M/s B.R. Travels Pvt. Ltd., Chandigarh V. ITO, W-5(3), Chandigarh

ITA 1001/CHANDI/2019

AI Insights

The case involves M/s B.R. Travels Pvt. Ltd., which appealed against the order of the CIT(A)-2, Chandigarh, concerning the assessment year 2015-16. The primary issues in the appeal included the addition of unpaid service tax liability, taxi hire charges considered as previous year expenditure, and non-deduction of TDS on interest payments to an NBFC. The Tribunal heard arguments from both the assessee and the revenue, considering various precedents and the mercantile system of accounting followed by the assessee. The Tribunal's decision focused on verifying the actual payments and accounting practices of the assessee before finalizing the additions made by the AO.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127782 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 19-06-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 09-07-2019
• Other Referred Cases: Pr. CIT Vs. Tops Security Ltd. (2019) 415 ITR 212 (Bom)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; TDS
• Section: 43B; 40(a)(ia)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य! एवं ी %व&म (संह यादव, लेखा सद-य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 1001/Chd/ 2019 Assessment Year : 2015-16 M/s B.R. Travels Pvt. Ltd. S.C.O. 48, First Floor, Sector 47D, Chandigarh The ITO Ward 5(3), Chandigarh PAN NO: AAECB1916F Appellant Respondent ! " Assessee by : Shri Raman Seth, C.A # ! " Revenue by : Smt. Amanpreet Kaur, Sr. DR $ % ! & Date of Hearing : 20/06/2023 '()* ! & Date of Pronouncement : 14/07/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-2, Chandigarh dt. 10/04/2019 pertaining to A.Y. 2015-16 wherein the assessee has raised the following grounds of appeal: 1. That the order of the learned CIT Appeals-2, Chandigarh is erred in not deleting the addition of Rs. 13,71,822/- made by the Ld. A.O on account of Unpaid Service Tax liability under section 43B, without considering the fact that the assessee has not claimed it as an expenditure or deduction. 2. That the order of the learned CIT Appeals-2, Chandigarh is erred in not deleting the addition of Rs. 1,11,844/- made by the Ld. A.O on account of Taxi Hire charges being previous year expenditure, without considering the fact that it is a regular feature, customary in nature, in earlier years too and as per the cycle of the business of assessee. 3. That the order of the learned CIT Appeals-2, Chandigarh is erred in not deleting the addition of Rs. 33,533/- made by the Ld. A.O on account of Non 2 deduction of TDS on the interest portion out of EMI payments made to an NBFC as installments of Car loan and so treating the assessee in default. 4. That the appellant craves leave, to add or amend the grounds of appeal before or at the time of hearing the appeal. 2. Regarding Ground No. 1, the Ld. AR submitted that the issue is no more res- integra in view of number of decisions of the Hon’ble High Courts. It was submitted that Section 43B does not contemplate liability to pay Service Tax before actual receipt of funds in the account of the assessee. It was submitted that the liability to pay Service Tax will rise only upon the assessee receiving the funds and not otherwise. In support, reliance was placed on the Hon’ble Bombay High Court decision in case of Pr. CIT Vs. Tops Security Ltd. (2019) 415 ITR 212 (Bom). It was submitted that SLP filed by the Department against the said decision has been dismissed by the Hon’ble Supreme Court as reported in (2019) 412 ITR (St.) 30-Ed. 2.1 It was further submitted that the assessee follows mercantile system of accounting and Ld. CIT(A) failed to appreciate the fact that Service Tax payable of Rs. 21,10,518/- as on 31/03/2015 is the accumulated amount of service tax liability till the close of the F.Y. 2014-15 and the said liability is not pertaining to the F.Y. 2014-15 on an standalone basis. 2.2 It was accordingly submitted that the Ld. CIT should have considered the amount as depicted in the P&L Account for the year under consideration and out of the amount realized from the customers, the liability towards the Service Tax needs to be considered and not otherwise. It was submitted that during the year under consideration, the assessee has charged and claimed Service Tax in bills to customers to the tune of Rs. 16,59,790/- as per audited P&L Account and out of which, the unrealized amount is to the tune of Rs. 1,56,040/- and thus the remaining amount of Rs. 15,03,750/- is the amount of Service Tax realized during the year under consideration which becomes liable for deposit and out of 3 which, the assessee has deposited a sum of Rs. 7,38,696/- before filing of the return of income which is duly verified and even accepted by the AO and the Ld. CIT(A). 2.3 It was submitted that the order of the Ld. CIT(A) is wrong to the extent of considering the figure of Rs. 21,10,518/- as the amount of total Service Tax payable as the liability to deposit instead of Rs. 15,03,750/- being the amount realized by the assessee during the F.Y. 2014-15 in respect of which the assessee was liable to pay Service Tax with the treasury. It was accordingly submitted that out of Rs. 15,03,750/-, Rs. 7,38,696/- has been deposited before filing of the return of income and only balance amount of Rs. 7,65,054/- remained unpaid till the filing of the return of income which at max could have been disallowed by the AO. It was accordingly submitted that the necessary relied be provided to the assessee in this regard wherein as against the addition of Rs. 13,71,822/-, the addition needs to be restricted to Rs. 7,65,054/-. 3. Regarding Ground No. 2, the Ld. AR submitted that the assessee is in the business of running of taxies and providing services to the corporate clients and the bills of the drivers who remain on the tours are generally submitted / settled at the later stage and so many of the March bills are settled / accounted for in April of the next Financial Year. 3.1 In this regard, it was submitted that bill for the month of March 2013 amounting to Rs. 73,661/- were booked in F.Y. 2013-14 relevant to A.Y. 2014-15. Bills for March 2014 amounting to Rs. 1,11,844/- are booked in F.Y 2014-15 relevant to A.Y 2015-16 and similarly bills for March 2015 amounting to Rs. 1,39,814/- are booked in F.Y 2015-16 pertaining to A.Y. 2016-17. It was submitted that it is a regular practice which has been consistently followed by the assessee from year to year. 4 3.2 It was further submitted that where the prior period expenditure of Rs. 1,11,844/- is added back to the income then as a necessary corollary the amount of Rs. 1,39,814/- should be allowed as increase in the expenditure therefore be reduced from the income following the mercantile system of accounting for A.Y 2015-16. 4. Regarding Ground No. 3, the Ld. AR submitted that assessee has paid EMI of pre-existing loan against vehicles of M/s Kotak Mahindra Prime Ltd. through electronic clearing service (ECS) inclusive of interest and principal as per the pre mandate singed earlier at the time of disbursement of loan. It was submitted that the provisions of Section 40(a)(ia) came into effect with effect from 01/04/2015 and being the first year, the assessee was under the bonafide belief of non deduction of TDS considering the payee company as part of Banking Institution being Kotak Mahindra Bank. It was submitted that by non deduction, the assessee has not claimed any benefit and it was only on account of the lack of awareness that the assessee has not deducted TDS and in any case, the payee company in all likelihood has considered the amount as part of this income while filing the return of income. It was submitted that where the payee company has also included the amount as part of his income, there should not be any disallowance in the hands of the assessee under section 40(a)(ia) of the Act. 5. Per contra, the Ld. DR submitted that assessee has in its statement of facts has itself admitted that there was Service Tax liability of Rs. 21,10,518/- as on 31/03/2015 out of which the assessee has deposited Rs. 7,38,696/- before filing of the return of income for A.Y. 2015-16 and due to paucity of funds, balance Service Tax liability of Rs. 13,71,822/- was deposited before close of the F.Y. 2015- 16. 5 5.1 It was further submitted that the assessee has itself submitted that the ledger account of taxi hire charges includes a sum of Rs. 1,11,844/- on account of March 2014 month bill taken in the F.Y. 2014-15 and that the assessee has paid interest of Rs. 1,13,714/- on car loan from Kotak Mahindra Prime Limited and due to clerical mistake, TDS was omitted to be deducted. It was accordingly submitted that the Ld. CIT(A) has decided all the three grounds of appeal raised by the assessee after duly considering the facts submitted by the assessee. Moreover, the assessee was following mercantile system of accounting during the F.Y. 2014-15 relevant to the A.Y 2015-16 and the AO has rightly added the Service Tax which was payable but not paid by the assessee in due time as per the Income Tax Act, the Taxi hire charges for bill raised for Month of March 2014 in F.Y. 2014-15 and the fact that the deduction of TDS on payment of interest was the primary liability of the assessee and same was not fulfilled by the assessee therefore the disallowance have been rightly made by the AO. Further as per the Ld. CIT(A) order, the assessee did not placed any evidence on record that the deductee have paid taxes on income so received from the assessee. It was accordingly submitted that there is no infirmity in the order of the Ld. CIT(A) while confirming the addition so made by the AO. 6. We have heard the rival contentions and pursued the material available on record. Firstly, regarding the additions towards the unpaid service tax liability, what needs to be considered is the bills/invoices raised by the assessee during the financial year wherein the services are liable for service tax and out of the amount so collected by the assessee from the realization of the bills so raised, deposit of service tax with the Govt. treasury during the year and the amount outstanding towards the close of the financial year. It was submitted by the ld AR that during the year under consideration, the assessee has charged and claimed Service Tax in bills to its customers to the tune of Rs. 16,59,790/- as per audited P&L Account and out of which, the unrealized amount is to the tune 6 of Rs. 1,56,040/- and thus the remaining amount of Rs. 15,03,750/- is the amount of Service Tax realized during the year under consideration which becomes liable for deposit and out of which, the assessee has deposited a sum of Rs. 7,38,696/- before filing of the return of income and only balance amount of Rs. 7,65,054/- remained unpaid till the filing of the return of income which could have been disallowed by the AO. We deem it appropriate to set-aside the matter to the file of the AO for the limited purpose of verifying the service tax numbers as so submitted by the assessee and where the same is found to be in order, allow the necessary relief to the assessee. In the result, the ground is allowed for statistical purposes. 7. Regarding liability towards the bills so submitted by the drivers pertaining to the month of March and which are accounted for the subsequent financial year, we find that given the nature of the assessee’s business and following the consistent accounting practice as followed in earlier years and in absence of any change in the rate of tax, we see no reason to deny the claim of the bills so accounted for by the assessee company in absence of any dispute regarding the genuineness of the bills and expenses so claimed by the assessee. In the result, the ground of appeal is allowed. 8. Regarding non-deduction of TDS on interest paid to Kotak Mhindra Prime Limited and disallowance thereof under section 40(a)(ia), there is no dispute that the assessee was liable to deduct TDS, at the same time, it has been contended that Kotak Mhindra Prime Limited, the payee company in all likelihood has considered the amount as part of this income while filing the return of income. It was submitted that where the payee company has also included the amount as part of his income, there should not be any disallowance in the hands of the assessee under section 40(a)(ia) of the Act. Given that we are setting-aside the matter in context of ground no. 1 to the file of the AO, we deem it appropriate to set-aside this matter also to the file of the 7 AO to verify as to whether the payee company has included the amount of interest so paid as part of its income while filing its return of income and has paid taxes thereon and where on verification, the same is found to be in order, allow the necessary relief to the assessee. In the result, the ground of appeal is allowed for statistical purposes. 9. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 14/07/2023. Sd/- Sd/- आकाश द प जैन %व&म (संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य! / VICE PRESIDENT लेखा सद-य/ ACCOUNTANT MEMBER AG Date: 14/07/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar