Head Digital Works Private Limited , Hyderabad V. Asst. Commissioner of Income Tax, Circle-2(2), Hyderabad

ITA 1215/Hyd/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8255 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB-A
• Assessment Year: 2016-2017
• Appeal Filed On: 31-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VENUDHAR GODESI
• Keywords: TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER I.T.A. No. 1215/HYD/2019 Assessment Year: 2016-17 Head Digital Works Private Limited, HYDERABAD [PAN: AAGCC9007N] Vs Assistant Commissioner of Income Tax, Circle-2(2) HYDERABAD (Appellant) (Respondent) For Assessee : Shri Pawan Kumar Chakrapani, AR For Revenue : Shri Venudhar Godesi, DR Date of Hearing : 22-09-2021 Date of Pronouncement : 17-11-2021 O R D E R PER S.S.GODARA, J.M. : This assessee’s appeal for AY.2016-17 arises against the CIT(A)-2, Hyderabad’s order dated 09-07-2019, in case No.10243 / 2018-19 / CIT(A)-2, involving proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]; respectively. Heard both the parties. Case file perused. 2. Coming to the assessee’s first and foremost substantive grievance that both the lower authorities have erred in law and on facts in denying the interest on TDS claim of ITA No. 1215/Hyd/2019 :- 2 -: Rs.12,56,626/-, we note that the CIT(A)’s detailed discussion to this effect reads as under: “The Decision: - The AO disallowed the interest on TDS of Rs. 12,50,626/-. The deduction of TDS is the statutory responsibility of the appellant and further the same is not related to the regular business activity of the appellant therefore has no relation to the expenses u/s.37(1). The appellant is supposed to deduct the TDS on account of credit or payment whichever is earlier and this Government money which has to be deposited on time. The interest on the same cannot be allowed as this is not the loan given by the Government it is a char e on account of default caused because of retaining the money which was a Government property. The TDS deduction does not emanate on account of a sale or a purchase bill but it is in relation to the specific items and that too on account of credit or payment of such items. Therefore the above cannot be categorized u/s.36(1)(ii) and nor u/s.37(1) as it is not related to the regular business activity of the appellant but it is a statutory default on part of the appellant. The appellant h s also further failed to justify the pressing reasons or situation for such delay, thus it becomes delay on account of a casual view towards statutory compliance. The interest on TDS cannot be considered at par with service tax, as the service tax. is part and parcel of the bills raised and there are issues regarding the credit of the same. In view of the above both the items are distinguishable and not the same. The late interest payment cannot be called a compensation as this is a statutory default. The appellant has not brought out any judgment of the jurisdictional ITAT or the jurisdictional Court in this regard which has been decided in the favour or against the appellant. In view of the same the ground no.3 and 4 are dismissed”. 3. Suffice to say, the Revenue’s vehement contention in support of the impugned disallowance is that the same has to be held as penal in nature only and therefore not allowable. We note in this factual backdrop that case law DCIT Vs. Narayani Ispat Private Limited ITA No.2127/Kol/2014, dt.30- 08-2017, ITO Vs. M/s.Lakshdweep Development Corporation Ltd, ITA No.311 & 312/Coch/2018 hold the impugned interest ITA No. 1215/Hyd/2019 :- 3 -: on TDS to be compensatory than penal in nature only. We therefore accept the assessee’s instant former substantive grievance in foregoing terms. 4. Next comes the latter issue of disallowance of provision of Rs.3,59,954/- made in both the lower proceedings. Learned counsel’s first and foremost argument is that the same stands reversed in the subsequent assessment years. Faced with this situation, we find that neither the Assessing Officer nor the CIT(A)’s detailed discussion takes into consideration the relevant factual backdrop of the nature of the impugned provision before invoking the disallowance in issue. We therefore restore the instant latter issue back to the Assessing Officer for his afresh factual verification as per law within three effective opportunities of hearing. Ordered accordingly. 5. This assessee’s appeal is partly allowed for statistical purposes in above terms. Order pronounced in the open court on 17 th November, 2021 Sd/- Sd/- ( A. MOHAN ALANKAMONY ) ( S.S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 17-11-2021 TNMM ITA No. 1215/Hyd/2019 :- 4 -: Copy to : 1.Head Digital Works Private Limited (Formerly known as Head Infotech India Private Limited which got amalgamated with Head Digital Works Private Limited), Plot No.17, 8 th Floor, Unit A, Atria Block, The V Software Units Layout, Madhapur, Hyderabad. 2.The Assistant Commissioner of Income Tax, Circle-2(2), Hyderabad. 3.CIT(Appeals)-2, Hyderabad. 4.The Pr.CIT-2, Hyderabad. 5.D.R. ITAT, Hyderabad. 6.Guard File.