1 - . 632 2009 Income tax Appeal No of IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ----- - . 632 2009 Income tax Appeal No of : 20.7.2010 Date of decision Commissioner of Income-tax Jalandhar-I, Jalandhar --- Appellant Versus M/s. Northern Carriers P. Ltd. Jalandhar --- Respondent --- CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- PRESENT: Mr. Vivek Sethi, Standing Counsel for the Revenue. Mr. J.S. Bhasin, Advocate for the assessee. --- AJAY KUMAR MITTAL, J. The Revenue has approached this Court under Section 260-A of the Income-tax Act, 1961 (in short “the Act’) and prayed that the following substantial questions of law arise in this appeal for the consideration of this Court, from the order of the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short “the Tribunal”) passed on 30.4.2009, in Income-tax Appeal No. 380 (ASR)/2008 for the assessment year 2004-05: 2 - . 632 2009 Income tax Appeal No of 1- Whether on the facts and in the circumstances of the case the ITAT was right in law in dismissing the appeal of revenue after recalling its own order dated 20.11.2008 allowing the appeal of the department. 2- Whether on the facts and in the circumstances of the case, the ITAT was right in law in dismissing the appeal of revenue ignoring the provisions of section 199 of Income Tax Act, 1961 according to which the assessee was not entitled for credit of TDS as the same cannot be treated as payment of tax on behalf of the assessee from whose income the deduction was made. 3-Whether on the facts and in the circumstances of the case the ITAT was right in law in allowing credit of TDS to the assessee on principle of consistency on the basis of decision of Hon’ble Supreme Court in the case of Berger Paints India Ltd. Vs. CIT, 266 ITR 99 ignoring that the facts of the above case are entirely different from that of assessee. In the case of Berger Paints the issue was related to inclusion of Excise duty in closing stock while in the case of assessee it is allowing credit of TDS deducted on amount which is not shown as income by the assessee. 4-Whether on the facts and in the circumstances of the case the ITAT was right in law in dismissing the appeal of revenue ignoring the decision of Hon’ble Supreme Court in the case of British Paints India Ltd. recorded at 188 ITR 3 - . 632 2009 Income tax Appeal No of 44, wherein it has been held that the Assessing Officer is not bound to accept the claims of assessee on the ground that the same had been accepted in the past.” The assessee, which is a transport company, filed return for the assessment year 2004-05 declaring income of Rs. 11,71,860/-. The return was processed under Section 143(1) of the Act. The case was taken up for scrutiny by issuing notice under Section 143(2) of the Act. During assessment, it was noticed that the assessee had claimed certain credits of tax deducted at source (TDS) but the income on which TDS was deducted neither belonged to the assessee nor had been credited in its books of accounts. The assessing officer, thus, opined that the TDS credit so claimed was in contravention of the provisions of Section 199(1) of the Act. Consequently, the assessing officer completed the assessment under Section 143(3) of the Act at the total income of Rs. 16,71,855/- wherein he disallowed the credit of TDS amounting to Rs. 9,27,219/-. Appeal filed by the assessee challenging the assessment order met with partial success. The Commissioner of Income-tax (Appeal) [(for short “CIT (A)], while allowing the appeal on 28.3.2008, made detailed observations in the judgment which will be noticed in the latter paras of this order. The order of the CIT (A) was affirmed by the Tribunal. We have heard learned counsel for the parties and have considered the submissions made by them. The primary question that arises for consideration by this Court is, whether the CIT (A) had rightly allowed the credit of tax- deductions at source to the assessee in respect of the deductions made by 4 - . 632 2009 Income tax Appeal No of the persons who had made payment to it. The claim which was rejected by the assessing officer with regard to credit of tax-deducted at source was reversed by the CIT (A). The findings recorded by the CIT (A), are as under: “I have carefully considered the submissions of the appellant, the report of the A.O. and the rejoinder/ further comments filed by the appellant. I have also gone through the details available on record. The facts reveal that the appellant appointed agents to operate on its behalf in certain areas from 1.10.2003 whereas M/s. Hamira Goods Carriers based at Hamira had been operating as agent of the appellant since long. The written agreement was executed by the appellant with the agents and it was appellant who was providing GRs to all the agents and was getting in turn agency money and in the case of Hamira Goods Carriers, it was getting 2.3% on the billed amount in addition to Rs. 2.5 per builty and accounted the same as its income. The GRs of the appellant being issued by its agents the contracting parties deducted tax at source in the name of the appellant with the result that form 16 was issued in favour of the appellant who claimed TDS based on said forms. The AO on the basis that income co-relatable to the said TDS certificates was not reflected rejected the claim for TDS in the hands of appellant by referring to Section 199 (1) of the Income Tax Act. The form 16 being issued in the name of appellant, M/s. Hamira Goods Company, the agent, who accounted the income, did not claim the credit for TDS 5 - . 632 2009 Income tax Appeal No of as TDS certificates were in the name of appellant. Thus, the credit for TDS was neither allowed in the hands of appellant nor in the hands of Hamira Goods Carrier who accounted the income for taxation in their return which corresponds to the said TDS certificates. The AO did not allow the credit based on the reasoning as mentioned in the order. The agent in the case of appellant, M/s. Hamira Goods Carriers who credited the commission income to their profit and loss account in turn paid to the appellant agency money, the builty charges and also the royalty. While agency money and builty charges were paid in cash the royalty was credited by the agent at the year end in the account of the appellant. The TDS certificates collected by the agent being handed over to the appellant the amount of the same was debited in the account of the appellant against the credit of the royalty in the books of the agent. Like in the case of Hamira Goods Carrier the royalty which was received/credited in the P&L account of appellant during the year was 7,13,030/- which was not actually paid but was adjusted against the amount of TDS which means it was directly relatable to the TDS. Its logical fall-out is that if the TDS is allowed then royalty income would not remain income in the hands of the appellant which was already credited to the P & L account. The word used in section 199(1) is income and it is not “any sum” as mentioned in Section 194C (1) of the I.T. Act. The total freight payment which was liable to TDS represented any sum and being not 6 - . 632 2009 Income tax Appeal No of credited in the books of the appellant the AO did not allow the credit for TDS u/s 199(1) of I.T. Act. But it was omitted to consider that what the appellant has actually offered was ‘income’ which was net of freight and which was received from the agent and it was directly co-relatable to the TDS. Neither in the case of Hamira Goods Carriers nor in the case of the appellant, credit for TDS was allowed when the same on being produced before the A.O. in the form of certificate issued u/s 203 of the I.T. Act its credit was admissible u/s 199 (1) of I.T. Act as the income corresponding to the same was already reflected. The appellant has not accounted the gross freight and claimed against it the freight paid as it was done in the case of Hamira Goods Carriers and the appellant only got the income in the form of agency commission and royalty as discussed above on the basis of written agreement with Hamira Goods Carrier which was before the AO. At the most going by AO’s logic what was further taxable was the income reflected in the hands of Hamira Goods Carrier and having already accepted in its hands, the said income in the hands of Hamira Goods Carrier amounting to Rs. 98,484/- as per its P & L A/c can be taxed in the hands of the appellant. It is because the AO took it as case of transfer of business, thus, Section 61 of the I.T. Act was invokeable to include the income of transferee with the income of appellant and the said income for the year comes at Rs. 98,484/- which makes the appellant eligible for credit for TDS as claimed in view of 7 - . 632 2009 Income tax Appeal No of Section 199(1) of the I.T. Act. While holding the support is drawn from Article 265 of the Constitution which prohibits levy or collection of any tax except by authority of law and going by the facts it has to be given credit either in the hands of the appellant or its agents. As held above since the income appears in the hands of appellant the credit becomes admissible in the hands of appellant. Herein I will like to make reference to the decision of Hon’ble ITAT Delhi “C” Bench, Delhi, in the case of Escorts Ltd. Vs. DCIT ITA No. 2436, 2437 and 2464/Delhi/2005 dated 11.5.2007 for assessment years 2001-02 to 2003-04, the decision in the context of Section 199 and reported at (2007) 15 SOT 368 (Delhi) wherein it was held that “payer does not pay the amount of TDS as his own liability and he only acts as the agent of the Govt. or as trustee to collect the TDS for the Govt. free of cost. If no credit is to be given to the payer and/or to the payee, the Govt. would have no authority to treat the same as tax and Article 265 does not empower the Govt to make any levy or collection of tax not authorized by law. It would be, therefore, improper and even impermissible for the Revenue to allow the amount of TDS after having received and enjoyed the same. It cannot be ignored that every item of TDS carries with it an obligation of trust and accountability to return the amount.” It was thus held therein that credit for TDS must in every case be given to the assessee from whose income tax was deducted at source and paid to the credit of 8 - . 632 2009 Income tax Appeal No of the Central Govt. Therefore, going by the Article of the Constitution and the citation above and income reflected in the hands of the agent having been treated as income of the appellant along with the agency income, builty charges and the royalty as representing the income of the appellant, therefore, u/s 199(1) of the I.T. Act the TDS claimed gets co- relatable to the said income and the appellant becomes eligible to get the credit for the same. Same is the position regarding other agents of the appellant as mentioned by the AO per annexure to the order. Moreover, principle of consistency is referred to as reported in 266 ITR 99 (SC) Berger Paints India Ltd. Vs. CIT. In earlier years for assessment year 1995-96 and 1998-99 in the case of appellant by completing regular assessment under Section 143(3) of I.T. Act the credit for TDS was never disputed and was allowed on the same pattern. Therefore, rule of consistency require that the same is also eligible in the year under consideration. Moreover, the AO has disallowed credit for TDS even in respect of the transactions prior to 30.09.2004 when the transportation work was assigned to other agents, other than Hamira Goods Carriers and the same is, therefore, factually incorrect. Therefore, AO’s conclusion not to allow credit for TDS in terms of Section 199(1) of I.T. Act is vacated.” The said findings were affirmed by the Tribunal on 30.4.2009, in the appeal preferred by the Revenue. 9 - . 632 2009 Income tax Appeal No of Learned counsel for the appellant-Revenue tried in vain to persuade this Court to re-appreciate the evidence and record a finding different than the one done by the appellate authorities below. He, however, could not point out any illegality or perversity in the concurrent findings recorded by the authorities below which may warrant interference by this Court. Under similar facts, the assessee had been granted credit of TDS under Section 199 of the Act in the assessment years 1995-96 and 1998-99. Further, the case is regarding giving credit of TDS to an assessee and it is not disputed that the burden of TDS has been borne by the assessee. Under such circumstances, the benefit of TDS should also be given to the assessee. In our opinion, the questions claimed by the Revenue are not substantial questions of law. The appeal is consequently dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) July 20, 2010 JUDGE *rkmalik*