M/s Satlej Construction Ltd., Chandigarh V. ACIT, Mohali

CO 54/CHANDI/2009

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7339 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER C.O.NO.54/CHD/2009 IN ITA NO.801 /CHD/2009 (ASSESSMENT YEAR:2006-07) M/S SUTLEJ CONSTRUCTION LTD., VS. THE A.C.I.T., SCO(2 ND FLOOR), NAC CIRCLE 3(1), MANIMAJRA, CHANDIGARH/ MOHALI. PAN: AAGCS4215A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY JAIN RESPONDENT BY : SHRI N.K.SAINI, DR DATE OF HEARING : 17.07.2012 DATE OF PRONOUNCEMENT : 30.07.2012 O R D E R PER SUSHMA CHOWLA, J.M. : THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST TH E APPEAL FILED BY THE REVENUE RELATING TO ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IN THE CROSS OBJECTION HAS RAISED F OLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN GIVING THE DIRECTION TO WITHDRAW THE CREDIT OF TDS ALLOWED BY THE ASSESSING OFFICER AT THE TIME OF PROCESSION THE RETURN U/S 143(1) OF THE INCOME TAX ACT, 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BY UPHOLDING THE ADDITION ON ACCOUNT OF FREIGHT EXPENSES OF RS.11,17,791/- AND ON ACCOUNT OF ADVERTISEMENT EXPENSES OF RS.56,408/- U/S 40(A)(I). NO FREIGHT CHARGES WERE PAID IN PURSUANCE OF A CONTRACT FOR A SPECIFIC PERIOD, 2 QUANTITY OR PRICE. MOREOVER, THESE EXPENSES WERE PAID DURING THE YEAR AND NOT PAYABLE AT THE END OF THE YEAR AND THESE CANNOT BE DISALLOWED U/S 40(A)(I) OF THE INCOME TAX ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BY UPHOLDING THE DISALLOWANCE OF INTEREST OF RS.2,94,558/- CLAIMED AS EXPENSES DURING THE YEAR UNDER CONSIDERATION WITHOUT CONSIDERING THE NATURE OF INTEREST AND WITHOUT APPRECIATING THE FACT THAT THE INTEREST HAS BEEN ACTUALLY PAID DURING THE YEAR AND NOT PAYABLE AT THE END OF THE YEAR AND THESE CANNOT BE DISALLOWED. 3. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST THE WITHDRAWAL OF CREDIT OF TDS. 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT D URING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED ARBITRATION AWARD FROM VARIOUS GOVERNMENT AGENCIES TOTALING RS.5.53 CRORES I.E. AW ARD AMOUNT OF RS.1.36 CRORES AND INTEREST OF RS.4.17 CRORES. OUT OF THE INTEREST AMOUNT TDS AMOUNTING TO RS.95,53,497/- WAS DEDUCTED. THE ASSESSEE HAD NOT DECLARED THE AWARD OR THE INTEREST IN THE RETURN OF INCOME BUT HAD CLAIMED CREDIT OF TDS AMOUNTING TO RS.95.53 LACS. THE ASSESSEE HAD ANNEXED NOTES TO ACCOUNTS ANNEXED WITH THE RETURN O F INCOME WHY THE SAID AMOUNT WAS NOT INCLUDIBLE IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE AS TO EX PLAIN WHEY UNDER THE PROVISIONS OF SECTION 199 OF THE ACT, THE CREDIT OF TDS BE ALLOWED IN THE YEAR IN WHICH THE INCOME WAS ASSESSABLE. THE EXPLA NATION OF THE ASSESSEE WAS THAT THE GOVERNMENT HAD CHALLENGED THE MONEY AWARDED BY THE ARBITRATOR AND ALSO THE INTEREST BY FILLING PET ITION BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT, WHICH WAS DISMISSED AN D THE GOVERNMENT CONTRACTEE HAD FILED SLP BEFORE THE HON'BLE SUPREME COURT, WHICH SHOWS THAT THE AWARD HAD NOT BECOME FINAL AND WAS UNDER C ONSIDERATION OF THE COURTS. THE ASSESSEE PLACED RELIANCE ON THE SERIES OF JUDGMENTS FOR THE 3 PROPOSITION THAT IN SUCH CIRCUMSTANCES THE ARBITRAT ION AMOUNT AND INTEREST THEREON WAS NOT INCLUDIBLE IN THE HANDS OF THE ASSESSEE. THE REPLY OF THE ASSESSEE IS INCORPORATED AT PAGES 2 TO 7 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER VIDE PARA 10 HELD AS UNDER: 10. SINCE THE ASSESSEE HAS CLAIMED TDS & CORRESPONDING REFUND ON THE ARBITRATION AWARD IY UN DER CONSIDERATION, THE AWARD AND INTEREST AMOUNT SHOULD HAVE BEEN ASSESSED IN THIS YEAR ONLY AS PER PROVISI ONS OF 199 OF THE INCOME TAX ACT, 1961. THE ASSESSEE COMPANY HAS ALSO UTILIZED THE BALANCE AMOUNT OF AWA RD AND INTEREST FOR ITS BUSINESS PURPOSES AS PER BANK ACCOUNT OF THE COMPANY MAINTAINED WITH PUNJAB & SIN D BANK, MANIMAJRA. IN VIEW OF THE JUDGMENTS, SUPRA, AND ALSO IN VIEW OF THE FACTS OF THE CASE THE ENTIRE AARBITRATION AWARD AND INTEREST THEREON AMOUNTING T O RS.5,53,65,488/- IS BROUGHT TO TAX AND IS ADDED TO THE RETURNED INCOME. 5. THE CIT (APPEALS) HELD THAT ONCE THE INCOME IS N OT TAXABLE IN THE INSTANT ASSESSMENT YEAR, THEN THERE WAS NO SCOPE OF ALLOWING TDS AS CLAIMED BY THE ASSESSEE IN THIS ASSESSMENT YEAR. T HE CIT (APPEALS) DIRECTED THE ASSESSING OFFICER TO WITHDRAW THE CRED IT OF TDS. 6. THE REVENUE WAS IN APPEAL BEFORE THE CHANDIGARH BENCH OF THE TRIBUNAL AGAINST THE TAXABILITY OF ARBITRATION AWAR D RECEIVED BY THE ASSESSEE IN ITA NO.801/CHD/2009 RELATING TO ASSESSM ENT YEAR 2006-07. THE TRIBUNAL VIDE PARAS 5 AND 6 OF ORDER DATED 21.1 0.2009 FOUND THAT SIMILAR ISSUE WAS RAISED IN ASSESSMENT YEAR 2004-05 AND FOLLOWING THE SAME THE ORDER OF THE CIT (APPEALS) WAS CONFIRMED T HAT ARBITRATION AWARD INCLUDING THE INTEREST WAS NOT INCLUDIBLE IN THE HANDS OF THE ASSESSEE. IN VIEW THEREOF, WHERE THE ARBITRATION A MOUNT IS HELD TO BE NOT INCLUDIBLE IN THE HANDS OF THE ASSESSEE IN THE INST ANT ASSESSMENT YEAR, UNDER THE PROVISIONS OF SECTION 199 OF THE ACT, THE CREDIT OF TDS RELATABLE TO SUCH ARBITRATION AWARD IS NOT TO BE AL LOWED TO THE ASSESSEE IN THE INSTANT ASSESSMENT YEAR AND THE SAME SHALL BE G IVEN CREDIT IN THE 4 FINANCIAL YEAR IN WHICH SUCH ARBITRATION AWARD IS B ROUGHT TO TAX. IN VIEW OF THE PROVISIONS OF THE ACT, WE FIND NO MERIT IN T HE CLAIM OF THE ASSESSEE AND GROUND NO.1 RAISED BY THE ASSESSEE IN CROSS OBJECTION IS REJECTED. 7. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IN CROSS OBJECTION IS AGAINST THE ADDITION MADE OUT OF FREIGHT EXPENSE S AND ADVERTISEMENT EXPENSES FOR NON DEDUCTION OF TAX AT SOURCE AND CON SEQUENT DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. THE PLEA OF TH E ASSESSEE WAS THAT THE SAID EXPENSES WERE PAID DURING THE YEAR AND WERE NO T PAYABLE AT THE END OF THE YEAR. 8. WE FIND THAT THE ISSUE IN THE PRESENT CASE STAND S COVERED BY THE DECISION OF THE SPECIAL BENCH OF VISHAKHAPATNAM REP ORTED IN ACIT VS. MERILYN SHIPPING & TRANSPORTS[140 TTJ 1(SB)(VISHAKH APATNAM)]. IN VIEW OF THE RATIO LAID DOWN BY THE SPECIAL BENCH OF VISHAKHAPATNAM, WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND IN CASE THE AMOUNTS HAVE BEEN PAID DURING THE YEAR ITSELF, NO DISALLOWANCE IS WARRANTED UNDER SEC TION 40(A)(IA) OF THE ACT. GROUND NO.2 RAISED BY THE ASSESSEE IN CROSS O BJECTION IS ALLOWED FOR STATISTICAL PURPOSES. 9. THE ISSUE IN GROUND NO.3 IS AGAINST THE DISALLOW ANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT OF RS.2,94,558/ -. 10. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITT ED THAT THE SAID ISSUE IS COVERED BY THE RATIO LAID DOWN BY THE HON' BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISHEKH INDUSTRIES [286 ITR 1 (P&H)]. 11. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDER OF THE CIT (APPEALS). 12. WE FIND THAT THE PRESENT ISSUE IS SQUARELY COVE RED BY THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN ABHISHEKH INDUSTRIES (SUPRA) AND FOLLOWING THE SAME WE UPHOLD THE DISALLOWANCE M ADE UNDER SECTION 5 36(1)(III) OF THE ACT. GROUND NO.3 RAISED BY THE A SSESSEE IN CROSS OBJECTION IS DISMISSED. 13. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JULY, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) 2ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 30 TH JULY, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH