Admittedly, as per TDS certificate issued by Mysore Breweries Limited, the total reimbursement made to the assessee as per their newly arrangement was Rs. 3,35,85,000/-. However, in the books of assessee, it was only Rs. 2,54,97,000/-. The assessee had explained that a credit note of Rs. 80,88,000/- issued by it in favor of Mysore Breweries Limited was not accounted for by them and, therefore, by this amount they had shown higher reimbursement to assessee. The contention of the assessee was that it was a case of clerical error committed by subsidiary Mysore Breweries Limited which was duly confirmed by Mysore Breweries Limited.
The assessee relied on the decision of Hon’ble Delhi High Court in the Case of Sudhir Sekhri vs. ACIT (Delhi HC) , wherein it was, inter-alia, held that where the issuer of the certificate had certified that the mistake had crept in due to the pre-fed computer programme and certified that no other charges other than what was reflected in the books of account of the assessee had been paid to the assessee, the addition was not justified merely on the basis of discrepancy in the TDS certificate and amount recorded in the books of account.
Under such circumstances, we find that the decision of Hon’ble Delhi High Court in the case of Sudhir Sekhri (supra) is squarely applicable to the facts of the case and, therefore, the addition of Rs. 80,88,000/- was wholly unwarranted.
INCOME TAX APPELLATE TRIBUNAL, DELHI
ITA No. 1011/Del/2012 –
Assessment Year: 2003-04
ITO Vs. SAB Miller India Ltd.
O R D E R
PER S.V. MEHROTRA, A.M.
This appeal filed by the Revenue is directed against the order of ld. CIT(A) dated 30/12/2011 for A.Y. 2003-04.
2. The assessee company, in the relevant assessment year, was engaged in the business of investing in existing breweries in India and providing technical, managerial and consultancy services to its subsidiaries. The assessee filed return of income declaring Nil income under normal provisions of the Act. The Book Profits of the Company were computed u/s 115JB of the Income Tax Act at Rs. 82,01,310/- and seven and a half percent of such Book Profits was Rs. Nil, as per the statement of facts filed before ld. CIT(A) by the assessee. Therefore, the assessee filed its return of income under the normal provisions of the Act and claimed a refund of Rs. 10,63,445/- being tax deducted at source.
3. The Assessing Officer completed the assessment under normal provisions of the Act at Rs. 1,41,28,246/-, inter-alia, making following additions: –
i) Income in respect of difference in TDS certificates Rs. 80,88,000/-;
ii) Dis allowance out of provisions for expenses Rs. 47,80,510/-.
4. Ld. CIT(A) while partly allowing the assessee’s appeal, deleted the addition of Rs. 80,88,000/- on account of difference in receipts as per TDS certificates and those credited to Profit & Loss A/c and also deleted the addition of Rs. 5,63,390/- out of Rs. 47,80,510/- made by the AO on account of provision of expenses.
5. Being aggrieved with the order of ld. CIT(A), the Department is in appeal before us.
6. Ground no. 1 reads as under: –
1. “The ld. Commissioner of Income Tax (Appeals) erred, in law and on the facts of the case, in deleting the addition of Rs. 80,88,000/- made by the AO on account of difference in receipts as per TDS certificate and those credited to Profit & Loss Account.”
7. Brief facts apropos this issue are that the AO noticed that there was discrepancy of income amounting to Rs. 80,88,000/- as reported in the audited financial statements and as per TDS certificate. The assessee explained that it being the holding company had hired the necessary resources such as human resources, back up support on accounting and financial matters, etc. During the year, it executed a cost sharing agreement with its subsidiary i.e. Mysore Breweries Ltd. to provide the aforesaid services. In return, Mysore Breweries Limited agreed to reimburse the cost incurred by the assessee company for the resources made available to it for its operations on the basis of time and effort spent by the resources hired by the assessee company. In this agreement it had been specifically mentioned that assessee company shall issue debit note in favour of Mysore Breweries Limited giving details of the cost allocated to it. During the year under consideration, the assessee had raised debit notes amounting to Rs. 3,35,85,000/- on Mysore Breweries Limited in terms of said arrangement. The TDS certificate issued by M/s Mysore Breweries Limited also showed that tax at source was deducted on total payment made to the assessee amounting to Rs. 3,35,85,000/-. The tax so deducted had also been deposited into Government Account relevant for the year under consideration. The assessee also submitted that a credit note of Rs. 80,88,000/- was raised on M/s Mysore Breweries Limited as the various debit notes issued were in excess by such an amount. The submission of assessee was that it was only a clerical mistake of the part of M/s Mysore Breweries Limited in issuing a TDS certificate showing the inflated and wrong figure. A confirmation to this effect was also filed from M/s Mysore Breweries Limited. The AO did not accept the assessee’s contention, inter¬alia, observing as under: –
“The fact however remains that tax at source has been deducted at total income of Rs. 3,35,85,000/- which must have been accounted for by M/s Mysore Breweries Ltd. in the year under consideration. This is also a fact that the assessee has claimed TDS on the entire sum of Rs. 3,35,85,000/- while only the receipts shown from M/s Mysore Breweries Ltd. are to the tune of Rs. 2,54,97,000/-. Under the Income Tax Act, income of a particular period is assessable in the assessment year to which it relates. Every assessment year is a separate entity. As per section 199 of the Income-tax Act credit for tax deducted at source has to be given in respect of the Income shown in that assessment year. As the assessee has claimed entire TDS for the year under consideration the sum of Rs. 80,88,000/- is taxable for this assessment year. The confirmation filed by the assessee from M/s Mysore Breweries Ltd. is only an internal arrangement and does not deserve to be relied upon as a concrete evidence in its favour.”
He, accordingly, made an addition of Rs. 80,88,000/-.
8. Before ld. CIT(A), the assessee reiterated the submissions made before Assessing Officer and further submitted that there were no provisions under the Act for issuance of revised TDS certificate and, therefore, the clerical mistake committed at the end of Mysore Breweries Limited could not be corrected by issuing revised TDS certificate. The assessee relied on the decision of Hon’ble Delhi High Court in the case of Sudhir Sekhri vs. ACIT 2010-TIOL-277-HC-Del-IT, wherein it was, inter-alia, held that where the issuer of the certificate had certified that the mistake had crept in due to the pre-fed computer programme and certified that no other charges other than what was reflected in the books of account of the assessee had been paid to the assessee, the addition was not justified merely on the basis of discrepancy in the TDS certificate and amount recorded in the books of account.
9. Ld. CIT(A) after considering the assessee’s submissions deleted the addition, inter-alia, observing in para 3.11 as under: –
“This appears to be a bonafide and inadvertent mistake, being admitted by both the sides and having no tax implications, since it is not the case of the AO that higher expenditure has been allowed in MBL’s hand whereas lower receipts have been shown in the appellant’s hand. Therefore, the differential amount between the amount shown in the TDS certificate and the amount actually paid/received on that count, cannot be brought to tax, solely on the ground that the TDS certificate disclose the amount as having been credited to the appellant’s account.”
10. He, accordingly, held that the actual reimbursement component received by the assessee during the year was Rs. 2,54,97,000/- and not Rs. 3,35,85,000/-, as disclosed in the TDS certificate.
11. We have considered the submissions of both the parties and have perused the record of the case.
12. Admittedly, as per TDS certificate issued by Mysore Breweries Limited, the total reimbursement made to the assessee as per their newly arrangement was Rs. 3,35,85,000/-. However, in the books of assessee, it was only Rs. 2,54,97,000/-. The assessee had explained that a credit note of Rs. 80,88,000/- issued by it in favor of Mysore Breweries Limited was not accounted for by them and, therefore, by this amount they had shown higher reimbursement to assessee. The contention of the assessee was that it was a case of clerical error committed by subsidiary Mysore Breweries Limited which was duly confirmed by Mysore Breweries Limited.
