Vivimed Labs Ltd., (formerly known as V.V.S. Pharmaceuticals & Chemicals P. Ltd), Hyd, Hyderabad V. ACIT, Circle-3(3), Hyd, Hyderabad

ITA 1143/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6173 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 29-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 40(a)(ia); 201(1); 73; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1143/HYD/2016 ASSESSMENT YEAR: 2007-08 VIVIMED LABS LTD., (FORMERLY KNOWN AS V.V.S. PHARMACEUTICALS & CHEMICALS PVT. LTD., NOW MERGED WITH VIVIMED LABS LTD) HYDERABAD [PAN: AABCV3087C] VS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(3), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI M.V. JOSHI, AR FOR REVENUE : SMT SUMAN MALIK, DR DATE OF HEARING : 25-01-2017 DATE OF PRONOUNCEMENT : 03-02-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-5, HYDERABAD D ATED 30-06-2016. THE ONLY ISSUE FOR ADJUDICATION IS THE D ISALLOWANCE U/S. 40(A)(IA) OF THE INCOME TAX ACT [ACT] MADE BY THE ASSESSING OFFICER (AO) AT RS. 19,00,842/-, WHEREAS THE LD.CIT(A ) CONFIRMED AN AMOUNT OF RS. 9,41,428/- BEING THE CORRECT AMOUNT TO BE DISALLOWED. 2. ASSESSEE, M/S. V.V.S. PHARMACEUTICALS & CHEMICALS PVT. LTD HAS MERGED WITH M/S. VIVIMED LABS LTD., VIDE ORDERS O F THE HON'BLE HIGH COURT OF ANDHRA PRADESH DT. 22-10-2007. THE REGI STRAR OF COMPANIES HAS ISSUED REGISTRATION NO. 01-34149 DT. 31- 12-2007, CONFIRMING THE AMALGAMATION OF THE M/S. V.V.S. PHARMAC EUTICALS & I.T.A. NO.1143/HYD/2016 :- 2 - : CHEMICALS PVT. LTD., WITH M/S. VIVIMED LABS LTD., (TRAN SFEREE COMPANY). HOWEVER, THE ASSESSMENT PROCEEDINGS FOR AY. 2007-08 HAVE BEEN COMPLETED IN THE NAME OF M/S. V.V.S. PHARMA CEUTICALS & CHEMICALS PVT. LTD., AND THE ORDER DT. 30-12-2009 HAS BEEN PASSED, DISALLOWING THE AMOUNT U/S. 40(A)(IA) AND ALS O OTHER AMOUNT U/S. 36(I)(VA) OF THE ACT. IN FURTHER APPEAL BE FORE THE LD.CIT(A), IT SEEMS NEITHER ASSESSEE HAS INTIMATED THE MERGER NOR LD.CIT(A) NOTICED AND APPEAL WAS DECIDED AGAINST M/S. V.V.S. PHARMACEUTICALS & CHEMICALS PVT. LTD., BY THE ORDER DT. 30-06- 2016. ASSESSEE WHILE FILING THE APPEAL HOWEVER, HAS FILED FORM NO. 36 IN THE NAME OF M/S. VIVIMED LABS LTD., AND ON ENQU IRY, FURNISHED THE CERTIFICATE ISSUED ON 31-12-2007. ACCO RDINGLY, THE APPEAL IS CONSIDERED IN THE NAME OF M/S. VIVIMED LAB S LTD., EVEN THOUGH THE ORDER OF THE CIT(A) IS AGAINST M/S. V.V.S. PHARMACEUTICALS & CHEMICALS PVT. LTD.( TRANSFERRED COM PANY) 3. AS BRIEFLY STATED, THE ONLY ISSUE IN THIS APPEAL IS WITH REFERENCE TO DISALLOWANCE OF AMOUNT OF RS. 19,00,842/ - BY THE AO STATED TO BE ON THE FOLLOWING REASON: 3. DISALLOWANCE U/S. 40(A)(IA) OF THE I.T ACT: DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE C OMPANY PAID THE FOLLOWING AMOUNTS WITHOUT DEDUCTING TAXES AS PE R CHAPTER-XVII B OF THE INCOME-TAX ACT. SL.NO. TYPE OF PAYMENT AMOUNT (RS) 1 EFFLUENT TREATMENT CHARGES 10,70,475 2 PROCESSING CHARGES 7,92,925 3 FREIGHT OUTWARD 37,442 TOTAL 19,00,842 AS THE ASSESSEE FAILED TO COMPLY WITH THE PROVISION S OF CHAPTER-XVII B OF THE INCOME-TAX ACT, THE ABOVE PAYMENTS ARE DIS ALLOWED UNDER SECTION 40(A)(IA) OF THE INCOME-TAX ACT. I.T.A. NO.1143/HYD/2016 :- 3 - : 4. IT WAS CONTESTED BEFORE THE LD.CIT(A) THAT : A) THE ENTIRE AMOUNT WAS PAID DURING THE YEAR AND THERE IS NO OUTSTANDING AMOUNT PAYABLE AT THE END OF THE FINANCIAL Y EAR IN FOLLOWING THE PRINCIPLES LAID DOWN BY THE SPECIAL BENCH, ITAT IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS . ACIT, [136 ITD 23 (SB)] [16 ITR 1] (SB)(VISAKHA.)(TRIB.) THE DISALLOWANCE U/S. 40(A)(IA) DOES NOT ARISE. B) IT WAS FURTHER CONTENDED THAT AO ERRED IN MAKING THE DISALLOWANCE AS HE HAS NOT TREATED ASSESSEE AS THE ASS ESSEE- IN-DEFAULT U/S. 201(1) AND THEREFORE, FOLLOWING THE P RINCIPLES LAID DOWN BY THE ITAT IN THE CASE OF M/S. VISU INTERN ATIONAL LIMITED IN ITA NOS. 488/HYD/2013 & 621/HYD/2013, DT. 12-11-2014, THE DISALLOWANCE CANNOT BE SUSTAINED. 4.1. HOWEVER, LD.CIT(A) IN HIS DETAILED ORDER NOT ONL Y EXAMINED THE FACTS OF THE CASE BUT ALSO VARIOUS CASE LAW ON THE I SSUE. AS FAR AS THE FACTS ARE CONCERNED, HE WAS OF THE OPINION THAT ONLY AN AMOUNT OF RS. 1,11,061/- SHOULD BE CONSIDERED AS AGA INST RS. 10,70,475/- MADE BY THE AO. REVENUE ACCEPTED THE SAM E. ACCORDINGLY, AS AGAINST RS. 19,00,842/-, LD.CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 9,41,128/-. 5. COMING TO THE ISSUE OF LEGAL PRINCIPLES ON DISALLO WANCE U/S. 40(A)(IA), LD.CIT(A) WHILE NOTICING THAT THERE ARE VAR IOUS DECISIONS OF HON'BLE HIGH COURTS FOR AND AGAINST THE DISALLOWANC E. HE FOLLOWED THE JUDGMENT OF HON'BLE P&H HIGH COURT AND HE LD THAT LIABILITY TO DEDUCT TDS OUT OF THE PAYMENTS MENTIONED AB OVE WOULD I.T.A. NO.1143/HYD/2016 :- 4 - : ARISE AND SECTION 40(A)(IA) HAD TO BE INVOKED. ACCOR DINGLY, HE LIMITED THE DISALLOWANCE TO RS. 9,41,428/-. 6. IT WAS SUBMITTED BY THE LD. COUNSEL THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO THE AMOUNTS W HICH ARE PAYABLE AT THE END OF THE FINANCIAL YEAR AND ARE NOT A PPLICABLE TO THE AMOUNTS WHICH WERE ALREADY PAID DURING THE YEAR UN DER CONSIDERATION. THEREFORE, SINCE THE ABOVE PAYMENTS WE RE ALREADY MADE DURING THE YEAR, NO DISALLOWANCE U/S. 40(A)(IA) IS WARRANTED. 6.1. IN THIS REGARD, RELIANCE IS PLACED ON THE FOLLOW ING CASE LAW: A) DECISION OF HON'BLE AP HIGH COURT IN THE CASE OF JAN APRIYA ENGINEERS SYNDICATE [371 ITR 439]; B) ORDER OF HON'BLE HYDERABAD ITAT JANAPRIYA PROPERTIES PVT. LTD., IN ITA NO. 1614/H/2012; C) ORDER OF HON'BLE HYDERABAD ITAT, WARANGAL URBAN COOPERATIVE BANK LTD., IN ITA NO. 73 TAXMANN.COM 229; D) DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD [357 ITR 642]; E) DECISION OF HON'BLE SUPREME COURT OF INDIA IN SLP FI LED BY DEPARTMENT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD., 8068/2014; 6.2. FURTHER, AS PER THE SECOND PROVISO TO SECTION 40( A)(IA) INSERTED IN STATUTE WHICH IS HELD TO BE RETROSPECTIVE, THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED IF NO ORDER U/ S. 201(1) & 201(1A) HAS BEEN PASSED AGAINST ASSESSEE. FACT REMA INS THAT ORDER U/S. 201(1) & 201(1A) HAS NOT BEEN PASSED AGAI NST THE ASSESSEE-COMPANY FOR AY. 2007-08. THIS BEING SO, NO DISALLOWANCE I.T.A. NO.1143/HYD/2016 :- 5 - : CAN BE MADE U/S. 40(A)(IA) OF THE ACT. IN THIS REGAR D, RELIANCE IS PLACED ON THE ORDER OF ITAT, HYDERABAD IN THE CASE OF VISU INTERNATIONAL LIMITED IN ITA NO. 488 & 621/H/2013, WH EREIN THE HON'BLE ITAT HAVE DIRECTED TO DELETE THE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT, IF THERE ARE NO 201(1) & 201(1A ) PROCEEDINGS IN THAT YEAR ON THE SAID NON DEDUCTION OF TAX. 7. LD.DR HOWEVER, RELIED ON THE ORDERS OF THE LD.CIT( A). 8. I HAVE CONSIDERED THE ISSUE AND PERUSED THE RIVAL CONTENTIONS. THE FACT IS THAT THE AMOUNTS WERE PAID DURIN G THE FINANCIAL YEAR AND THERE IS NO AMOUNT OUTSTANDING AT TH E END OF THE FINANCIAL YEAR. IT IS ALSO CONFIRMED THAT THE AMOUNTS SO PAID WERE ACCOUNTED BY THE RESPECTIVE PARTIES AND NO PROCEEDINGS U/S. 201(1A) ARE INITIATED. 8.1. I FURTHER FIND THAT WHILE DECIDING THE APPEAL IN TH E CASE OF JANAPRIYA ENGINEERS SYNDICATE (I.T.T.A. NO.352 OF 20 14 DATED 24-06-2014) THE HONBLE ANDHRA PRADESH HIGH COURT HAS CLARIFIED THE ISSUE OF INTERIM STAY GRANTED BY IT IN THE CASE OF M ERILYN SHIPPING AND TRANSPORT LTD., VS. ACIT 136 ITD 23 (SB) [16 ITR 1] (SB)(VISAKHA.)(TRIB.) (SUPRA). I WOULD LIKE TO REPR ODUCE THE RELEVANT PART OF THE SAID ORDER AND SAME READS AS UNDER: '4. WE ARE OF THE VIEW THAT UNTIL AND UNLESS THE DE CISION OF THE SPECIAL BENCH IS UPSET BY THIS COURT, IT BINDS SMAL LER BENCH AND COORDINATE BENCH OF THE TRIBUNAL. UNDER THE CIRCUMS TANCES, IT IS NOT OPEN TO THE TRIBUNAL, AS RIGHTLY CONTENDED BY MR. NARASI MHA SARMA, LEARNED COUNSEL, TO REMAND ON THE GROUND OF PENDENCY ON THE SAME ISSUE BEFORE THIS COURT, OVERLOOKING AND OVERRULING, BY NECESSAR Y IMPLICATION, THE DECISION OF THE SPECIAL BENCH. WE SIMPLY SAY THAT I T IS NOT PERMISSIBLE UNDER QUASI JUDICIAL DISCIPLINE'. I.T.A. NO.1143/HYD/2016 :- 6 - : 8.2. FROM THE CLARIFICATION ISSUED BY THE HON'BLE H IGH COURT, IT IS CLEAR THAT UNTIL AND UNLESS THE DECISION OF MERILYN SHI PPING AND TRANSPORT LTD., VS. ACIT [136 ITD 23 (SB)] [16 ITR 1] (SB)(VISAKHA.)(TRIB.) (SUPRA) IS REVERSED, IT IS TO B E FOLLOWED. HON'BLE HIGH COURT HAS HELD THAT JUDICIAL DISCIPLINE MANDATES TH AT THE DECISION OF THE SPECIAL BENCH HAS TO BE FOLLOWED BY O THER BENCHES. IN TEJA CONSTRUCTION VS. ACIT [2010J 39 SOT 13(HYD)( URO) ITAT HYDERABAD BENCH 'A' AND BARTRONICS INDIA LTD. V. ACI T [2012J 22 TAXMANN.COM 5 (HYD.) IT WAS HELD THAT SECTION 40(A)(IA) ARE APPLICABLE ONLY IN RESPECT OF PAYABLE AMOUNT SHOWN IN BALANCE SHEET AS OUTSTANDING EXPENSES, ON WHICH TDS HAS NOT BEE N MADE. 8.3. NO DECISION OF THE JURISDICTIONAL HIGH COURT OR TH E DECISION OF THE ITAT HYDERABAD BENCH WAS BROUGHT TO MY NOTICE WHER EIN A CONTRARY VIEW IS TAKEN ON THIS ASPECT. SINCE THE ITAT I S FOLLOWING THE OBSERVATIONS OF THE HON'BLE JURISDICTIONAL HIGH CO URT WHICH IN TURN WAS REFERRED TO BY THE ITAT HYDERABAD BENCHES IN NUMBER OF CASES AND IN VARIOUS CASES AS STATED IN ASSESSEE SUBM ISSIONS THIS PRINCIPLE WAS ACCEPTED, I DIRECT THE AO TO DELETE THE A MOUNTS, FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SP ECIAL BENCH OF ITAT IN THE CASE OF MERILYN SHIPPING AND TRANSPORT L TD., VS. ACIT [136 ITD 23 (SB)] [16 ITR 1] (SB)(VISAKHA.)(TRIB.). ACCORDINGLY, ASSESSEES GROUNDS ARE ALLOWED. 9. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD FEBRUARY, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 3 RD FEBRUARY, 2017 TNMM I.T.A. NO.1143/HYD/2016 :- 7 - : COPY TO : 1. VIVIMED LABS LTD., (FORMERLY KNOWN AS VVS PHARMACEUTICALS & CHEMICALS PVT. LTD., NOW MERGED W ITH VIVIMED LABS LTD), C/O. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(3 ), HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-5, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.