DCIT, Hyderabad V. M/s. IVRCL Infrastructure & Projects Ltd., Hyderabad

ITA 1220/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69986 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 22-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Retrospective amendment; Question of law; Difference of opinion
• Section: 43B; 143(3); 133A; 153A; 132; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1220/HYD/2013 ASSESSMENT YEAR 2005-06 THE DCIT CENTRAL CIRCLE-1 HYDERABAD VS. M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD., HYDERABAD PAN: AAACI5139B APPELLANT RESPONDENT APPELLANT BY: SRI P. SOMA SEKHAR REDDY RESPONDENT BY: SRI V. RAGHAVENDRA RAO DATE OF HEARING: 05 . 12 .2013 DATE OF PRONOUNCEMENT: 20.12.2013 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-I, HYDERABAD DATED 31.5.2013 FOR A.Y. 2005-06. 2. THE REVENUE RAISED THE FOLLOWING GROUND OF APPEAL: 'WHETHER THE HONBLE CIT(A) WAS JUSTIFIED IN COMING TO A CONCLUSION THAT THE AMENDMENT BROUGHT IN SECTION 40(A)(IA) HAS RETROSPECTIVE OPERATION AND CONSEQUENTLY NO DISALLOWANCE UNDER SECTION 40(A)(IA ) REQUIRED TO BE MADE.' 3. BRIEF FACTS OF THE ISSUE ARE THAT IN THIS CASE, AN ACTION U/S. 132 OF THE ACT HAD BEEN CARRIED OUT IN CONNECT ION WITH THE MADHU KODA GROUP OF CASES AT RANCHI. SUBSEQUENTLY, A NOTICE U/S. 153A WAS ISSUED ON 17.1.2011, IN RESPONSE TO W HICH THE ASSESSEE FILED A RETURN ON 22.3.2011, DECLARING INC OME OF RS. 6,34,88,450. PRIOR TO THE ABOVE SAID SEARCH & SEIZU RE ACTION, A SURVEY U/S. 133A HAD ALSO BEEN CONDUCTED IN THE ASS ESSEE'S PREMISES ON 21.8.2006, WHEREIN THE ASSESSEE HAD ADM ITTED AN ADDITIONAL INCOME OF RS. 6 CRORES FOR THE A.Y. 2005 -06. LATER, AN ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 2 ASSESSMENT U/S. 143(3) WAS COMPLETED ON 20.4.2007, DETERMINING THE TOTAL INCOME AT RS. 74,58,97,549 BY ADDING BACK EXPENDITURE UNDER THE HEADS ESOP, DEDUCTION U/ S. 80IA(4), IN ADDITION TO THE ADDITIONAL INCOME OFFER ED DURING THE COURSE OF SURVEY. THE ADDITIONS SO MADE WERE UPHEL D BY THE CIT(A)-III, HYDERABAD IN HIS ORDER DATED 15.10.2007 . HOWEVER, THE ITAT, VIDE THEIR ORDER DATED 23.7.2008 IN ITA N O. 1114/HYD/07, SET ASIDE THE MATTER TO THE FILE OF TH E ASSESSING OFFICER BY RELYING ON THE DECISION OF THE SPECIAL B ENCH IN ASSESSEE'S OWN CASE FOR THE A.Y. 2001-02. IN TERMS OF THE ORDER OF ITAT, THE ASSESSING OFFICER, VIDE HIS ORDER DATE D 31.12.2009, REASSESSED THE INCOME AT RS. 74,58,97,549/-. THE AS SESSEE'S APPEAL AGAINST THE SAID ORDER WAS AGAIN DISMISSED B Y THE CIT(A). THE ASSESSEE HAD NOT FILED ANY FURTHER APPEAL AGAIN ST THE SAID ORDER BY THE CIT(A), HYDERABAD-I DATED 10.6.2011 TI LL THE DATE OF PASSING OF THE ASSESSMENT ORDER UNDER SECTION 153A READ WITH SECTION 143(3) OF THE ACT. AFTER THE ISSUE OF NOTI CE U/S. 153A ON 26-12-2011, ANOTHER ASSESSMENT WAS MADE U/S. 143(3) R.W.S. 153A OF THE ACT, DETERMINING THE TOTAL INCOME AT RS . 167,67,24,318. 4. WHILE FRAMING THE ASSESSMENT ORDER, THE AO ON VERIFICATION OF THE DETAILS OF TDS DEDUCTION AND RE MITTANCE THEREOF, IT WAS NOTICED THAT TDS HAD BEEN REMITTED BELATEDLY AS UNDER: MONTH OF TDS RECOVERY AMOUNT OF TDS (RS.) DUE DATE OF REMITTANCE AMOUNT PAID (RS.) DATE OF PAYMENT 09/2004 3641626 07/10/04 3641626 07/04/05 11/2004 358374 07/10/04 358374 07/04/05 410488 07/10/04 410844 31/05/05 12/2004 4056908 07/01/05 4056908 31/05/05 01/2005 691786 07/02/05 691786 31/05/05 02/2005 1420421 07/03/05 1420421 31/05/05 10579973 ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 3 5. IN VIEW OF THE ABOVE, THE AO DISALLOWED THE PROPORT IONATE EXPENDITURE @ 1.045%, AMOUNTING TO RS. 101,19,00,00 0, THERE BEING A VIOLATION OF THE PROVISIONS OF SEC. 40(A)(I A). IT WAS ARGUED BEFORE HIM THAT THE PAYMENTS TO SUB-CONTRACTORS WER E BUSINESS EXIGENCIES AND WERE ON RUNNING ACCOUNT. IT WAS ALS O PLEADED THAT THE SAID CONTRACTORS WERE ON THE ROLLS OF THE ASSESSEE FOR ASSIGNMENT OF VARIOUS WORKS AND SINCE THEIR ACCOUNT S WERE SETTLED AT THE END OF EACH ACCOUNTING YEAR, I.E., O N 31-3-2005 FOR THE RELEVANT FINANCIAL YEAR, THE TDS SO MADE THEREO N WAS PAID ON OR BEFORE 31-5-2005 AS PER SEC. 200(1) READ WITH RULE 30. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(A). 6. THE CIT(A) OBSERVED THAT THE CONTENTION OF THE ASSE SSEE WAS NOT ACCEPTED BY THE AO. THE AO NOTICED THAT DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD GIVEN SOME OF ITS WORKS TO SUB CONTRACTORS AND IN TERMS O F SEC. 194C, IT WAS REQUIRED TO MAKE TDS AT THE TIME OF CREDIT O R PAYMENT, WHICHEVER WAS EARLIER. REFERRING TO THE PROVISIONS OF SEC. 40(A)(IA), HE NOTED THAT SUCH TDS WAS TO BE DEDUCTE D EITHER AT THE TIME OF CREDIT TO SUCH CONTRACTOR'S ACCOUNT OR AT THE TIME OF PAYMENT THEREOF AND THE TDS SO DEDUCTED WAS TO BE C REDITED TO THE GOVERNMENT ACCOUNT. HE FOUND THAT THOUGH THE A SSESSEE HAD DEDUCTED TAX IN THE MONTHS OF SEP. 2004 TO FEB. 2005, THE SAME WAS DEPOSITED BELATEDLY ON 7-4-2005 AND 31-5-2 005 ONLY. HE FELT THAT AS PER THE PROVISO OF SEC. 40(A)(IA), THE SAME SHOULD HAVE BEEN PAID DURING THE PREVIOUS YEAR 2004-05 ITS ELF, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME ALLOW ED U/S. 200(1), WHICH IS BEFORE THE 7 TH DAY ON THE FOLLOWING MONTH. ON VERIFICATION OF INFORMATION SUBMITTED, HOWEVER, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAD MADE CERTAIN PAYMENTS DURING THE YEAR UNDER CONSIDERATION ON VAR IOUS DATES, AS TABULATED ABOVE, AND WHILE MAKING SUCH PAYMENT/C REDITING THE CONTRACTOR'S ACCOUNT, IT WAS SUPPOSED TO DEDUCT TDS AS ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 4 APPLICABLE AND REMIT SUCH TDS TO GOVT. ACCOUNT ON O R BEFORE 7TH DAY OF THE FOLLOWING MONTH AS PER RULE-30 OF IT RULES, AS MENTIONED IN THE TABLE GIVEN ABOVE. HE FELT THAT AS PER SEC. 40(A)(IA), SUCH SUM SHALL BE ALLOWED AS DEDUCTION I F TDS MADE DURING ANY OTHER MONTH OTHER THAN THE LAST MONTH OF THE PREVIOUS YEAR IS PAID WITHIN THE SAME YEAR. ACCORDI NGLY, HE FELT THAT THE ASSESSEE OUGHT TO HAVE REMITTED THE TDS BE FORE 31 ST MARCH, 2005. HOWEVER, THE ASSESSEE HAD PAID TDS IN THE SUBSEQUENT YEAR, AND THEREFORE, THE PROVISIONS OF S EC. 40(A)(IA) WERE ATTRACTED IN ITS CASE. 7. SINCE THE ASSESSEE HAD FAILED TO REMIT TDS IN TIME, THE PROPORTIONATE EXPENDITURE OF RS. 101,19,00,000/- WA S ADDED BACK TO THE ASSESSEE'S INCOME U/S. 40(A)(IA). WHIL E DOING SO, THE AO NOTED THAT THOUGH IN THE ORIGINAL COMPUTATION OF INCOME, THE ASSESSEE HAD ITSELF ADDED BACK A SUM OF RS. 8,10,73 ,231, SUCH SUM WAS NOT ADDED BACK IN THE RETURN FILED IN TERMS OF SEC. 153A LATER. SINCE THE PRESENT ASSESSMENT WAS BASED ON THE ORIGINALLY ASSESSED INCOME ITSELF, WHEREIN THE SUM OF RS. 8,10,73,231/- HAD ALREADY BEEN ADDED BACK, THE DISA LLOWANCE U/S. 40(A)(IA) WAS RESTRICTED TO RS. 93,08,26,769 ( RS. 101,19,00,000 RS. 8,10,73,231). 8. THE CIT(A) OBSERVED THAT IN THE INSTANT CASE, THE A O PROCEEDED TO MAKE THE DISALLOWANCE U/S. 40(A)(IA) O F THE ACT FOR THE REASON THAT THE ASSESSEE FAILED TO REMIT THE TD S IN TIME. HE WORKED OUT THE DISALLOWABLE AMOUNT OF RS. 101,19,00 ,000 BY MAKING A BACKWARD CALCULATION FROM THE AMOUNT OF RS . 1,05,79,973, WHICH AS PER THE CHART ABOVE WAS PAID IN THE MONTH OF APRIL AND MAY, 2005, THOUGH THE SAME WAS R ECOVERED BEFORE MARCH, 2005. HE OPINED THAT UNDER THE PROVI SIONS OF SEC. 40(A)(IA), THE AMOUNT SO DEDUCTED SHOULD HAVE BEEN REMITTED BEFORE 31-3-2005. ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 5 9. THE CIT(A) OBSERVED THAT THE PRIMARY CONTENTION OF THE AR OF THE ASSESSEE IS THAT THE ASSESSEE IS A CONTRACTO R AND WAS MAINTAINING RUNNING ACCOUNTS OF THE RESPECTIVE SUB- CONTRACTORS, WHICH WERE MADE UP ONLY AT THE END OF THE FINANCIAL YEAR BY TAKING INTO ACCOUNT VARIOUS DEBITS AND CREDITS. AC CORDINGLY, IT IS ARGUED THAT THE ASSESSEE BECAME LIABLE TO REMIT THE TDS WITHIN TWO MONTHS ONLY AFTER FINALISATION OF THE RESPECTIV E ACCOUNTS AT THE YEAREND I.E., 31.03.2005. THE AR HAS CLAIMED TH AT SINCE THE PAYMENT WAS MADE BEFORE 31.03.2005, IT WAS VERY MUC H WITHIN THE DUE DATE PRESCRIBED U/S. 200 READ WITH RULE 30 OF THE IT RULES, 1962. HOWEVER, IT IS CLEAR THAT AS PER THE PROVISIONS CONTAINED IN CHAPTER XVII-B, THE DEDUCTOR IS REQUIR ED TO DEDUCT THE TDS AT THE TIME OF CREDIT OF SUCH SUM TO THE AC COUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CAS H OR BY ISSUE OF A CHEQUE OR A DRAFT OR ANY OTHER MODE, WHICHEVER IS EARLIER. ACCORDINGLY, EVEN IF THE ASSESSEE WAS HAVING RUNNIN G ACCOUNTS OF RESPECTIVE SUB-CONTRACTORS, IT WAS UNDER OBLIGAT ION TO DEDUCT TDS AT THE TIME OF EACH CREDIT OR PAYMENT TOWARDS S UCH ACCOUNTS. THEREFORE, FINDING NO MERIT IN THE CONTE NTION OF THE ASSESSEE THAT THE PAYMENT MADE ON OR BEFORE 31.05.2 005 WAS WELL WITHIN THE DUE DATE PRESCRIBED U/S. 200 OF THE ACT READ WITH RULE 30 OF THE IT RULES, GROUND NO. 2 IS DECID ED AGAINST THE ASSESSEE. 10. THE CIT(A), AS REGARDS THE ALTERNATIVE GROUNDS, OBS ERVED THAT IT IS THE CONTENTION OF THE ASSESSEE THAT IN V IEW OF THE AMENDMENTS OF SECTION 40(A)(IA) BY THE FINANCE ACT, 2010, DEDUCTION FOR EXPENSES IS TO BE ALLOWED IF THE TDS IS MADE AND THE AMOUNTS SO DEDUCTED IS PAID TO THE GOVERNMENT A CCOUNT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U /S. 139(1) OF THE ACT. IN THIS REGARD, THE CIT(A) OBSERVED THAT T HAT THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. VIRGI N CREATIONS (ITA NO. 302 OF 2011 DT. 23-11-2011), HAVE HELD THA T IN THE ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 6 CASES OF ALLIED MOTORS (224 ITR 667) AND ALOM EXTRU SIONS (319 ITR 306), THE HON'BLE SUPREME COURT HAVE HELD THAT THE AMENDMENTS TO THE PROVISIONS OF SEC. 43B HAVE RETRO SPECTIVE APPLICATION. IN THE CASE OF R.B. JODHA MAL KUTHIAL A (82 ITR 570) ALSO THEY HAD HELD THAT PROVISION WHICH WAS IN SERTED AS A REMEDY TO MAKE A PROVISION WORKABLE REQUIRES TO BE TREATED WITH RETROSPECTIVE OPERATION SO THAT REASONABLE DEDUCTIO N CAN BE GIVEN TO THE SECTION AS WELL. IN VIEW OF THE ABOVE SAID AUTHORITATIVE PRONOUNCEMENTS OF THE HON'BLE APEX CO URT, HON'BLE HIGH COURT OF CALCUTTA FELT THAT THE ISSUE IN RESPECT OF RETROSPECTIVE APPLICATION OF THE AMENDMENT TO SECTI ON 40(A)(IA) COULD NOT BE DECIDED OTHERWISE. THEREFORE, IN VIEW OF THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE ABOV E REFERRED DECISION, THE AMENDMENT TO THE PROVISIONS OF SEC. 4 0(A)(IA) IS INDEED RETROSPECTIVE IN NATURE, AND CONSEQUENTLY, A NY PAYMENT OF TAX DEDUCTED AT SOURCE DURING THE PREVIOUS YEAR RELEVANT TO AND FROM ASSESSMENT YEAR 2005-06 CAN BE MADE TO THE GOVERNMENT ON OR BEFORE THE DUE DATE FOR FILING OF RETURN OF INCOME U/S. 139(1) OF THE ACT, AND IF PAYMENTS ARE SO MADE, NO DISALLOWANCE U/S. 40(A)(IA) CAN BE MADE. 11. THE CIT(A) OBSERVED THAT A SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON'BLE HIGH COURT OF KARNATAKA IN THEIR RELATIVELY RECENT DECISION DT. 1-02-2013 IN THE CAS E OF ITO VS ANIL KUMAR & CO. (2013) (31 TAXMANN.COM 317) (KAR.) . THEY HAVE OPINED THAT WITH THE CHANGE OF LAW, WHEN THE E FFECT OF THE AMENDMENT WAS TO GIVE BENEFIT TO THE ASSESSEE, THE APPELLATE AUTHORITY AND THE TRIBUNAL WERE JUSTIFIED IN EXTEND ING THE SAID BENEFIT. 12. THE CIT(A) OBSERVED THAT THOUGH THE SPECIAL BENCH O F MUMBAI ITAT IN THE CASE OF BHARATI SHIPYARD LTD. (1 32 ITD 53) HAD TAKEN A CONTRARY VIEW IN THE MATTER, IT IS ALSO AN ESTABLISHED ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 7 POSITION OF LAW THAT THE DECISION OF A NON-JURISDIC TIONAL HIGH COURT PREVAILS OVER THE DECISION OF THE SPECIAL BEN CH. THIS POSITION HAS BEEN CLEARLY PRONOUNCED BY THE ITAT, VISAKHAPATNAM IN THE CASE OF RAJAMAHENDRI SHIPPING AND OIL FIELD SERVICES LTD. VS. ADDI.CIT (51 SOT 242) ALSO. ACCORDINGLY, HE WAS OF THE CONSIDERED VIEW THAT FOLLOWING THE VI EW TAKEN BY THE HON'BLE HIGH COURTS OF CALCUTTA AND KARNATAKA I N THE AFORESAID CASES, THE AMENDMENT TO THE PROVISIONS OF SEC. 40(A)(IA) HAS TO BE CONSIDERED AS APPLICABLE RETROS PECTIVELY, AND CONSEQUENTLY, NO DISALLOWANCE UNDER THE SAID SECTIO N CAN BE MADE IF TDS IS MADE FROM THE AMOUNTS PAID/ CREDITED TO THE PAYEES DURING THE RELEVANT PREVIOUS YEAR AND THE AM OUNTS SO DEDUCTED AS TDS ARE PAID TO THE GOVERNMENT ACCOUNT ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME F OR SUCH YEAR U/S. 139(1) OF THE ACT. 13. THE CIT(A) OBSERVED THAT ON THE FACTS OF THE PRESEN T CASE IT IS CLEAR THAT THE TDS OF RS. 1,05,79,973 HAD BEE N RECOVERED IN THE MONTHS OF SEPTEMBER, 2004 TO FEBRUARY, 2005 AND THE SAME WAS PAID TO THE GOVERNMENT ACCOUNT IN APRIL AND MAY , 2005, WHICH WAS INDEED WELL BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S. 139(1) OF THE ACT. RESPECTFULLY FOLLOWI NG THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN CREATIONS (SUPRA), THEREFORE, IT IS HELD THAT SINCE TDS HAS BEEN DEDUCTED OUT OF THE PAYMENTS TO THE SUB-CONTRACTS D URING THE YEAR AND THE SAME WAS REMITTED TO THE GOVERNMENT AC COUNT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, NO DISALLOWANCE U/S. 40(A)(IA) COULD HAVE BEEN MADE. ACCORDINGLY, T HE CIT(A) DIRECTED THE AO TO VERIFY WHETHER THE TAX OF RS. 1, 05,79,973/- WAS DEDUCTED AT SOURCE OUT OF THE AMOUNTS PAID/CRED ITED BY THE ASSESSEE AND IF IT IS FOUND THAT THE ASSESSEE HAD D ULY DEDUCTED THE TAX AT SOURCE OUT OF THE PAYMENTS MADE BY IT IN CONFORMITY WITH CHAPTER XVII-B OF THE INCOME TAX ACT AND HAD A LSO ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 8 DEPOSITED THE SAME WITH THE GOVERNMENT ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, N O DISALLOWANCE IS REQUIRED TO BE MADE U/S. 40(A)(IA) OF THE ACT IN TERMS OF THE JUDGMENT OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN CREATIONS (SUPRA). 14. THE CIT(A) OBSERVED THAT IN VIEW OF THE REQUEST OF THE ASSESSEE, THE ASSESSING OFFICER HAD PASSED AN ORDER U/S, 154 OF THE ACT FOR THE ASSESSMENT YEAR 2006-07 ON 23.2.201 2, ALLOWING EXPENDITURE OF RS. 93,08,26,769/-, WHICH WAS DISALL OWED IN THE ASSESSMENT YEAR 2005-06, IN THE ASSESSMENT YEAR 200 6-07, AS THE TDS OF RS. 1,05,79,973/- WAS REMITTED IN THE FI NANCIAL YEAR 2005-06. NOW THAT IN VIEW OF THE DECISION OF THE H ON'BLE CALCUTTA HIGH COURT DISCUSSED ABOVE, THE EXPENDITUR E RELATABLE TO SUCH TDS OF RS. 1,05,79,973/- HAS BEEN HELD AS A LLOWABLE, SUBJECT TO VERIFICATION AS STATED ABOVE, IN THE ASS ESSMENT YEAR 2005-06 ITSELF, AND HE DIRECTED THE AO TO RECOMPUTE THE INCOME FOR THE ASSESSMENT YEAR 2006-07 ALSO BY WITHDRAWING ANY CREDIT SO GIVEN IN RESPECT OF ANY EXPENDITURE RELATABLE TO THE ASSESSMENT YEAR 2005-06 ON THE BASIS OF PAYMENT OF TDS IN THE FINANCIAL YEAR 2005-06. THE ALTERNATIVE CONTENTION IN GROUND NO. 3 IS THEREFORE, DECIDED IN FAVOUR OF THE ASSESS EE. 15. THE LEARNED DR SUBMITTED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL I N THE CASE OF BHARTHI SHIPYARD LTD. VS. DCIT (132 ITD 53) (SB) (M UM). 