ITO, CHENNAI V. Kamadhenu Business Fortune Ltd., CHENNAI

ITA 127/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96044 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 16-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: G BASKAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.127/MDS/2015 ( / ASSESSMENT YEAR: 2010-11) THE INCOME TAX OFFICER, CORPORATE WARD-4(3) 4 TH FLOOR, MAIN BUILDING, CHENNAI-34. VS M/S. KAMADHENU BUSINESS FORTUNE LTD., 9, VISHNU AVENUE, VIRUGAMBAKKAM, CHENNAI-600 092. PAN:AADCK0008J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. P.RADHAKRISHNAN, JCIT /RESPONDENT BY : MR. G.BASKAR, ADVOCATE /DATE OF HEARING : 11 TH AUGUST, 2015 /DATE OF PRONOUNCEMENT : 16 TH SEPTEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNA I DATED 17.10.2014 FOR THE ASSESSMENT YEAR 2010-11. THE ONL Y GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DISAL LOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. 2. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT DISALLOWED A SUM OF ` 40,58,325/- FOR THE REASON THAT ASSESSEE HAS NOT FILED DETAILS IN RESPECT OF DEDUCT ION OF TDS 2 ITA NO.127/MDS/2015 ON COMMISSION PAYMENTS EXCEEDING ` 2500/- AS REQUIRED UNDER SECTION 194H OF THE ACT. ON APPEAL, THE COMM ISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO ` 1,29,583/- AS AGAINST ` 40,58,325/- AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. WHILE RESTRICTING S UCH DISALLOWANCE, THE COMMISSIONER OF INCOME TAX (APPEA LS) FOLLOWED THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORTERS VS. ADDL. CIT (136 ITD 23) ALSO THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF VEC TOR SHIPPING SERVICES P. LTD. (357 ITR 642) AND THE CO -ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S.TH EEKATHIR PRESS IN ITA NO.2076/MDS/2012 DATED18.09.2013, AGA INST WHICH THE REVENUE CAME UP IN APPEAL BEFORE US. 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER. THE DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON THE DECISION OF M UMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. PRATIB HUTI VINIYOG LTD. IN ITA NO.1689/MUM/2011 DATED 22.08. 2014 IN SUPPORT OF HIS CONTENTIONS. 3 ITA NO.127/MDS/2015 4. COUNSEL FOR THE ASSESSEE SUPPORTS THE ORDER OF T HE COMMISSIONER OF INCOME TAX (APPEALS). 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. THE COMMISSIONER OF IN COME TAX (APPEALS) FOLLOWING THE SPECIAL BENCH DECISION IN T HE CASE OF MERILYN SHIPPING & TRANSPORTERS VS. ADDL. CIT (136 ITD 23) ALSO THE DECISION OF ALLAHABAD HIGH COURT IN THE CA SE OF VECTOR SHIPPING SERVICES P.LTD. (357 ITR 642) AND THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN TH E CASE OF ITO VS. THEEKATHIR PRESS IN ITA NO.2076/MDS/2012 DATED18.09.2013, HELD THAT AMOUNTS ALREADY PAID TO WARDS COMMISSION AS ON 31.03.2010 I.E. BEFORE THE CLOSE O F ACCOUNTING YEAR HAS TO BE ALLOWED AS DEDUCTION OBSE RVING AS UNDER:- 4.1.4. THE WORDS 'PAID' AND 'PAYABLE: FOR THE PURPOSE OF SECTION 40(A) (IA) HAVE BEEN DELIBERATED BY VARIOUS TRIBUNALS AND HIGH COURTS. THE SPECIAL BENCH OF ITA T (VIZAG BENCH), IN THE CASE OF MERILYN SHIPPING AND TRANSPORTERS VS. ADDL CIT ( 136 ITD 23)(VIZAG SPL.), HAS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) A RE APPLICABLE ONLY TO THE EXPENSES THAT ARE 'PAYABLE' AND OUTSTANDING AS ON 31ST MARCH OF THE RELEVANT FINANC IAL YEAR IN WHICH 'THE EXPENSES ARE CLAIMED. THIS VIEW HAS ALSO BEEN ENDORSED BY THE HIGH COURT OF ALLAHABAD I N THE CASE OF VECTOR SHIPPING SERVICESP. LTD. (357 ITR 642), WHERE IT HAS CLEARLY BEEN HELD THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION O N THE GROUND THAT TDS HAS NOT BEEN DEDUCTED THE AMOUN T SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY TH E END OF THE YEAR. THE HEAD NOTE OF THE DECISION IS A S UNDER:- 4 ITA NO.127/MDS/2015 CIT VS. VECTOR SHIPPING SERVICES (P) LTD. 357 ITR 642)ALL: SECTION 40(A)(IA) READ WIT SECTION 192 OF THE IT ACT, 1961 BUSINESS ALLOWANCE - INTEREST ETC. PAID TO RESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE - ASSESSMENT YEAR 2009-10 - WHETHER FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION ON GROUND THA T TDS HAS NOT BEEN DEDUCTED, AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY END OF YEAR - HELD, YES - ASSESSEE, A SHIPPING COMPANY, CLAIMED DEDUCTION OF SALARY PAID TO EMPLOYEES OF COMPANY 'M' WHICH PERFORMED SHIP MANAGEMENT WORK ON ITS BEHALF - ASSESSING OFFICER DISALLOWED EXPENSES UNDER SECTION 40(A)(IA) ON GROU ND THAT TDS WAS NOT DEDUCTED ON SUCH EXPENSES - COMMISSIONER (APPEALS) AND TRIBUNAL DELETED DISALLOWANCE BY RECORDING FINDING THAT M HAD DEDUCTED TDS ON SALARIES PAID BY IT ON BEHALF OF ASSESSEE AN D NO AMOUNT REMAINED PAYABLE AT YEAR END - WHETHER TRIBUNAL WAS JUSTIFIED IN DELETING DISALLOWANCE - HELD, YES [PARA 10] ON THE CONTRARY, THE HIGH COURTS OF KOLKATA AND GUJARAT, IN THE CASES OFCIT VS. CRESENT EXPORTS SYNDICATE (216 TAXMAN 258)(KOL.) AND CIT VS. SIKANDAR KHAN N TANVAR (357 ITR 312)(GUJ.) RESPECTIVELY, HAVE HELD THAT THE PROVISIONS OF SECTION 40 (A)(IA) CAN BE INVOKED EVEN IF THE EXPENSES ARE ALREADY PAID AND NOT OUTSTANDING AS ON 31 ST MARCH OF THE RELEVANT FINANCIAL YEAR. 4.1.5. ANALYSING THE ABOVE DECISIONS, JURISDICTIONAL CHENNAI BENCH OF ITA T, RECENTLY, IN THE CASE OF IT O WARD 11 (4) MADURAI VS. M/ S . THEEKATHIR PRESS MADURAI (ITA NO. 20 76(MDS)/2012 DATED 18.9.2013), HAS ALSO HELD THAT THE PROVISIONS OF SECTION 40 (A)(IA) ARE APPLICABLE ONLY WHEN THE EXPENSES ARE ''PAYABLE '' AND OUTSTANDING AS ON 31 ST MARCH OF THE RELEVANT FINANCIAL YEAR. THE RELEVANT PORTION OF THE DECISION IS AS UNDER: 5. WE FIND THAT THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IS IN FAVOUR OF THE ASSESSEE. AT THE SAME TIME, WE FIND THAT THE ORDERS OF THE CALCUTTA HIGH COURT AND THE GUJARAT HIGH COURT ARE AGAINST THE ASSESSEE. IN SUCH CIRCUMSTANCES THE RULE OF JUDICIAL PRECEDENCE DEMANDS THAT THE VIEW FAVOURABLE TO THE ASSESSEE MUST BE ADOPTED, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD., 88 ITR 192. FOLLOWING THE ABOVE FUNDAMENTAL RULE DECLARED BY THE HON 'BLE SUPREME COURT, WE HAVE TO FOLLOW THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT, WHICH IS IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE UNDER SECTION 40(A)IA) APPLIES ONLY TO THOSE AMOUNTS 'PAYABLE' AND NOT TO THOSE AMOUNTS 'PAID' .... ' FURTHER RECENTLY, THE HON'BLE SUPREME COURT OF INDI A, VIDE CC NO.8068/2014 DATED 02.07.2014, HAS UPHELD THE DECISION OF THE ALLAHABAD HIGH COURT (IN THE CASE O F VECTOR SHIPPING SERVICES P. LTD) BY DISMISSING THE SLP FILED BY THE REVENUE. 5 ITA NO.127/MDS/2015 4.1.6. THEREFORE, IN VIEW OF THE DECISIONS OF THE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES P. LTD. (357ITR 642)(ALL.) WHICH HAS ALSO BEEN UPHELD BY THE APEX COURT, AND ALSO THE JURISDICTIONAL ITAT IN THE CASE OF ITO VS. THEEKATHIR PRESS MADURAI (ITA NO. 2076 (MDS) /2012 DATED 18.9.2013), I HOLD THAT THE PROVISIONS OF SECTION 40 (A)(IA) ARE APPLICABLE ONLY IF THE AMOUNTS ARE PAYABLE' AND OUTSTANDING AS 31 ST MARCH OF THE RELEVANT FINANCIAL YEARS. IN THE PRESENT CASE, AS COULD BE SEEN M THE BALANCE SHEET OF 31.03.2010 (AT SCHEDULE-5 CURRENT LIABILITIES) THE OUTSTANDING COMMISSION PAYABLE IS ONLY RS.1,29,583/ - . THEREFORE, SINCE THE ASSESSEE HAS ALREADY PAID TH E COMMISSION EXPENSES OF ( 1,36,55,092/- (I.E. OUT OF THE TOTAL COMMISSION RS.I,37,84,675/- DEBITED IN TH E P&L ACCOUNT) AS ON 31.03.2010, THE SAME CANNOT BE DISALLOWED II/S.40(A)(IA) OF THE ACT. THE ONLY AMOUNT THAT FALLS WITHIN THE PURVIEW OF SECTION 40(A)(IA) OF THE ACT IS RS.I,29,5831 -. HENCE THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISALLOWANCE TO RS.L,29,5831/-U/S.40(A)(IA) OF THE ACT, AS AGAINST RS.40,58,325/- MADE BY HIM IN HIS ORDER. THE DISALLOWANCE TO THE EXTENT OF RS.39,28,7421/- (I.E.RS.40,58,325/- RS.1,29, 583) STANDS DELETED. 6. ON GOING THROUGH THE ABOVE ORDER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS). THUS, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAG ENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 16 TH SEPTEMBER, 2015 SOMU 6 ITA NO.127/MDS/2015 ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .