ACIT, Circle-3(2), Hyd, Hyderabad V. IL & FS Engineering & Construction Company Ltd., Hyd, Hyderabad

CO 41/HYD/2016

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2541 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 25-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Section: 28

Judgement Text

ITA NOS 1033 AND CO 41 OF 2016 IL&FS ENGG & CONSTRU CTION CO LTD HYDERABAD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1033/HYD/2016 (ASSESSMENT YEAR: 2007-08) ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(2) HYDERABAD VS M/S. IL & FS ENGG. & CONSTRUCTION CO. LTD (FORMERLY MAYTAS INFRA LTD) HYDERABAD PAN: AABCM 3722 F C.O. NO.41/HYD/2016 (ARISING OUT OF ITA NO.1033/HYD/2016 (ASSESSMENT YEAR: 2007-08) ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(2) HYDERABAD VS M/S. IL & FS ENGG. & CONSTRUCTION CO. LTD (FORMERLY MAYTAS INFRA LTD) HYDERABAD PAN: AABCM 3722 F FOR REVENUE: SMT. U. MINI CHANDRAN, DR FOR ASSESSEE: SHRI K.C. DEVDAS O R D E R PER SHRI J. SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-11 HYDERABAD DATED 22.03.2016 A ND THE CROSS OBJECTION IS FILED BY THE REVENUE. 2. WE HAVE HEARD THE RIVAL CONTENTIONS. ON A CAREFU L CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSAL OF THE PAPERS ON RECORD, WE HOLD AS FOLLOWS . DATE OF HEARING : 10.11.2016 DATE OF PRONOUNCEMENT : 16.11.2016 ITA NOS 1033 AND CO 41 OF 2016 IL&FS ENGG & CONSTRU CTION CO LTD HYDERABAD PAGE 2 OF 5 ITA NO.1033/HYD/2016: 3. FIRST WE TAKE UP THE REVENUES APPEAL AND THE GRO UNDS RAISED BY THE REVENUE ARE AS FOLLOWS: (1) THE LEARNED CIT (A) ERRED IN BOTH FACTS AND IN LAW. (2) THE LEARNED CIT (A) ERRED IN DELETING THE ADDITI ON OF RS.1,29,36,790 ON THE GROUND THAT IT IS MERE PROVIS ION MADE ON ESTIMATION BASIS FOR THE WORKS DONE BY SUB CONTRACTORS, HENCE PROVISIONS OF SECTION 40(A)(IA) DOES NOT APPLY. (3) THE LEARNED CIT (A) OUGHT TO HAVE ENHANCED THE INCOME OF RS.1,29,36,790 AS IT IS MERE PROVISION. (4) THE LEARNED CIT (A) ERRED IN DELETING THE ADDITI ON MADE OF U/S 40(A)(IA) OF THE I.T. ACT OF RS.3,75,18 ,009 ON THE GROUND THAT SECTION 40(A)(IA) OF THE I.T. ACT WILL HAVE NO APPLICATION AS THE SAME IS PAID BEFORE THE Y EAR END. (5) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THA T DECISION RELIED UPON RENDERED BY THE SPECIAL BENCH (VIZAG) IN CASE OF MERILYN SHIPPING & TRANSPORT THAT SECTION 40(A)(IA) APPLIES ONLY TO AMOUNTS PAYABLE IS STAYED BY THE HON'BLE A.P. HIGH COURT. 4. GROUND NOS 2 TO 5 RELATE TO THE DELETION OF AN A DDITION U/S 40(A)(IA) OF RS.6,07,91,802, BUT THE LEARNED CI T (A) HAS BEEN CHALLENGED BY THE REVENUE. THE BRIEF FACTS ARE THAT THE AO NOTICED FROM THE REPORT OF SPECIAL AUDITOR U/S 142(2A) THAT TDS WAS NOT DEDUCTED IN RESPECT OF VARIOUS PAYMENTS AGGREGATING TO RS.6,32,79,945. THEY WERE ACCORDINGLY PROPOSED FOR DISALLOWANCE U/S 40(A)(IA). THE ASSESSEE DISPUTED THE FACTUAL CO RRECTNESS OF THE REPORT OF THE SPECIAL AUDITOR IN RESPECT OF PAYMENT S AGGREGATING TO RS.24,88,143 ON ACCOUNT OF INSTANCES OF TAX DEDUCTI ON ITA NOS 1033 AND CO 41 OF 2016 IL&FS ENGG & CONSTRU CTION CO LTD HYDERABAD PAGE 3 OF 5 OVERLOOKED, OR INSTANCES WHERE TAX DEDUCTION WAS NO T CALLED FOR IN LAW. IN RESPECT OF THE REMAINING AMOUNTS THE ASSESS EE COMPANY EXPRESSED DIFFICULTY IN FURNISHING ANY FURTHER EXPL ANATION IN ITS DEFENSE AND ACCEPTED ITS LIABILITY U/S 201, WHILE S IMULTANEOUSLY STATING THAT THE RECIPIENTS WOULD HAVE IN ALL PROBA BILITY OFFERED THESE AMOUNTS TO TAX IN THEIR RESPECTIVE RETURNS OF INCOME. IN RESPECT OF PAYMENTS TO CONTRACTORS AND SUB-CONTRACT ORS AMOUNTING TO RS.4,98,68,763 IT WAS ALSO ARGUED THAT THEY ARE CLAIMED U/S 28 AND NOT UNDER THE PROVISIONS OF SECT ION 30 TO 38 AS A RESULT OF WHICH THE PROVISIONS OF SECTION 40 C AN HAVE NO APPLICATION. THE AO ACCEPTED THE ASSESSEES ARGUMEN TS TO THE EXTENT OF RS.24,88,143 AND DISALLOWED THE REMAINING SUM OF RS.6,07,91,802 AND DISMISSED THE ASSESSEES EXPLANA TION THAT EXPENDITURE OF RS.4.98 CRORES DID NOT INVITE DISALL OWANCE U/S 40(A)(IA) BECAUSE THE EXPENDITURE HAS TO BE SEEN WI TH REFERENCE TO SECTION 37(1). 5. AFTER THE RIVAL CONTENTION, WE FIND THAT A SUM O F RS.1,29,36,790 WAS ONLY A YEAR END PROVISION FOR EX PENDITURE AND THIS ENTRY WAS REVERSED NEXT YEAR. TDS PROVISION ON THIS AMOUNT IS NOT APPLICABLE. CONSEQUENTLY, THE DISALLOWANCE U /S 40(A)(IA) OF THE ACT ON THIS AMOUNT IS UNCALLED FOR. 6. IN RESPECT OF AMOUNT OF RS.3,75,18,009, THE LEAR NED CIT (A) APPLIED THE DECISION OF THE SPECIAL BENCH O F THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORT (146 TT J (1) AND HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT AP PLICABLE AS THERE IS NO AMOUNT PAYABLE AT THE END OF THE YEAR. HE ALS O PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT ITA NOS 1033 AND CO 41 OF 2016 IL&FS ENGG & CONSTRU CTION CO LTD HYDERABAD PAGE 4 OF 5 IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES LTD REPORTED IN 357 ITR 647 WHEREIN THE HON'BLE SUPREME COURT HAD DISMI SSED THE SLP FILED BY THE REVENUE, AGAINST THE SAID DECISION . WE FIND NO INFIRMITY IN THE SAME. 7. THUS, WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT, THIS APPEAL OF THE REVENUE IS DIS MISSED. C.O.41/HYD/2016 9. IN THE CROSS OBJECTION, THE ASSESSEE HAS TAKEN T HE FOLLOWING GROUNDS: (I) THE CIT (A)-11 HY DERABAD HAVING GROUND THAT AS A MATTER OF FACT THAT THE SUM OF RS.1,29,36,790 IS LI ABLE TO BE EXCLUDED FROM THE DISALLOWANCE MADE, ERRED IN HOLDING THAT IT WAS SUBJECT TO THE VERIFICATION OF THE RELEVANT ENTRY IN THE JOURNAL AND LEDGER WHICH IS WITHOUT JURISDICTION AND BEYOND THE POWERS OF THE CIT (A). (II (II) THE LEARNED CIT (A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS.1,03,37,003. 10. GROUND NO.1 IS AGAINST THE DIRECTIONS OF THE LE ARNED CIT (A) TO THE AO TO VERIFY THE RELEVANT JOURNAL EN TRIES AND LEDGER ACCOUNT BEFORE ALLOWING THE CLAIM OF THE ASSESSEE. WE FIND NO INFIRMITY IN THIS DIRECTION. HENCE THIS GROUND OF T HE CROSS OBJECTION IS DISMISSED. 11. GROUND NO.2 OF THE C.O. IS TO BE DISMISSED AS T HE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT, SECTION ITA NOS 1033 AND CO 41 OF 2016 IL&FS ENGG & CONSTRU CTION CO LTD HYDERABAD PAGE 5 OF 5 40(A)(IA) APPLIES ONLY TO EXPENDITURE CLAIMED U/S 3 0 TO 38 AND NOT PAYMENTS U/S 28 AS THIS IS DEVOID OF MERIT. IN OUR VIEW, THE FINDINGS OF THE FIRST APPELLATE AUTHORITY AT PARA 6 .5 HAS TO BE UPHELD. 12. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 13. TO SUM UP, BOTH THE APPEAL AND CROSS OBJECTION ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2016. SD/- SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER (J.SUDHAKAR REDDY) ACCOUNTANT MEMBER HYDERABAD, DATED 16 TH NOVEMBER, 2016. VINODAN/SPS COPY TO: 1 SHRI RAJASEKHAR BUGGAVEETI, PROP. CREATIVE MULTIM EDIA SERVICES, NO.16-11-477/6/1/A, 4 TH FLOOR, SAI TOWERS, MAIN ROAD, DILSUKHNAGAR, HYDERABAD 500036 2 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 9(1) BL OCK NO.1B, INCOME TAX TOWERS, AC GUARDS HYDERABAD-4 3 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 9(1) HY DERABAD 4 CIT (A)-VI HYDERABAD 5 CIT-VI HYDERABAD 6 THE DR, ITAT HYDERABAD 7 GUARD FILE BY ORDER