The Commissioner Of Income Tax (Tds)-I, Chandigarh v. Canara Bank, Sector 17-C, Chandigarh

ITA No. 485 of 2015 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 485 of 2015 Date of Decision: 16.3.2016 The Commissioner of Income Tax (TDS)-I, Chandigarh ....Appellant. Versus Canara Bank, Sector 17-C, Chandigarh ...Respondent. 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 MRS. JUSTICE RAJ RAHUL GARG. PRESENT: Mr. Denesh Goyal, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 15.4.2015 (Annexure A-3) passed by the Income TaxAppellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafterreferred to as “the Tribunal”) in ITA No. 1128/CHD/2014, for theassessment year 2012-13, claiming the following substantial questionsof law:- Whether the ITAT was right in law in deleting thedemand created u/s 201(1) & 201(1A) in respect ofPunjab Infrastructure Development Board, treatingthe assessee in default for not deducting the tax at source, as compulsory required u/s 194A of the Act,whereas no automatic exemption is available, even ifthe assessee is exempted u/s 10(23C)(iv) of the Act?2.Briefly stated, the facts necessary for adjudication of theinstant appeal as narrated therein may be noticed. A TDS Inspection/Survey under Section 133A of the Act was carried out at the businesspremises of the assessee on 14.5.2013. During the course of saidsurvey, it was noticed that the assessee had made payment of interestwithout deduction of tax at source to the following persons:- (i)Director, PEC University of Technology,Chandigarh (Salary Account);Chandigarh (Salary Account); (ii)Director, PEC University of Technology (PFTrust Fund);Trust Fund); (iii)PEC University of Technology (Pension FundTrust); and Trust); and (iv)Punjab Infrastructure Development Board. 3.The Assessing Officer questioned the assessee for non-deduction of tax on interest payments, who produced lower deductioncertificate for the financial year 2012-13 in respect of some of thepersons but failed to produce the same for the financial year 2011-12being not traceable. As the lower deduction of tax certificate was notproduced by the assessee, the Assessing Officer held the PersonResponsible (PR) as 'assessee in default' and created demand of` 74,03,620/- under Sections 201(1) and 201(1A) of the Act for non-deduction of tax at source on total interest payment of ` 6,01,92,037/-.Further, the assessee had also not deducted tax at source on paymentsmade to three individuals (NNND Agents) hired by the bank for daily collection purposes in respect of pigmy deposits. The Assessing Officertreated the payment made to the three individuals as commission underSection 194H of the Act and by holding the PR as 'assessee in default'for non-deduction of tax at source created the demand of ` 98,944/-under Section 201(1)/201(1A) of the Act. The Assessing Officer videorder dated 28.2.2014 (Annexure A-1) created a total demand of `75,02,564/- for non-deduction of tax at source. Feeling aggrieved, theassessee filed an appeal before the Commissioner of Income Tax(Appeals), Chandigarh [for brevity “the CIT(A)”]. The CIT(A) vide orderdated 31.10.2014 (Annexure A-2) partly allowed the appeal of theassessee and deleted the demand. Against the order, Annexure A-2, theassessee as well as revenue filed appeals before the Tribunal who videorder dated 15.4.2015 (Annexure A-3) upheld the order of the CIT(A)and dismissed both the appeals. Hence, the present appeal. 3.Learned counsel for the appellant-revenue submitted thatthe assessee was required to deduct TDS under Section 194A of the Actand having failed to do so, was liable for additional demand underSections 201(1) and 201(1A) of the Act. 4.We have heard learned counsel for the revenue and are notimpressed with the argument raised by him. 5.The CIT(A) has noticed that the assessee had madepayments of interest to the following persons without deduction of tax atsource:- (i)Director, PEC University of Technology,Chandigarh (Salary Account).Chandigarh (Salary Account).(ii)Director, PEC University of Technology (PFTrust Fund).Trust Fund). ITA No. 485 of 2015 (iii)PEC University of Technology (Pension Fund Trust). (iv)Punjab Infrastructure Development Board. 6.In the case of entity at Sr. No.