By Ajay R. Singh, Advocate
Commissioner of Income Tax vs. Underwater Services Company
(Dissolved). [ Income tax Appeal no 1240 of 2014, dt : 20/12/2016 (Bombay High
Court)].
[Underwater Services Company (Dissolved). vs. Assistance
Commissioner of Income Tax,. [ITA No.
5828/MUM/2012; Bench : F ; dated
30/07/2012 ; Mum. ITAT ]
The Assessee was engaged in providing underwater services,
such as diving, towing, salvaging, underwater marine repair and maintenance.
For the aforesaid purpose, it chartered two vessels belonging to M/s.Samsung
Maritime Ltd. (a sister concern) and claimed charter hire expenses for the year
at Rs.441.37 lakh. The same was liable for deduction of tax at source u/s.
194-I of the Act. The recipient/payee of the hire charges i.e. M/s. Samsung
Maritime Ltd. had applied to the department for waiver of tax deducted at
source u/s. 197 of the Act. The Income Tax Officer (TDS) by a communication
dated 7th May, 2008 granted a certificate u/s. 197(1) of the Act and
directed the Assessee that charter hire paid or credited to M/s.Samsung
Maritime Ltd. would be after deduction of tax at the rate of 2.02% (net) instead of 10%.
During the assessment proceedings, the assessee urgedthat the amounts on account of charter
hire charges were paid and also credited to the account of M/s.Samsung Maritime
Ltd. after 7th May, 2008. Thus the deduction of tax was at the
concessional rate of 2.02%. Without prejudice it was pointed that the amount
which could be disallowed at the highest was Rs.86.40 lakh on account of
services received prior to 7th May, 2008. The AO passed the order
and disallowed the amount of Rs.86.40 lakh which according to him was an amount
payable prior to date of certificate dated 7th May, 2008. This on
the ground that the certificate was operative only from the date of issue i.e.
7th May, 2008 and coupled with his undertaking that the assessee has
itself offered the disallowance of Rs.86.40 lakh.
Being aggrieved, the Assessee had filed an appeal before the
CIT (A). The CIT (A) dismissed the assessee’s appeal. It upheld the
disallowance of Rs.86.46 lakhs for non deduction of tax at the rate of 10% as
done by the AO.
Being aggrieved, the Assessee carried the issue in appeal to
the Tribunal. The Tribunal held that amount payable for month of April 2008 in
respect of two vessels taken on hire from M/s. Samsung Maritime Ltd. stood
credited in the books of Assessee only after 7th May, 2008 and
admittedly paid thereafter. In the above view the Tribunal held that the liability to deduct tax at
source only arose post 7th May, 2008 even in respect of services
received earlier. Consequently, the tax deducted on such credit/payment would
be on lower rate of 2.02% (net) as allowed by the certificate u/s. 197(1) of
the Act. The Tribunal also relied upon its earlier order for the Assessment
Year 2007-08 which accepted the Assessee’s contention, that is, as date of
credit and date of payment were as in the present facts both after the issuance
of certificate u/s. 197(1) of the Act the tax will be deducted at lower rate.
The grievance of the Revenue before High Court is two fold,
one that the Assessee has itself accepted the liability to deduct tax at the
rate of 10% prior to 7th May, 2008 and offered to disallow
expenditure of Rs.86.40 lakh. Therefore, it is not now open to the Assessee to
urge before the Appellate Authorities that the amount of Rs.86.40 lakh cannot
be disallowed as now contended. Secondly, it is submitted that entries are made
in the books by the Assessee only to circumvent the provisions of Act coupled
with the fact that the payee M/s. Samsung Maritime Ltd. and Assessee belong to
same group. Therefore, the Assessee’s claim made before and allowed by the
Tribunal is incorrect.
The High Court noted that the Tribunal on examination of the ledger account of the
Assessee noted that the date of credit for the charter hire charges payable to
its sister company M/s.Samsung Maritime Ltd. was credited only after 7th
May, 2008. The payment was also made by the Assessee after crediting of the
amount in its books of account. Moreover, the ledger account was produced
before the Tribunal as the same was produced even before the AO. Moreover,
there can be no estoppel against the statute. Therefore, even if it is
assumed that the Assessee had suggested that Rs.86.40 lakh be disallowed for
not deducting tax at 10% then the same would be contrary to the deduction of
tax to be done u/s. 197 of the Act. The Authorities under the Act were obliged
to apply the law to the facts existing and grant relief to the Assessee
wherever available. In view of above, the view taken by the Tribunal in the
impugned order on the available facts is a possible view. Appeal of revenue was
dismissed.
