ITO (TDS) Vs Sashwat Energy Private Limited (ITAT Mumbai)
ITAT Mumbai Holds Deductor Not in Default Where Payee Has Paid Tax: TDS Demand under Sections 201(1) & 201(1A) Set Aside
The Mumbai Bench of the ITAT partly allowed the Revenue’s appeal and allowed the assessee’s cross-objection for statistical purposes in the case of Sashwat Energy Private Limited for AY 2021-22, dealing with liability under sections 201(1), 201(1A) and consequential levy under section 234E.
The dispute arose from a TDS survey under section 133A(2A), where the Assessing Officer treated the assessee as an “assessee in default” for non-deposit of TDS on interest of about ₹32.38 crore credited to Shapoorji Pallonji & Co. Pvt. Ltd. (SPPL). Although the assessee had booked interest and a corresponding TDS entry in its books, it contended that no actual interest payment was made due to severe financial constraints and that the TDS entry was only an accounting adjustment. Importantly, SPPL had offered the entire interest income to tax and paid due taxes, supported by Form 26A.
The CIT(A) accepted the assessee’s contention and held that, in view of the first proviso to section 201(1), the assessee could not be treated as a defaulter since the payee had already discharged its tax liability.
Upholding this principle, the ITAT relied on the Supreme Court decision in Hindustan Coca Cola Beverage Pvt. Ltd. and the statutory recognition given by the proviso to section 201(1). The Tribunal held that once the deductee has included the income in its return and paid tax thereon, no demand under section 201(1) can be enforced against the deductor. However, with respect to interest under section 201(1A), the ITAT clarified that interest is payable only from the date on which tax was deductible till the date of furnishing of return by the deductee.
Accordingly, the matter was restored to the Assessing Officer for limited verification of taxes paid by the deductee, with a direction to delete the demand if the conditions of the proviso to section 201(1) are satisfied. The issue of fee under section 234E was also restored for fresh examination.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The above captioned appeal has beenpreferred by theRevenue and Cross appeal by the assessee against the order passed by the Learned Commissioner of Income-tax, Appeal, Addl./JCIT(A), Bhopal [hereinafter referred to as “CIT(A)”] pertaining to the order passed u/s. 201(1) and 201(1A) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2021-22.
