ITO, Ward-7(3), Hyderabad, Hyderabad V. Yeshwanth Kumar Kishta, Hyd, Hyderabad

ITA 1290/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6162 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 13-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Section: 143(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1290/HYD/2015 ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, WARD 7(3), HYDERABAD. VS. YESHWANTH KUMAR KISHTA, HYDERABAD. PAN AGUPK 9630 L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B. KURMI NAIDU ASSESSEE BY : SHRI MOHD. AFZAL DATE OF HEARING : 05-01-2016 DATE OF PRONOUNCEMENT : 22-01-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A) - 5, HYDERABAD, DATED 30/09/2015, FOR THE AY 2007 -08. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SMENT IN THIS CASE WAS ORIGINALLY COMPLETED U/S 143(3) OF THE INC OME-TAX ACT, 1961 ( IN SHORT ACT) DETERMINING THE TOTAL INCOME AT R S. 94,24,594/- AFTER MAKING AN ADDITION U/S 40(A)(IA) OF RS. 84,25,430/- TOWARDS PAYMENT OF HIRE CHARGES TO THE TOURIST VEHICLES WITHOUT DED UCTION OF TAX AND OTHER SMALL DISALLOWANCES. THE FIRST APPELLATE AUTH ORITY CONFIRMED THE ADDITION. ON A FURTHER APPEAL BEFORE THE HON'BLE IT AT, A DIRECTION WAS GIVEN TO THE CIT (A) / ASSESSING OFFICER TO FOLLOW THE DIRECTIONS OF VIZAG SPECIAL BENCH IN THE CASE OF MERILYN SHPPING & TRANSPORT VISHAKHAPATNAM VS ACIT IN ITA NO. 477/VIZ/2008. HOW EVER, THE ASSESSING OFFICER HAS REFUSED TO FOLLOW THE SAID DI RECTIONS ON THE PLEA THAT THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE HON 'BLE AP HIGH COURT. 2 ITA NO. 1290 /HYD/2015 YESHWANTH KUMAR KISHTA 3. AGGRIEVED, THE ASSESSEE PREFERRED THE APPEAL BEF ORE THE CIT(A). 4. THE CIT(A) REFERRING TO THE PROVISIONS OF SECTIO NS 194C(1) AND 40(A(IA), NOTED THAT IN THIS CASE THE OUTSTANDING A MOUNT PAYABLE AS ON 31/03/2007 IS RS. 6,71,710/- ONLY. FROM THE DETAILS FILED AND BALANCE SHEET DETAILS, IT WAS SEEN THAT DURING THE RELEVANT ACCOUNTING PERIOD, ASSESSEE HAD DEBITED RS. 84,25,430/- AS HIRE CHARGE S PAYMENTS TO 12 PERSONS. HOWEVER, AT THE END OF THE YEAR A TOTAL SU M OF RS. 6,71,710/- REMAIN OUTSTANDING AS THE AMOUNT PAYABLE TO SUCH 12 PERSONS. 4.1 FURTHER, THE CIT(A) REFERRING TO THE DECISIONS HONBLE HIGH COURTS INCLUDING THAT OF MERLYN SHIPPING & TRANSPOR TS VS. ADDL. CIT [2012] 136 ITD 0023 (SB) 16 ITR 0001, SUSTAINED THE OUTSTANDING AMOUNT OF RS. 6,71,710 AS AGAINST THE ADDITION OF R S. 84,25,430 MADE BY THE AO BY OBSERVING AS UNDER: I FURTHER FIND THAT WHILE DECIDING THE APPEAL IN THE CASE OF JANAPRIYA ENGINEERS SYNDICATE (I.T.T.A. NO. 352 OF 2014 DT. 24.06.2014) THE HON'BLE ANDHRA PRADESH HIGH COURT HAS CLARIFIED THE ISSUE OF INTERIM STAY GRANTED BY IT IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA). I WILL LIKE TO REPRODUCE 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 SMALLER BEN CH AND COORDINATE BENCH OF THE TRIBUNAL. UNDER THE CIRCUMSTANCES, IT IS N OT OPEN TO THE TRIBUNAL, AS RIGHTLY CONTENDED BY MR. NARASIMHA SARMA, LEARNED COUNSEL, TO REMAND ON THE GROUND OF PENDENCY ON THE SAME ISSUE BEFORE TH IS COURT, OVERLOOKING AND OVERRULING, BY NECESSARY IMPLICATION, THE DECI SION OF THE SPECIAL BENCH. WE SIMPLY SAY THAT IT IS NOT PERMISSIBLE UN DER QUASI JUDICIAL DISCIPLINE'. FROM THE CLARIFICATION ISSUED BY THE HON'BLE HIGH COURT, IT IS CLEAR THAT UNTIL AND UNLESS THE DECISION OF MARILYN SHIPPING & TRAN SPORT (SUPRA) IS REVERSED, IT IS TO BE FOLLOWED. HON'BLE COURT HAS HELD THAT JUDICIAL DISCIPLINE MANDATES THAT THE DECISION OF THE SPECIAL BENCH HA S TO BE FOLLOWED BY OTHER BENCHES. THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE H ON'BLE ITAT, I HOLD THAT I. THE LIABILITY TO DEDUCT TDS OUT OF HIRE CHARGES PAYMENTS DOES ARISE AND II. OUT OF ADDITION OF RS 84,25,430, THE OUTSTANDI NG AMOUNT OF RS 6,71,710 IS SUSTAINED AND THE REMAINING AMOUNT IS DIRECTED TO BE DELETED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL: 3 ITA NO. 1290 /HYD/2015 YESHWANTH KUMAR KISHTA 1. LD. CIT (A) ERRED ON BOTH LAW AND FACTS OF THE CASE. 2. LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS.77,53,7201- MADE BY THE INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE I. T. ACT. 3. THE LEARNED CIT(A) ERRED IN DELETING THE DISALL OWANCE OF EXPENDITURE U/S 40(A)(IA) OF THE ACT, HOLDING THAT THE AMOUNTS ARE NOT PAYABLE AS AT THE END OF THE YEAR, IGNORING THAT THE PROVISIONS ARE APPL ICABLE IN RESPECT OF PAYMENT MADE DURING THE YEAR WITHOUT TDS BEING MAD E. 4. THE LD. CIT(A) ERRED IN RELYING UPON THE DECISI ON OF HON'BLE ITAT, SPECIAL BENCH, VISAKHAPATNAM, IN THE CASE OF MERYL IN SHIPPING & TRANSPORTING NOT CONSIDERING THE CIRCULAR OF CBDT IN NO: 10/DV/2013[F.NO.279/MISC/M-61/2012-ITJ DATED 16.12 .2013]. 5. THE LD.CIT(A) ERRED IN RELYING UPON THE DECISIO N OF HON'BLE ITAT, SPECIAL BENCH, VISAKHAPATNAM, IN THE CASE OF MERYL IN SHIPPING & TRANSPORTING NOT CONSIDERING THE FACT THAT SAID DE CISION IS PLACED UNDER INTERIM SUSPENSION BY HON'BLE HIGH COURT OF JUDICA TURE AT HYDERABAD FOR THE STATE OF TELANGANA AND STATE OF ANDHRA PRADESH . 6. WE HAVE HEARD THE BOTH THE COUNSELS AND PERUSED THE MATERIAL FACTS ON RECORD. AS HELD BY THE CIT(A) THAT SINCE T HE DECISION OF MERLYN SHIPPING AND TRANSPORT (SUPRA) IS NOT REVERS ED BY ANY HIGHER FORUM, THE SAME IS TO BE FOLLOWED. 6.1 IN THE PRESENT CASE, THE COORDINATE BENCH IN IT A NO 550/HYD/2011 DATED 20.07.2012 HAS DIRECTED TO RE-D ETERMINE THE AMOUNT OF EXPENDITURE, IF ANY, THAT IS DISALLOWABLE IN TERMS OF S.40(A)(IA) OF THE ACT IN THE LIGHT OF THE RATIO OF THE DECISION IN MERILYN SHIPPING & TRANSPORTS (SUPRA). THE SPECIAL BENCH HELD THAT AS S. 40 (A)(IA) REFERS TO 'AMOUNT PAYABL E', ONLY THE OUTSTANDING AMOUNT OR THE PROVISION FOR EXPENSE AS OF 31ST MARCH (AND NOT THE AMOUNT ALREADY PAID DURING THE YEAR) I S LIABLE FOR DISALLOWANCE IF TDS IS NOT DEDUCTED. 6.2 IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD , 357 ITR 642, THE ALLAHABAD HIGH COURT HELD THAT DISALLOWANC E U/S 40(A)(IA) APPLIES ONLY TO AMOUNTS PAYABLE AS OF 31ST MARCH AND NOT TO AMOUNTS ALREADY PAID DURING THE YEAR AND THE MAJO RITY JUDGEMENT IN MERILYN SHIPPING WAS APPROVED BY THE HIGH COURT. THE OBSERVATIONS OF THE ALLAHABAD HIGH COURT ARE AS FOL LOWS: THE REVENUE CANNOT TAKE ANY BENEFIT FROM THE OBSE RVATIONS MADE BY THE SPECIAL BENCH OF THE TRIBUNAL IN MERILYN SHIPPING AND TRANSPORT LTD 136 ITD 4 ITA NO. 1290 /HYD/2015 YESHWANTH KUMAR KISHTA 23 (SB) TO THE EFFECT THAT S. 40 (A) (IA) WAS INT RODUCED BY THE FINANCE ACT, 2004 W.E.F. 1.4.2005 WITH A VIEW TO AUGMENT THE RE VENUE THROUGH THE MECHANISM OF TAX DEDUCTION AT SOURCE. S. 40(A)(IA) WAS BROUGHT ON THE STATUTE TO DISALLOW THE CLAIM OF EVEN GENUINE AND ADMISSIBLE EXPENSES OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION IN CASE THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES. THE DEFAULT IN DEDUCTION OF TDS WOULD RESULT IN DISALLOWANCE OF E XPENDITURE ON WHICH SUCH TDS WAS DEDUCTIBLE. ON FACTS, TAX WAS DEDUCTE D AS TDS FROM THE SALARIES OF THE EMPLOYEES PAID BY MERCATOR LINES A ND THE CIRCUMSTANCES IN WHICH SUCH SALARIES WERE PAID BY MERCATOR LINES FO R THE ASSESSEE WERE SUFFICIENTLY EXPLAINED. IT IS TO BE NOTED THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEE N PAID BY THE END OF THE YEAR. 6.3 THE DEPARTMENT FILED A SPECIAL LEAVE PETITION ( SLP) IN THE SUPREME COURT. THE SAID SLP HAS BEEN DISMISSED BY T HE SUPREME COURT IN LIMINE . 6.4 IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE OF RS. 77,53,720 MADE BY THE AO INVOKING THE PROVISIONS OF SECTION 4 0(A)(IA) OF THE ACT, THEREFORE, THE ORDER OF THE CIT(A) IS HEREBY U PHELD DISMISSING THE GROUNDS RAISED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY , 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 22 ND JANUARY, 2016 KV COPY TO:- 1) ITO, WARD 7(3), HYDERABAD. 2) SRI YESHWANT KUMARKISHTA, PROP. M/S SONY TR AVELS, 15-5-884, AFZALGUNJ, HYDERABAD 3 CIT(A) - 5, HYDERABAD 4) PR. CIT - 3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 5 ITA NO. 1290 /HYD/2015 YESHWANTH KUMAR KISHTA DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER