Payment made to the manager for Euro Issue without deducting TDS can create liability of interest under sec 194A of the Act

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in directing to allow interest under section 244A on the amount of self assessment tax ignoring the Circular No.769 and 790 issued by the CBDT The facts which are revealed from the record as under. The assessee made a Euro issue in February, 1994 for USD 75.00 million. The assessee had appointed M/s. Barclays de Zoete (BZ) (in short Barclays) as a lead manager for assisting the issue and had paid an amount of Rs.8.72 crores towards various services rendered by said party as a lead Manager of the assessee. At the time of making payments to Barclays the assessee did not withhold any tax u/s.195 of the Act. The A.O. passed the order u/s.195 r.w.s. 201(1) and 201(1A) of the Act dated 24.01.2000 treating the assessee as assessee in default for not deducting tax u/s.195 in respect of the payment made to M/s. Barclays, lead Manager and raised demand of Rs.6.25 crores on the assessee, comprising tax demand of Rs.3.74 crores and interest u/s.201(1A) of the Act of Rs.2.78 crores. In pursuance of the order passed by the A.O. u/s.195 r.w.s. 201(1) and 201(1A) of the Act the assessee paid Rs.1 crore on 30.03.2000 to meet the part of the demand. The assessee challenged the said order before the first appellate authority who passed the order dated 04.04.2000 sustaining the order of the A.O. but set aside the issue of non-applicability of grossing-up of tax to the A.O. and gave direction for adopting lower rate of tax. The A.O. passed the order giving appeal effect on 30.05.2000 and recomputed the demand at Rs.4.91 crores which comprised tax of Rs.2.62 crores and interest of Rs.2.29 cores. In setting aside the proceedings, the A.O. rejected the contention of the assessee on non-applicability of grossing up and after adopting lower rate of tax, granted credit of Rs.1 crore paid on 30.03.2000 and raised the fresh demand of Rs.3,98,00,000/-. Again the assessee carried the issue before the Ld. CIT (A) who allowed the appeal of the assessee on the issue of the grossing-up and directed the A.O. not to comply grossing-up while working out tax liability. The assessee further carried the matter before the ITAT and the ITAT vide order dated 08.06.2005 allowed the appeal filed by the assessee and cancel the demand raised by the A.O. u/s.195 r.w.s. 201(1) and 201(1A) of the Act. The A.O. passed the order giving appeal effect to the order of the Tribunal dated 30.09.2005, deleting the demand of Rs.4.91 crores who omitted the credit of Rs.1 crore for tax paid by the assessee. The A.O. passed the rectification order u/s.154 on 18.01.2006 granting refund of tax of Rs.1 crore along with the interest u/s.244A(1) of the Act of Rs.47.50 lakhs, for period from 30.03.2000 to 18.01.2006 (date of order). However, subsequently, the A.O. vide order dated 2.6.2009 passed u/s.154 has withdrawn interest of Rs.47.50 lakhs which was allowed u/s.244A(1) of the Act vide order dated 18.01.2006. The assessee challenged the order passed by the A.O. u/s.154 withdrawing interest granted u/s.244A(1) of the Act before the Ld. CIT (A). The Ld. CIT (A) after considering the decision in the case of ITO vs. Delhi Development Authority 252 ITR 772 (SC) as well as the decision in the case of ADIT Mumbai vs. M/s. Reliance Info Com Ltd. 209-TIOL-602-ITAT-Mumbai order dated 09.09.2009 directed the A.O. on the ground to allow the interest on the amount of Rs.1 crore paid by the assessee. Now, the revenue is in appeal before us.

Citation :
Asst. Director of Income-tax (International Taxation)-1(2),119, Scindia House,Ballard Pier, Mumbai-400 038 .....…. Appellant Vs Carol Info Services Ltd.,(Formerly –Wockhardt Life Sciences Ltd.)City Survey No.681, Village-Nahur,Mulund Goregaon Link Road, Bhandup (W), Mumbai -4000 078 .....… Respondent