16. ON THE OTHER HAND, THE AR SUBMITTED THAT SIMILAR IS SUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN THE CASE OF PEC ELECTRICALS LTD. WHEREIN THE HIGH COURT CONFIRMED T HE ORDER OF THE TRIBUNAL BY OBSERVING AS FOLLOWS: 'WITH REGARD TO THE NEXT QUESTION, THE TRIBUNAL BY FOLLOWING THE DECISION OF THE KOLKATA HIGH COURT IN ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 9 CIT VS. VIRGIN CREATIONS (GA NO. 3200/2011), WHEREIN IT HAS BEEN HELD THAT THE AMENDMENT TO THE PROVISIONS OF SECTION 40(A)(IA) IS RETROSPECTIVE IN OPERATION AND CONSEQUENTLY IN RESPECT OF ANY PAYMENT OF TDS MADE BEFORE THE DUE DATE FOR THE FILING OF THE RETURN OF INCOME, THE PROVISIONS OF S ECTION 40(A)(IA) CANNOT BE INVOKED. THEREFORE, WE DO NOT FIND ANY REASON TO SEE THAT ANY FURTHER DECISION ON THIS POINT IS REQUIRED BY THIS COURT.' 17. FURTHER, HE ALSO RELIED ON THE ORDER OF THE TRIBUNA L IN THE CASE OF R.V. CHAKRAPANI VS. ACIT IN ITA NO. 894/HYD /2012 DATED 1.10.2013 WHEREIN THE TRIBUNAL HELD AS FOLLOW S: '5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE SAME ISSUE CAM E BEFORE THIS TRIBUNAL IN THE CASE OF MADINENI MOHAN (CITED SUPRA) WHEREIN THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. FURTHER, THE KARNATAKA HIG H COURT IN THE CASE OF ITO VS. ANIL KUMAR & CO. (354 ITR 170) HELD AS FOLLOWS: 'IT IS NOT IN DISPUTE THAT ON THE DATE THE ASSESSEE DEDUCTED THE TAX, HE HAD NO PAY/REMIT THE MONEY WITHIN SEVEN DAYS FROM THAT DATE AND IF THE AMOUNT IS ACTUALLY PAID WHEN THE CREDIT IS GIVEN, THEN THE TAX IS PAYABLE WITHIN TWO MONTHS. IN THE INSTANT CASE, ASSESSEE DID NOT COMPLY WITH THE LEGAL REQUIREMENT; THEREFORE, THE ASSESSING AUTHORITY WAS JUSTIFIED IN MAKING THE DISALLOWANCE, BUT ON THE DATE THE APPEAL WAS FILED, THE SECTION CAME TO BE AMENDED, GIVING RETROSPECTIVE BENEFIT. THEREFORE, THE APPELLATE AUTHORITY EXTENDED THE BENEFIT OF THE AMENDED PROVISION AND HELD THAT THE DISALLOWANCE IS PAID AND THE ORDER HAS BEEN UPHELD BY THE TRIBUNAL. BY FINANCE ACT, 2008 WHICH IS GIVEN RETROSPECTIVE EFFECT FROM 1.4.2005, THE BENEFIT OF THAT PROVISION HAD BEEN EXTENDED TO THE ASSESSEE, THOUGH NO FAULT WAS FOUND WITH THE ASSESSMENT ORDER PASSED INITIALLY. WITH CHANGE OF LAW, WHEN THE EFFECT OF THE AMENDMENT IS TO GIVE BENEFIT TO THE ASSESSEE, THE APPELLATE AUTHORITY AND THE TRIBUNAL WERE JUSTIFIED IN EXTENDING THE SAID BENEFIT. THUS, ORDER PASSED BY THE TRIBUNAL IS IN ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 10 ACCORDANCE WITH LAW AND DOES NOT CALL FOR INTERFERENCE. THEREFORE, THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' 6. FURTHER, THE GUJARAT HIGH COURT IN THE CASE OF C IT VS. M/S. J.K. CONSTRUCTION CO. IN TAX APPEAL NO. 70 6 OF 2010 HELD AS FOLLOWS: 'PLAINLY SPEAKING, ASSESSEE HAD TO MAKE DEDUCTION BEFORE 31 ST MARCH OF THE YEAR IN QUESTION AND AS LONG AS SUCH AMOUNTS WERE DEPOSITED BEFORE LAST DATE OF FILING OF THE RETURN, REQUIREMENTS OF LAW WOULD BE FULFILLED. IT WAS ON THIS BASIS THAT TRIBUNAL WAS OF THE OPINION THAT THE ASSESSEE COMMITTED NO WRONG AND WAS, THEREFORE, ENTITLED TO SEEK DEDUCTION OF RS. 32,94,149/- FROM THE INCOME WHICH AMOUNT THE ASSESSEE HAD DEDUCTED FROM PAYMENTS OF CONTRACTORS AND HAD ALSO DEPOSITED WITH REVENUE BEFORE THE LAST DATE OF FILING OF THE RETURN. WE D O NOT FIND ANY ILLEGALITY IN ORDER OF TRIBUNAL. TAX APPEAL IS THEREFORE, DISMISSED.' 