Brief of the case:
When payee or resident has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. Chandigarh Bench of ITAT held in the above in various appeals against Punjab Infratructure & Development Board, Chandigarh. ITAT relied upon the case of Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd Vs. CIT in  293 ITR 226 (SC), wherein the Hon’ble Supreme Court held that where the Payee has already paid tax on the income on which there was a short deduction of tax at source, recovery of tax cannot be made once again from the tax deductor.
Facts of the case:
- During the course of TDS inspection and assessment proceedings u/s 201(1) and 201(1A) the AO noticed that assessee in its receipt and expenditure account for the year ending 31.3.2009 had made expenditure of Rs. 492,68,37,890/- under the head ‘project related expenditure’ to different parties but the assessee had not deducted tax on these payments.
- The AO also observed that during financial year 2008-09, the Person Responsible (PR) has received an amount of Rs. 7,36,10,000/- on account of toll fee for which no TDS was collected by the PR.
- AO Also observed that assessee is in agreement with Govt. of Punjab and according to which project has to hand over of govt. after completion of the project.
- AO held that PR was required to deduct tax on the payments made to the contractor / builder u/s 194C of the Act but it was not done and so he treated the PR as ‘assessee in default’ and created demand in various years.
- Assessee filed appeal against the orders and CIT (A) Allowed appeals of the assessee.
- During the course of appellate proceedings before CIT(A), the assessee filed an application under Rule 46A for placing on record the balance sheet, certificate of Chartered Accountants and a copy of the Income-tax return of the Payee M/s Rohan Rajdeep Tollways Ltd.
- The CIT(A) forwarded the aforesaid evidence to the Assessing officer for his comments and after receiving the remand report, the CIT(A) admitted the additional evidence produced by the assessee.
Contention of the revenue:
- If the payment made to builder / contractors as per the agreement are grants/loans then these amounts should have been reflected as capital expenditure whereas the assessee had shown these as Revenue expenditure.
- AO also observed that after the expiry of the period mentioned in the agreements between govt. and assessee, the assets are to be transferred to Government of Punjab and the assessee had signed all these agreements on behalf of the Government of Punjab. Hence, PR/ assessee is required to deduct tax.
Contention of the assessee:
- In the instant case the Concessionaire / Payee included the amount of grant made by the assessee in his return of income and had already paid taxes on the returned income as per the regularly followed accounting policy and, therefore, present case is squarely covered by the decision of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd Vs. CIT in  293 ITR 226 (SC), wherein the Hon’ble Supreme Court held that where the Payee has already paid tax on the income on which there was a short deduction of tax at source, recovery of tax cannot be made once again from the tax deductor.
- The payee (M/s Rohan Rajdeep Tollways Ltd.) –
i. has furnished his return of income under section 139;
ii. has taken into account such sum for computing income in such return of income; and
iii. has paid the tax due on the income declared by him in such return of income; and he has furnished a certificate to this effect from an accountant as per the first proviso to section 201(1) of the Act.
Held by the CIT (A):
- The impugned projects are, in fact, in the nature of joint venture of public and private participation and the contribution/payments made by the appellant on behalf of the Government of Punjab are actually equity participation towards the cost of project. Hence, AO was not right in holding that the appellant was required to deduct tax u/s 194C on the impugned payments and in treating the PR as ‘assessee in default’ u/s 201(1) and 201(1A) of the Act.
Held by ITAT:
- The issue involved is squarely covered by the decision of Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd in ITA No. 162 of 2015. The issue raised by the Revenue before the Hon’ble Delhi High Court pertain to the retrospectivity of the second proviso to Section 40(a)(ia).
- The Hon’ble Delhi High Court has held that what is common to both the provisos to Section 40(a)(ia) and Section 201 (1) of the Act is that as long as the Payee / resident has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the assessee would not be treated as a person in default.
- The Hon’ble High Court has categorically held that no doubt there is a mandatory requirement u/s 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfillment of the conditions as stipulated in the first proviso to Section 201(1).
- Regarding interest u/s 201 (1) it was held that there is no loss of revenue. The appellant has filed its return declaring loss and hence there is no tax liability regarding interest income due to TDS arises in the hand of the assessee.
Comments by author:
On issue related to TCS and liability u/s 206 C (7) on toll way in some of the appeals ITAT held that amount received by assessee is concession fee not toll fee, which was considered by AO. The project was assigned to the assessee on the basis of BOT (Build-operate-transfer). The liability of section 206C (7) cannot be applied to assessee.