Income Tax offocer -4(3) , Lucknow V. Shri Rahul Singh, Lucknow

ITA 107/LKW/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9135 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C P SINGH
• Keywords: Retrospective amendment
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.49/LKW/2013 ASSESSMENT YEAR:2009-10 ACIT-III KANPUR V. SHRI. RAJA CHKRAVARTY PROP. M/S MARC MEDICAL SYSTEMS TRANSPORT NAGAR KANPUR TAN/PAN:AFFPC0708M (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. C. P. SINGH, D.R. RESPONDENT BY: SHRI. ABHINAV MEHROTRA, ADVOCATE DATE OF HEARING: 17 12 2014 DATE OF PRONOUNCEMENT: 06 02 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON VARIOUS GROUNDS, WHICH ARE AS UNDER:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.25,00,484/- MADE BY THE A.O. U/S 40(A)(IA) ON ACCOUNT OF NON DEDUCTION OF TDS ON COMMISSION AND SERVICE CHARGES WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR, HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.25,00,484/- WITHOUT APPRECIATING THE FACT THAT PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ON NON-DEDUCTION OF TDS ON COMMISSION AND SERVICE CHARGES WHETHER 'PAID' OR 'PAYABLE'. :- 2 -: THAT THE DRAWING OF AN OVER CONSCIENTIOUS DISTINCTION BETWEEN 'PAID' AND 'PAYABLE', TO RESTRICT THE APPLICATION OF SECTION 40A(IA) ONLY TO PAYABLE (UNPAID) AMOUNTS, WOULD DEFEAT THE VERY LEGISLATIVE INTENT BEHIND SECTION 194H WHICH PLACES OBLIGATION, ON THE PERSON PAYING COMMISSION, TO DEDUCT TAX AT THE TIME OF CREDIT OR PAYMENT OF THE AMOUNT BY CASH OR CHEQUE. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR, HAS ERRED IN LAW AND ON FACTS IN RELYING ON THE ORDER OF IT AT IN THE CASE OF CIT-I, VISHAKHAPATNAM VS. M/S MERILYN SHIPPING & TRANSPORTS, VISHAKHAPATNAM WITHOUT TAKING COGNIZANCE OF THE INTERIM ORDER DATED 08.10.2012 OF HON'BLE HIGH COURT OF ANDHRA PRADESH IN ITTAMP NO. 908 OF 2012, WHEREBY HON'BLE COURT HAS SUSPENDED THE SAID IT AT ORDER. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN RELYING ON THE ORDER OF HON'BLE APEX COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. VS. CIT (293 ITR 226), WHICH PERTAINS TO THE APPLICATION OF SECTION 201(1) AND THE ISSUE OF DOUBLE TAXATION AT THE HANDS OF DEDUCTOR AS WELL AS DEDUCTEES, WHEREAS THE PRESENT CASE RELATES TO APPLICATION OF SECTION 40A(IA), WHICH DISALLOWS CERTAIN PRESCRIBED EXPENSES ON WHICH TAX HAS NOT BEEN DEDUCTED AT SOURCE AND/OR THE SAME HAS NOT BEEN PAID TO GOVERNMENT ACCOUNT WITHIN THE STIPULATED TIME. 5. THAT THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR DT. 19.10.2012 NEEDS TO BE QUASHED AND ORDER DATED 29.12.2011 PASSED BY THE ASSESSING OFFICER TO BE RESTORED. 2. THOUGH VARIOUS GROUNDS ARE RAISED, BUT THEY ALL RELATE TO THE DISALLOWANCE OF RS.25,00,484/- MADE BY THE ASSESSING OFFICER, HAVING INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') ON ACCOUNT OF NON-DEDUCTION OF TDS ON COMMISSION AND SERVICE CHARGES. :- 3 -: 3. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS DOING BUSINESS OF TRADING OF MEDICAL EQUIPMENTS AND LIASONING OF MEDICAL EQUIPMENTS ON COMMISSION BASIS UNDER THE NAME AND STYLE OF PROPRIETORSHIP CONCERN, M/S MARC MEDICAL SYSTEMS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS MADE PAYMENT OF COMMISSION OF RS.25,00,484/- AND NO TDS WAS DEDUCTED. HE ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND MADE DISALLOWANCE OF RS.25,00,484/-, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT WHOLE AMOUNT OF RS.25,00,484/- WAS PAID BY THE END OF THE FINANCIAL YEAR, THEREFORE, NOTHING WAS PAYABLE. AS SUCH, THE CASE WAS COVERED BY THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS. ACIT [2012] TIOL 184 ITAT VIZAG SB. RELIANCE WAS ALSO PLACE ON THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF HINDUSTAN COCACOLA BEVERAGES PVT. LTD. VS. CIT, 293 ITR 226 (SC). IT WAS ALSO CONTENDED THAT THE DEDUCTEES WERE ASSESSED TO TAX AND THEY HAVE FILED THEIR OWN RETURNS OF INCOME. THE LD. CIT(A), RELYING UPON THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF HINDUSTAN COCACOLA BEVERAGES PVT. LTD. VS. CIT (SUPRA) AND THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS. ACIT (SUPRA), HAS DELETED THE ADDITION, HAVING CONCLUDED THAT THE WHOLE AMOUNT OF RS.25,00,484/- HAS ALREADY BEEN PAID AND NOTHING IS SHOWN AS PAYABLE BY THE END OF THE FINANCIAL YEAR. 4. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT UNDISPUTEDLY TDS WAS NOT DEDUCTED ON PAYMENT OF AFORESAID COMMISSION, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR MAKING DISALLOWANCE OF THE SAID PAYMENT. THE LD. D.R. HAS ALSO PLACED RELIANCE UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF DCIT VS. AMA MEDICAL & :- 4 -: DIAGNOSTIC CENTRE IN I.T.A. NO.119/LKW/2013, IN WHICH THE TRIBUNAL HAS EXAMINED THE JUDGMENT OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS. ACIT (SUPRA) AND OTHER JUDGMENTS OF VARIOUS HIGH COURTS AND HAVE CONCLUDED THAT SECTION 40(A)(IA) OF THE ACT CAN BE INVOKED ON NON-DEDUCTION OF TDS IRRESPECTIVE OF THE FACT THAT PAYMENTS WERE MADE BEFORE THE END OF THE FINANCIAL YEAR. 5. THE LD. COUNSEL FOR THE ASSESSEE, SHRI. ABHINAV MEHROTRA HAS INVITED OUR ATTENTION TO THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJINDER KUMAR [2013] 39 TAXMANN.COM 126 (DELHI), IN WHICH THEIR LORDSHIPS HAVE HELD THAT THE EXPRESSION SAID DUE DATE AS OCCURRING IN ITEM (A) OF PROVISO TO SECTION 40(A)(IA) OF THE ACT CANNOT MEAN DATE ON WHICH TDS AS PER CHAPTER XVIIIB SHOULD HAVE BEEN PAID; IT REFERS TO DUE DATE OF FILING RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. THEREFORE, PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CAN ONLY BE INVOKED WHERE THE TAX DEDUCTED HAS NOT BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN UNDER SECTION 139(1) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER INVITED OUR ATTENTION TO THE SECOND PROVISO TO SECTION 40 OF THE ACT INTRODUCED W.E.F. 1.4.2013 BY THE FINANCE ACT, 2012, ACCORDING TO WHICH WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB- SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT SINCE THE DEDUCTEES HAVE PAID TAXES AND THE ASSESSEE HAS NOT BEEN HELD TO BE IN DEFAULT, IT SHOULD BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID TAX ON SUCH SUM ON THE DATE OF FURNISHING OF THE RETURN. IT WAS FURTHER CONTENDED THAT SINCE THIS PROVISO IS CLARIFICATORY IN NATURE, IT :- 5 -: HAS RETROSPECTIVE EFFECT. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE ORDER OF THE AGRA BENCH OF THE TRIBUNAL IN THE CASE OF RAJEEV KUMAR AGARWAL VS. ACIT, MATHURA IN I.T.A. NO. 337/AGRA/2013. COPY OF THE ORDER IS PLACED ON RECORD. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT SINCE THE DEDUCTEES HAVE PAID TAXES ON THE AFORESAID RECEIPTS, NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE ON ACCOUNT OF NON-DEDUCTION OF TDS ON THE PAYMENT OF COMMISSION. 7. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE RECORD AND THE JUDGMENTS REFERRED TO BY THE PARTIES, WE FIND THAT THERE IS NO DISPUTE WITH REGARD TO THE NON-DEDUCTION OF TDS AT THE TIME OF PAYMENT OF COMMISSION WHEN IT BECOMES PAYABLE. MOREOVER, IT WAS PAID BEFORE THE END OF THE FINANCIAL YEAR. THOUGH IT WAS CLAIMED THAT SINCE COMMISSION WAS PAID BEFORE THE END OF THE FINANCIAL YEAR, SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED IN THE LIGHT OF THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS. ACIT (SUPRA), BUT IN THIS REGARD, WE ARE ALSO CONSCIOUS OF THE FACT THAT THE JUDGMENT OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS. ACIT (SUPRA) WAS EXAMINED BY US IN THE CASE OF DCIT VS. AMA MEDICAL & DIAGNOSTIC CENTRE (SUPRA) AND WE HAVE TAKEN A VIEW IN THAT CASE THAT SECTION 40(A)(IA) OF THE ACT CAN ALSO BE INVOKED WHEN DUE AMOUNT BECOMES PAYABLE. DURING THE CURSE OF HEARING, OUR ATTENTION WAS INVITED TO THE SECOND TO THE PROVISO TO SECTION 40(A)(IA) OF THE ACT INTRODUCED W.E.F.1.4.2003 BY THE FINANCE ACT, 2012, ACCORDING TO WHICH IF THE DEDUCTEE HAS PAID TAX, THEN THE ASSESSEE SHALL BE DEEMED TO HAVE DEDUCTED AND PAID TAX ON SUCH SUM ON THE DATE OF FURNISHING THE RETURN OF INCOME. THOUGH THIS PROVISO WAS INTRODUCED W.E.F. 1.4.2013 BUT BEING CLARIFICATORY AND BENEFICIAL PROVISION, IT HAS RETROSPECTIVE EFFECT AS HELD BY THE AGRA BENCH OF THE TRIBUNAL IN THE CASE OF RAJEEV KUMAR AGARWAL VS. ACIT, MATHURA :- 6 -: (SUPRA). THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE DEDUCTEE HAS FILED THE RETURN OF INCOME, BUT IT IS NOT CLEAR WHETHER THE DEDUCTEE HAS PAID TAX THEREON. NO DOCUMENTARY EVIDENCE IS PLACED ON RECORD IN SUPPORT OF THESE CONTENTIONS. WE, THEREFORE, FOLLOWING THE ORDER OF THE AGRA BENCH OF THE TRIBUNAL IN THE CASE OF RAJEEV KUMAR AGARWAL VS. ACIT, MATHURA (SUPRA), HOLD THAT ONCE IT IS PROVED THAT THE DEDUCTEE HAS PAID TAXES ON THE COMMISSION RECEIVED FROM THE ASSESSEE, THE ASSESSEE SHALL BE DEEMED TO HAVE DEDUCTED AND PAID TAXES OF SUCH SUM ON THE DATE OF FURNISHING THE RETURN OF INCOME. IN THE LIGHT OF THIS PROPOSITION, WE ARE OF THE VIEW THAT NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE IF IT IS ESTABLISHED THAT THE DEDUCTEE HAS PAID TAX ON THE COMMISSION RECEIVED AND FOR ITS VERIFICATION THE MATTER HAS TO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR MAKING NECESSARY VERIFICATION AND IF IT IS ESTABLISHED THAT THE DEDUCTEES HAVE MADE PAYMENT OF TAX ON THE COMMISSION RECEIVED, NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT SHALL BE MADE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:6 TH FEBRUARY, 2015 JJ:1601 :- 7 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR