M/S HINDUSTAN COCA COLA BEVERAGE PVT. LTD.versusCOMMISSIONER OF INCOME TAX

A         "' l -MIS. HINDUSTAN COCA COLA BEVERAGE PVT. LTD.
                                      v.
                        - COMMISSIONER OF INCOME TAX

                            -... , AUGl;ST 16, 2007
                   ..                ·,   ,,,.
                 (S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.]


           Judicial Interft;ren<;:e-Order by tribun_al directing reopening. of matter
    for further hearing-Order of tribunal having attained finality-Interference
C }Y    Jiigh Court-Propriety of-Held: Not proper-Judgment/Order.

          Income Tax Act, I96I-Sections I94C and 20I(l)-Assessee paying
    warehouse charges to a company on which it deducted tax under section
    I 94-C-Assessing Officer holding 'assessee in default' for amount of short
    deduction of tax and levied interest thereon-Circular that no demand
D   visualized under s. 20I (I) to be enforced after tax deductor satisfied the
    officer-in-charge of TDS, that taxes due were paid by deductee-assessee-
    However, interest could be levied under s. 20I till the date of payment of          . __
    taxes by deductee-assessee-On facts, both interest uls 211 and tax due
    paid-Circular applicable to the facts of the case-CBDT Circular No. 2751
    20I/95-IT (B} dated 29.1.1997.
E
          Appellant-assessee used the premises of POC for store purpose and paid
    POC the warehouse charges on which tax was deducted under section 194C
    of the Income Tax Act, 1961 @2%. Assessing Officer held the appellant to
    be 'assessee in default' for the shortfall in the amount of tax deducted at
F   source in respect of warehouse charges paid to POC and levied interest under
    section 201 (IA) of the Act on the amount of tax alleged to be short deducted.
                                                                                          'I-
    Appellant filed appeal. Tribunal upheld the order of the Assessing Officer.
    High Court also upheld the order. Thereafter, appellant filed miscellaneous
    application in the appeals that were already disposed of. Appellant sought
    rectification of the order of tribunal on the ground that its alternative
G   contention raised in Ground No. 7 in the memorandum of appeal that the
    warehouser has been assessed on its income and the tax due has been recovered
    from it by the department and as such, no further tax could be collected from
    the appellant on the same income, was not considered by the Tribunal. The
    Tribunal allowed the application by recalling its earlier order. The Department

H                                                1046
                HINDUSTAN COCA COLA BEVERAGE PVT. LTO.•. COMMNR. OF INCOME TAX   I04 7

did not challenge the said order. Tribunal upon rehearing the appeal held that           A
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 POC had already paid taxes on the amount
received from the appellant However, High Court held that the tribunal could
not have reopened the matter for any further hearing since the earlier order
of the Tribunal attained finality on dismissal of appeal filed against the earlier       B
order, by High Court; that the point based on Ground No. 7 was not taken up
in the appeal filed by the appellant; and that the Tribunal's earlier order got
itself merged into the order passed by High Court. Hence the present appeal.

      Allowing the appeal, the Court
                                                                                         c
     HELD: 1.1. 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. (Para 9) (1050-B)
                                                                                         D
        1.2. The circular No. 275/201/95-IT(B) dated 29.1.1997 issued by the
Central Board of Direct Taxes declares "no demand visualized under s. 201
(1) of the Income-tax Act should be enforced after the tax deductor has satisfied
the officer-in-charge ofTDS, 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-            E
assessee or the liability for penalty under Section 271C of the Income-tax
Act." (Para 10) (1050-C, DI

      1.3. 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, POC. It is not disputed that the circular is applicable to            F
the facts situation on hand. (Para 11) (1050-E)

      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3765 of2007.

      From the Judgment and Order dated 11. I0.2006 of the High Court of
Delhi at New Delhi in LT.A. Nos. 478 and 843of2005.                      G
     Soli J. Sorabjee, Bhargava V. Desai, Kavita Jha, Rahul Gupta and Reema
Sharma for the Appellant.

     P.P. Malhotra, lrshad Ahmad and B.V. Balaram Das for the Respondent.
                                                                                         H
    1048                    SUPREME COURT REPORTS                   [2007] 8 S.C.R.

A          The Judgment of the Court was delivered by

           B. SUDERSHAN REDDY, J. l. Leave granted.

          2. This appeal by Special Leave preferred by the appellant-assessee is
    directed against the judgment of Delhi High Court dated I I. I 0.2006 in ITA No.
B   478 of2005.

           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 Mis.
C   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 Mis. Pradeep Oil
    Corporation on which tax was deducted under Section 194C of the Income Tax
    Act, 196I (for short 'the Act')@ 2%. The Assessing Officer vide order dated
D   30.3.200I held the appellant to be 'assessee in default' for failure to deduct
    tax at source in respect of warehousing charges paid to Mis. 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 I 94C of the Act at 2%.
    The Asst:ssing Officer accordingly heL ~iat the warehousing charges were
E   in the nature ofrent as defined in Explanation to Section I94-I of the Act and,
I
    therefore, tax ought to have been deducted at 20% under the said provisions
    as against deduction of tax at 2% under Section I 94C 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
    20I(IA) of the Act on the amount of tax alleged to be short deducted. The
F   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
G   before the 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 20I(IA)
    of the Act. The further appeal preferred by the appellant-assessee was
    dismissed by the High Court on 21.5.2004.

H          6. The appellant thereafter preferred miscellaneous application in the
        HINDUSTAN COCA COLA BEVERAGE PVT. LTD., .. COMMNR. OF INCOME TAX (B. SUDERSHAN REDDY. J.(   1049

appeals that were already disposed of seeking rectification of the order of the                            A
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 (I A) 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                                B
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                              C
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                           D
for the limited purpose of taking up the particular grJund 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.
                                                                                                           E
       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 :m 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                                F
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                                  G
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 same by the appellant                        H
                                                                                        +
    1050                   SUPREME COURT REPORTS                     [2007) 8 S.C.R.

A   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
B   conclusion that the Tribunal could pot 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
C   with the final order passed by the Income-tax Appellate Tribunal.

           10. Be that as it may, the circular No. 275/201/95-lT(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 20 I (l) of the Income-tax Act should be enforced
D   after the tax deductor has satisfied the officer-in-charge ofTDS, that taxes due
    have been paid by the deductee-assessee. However, this will not alter the
    liability to charge interest under Section 201 (IA) 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."

E        · 11. In the instant case, the appellant had paid the interest under Section
    201 (IA) 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
F   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.
G The appeal is allowed with no order as to costs.
    N.J.                                                           Appeal allowed.