it was submitted that a similar issue fell for considerationbefore the Supreme Court and the interest generated on the fixeddeposits was treated as income from the other sources for being taxedunder Section 56 of ‘the Act’. According to Ms. Sinha, had it been acase where the Official Liquidator had filed a certificate underSection 197A of the Act informing the Bank of NIL income, theappellant had reasons for such non-deduction as happened in the caseof BIADA and IDA. In reference to the case of the Bihar StateHousing Board, she submits that the Commissioner of Income Tax(Appeals) while upholding the interest charged on the appellantunder Section 201(1A) of ‘the Act’, waived of deduction of taxelement. According to Ms. Sinha, there had to be sufficient documents in possession of the Bank to justify the non-deduction andeven if the Bank has escaped default in the case of BIADA and IDAon production of the certificate under section 197A, the default hasbeen partially upheld in the case of the Bihar State Housing Boardand in so far as the case of the Official Liquidator is concerned, thedefault is in its entirety because there is nothing in possession of theBank to justify the non-deduction. We have heard learned counsel for the parties and haveperused the records and while there is no dispute that the interest onfixed deposit are chargeable to tax, the appellant was under duty todeduct the same in absence of any returns filed by the OfficialLiquidator declaring losses and/or filing of a certificate under section197A to declare NIL income. That the fixed deposits generated aninterest of Rs.44,76,182/- which constituted income of the companyin liquidation and deductable to tax in absence of the documents/certificate present to justify the non-deduction, the Bank was legallybound to discharge the obligation. We have heard learned counsel for the parties and haveperused the records and while there is no dispute that the interest onfixed deposit are chargeable to tax, the appellant was under duty todeduct the same in absence of any returns filed by the OfficialLiquidator declaring losses and/or filing of a certificate under section197A to declare NIL income. That the fixed deposits generated aninterest of Rs.44,76,182/- which constituted income of the companyin liquidation and deductable to tax in absence of the documents/certificate present to justify the non-deduction, the Bank was legallybound to discharge the obligation. The pleadings on record confirm that the appellant Bankwas held the assessee in default in respect of the four depositors,namely, BIADA, IDA, the Bihar State Housing Board and theOfficial Liquidator of Patna High Court. The order of the AssessingOfficer, the Assistant Commissioner of Income Tax at Annexure 1passed in purported exercise of jurisdiction under sections 201(1) and 201(1A) of ‘the Act’ gives the details of interest generated ondeposits in each case as well as the tax deductable against the same.The statutory ladder through which the case has moved confirms thatwhile a demand in its entirety on default of such deduction wasraised by the Assistant Commissioner of Income Tax, the same wasmodified by the order passed under section 154 of ‘the Act’ in viewof the certificates of exemption submitted under section 197A by M/sBIADA and by M/s IDA. The matter moved in appeal as against theremaining two depositors i.e. the Bihar State Housing Board and theOfficial Liquidator and the Commissioner of Income Tax (Appeals)having noted the losses returned by the Bihar State Housing Boardhas interfered with the default of the appellant in not deducting taxand thus while modifying the demand in so far as tax element wasconcerned, the Commissioner of Income Tax (Appeals) upheld theinterest chargeable thereon. The order passed by the assessingauthority as it stood modified by the order passed under section 154stood further modified but in so far as the issue in hand is concerned,the appellate authority bearing note of the interest generated ofRs.44,76,182/- and in absence of any document or a certificate undersection 197A found no infirmity in the order passed by the assessingauthority and which view of the Commissioner of Income Tax(Appeals) has been affirmed by the Appellate Tribunal as well whichin our considered opinion does not require any interference because in our opinion the appellant was definitely an assessee in default innot having deducted tax at source on the interest generated on thefixed deposits made by the Official Liquidator, Patna High Court inrespect of the company in liquidation with the appellant Bank. The argument advanced by Mr. Pathy that the company inliquidation was in losses, is an argument only taken for rejection forin absence of any returns filed by the Official Liquidator to canvassas such and/or in absence of any certificate filed by the OfficialLiquidator under section 197A, it was not within the jurisdiction ofthe Bank to adjudicate on the admissibility of tax or on its deductionat source. In so far as the reliance on the judgment of the AllahabadHigh Court in the case of M/s Sahara India Commercial Corpn.Ltd. (supra) is concerned, Mr. Pathy has missed to take note of thefact that the conclusion drawn by the Allahabad High Court is on thefoundation where, the recipient assessee has either paid tax or is notliable to pay any tax and in which circumstance no interest undersection 201(1A) could have been recovered by the assessee indefault. In so far as the case in hand is concerned, there isabsolutely nothing on record in form of return filed by the Liquidatoror a certificate to such effect under section 197A of ‘the Act’ whichwould justify the default by the appellant in deduction of tax atsource on the interest generated on the deposits made by the Official In so far as the case in hand is concerned, there isabsolutely nothing on record in form of return filed by the Liquidatoror a certificate to such effect under section 197A of ‘the Act’ whichwould justify the default by the appellant in deduction of tax atsource on the interest generated on the deposits made by the Official Liquidator on behalf of the company in liquidation. The substantialquestion of law is answered accordingly. The appeal is accordingly dismissed. (Jyoti Saran, J) Anjani Kumar Sharan,J. I agree. ( Anjani Kumar Sharan, J) Surendra/- AFR/NAFRAFRCAV DATENAUploading Date16.08.2019Transmission DateNA