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Commissioner Of Income-Tax v. Rajasthan Rajya Vidyut Prasaran Nigam Ltd.
Summarized Legal Opinion
Factual and Procedural Background
The question presented for admission of the appeal was whether the Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Appeals) deleting interest of Rs. 1,60,105 levied under section 201(1A) of the Income-tax Act. The facts are stated to be undisputed that, as and when the amounts were paid, tax had been deducted and that tax was paid to the Department. The Commissioner of Income-tax (Appeals) had directed deletion of interest after verifying that the recipient had already deducted tax at source in full. The Tribunal reviewed the matter, considered relevant authorities and the parties' submissions, and sustained the order of the Commissioner of Income-tax (Appeals) deleting the interest. The appeal in the present matter was dismissed at the admission stage.
Legal Issues Presented
- Whether, on the facts and circumstances of the case, the Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Appeals) deleting the interest of Rs. 1,60,105 levied under section 201(1A) of the Act?
Arguments of the Parties
Revenue's Arguments
- The Revenue's appeals were directed against the deletion of interest under section 201(1A) even though tax might have been paid subsequently; the statutory provision for interest is mandatory and automatic and compensates the Revenue for late receipt of tax.
Assessee's / Authorised Representative's Arguments
- The authorised representative relied on authority holding that if the amount payable to the Revenue had been duly paid, there was no question of levying any interest; in other words, when tax has been paid (and where a refund arises because the assessee paid more tax than payable), interest under section 201(1A) should not be charged.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner Of Income-Tax v. Rathi Gum Industries, [1995] 213 ITR 98 (Rajasthan HC) | Interest is to compensate the Revenue for loss suffered due to late receipt of tax; interest is mandatory and automatic from date tax was deductible until date tax is actually paid. | The Tribunal cited this authority to emphasize that interest under section 201(1A) is designed to compensate the Revenue for late receipt and ordinarily operates mandatorily from the date tax was deductible. |
| Commissioner Of Income-Tax v. Dhanalakshmy Weaving Works, [2000] 245 ITR 13 (Ker) | The purpose of the levy of interest is to claim compensation on the amount which ought to have been deducted and deposited but was not. | The Tribunal relied on this decision to support the proposition that interest seeks to compensate for amounts that ought to have been deducted and deposited. |
| Commissioner Of Income-Tax v. Rishikesh Apartments Co-Operative Housing Society Ltd., [2002] 253 ITR 310 (Guj) | Where the amount payable to the Revenue has been duly paid, there is no question of levying any interest. | The authorised representative relied on this authority to contend that interest should not be levied where the tax due to the Department had already been paid; the Tribunal regarded this line of authority as relevant in cases where the recipient had already deducted and paid tax and had claimed a refund. |
Court's Reasoning and Analysis
The court (Tribunal) proceeded by examining the undisputed factual position that tax had been deducted and paid to the Department when amounts were paid. It noted the Commissioner of Income-tax (Appeals)'s conclusion that tax at source was deductible on the composite contract (including supply of material). The Tribunal observed that the Revenue's appeals were directed only against the deletion of interest under section 201(1A) after verification that the recipient had already deducted tax in full.
The Tribunal reviewed the statutory scheme reflected in section 201(1A), observing that the provision contemplates both collection of tax not deducted and levy of interest. It acknowledged authorities establishing that the purpose of interest is to compensate the Revenue for delayed receipt and that interest provisions are ordinarily mandatory and automatic, running from the date tax was deductible until payment is made.
The Tribunal also considered precedent relied upon by the authorised representative which holds that where the amount payable to the Revenue has been duly paid, interest will not be levied. Balancing these positions, the Tribunal concluded that where, after due verification by the Assessing Officer supported by enclosures and supporting documents, it is found that the recipient had deducted tax at source and claimed a refund (i.e., where more tax was paid than payable and refund was due), deletion of the interest under section 201(1A) was justified. On that factual and documentary basis the Tribunal found no infirmity in the Commissioner (Appeals)'s order deleting interest and sustained that order.
Holding and Implications
DISMISSED AT THE ADMISSION STAGE.
Direct effect: The Tribunal's decision sustaining the Commissioner of Income-tax (Appeals)'s deletion of interest under section 201(1A) stands; the appeal against that aspect was dismissed at the admission stage. The opinion indicates that, on the facts before the Tribunal (where tax had been deducted, paid and a refund arose because more tax was paid than payable), there was no justification for charging interest under section 201(1A).
Broader implications: The opinion itself does not state that it establishes a new legal precedent beyond applying existing authorities to the facts; it confines its conclusion to the facts and documentary verification in the case at hand.
1. The following question is proposed for admission of the appeal:
“Whether, on the facts and circumstances of the case, the Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Appeals) deleting the interest of Rs. 1,60,105 levied under section 201(1A) of the Act?”
2. The facts are not in dispute that as and when the amount is paid, the tax has been deducted and that has been paid to the Department.
3. The Tribunal has considered this aspect in paras. 6 and 7 of its order. For ready reference, they read as under:
“6. We have heard the rival submissions and perused the materials available on record. We find that in this case the learned Commissioner of Income-tax (Appeals) had held that tax at source was to be deducted on the composite contract including on supply of material. The Revenue's appeals are directed only against the direction of the learned Commissioner of Income-tax (Appeals) for deletion of interest charged under section 201(1A) of the Act for both the years after due verification of the facts that the recipient had already deducted tax at source in full. The provision of section 201 provides not only for collection of tax which had not been deducted but for levy and charge of interest also. If the tax had already been paid by the recipient on such income it may not be justified to recover the said amount of tax, but so far as the liability of interest is concerned, that cannot be considered to be non-existent on account of deposit of tax by the recipient at a subsequent or later stage. It was also held by the hon'ble Rajasthan High Court at page 101 in the case of Commissioner Of Income-Tax v. Rathi Gum Industries., [1995] 213 ITR 98 that the interest is to compensate the Revenue for the loss, which it had suffered on account of late receipt of the tax. The provisions of interest are mandatory and automatic and interest has to be paid from the date on which the tax was deductible till the date on which the tax is actually paid. We may also refer to the decision in Commissioner Of Income-Tax v. Dhanalakshmy Weaving Works, [2000] 245 ITR 13 (Ker). In this case, it was held that the purpose of the levy is to claim compensation on the amount which ought to have been deducted and deposited and has not been done by the assessee. The learned authorised representative had relied upon the decision of Commissioner Of Income-Tax v. Rishikesh Apartments Co-Operative Housing Society Ltd., [2002] 253 ITR 310 (Guj). In this case, it was held that there was no question of levying any interest on the assessee as the amount which was payable to the Revenue had been duly paid.
7. After perusal of the facts of the case and relevant law as on the subject, we are of the opinion that learned Commissioner of Income-tax (Appeals) had rightly held that interest under section 201(1A) of the Act was to be deleted after due verification by the Assessing Officer from the enclosures with supporting documents. In all the cases, the recipient of the income had claimed refund, which had arisen due to tax deducted at source. Therefore, we find no infirmity in the order of the learned Commissioner of Income-tax (Appeals) and the same is hereby sustained.”
4. When the assessee has paid more tax than the tax payable and refund is due, even tax deducted at source is counted, in such case, there is no justification for charging of interest under section 201(1 A).
5. The appeal stands dismissed at the admission stage.
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