M/s. Gaurishankar Bihani, Kolkata V. DCIT, Circle - 34, Kolkata, Kolkata

ITA 1127/KOL/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7861 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 01-09-2011
• Court: TRIBUNAL
• Department Lawyers: AMITAVA ROY ACIT
• Assessee Lawyers: S JHAJHARIA; J P KHAITAN
• Keywords: Charitable institution
• Section: 12A; 12AA

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA ( ) BEFORE , /AND , ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA , AM ] / I.T.A NO. 112 7 /KOL/20 1 1 / ASSESSMENT YEAR : 200 7 - 0 8 M/S. GOURISHANKAR BIHANI V DEPUTY COMMISSIONER OF INCOME - TAX, (PAN: AACFG8931E) CIRCLE - 3 4 , KOLKATA. ( /APPELLANT ) ( / RESPONDENT ) DATE OF HEARING: 0 2 . 12 .201 4 DATE OF PRONOUNCEMENT: 18 . 1 2 .201 4 FOR THE APPELLANT : SHRI J. P. KHAITAN SR. ADVOCATE & SHRI S. JHAJHARIA, FCA FOR THE RESPONDENT : SHRI AMITAVA ROY, ACIT / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT (A) - X X , KOLKATA IN APPEAL NO. 134 / CIT(A) - X X / CIR - 34/09 - 10/KOL DATED 1 9 . 0 7 .20 1 1 . ASSESSMENT W AS FRAMED BY D CIT, CIRCLE - 3 4 , KOLKATA U/S. 1 4 3 (3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 7 - 0 8 VIDE HIS ORDER DATED 27 . 1 1 .20 0 9 . 2. O NLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) , CONFIRMING DISALLOWANCE OF EXPENDITURE FOR NON - DEDUCTION OF TDS U/S. 194 - I OF THE ACT, BY INVOKING PROVISIONS OF S ECTION 40(A)(IA) OF THE ACT , ON RENT PAID TO KOLKATA PORT TRUST (KPT) . 3. BRIEF FACTS ARE THAT THE ASSESSEE HAS CLAIMED EXPENDITURE ON ACCOUNT OF RENT PAID TO KPT AT RS.54,21,256/ - . THE ASSESSEE HAS NOT DEDUCTED ANY TAX AT SOURCE ON PAYMENT OF THIS RENT TO KPT. THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY EXPENDITURE CLAIMED ON ACCOUNT OF PAYMENT OF RENT TO KPT BE DISALLOWED BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TDS U/S 194I OF THE ACT . ACCORDINGLY, AO DISALLOW ED THE EXPENDITURE DEBITED ON ACCOUNT OF RENT AT RS.54,21,256/ - BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE ITAT . 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. FACTS ARE ADMITTED AND NO DISPUTE ON THE SAME. BEFORE US, LD. SR. ADVOCATE SHRI J. P. KHAITAN ARGUED THAT THE ASSESSEE HAS PAID RENT TO KPT, WHI CH IS A PUBLIC CHARI TABLE TRUST REGISTERED U/S. 2 ITA NO.1127/K/2011 M/S. GAURISHANKAR BIHANI AY 2007 - 08 12AA OF THE ACT. HIS FIRST ARGUMENT IS THAT INCOME OF PUBLIC CHARITABLE TRUST REGISTERED U/S. 12AA OF THE ACT IS EXEMPT AND ONCE THE INCOME IS EXEMPTED , ASSESSEE IS NOT LIABLE TO TDS. WE FIND FROM THE ORDER O F TRIBUNAL DATED JUNE, 8, 2007 PASSED IN ITA NO. 2011/KOL/2006 IN THE CASE OF KOLKATA PORT TRUST V. DIT(EXEMPTION), KOLKATA THAT KOLKATA PORT TRUST IS A CHARITABLE INSTITUTION ELIGIBLE FOR REGISTRATION U/S 12A OF THE ACT AND SUCH REGISTRATION WAS DIRECTED TO BE GRANTED WITH EFFECT FROM APRIL, 1, 2005. HON'BLE TRIBUNAL IN DECIDING KOLKATA PORT TRUST S CASE , PLACED RELIANCE, INTER ALIA, ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. GUJARAT MARITIME BOARD (2007) 289 ITR 139 (GUJ). THE REVENUE S APPEAL AGAINST THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT WAS DISMISSED BY HON'BLE SUPREME COURT IN CIT V. GUJARAT MARITIME BOARD (2007) 295 ITR 561 (SC). 5. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT KOLKATA PORT TRUST IS A CHARITABLE INS TITUTION ENTITLED FOR REGISTRATION UNDER SECTION 12A OF THE ACT. FOR ASSESSMENT YEAR 2007 - 08 INVOLVED IN THIS APPEAL, KOLKATA PORT TRUST WAS ASSESSED IN THE STATUS OF A CHARITABLE INSTITUTION AND THERE WAS NO DEMAND RAISED AGAINST IT AND REFUND OF THE ORDE R OF RS.91.61 CRORES WAS ISSUED TO IT. THE AFORESAID FACTS ARE MENTIONED IN THE LETTER DATED MAY 4, 2012 OF THE KOLKATA PORT TRUST ENCLOSED AT PAGE 17 OF ASSESSEE S PAPER BOOK. IN VIEW OF THE ABOVE FACTS AND AS ARGUED BY LD. COUNSEL FOR THE ASSESSEE THAT T HE AFORESAID POSITION OBTAIN ED IN THE CASE OF KOLKATA PORT TRUST VIZ. THAT IT WAS GRANTED REGISTRATION AND ASSESSED AS A CHARITABLE INSTITUTION UNDER THE PROVISIONS OF THE ACT, IT CANNOT BE DISPUTED THAT THE INCOME OF KOLKATA PORT TRUST IS NOT CHARGEABLE T O TAX UNDER THE PROVISIONS OF THE ACT. SECTION 11 UNDER WHICH KOLKATA PORT TRUST WAS ASSESSED, INTER ALIA, FOR THE ASSESSMENT YEAR 2007 - 08 FALLS UNDER CHAPTER III OF THE ACT FOR INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME . WE FIND THAT WHEN INCOME IS NOT TO BE INCLUDED IN THE TOTAL INCOME, IT IS WITHOUT A DOUBT , NOT CHARGEABLE UNDER THE PROVISIONS OF THE ACT. IN VIEW OF THE ABOVE, WE HE RE REFERRED TO SECTION 2(45) OF THE ACT , WHICH DEFINES TOTAL INCOME AND TO MEAN THE TOTAL AMOUNT OF INCOME REFERRED TO IN SECTION 5, COMPUTED IN THE MANNER LAID DOWN IN THE ACT. SECTION 4 IS THE CHARGING SECTION AND PROVIDES FOR LEVY OF INCOME TAX ON THE TOTAL INCOME , WHEREAS, SECTION 5 LAYS DOWN THE SCOPE OF TOTAL INCOME. BOTH SUB - SECTIONS (1) AND (2) OF SECTION 5 OF THE ACT START WITH THE EXPRESSION SUBJECT TO THE PROVISIONS OF THIS ACT AND THEN GO ON TO SAY WHAT TOTAL INCOME INCLUDES. THUS, WHERE ANY INCOME IS NOT TO BE INCLUDED IN THE TOTAL INCOME, IT IS CLEARLY NOT CHARGEABLE UNDER THE PROVISIONS OF THE ACT. W E THEN WENT THROUGH TH E PROVISIONS OF SECTION 194 - I , WHICH PROVID E S FOR DEDUCTION OF TAX FROM RENT HA S TO BE READ IN CONJUNCTION WITH SECTION 204(III) OF THE ACT. SECTION 194 - I IMPOSES THE OBLIGATION TO DEDUCT TAX ON PERSON RESPONSIBLE FOR PAYING INCOME BY WAY OF RENT. THE EXPRESSION PERSON RESPONSIBLE FOR PAYING HAS BEEN DEFINED IN SECTI O N 204 OF THE ACT. CLAUSE (III) OF SECTION 204 IS REL E VANT IN THE CONTEXT OF SECTION 194 - I. THE MATERIAL PORTION OF SECTION 204 RELEVANT FOR THE PURPOSES OF THE INSTANT APPEAL IS SET OUT HEREIN BELOW: - 3 ITA NO.1127/K/2011 M/S. GAURISHANKAR BIHANI AY 2007 - 08 204. FOR THE PURPOSES OF THE FOREGOING PROVISIONS OF THIS CHAPTER AND SECTION 2885, THE EXPRESSION PERSON RESPONSIBLE FOR PAYING: MEANS - **** (III) IN THE CASE OF CREDIT, OR, AS THE CASE MAY BE, PAYMENT OF ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT , THE PAYER HIMSELF, OR, IF THE PAYER IS A COMPANY, THE COMPANY ITSELF INCLUDING THE PRINCIPAL OFFICER THEREOF THE OBLIGATION TO DEDUCT TAX FROM PAYMENTS TO RESIDENTS IS IN RESPECT OF SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT . SECTION 195 IS APPLICABLE IN RESPECT OF PAYMENTS TO NON - RESIDENTS AND ALSO STIPULATES DEDUCTION OF INCOME TAX AT SOURCE FROM SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT . THUS, THE OBLIGATION TO DEDUCT TAX WOULD ARISE ONLY WHE N THE AMOUNT IS SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT , W HETHER THE PAYEE IS A RESIDENT OR NON - RESIDENT. IN RESPECT OF PAYMENTS TO RESIDENTS, EACH OF THE PROVISIONS REQUIRING TAX DEDUCTION AT SOURCE INCLUDING SECTION 194 - I HAS TO BE READ IN CONJUNCTION WITH SECTION 204 AND NO TAX IS REQUIRED TO BE DEDUCTED IF THE AMOUNT PAYABLE IS NOT CHARGEABLE UNDER THE PROVISIONS OF THE ACT. THE CASE OF PAYMENT TO A NON - RESIDENT WAS CONSIDERED BY THE HON' BLE SUPREME COURT IN GE INDIA TECHNOLOGY CENTRE P. L TD. V CIT, (2010) 327 ITR 456 (SC) , WHERE IT WAS HELD THAT PROVISIONS RELATING TO TAX DEDUCTION AT SOURCE APPLIED ONLY TO THOSE SUMS WHICH WERE CHARGEABLE TO TAX UNDER THE ACT . THE SAID CASE DEALT WITH SEC TION 195 OF THE ACT BUT THE PRINCIPLE LAID DOWN THEREIN IS EQUALLY APPLICABLE EVEN IN RESPECT OF PROVISIONS RELATING TO DEDUCTION OF TAX AT SOURCE FROM PAYMENTS TO RESIDENTS WHICH HAVE TO BE READ ALONG WITH SECTION 204 OF THE ACT. IN THE SAID CASE, THE PRO VISIONS OF SECTION 204 OF THE ACT DID NOT COME UP FOR CONSIDERATION. 6. IN TERM OF THE ABOVE, WE ARE OF THE VIEW THAT IN THE INSTANT CASE NO TAX WAS DEDUCTIBLE AT SOURCE UNDER SECTION 194 - I READ WITH SECTION 204 COMPRISED IN CHAPTER XVII - B FROM THE RENT PAID BY THE ASSESSEE TO KPT. THIS IS BECAUSE SUCH RENT WAS NOT TO BE INCLUDED IN THE TAXABLE TOTAL INCOME OF THE KPT AND WAS, THEREFORE, NOT CHARGEABLE UNDER THE PROVISIONS OF THE ACT. AS ARGUED BY LD. SENIOR ADVOCATE THAT IN THE INSTANT CASE NO TAX WAS A T ALL PAYABLE BY KPT FOR AY 2007 - 08. U/S 191 OF THE ACT THE PERSON MAKING THE PAYMENT CAN BE DEEMED TO BE AN ASSESSEE IN DEFAULT WITHIN THE MEANING OF SUB - SECTION (1) OF SECTION 201 ONLY WHERE THE DEDUCTEE/PAYEE HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY. TH IS ISSUE HAS BEEN CONSIDERED BY HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF JAGRAN PRAKASHAN LTD. V. DCIT (TDS) (2012) 345 ITR 288 (ALL) AND BY ITAT KOLKATA BENCH IN THE CASE OF RAMAKRISHNA VEDANTA MATH V. ITO (2013) 55 SOT 417 (KOL). IN THE INSTANT CASE, KPT WAS NOT REQUIRED TO PAY ANY TAX AND IN TURN THE ASSESSEE CANNOT BE TREATED TO BE IN DEFAULT WITHIN THE MEANING OF SECTION 201(1). ACCORDINGLY, WE ARE OF THE VIEW THAT NO DISALLOWANCE OUGHT TO HAVE BEEN MADE UNDER SECTION 40(A)(IA) OF THE ACT. BUT, LD. SENIOR DR, SHRI AMITAVA ROY RELIED ON THIS TRIBUNAL S ORDER OF B BENCH IN ITA NO.1091/KOL/2012 DATED 14 - 10 - 2014 FOR THE AY 2009 - 10 IN THE CASE OF ACIT V. H ITECH LOGISTICS LTD. WHEREIN EXACTLY THE SIMILAR FACTS WERE THERE AND THE SAME 4 ITA NO.1127/K/2011 M/S. GAURISHANKAR BIHANI AY 2007 - 08 PARTY THAT KPT WAS T HE RECIPIENT OF RENT WITHOUT THE DEDUCTION OF TDS AND HON'BLE BENCH DECIDED THE ISSUE VIDE PARA - 4 OF ITS ORDER AS UNDER: - 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CIT(A) HAS DELETED THE DI SALLOWANCE FOR THE REASON THAT THE PAYMENTS MADE TO KOLKATA PORT TRUST DO NOT ATTRACT THE TDS PROVISION. FOR THIS, HE OBSERVED THAT I FIND THAT THE KOLKATA PORT TRUST IS UNDER THE MINISTRY OF SURFACE TRANSPORT, WHERE IN THE GOVT. OF INDIA HAS FULL BENEFI CIAL INTEREST. THEREFORE, ANY PAYMENT MADE TO KOLKATA PORT TRUST WILL BE COVERED U/S. 196 OF THE I. T. ACT, 1961 AND AS SUCH ASSESSEE S APPEAL ON THIS GROUND IS ALLOWED. WE FIND THAT THE FINDINGS OF CIT(A) IS TOTALLY PERVERSE AND AGAINST LAW FOR THE REA SON THAT THE TDS FROM RENT PAYMENT TO KOLKATA PORT TRUST IS LIABLE TO TDS U/S. 194 - I OF THE ACT. KOLKATA PORT TRUST IS ASSESSABLE ENTITY WITHIN THE PROVISIONS OF INCOME TAX ACT AND IT IS NOT GOVERNMENT ITSELF. IT IS A CORPORATE ENTITY ASSESSABLE TO TAX. O NCE THE PAYMENT OF RENT ON ACCOUNT OF WAREHOUSE BY THE ASSESSEE WAS MADE TO KOLKATA PORT TRUST AND IS CLAIMED AS EXPENDITURE, THE SAME IS LIABLE FOR TDS U/S. 194 - I OF THE ACT, FOR WHICH THE ASSESSEE HAS NOT DEDUCTED ANY TDS. THE DISALLOWANCE MADE BY INVOKI NG THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BY THE AO IS WITHIN THE PROVISIONS OF LAW. HENCE, WE RESTORE THE DISALLOWANCE AND THE ORDER OF CIT(A) IS REVERSED. THIS ISSUE OF REVENUE S APPEAL IS ALLOWED. ACCORDINGLY LD SENIOR DR STATED THAT THE ISSUE IS COVERED IN FAVOUR OF REVENUE. BUT OTHER FACET OF ARGUMENTS HA S NOT BEEN COUNTERED . 7 . IN VIEW OF THE ABOVE FACT , WE ARE OF THE VIEW THAT IN THE INSTANT CASE NO TAX WAS DEDUCTIBLE AT SOURCE UNDER SECTION 19 4 - I READ WITH SECTION 204 COMPRISED IN CHAPTER XVII - B FROM THE RENT PAID BY THE ASSESSEE TO KPT. THIS IS BECAUSE SUCH RENT WAS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE KPT AND WAS, THEREFORE, NOT CHARGEABLE UNDER THE PROVISIONS OF THE ACT. IN THE CASE LAW REFERRED BY LD. SR. DR THE FACT RELATING TO THE CLAIM OF EXEMPTION OF THE INCOME OF KPT WAS NOT BEFORE TRIBUNAL OR THAT ISSUE WAS NOT RAISED BUT I N THE INSTANT CASE, KPT WAS NOT REQUIRED TO PAY ANY TAX AND IN TURN CANNOT BE TREATED TO BE IN DEFAULT WI THIN THE MEANING OF SECTION 201(1). ACCORDINGLY, WE ARE OF THE VIEW THAT NO DISALLOWANCE OUGHT TO HAVE BEEN MADE UNDER SECTION 40(A)(IA) OF THE ACT. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 9 . ORDER PRONOUNCED IN OPEN COURT ON 18.12.2014 SD/ - SD/ - , , ( SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18 TH DECEMBER , 201 4 JD.(SR.P.S.) - COPY OF THE ORDER FORWARDED TO: 5 ITA NO.1127/K/2011 M/S. GAURISHANKAR BIHANI AY 2007 - 08 1 . / A PPELLANT M/S. GAURISHANKAR BIHANI, C/O SALARPURIA JAJODIA & CO., 7, C. R. AVENUE, KOLKATA - 700 072. 2 / RESPONDENT DCIT, CIRCLE - 34, KOLKATA. 3 . ( )/ THE CIT(A), KOLKATA 4. 5. / CIT KOLKATA / DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR .