ITO, Wd.-2(1), Jalgaon V. M/s. Anand Buildcon, Jalgaon

ITA 1168/PUN/2011

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0015 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 16-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: VINAY KAWADIA
• Keywords: Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1168/PN/2011 (ASSESSMENT YEAR: 2007-08) INCOME-TAX OFFICER, WARD 2(1) JALGAON .. APPELL ANT VS. M/S. ANAND BUILDCON SHANTI SADAN, BALAJI LANE BHUSAWAL, DIST. JALGAON PAN AAKFA 3563 Q .. RESPONDENT C.O. 76/PN/2011 ARISING OUT OF ITA NO. 1168/PN/2011 (ASSESSMENT YEAR: 2007-08) M/S. ANAND BUILDCON SHANTI SADAN, BALAJI LANE BHUSAWAL, DIST. JALGAON PAN AAKFA 3563 Q CROSS OBJECTOR VS. INCOME-TAX OFFICER WARD 2(1) JALGAON APPELLANT IN APPEAL ASSESSEE BY: SHRI VINAY KAWADIA D EPARTMENT BY: MS. ANN KAPTHUAMA ORDER PER G.S. PANNU, A.M .: THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II NASIK DATED 5-7-2011 WHICH, IN TURN, HAVE ARISEN FR OM ORDER DATED 9-12-2009 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 143( 3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSM ENT YEAR 2007-08. 2. THE REVENUE IN ITS APPEAL HAS RAISED THE FOLLOWI NG GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN DELETING THE ADDITION MADE TO T HE TUNE OF RS. 19,99,800/- ON ACCOUNT OF DISALLOWANCE OF PAYMENT TO LABOUR U/S 40(A)(IA) WITHOUT DEDUCTING A ND PAYMENT OF TDS INTO CENTRAL GOVT. ACCOUNT WITHOUT CONSIDERING THE FACT THAT THE TDS AMOUNT WAS ALREAD Y PAID AND NOT PAYABLE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) ERRED IN RELYING UPON THE DECISION OF IT T PUNE BENCH, PUNE IN THE CASE OF M/S. SANAP AGRO ANIMALS PVT. LTD., VS. ACIT DATED 17-1-2011 VIDE ORDER NO.1192/PN/2009 FOR A.Y. 2006-07 WITHOUT CONSIDERIN G ITA NO 1168 AND CO 76/PN/11 ANAND BUILDCON A.Y. 2007-08 THE DECISION OF HONBLE ITT MUMBAI SPECIAL BENCH IN THE CASE OF BHARATI SHIPYARD LTD. VS. DCIT 3. ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT ESSENTIALLY THE GRIEVANCE IS AGAINST THE ACTION OF CIT(A) IN DELETING AN ADDITION OF RS. 19,99,800/- MADE BY THE ASSESSING OFFICER INVOKING SECTION 40(A)(IA) OF THE ACT. 4. IN BRIEF, FACTS ARE THAT THE ASSESSEE IS AN INDI VIDUAL ENGAGED IN THE BUSINESS OF CONTRACTING. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD PAID LABOUR CHARGES OF RS. 19,99,800/- AS DETAILED IN THE ASSESSMENT ORDER AND ASSESSEE HAD DEDUCTED TAX AT SOURCE OF RS. 21,144/- ON THE ENTIRE CONTRACT PAYMENTS. THE ASSESSING OFFICER FURTHER NOTICED THAT THE TAX SO DEDUCTED WAS PAID T O THE CENTRAL GOVERNMENT ACCOUNT ON 31-5-2007. AS PER THE ASSESS ING OFFICER, THE AMOUNT OF SUCH TDS WAS REQUIRED TO BE DEPOSITE D IN THE CENTRAL GOVERNMENT ACCOUNT BY 31-3-2007 AND SINCE IT WAS DE POSITED LATE, THE CORRESPONDING EXPENDITURE ON LABOUR CHARGES AMO UNTING TO RS. 19,99,800/- WAS DISALLOWED U/S 40(A)(IA) OF THE ACT . THE CIT(A) HAS SINCE DELETED THE ADDITION FOLLOWING THE DECISION O F PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. SANAP AGROANIMALS PVT. LTD. VS. ACIT IN ITA NO. 1192/PN/2009 FOR A.Y. 2006-07 DATED 12-1-2011. AS PER THE DECISION IN THE CASE OF SANAP AGROANIMAL S PVT. LTD. (SUPRA), THE PROVISIONS OF SEC. 40(A)(IA) OF THE AC T ARE NOT APPLICABLE IN A CASE WHERE ASSESSEE HAD MADE ACTUAL PAYMENT O EXPENDITURE AND NO AMOUNT WAS OUTSTANDING AT THE END OF THE YEA R. SINCE IN THE PRESENT CASE, ASSESSEE HAD MADE ACTUAL PAYMENT OF R S. 19,99,800/- ON ACCOUNT OF LABOUR CHARGES BEFORE CLOSE OF THE YE AR, DISALLOWANCE U/S 40(A)(IA) OF THE ACT WAS THUS DELETED. AGAINST THE AFORESAID, REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED DR HAS JUSTIFIED THE STAN D OF THE ASSESSING OFFICER BY POINTING OUT THAT IN TERMS OF THE PROVISIONS OF ITA NO 1168 AND CO 76/PN/11 ANAND BUILDCON A.Y. 2007-08 SECTION 40(A)(IA) AS AMENDED BY THE FINANCE ACT, 20 03 THE AMOUNT OF TAX DEDUCTED ON PAYMENT MADE TILL 28-2-2007 WAS LIABLE TO BE DEPOSITED IN THE ACCOUNT OF CENTRAL GOVERNMENT BY 3 1-3-2007 TO AVOID THE DISALLOWANCE ENVISAGED U/S 40(A)(IA) OF T HE ACT. IN THIS CASE, THE ASSESSEE HAD DEPOSITED THE AMOUNT OF TDS ON 31-5-2007 AND THUS THE DISALLOWANCE WAS MADE FOR JUSTIFIABLE REASONS. ON THE OTHER HAND, LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE PROPOSITION RELIED UPON BY THE CIT(A) IN ORDER TO DELETE THE ADDITION HAS SINCE BEEN AFFIRMED BY THE SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPOR TS (20 TAXMANN.COM 244(2012). APART THEREFROM, THE LEARNED REPRESENTATIVE FURTHER SUBMITTED THAT THE AMENDMENT MADE BY THE FINANCE ACT 2010 WITH RETROSPECTIVE EFFECT FROM 1-4 -2010 PROVIDES THAT THE AMOUNT OF TAX DEDUCTED AT SOURCE AT ANY TI ME DURING THE RELEVANT PREVIOUS YEAR, IF DEPOSITED BEFORE THE DUE DATE FOR FILING OF THE RETURN AS SPECIFIED U/S 139(1) OF THE ACT WOULD MITIGATE THE DISALLOWANCE ENVISAGED U/S 40(A)(IA) OF THE ACT. C ONSIDERED ON THIS BASIS, IT WAS POINTED OUT THAT THOUGH THE TDS IN QU ESTION HAS BEEN DEPOSITED ON 31-5-2007 WHICH IS PRIOR TO THE DATE S PECIFIED IN SECTION 139(1) OF THE ACT FOR FILING OF THE RETURN FOR THE INSTANT ASSESSMENT YEAR AND, THEREFORE, THE DISALLOWANCE IS UNCALLED F OR. IT IS FURTHER POINTED OUT THAT SUCH AMENDMENT MADE BY THE FINANCE ACT 2010 HAS BEEN HELD TO BE RETROSPECTIVE SO AS TO APPLY FOR TH E INSTANT ASSESSMENT YEAR OF 2007-08, AS HELD BY HONBLE CALC UTTA HIGH COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS (ITAT NO. 3 02 OF 2011) DATED 23-11-2011, A COPY OF WHICH HAS BEEN PLACED ON RECO RD. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. FACTUALLY SPEAKING, IN THIS CASE, THE TAX HAS BEEN DEDUCTED A T SOURCE ON PAYMENTS OF LABOUR CHARGES OF RS. 19,99,800/-, WHIC H IS THE SUBJECT MATTER OF DISPUTE. THE ONLY CASE MADE OUT BY THE A SSESSING OFFICER ITA NO 1168 AND CO 76/PN/11 ANAND BUILDCON A.Y. 2007-08 IS THAT THE TAX DEDUCTED ON SUCH PAYMENT OF LABOUR CHARGES, HAS BEEN DEPOSITED IN THE GOVERNMENT TREASURY BELATEDLY I.E. ON 31-5- 2007. IN TERMS OF AN AMENDMENT MADE TO SECTION 40( A)(IA) OF THE ACT BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFF ECT FROM 1-4-2010 THE POSITION EMERGES THAT THE ASSESSEE DEDUCTING TA X AT SOURCE AT ANY TIME IN THE PREVIOUS YEAR SHALL BE ENTITLED TO DEDUCTION OF THE EXPENDITURE IN THE YEAR OF ITS INCURRENCE SO LONG A S THE TAX DEDUCTED HAS BEEN DEPOSITED IN THE STATE EXCHEQUER ON OR BEF ORE THE DUE DATE FOR FILING OF THE RETURN SPECIFIED U/S 139(1) OF THE ACT. CLEARLY, THE CASE OF THE ASSESSEE IS COVERED BY THE SAID AME NDMENT INASMUCH AS THE TAX DEDUCTED AT SOURCE OF RS. 21,14 4/- WITH RESPECT TO LABOUR PAYMENT OF RS. 19,99,800/- HAS BEEN DEPOS ITED ON 31-5- 2007 WHICH IS PRIOR TO THE DATE SPECIFIED U/S 139(1 ) OF THE ACT FOR FILING OF THE RETURN FOR THE ASSESSMENT YEAR IN QUE STION I.E. 2007-08. THE PLEA OF THE REVENUE ON THIS POINT IS THAT THE A FORESAID AMENDMENT BY THE FINANCE ACT 2010 CAME UP FOR CONSI DERATION BEFORE THE SPECIAL BENCH OF THE TRIBUNAL IN THE CAS E OF BHARATI SHIPYARD LTD. VS. DCIT (ITA NO.; 2404/MUM/2009 FOR A.Y. 2005-06 DATED 9-9-2011) WHEREIN IT WAS HELD THAT SUCH AMEND MENT WAS APPLICABLE WITH PROSPECTIVE EFFECT FROM A.Y. 2010-1 1 AND COULD NOT BE HELD TO BE RETROSPECTIVE FROM THE A.Y. 2005-06. IT WAS THEREFORE, SUBMITTED THAT THE CONTENTS OF THE AFORESAID AMENDM ENT CARRIED OUT BY THE FINANCE ACT, 2010 CANNOT IPSO FACTO APPLY TO THE PRESENT CASE OF ASSESSMENT YEAR 2007-08, WHICH IS PRIOR TO THE A SSESSMENT YEAR 2010-11. 7. HOWEVER, IT IS NOTICED THAT SUBSEQUENT TO THE DE CISION OF THE SPECIAL BENCH IN THE CASE OF BHARATI SHIPYARD LTD ( SUPRA), AN IDENTICAL ISSUE CAME UP BEFORE THE CALCUTTA HIGH CO URT IN THE CASE OF VIRGIN CREATIONS (SUPRA). IN THE SAID DECISION, TH E TRIBUNAL VIDE ITS ORDER DATED 15-12-2010 (SUPRA) HELD THAT THE AMEND MENT IN ITA NO 1168 AND CO 76/PN/11 ANAND BUILDCON A.Y. 2007-08 QUESTION MADE BY THE FINANCE ACT 2010 WOULD HAVE RE TROSPECTIVE APPLICATION EVEN FOR THE A.Y. 2005-06 WHICH WAS THE ASSESSMENT YEAR BEFORE IT. ON AN APPEAL BY THE REVENUE BEFORE THE CALCUTTA HIGH COURT AGAINST SUCH A DECISION, THE ORDER OF TH E TRIBUNAL WAS AFFIRMED. AS A RESULT OF THE JUDGMENT OF HONBLE C ALCUTTA HIGH COURT DATED 23-11-2011 (SUPRA), THE IMPUGNED AMENDMENT MA DE TO THE PROVISION OF SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 HAS BEEN HELD TO BE RETROSPECTIVE FROM 1-4-2005. AS A RESUL T THEREOF, IT HAS TO BE UNDERSTOOD THAT FROM 1-4-2005 THE EFFECT WOULD B E THAT THE PAYMENT OF TDS TO THE CREDIT OF GOVERNMENT MADE ON OR BEFORE THE DUE DATE FOR FILING OF THE RETURN U/S 139(1) OF THE ACT FOR THE RELEVANT ASSESSMENT YEAR WOULD MITIGATE THE RIGORS OF SECTIO N 40(A)(IA) OF THE ACT WITH RESPECT TO THE CORRESPONDING EXPENDITURE. 8. IN THIS BACKGROUND OF THE MATTER, WE THEREFORE, ARE OF THE VIEW THAT THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT WH ICH OSTENSIBLY SUPPORTS THE VIEW CONTRARY TO THAT OF THE SPECIAL B ENCH OF THE TRIBUNAL IN THE CASE OF BHARATI SHIPYARD LTD (SUPRA ) IS TO PREVAIL. NOTABLY SIMILAR SITUATION AROSE BEFORE THE BOMBAY B ENCH OF THE TRIBUNAL IN THE CASE OF PIYUSH C. MEHTA (ITA NO. 13 21/MUM/2009 FOR A.Y. 2005-096 DATED 11-4-2012) WHEREIN FOLLOWING DI SCUSSION IS RELEVANT. 18. THE QUESTION NOW IS AS TO WHETHER TO FOLLOW TH E DECISION OF THE HONBLE SPECIAL BENCH WHICH HAS TAK EN THE VIEW THAT AMENDMENT BY THE FINANCE ACT 2010TO T HE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT ARE PROSPEC TIVE AND NOT RETROSPECTIVE FROM 1-4-2005 OR THE DECISION OF THE HONBLE CALCUTTA HIGH COURT TAKING A CONTRARY V IEW. ON THE ABOVE QUESTION, THE LEARNED COUNSEL FO4R THE ASSESSEE BROUGHT TO OUR NOTICE THE DECISION OF THE ITAT DELHI BENCH IN THE CASE OF TEJ INTERNATIONAL (P) LT D. VS. DY. CIT (2000) 69 TTJ (DEL) 650, WHEREIN IT WAS HEL D THAT IN THE HIERARCHICAL JUDICIAL SYSTEM THAT WE HA VE IN INDIA, THE WISDOM OF THE COURT BELOW HAS TO YIELD T O THE HIGHER WISDOM OF THE COURT ABOVE, AND THEREFORE, ON CE AN AUTHORITY HIGHER THAN THIS TRIBUNAL HAS EXPRESSE D ITS ESTEEMED VIEWS ON AN ISSUE, NORMALLY, THE DECISION OF THE HIGHER JUDICIAL AUTHORITY IS TO BE FOLLOWED. THE BENCH HAS FURTHER HELD THAT THE FACT THAT THE JUDGM ENT OF THE HIGHER JUDICIAL FORUM IS FROM A NON-JURISDICTIO NAL HIGH ITA NO 1168 AND CO 76/PN/11 ANAND BUILDCON A.Y. 2007-08 COURT DOES NOT REALLY ALTER THIS POSITION AS LAID D OWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . GODAVARIDEVI SARAF (113 ITR 589 (BOM). 19. IN VIEW OF THE ABOVE, WE HOLD FOLLOWING THE DECISION OF THE HONBLE CALCUTTA HIGH COURT THAT AMENDMENT TO THE PROVISIONS OF SEC. 40(A)(IA) OF TH E ACT BY THE FINANCE ACT, 2010 IS RETROSPECTIVE FROM 1-4- 2005. CONSEQUENTLY, ANY PAYMENT OF TAX DEDUCTED AT SOURCE DURING PREVIOUS YEARS RELEVANT TO AND FROM A.Y. 200 5-06 CAN BE MADE TO THE GOVERNMENT ON OR BEFORE THE DUE DATE FOR FILING RETURN OF INCOME U/S 139(1) OF THE ACT. IF PAYMENTS ARE MADE AS AFORESAID, THEN NO DEDUCTION U /S 40(A)(IA) OF THE ACT CAN BE MADE. ADMITTEDLY, IN T HE PRESENT CASE THE ASSESSEE HAD DEPOSITED THE TAX DEDUCTED AT SOURCE ON OR BEFORE THE DUE DATE FOR FI LING RETURN OF INCOME U/S 139(1) OF THE ACT AND THEREFOR E THE IMPUGNED DISALLOWANCE DESERVES TO BE DELETED. WE ORDER ACCORDINGLY AND ALLOW THE APPEAL OF THE ASSES SEE. 9. IN VIEW OF THE AFORESAID PRECEDENT, WE THEREFORE , HOLD THAT FOLLOWING THE RATIO OF THE JUDGMENT OF CALCUTTA HIG H COURT IN THE CASE OF VIRGIN CREATIONS (SUPRA), DISALLOWANCE OF RS. 19 ,99,800/- BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS UNJUSTIFIED, INASMUCH AS THE ASSESSEE HAS DEPOSITED THE CORRESPO NDING TAX DEDUCTED AT SOURCE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME SPECIFIED U/S 139(1) OF THE ACT FOR ASSESSME NT YEAR IN QUESTION. 10. AS A CONSEQUENCE, THE ULTIMATE DECISION OF THE CIT(A) IN DELETING THE ADDITION IS UPHELD, ALBEIT ON DIFFEREN T GROUNDS. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED . 11. COMING TO THE CROSS OBJECTION FILED BY THE ASSE SSEE, THE SAME SUPPORTS THE ORDER OF THE CIT(A). SINCE WE HAVE UP HELD THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF PAYMENT TO LABOUR U/S 40(A)(IA) OF THE ACT, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. 12. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE A S WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ITA NO 1168 AND CO 76/PN/11 ANAND BUILDCON A.Y. 2007-08 DECISION PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER 2012. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED:27 TH SEPTEMBER 2012 ANKAM COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT (A) II NASIK 4) THE CIT NASIK 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T.A.T., PUNE. BY ORDER //TRUE COPY// SR. P.S. I.T.A.T., PUNE