8. Interpretation – SUBLATO FUNDAMENTO CEDIT OPUS – Once the foundation is removed, the superstructure falls.

Commissioner of Income Tax, TDS vs.
M/s.Oberoi Constructions Pvt.Ltd. [Income tax Appeal no 573 of 2014 dt :
01/10/2016 (Bombay High Court)].

[Commissioner of Income Tax, TDS vs.
M/s.Oberoi Constructions Pvt.Ltd., [dated 06/10/2013 ; A Y: 2006-07. Mum. ITAT
]

The assessee is in construction business.
During the AY: 2006 – 07, the assessee had paid share application money to one
M/s. Siddhivinayak Realities Pvt. Ltd. The Assessing Officer added the amount
of Rs.10.35 crore as deemed dividend on a substantive basis in the hands of
Siddhivinayak Realities Pvt. Ltd. and on a protective basis in the hands of its
director Mr. Vikas Oberoi in their assessment orders. Being aggrieved, both
M/s.Siddhivinayak Realities Pvt. Ltd. and Mr. Vikas Oberoi challenged their
orders of assessment holding that they are in receipt of deemed dividend. Their
appeals were allowed by the CIT(A) holding that they could not be charged to
tax on the amount of Rs.10.35 crores as recipients of deemed dividend u/s.
2(22)(e).

Being aggrieved by the order of CIT(A), the
Revenue filed an appeal to the Tribunal which was dismissed. Thereafter, the
Revenue filed an appeal to High court, being in the case of M/s.Siddhivinayak
Realities Pvt. Ltd. and Mr. Vikas Oberoi. The High Court by orders dated 4^th
July 2014 and 8^th June 2016, respectively, dismissed both the
Revenue’s appeals from the orders of the Tribunal holding that M/s.
Siddhivinayak Realities Pvt. Ltd. and Vikas Oberoi cannot be charged to tax as
recipients of deemed dividend.

In the meantime, pending the aforesaid
proceedings, the ACIT (TDS) passed an order dated 11^th February 2011
u/s. 201(1) and 201(1A) of the Act holding the assessee to be an assessee in
default for not having deducted tax on the deemed dividend of Rs.10.35 crore
paid to M/s. Siddhivinayak Realities Pvt. Ltd. The assessee, being aggrieved,
filed an appeal to the CIT (A). The appeal of the assessee was allowed by the
CIT (A) holding that as in the appellate proceedings in respect of M/s.
Siddhivinayak Realities Pvt. Ltd. and Mr. ikas Oberoi, the addition of income
to the extent of Rs.10.35 crore u/s. 2(22)(e) of the Act on substantive and
protective basis had been deleted, there was no taxable income which had to
suffer tax deduction at source. Consequently, no failure to deduct tax could
arise.

Being aggrieved, the Revenue carried the
issue in further appeal to the Tribunal. The Tribunal upheld the order of the
CIT (Appeals) holding that once the addition made on account of deemed dividend
is deleted in the hands of the recipient of the amount of Rs.10.35 crore, there
could be no failure to deduct tax at source thereon. Thus, the consequent
demand u/s. 201(1) and 201(1A) upon the assessee was not justified.

Being aggrieved, the Revenue filed an appeal
before High Court. The High Court held that both the CIT (A) as well as the
Tribunal in these (TDS) proceedings have held that as the very basis for
holding the assessee liable for failure to deduct tax did not subsist, the TDS
proceedings must also fail. This was in view of the orders passed in the case
of recipients i.e. M/s.Siddhivinayak Realities Pvt. Ltd. and Mr.Vikas Oberoi in
appeal by the authorities under the Act including this Court that they were not
liable to any tax as they had not received any deemed dividend u/s. 2(22)(e).
Once the foundation is removed, the superstructure falls (sublato fundamento
Cedit opus). The grievance of the Revenue is that in TDS proceedings, one
must ignore the orders passed in the hands of the recipients i.e.
M/s.Siddhivinayak Realities Pvt. Ltd. and Mr.Vikas Oberoi.

The Court observed that the officers of the
Revenue while administering the TDS provisions are not outside the scope of the
Act and orders passed under the Act in respect of the character of the payment
made under the Act are binding upon them. The fact that at the time the order
of the ACIT (TDS) was passed, there was basis to do so does not mean that
orders passed on income in the hands of the recipients will have no bearing in
deciding its validity. One must not ignore the fact that this order of the TDS
officer is tentative in nature and its existence would depend upon the nature
of receipt in the hands of the recipient and subject to the orders passed in
respect thereof by appropriate court. In the above view, the appeal was
dismissed.