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Taxpayer cannot be expected to deduct TDS on certain payments, simply on basis of amendments made later in Income tax Act: ITAT

READ ORDER BELOW :

2019-TIOL-1325-ITAT-MUM

IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH ‘D’ MUMBAI

ITA No.5497/Mum/2017
Assessment Year: 2012-13

DEPUTY COMMISSIONER OF INCOME TAX 
(TDS)-2(1), ROOM No 615, 6TH FLOOR
SMT K G MITTAL AYURVEDIC HOSPITAL BLDG
CHARNI ROAD(W), MUMBAI-400 002

Vs

M/s REDIFF.COM INDIA LTD
1ST FLOOR, MAHALAXMI ENGG ESTATE
L.J. ROAD NO.1
MAHIM (W) MUMBAI
PAN/TAN AAACR-2762-F/ MUM-07624-B

Mahavir Singh, JM & Manoj Kumar Aggarwal, AM

Date of Hearing: March 11, 2019
Date of Decision: March 13, 2019

Appellant Rep by: D G Pansari-Ld.DR
Respondent Rep by: Pankaj Jain-Ld. AR

Income tax – Sections 194J, 201(1) & 201(1A)

Keywords – assessee in default – data line charges – tax at source

THE assessee company was engaged in the business of providing online news, information, communication, entertainment and shopping services. It had preferred the present appeal challenging the order u/s. 201(1) / 201(1A) passed by Asst CIT wherein it transpired that the assessee had failed to deduct tax at source on payment of Rs.13.81 Crores representing payment for Data Line Charges as per the provisions of Section 194J. Although the assessee defended its stand by contending that the provisions of Section 194J were not applicable to such payments and secondly, the payee had offered the receipts in their respective return, however, not convinced, the AO, treating the assessee as in default, raised a TDS demand of Rs.138.17 Lacs u/s 201(1) and corresponding interest demand u/s 201(1A) for Rs.41.75 Lacs. On appeal, the FAA deleted the additions.

On appeal, the ITAT held that,

Whether taxpayer can be expected to deduct tax at source on certain payments, simply on basis of amendments made later in Income tax Act – NO: ITAT

++ it is seen that the Coordinate Bench in ITA Nos. 3116-17/Mum/2014 – 2016-TIOL-23-ITAT-MUM, has observed that: “….the dispute with regard to the nature of payment made for purchase of software was settled at rest only by Finance Act 2012 through which Explanation-4 was added to Sec. 9(1)(vii). Although the said amendment was given retrospective effect, legal maxim, lex non cogit ad impossibillia, meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform….” The FAA has provided relief to the assessee by placing reliance on this decision of the Tribunal. Therefore, no infirmity could be find in the same.

Revenue’s appeal dismissed

Case followed:

ITA Nos. 3116-17/Mum/2014 – 2016-TIOL-23-ITAT-MUM

ORDER

Per: Manoj Kumar Aggarwal:

1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2012-13 contest the order of Ld. Commissioner of Income- Tax (Appeals)-60, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No.CIT(A)-60/IT-31/ITO(TDS)RG.3(4)/2014-15 dated 20/06/2017 qua deletion of certain addition u/s 201(1) / 201(1A). The assessee was engaged in the business of providing online news, information, communication, entertainment and shopping services.

2. The genesis of the same lies in order u/s. 201(1) / 201(1A) dated 28/02/2014 for AY 2012-13 passed by Ld. Assistant Commissioner of Income Tax (TDS)-3(2) wherein it transpired that the assessee failed to deduct tax at source [TDS] on payment of Rs.13.81 Crores representing payment for Data Line Charges as per the provisions of Section 194J. Although the assessee defended its stand vide reply dated 11/02/2014, inter-alia by contending that the provisions of Section 194J were not applicable to such payments and secondly, the payee had offered the aforesaid receipts in their respective return of income, however, not convinced, Ld. AO, treating the assessee as assessee-in-default, raised a TDS demand of Rs.138.17 Lacs u/s 201(1) and corresponding interest demand u/s 201(1A) for Rs.41.75 Lacs.

3. The first appellate authority deleted the same by relying upon the decision of this Tribunal rendered in assessee’s own case for AYs 2010-11 & 2011-12. Although Ld. Departmental Representative supported the view of Ld. AO, however, failed to demonstrate any distinguishing feature in the Impugned AY. No contrary judgment has been placed on record.

4. Upon perusal of Tribunal’s order ITA Nos. 3116-17/Mum/2014 dated 04/11/2015 = 2016-TIOL-23-ITAT-MUM, we find that the matter has been concluded in assessee’s favor by making following observations: –

“6. We have carefully perused the orders of the authorities below. In our considered opinion, the dispute with regard to the nature of payment made for purchase of software was settled at rest only by Finance Act 2012 through which Explanation-4 was added to Sec. 9(1)(vii). Although the said amendment was given retrospective effect, legal maxim, lex non cogit ad impossibillia, meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform.

6.1. As mentioned elsewhere, the amendment was given a retrospective effect but by that time the assessee has already done the transactions without deducting tax at source. On these facts, the assessee cannot be held to have violated the provisions of Sec. 194J of the Act. Our view is fortified by the decisions of the Tribunal in the case of Channel Guide India Ltd. Vs ACIT 139 ITD 0049 = 2012-TII-139-ITAT-MUM-INTL and Rich Graviss Products (P) Ltd. 166 TTJ 329 = 2014-TII-133-ITAT-MUM-INTL and also by the decision in the case of New Bombay Park Hotel Pvt. Ltd Vs ITO in ITA No. 7641/M/2011 2013-TII-188-ITAT-MUM-INTL. Respectfully following the decisions of the Coordinate Bench (supra), we do not find any reason to interfere with the findings of the Ld. CIT(A).”

The first appellate authority has provided relief to the assessee by placing reliance on this decision of the Tribunal. Therefore, no infirmity could be find in the same.

5. The appeal stands dismissed.

(Order pronounced in the open court on 13.3.2019)

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