Deputy Commissioner of Income-tax, V. Shri Ashok M. Musale, Pune

ITA 1119/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0399 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 23-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWRE
• Keywords: Business income; Salary income; Non-deduction of tax
• Section: 143(3); 133A; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1119/PN/2014 $& ' !(' / ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME TAX, CIRCLE 8, PUNE ....... / APPELLANT )& / V/S. SHRI ASHOK M. MUSALE, C/O. M/S. PUNE METAGRAPH, G-113, MIDC, BHOSARI, PUNE-411044 PAN : AAUPM2922P / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI ANIL CHAWRE / DATE OF HEARING : 20-10-2016 / DATE OF PRONOUNCEMENT : 30-11-2016 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 17-02- 2014 FOR THE ASSESSMENT YEAR 2006-07. 2 ITA NO. 1119/PN/2014, A.Y. 2006-07 2. THE REVENUE HAS RAISED 6 GROUNDS IN ITS APPEAL, THE G ROUND NOS. 1 TO 5 OF THE APPEAL RELATE TO SOLITARY ISSUE OF ALLOWING THE CLAIM OF ASSESSEE U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS AN INDIVIDUAL AND HAS INCOME FROM SALARY, HOUS E PROPERTY, CAPITAL GAIN AND OTHER SOURCES DURING THE IMPUGNED ASSES SMENT YEAR. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMEN T YEAR 2006-07 ON 31-10-2006 DECLARING TOTAL INCOME OF ` 16,96,160/-. A SURVEY ACTION U/S. 133A OF THE ACT WAS CARRIED OUT ON 2 4-01-2012 IN THE CASE OF M/S. ENPACK PLASTICS PVT. LTD. AND ITS GROUP C ONCERN M/S. PUNE METAGRAPH. CONSEQUENT TO THE SURVEY ACTION PROC EEDINGS U/S. 147 WERE INITIATED AGAINST THE ASSESSEE AND ACCORDINGLY NOTICE U/S. 148 WAS ISSUED TO THE ASSESSEE ON 28-03-2012. IN RESPONS E TO NOTICE U/S. 148, THE ASSESSEE FILED RETURN OF INCOME ON 27-07-2012 D ECLARING TOTAL INCOME AS ` 53,46,800/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER INTER ALIA OBSERVED THAT THE ASSESSE E HAS CLAIMED AN AMOUNT OF ` 30,88,377/- WHICH WAS DISALLOWED U/S. 40(A)(IA) OF THE ACT IN ASSESSMENT YEAR 2005-06. 3.1 THE ASSESSEE HAD A PROPRIETARY CONCERN M/S. SOLIDUS HI TECH WHICH WAS CONVERTED INTO COMPANY NAMELY M/S. SOLIDUS HI T ECH PRODUCTS PVT. LTD. ON 10-01-2005 I.E. IN THE PERIOD RELEVAN T TO THE ASSESSMENT YEAR 2005-06. THE ENTIRE ASSETS AND LIABILITIES OF THE SAID FIRM WERE TAKEN OVER BY THE COMPANY. DURING THE COURSE OF ASSESSMENT IN ASSESSMENT YEAR 2005-06 AN AMOUNT OF ` 30,88,377/- CLAIMED BY THE ASSESSEE WAS DISALLOWED U/S. 40(A)(IA) OF THE ACT. THE AFOR ESAID EXPENDITURE WAS IN RESPECT OF M/S. SOLIDUS HI TECH, THE PR OPRIETARY 3 ITA NO. 1119/PN/2014, A.Y. 2006-07 CONCERN OF THE ASSESSEE WHICH CEASED TO EXIST W.E.F. 10-01 -2005. IN THE RETURN FOR ASSESSMENT YEAR 2006-07, THE ASSESSEE CLAIME D THE PAYMENT OF TDS AS EXPENSES OUT OF INCOME FROM REMUNERATION AND IN TEREST. THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICE R VIDE ASSESSMENT ORDER DATED 28-09-2012 PASSED U/S. 143(3) R .W.S. 147 OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFER RED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AGA INST THE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFICER WHICH INTER ALIA INCLUDE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT. THE COMMISS IONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER ACCEPTED THE CLAIM OF THE ASSESSEE U/S. 40(A)(IA) OF THE ACT. AGAINST THE FINDINGS OF COM MISSIONER OF INCOME TAX (APPEALS) IN ALLOWING THE CLAIM OF DEDUCTION U/S. 40(A)(IA) OF THE ACT, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. SHRI ANIL CHAWRE REPRESENTING THE DEPARTMENT SUBMITT ED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN ACCE PTING THE CLAIM OF THE ASSESSEE EVEN THOUGH THE PROPRIETARY CONCE RN IN RESPECT OF WHICH THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT WAS MADE CEAS ED TO EXIST. THE CLAIM MADE BY THE ASSESSEE WITH REGARD TO ITS INCOME IS NOT ALLOWABLE MORE SO WHEN THE TDS LIABILITY OF THE ASSESSEE WAS PAID BY THE COMPANY AND NOT BY THE ASSESSEE. THE LIABILITY TO PA Y TDS IN RESPECT OF PROPRIETARY BUSINESS WAS TRANSFERRED TO THE COMPANY W.E.F. 10-01-2005. THE NEWLY FORMED COMPANY HAD ACQUIRED ALL THE ASSETS AND LIABILITIES OF THE PROPRIETARY CONCERN. THEREFORE, EVEN T HOUGH DISALLOWANCE WAS MADE IN THE YEAR IN WHICH THE ASSESSEE WAS THE OWNER OF PROPRIETARY CONCERN, THE BENEFIT WILL NOT ACCRUE T O THE ASSESSEE SUBSEQUENTLY. THE LD. DR CONTENDED THAT IT IS AN UNDISPU TED FACT THAT 4 ITA NO. 1119/PN/2014, A.Y. 2006-07 THE TDS LIABILITY WAS DISCHARGED BY THE COMPANY M/S. SOLIDA S HITECH PRODUCTS PVT. LTD. SUBSEQUENT TO THE TRANSFER OF BUSINES S. SINCE, THE PAYMENT IS MADE BY COMPANY IN COMPLIANCE OF THE AGREEME NT OF SALE OF BUSINESS, THE BENEFIT CANNOT ARISE TO THE ASSESSEE WHO HAS TRANSFERRED ITS ENTIRE ASSETS AND LIABILITIES TO THE COMPANY. EVEN IF IT IS ASSUMED THAT THE BENEFIT WILL ARISE TO THE ASSESSEE IN ACCORDANCE WITH LANGUAGE USED IN SECTION 40(A)(IA) AND THE SAME HAS NOT BEEN CLAIME D BY THE COMPANY. IT HAS TO BE TAXED IN THE HANDS OF THE ASSES SEE AS IT HAS RESULTED INTO ENRICHMENT OF THE ASSESSEE ARISING FROM THE SAME TRANSACTION OF SALE OF BUSINESS. THE LD. DR CONTENDED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN OBSERVING THAT THE ASSESSEE WAS HAVING BUSINESS INCOME BY WAY OF REMUNERAT ION AS WELL AS INTEREST FROM PARTNERSHIP FIRM I.E. M/S. PUNE METAGRAPH A ND THUS, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 40(A)(IA) OF THE A CT. THE RETURN FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006-0 7 CLEARLY SHOWS THAT THE INCOME HAS BEEN RETURNED UNDER THE HEAD SALA RY, INCOME FROM HOUSE PROPERTY, INCOME FROM PROFIT AND GAINS OF BUSINESS A ND PROFESSION AND INCOME FROM OTHER SOURCES. THERE IS NO NE XUS BETWEEN THE CLAIM OF ASSESSEE AND REMUNERATION AND INTEREST RECE IVED FROM PARTNERSHIP FIRM. THE LD. DR VEHEMENTLY SUPPORTED THE OR DER OF ASSESSING OFFICER AND PRAYED FOR REVERSING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. 5. ON THE OTHER HAND SHRI NIKHIL PATHAK APPEARING ON BEH ALF OF THE ASSESSEE STRONGLY DEFENDED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION U/S. 40(A)(IA) OF THE ACT. THE LD. AR OF THE ASSESSEE SUBMITTED THAT UNDISPUTEDLY THE PROPRIETO RSHIP FIRM OF THE ASSESSEE M/S. SOLIDAS HITECH WAS TAKEN OVER BY THE COMP ANY M/S. SOLIDAS HITECH PRODUCTS PVT. LTD. IN JANUARY, 2005 I.E. DURING THE 5 ITA NO. 1119/PN/2014, A.Y. 2006-07 PERIOD RELEVANT TO THE ASSESSMENT YEAR 2005-06. THE LD . AR REFERRED TO AGREEMENT BETWEEN THE PROPRIETORSHIP FIRM OF ASSESSEE M/ S. SOLIDAS HITECH AND THE COMPANY M/S. SOLIDAS HITECH PRODUCTS PVT. LTD. AT PAGES 12 TO 20 OF THE PAPER BOOK. THE LD. AR CONTENDED THAT ALL THE ASSETS AND LIABILITIES OF THE PROPRIETORSHIP FIRM WHERE TAKEN OVER BY THE NEWLY FORMED COMPANY. THE LD. AR FURTHER ADMITTED THAT THE TDS DEFAULT MADE BY THE PROPRIETORSHIP FIRM WAS COMPLIED WITH BY THE COMPANY. HOWEVER, THE COMPANY HAS NOT CLAIMED THE EXPE NDITURE IN RESPECT OF COMPLIANCE OF TDS DEFAULT. THE LD. AR CONTENDED THAT A PERUSAL OF PROVISIONS OF SECTION 40(A)(IA) SHOWS THAT THE DISA LLOWANCE HAS BEEN MADE IN THE HANDS OF THE ASSESSEE AND NOT TH E UNDERTAKING. IRRESPECTIVE OF THE FACT, WHO DISCHARGED THE LIABILITY ON AC COUNT OF TDS IT SHOULD BE ALLOWED AS EXPENDITURE IN THE YEAR OF PAYMENT . THE DISALLOWANCE WAS MADE IN THE HANDS OF THE ASSESSEE BEING PROPRIETOR OF M/S. SOLIDAS HITECH, THEREFORE, AFTER THE PAYMENT THE DEDUC TION U/S. 40(A)(IA) SHOULD BE ALLOWED TO THE ASSESSEE. THE LD. AR PLACE D RELIANCE ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF C IT VS. RAJINDER KUMAR REPORTED AS 260 CTR 113 AND CONTENDED THAT THE HON'BLE HIGH COURT HAS EXPLAINED THE INTENTION OF THE LEGIS LATURE BEHIND ENACTING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ONCE, THE PROVISIONS OF SECTION 40(A)(IA) HAVE BEEN COMPLIED, THE BENEFIT S HOULD FLOW TO THE ASSESSEE ON BEHALF OF WHICH THE COMPLIANCE WAS MADE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE UNDISPUTED FACTS WHICH HAVE EMERGED FROM THE RECORDS AN D THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SID ES ARE THAT THE ASSESSEE DEFAULTED IN DEDUCTING AND DEPOSITING TAX AT SOU RCE IN RESPECT OF PAYMENTS AMOUNTING TO ` 30,88,377/- IN RESPECT OF ITS SOLE 6 ITA NO. 1119/PN/2014, A.Y. 2006-07 PROPRIETARY BUSINESS M/S. SOLIDAS HITECH IN THE ASSESSMENT YEAR 2005-06. THE ASSESSEE TRANSFERRED THE ASSETS AND LIAB ILITIES OF ITS PROPRIETARY BUSINESS M/S. SOLIDAS HITECH TO M/S. SOLIDAS HIT ECH PRODUCTS PVT. LTD. IN JANUARY, 2005. A PERUSAL OF THE T AKEOVER AGREEMENT PLACED ON RECORD BY THE ASSESSEE AT PAGE 1 2 OF THE PAPER BOOK SHOWS THAT NEWLY FORMED COMPANY HAS ACQUIRED ENT IRE FIXED ASSETS AND CURRENT ASSETS OF THE COMPANY INCLUDING TDS RECEIVABLES AS WELL AS LIABILITIES COMPRISING OF SECURED LOAN AND CURRENT LIABILITIE S INCLUDING TDS PAYABLES. IN LIEU OF TRANSFER OF SOLE PROPRIETAR Y BUSINESS AS A GOING CONCERN THE ASSESSEE RECEIVED A CONSIDERATIO N OF ` 36,15,821.54. THUS, IT IS EVIDENT FROM THE AGREEMENT THAT T HE ASSESSEE HAS RECEIVED FULL AND FINAL PAYMENT FROM THE COMP ANY IN LIEU OF TRANSFER OF ENTIRE ASSETS AND LIABILITIES OF THE PROPRIETORS HIP FIRM M/S. SOLIDAS HITECH. 7. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2 006-07 THE COMPANY M/S. SOLIDAS HITECH PRODUCTS PVT. LTD. PAID THE TD S LIABILITY ACQUIRED FROM M/S. SOLIDAS HITECH PROPRIETORSHIP FIRM OF THE A SSESSEE. THE LD. AR HAS STATED AT THE BAR THAT THE COMPANY IN IT S RETURN OF INCOME HAS NOT CLAIMED THE BENEFIT OF THE SAID TDS LIABILITY PA ID. THE ASSESSEE IN ITS RETURN OF INCOME FOR ASSESSMENT YEAR 200 6-07 HAS CLAIMED THE DEDUCTION OF DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT IN ASSESSMENT YEAR 2005-06 AFTER THE COMPANY HAS DISCHAR GED THE TDS LIABILITY. NOW, THE ISSUE IS, WHETHER THE ASSESSEE CAN CLAIM DEDUCTION IN RESPECT OF DISALLOWANCE U/S. 40(A)(IA) WHERE THE COMPLIANCE IS MADE BY PERSON OTHER THAN ASSESSEE. 8. BEFORE PROCEEDING FURTHER IT WOULD BE RELEVANT TO REFE R TO THE PROVISIONS OF SECTION 40(A)(IA) AND THE NOTES TO MEMORANDUM EXPLAINING 7 ITA NO. 1119/PN/2014, A.Y. 2006-07 THE REASON BEHIND INSERTION OF CLAUSE (IA) TO SECTION 40(A) OF THE ACT BY THE FINANCE (NO. 2) BILL, 2004. THE RELEVANT EXTRACT OF PROV ISIONS OF SECTION 40(A)(IA) ARE AS UNDER : 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO NS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION', (A) IN THE CASE OF ANY ASSESSEE XXXXXXXXXX XXXXXXXXXX (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT, R OYALTY,] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR F OR CARRYING OUT ANY WORK)], ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, [HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 :] PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEE N DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTIO N (1) OF SECTION 139, [THIRTY PER CENT OF] SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX H AS BEEN PAID. :] THE RELEVANT EXTRACT OF MEMORANDUM EXPLAINING THE PURPOS E FOR INTRODUCING CLAUSE (IA) TO SECTION 40(A) READS AS UNDER : WITH A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISION S, IT IS PROPOSED TO EXTEND THE PROVISIONS OF SECTION 40(A)(I) TO PAYMEN TS OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERV ICES OR FEES FOR TECHNICAL SERVICES TO RESIDENTS, AND PAYMENTS TO A RESIDENT CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX HAS NOT BEEN D EDUCTED OR AFTER DEDUCTION, HAS NOT BEEN PAID BEFORE THE EXPIRY OF T HE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200 AND IN ACCORDA NCE WITH THE OTHER PROVISIONS OF CHAPTER XVII-B. IT IS ALSO PROPOSED T O PROVIDE THAT WHERE IN RESPECT OF PAYMENT OF ANY SUM, TAX HAS BEEN DEDUCTE D UNDER CHAPTER XVII-B OR PAID IN ANY SUBSEQUENT YEAR, THE SUM OF P AYMENT SHALL BE ALLOWED IN COMPUTING THE INCOME OF THE PREVIOUS YEA R IN WHICH SUCH TAX HAS BEEN PAID. 8 ITA NO. 1119/PN/2014, A.Y. 2006-07 THEREAFTER, SECTION 40(A)(IA) OF THE ACT WAS AMENDED BY THE FINANCE ACT, 2008, FINANCE ACT, 2010 AND NOW RECENTLY BY THE FINANCE ACT, 2012. A READING OF THE MEMORANDUM EXPLAINING INSERTION OF CLAUSE (IA) TO SECTION 40(A) WOULD MAKE IT CLEAR THAT CLAUSE (IA) WAS INTRODUCED WITH THE MAIN OBJECTIVE OF BETTER COMPLIANCE OF TDS PROVISIONS. SUBSEQUENT AMENDMENTS WERE MADE TO THE SE CTION FOR MITIGATING HARDSHIPS FACED BY THE ASSESSEES WHERE THE CO MPLIANCE FOR TDS PROVISIONS WERE MADE IN SUBSEQUENT ASSESSMENT YEAR OR BELATEDLY. THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT PENAL PROVISIONS BU T ARE DETERRENT FOR EFFECTIVE COMPLIANCE OF PROVISIONS OF CHAPTER X VII-B OF THE ACT. 9. IN THE PRESENT CASE UNDOUBTEDLY TDS COMPLIANCE WER E MADE BY THE COMPANY WHICH HAVE TAKEN OVER THE PROPRIETARY BUS INESS OF THE ASSESSEE. A PERUSAL OF THE TAKEOVER AGREEMENT SHOWS T HAT ALL THE LIABILITIES INCLUDING TDS LIABILITIES HAVE BEEN CONSIDERED WHILE FIXING THE CONSIDERATION. THUS, THE TDS LIABILITY OF THE PROPRIETORSHIP B USINESS MUST HAVE BEEN FACTORED WHILE DETERMINING THE CONSIDERATIO N FOR TAKEOVER. ONCE, THE TDS PROVISIONS HAVE BEEN COMPLIED WIT H DEHORS THE FACT WHETHER THE LIABILITY HAS DISCHARGED BY THE ASSES SEE OR THE COMPANY WHICH HAS TAKEN OVER THE BUSINESS OF ASSESSE E, THE BENEFIT OF SAME SHOULD ACCRUE TO THE ASSESSEE AS THE DISALLOWANCE U/S. 40(A)(IA) WAS MADE IN THE HANDS OF THE ASSESSEE AND THE COMPANY HAS NOT CLAIMED ANY SUCH DEDUCTION ON ACCOUNT OF PAYMENT OF SUC H TDS LIABILITY IN ITS COMPUTATION OF INCOME. 10. WE DRAW SUPPORT FROM THE DECISION OF GAUHATI BENCH O F THE TRIBUNAL IN THE CASE OF OM INDIA TRADING CO. (P.) LTD. VS. ASS TT. COMMISSIONER OF INCOME TAX REPORTED AS 58 TAXMANN.COM 3 25. THE 9 ITA NO. 1119/PN/2014, A.Y. 2006-07 TRIBUNAL DELETED DISALLOWANCE U/S. 40(A)(IA) WHERE TDS LIABILITY OF T HE ASSESSEE THEREIN WAS DISCHARGED BY THIRD PARTY ON BEHA LF OF ASSESSEE. IN THE SAID CASE THE ASSESSEE COMPANY WAS ENGAGED IN EXPORT OF AGRICULTURAL PRODUCTS. IT CLAIMED EXPENDITURE UNDER THE H EAD FREIGHT AND CARTAGE FOR TRANSPORTATION OF EXPORT GOODS TO SEA PORT AT MUMBAI. THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE U/S. 40 (A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE. THE PAYMENTS FOR LORRY FREIGHT, CLEARING AND FORWARDING FOR EXPORT WERE MADE TO M/S. NARENDRA FO RWARDAS (P.) LTD. (NFPL). NFPL USE TO DEDUCT AND DEPOSIT TDS FOR ON B EHALF OF THE ASSESSEE. THE ASSESSEE REIMBURSED THE AMOUNT TO NFPL . THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ORDER OF A SSESSING OFFICER. THE MATTER TRAVELLED TO TRIBUNAL. THE TRIBUNAL HELD THAT THE RELATION BETWEEN THE ASSESSEE AND NFPL IS THAT OF THE P RINCIPAL AND AGENT AND THE OBLIGATION TO DEDUCT TAX AT SOURCE FROM PAYMENT OF TRANSPORTATION CHARGES WAS COMPLIED WITH BY THE AGENT FO R AND ON BEHALF OF THE ASSESSEE AND THEREFORE, NO DISALLOWANCE U/S. 4 0(A)(IA) IS CALLED FOR. IN THE PRESENT CASE ALTHOUGH THE RELATION BETWEEN THE ASSESSEE AND M/S. SOLIDUS HI TECH PRODUCTS PVT. LTD. IS NOT THAT O F PRINCIPAL AND AGENT, HOWEVER AT THE TIME OF TAKEOVER THE SAID COMPANY HAS AGREED TO TAKEOVER TDS LIABILITY OF THE ASSESSEE. ONCE, THE LIABILITY TAK ENOVER BY THE COMPANY HAS BEEN DISCHARGED ON BEHALF OF THE ASSESS EE, NO DISALLOWANCE U/S. 40(A)(IA) IN THE HANDS OF ASSESSEE IS WARRANTED. 11. THUS, IN VIEW OF OUR ABOVE FINDINGS, WE ARE OF CONSIDER ED VIEW THAT THE ASSESSING OFFICER HAS ERRED IN DISALLOWING THE CLAIM OF ASSESSEE IN RESPECT OF AMOUNT ` 30,88,377/- DISALLOWED U/S. 40(A)(IA) IN THE ASSESSMENT YEAR 2005-06. WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF 10 ITA NO. 1119/PN/2014, A.Y. 2006-07 COMMISSIONER OF INCOME TAX (APPEALS) IN REVERSING THE FINDING S OF ASSESSING OFFICER AND ACCEPTING THE CLAIM OF ASSESSEE. WE DO NOT FIND ANY MERIT IN THE APPEAL BY DEPARTMENT, ACCORDINGLY, THE A PPEAL OF THE DEPARTMENT IS DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 30 TH DAY OF NOVEMBER, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 30 TH NOVEMBER, 2016 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-V, PUNE 4. ' / THE CIT-V, PUNE 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE