ITO, WARD - 2, Kakinada V. Sri Sai Ram Ice Factory, Kakinada

CO 34/VIZ/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1807 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 01-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BODA ANAND KUMAR
• Assessee Lawyers: P SRINIVASA MURTHY
• Section: 143(3); 194C; 263

Judgement Text

ITA NO.489/VIZAG/2012 & CO 34/VIZAG/2013 SRI SAI RAM ICE FACTORY, KAKINADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.489/VIZAG/2012 ( / ASSESSMENT YEAR : 2006-07 ) ITO WARD - 2 KAKINADA VS. SRI SAI RAM ICE FACTORY KAKINADA [ PAN: ABAFS 4590E] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) C.O. NO.34/VIZAG/2013 (ARISING OUT OF I.T.A.NO.489/VIZAG/2012) ( / ASSESSMENT YEAR : 2006-07 ) SRI SAI RAM ICE FACTORY KAKINADA VS. ITO WARD - 2 KAKINADA ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI P. SRINIVASA MURTHY, DR '(& ) / RESPONDENT BY : SHRI BODA ANAND KUMAR, AR ) - / DATE OF HEARING : 26.11.2015 ) - / DATE OF PRONOUNCEMENT : 18.12.2015 ITA NO.489/VIZAG/2012 & CO 34/VIZAG/2013 SRI SAI RAM ICE FACTORY, KAKINADA 2 / O R D E R PER BENCH: THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSE, ARE DIRECTED AGAINST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 26.9.2012 FOR THE ASSESSMENT YEAR 2006-07. SINCE, THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON, THEY ARE CLUBBED, HEAR D TOGETHER AND DISPOSED OFF, BY WAY OF THIS COMMON ORDER FOR THE S AKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 4.10.2006 DECLARING TOTAL INCOME OF RS. 1,02,600/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER CALLED AS THE ACT) DATED 24.11.2008 AND ACCEPTED THE INCOME RETURNED BY THE ASSESSEE. SUBSEQUENTLY, THE CIT HAS TAKEN U P THE CASE FOR REVISION U/S 263 OF THE ACT. CONSEQUENT TO ORDER U /S 263 OF THE ACT, THE CASE WAS AGAIN TAKEN UP FOR SCRUTINY ASSESSMENT U/S 143(3) R.W.S. 263 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE AO MADE A DISALLOWANCE OF RS.32,91,000/- U/S 40(A)(IA) OF T HE ACT, FOR NON- DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE CONTENDED ITA NO.489/VIZAG/2012 & CO 34/VIZAG/2013 SRI SAI RAM ICE FACTORY, KAKINADA 3 THAT THE FREIGHT CHARGES DEBITED TO PROFIT & LOSS A CCOUNT HAS BEEN ALREADY PAID DURING THE FINANCIAL YEAR ITSELF, THER EFORE, IN VIEW OF THE SPECIAL BENCH DECISION OF VISAKHAPATNAM ITAT, IN TH E CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (2012) 136 I TD 23, NO DISALLOWANCE CAN BE MADE FOR THE AMOUNTS ALREADY PA ID DURING THE FINANCIAL YEAR. THE CIT(A) AFTER CONSIDERING ASSES SEES EXPLANATIONS AND ALSO RELIED UPON THE SPECIAL BENCH DECISION OF VISA KHAPATNAM ITAT, IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER. 4. THE LD. D.R. ARGUED THAT THE DEPARTMENT HAS NOT ACCEPTED THE SPECIAL BENCH DECISION AND FURTHER APPEAL HAS BEEN FILED BEFORE THE HONBLE A.P. HIGH COURT AGAINST THE ORDER OF THE IT AT. THE HONBLE A.P. HIGH COURT STAYED THE OPERATION OF SPECIAL BENCH DE CISION, THEREFORE, IN VIEW OF THE FACT THAT THE ISSUE IS STILL ALIVE, THE ADDITIONS MADE BY THE ASSESSING OFFICER SHOULD BE UPHELD. 5. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SU BMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL, IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE, BY THE SPECIAL BENCH DECISION OF THIS TRIB UNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) . THEREFORE, REQUESTED TO UPHELD THE CIT(A) ORDER. ITA NO.489/VIZAG/2012 & CO 34/VIZAG/2013 SRI SAI RAM ICE FACTORY, KAKINADA 4 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. AT THE OUTSET, THE A.R. OF TH E ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL, IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL, IN THE CASE OF M /S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA). WE HAVE GONE THROUGH THE SPECIAL BENCH DECISION IN THE LIGHT OF THE FACTS OF THE PRESENT C ASE AND COME TO THE CONCLUSION, THAT SPECIAL BENCH OF VISAKHAPATNAM ITA T, IN THE ABOVE CASE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE R ELEVANT PORTION IS REPRODUCED AS UNDER: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2005-06. A REFERENCE U/S 255(3) OF THE INCOME-TAX ACT HAS BEEN MADE TO THE HONBLE PRESIDENT TO CONSTITUTE A SPECIAL BENCH TO ADJUDICATE AN ISSUE W HETHER SECTION 40A(IA) OF THE INCOME TAX ACT CAN BE INVOKED ONLY TO DISALL OW EXPENDITURE OF THE NATURE REFERRED TO THEREIN WHICH IS SHOWN AS PAYABL E AS ON THE DATE OF BALANCE SHEET OR IT CAN BE INVOKED ALSO TO DISALLOW SUCH EXPENDITURE WHICH BECOMES PAYABLE AT ANY TIME DURING THE RELEVANT PRE VIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR? CONSEQUENTL Y, SPECIAL BENCH WAS CONSTITUTED AND THE AFORESAID QUESTION WAS ANSWERED IN FAVOUR OF THE ASSESSEE. ACCORDING TO THE MAJORITY VIEW, IT WAS HE LD THAT SECTION 40A(IA) OF THE ACT IS APPLICABLE ONLY TO EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED TO DISALL OW THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE YEAR WITHOUT DEDU CTING TAX AT SOURCE. 2. ISSUE INVOLVED IN THIS APPEAL IS WITH REGARD TO THE DISALLOWANCE OF PAYMENTS OF RS. 38,75,000/- TOWARDS BROKERAGE AND RS.2,43,253/- TOWARDS COMMISSION ON NON-DEDUCTION OF TDS BY INVOK ING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE ASSESSEES CASE WAS THAT THE ENTIRE BROKERAGE IN COMMISSION PAYMENTS WERE ACTUALLY PAID DURING THE FINANCIAL YEAR EXCEPTING AN AMOUNT OF RS. 1,78,025/- WHICH REMAINED PAYABLE AS ON 31.3.2005. THE CLAIM OF THE ASSESSEE WAS REJECTED B Y THE REVENUE RESULTING IN AN APPEAL BEFORE US BY THE ASSESSEE. F OLLOWING THE MAJORITY VIEW OF THE SPECIAL BENCH, THE PROVISIONS OF SECTIO N 40A(IA) CANNOT BE INVOKED WITH RESPECT TO THE AFORESAID PAYMENTS WHIC H WERE ACTUALLY PAID DURING THE FINANCIAL YEAR BUT IT CAN BE INVOKED WIT H RESPECT TO ITA NO.489/VIZAG/2012 & CO 34/VIZAG/2013 SRI SAI RAM ICE FACTORY, KAKINADA 5 RS.1,78,025/- WHICH REMAINED PAYABLE AS ON 31.3.200 5. THEREFORE, THE DISALLOWANCE IS REDUCED TO RS.1,78,025/- ONLY. ACCO RDINGLY, THE ORDER OF THE CIT(A) IS MODIFIED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. ITAT, VISAKHAPATNAM BENCH IN THE CASE OF DCIT VS . VEERA ASSOCIATES (2015) 55 TAXMAN.COM, UNDER SIMILAR SET OF FACTS HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORT ION IS REPRODUCED HEREIN UNDER: IN VIEW OF THE AFORESAID, CONTENTION OF THE DEPARTM ENT THAT THE RATIO LAID DOWN BY THE ITAT VISAKHAPATNAM SPECIAL BENCH I N CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) IS NOT APPLICABLE, CA NNOT BE ACCEPTED. SINCE THE DEPARTMENT HAS NOT CONTROVERTED THE FACT THAT THE ENTIRE AMOUNT OF ` 5,98,13,357 WAS PAID BY THE ASSESSEE DURING THE REL EVANT PREVIOUS YEAR AND NOTHING REMAINED PAYABLE ON THE L AST DAY OF THE PREVIOUS YEAR, IN OUR VIEW, AS PER THE RATIO LAID D OWN IN CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), NO DISALLOWANCE UNDE R SECTION 40(A)(IA) CAN BE MADE. ACCORDINGLY, THE CIT(A)S ORDER ON TH IS ISSUE DESERVES TO BE UPHELD. 8. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE AND ALSO APPLYING THE RATIO LAID DOWN BY THE SPECIAL BENCH O F THIS TRIBUNAL, IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA), WE ARE OF THE OPINION THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)( IA) OF THE ACT, FOR THE AMOUNTS ALREADY PAID DURING THE FINANCIAL YEAR. ACCORDINGLY, WE UPHELD THE CIT(A)S ORDER AND DISMISS THE APPEAL FI LED BY THE REVENUE. ITA NO.489/VIZAG/2012 & CO 34/VIZAG/2013 SRI SAI RAM ICE FACTORY, KAKINADA 6 C.O. NO.34/VIZAG/2013: 9. THE CROSS OBJECTION FILED BY THE ASSESSEE IS ONL Y SUPPORTING THE ORDER OF THE CIT(A). THEREFORE, IN VIEW OF THE DISC USSIONS IN PRECEDING PARAGRAPHS, THE C.O. FILED BY THE ASSESSE BECOMES I NFRUCTUOUS. HENCE, THE CROSS OBJECTION FILED BY THE ASSESSE IS DISMISS ED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND CO FILED BY THE ASSESSEE IS ALSO DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DEC15. SD/- SD/- ( . ) ( . . . . ) ( (( ( V. DURGA RAO ) )) ) ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 3 / DATED : 18.12.2015 VG/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT THE ITO WARD-2, KAKINADA 2. '(& / THE RESPONDENT M/S. SRI SAI RAM ICE FACTORY, PLOT NO.44 & 45, IDA EXPANSION, PHASE-II, KAKINADA 3. 5 / THE CIT, KAKINADA 4. 5 / THE CIT, VISAKHAPATNAM 5. 5 () / THE CIT (A), VISAKHAPATNAM 6. ' , , / // / DR, ITAT, VISAKHAPATNAM 7 . . . . / GUARD FILE / BY ORDER // TRUE COPY //