7. FURTHER, THIS TRIBUNAL IN THE CASE OF DCIT VS. M /S. LIQUIDZ INDIA PVT. LTD. IN ITA NO. 835/HYD/2013 ORDER DATED 28.8.2013 HELD AS FOLLOWS: '7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AS HELD BY THE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJINDER KUMAR IN INCOME TAX APPEAL NO. 65/2013 DATED 1 ST JULY, 2013, THE IMPUGNED AMENDMENT TO SECTION 40(A)(IA) PERMITS REMITTANCE OF TDS TO THE CENTRAL GOVERNMENT ACCOUNT ON OR BEFORE THE DUE DATE OF FILING RETURN OF INCOME U/S. 139(1) OF THE ACT IS RETROSPECTIVE IN NATURE. SAME VIEW HAS BEEN TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PEC ELECTRICALS PVT. LTD., IN ITA NO. 263 OF 2013 DATED 12.7.2013. THE ASSESSEE IN PRESENT CASE PAID THE TDS TO THE CENTRAL GOVERNMENT ACCOUNT BEFORE FILING THE RETURN OF INCOME AND THE SAME IS TO BE ALLOWED AS HELD BY THE ABOVE JUDGEMENTS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE U/S 40(A)(IA) OF THE ACT AND, ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 11 THEREFORE, THE ORDER OF THE CIT(A) IS HEREBY UPHELD ON THIS COUNT. THIS GROUND RAISED BY THE REVENUE IN THIS REGARD IS DISMISSED.' 8. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINED TO HOLD THAT WHEN THE ASSESSEE, THOUGH DEDUCTED TDS BEFORE 31 ST MARCH OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AND PAID THE SAME IN TO THE CENTRAL GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, THE EXPENDITURE CANNOT BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. IN THE PRESE NT CASE, THERE IS NO DISPUTE REGARDING THE PAYMENT OF TDS AMOUNT IN TO THE CENTRAL GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME OF THE ASSESSEE. BEING SO, EXERCISING THE POWER U/S. 263 OF THE ACT BY THE CIT ON THIS ISSUE IS NOT JUSTIFIED. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED.' 18. FURTHER HE SUBMITTED THAT AT THE TIME OF DELIVERIN G OF SPECIAL BENCH ORDER IN THE CASE OF BHARTI SHIP YARD ON 12.9.2011 THERE IS NO OCCASION TO THE TRIBUNAL TO C ONSIDER THE FOLLOWING JUDGEMENTS WHICH WERE DELIVERED SUBSEQUEN T TO THAT DATE: A) CIT VS. VIRGIN CREATIONS (GA NO. 3200/2011) (CAL.) DATED 23.11.2011 B) PEC ELECTRICALS (ITTA NO. 263 OF 2013) (AP) DATED 12.7.2013 C) RAJINDER KUMAR IN ITA NO. 65/2013 (DELHI) DATED 1.7.2013. D) NARESH KUMAR & M/S. TAL BROS (P) LTD. IN ITA NOS. 24/2013 AND 218/2013 (DELHI) DATED 6.9.2013. E) ITO VS. ANIL KUMAR & CO. (354 ITR 170) (KAR.) F) CIT VS. M/S. JK CONSTRUCTION CO. IN TAX APPEAL NO. 706 OF 2010 (GUJ). G) MEIL RATNA JV IN ITA NO. 20/HYD/2013 DATED 21.8.2013. (TRIBUNAL HYDERABAD BENCH) H) RV CHAKRAPANI VS. ACIT IN ITA NO. 894/HYD/2013 DATED 1.10.2013 (TRIBUNAL HYDERABAD BENCH) I) RAJAMAHENDRI SHIPPING LTD. VS. ACIT (51 SOT 242) (TRIBUNAL VISAKHAPATNAM BENCH). J) MADINENI MOHAN VS. ITO IN ITA NO. 762/HYD/2012 DATED 312.5.2013 (TRIBUNAL HYDERABAD BENCH) ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 12 K) PIYUSH C. MEHTA VS. ACIT (52 SOT 27) (MUM). L) M/S. ALPHA PROJECTS SOCIETY (P) LTD. VS. DCIT IN IT A NO. 2869/AHD/2011 DATED 23.3.2012 (TRIBUNAL AHMEDABAD BENCH). 19. HE SUBMITTED THAT THE HIGH COURT JUDGEMENT MAY BE FOLLOWED IN THIS ISSUED. FURTHER HE ALSO SUBMITTED THAT IN THE DECISIONS IN THE CASES OF LIQUIDZ INDIA (P) LIMITED DT. 28-08- 2013 (SUPRA), MEIL RATNA JV DT 21-08-2013 (SUPRA) AND RV CHAKRAPANI DT 01-10-2013 (SUPRA), THE DECISION OF T HE JURISDICTIONAL HIGH COURT DT 12-07-2013 IN THE CASE OF PEC ELECTRICALS (P) LIMITED (SUPRA) HAS BEEN FOLLOWED B Y THE HON'BLE BENCHES. 20. HE SUBMITTED WITH REGARD TO THE DECISION OF THE SPE CIAL BENCH IN THE CASE OF M/S. BHARTI SHIPYARD IN ITA NO . 2404/MUM/2009, (SINCE REPORTED IN 132 ITD 53) RELIE D ON BY THE LEARNED DR, THAT THE HON'BLE BENCH DID REFER TO THE SPECIAL BENCH DECISION BUT DID NOT FOLLOW IT IN THE CASE OF LIQUIDZ INDIA PRIVATE LIMITED (SUPRA) BY TAKING NOTICE OF THE DEC ISION OF THE CO- ORDINATE BENCH AT AHMEDABAD IN THE CASE OF M/S ALPH A PROJECTS SOCIETY (P) LIMITED VS DCIT (ITA NO. 2869/AHD/2011 DT 23-03- 2012). THERE THE BENCH ALSO NOTICED THAT AHMEDABAD BENCH REFERRED TO THE SPECIAL BENCH DECISION BUT NOT FOLL OWED IT. THEREFORE, THE DEPARTMENT'S RELIANCE ON THE SPECIAL BENCH DECISION IN THE CASE OF BHARTI SHIPYARD (SUPRA) IS NO LONGER CORRECT. TO THE SAME EFFECT IS THE CASE OF MADINEN I MOHAN VS ITO, SURYAPET IN ITA NO. 762/HYD/2012 DT 31-05-2013 WHICH ALSO IS A DECISION LATER THAN THAT OF BHARTI SHIPYA RD (SUPRA). 21. HE SUBMITTED THAT THE DECISIONS OF SEVERAL HIGH COU RTS IN REGARD TO THE RETROSPECTIVE NATURE OF THE AMENDMENT OF SEC 40(A)(IA) BY THE FINANCE ACT 2010 ARE APPLICABLE IN PREFERENCE TO THE DECISION OF THE SPECIAL BENCH. THE HYDERABAD BE NCHES OF ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 13 THE TRIBUNAL HAVE INDEED APPLIED THE DECISIONS OF T HE HIGH COURTS EVEN AFTER NOTICING THE DECISION OF THE SPEC IAL BENCH. FURTHER THE TRIBUNAL BENCHES AT HYDERABAD APPLIED T HE JUDGEMENT JURISDICTIONAL HIGH COURT IN THE CASE OF PEC ELECTRICALS INDIA LIMITED (SUPRA) IN THEIR ORDERS I N THE CASES OF MEIL RATNA JV (SUPRA) AND RV CHAKRAPANI (SUPRA). VISAKHAPATNAM BENCH IN THE CASE OF RAJMAHENDRI SHIP PING & OIL FIELD SERVICES VS ACIT (51 SOT 242) AND A MUMBA I BENCH IN THE CASE OF PIYUSH C MEHTA VS ACIT (52 SOT 27) DISC USSED AS TO WHICH OF THE JUDGEMENTS, WHETHER THAT IN THE CASE O F BHARTI SHIPYARD LTD OR OF CALCUTTA HIGH COURT JUDGEMENT IN VIRGIN CREATIONS SHOULD BE FOLLOWED AND HELD THAT ANY HIGH COURT DECISION IS HIGHER IN PRECEDENCE VALUE OVER A SPECI AL BENCH DECISION. 22. HE FURTHER SUBMITTED THAT FROM THE FOREGOING THAT T HERE IS A DIFFERENCE OF OPINION BETWEEN THE SPECIAL BENCH A ND THE LATTER DECISIONS OF THE DELHI HIGH COURT, CALCUTTA HIGH CO URT, GUJARAT HIGH COURT AND ANDHRA PRADESH HIGH COURT IN REGARD TO THE PROSPECTIVE / RETROSPECTIVE NATURE OF THE AMENDMENT BY FINANCE ACT 2010. WHERE THERE IS AMBIGUITY IN THE INTERPRET ATION OF A PROVISION, THE HON'BLE SUPREME COURT HELD IN THE CA SE OF VEGETABLE PRODUCTS LIMITED (88 ITR 192), THAT THE I NTERPRETATION FAVOURABLE TO THE ASSESSEE MUST BE FOLLOWED. THE AN DHRA PRADESH HIGH COURT, IN THE CASE OF COMMERCIAL TAX O FFICER VS STATE OF ANDHRA PRADESH (169 ITR 564, 571-2), HAS P OINTED OUT TO A DECISION OF THE BOMBAY HIGH COURT IN THIS REGA RD AND HELD THAT WHERE THERE ARE CONFLICTING VIEWS OF THE HIGH COURTS AND THERE IS NO DECISION OF THE JURISDICTIONAL HIGH COU RT ON THE ISSUE, INTERPRETATION FAVOURABLE TO THE ASSESSEE MU ST BE FOLLOWED. THE ASSESSEE'S CASE HERE IS ON A BETTER F OOTING BECAUSE THERE IS NO CONFLICT IN THE DECISIONS OF THE SEVERA L HIGH COURTS ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 14 ON THE RETROSPECTIVE NATURE OF THE AMENDMENT TO SEC 40(A)(IA) BY FINANCE ACT 2010. 23. HE SUBMITTED THAT THERE IS NO DISPUTE BY THE AO ABO UT THE CLAIM OF THE EXPENDITURE COVERED BY THE IMPUGNED CO NTRACT PAYMENTS, EXCEPT FOR THE APPLICABILITY OF THE PROVI SIONS OF SEC 40(A)(IA). THEREFORE THERE IS ALSO NO GROUND OF APP EAL ON THE ALLOWABILITY OF THE CLAIM OF EXPENDITURE EITHER AT THE FIRST APPEAL STAGE OR AT THE SECOND APPEAL STAGE. THE LEARNED DR ALSO HAS NOT ARGUES ON THE NON-ALLOWABILITY OF THE CLAIM OF EXPENDITURE ITSELF ON ANY GROUND EXCEPT ON THE APPLICABILITY OF THE PROVISIONS OF SEC 40(A)(IA) OF THE IT ACT. NEEDLESS TO ADD, TH E SUB- CONTRACTORS ARE LIABLE TO ADMIT THE CONTRACT RECEIP TS FROM THE ASSESSEE BASED ON THE METHOD OF ACCOUNTING OF ACCRU AL OF THE INCOME. THIS WILL NOT IMPINGE ON THE CLAIM OF EXPEN DITURE BY THE ASSESSEE WHO HAS TO DEDUCT TAX AS AND WHEN THE PAYM ENTS ARE MADE, IRRESPECTIVE OF THE DATES OF ACCRUAL OF THE I NCOME IN THE HANDS OF THE SUB-CONTRACTORS. FURTHER THE SUB-CONTR ACTORS WOULD NOT AND NEED NOT AWAIT THE DEDUCTION OF TAX A T SOURCE BY THE ASSESSEE FOR ADMITTING THE INCOMES IN THEIR OWN RETURNS. IN ANY CASE, THE YEAR OF ACCRUAL OF INCOME AND THE ADM ISSION THEREOF BY THE SUB-CONTRACTORS IS NOT IN ISSUE. THE CLAIM OF THE EXPENDITURE BY THE ASSESSEE BY WAY OF CONTRACT PAYM ENTS IS NOT IN ISSUE. THIS IS SUBMITTED ONLY BY WAY OF CLARIFIC ATION AND NOT RELATED TO ANY GROUND OF APPEAL EITHER BEFORE THE C IT(A) OR BEFORE THE TRIBUNAL. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN OUR OPINION, SIMILAR ISSUE WAS CONSI DERED BY THIS TRIBUNAL IN THE CASE OF ADIT VS. M/S NIPPON JOGESUI DO SEKEI CO. LTD., IN ITA NO. 726/HYD/2013. THE TRIBUNAL VID E ORDER DATED 6.12.2013 HELD AS FOLLOWS: ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 15 'WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AS HELD BY THE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJINDER KUMAR IN INCOME TAX APPEAL NO. 65/2013 DATED 1 ST JULY, 2013, THE IMPUGNED AMENDMENT TO SECTION 40(A)(IA) PERMITS REMITTANCE OF TDS TO THE CENTRAL GOVERNMENT ACCOUNT ON OR BEFORE THE DUE DATE OF FILING RETURN OF INCOME U/S. 139(1) OF THE ACT IS RETROSPECTIVE IN NATURE. SAME VIEW HAS BEEN TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PEC ELECTRICALS PVT. LTD., IN ITA NO. 263 OF 2013 DATED 12.7.2013. THE ASSESSEE IN PRESENT CASE PAID THE TDS TO THE CENTRAL GOVERNMENT ACCOUNT BEFORE FILING THE RETURN OF INCOME AND THE SAME IS TO BE ALLOWED AS HELD BY THE ABOVE JUDGEMENTS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE U/S 40(A)(IA) OF THE ACT AND, THEREFORE, THE ORDER OF T HE CIT(A) IS HEREBY UPHELD ON THIS COUNT. THE GROUNDS RAISED BY THE REVENUE IN THIS REGARD ARE DISMISSED.' 25. CONSIDERING THE CONSISTENT VIEW TAKEN BY THE TRIBUN AL, WE ARE INCLINED TO HOLD THAT WHEN THE ASSESSEE, THOUGH DEDUCTED TDS BEFORE 31 ST MARCH, 2005, RELEVANT TO A.Y. 2005-06, RELATING TO EXPENDITURE CLAIMED FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION AND PAID THE SAID AMOUNT TO THE CENTR AL GOVERNMENT BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME FOR A.Y. 2005-06, THAT EXPENDITURE CANNOT BE DISALL OWED U/S. 40(A)(IA) OF THE ACT. IF IT IS SO, THE CIT(A) IS J USTIFIED IN ALLOWING CLAIM OF THE ASSESSEE. 26. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2013. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 20 TH DECEMBER, 2013 TPRAO ITA. NO. 1220/HYD/2013 M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD. ============-================== 16 COPY FORWARDED TO: 1. THE DCIT, CENTRAL CIRCLE - 1, 7 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD-500 004. 2. M/S. IVRCL INFRASTRUCTURE & PROJECTS LTD., M22/3RT, VIJAYA NAGAR COLONY, HYDERABAD. 3. THE CIT(A) - I, HYDERABAD. 4. THE CIT (CENTRAL) , HYDERABAD 5. THE DR 'A' BENCH, ITAT, HYDERABAD