The Punjab State Electricity Board, Patiala v. The Commissioner Of Income-Tax, Patiala And Another

CWP No. 16418 of 1994 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No. 16418 of 1994 Date of Decision: 28.6.2010 The Punjab State Electricity Board, Patiala ....Petitioner. Versus The Commissioner of Income-Tax, Patiala and another ...Respondents. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Pankaj Jain, Advocate and Mr. Rishabh Kapoor, Advocate for the petitioner.Mr. Rishabh Kapoor, Advocate for the petitioner. Ms. Urvashi Dugga, Advocate for the Revenue. ADARSH KUMAR GOEL, J. 1.This order shall dispose of CWP No. 16418 of 1994 andITA Nos. 104, 106, 109 of 2002, 17, 29 of 2003, 509 and 523 of 2006. 2.In the writ petition, the petitioner seeks a direction forquashing the orders dated 1.7.1994 (Annexure P-1) and dated9.11.1994 (Annexure P-2) passed by respondent No.2 for recovery ofamount of surcharge from the petitioner on the ground that thepetitioner failed to deduct at source the amount of surcharge due, underSection 193 of the Income Tax Act, 1961 (in short, “the Act”), for thefinancial years 1990-91 and 1987-88 to 1989-90, respectively. 3.The case of the petitioner is that it issued bonds to raisefinances which were subscribed by the nationalized banks and other financial institutions. The petitioner-Electricity Board paid interest onthe bonds to the banks and financial institutions. While making thepayment of the interest so accrued in favour of the banks and financialinstitutions, the petitioner was required to deduct tax at source underSection 193 of the Act. The petitioner having not made the saiddeduction, the revenue took steps to recover the said amount from it.The objection of the petitioner is that the tax on the interest incomehaving been paid directly by the banks and financial institutions whowere recipients of income, the petitioner could not be required to meetthe said liability. 4.During the pendency of the writ petition, the matter wasconsidered by the Income Tax Appellate Tribunal (ITAT). The ITATaccepted the plea of the petitioner that it was not liable to pay theamount of tax which was not deducted under Section 193 of the Actwhen the tax liability has been duly discharged by the banks and thefinancial institutions concerned. Only interest was liable to be paid forthe period of delayed payment. The department filed appeals bearingITA Nos. 104, 106, 109 of 2002, 17, 29 of 2003, 509 and 523 of 2006which were admitted by this Court in view of pendency of the writpetition. 5.Learned counsel for the petitioner-Electricity Board statesthat in view of the orders passed in the departmental proceedings bythe ITAT for the assessment years in question, the writ petition hasbecome infructuous. Accordingly, the present writ petition is disposedof as having been rendered infructuous. 6.As regard the appeals filed by the revenue which have been admitted only on account of pendency of the writ petition, there isa finding of fact recorded that the tax liability has been duly met by theconcerned banks and the financial institutions. The appeals underSection 260A of the Act are competent only when there are substantialquestions of law. Though the substantial questions of law have beenframed in the appeals but the same were admitted without examiningthe said questions of law. We have, thus, to determine whether anysubstantial question of law for entertaining the appeals arises or not.7.The findings recorded by the CIT (A) in its order dated8.6.1994 (Annexure A-1) for the assessment years 1990-91, 1991-92and 1992-93 are as under:- 6.As regard the appeals filed by the revenue which have been admitted only on account of pendency of the writ petition, there isa finding of fact recorded that the tax liability has been duly met by theconcerned banks and the financial institutions. The appeals underSection 260A of the Act are competent only when there are substantialquestions of law. Though the substantial questions of law have beenframed in the appeals but the same were admitted without examiningthe said questions of law. We have, thus, to determine whether anysubstantial question of law for entertaining the appeals arises or not.7.The findings recorded by the CIT (A) in its order dated8.6.1994 (Annexure A-1) for the assessment years 1990-91, 1991-92and 1992-93 are as under:- “24. As far as financial year 1990-91 is concerned,the facts are slightly different. Order u/s 201 (1A)itself mentions that out of total amount of surchargeof Rs.72,23,554 only a sum of Rs.37,95,906.76 wasrecovered by the Deptt. from the appellant on28.7.1993. The balance amount of Rs.34,28,352/-was not collected due to the fact that theassessments of different banks from whom theamount of surcharge was to be recovered had sincebeen completed and refunds had also beendetermined. Photocopies of these assessmentorders were filed before the Assessing Officer andthe plea of the appellant for not depositing thebalance amount was accepted. Assessing Officer,however, calculated the interest on the entire amount 8. due for the three years upto the date of payment andeven levied interest on the balance amount ofRs.34.28 lacs which was not even deposited by theappellant. This is apparently wrong. There is noquestion of interest being levied on the amount ofsurcharge which itself has not been collected forreasons discussed in the order of the AssessingOfficer. As decided in respect of financial years1991-92 & 92-93 interest on non-payment ofsurcharge should be recalculated upto the end of thefinancial year i.e. 31[st] March, 1991 after verification ofthe fact that all the payees had duly paid their taxeseither by way of advance-tax or by way of TDS.” The findings of the ITAT on this aspect are as under:- “The A.O. in the assessment order has recorded thaton verification, the contention of the assessee thatrecipients paid surcharge on interest received bythem was correct. The CIT (A) on the basis ofmaterial available has held that surcharge must havebeen paid before 31[st] of March of the financial years1991-92 and 1992-93 and, therefore, directed thatinterest could be charged only upto 31[st] of therespective financial year. Similar recommendationwas made in the period relevant to assessment year1990-91. The aforesaid inference from the factscollected by the Assessing Officer is possible. But The findings of the ITAT on this aspect are as under:- “The A.O. in the assessment order has recorded thaton verification, the contention of the assessee thatrecipients paid surcharge on interest received bythem was correct. The CIT (A) on the basis ofmaterial available has held that surcharge must havebeen paid before 31[st] of March of the financial years1991-92 and 1992-93 and, therefore, directed thatinterest could be charged only upto 31[st] of therespective financial year. Similar recommendationwas made in the period relevant to assessment year1990-91. The aforesaid inference from the factscollected by the Assessing Officer is possible. But both the parties are aggrieved from the aforesaidfindings. In principle, it has to be accepted thatinterest could be charged only upto the date thesurcharge due was actually paid to the credit of theGovernment. Now what is the actual date ofpayment, is a question of fact. Each payment willhave to be examined in case the interest is to becorrectly computed. We see no reason why correctamount should not be determined. After all, interestpayable is compensatory in nature and has to berecovered for the period for which the State wasdeprived of the amount due to it. None of the partieshas furnished calculation or details of date of actualpayment. But then as per mandate of sub-section(1A) of section 201 read with Article 265 of theConstitution of India, interest can be recovered onlytill the amount was actually paid. The date of actualpayment has to be determined and interest computedfrom the date of default to the aforesaid date as onvisages under sub-section (1A) of Section 201 of theIncome Tax Act. The A.O. has collected materialfrom various recipients regarding surcharge paid bythem. Therefore, he should have taken date ofactual payment into account. It is possible that therecipients paid tax and surcharge on this income(Interest on Bonds) along with other income and bifurcated figures are not available. In that case, theA.O. should allow benefit of payment onproportionate/rational basis having regard to the factthat the entire liability was cleared in the financialyear. We direct accordingly and modify thedirections of the CIT (A) on the question of interestpayable u/s 201 (1A) of the Income Tax Act.” 9.In view of the above findings which are not shown to beerroneous, we are unable to hold that any substantial question of lawarises in these appeals. 10.The appeals are accordingly dismissed. (ADARSH KUMAR GOEL)JUDGE June 28, 2010gbs (AJAY KUMAR MITTAL)JUDGE