IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : A : NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
AND
SHRI A.N. PAHUJA, ACCOUNTANT MEMBER
ITA No.2934/Del/2012
Assessment Year : 2003-04
ITO, Vs. Indian Printing Packaging &
Ward 50(1), Room No.504, Allied Machinery Manufacturers
5th Floor, Aayakar Bhawan, Association,
Laxmi Nagar, C-54, Sec.62,
New Delhi. Industrial Area,
Noida.
PAN : DELI04128F
(Appellant) (Respondent)
Assessee by : Shri T.R. Talwar, Advocate
Revenue by : Mrs. Anusha Khurana, Sr. DR
ORDER
PER A.D. JAIN, JUDICIAL MEMBER
This is an appeal filed by the department for Assessment Year
2003-04 against the order dated 30.03.2012 passed by the CIT (A)-
XVII, New Delhi. The department has taken the following grounds of
appeal:-
"1. On the facts and in the circumstances of the case as well
as in law, the Ld. CIT (A) XVII, New Delhi has erred in deleting
the demand raised by the A.O. u/s 201/201(1A) rws 194-I of the
IT Act, holding that the certificate u/s 197 of the IT Act was valid
for the F.Y. 2002-03 though the certificate was issued on
23.4.2002.
2. On the facts and in the circumstances of the case as well as
in law, the Ld. CIT (A) XVII, New Delhi has erred in not
appreciating the fact that as per the provisions of section 194-I
of the IT Act, tax is deductible at the time of credit of rental
2 ITA No.2934/Del/2012
income or at the time of payment of rental income whichever is
earlier and at that time no certificate u/s 197 of IT Act has been
granted.
3. On the facts and in the circumstances of the case as well as
in law, the Ld. CIT (A) XVII, New Delhi has erred in not
appreciating the fact that as per sub-section (2) of section 197
of the IT Act, the person responsible for paying the income shall
deduct TDS at the rates specified at the time of payment or rate
specified in certificate issued u/s 197 of the Income Tax Act."
2. The facts of the case as per the relevant orders are that the
Assessing Officer levied tax u/s 201(1) of the IT Act on the assessee,
for the assessee's failure to deduct tax from advance of rent paid to
M/s NESCO Ltd. The assessee had paid advance rent to M/s NESCO
Ltd. on 01.04.2002 after deducting tax at a lower rate of 2%, instead of
the higher rate of 20%. Interest u/s 201(1A) of the Act was also levied
on the said tax by the Assessing Officer, for a period of 60 months.
3. By virtue of the impugned order, the Ld. CIT (A) deleted the tax
levied of ` 3,36,600/- and the interest levied of ` 2,16,720/-
4. Aggrieved, the department is in appeal.
5. Challenging the impugned order, the Ld. DR has contended that
the Ld. CIT (A) has erred in deleting the demand validly raised by the
Assessing Officer u/s 201/201(1A) (rws 194-I of the IT Act); that in
doing so, the Ld. CIT (A) has erred in holding that the certificate u/s
197 of the Act was valid for the financial year 2002-03 relevant to the
assessment year under consideration i.e., A.Y. 2003-04; that this
conclusion was wrongly arrived at by the Ld. CIT (A) in the face of the
fact that the said certificate had been issued on 23.04.2002; that the
Ld. CIT (A) has further erred in failing to appreciate that as per the
provisions of Section 194-I of the Act, tax is deductible either at the
time of credit of the rental income, or at the time of payment thereof,
3 ITA No.2934/Del/2012
whichever is earlier; the Ld. CIT (A) erred in not taking into
consideration the fact that at that relevant time, the certificate u/s 197
of the Act had not been granted; that the Ld. CIT (A) has further erred
in not taking into consideration the provisions of Section 197 (2) of the
Act, as per which, the person responsible for paying the income shall
deduct tax at the rates specified at the time of payment, or the rate
specified in the certificate issued u/s 197 of the Act; and that
therefore, the order passed by the Ld. CIT (A) being untenable in law
be cancelled and that of the Assessing Officer be revived by allowing
the appeal filed by the department.
6. On the other hand, the ld. counsel for the assessee has placed
strong reliance on the impugned order, contending that the Ld. CIT (A)
has correctly decided the issue in favour of the assessee inasmuch as
while levying the tax, the Assessing Officer had illegally ignored the
fact that the deductee of tax had applied for the certificate u/s 197 of
the Act before the payment had been made by the assessee company
to the deductee and the same had been granted in the very month in
which the payment had been made; that in fact, the assessee
company had deducted the tax at the appropriate rate in the
subsequent month and had deposited the tax in accordance with the
directions contained in the certificate issued u/s 197 of the Act; that
this fact had, however, been wrongly ignored by the Assessing Officer
while trading, again illegally, the assessee as an assessee in default
and levying the tax and interest thereon; that the Assessing Officer
had erred in not appreciating that the certificate was valid for the
financial year relevant to the assessment year under consideration;
that the Assessing Officer had further failed to appreciate that in fact,
no loss whatsoever had been occasioned to the revenue by the
deduction of the tax at the appropriate rate as per the direction
contained in the certificate issued u/s 197 of the Act during the
4 ITA No.2934/Del/2012
financial year under consideration, since the tax stood duly paid by the
deductee and the assessee company remained under no further
obligation to pay tax as demanded; and that therefore, there being
nothing wrong with the order passed by the Ld. CIT (A), the same is
entitled to be confirmed on dismissal of the appeal filed by the
department.
7. We have heard the parties and have perused the material on
record. The assessee has also placed before us a calendar of events,
which it would be appropriate to reproduce hereunder:-
01.04.2002 Application submitted by the payee M/s Nesco Ltd.
u/s 197 of the IT Act to the ITO
01.04.2002 Date of payment of advance rent by the assessee to
the payee M/s Nesco Ltd. of Rs.15 lacs (PB2)
23.04.2002 Grant of certificate u/s 197 by the ITO to the payee
to deduct tax at source @ 2% u/s 194 I of the IT Act
(PB 4-5). Certificate valid upto 31.3.2003.
06.05.2002 Deposit of TDS by the assessee to the Govt. Account
@ 2% as allowed by the ITO u/s 197 (PB11)
23.10.2002 Payment of 2nd installment of rent by the assessee to
the payee M/s Nesco Ltd. Rent (-) TDS (PB-2)
9.11.2002 Deposit of TDS by the assessee to the Govt. Account
@ 2% as allowed by the ITO u/s 197 (PB 12).
8. From the above sequence of events, undisputedly, payment of `
15 lacs had been made by the assessee company to M/s Nesco Ltd. on
01.04.2002. This is also clear from the copy of account of M/s Nesco
Ltd. (copy at pages 2-3 of the assessee's paper book) for the period
from 01.04.2002 to 31.03.2003. On a query as to why the assessee
had failed to deduct tax at source on such payment, @ 22.44%, the
assessee had submitted that the certificate u/s 197 of the Act stood
already applied for by M/s Nesco Ltd. even before the date of payment,
5 ITA No.2934/Del/2012
i.e., 01.04.2002. Undisputedly, the certificate u/s 197 of the Act was
granted only on 23.04.2002, authorizing the assessee to deduct tax at
source @ 2% plus surcharge u/s 194 I of the Act from the licence and
maintenance fee/rent compensation payable by the assessee to M/s
Nesco Ltd. upto 31.03.2003. A copy of the said certificate is contained
at pages 4-5 of the assessee's paper book. The date "26.04.2002" is
available thereon. In this document, the ITO has certified as follows:-
"I hereby authorize M/s Indian Printing Packaging and Allied
Machinery Manufacturers Association Plot no.54, Sector-62,
Institutional Area, Noida-201307 to deduct tax at source @ 2%
s.c. u/s 194-I of the Income Tax Act, 1961 from the license &
maintenance fees/rent compensation payable by you to M/s
Nesco Limited upto 31st March, 2003.
This certificate shall remain in force until 31st March, 2003
unless it is cancelled by me under intimation to you before that
date."
9. From the above contents of the certificate, it is quite clear that it
was to remain in force till 31.03.2003, unless cancelled by the ITO prior
to the said date.
10. It was in accordance with the authorization contained in the
aforesaid certificate, that the assessee deducted TDS of ` 31,500/- @
2% plus surcharge and deposited it on 06.05.2002. Such deposit,
undisputedly, was within the statutory requirement of Section 200 of
the Act read with Rule 30 of the IT Rules, 1962. Thus, the assessee
has not been shown to have committed any default in deducting the
tax and depositing it. It was only because the assessee did not have
the TDS certificate for low deduction @ 2% on 01.04.2002 while paying
the advance rent, that the Assessing Officer treated the assessee as an
assessee in default for not deducting 20% tax on 01.04.2002, on the
advance rent paid to M/s Nesco Ltd. Now this, as rightly considered by
the Ld. CIT (A), if at all, was only a venial breach or default. On the
other hand, such default could have been ascribed to the assessee
6 ITA No.2934/Del/2012
only and only if no tax had been deducted in accordance with the
provisions of Section 201(1) of the Act. The Assessing Officer while
doing so, erred in not taking into consideration the specific recital in
the certificate issued u/s 197 of the Act, to the effect that "this
certificate shall remain in force until 31.03.2003 unless it is cancelled
by me under intimation to you before that date." It is seen the case of
the department is that the said certificate had been cancelled by the
ITO on any date prior to 31.03.2003. The validity of the certificate
dated 31.03.2003 means that the certificate was valid for the whole of
A.Y. 2003-04 and therefore, has correctly held in the impugned order
by virtue of the said certificate, there was no occasion to deem the
assessee to be an assessee in default. There is no gainsaying that the
assessee can be deemed to be an assessee in default only in the case
of non-payment of tax within the prescribed time. In the present case,
the tax having been deducted @ 2% and having been deposited before
the prescribed date, by no stretch of imagination can the assessee be
deemed to be an assessee in default.
11. In view of the above discussion, we find the order of the ld.
Commissioner (Appeals) to be a well versed order. The grievance
sought to be raised thereagainst by the department before us is found
to carry no force whatsoever and the grounds raised by the
department are, accordingly, rejected.
12. In the result, the appeal filed by the department is dismissed.
The order pronounced in the open court on 31.08.2012.
Sd/- Sd/-
[A.N. PAHUJA] [A.D. JAIN]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated, 31.08.2012.
7 ITA No.2934/Del/2012
dk
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar,
ITAT, Delhi Benches
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