Reebok India Company Vs J.C.I.T (ITAT Delhi)
ITAT Delhi held that the limitation period is four years for passing assessment order in case of TDS statement not filed. Limitation period substituted to six years effective only from 01/10/2014.
Facts- The assessee is engaged in the business of distribution of foot wear and apparels and sell its merchandise in India directly to independent retailers, often under distribution or franchise agreement. Based on the survey proceedings conducted u/s. 133A of the Income-tax Act, 1961 on the Ambience Group who are the owners and operators of malls where assessee’s stores are situated.
AO noted that the mall owners have collected/recovered expenses in the form of Common Area Maintenance charges on which the deductors/tenants have deducted tax at source @ 2% considering the same to be covered under the provisions of Section 194C of the Act.
AO was of the firm belief that these payments are directly relatable to and being a part of rental activity, tax should have been deducted as per the provisions of section 194I of the Act @ 10% as against 2% being made by the deductor/tenant. Based on this view, order u/s 201(1)/1A of the Act was framed and accordingly, the assessee was directed to pay TDS amount and interest.
Order was challenged before the ld. CIT(A) on the ground that the impugned order is barred by limitation. However, CIT(A) rejected the contention.
Conclusion- Section 201(3) of the Act as amended by Finance Act, 2012 amended on 28/5/2012 was specifically made applicable retrospectively w.e.f. 1/14/2012, whereby limitation period was substituted from four years to six years for passing orders where TDS Statement had not been filed. However, section 201(3) of the Act as amended by Finance Act No.2 of 2014, is stated to have effect from 1st October, 2014.
The said amendment will take effect from 1/10/2014. In the present cases, limitations provided for passing order under section 201(1) of the Act for A.Y. 2011-12 had already been expired on 31/3/2014 i.e. prior to section 201(3) came to be amended by Finance Act No. 2 of 2014.
We have no hesitation to hold that the assessment order dated 30.03.2018 is barred by limitation.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is preferred against the order of the ld. CIT(A) – 38, New Delhi dated 29.01.2020 pertaining to A.Y. 2011-12.
2. Grievances of the assessee read as under:
“1. On the facts and in the circumstances of the case and in law, the Hon’ble Commissioner of Income Tax (Appeals) – 38 (‘CIT(A)’) erred in upholding the addition made by the the Assistant Commissioner of Income-tax, Circle 78(1), Delhi (‘the Ld. AO’) which is bad in law, contrary to the facts and must be quashed.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in ignoring that the Ld. AO passed an order after the expiry of 2 years from the end of financial year in which the TDS statement was filed. The Ld. AO has erred in given retrospective effect to the amendment in sub-section (3) of Section 201 of the Act which extended the time-limit to 7 years with effect from October 01, 2014.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in interpreting the amended provisions sub-section (3) of Section 201 of the Act as per which the only change which was effected from the earlier provision was the limitation period of four years in case of a deductor not filing TDS statement was extended to six years from four years. Whereas, in case of a person/deductor filing TDS statement, the limitation period of two years remained unchanged.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in alleging that the payment for maintenance of common area of a mall is in the nature of rent and thereby subject to TDS under section 194I of the Act.
5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has ignored the judgement of the Hon’ble Mumbai High Court wherein the common area maintenance charges were held to be business receipts and not in the nature of rental income.
6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the assessee to be in default for deduction of tax at a lower rate and ignoring the fact that the primary liability to pay the taxes is on the recipient.
7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in ignoring that the Ld. AO revisited the order passed u/s addendum with additional demand on account of common area maintenance charges paid iu other parties.
8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in upholding that the Ld. AO held the assessee as assessee in default and incorrectly charging interest u/s 20i(iA) of the Act.
9. Without prejudice to the above, the assessment made is highly excessive and contrary to facts, law and principles of natural justice and fair play.
The above grounds are without prejudice to each other.
That the Appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal.”
3. Briefly stated, the facts of the case are that the assessee is engaged in the business of distribution of foot wear and apparels and sells its merchandise in India directly to independent retailers, often under distribution or franchise agreement.
4. As a consequence of the survey proceedings conducted u/s 133A of the Income-tax Act, 1961 [hereinafter referred to as ‘The Act’] on the Ambience Group who are the owners and operators of malls where assessee’s stores are situated.
5. It came to the notice of the Assessing Officer that the mall owners have collected/recovered expenses in the form of Common Area Maintenance charges on which the deductors/tenants have deducted tax at source @ 2% considering the same to be covered under the provisions of Section 194C of the Act.
6. The Assessing Officer was of the firm belief that these collections/payments are directly relatable to and being a part of rental activity, tax should have been deducted as per the provisions of section 194I of the Act @ 10% as against 2% being made by the deductor/tenant. Based on this view, order u/s 201(1)/1A of the Act was framed on 30.03.2018 and accordingly, the assessee was directed to pay TDS amount of Rs. 26,76,475/– and interest thereon amounting to Rs. 23,96,645/–.
7. Order was challenged before the ld. CIT(A) on the ground that the impugned order is barred by limitation. It was strongly contended that the assessee has filed form 26Q for 4 quarters as under:
