CIT (TDS) Vs. Sahara India Commercial Corpn. Ltd. (Allahabad High Court)
It is an important aspect to be examined whether Recipient- Assessee has directly paid tax or has no liability of tax at all. Since this aspect was not examined by Assessing Authority, therefore, in our view, Tribunal has rightly remanded matter to Assessing Authority to examine this aspect. If Assessing Authority finds that Recipient- Assessee, i.e., SAL was not liable to pay any tax during relevant assessment year or has actually paid tax, assessee cannot be held to be “Assessee in Default” merely for the reason that it has failed to deduct tax or has short deducted tax and for that reason alone Assessing Authority cannot raise demand of tax from assessee.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
Heard Sri Alok Mathur, learned counsel for appellant and Sri Waseeq Uddin Ahmad, Advocate for respondent.
2. All these appeals filed under section 260-A of Income Tax Act, 1961 (hereinafter referred to as the “Act, 1961”) have arisen from common judgment and order dated 17-12-2014 passed by Income Tax Appellate Tribunal (hereinafter referred to as the “Tribunal”) and, therefore, as agreed by learned counsel for the parties have been heard together and are being decided by this common judgment.
3. In fact Tribunal decided three bunches of appeals pertaining to assessment years 2003-04 to 2007-08 by a common judgment in which questions relating to sections 201(1), 201(1A) and 271C of Act, 1961 were raised. In the present appeals we are concerned with that part of judgment which relates to section 201(1) of Act, 1961.
4. Following substantial questions of law have arisen in these appeals :–
“1. Whether the ITAT was justified in holding assessee, not liable for deduction of tax on the basis of judgment of Supreme Court in case of M/s. Hindustan Coca Cola Breweries (P) Ltd. The facts and circumstances of the case are different in case of Hindustan Coca Cola Breweries (P) Ltd. v. CIT. In that case there was already deduction of tax at source at 2% under section 194C while assessing officer held it to be at 20% under section 194. Hence issue was not of deduction or non-deduction but difference of rate of deduction. As per section 194C of Income Tax Act, 1961, liability of deduction of tax is on payment made by deductor to deductee. Positive or negative income is not a determining condition for applicability of TDS provisions.
2. Whether Tribunal was justified in restoring issue of applicability of section 201(1) of Income Tax Act, to the file of assessing officer for verification, whether or not deductee has returned losses for impugned years and not giving direction to verify whether or not deductee has paid taxes due on its assessed income.
3. Whether Tribunal was justified in confirming Commissioner (Appeals)’s order in holding that assessing officer’s order under section 201(1) of Income Tax Act, for financial years 2002-03 and 2003-04 was time barred relying upon judgment of Delhi High Court when the said time limit of four years was not prescribed in the statute and decision of Delhi High Court relied upon by Commissioner (Appeals) was not binding in the territory of Uttar Pradesh. Parliament would have prescribed any time limit if deemed fit and has since prescribed time limit of seven years for this purpose as per section 201(3) of Income Tax Act.”
5. Now before discussing issues raised in these appeals it would be appropriate to have a brief facts narration giving rise to present dispute.
6. Respondent- Assessee, M/s. Sahara India Commercial Corporation Ltd. (hereinafter referred to as the “assessee”) is engaged in business of real estate development, construction and media activities etc. It entered into business agreement with M/s. Sahara Airlines Ltd. (now known as M/s. Jet lite (India) Ltd.) (hereinafter referred to as the “SAL”) vide agreement dated 30-3-1995 for giving publicity to promote business and area of operation of assessee. As per agreement, SAL was required to display logo of assessee on both sides of air crafts, tickets, boarding passes, baggage tags, newspapers, hoardings, etc. Brochures of assessee are also to be distributed by SAL with its tickets. Under the said agreement, for assessment year 2007-08, assessee paid Rs. 400 crores to SAL. Assessee was supposed to deduct tax at source under section 194C on aforesaid payment made to SAL but as a matter of fact no such deduction was made. Assessing Authority, coming to know about this fault on the part of assessee, issued notice dated 8-5-2008 giving opportunity of hearing to Directors of assessee to explain reason of non deduction of tax at source. The representative of assessee did not accept of entering into an agreement for giving publicity to SAL. Against their passenger’s ticket sale and in return of subsidy which was provided to SAL, they were entrusted with the job of printing of logo, colour scheme etc. on boarding card, ticket, baggage tag on board their aircraft so that passengers traveling could know about Company. Hence, SAL has not undertaken any agreement for advertisement activity for and on behalf of Assessee- Company and, therefore, section 194C was not attracted.
7. Assessee’s representative relied on C.B.D.T. Circular No. 714, dt. 3-8-1995 in respect of meaning of term “advertising”, explained therein. Assessee’s Representative thus explained arrangement with regard to payment of subsidy towards passengers fair to SAL, in the nature of facilitation arrangement with them for branding reality project undertaken by Assessee- Company. Reliance was also placed on accounting entry made in the books of assessee as well as SAL. Assessee- Company debited aforesaid payment as :”Work in Progress” while in account of SAL the amount was credited under the head “Passenger Revenue”. Assessing Authority thereafter obtained copy of original agreement dated 30-3-1995, on 9-6-2008 through Representative of assessee and found payments by assessee to SAL in financial years 2002-03 to 2006-07 as under :–
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