(i), the assessee was notliable to deduct TDS as the income of the recipient was exempt underSection 10(23)(iiiab) of the Act. As regards Sr. No. (ii), the fund beingrecognized by the Commissioner of Income Tax, Chandigarh whereasthe income of organization at Sr. No. (iv), was exempt under Section 10(23C)(iv) of the Act, thus, no TDS was required to be deducted by theassessee. Further, the tax was required to be deducted in respect ofthree individuals NNND Agents, hired by the banks for daily collectionpurpose qua pigmy deposits by treating the payment as 'salary' in viewof letter dated 12.12.2007 issued by the Under Secretary (ITB). Sincethe person at Sr. No. (iii), i.e. PEC University of Technology (PensionFund Trust) was not exempt from tax under Section 10(23AAA) of theAct as on date, the tax was required to be deducted on interest paid to it.Accordingly, the CIT(A) treating the assessee in default in respect ofpayment made to the person at Sr. No. (iii) confirmed the demand of `12,56,023/- created under Section 201(1)/(1A) of the Act and deleted therest of the demand of ` 62,46,541/-. The relevant findings recorded bythe CIT(A) read thus:- “5.I have considered facts of the case. As per thedocuments filed by the appellant, tax was not requiredto be deducted at source on interest paid to thefollowing:-documents filed by the appellant, tax was not requiredto be deducted at source on interest paid to thefollowing:- (i)PEC University of Technology, Chandigarh(Salary Account), since its income is exempt u/s 10 (23C)(iiiab) of the Act. (ii)PEC University of Technology (PF Trust Fund),since the fund is recognized by the Commissioner ofIncome Tax, Chandigarh. (iii)Punjab Infrastructure Development Board, sinceits income is exempt u/s 10(23C)(iv) of the Act. 5.1.Tax was required to be deducted by treating thepayment as 'salary' in respect of three individualsNNND Agents, hired by banks for daily collectionpurpose in respect of Pigmy deposits, in view of theletter dated 12.12.2007, issued by Under Secretary(ITB) from F. No. 275/75/2007-ITB. The AssessingOfficer has wrongly treated the payment made ofthese individuals as commission u/s 194H of the Act.” On appeal the said findings were affirmed by the Tribunal. 7.The CIT(A) and the Tribunal on appreciation of material onrecord have concurrently recorded that if an organization is exemptedfrom payment of tax there was no need for deduction of tax at source bythe assessee. Learned counsel for the revenue was not able todemonstrate that the approach of the CIT(A) and the Tribunal waserroneous or perverse or that the findings of fact recorded were basedon misreading or misappreciation of evidence on record. The view of theCIT(A) and the Tribunal is in conformity with the decision of the ApexCourt in M/s Hindustan Coca Cola Beverage v. Commissioner ofIncome Tax, (2007) 293 ITR 226 (SC), where it has been held asunder:- “10.Be that as it may, the circular No. 275/201/95-IT ITA No. 485 of 2015-6- 7.The CIT(A) and the Tribunal on appreciation of material onrecord have concurrently recorded that if an organization is exemptedfrom payment of tax there was no need for deduction of tax at source bythe assessee. Learned counsel for the revenue was not able todemonstrate that the approach of the CIT(A) and the Tribunal waserroneous or perverse or that the findings of fact recorded were basedon misreading or misappreciation of evidence on record. The view of theCIT(A) and the Tribunal is in conformity with the decision of the ApexCourt in M/s Hindustan Coca Cola Beverage v. Commissioner ofIncome Tax, (2007) 293 ITR 226 (SC), where it has been held asunder:- “10.Be that as it may, the circular No. 275/201/95-IT ITA No. 485 of 2015-6- (B) dated 29.1.1997 issued by the Central Board ofDirect Taxes, in our considered opinion, should put anend to the controversy. The circular declares “nodemand visualized under Section 201(1) of theIncome-tax Act should be enforced after the taxdeductor has satisfied the officer-in-charge of TDS,that taxes due have been paid by the deductee-assessee. However, this will not alter the liability tocharge interest under Section 201(1A) of the Act tillthe date of payment of taxes by the deductee-assessee or the liability for penalty under Section271C of the Income-tax Act.” 8.In view of the above, no substantial question of law arises inthis appeal. Accordingly, the instant appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE March 16, 2016gbs (RAJ RAHUL GARG) JUDGE