> v. Income Tax Officer Ward 77 4 New Delhi & Ors

$~62 * IN THE HIGH COURT OF DELHI AT NEW DELHI+ W.P.(C) 1615/2024 & CM APPL. 6679/2024 (interim relief)SWIFTRANS INTERNATIONAL PVT LTD ..... Petitioner Through: Mr. Sandeep Malik, Mr. Sanjay Malik and Ms. Vartika Malik, Advs. Versus INCOME TAX OFFICER WARD 77 4 NEW DELHI & ORS. ..... Respondents Through: Mr. Sanjeev Menon, Jr.SC for Mr. Zoheb Hossain, Sr.SC. % CORAM:HON'BLE MR. JUSTICE YASHWANT VARMAHON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV O R D E R21.03.2024 1.Although we had granted time to the respondents to file a counter affidavit, no counter affidavit has been filed. 2.In any view, we note that the issue would be governed by the judgment rendered by us in Puri Constructions Private Limited v. Additional Commissioner of Income Tax & Ors. [2024 SCC OnLine Del 939]. 3.In Puri Constructions Private Limited, we had enunciated the legal position as under:- “72. In A.P. SRTC, the Supreme Court had held that a statutory corporation has a personality distinct and separate from that of the State or its shareholders. This would thus appear to lend credence to the stand of the respondents who had argued that even if HSVP be funded by the State Government, it would continue to remain a legal entity separate from the State Government. We are also unimpressed by the argument that since the payment was made on the directives of the DTCP, it should be treated as falling within the scope of Section 196 of the Act. It becomes pertinent to note that Section 196 is not dependent upon a directive to pay. It is concerned solely with whether the payment is made to a Government or an authority specified therein. Similarly, the fact that arrears of EDC could be recovered as arrears of land revenue is also wholly immaterial. Section 10A is merely a mode of recovery of EDC. Even if that provision were to elevate EDC to a statutory levy, the same would not be determinative of whether the payment falls within the scope of Section 196. The applicability of Section 196 is not liable to be answered on the basis of whether the amount has a statutory hue. The amount paid would be exempt from the rigours of TDS only if it is made to a category of entities specified therein. 73. Ultimately, the question which warrants consideration is whether EDC was a payment to the State. This must necessarily be answered in the negative bearing in mind the undisputed fact that the income was placed in the hands and at the disposal of HSVP. We note that undisputedly at least till 31 March 2017 all EDC payments even as per the DTCP were being made out in favour of HSVP. It is only thereafter that EDC was deposited with the DTCP. This too leads us to the irresistible conclusion that the payments made to HSVP would not fall within Section 196. 74. We also bear in mind the unambiguous legislative command of Section 194C which places the payer under the unshirkable obligation of deducting tax from all payments being made to a contractor. We have already noticed in the preceding parts of this decision that Section 194C of the Act vests no discretion in the payer to examine or contemplate chargeability of that payment to tax. We, in this connection, note the following pertinent observations as rendered by the Supreme Court in Associated Cement Co. Ltd. v. Commissioner of Income Tax. “7. The above decision cannot be of any help to the appellant for it does not lay down that the percentage amount deductible under Section 194-C(1) should be out of the income of the contractor from the sum or sums credited to the account of or paid to him. The words in the sub-section „on income comprised therein‟ appearing immediately after the words „deduct an amount equal to two per cent of such sum as income tax‟ from their purport, cannot be understood as the percentage amount deductible from the income of the contractor out of the “7. The above decision cannot be of any help to the appellant for it does not lay down that the percentage amount deductible under Section 194-C(1) should be out of the income of the contractor from the sum or sums credited to the account of or paid to him. The words in the sub-section „on income comprised therein‟ appearing immediately after the words „deduct an amount equal to two per cent of such sum as income tax‟ from their purport, cannot be understood as the percentage amount deductible from the income of the contractor out of the sum credited to his account or paid to him in pursuance of the contract. Moreover, the concluding part of the sub-section requiring deduction of an amount equal to two per cent of such sum as income tax, by use of the words „on income comprised therein‟ makes it obvious that the amount equal to two per cent of the sum required to be deducted is a deduction at source. Indeed, it is neither possible nor permissible to the payer to determine what part of the amount paid by him to the contractor constitutes the income of the latter. It is not also possible to think that the Parliament could have intended to cast such impossible burden upon the payer nor could it be attributed with the intention of enacting such an impractical and unworkable provision. Hence, on the express language employed in the sub-section, it is impossible to hold that the amount of two per cent required to be deducted by the payer out of the sum credited to the account of or paid to the contractor has to be confined to his income component out of that sum. There is also nothing in the language of the sub-section which permits exclusion of an amount paid on behalf of the organisation to the contractor according to Clause 13 of the terms and conditions of the contract in reimbursement of the amount paid by him to workers, from the sum envisaged” 75. We thus find ourselves unable to sustain the challenge as raised. 76. In light of the foregoing discussion and for reasons set out hereinabove, we find ourselves unable to concur with the view taken by the Tribunal in Santur, Satya, Perfect Constech and Spaze Tower. Those decisions have proceeded on the basis of a contractual obligation between the petitioner and HSVP being a prerequisite. They have additionally based their decision on the fact that HSVP was undertaking external development work on the directives of the DTCP. These, for reasons recorded hereinabove, were factors wholly irrelevant for the purposes of considering the applicability of Section 194C. 77. That only leaves to consider some of the supplemental questions which were raised and which included the Show Cause Notices not specifically adverting to the specific provision contained in Chapter XVIIB and in terms of which the petitioners were held liable to deduct tax. We, in this regard, also bear in consideration the two earlier rounds of litigation when in the first instance the respondents had sought to hold the petitioners liable to deduct tax under Section 194 in the case of BPTP and subsequently under Section 194I as is evident from the judgment rendered in DLF Homes ”Panchkula. [Emphasis supplied] 4.In view of the aforesaid, while we set aside the impugned orders dated 16 March 2023 and 31 October 2023, we leave it open to the respondents to proceed further in accordance with law and the observations as rendered in Puri Constructions Private Limited. 5.The petition is disposed of. YASHWANT VARMA, J. PURUSHAINDRA KUMAR KAURAV, J.MARCH 21, 2024/p