13. Under such circumstances, we find that the decision of Hon’ble Delhi High Court in the case of Sudhir Sekhri (supra) is squarely applicable to the facts of the case and, therefore, the addition of Rs. 80,88,000/- was wholly unwarranted. We, accordingly, confirm the order of ld. CIT(A) on this issue.
14. In the result, the ground no. 1 is dismissed.
15. Ground no. 2 reads as under: –
2. “The ld. CIT(A) erred in law and on the facts of the case in directing the AO to allow credit of Rs. 84,924/- being TDS on the amount of Rs. 80,88,000/- addition of which has been deleted by him.”
16. The issue for consideration is whether the TDS amount attributable to Rs. 80,88,000/- which works out to Rs. 84,924/-, should be allowed as a credit of tax to the assessee, when the income component was neither being admitted, nor was being offered to tax.
17. Before ld. CIT(A), the assessee had relied on following decision: –
i) Sandvik Asia Ltd. vs. CIT (2006), 280 ITR 643 &
18. Ld. CIT(A) after considering both these decisions held that both were not applicable because the decision of Hon’ble Supreme Court was rendered with reference to interest on interest payable u/s 244 and the decision of Hon’ble Delhi High Court was per incurium because the relevant circulars of the CBDT on the issue of grant of refund of amounts paid in excess of tax deducted and/ or deductible, had not been considered. He referred to Circular No. 285 dated 21/10/1980 and Circular No. 2/2011 dated 27/04/2011 and pointed out that in the first circular dated 21/10/1980 it has been provided that where excess amount had been deducted, the same can be claimed as a refund by following procedure laid down in the said circular. He further pointed out that in the subsequent circular no. 2/2011 dated 27/04/2011 made applicable to claims of refund upto 31/03/2010, it has been provided that deductor can seek refund of excess TDS made under the following circumstances: –
i. “It is a case of genuine error and that the error had occurred inadvertently;
ii. That the TDS certificate for the refund amount requested has not been issued to the deductee and;
iii. That the credit for the excess amount has not been claimed by the deductee(s) in the return of income or the deductee(s) undertakes not to claim such credit.”
19. He, therefore, concluded that the excess TDS made by the deductor could not be claimed as a refund since it had already issued a TDS certificate to the assessee and the assessee-deductee had also claimed a refund of this excess amount in its return of income.
20. Ld. CIT(A), thereafter examined whether the assessee deductee could seek a refund on principles of equity, unjust enrichment and the general principle that the government was not eligible to retain any payment by way of tax beyond the liability in this account, and, inter-alia, observed as under: –
“In fact the CBDT circular no. 14(XL-35) dated 11/04/1995 also exhorts the AO’s to assist in every reasonable way the claim refund of excess TDS. The relevant portion of circular is reproduced hereunder:
“Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assesses on whom it is imposed by law, officers should –
(a) draw their attention to any refund or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;
(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.”
Following the circulars issued by CBDT coupled with the fact that deductor i.e. MBL cannot claim refund of excess TDS, the AO is directed to grant the credit of excess TDS of Rs. 84,924/- while giving effect to this appellate order. However, this refund is arising for reasons of mistakes/error committed on the part of the deductor as well as deductee. In fact, reasons are attributable mostly to the assessee. Therefore, the AO is directed not to grant interest u/s 244A of the I. T. Act to the assessee on account of refund arising on adjudication of this issue. He is directed to withhold such interest in terms of 244A(2) of I.T. Act.”
21. We have considered the submissions of both the parties and have perused the record of the case.
22. We are of the opinion that this issue is squarely covered by the decision of Hon’ble Delhi High Court in the case of Lear Automotive India Ltd. (supra), wherein it has been held that credit is to be allowed to the deductee in respect of TDS made on higher amount of reimbursement than was actually offered to tax. The CBDT Circular No. 2/2011 dated 27/04/2011 referred to by ld. CIT(A) which provides that the deductor could seek refund of excess TDS under certain circumstances cannot take away the substantive right of deductee to claim refund of excess tax deducted from its income. Once the TDS certificate has been issued by deductor he cannot claim refund of the amount deducted because the tax deducted primarily constitutes income of deductee and he can only claim the refund of the amount. We, therefore, relying on the decision of Hon’ble Delhi High Court uphold the conclusion of ld. CIT(A).
23. In the result, this ground is dismissed.
24. Ground no. 3 reads as under: –
3. “The ld. CIT(A) erred in law and on the facts of the case in deleting the addition of Rs. 5,63,390/- out of Rs. 47,80,510/- made by the AO on account of provision of expenses, in contravention of Rule 46A of the Income Tax Rules, 1962.”
25. Brief facts apropos this issue are that the AO had required the assessee to submit the invoices/vouchers for Rs. 47,80,510/-. However, the assessee showed its inability to produce the said invoices submitting that the relevant documents were not available since the same got mutilated/ destroyed while shifting of office from Delhi to Bangalore in the year 2005. He, therefore, made a dis allowance of Rs. 47,80,510/-.
26. Before ld. CIT(A) the assessee had submitted collateral and circumstantial evidence in respect of personnel expenses and audit fees and in this regard ld. CIT(A) has observed as under: –
i) “With regard to leave travel allowance (Rs. 2, 54, 672/-), perquisites provided to its expatriate employees (Rs. 67,388/-) and salary (Rs. 31,192/-) totaling Rs. 3,53,252/-. It was submitted that they form part of the overall salary payment of Rs. 3,24,32,792/- debited to Profit & Loss A/c in order to prove that this expenditure has actually been incurred by the appellant company and that the tax has been deducted on the same, they brought my attention to the receipt issued by the E-filing Administrator of the department i.e. National Security Depository Ltd. vide receipt no. 5280 dated 31/03/2004 wherein, proof of TDS on salary payment of Rs. 3,78,81,904/- is available. I have gone through the assessment records and I find that this particular document has also been submitted before the AO who had not accepted the same as sufficient proof. As a circumstantial proof, this document passes muster and I am inclined to accept this circumstantial evidence in support of its claim of salary expenses.
ii) With regard to the Audit Fee, for which provision of Rs. 2,10,138/- was created in the books of the assessee and necessary deduction had been claimed, the appellant has submitted a bill for Rs. 3,94,347/- vide bill No. ADB¬101/04 dated 1 2/06/2003 issued by Price Water house mentioning that the same is claimed towards statutory audit fee. Since this documentary proof has been submitted, so far as the claim of Rs. 2,10,138/- towards “provision for audit fee” is concerned, the evidence submitted is satisfactory and is taken as a circumstantial evidence in support of the claim of deduction to the extent of Rs. 2,10,138/-.”
27. The Department’s main grievance is that ld. CIT(A) had accepted the details in contravention to Rule 46A of the Income Tax Rules.
28. We have considered the rival submissions of both the parties and have perused the record of the case.
29. As far as ld. CIT(A)’s findings in regard to personnel expenses aggregating to Rs. 3,53,252/- are concerned, we are of the opinion that no interference is called for with the said findings because the impugned amount was part of the overall salary payments of Rs. 3,24,32,792/- debited to Profit & Loss A/c. Therefore, this cannot be said to be new evidence before ld. CIT(A). However, as far as provision for audit fees of Rs. 2,10,138/- is concerned, we find that the assessee had submitted a bill for Rs. 3,94,347/- vide bill no. ADB-101/04 dated 12/06/2003 issued by Price Waterhouse mentioning that the same is claimed towards statutory audit fee.
30. We find that this bill was not before the Assessing Officer and, therefore, it would be in the interest of justice that the matter is restored back to the file of AO for the limited purpose of examining the bill issued by price water house in order to examine its genuineness. We direct accordingly.
31. In the result, this ground is partly allowed for statistical purposes. 32. In the result, the departmental appeal is partly allowed for statistical purposes.
Order pronounced in the open court on 07/12/2012