Sharma Pharmaceuticals Pvt.Ltd., Baroda V. The ACIT, Circle- 4, Baroda

CO 20/AHD/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1658 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH B THAKKAR
• Keywords: Retrospective amendment
• Section: 143(3); 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ./ ITA NO. 2605/AHD/2012 & CO NO.20/AHD/2013 / ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE-4 BARODA .. APPELLANT VS M/S. SHARMA PHARMACEUTICAL PVT LTD 444, GIDC WAGHODIA, BARODA .. RESPONDENT PAN : AAICS 2527 B & CROSS-OBJECTOR REVENUE BY MS. SANYOGITA NAGPAL, SR DR ASSESSEE(S) BY SHRI PRAKASH B. THAKKAR , AR / DATE OF HEARING 01/12/2015 /DATE OF PRONOUNCEMENT 11/12/2015 / O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE AND THE CROSS-OBJE CTION THEREOF FILED BY THE ASSESSEE ARE DIRECTED AGAINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, BARODA DA TED 08.08.2012 PASSED FOR ASSESSMENT YEAR 2008-09. 2. REVENUE IN ITS APPEAL HAS RAISED FOLLOWING GROUN DS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE AD DITION OF RS. 11,85,459/- U/S 40(A)(IA) OF THE ACT, HOLDING T HAT THE PROVISIONS OF SECTION 40(A)(IA) AS AMENDED BY THE F INANCE ITA NO. 2605/AHD/2012 & CO 20/AHD/2013 ACIT VS. SHARMA PHARMACEUTICALS PVT LTD AY 2008-09 - 2 - ACT, 2010 W.E.F. 01.04.2010, ARE OF CLARIFICATORY N ATURE AND, THEREFORE RETROSPECTIVE, WITHOUT CONSIDERING T HE FACT THAT THE RELEVANT PORTION OF THE MEMORANDUM EXPLAIN ING THE PROVISIONS IN FINANCE BILL, 2010 CLEARLY STATES THAT THIS AMENDMENT IS PROPOSED TO TAKE EFFECT FROM 01.04,2010 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2010-11 AND SUBSEQUENT YEARS. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE AO T O VERIFY AND ALLOW THE DISALLOWANCE OF EXPENDITURE OF RS.2,79,617/- ( RS.1,75,512/- + RS.82,716/- + RS.21 ,389) U/S 40(A)(IA) OF THE ACT MADE BY THE AO, IF THE SAM E IS PAID BY 31.03.2008, COMPLETELY OVERLOOKING THE FACT THAT THE TDS PROVISIONS U/S 194C WERE NOT COMPLIED WITH BY THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. 4. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. 3. IN CROSS-OBJECTION, THE ASSESSEE HAS RAISED FOLL OWING GROUNDS:- WE MOST RESPECTFULLY GIVE OUR SUBMISSION FOR EACH PARA AS UNDER: DISALLOWANCE VIDE PARA 7(I) AND 7(II) OF THE ORDER IS IN RESPECT OF SECTION 40(A)(IA). DURING THE COURSE OF ASSESSMENT LEARNED ITO HAS DISALLOWED EXPENSE TO TH E TUNE OF RS. 1185459/- FOR THE REASON THAT THE RESPO NDENT HAS PAID TDS AFTER THE DUE DATE. IN THIS REGARD OUR REPRESENTATION BEFORE HON. CIT (APPEALS)-III, BAROD A, WAS AS UNDER, 1. SECTION 40(A)(IA) IS AMENDED AS UNDER. SECTION 40 ' NOTWITHSTANDING ANYTHING TO THE CONTRA RY IN SECTION 30 TO 38, THE FOLLOWING AMOUNT SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER T HE HEAD ' PROFITS AND GAINS OF BUSINESS OR PROFESSION' ITA NO. 2605/AHD/2012 & CO 20/AHD/2013 ACIT VS. SHARMA PHARMACEUTICALS PVT LTD AY 2008-09 - 3 - (A) IN THE CASE OF ANY ASSESSEE- (B) ....................................... (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, R OYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT A NY WORK) ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CH APTER XVIIB AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139; HOWEVER, THE UNDERLINED WORDS ARE SUBSTITUTED BY FINANCE ACT, 1-4-2010. PRIOR TO ITS SUBSTITUTION T HE SECTION 40(A)(IA) READ AS UNDER SECTION 40 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 30 TO 38, THE FOLLOWING AMOUNT SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD ' PR OF ITS AND GAIN OF BUSINESS OR PROFESSION' (C) IN THE CASE OF ANY ASSESSEE (I) ..................................... (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, R OYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUBCONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT A NY WORK) ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CH APTER XVIIB AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION HAS NOT BEEN PAID (A) IN CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS S O DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN THE SUBSECTI ON (1) OF SECTION 139: OR (B) IN ANY OTHER CASE ON OR BEFORE THE LAST DATE O F THE PREVIOUS YEAR. THE ABOVE HIGHLIGHTED WORDS WERE PRIOR TO IT SUBSTI TUTION BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 1.4.2005. ITA NO. 2605/AHD/2012 & CO 20/AHD/2013 ACIT VS. SHARMA PHARMACEUTICALS PVT LTD AY 2008-09 - 4 - SIR, IN THE CASE OF YOUR RESPONDENT, SO FAR AS THE DISALLOWANCE CONTAINED IN PARA 7(I) OF THE ASSESSME NT ORDER, YOUR RESPONDENT HAS PAID TDS AMOUNT BEFORE T HE DUE DATE OF FILING OF RETURN, THOUGH THE AMOUNT WAS NOT PAID ON OR BEFORE THE LAST DATE OF PREVIOUS YEAR. T HE RESPONDENT HAD FURNISHED RELEVANT DETAILS OF THE CH ALLANS PAID BEFORE HON. CIT (APPEALS)-III, BARODA. BASED ON THE ABOVE REPRESENTATION BECAUSE THE TAX W AS PAID BEFORE DUE DATE OF FILING OF RETURN, THE HON. CIT APPEALS -III HAS RIGHTLY DELETED THE DISALLOWANCE. YOUR RESPONDENT IS RELYING UPON THE JUDGMENT OF HON 'BLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN CREATIONS (2012) 6 TAXCORP (DT) 50407 (CALCUTTA) THAT AMENDMENTS TO SECTION 40(A)(IA) IS RETROSPECTIVE IN EFFECT AND HE NCE WHERE THE TDS PAYMENTS ARE MADE BEFORE DUE DATE OF FILING OF RETURN, NO DISALLOWANCE CAN BE MADE. FURTHER, THE SAID ISSUE IS DETERMINED BY HON'BLE AHMEDABAD TRIBUNAL IN THE CASE OF M/S. ALPHA PROJEC TS SOCIETY PVT LTD. V DCIT CIR 1(1) VADODARA WHILE DEC IDING THE MATTER WHETHER AMENDMENT IN SECTION 40(A)(IA) I S PROSPECTIVE OR RETROSPECTIVE, OBSERVED THAT 'THE IS SUE INVOLVED IN THE PRESENT APPEAL HAS BEEN DECIDED BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN C REATORS IN GA NO. 3200/2011 DATED 23-11-2011 AGAINST THE REVENUE. 2. SO FAR AS THE DISALLOWANCES CONTAINED IN PARA 7( III) AND 7(IV) IN ASSESSMENT ORDER THE SAME IS IN RESPECT OF PAYMENTS MADE TO CONTRACTORS AND TRANSPORTER FOR WH ICH TDS IS NOT MADE. SO FAR AS DISALLOWANCE CONTAINED I N PARA 7(III) IS CONCERNED IT IS IN RESPECT OF PAYMENT MAD E TO MR. GM MISTRY A CONTRACTOR AMOUNTING RS.175512/- AND SO FAR AS DISALLOWANCE CONTAINED IN PARA 7(IV) IS IN R ESPECT OF PAYMENT MADE TO M/S. SHREEJI ALUMINIUM FABRICATORS AMOUNTING RS 82716/- AND PAYMENT MADE TO SHREE SARYODAYA TRANSPORT. IN THIS REGARD YOUR RESPONDENT, REPRESENTED BEFORE HON. CIT APPEALS (III), BARODA THAT DISALLOWANCE U/S. 40 (A)(IA) ITA NO. 2605/AHD/2012 & CO 20/AHD/2013 ACIT VS. SHARMA PHARMACEUTICALS PVT LTD AY 2008-09 - 5 - IS APPLICABLE ONLY IF THE AMOUNT WAS PAYABLE AND NO T IN RESPECT OF AMOUNT PAID. IN THE CASE OF YOUR RESPOND ENT, FROM THE ASSESSMENT ORDER ITSELF IT MAY BE OBSERVED THAT THE DISALLOWANCE IS MADE FOR THE PAYMENTS MADE AND IDS IS NOT DEDUCTED. THE AMOUNTS WERE NOT OUTSTANDING O R PAYABLE AT THE BALANCE SHEET DATE. THIS SUBMISSION IS SQUARELY COVERED BY THE VISHAKHAPATANAM SPECIAL BEN CH DECISION IN THE CASE OF MERYLIN SHIPPING AND TRANSP ORT V ACIT (20 TAXMANN.COM 244 (VISH), BASED ON THE ABOVE REPRESENTATION, HON CIT (APPEALS )-III, BARODA DELETED THE DISALLOWANCE MADE IN THIS REGARD . ACIT CIRCLE - 4, BARODA HAS NOT GIVEN ANY CONCRETE ARGUMENTS FOR UPHOLDING THE ORDER PASSED BY HIS PREDECESSOR, ITO WARD 4(3), BARODA. AS AGAINST THIS YOUR RESPONDENT IS FULLY SUPPORTED BY ABOVE REFERRED CAS E LAWS. IN VIEW OF THIS WE EARNESTLY REQUEST YOU TO UPHELD THE ORDER PASSED BY HON. CIT (APPEALS)-III, BARODA. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN MANUFACTURING ACTIVITIES OF ORTHOPEDIC IMPLANTS. THE ASSESSEE HAS FILED RETURN OF INCOME ON 26.09.2008 D ECLARING TOTAL INCOME OF RS.56,66,240/-. THE CASE WAS SELEC TED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) O F THE INCOME-TAX ACT WAS FRAMED VIDE ORDER DATED 30.12.20 10. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER DISAL LOWED TDS CLAIM AMOUNTING TO RS. 11,85,459/- BY INVOKING PROV ISIONS OF SECTION 40(A)(IA) ON THE GROUND THAT THE ASSESSEE H AS DEDUCTED TDS ON BUILDING MAINTENANCE PAYMENT AND CONFERENCE EXPENSES, BUT THE AMOUNT OF TDS WAS DEPOSITED AFTER DUE DATE. THE ASSESSING OFFICER HAS ALSO DISALLOWED ANOTHER E XPENDITURE ITA NO. 2605/AHD/2012 & CO 20/AHD/2013 ACIT VS. SHARMA PHARMACEUTICALS PVT LTD AY 2008-09 - 6 - AGGREGATING TO RS.2,79,617/- U/S 40(1)(IA) OF THE A CT ON ACCOUNT OF ASSESSEES FAILURE TO MAKE THE TDS BEFOR E DUE DATE. 4.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) HAS DELETED THE ADDITIONS MADE BY ASSESSING OFFICER U/S 40(A)(I A) OF THE ACT, I.E. RS.11,85,459/- AND RS.2,79,617/-, RELYING UPON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS [IT APPEAL NO.302 OF 2011, GA 3200 OF 2011 DATED 23.11.2011. IN LIGHT OF AFORESAID DECISION IN THE CASE OF VIRGIN CREATIONS (SUPRA), THE CIT(A) HAS DIRECTED T HE ASSESSING OFFICER TO ALLOW THE EXPENSES ON WHICH THE TDS HAS ALREADY BEEN DEPOSITED BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF ITS RETURN. FURTHER FOLLOWING THE DECISION OF HONB LE SPECIAL BENCH OF ITAT-VISAKHAPATNAM IN THE CASE OF MERYLIN SHIPPING AND TRANSPORT V. ACIT, REPORTED IN 20 TAXMANN.COM 2 44 (VISH), THE ASSESSING OFFICER WAS DIRECTED TO VERIFY WHETHE R THE ASSESSEES CLAIM THAT THE PAYMENTS DISALLOWED UNDER PARA 7(III) AND 7(IV) OF THE ASSESSMENT ORDER HAVE ALREADY BEEN PAID BEFORE 31.03.2008 AND IF THE SAME WERE FOUND TO BE CORRECT , THE DISALLOWANCES WILL ALSO STAND DELETED. ITA NO. 2605/AHD/2012 & CO 20/AHD/2013 ACIT VS. SHARMA PHARMACEUTICALS PVT LTD AY 2008-09 - 7 - 4.2 THESE REASONED FINDINGS OF THE CIT(A) NEED NO I NTERFERENCE FROM OUR SIDE WHICH HAS BEEN RENDERED IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS AS REFERRED ABOVE. ACCORDIN GLY, THE ORDER OF THE CIT(A) IS UPHELD. THIS TAKES CARE OF ISSUE RAISED BY THE ASSESSEE BY WAY OF CROSS OBJECTION. 5. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS-O BJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 11TH OF DECEMBER, 2015 AT AHMEDABAD. SD/- SD/- ( RAJESH KUMAR ) ACCOUNTANT MEMBER ( SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER AHMEDABAD; DATED 11/12/2015 *BT / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. && ' / CONCERNED CIT 4. ' ( ) / THE CIT(A), 5. ()* $++ , , / DR, ITAT, AHMEDABAD 6. *, / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) ! , / ITAT, AHMEDABAD