VANDANA DINESHKUMAR INANI, LATUR V. INCOME TAX OFFICER, WARD 1 LATUR, LATUR

ITA 103/PUN/2022

AI Insights

The case involves Vandana Dinehkumar Inani, a commission agent and general merchant, who appealed against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of Rs.69,27,693/- by the Assessing Officer. The disallowance was made under section 40(a)(ia) of the Income Tax Act, 1961, for non-deduction of TDS on payments made to warehouses for storage of goods. The Tribunal examined whether the payments were mere reimbursements or constituted rent, and concluded that they were rent, thus requiring TDS deduction. The Tribunal also addressed the issue of interest under sections 234A, 234B, and 234C, finding no defects in the calculation of the impugned interest.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134298 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-12-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 22-02-2022
• Other Referred Cases: Commissioner of Income Tax Vs. Ansal Land Mark Township (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Non-deduction of tax; TDS
• Section: 28; 143(3); 234B; 40(a)(ia); 133(6); 44AB

Judgement Text

आयकर अपीलीय अिधकरण “बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.103/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year : 2009-10 Vandana Dinehkumar Inani, 84/2, Inani House, Main Road, Latur – 413512. PAN: AABPI 2299 G V s The Income Tax Officer, Ward-1, Latur. Appellant/ Assessee Respondent / Revenue Assessee by Shri M.M.Kulkarani – AR Revenue by Shri M.G.Jasnani – DR Date of hearing 20/12/2022 Date of pronouncement 17/03/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], Delhi dated 16.12.2021 emanating from the assessment order dated 11.12.2019 under section 143(3) r.w.s 254 of the I.T.Act, 1961 for A.Y.2009-10. The Assessee has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming disallowance made by AO, of an amount of Rs.69,27,693/- out of storage charges reimbursed by the appellant to the customers by invoking provisions of section 4o(a)(ia) in view of the following: ITA No.103/PUN/2022 Vandana Dineshkumar Inani [A] 2 a) On the facts and in the circumstances of case, Ld AO has not taken all the necessary steps and efforts, and not executed his powers in this de novo assessment proceeding. b) The provisions in respect of the tax deduction at source in the Income Tax Act 1961 are not applicable on the payment made to the corporation established under an Act of parliament. C) The provisions of the tax deduction at source are not applicable to the reimbursement made of payments made by others in which the event of the payment of expenses are not in control of the appellant assessee and Appellant was not party for making the payment of ware house charges. d) On the facts and circumstances of the case, application of the provisions of the TDS was an impossibility so far as the assessee is concerned and to expect from the assessee to do an impossible act is untenable in law. e) Disallowance u/s 4o(a)(ia) cannot be made as the deduction of the expenditure/ payment in question is covered by section 28 and not sections 30 to 38 in view of the express language of section 4o(a)(ia), which does not cover the deduction of items available in section 28 itself as direct expenditure to be deduced in arriving at the gross profit,. f) On the facts and circumstances of the case, the provisions of section 1941 were not applicable to the assessee as there was no contract entered into by the assessee to take any land or building on rent or lease. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming action of the Assessing Officer in levying interest u/s 234A, 234B and 234C. 4. The Appellant prays that the order for disallowance of warehouse charges shall be deleted. The Appellant craves leave to add, amend, alter vary and/or withdraw any or all the above grounds of appeal.” 2. Brief facts of the case are that the assessee is a Commission Agent & General Merchant. She filed return of Income on ITA No.103/PUN/2022 Vandana Dineshkumar Inani [A] 3 20/10/2009. The AO in the assessment order passed u/s.143(3) held that the assessee has made payments to certain warehouses without deducting TDS and hence disallowed Rs.69,27,693/- u/s.40(a)(ia) of the Act. Aggrieved by the assessment order the Assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) Aurangabad vide order dated 30/08/2012 deleted the addition made u/s.40(a)(ia) of the Act. The revenue filed appeal before ITAT. ITAT in ITA no. 2146/Pune/2012 vide order dated 27/12/2013 restored the appeal to the file of the CIT(A). Ld.CIT(A) upheld the addition. The assessee filed appeal before the ITAT. The ITAT in ITA No.124/PUN/2016 vide order dated 26/04/2018 remitted the issue to the file of the AO for proper verification and proper opportunity to the assessee. The AO carried out necessary verification and then again disallowed the impugned amount. The Ld.CIT(A) upheld it. Aggrieved by the same the assessee filed appeal before this Tribunal. Submission of Ld.AR : 3. The Ld.AR submitted that the assessee procures food grains from Dinesh Kumar Inani and some other persons. At the time of the said purchases the grains were lying in the warehouses. Subsequently the assessee sold the grains to various parties who got delivery of the grains directly from the warehouses. The purchaser directly paid the warehousing charges and then debited it to the assessee. The assessee ITA No.103/PUN/2022 Vandana Dineshkumar Inani [A] 4 has shown sale of grains in the P&L account and also debited warehouse charges to P&L account. The ld.AR submitted that the provisions of section 40(a)(ia) are not applicable in the case of the assessee as the amounts have been paid by the purchaser directly to the warehouse. The Ld.AR submitted that the AO had issued letters u/s 133(6) to various persons but non replied. The assessee also could not get any confirmations from them. Ld.DR’s submission : 4. Ld.DR relied on the order of the AO. The ld.DR submitted that AO had issued letters to various persons but no reply received by the AO. The assessee also failed to file confirmations. The LD.DR submitted that the assessee has admittedly debited the amounts paid to warehouses and claimed as expenditure. Once the assessee had claimed it as expenditure, the assessee was mandatorily required to deduct Tax at source u/s.194-I. Assessee has admittedly not deducted the Tax at source. Hence the disallowance shall be sustained. Findings and discussions : 5. We have heard both the parties and perused the records. At the outset, we would like to reproduce the relevant paragraphs of the ITAT Order in ITA No.124/PUN/2016 dated 26.04.2018 vide which ITA No.103/PUN/2022 Vandana Dineshkumar Inani [A] 5 the ITAT had set-aside the order to the Assessing Officer for denovo adjudication. Quote “3. Shri M.K. Kulkarni appearing on behalf of the assessee submitted at the outset that he is not pressing ground Nos. 1(d) and 1(e) raised in the appeal. The other grounds i.e. ground Nos. 1(a), 1(b), 1(c) and 1(f) are directed against the single issue of disallowance of Rs.69,27,693/- u/s. 40(a)(ia) of the Act................. 5. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The solitary issue raised in appeal by the assessee is with respect to disallowance u/s. 40(a)(ia) for non-deduction of tax at source on payments made to warehousing corporations for storage of goods. The contention of the assessee is that the payments to the warehousing corporations are merely reimbursement of charges collected from buyers of the goods. We do not find merit in the submissions made by the assessee. There is no document on record that would indicate that it is a case of reimbursement of charges. The invoices furnished by the assessee at pages 4 to 7 of the paper book indicate that the assessee has charged for the goods and there is no reference of any collection of warehousing charges. Therefore, the plea raised by the assessee that it is a case of reimbursement or expenses is without any merit. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in confirming the addition. The invoices furnished by the assessee at pages 4 to 7 of the paper book indicate that the assessee has charged for the goods and there is no reference of any collection of warehousing charges. Therefore, the plea raised by the assessee that it is a case of reimbursement or expenses is without any merit. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in confirming the addition. 6. The ld. Counsel for the assessee made an oral prayer that the assessee can produce necessary evidence to show that the recipient of the amount i.e. the warehousing corporations have offered the amount paid by assessee to tax if, the matter is remitted back to the Assessing Officer for verification in the light of second proviso to section 40(a)(ia) of the Act inserted by Finance Act, 2012 w.e.f. 01- 04-2013. The ld. Counsel submitted that the Hon’ble Delhi High Court in the case of Commissioner of Income Tax Vs. Ansal Land Mark Township (P) Ltd. reported as 377 ITR 635 has held that the second proviso is declaratory and curative and it has retrospective effect from 01-04-2005. ITA No.103/PUN/2022 Vandana Dineshkumar Inani [A] 6 7. We find merit in the alternate prayer made by the assessee. Accordingly, we remit this issue back to the file of Assessing Officer for verification. The assessee shall furnish necessary details before the Assessing Officer to substantiate that the recipients of the amount i.e. the warehousing corporations have offered the amount to tax. The Assessing Officer shall decide this issue de-novo after considering the necessary documents furnished by the assessee, if any and after affording opportunity of hearing to the assessee, in accordance with law.” Unquote. 5.1 Thus, the ITAT had rejected the assessee’s plea that it was mere reimbursement. The ITAT had directed assessee to file evidence to prove that warehouses had offered the impugned amount for taxation. 5.2. It is an admitted fact that the Assessee has not deducted TDS on the amounts paid to warehouses. It is also an admitted fact that the assessee has debited said amounts in her books and claimed as expenditure. 5.3 Section 194I as applicable for relevant AY is as under : [Rent. 93 194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to 94 [a resident] any income by way of rent 95 , shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, 96 [deduct income-tax thereon at the rate of— 97 [(a) two per cent for the use of any machinery or plant or equipment; and (b ) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings:]] Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed one hundred and twenty thousand rupees : ITA No.103/PUN/2022 Vandana Dineshkumar Inani [A] 7 98 [Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section.] Explanation.—For the purposes of this section,— 99 [( i) "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,— (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee;] (ii ) where any income is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] 6. In this case there was an arrangement between the assessee and warehouses, that the assessee will store the grains in the warehouses for which assessee was liable to pay certain charges. These are nothing but rent as defined in section 194I. Therefore, the assessee was liable to deduct tax at source. The assessee failed to deduct the tax at source. Hence as per section 40(a)(ia) the amount needs to be disallowed. The Ld.AR submitted that the actual amount was paid by the purchaser directly to the warehouses. However, this does not change the character of the Rent. It was the liability of the assessee. The assessee has admittedly debited the said amounts in its books. It ITA No.103/PUN/2022 Vandana Dineshkumar Inani [A] 8 is also a fact that assessee could not file any confirmations from the warehouses that they have shown the amounts as Income and paid taxes. In these facts and circumstances of the case, we are of the opinion that the disallowance made by the AO u/s 40(a)(ia) was right. Accordingly the disallowance of Rs.69,27,693/- is upheld. Therefore, the ground numbers 1 and 3 of the assessee are dismissed. 7. Ground No.2 is regarding interest u/s.234A, 234B & 234C. The Ld.AR could not explain any defect in the calculation of the impugned interest. Therefore, we are of the opinion that the AO has rightly calculated the interest u/s.234A, 234B and 234C. Accordingly, the Ground No.2 of the assessee is dismissed. Accordingly, the appeal of the assessee is dismissed. 8. In the result, appeal of the assessee is dismissed. Order pronounced in the open Court on 17 th March, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 17 th March, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकरअपीलीयअिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. ITA No.103/PUN/2022 Vandana Dineshkumar Inani [A] 9 आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT, Pune.