CASE NO.: Appeal (civil) 3765 of 2007 PETITIONER: M/s. Hindustan Coca Cola Beverage Pvt. Ltd RESPONDENT: Commissioner of Income Tax DATE OF JUDGMENT: 16/08/2007 BENCH: S.H. Kapadia & B. Sudershan Reddy JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO. 3765 OF 2007
(Arising out of SLP(c) No. 3883 of 2007)
B.SUDERSHAN REDDY,J.
Leave granted.
2. This appeal by Special Leave preferred by the
appellant-assessee is directed against the judgment of Delhi
High Court dated 11.10.2006 in ITA No. 478 of 2005.
3. Briefly stated the facts are as follows:
4. The appellant-assessee is engaged in the
manufacture and sale of soft drinks. The appellant-
assessee entered into an agreement with M/s. Pradeep
Oil Corporation for use of their premises for receipt,
storage and dispatch of goods belonging to the
appellant-company. There is no dispute that the
appellant had paid the warehousing charges to M/s.
Pradeep Oil Corporation on which tax was deducted
under Section 194C of the Income Tax Act, 1961 (for
short ‘the Act’) @ 2%. The Assessing Officer vide order
dated 30.3.2001 held the appellant to be ‘assessee in
default’ for failure to deduct tax at source in respect of
warehousing charges paid to M/s. Pradeep Oil
Corporation. The Assessing Officer rejected the plea of
the assessee that the payments made by the appellant-
company were in the nature of contractual payments on
which tax was deducted under Section 194C of the Act
at 2%. The Assessing Officer accordingly held that the
warehousing charges were in the nature of rent as
defined in Explanation to Section 194-I of the Act and,
therefore, tax ought to have been deducted at 20%
under the said provisions as against deduction of tax at
2% under Section 194C of the Act. The Assessing Officer
having held the appellant to be ‘assessee in default’ for
the shortfall in the amount of tax deducted at source
levied interest under Section 201 (1A) of the Act on the
amount of tax alleged to be short deducted. The
Assessing Officer accordingly determined the amount of
short deduction of tax and also levied interest payable
thereon under Section 201 (1A) of the Act.
5. The appellant preferred an appeal against the order
of the Assessing Officer before the Commissioner of
Income Tax (Appeals) and thereafter before the
Tribunal. The Tribunal also took the view that the
appellant-assessee to be an ‘assessee in default’ in
respect of the amount of short deduction of tax and also
upheld the levy of interest under Section 201 (1A) of the
Act. The further appeal preferred by the appellant-
assessee was dismissed by the High Court on
21.5.2004.
6. The appellant thereafter preferred miscellaneous
application in the appeals that were already disposed of
seeking rectification of the order of the Tribunal dated
12.7.2002. Be it noted, the appellant did not raise any
dispute about it being the ‘assessee in default’ and also
raised no objection as regards the levy of interest under
Section 201 (1A) of the Act. The grievance of the
appellant was that its alternative contention that the
warehouser has been assessed on its income and the
tax due has been recovered from it by the department
and therefore, no further tax could have been collected
from the appellant has not been considered by the
Tribunal in its order dated 12.7.2002. The contention
was that since the tax to be recovered by the
department on the income has already been paid by the
assessee, no further tax should be recovered from the
appellant on the same income. The Tribunal vide its
order dated 13.9.2004 allowed the application of the
appellant on the ground that the alternative contention
of the appellant has not been considered while disposing
of the appeal. The contention was specifically raised in
Ground No. 7 of the memorandum of appeal preferred
by the appellant. The Tribunal accordingly held, to that
extent, there is a mistake apparent on the face of record
and, therefore, constitutes a rectifiable mistake under
Section 254 (2) of the Act. The Tribunal accordingly
recalled its earlier order dated 12.7.2002 for the limited
purpose of taking up the particular ground raised in
Ground No. 7 in the memorandum of appeal. This order
directing the reopening of the matter has attained its
finality. The department did not challenge the said
order.
7. The Tribunal upon rehearing the appeal held that
though the appellant-assessee was rightly held to be an
‘assessee in default’, there could be no recovery of the
tax alleged to be in default once again from the
appellant considering that Pradeep Oil Corporation had
already paid taxes on the amount received from the
appellant. It is required to note that the department
conceded before the Tribunal that the recovery could not
once again be made from the tax deductor where the
payee included the income on which tax was alleged to
have been short deducted in its taxable income and paid
taxes thereon. There is no dispute whatsoever that
Pradeep Oil Corporation had already paid the taxes due
on its income received from the appellant and had
received refund from the tax department. The Tribunal
came to the right conclusion that the tax once again
could not be recovered from the appellant (deductor-
assessee) since the tax has already been paid by the
recipient of income.
8. The High Court interfered with the order passed by
the Tribunal on the ground that the order dated
12.7.2002 of the Income-Tax Appellate Tribunal has
attained its finality since the appeal filed against the
same by the appellant was dismissed by the High Court
on 21.5.2004; the point based on Ground No. 7 was not
taken up in the appeal preferred by the appellant in the
High Court. The High Court further held that the
Income-tax Appellate Tribunal’s order dated 12.7.2002
got itself merged into the order passed by it on
21.5.2004 dismissing the appeal of the appellant herein.
The High Court came to the conclusion that the Tribunal
could not have reopened the matter for any further
hearing.
9. We have already noticed that the order passed by
the Tribunal to reopen the matter for further hearing as
regards ground No. 7 has attained its finality. In the
circumstances, the High Court could not have interfered
with the final order passed by the Income-tax Appellate
Tribunal.
10. Be that as it may, the circular No. 275/201/95-
IT(B) dated 29.1.1997 issued by the Central Board of
Direct Taxes, in our considered opinion, should put an
end to the controversy. The circular declares “no
demand visualized under Section 201 (1) of the Income-
tax Act should be enforced after the tax deductor has
satisfied the officer-in-charge of TDS, that taxes due
have been paid by the deductee-assessee. However,
this will not alter the liability to charge interest under
Section 201 (1A) of the Act till the date of payment of
taxes by the deductee-assessee or the liability for
penalty under Section 271C of the Income-tax Act.”
11. In the instant case, the appellant had paid the
interest under Section 201 (1A) of the Act and there is
no dispute that the tax due had been paid by deductee-
assessee (M/s Pradeep Oil Corporation). It is not
disputed before us that the circular is applicable to the
facts situation on hand.
12. In the circumstances, it is not necessary to go in
detail as to whether the Tribunal could have at all
reopened the appeal to rectify the error apparent on the
face of the record. We do not wish to express any firm
view on this aspect.
13. The impugned judgment of the High Court is
accordingly set aside. The appeal is allowed with no
order as to costs.
