Issue before court:
- Whether proceedings u/s 201 can be initiated against assessee on account of default in deducting TDS after the lapse of four years.
- Whether provisions of section 2(22)(e) can be attracted when shareholder is either registered shareholder or beneficial shareholder.
Brief facts:
- These appeals pertain to years 1999-00, 2000-01 & 2002-02. Ms. Harjit Kour, who is a share holder of M/s Pure Drinks Ltd. borrowed funds from CJ International Hotel Ltd.
- AO invoked provision of section 2(22)(e) by holding that Harjit Kour had more than 10 % stake in assessee company.
- AO also found that assessee faulted in deducting tax and initiate proceedings u/s 201.
Contention of the revenue:
- the terms of Section 201, no limitation can be imputed and that if Parliament had so intended like other instances in the Income Tax Act, a specific period would have been engrafted.
- It was argued next that since the shareholder was a direct beneficiary and a beneficial owner of shares of the assessee, the AO acted correctly within jurisdiction in invoking Section 2 (22) (e).
Contention of the Assessee:
- Assessee contended and relied upon the ruling of Delhi High Court in CIT vs. NHK Japan Broadcasting Corporation (2008) 305 ITR 137 (Del) & CIT Vs. Hutchison Essar Telecom Ltd. (2010) 323 ITR 230 (Delhi) in which both the division benches held that the foundational requisite for initiation of proceedings under Section 201 is a period of four years if no limitation is prescribed.
- On the issue of section 2 (22) (e) assessee relied upon the Division Bench ruling in Commissioner of Income Tax v. National Travel Service, (2012) 347 ITR 305 (Del) and CIT Vs. Ankitech (P) Ltd. (2012) 340 ITR 14 to say that the requirement of Section 2 (22) (e) is fulfilled only if both the pre-conditions are met with.
Held by the court:
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