M/S Council For Citrus And Agri Juicing In Punjab, Chandigarh v. Commissioner Of Income Tax (Tds) And Another

ITA No. 338 of 2015 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 338 of 2015 (O&M) Date of Decision: 9.10.2015 M/s Council for Citrus and Agri Juicing in Punjab, Chandigarh ....Appellant. Versus Commissioner of Income Tax (TDS) and another ...Respondents. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? Yes3.Whether the judgment should be reported in the Digest?3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE RAMENDRA JAIN. PRESENT: Mr. Vishal Gupta, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 17.3.2015 (Annexure A-3) passed by the Income TaxAppellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No. 30/ASR/2014, for the assessment year 2008- 09, claiming the following substantial questions of law:- i)Whether the Tribunal erred on facts and in lawin dismissing the appeal of the appellant on theground that the assessee-appellant has failed toprove the loan amount being raised from theState Government and the interest is payable toin dismissing the appeal of the appellant on theground that the assessee-appellant has failed toprove the loan amount being raised from theState Government and the interest is payable to ITA No. 338 of 2015 -2- the Government and as such the issue iscovered under Section 196(i) of the Act? ii)Whether the Tribunal was justified in dismissingthe appeal of the assessee on the ground thatno evidence has been produced on record thatthe loan amount belongs to the StateGovernment and neither the interest nor theprincipal has ever been paid by the appellant? 2.A few facts necessary for adjudication of the instant appealas narrated therein may be noticed. The Income Tax Officer (TDS)-II,Chandigarh has received information that the assessee has neitherdeducted or short deducted tax at source under Sections 194A, 194C,194I and 194J of the Act amounting to ` 9,21,626/- for the financial year2007-08 relating to the assessment year 2008-09 and he passed on thesame to the Income Tax Officer (TDS)-I, Jalandhar for necessary action.The Income Tax Officer (TDS)-I, Jalandhar issued a show cause noticedated 21.3.2012 to the assessee for verification of the compliance ofTDS/TCS provisions. The Assessing Officer vide order dated 27.3.2012(Annexure P-1) passed under Sections 201(1)/201(1A) of the Act raiseda demand of ` 13,64,006/- including interest. Feeling aggrieved, theassessee filed an appeal before the Commissioner of Income Tax(Appeals) [for brevity “the CIT(A)”]. The CIT(A) vide order dated8.11.2013 (Annexure A-2) partly allowed the appeal. Still dissatisfied,the assessee challenged the orders, Annexures A-1 and A-2 before theTribunal, who vide order dated 17.3.2015 (Annexure A-3) upheld theorder of the CIT(A) and dismissed the appeal. Hence, the presentappeal. 3.Learned counsel for the assessee submitted that theauthorities below were in error in declining the benefit as was availableunder Section 196(i) of the Act. It was urged that the interest paid by theassessee was to the Government as envisaged thereunder and,therefore, no tax deduction at source was required to be made. Learnedcounsel referred to Annexures A-4 and A-5 to contend that it clearlyshows that the interest was paid to the Government as the corpus fundwas created by the Government. 4.After hearing learned counsel for the appellant-assessee,we do not find any merit in the appeal. we do not find any merit in the appeal. 5.Section 196(i) of the Act reads as under:- 3.Learned counsel for the assessee submitted that theauthorities below were in error in declining the benefit as was availableunder Section 196(i) of the Act. It was urged that the interest paid by theassessee was to the Government as envisaged thereunder and,therefore, no tax deduction at source was required to be made. Learnedcounsel referred to Annexures A-4 and A-5 to contend that it clearlyshows that the interest was paid to the Government as the corpus fundwas created by the Government. 4.After hearing learned counsel for the appellant-assessee,we do not find any merit in the appeal. we do not find any merit in the appeal. 5.Section 196(i) of the Act reads as under:- “196. Notwithstanding anything contained in theforegoing provisions of this Chapter, no deduction oftax shall be made by any person from any sumspayable to- (i)the Government, or (ii) to (iv)XXXXXX where such sum is payable to it by way of interest ordividend in respect of any securities or shares ownedby it or in which it has full beneficial interest, or anyother income accruing or arising to it.” 6.A plain reading of the said section shows that there wouldbe no deduction of tax from the sums which are paid or payable to theGovernment by way of interest or dividend in respect of any securities orshares owned by it or in which it has full beneficial interest, or any otherincome accruing or arising to it. 7.A show cause notice dated 26.3.2012 was issued to the assessee for short deduction of tax at source and accordingly theAssessing Officer vide order dated 27.3.2012 (Annexure A-1) created atotal demand of ` 13,64,006/- including ` 9,21,626/- for short deductionof tax at source under Section 201(1) of the Act and ` 4,42,380/- onaccount of interest under Section 201(1A) of the Act. The CIT(A)recorded that the assessee had made a provision for the interest of ` 48lacs in its books of account where no TDS was deducted even after thefinancial year was over. It was also recorded that the Punjab AgroIndustrial Corporation (PAIC) has also not shown the interest income intheir books of account. The CIT(A) concluded that the Assessing Officerwas right in creating demand of ` 5,43,840/- along with interest for notdeducting TDS. The Tribunal while affirming the findings of the CIT(A)held that there was no documentary evidence to the effect that the loanhas been raised by the assessee from the Government and the interestthereon was payable to the Government. However, the Tribunal sent thematter back to the Assessing Officer for determination of rate of TDSapplication, i.e. @ 10.30% or 11.33%. The relevant findings recorded bythe Tribunal read thus:- “8.We have heard the rival contentions andperused the facts of the case. There is nodocumentary evidence placed on record by the ld.counsel for the assessee that the loan has beenraised from the Government and interest is payable tothe Government and therefore, the submission madebefore the ld. CIT(A) and before us cannot help theassessee to cover the issue u/s 196(i) of the Act. Ithas also been conceded before the ld. CIT(A) that Punjab Agro Food Grains Corpn. Ltd. has also notdeclared the said interest income in their books ofaccount and therefore, judicial pronouncement in thecase of Hindustan Coca-Cola will not be available tothe assessee as held by the ld. CIT(A). The relevantfindings of ld. CIT(A) at page 18 are reproduced forthe sake of convenience as under:- “8.We have heard the rival contentions andperused the facts of the case. There is nodocumentary evidence placed on record by the ld.counsel for the assessee that the loan has beenraised from the Government and interest is payable tothe Government and therefore, the submission madebefore the ld. CIT(A) and before us cannot help theassessee to cover the issue u/s 196(i) of the Act. Ithas also been conceded before the ld. CIT(A) that Punjab Agro Food Grains Corpn. Ltd. has also notdeclared the said interest income in their books ofaccount and therefore, judicial pronouncement in thecase of Hindustan Coca-Cola will not be available tothe assessee as held by the ld. CIT(A). The relevantfindings of ld. CIT(A) at page 18 are reproduced forthe sake of convenience as under:- “It has been submitted by the assessee that thePunjab Agro Food Grains Corporation Limitedhas provided loan/funds of Rs.6 crores to theassessee on which no interest was ever paid bythe assessee. It has also been submitted thatthe assessee has also not provided any intereston the loan of Rs.6 crores in the books ofaccount/balance sheet. When asked theassessee to substantiate its claim, it has beenfairly conceded by the Ld. ARs of the assesseethat the assessee has provided for the interestof Rs.48 lakhs in the books and no TDS wasdeducted as the financial year was alreadyover. It has also been conceded during theappellate proceedings that PAIC has also notshown the interest income in their books ofaccount as their income meaning thereby thatthe benefit of the judicial pronouncement in thecase of Hindustan Coca-Cola will also not beavailable to the assessee. In these facts and in ITA No. 338 of 2015 -6- the circumstances of the case, I am of theopinion that the AO is justified in creatingdemand of Rs.5,43,840/- along with interest inthe case of the assessee for not deducting TDSas per provisions of section 194 of the Act. Inthe result, ground of appeal no.2 taken by theassessee is dismissed.” 9.In the facts and circumstances of the case, wefind no infirmity in the order of the ld. CIT(A), who hasrightly held the assessee in default u/s 201(1) and 201(1A) of the Act. We find no infirmity in the order of theld. CIT(A) subject to the rate of interest which theassessee in ground No.3 has agitated should havebeen 10.30% instead of 11.33%. The AO is directedto verify the rate of interest as per law whether it is10.30% or 11.33%. Accordingly, the matter is set-aside to the file of the AO only to the extent ofdetermination of rate of TDS applicable i.e. @ 10.30%or 11.33%. Hence, ground no.2 of the assessee isdismissed and ground no.3 is set aside to the file ofthe AO to determine the rate of interest applicable inthe light of our direction hereinabove. Ground No.4 isalso dismissed in view of our finding and finding of theld. CIT(A).” 8.Learned counsel for the assessee was unable to show fromthe perusal of Annexures A-4 and A-5 appended along with the appealthat the payment of interest was made to the Government except to repeat that the corpus fund was created by the Government from whichthe loan was advanced to the appellant. A perusal of Annexure A-4shows that it is a certificate issued by the PAIC that the corpus fundbelong to the State Government of Punjab and an income arising out ofit belonged to the Government of Punjab. Annexure A-4 is a self-servingcertificate issued without any corroboration from any supporting material.Annexure A-5 also does not advance the case of the appellant as it isthe minutes of meeting of Corpus Fund Committee only. Thus, it cannotbe said that the interest paid by the appellant was to the Governmentand would fall under Section 196(i) of the Act. 9.In view of the above, no substantial question of law arises inthis appeal. Consequently, finding no merit in the instant appeal, thesame is hereby dismissed. 9.In view of the above, no substantial question of law arises inthis appeal. Consequently, finding no merit in the instant appeal, thesame is hereby dismissed. 10.There is a delay of 2 days in filing the appeal. CM No.19282-CII of 2015 has been filed for condonation of 2 days' delay infiling the appeal. Since the appeal has been dismissed on merits, nofurther orders are required to be passed in the application forcondonation of delay in filing the appeal and the same is disposed of assuch. (AJAY KUMAR MITTAL) JUDGE October 9, 2015 gbs (RAMENDRA JAIN) JUDGE