Bombay High Court

Kirtikumar Shantilal Chandan vs Hitesh Pawanraj Mehta on 25 January, 2024

Author: Abhay Ahuja

Bench: Abhay Ahuja

                                                            5. COMSS 11-22.doc


                 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                     ORDINARY ORIGINAL CIVIL JURISDICTION
                         IN ITS COMMERCIAL DIVISION

                  COMMERCIAL SUMMARY SUIT NO. 11 OF 2022

 Kirtikumar Shantilal Chandan                        ...Plaintiff
             V/s.
 Hitesh Pawanraj Mehta                               ...Defendant



 Mr. Nirman Sharma with Ms. Uma Sharma, Advocate for the Plaintiff.
 None for the Defendant.


                           CORAM   :   ABHAY AHUJA, J.

                           DATE    :   25th JANUARY, 2024


 P.C. :

1. Pursuant to the order dated 18th January, 2024 and pursuant to

the circulation sought by the learned Counsel for the Plaintiff, this

matter is listed today.

2. Pursuant to the earlier order of this Court, Mr. Prathamesh

Kamat, learned Counsel of this Court was appointed as Amicus Curiae

to examine and assist the Court on the issue of limitation with respect

to the TDS Certificate i.e. Whether the TDS certificate can be

considered as an acknowledgment of liability for extending the period

of limitation under Sections 18 and 19 of the Limitation Act, 1963. Mr.

5. COMSS 11-22.doc

Kamat had relied upon decisions in the cases of S. P. Brothers Vs. Biren

Ramesh Kadakia1, Actal Vs India Infoline Limited 2 and J. K. Engineering

Pvt. Ltd. Vs. ANE Industries Pvt. Ltd.3

3. It is submitted that the view of the Division Bench of this Court

in the case of S. P. Brothers Vs. Biren Ramesh Kadakia (supra) holding

that the issuance of the TDS certificates does not amount to an

acknowledgment of debt within the meaning of Section 25 of the

Indian Evidence Act, which has been affirmed by a Full Bench of this

Court in the case of Jyotsna K. Valia Vs. T. S. Parekh and Co. 4 which

held that the TDS certificate is primarily to acknowledge the deduction

of tax at source. That the certificate does not refer to any amount of

loan or the rate of interest which is payable on the principal amount.

That a bare reading of Order 37 Rule 2 shows that these provisions

have restricted application and certificate for tax deducted at source

would not be a document which will fall in any of the clauses stated

under Order 37 Rule 2.

1 2008 SCC Online Bom 1599 2 2012 SCC Online Bom 1507

4 2007(4) Mh. L. J.

5. COMSS 11-22.doc

4. Mr. Sharma, learned Counsel for the Plaintiff has drawn the

attention of this Court to the decision of the Hon'ble Delhi High Court

in the case of Ansal Housing Ltd Vs. Samyak Projects Pvt. Ltd.5, where a

contrary view has been taken on the basis of analysis of Section 19 of

the Limitation Act, 1963 read with Section 194A and 198 of the Income

Tax Act where the Delhi High Court held that as the deposit of TDS was

made on a particular date in terms of Section 198 of the Income Tax

Act, it would be deemed to be an income received by the Plaintiff and

the said payment would, in terms of Section 19, extend the period of

limitation. The Delhi High Court held that the issue of TDS certificate

would satisfy the second condition of Section 19 of the Limitation Act.

The Delhi High Court has also distinguished the decision of this Court

in the case of S. P. Brothers Vs. Biren Ramesh Kadakia (supra) and

Actal Vs India Infoline Limited (supra) holding that the said judgments

have no application to the facts of the said case and that although

deposit of TDS may not act as an acknowledgment of debt by the

Defendant, it being a payment made by the Defendant on account of

the Plaintiff and on account of a debt, would lead to a fresh period of

limitation being computed from the date the deposit of TDS was made.

Accordingly, the Delhi High Court held that the suit cannot be barred

5 2023 SCC online Del 2387

5. COMSS 11-22.doc

by limitation.

5. Paragraphs 29 to 38 of the said decision are usefully quoted as

under:-

"29. The learned senior counsel for the defendant has asserted that as the case of the plaintiff itself is that the last payment made against the Deed of Cancellation was received by the plaintiff from the defendant on 27.03.2015, the present Suit having been filed on 20.09.2018, is, therefore, barred by limitation. He has submitted that the mere fact of the deposit of TDS on 30.09.2015 by the defendant would not extend the period of limitation.

30. The above submission is disputed by the learned senior counsel for the plaintiff contending that the TDS deposited is to the account of the plaintiff and, therefore, would extend the period of limitation.

31. Section 19 of the Limitation Act, 1963 reads as under:

"19. Effect of payment on account of debt or of interest on legacy.--Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made:

Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the handwriting of, or in a writing signed by, the person making the payment."

32. To attract the above provision and take benefit thereof, the plaintiff has to prove that:--

(a) The payment on account of the debt was made by the defendant before the expiration of the prescribed period;

(b) The payment was acknowledged by some term of writing either in the handwriting of the payer or signed by the payer.

5. COMSS 11-22.doc

33. Section 194A of the Income Tax Act obliges the person responsible for paying interest to another to deduct, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by an issue of a cheque or draft or by any other mode, whichever is earlier, income tax thereon at the rate in force. Explanation to Section 194A (1) further provides that where any income by way of interest is credited to any account in the books of account of the person liable to pay such income, such crediting shall also be deemed to be a credit of such income to the account of the payee making such person liable to deduct TDS.

34. Section 198 of the Income Tax Act further provides that all sums deducted shall, for the purpose of computing the income of the assessee, be deemed to be income received by such assessee.

35. In Baranagore Jute Factory PLC. Mazadoor Sangh (BMS) (supra), the Supreme Court observed that the amount deposited as TDS also partakes the character of compensation that was payable by NHAI in the said case.

36. In the present case, as the deposit of TDS was made on 30.09.2015, in terms of Section 198 of the Income Tax Act, it would be deemed to be an income received by the plaintiff. The said payment being made against the Cancellation Deed, which is not denied by the defendant, would in terms of Section 19 of the Limitation Act, extend the period of limitation. The issue of the TDS Certificate by the defendant shall satisfy the second condition of Section 19 of the Limitation Act as culled out above.

37. In Utility Powertech Limited (supra), the Court held that the deduction of TDS is not an admission of liability. The same was the ratio in Actal (supra) and in S.P. Brothers (supra). The said judgments would, however, have no application to the facts of the present case. Though deposit of TDS may not act as an acknowledgment of debt by the defendant, it being a payment made by the defendant on account of the plaintiff and on account of a debt, would lead

5. COMSS 11-22.doc

to a fresh period of limitation being computed from the date when the deposit of TDS was made.

38. The Suit therefore, cannot be said to be barred by limitation."

6. In my view, the view taken by the Hon'ble Delhi High Court could

be examined in the facts and circumstances of a particular case.

7. Today the matter has been listed for Mr. Sharma, learned Counsel

for the Plaintiff, to proceed with the submissions on the facts of the

case to pursue this Court to pass ex-parte decree. However, Mr. Sharma,

has points out that pursuant to the notification issued in this regard

and a notice of this Court, this matter has been listed in the list of

matters which are likely to be transferred to the City Civil Court at

Bombay, the appointed date being 28th January, 2024.