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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

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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

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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.