M/s Mak Ispat India pvt. Ltd., Kolkata V. ITO, WD-3(4), KOLKATA, Kolkata

ITA 1300/KOL/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99820 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 14-10-2015
• Court: TRIBUNAL
• Assessee Lawyers: AMIT KUMAR ACA
• Section: 131; 133(6)

Judgement Text

I.T.A. NO. 1300/KOL./2015 ASSESSMENT YEAR: 2006-2007 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO.1300/KOL/2015 ASSESSMENT YEAR: 2006-2007 M/S. MAK ISPAT INDIA PVT. LIMITED,................. .......................APPELLANT P-34, INDIA EXCHANGE PLACE, 4 TH FLOOR, KOLKATA-700 001 [PAN: AABCM 9092 N] -VS.- INCOME TAX OFFICER,................................ ...............................RESPONDENT WARD-3(4), KOLKATA, AAYAKAR BHAWAN, 7 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI AMIT KUMAR, ACA , FOR THE ASSESSEE SHRI AMITABH BHATTACHARYA, JCIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JULY 27, 2016 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 21, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA DAT ED 31.07.2015, WHEREBY HE CONFIRMED THE DISALLOWANCE OF RS.11,39,4 80/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE IN COME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF DEALING IN IRON AND STEEL ITEMS. TH E RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 20. 11.2006 DECLARING TOTAL INCOME OF RS.9,15,940/-. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSES SEE HAS PAID A SUM OF RS.11,39,480/- AGAINST SERVICE CHARGES WITHOUT DEDU CTION OF TAX AT SOURCE. ACCORDING TO THE ASSESSING OFFICER, THE SER VICE CHARGES SO PAID BY THE ASSESSEE WERE IN THE NATURE OF COMMISSION OR BR OKERAGE AND THE I.T.A. NO. 1300/KOL./2015 ASSESSMENT YEAR: 2006-2007 PAGE 2 OF 4 ASSESSEE, THEREFORE, WAS LIABLE TO DEDUCT TAX AT SO URCE FROM THE PAYMENT THEREOF AS PER SECTION 194H OF THE ACT. SINCE NO SU CH TAX AT SOURCE WAS DEDUCTED BY THE ASSESSEE, THE ASSESSING OFFICER INV OKED THE PROVISIONS OF SECTION 40(A)(IA) AND DISALLOWED THE EXPENSES CLAIM ED BY THE ASSESSEE ON ACCOUNT OF SERVICE CHARGES AMOUNTING TO RS.11,39,48 0/-. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MA DE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPE ALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FO LLOWING GROUNDS:- (1) THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.11,39,480/- U/S 194H/40(A)(IA) O F THE ACT BY WRONGLY TREATING M/S. MSTC LTD. AN AGENT OF THE APPELLANT COMPANY. THE RELATIONSHIP OF THE APPELLAN T COMPANY AND MSTC LTD. IS NOT OF PRINCIPLE AND AGENT . HENCE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AND PROVISION OF SEC. 40(A)(IA) DOES NOT APPLY TO T HE INSTANT CASE. (2) WITHOUT PREJUDICE, THAT THE LD. CIT(A) ERRED IN NOT DELETING THE DISALLOWANCE OF RS.11,39,480/- IN VIEW OF THE SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT INSERT ED BY THE FINANCE ACT, 2012. THE SECOND PROVISO IS CURATIVE I N NATURE AND ASSESSEE CANNOT BE HELD AS DEFAULTER FOR NOT DEDUCTING TAX AT SOURCE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE, THE ADDITION IS W RONG AND LIABLE TO BE DELETED. 3. AT THE TIME OF HEARING BEFORE ME, THE LD. COUNS EL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APPEAL. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 4. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 2, T HE LD. REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT A SIMILAR ISSUE INVOLVED IN THE CASE OF M/S. ABHOY CHARAN BAKSHI V S.- ACIT HAS BEEN RESTORED BY THE TRIBUNAL TO THE FILE OF THE ASSESSI NG OFFICER VIDE ORDER DATED 06.04.2016 PASSED IN ITA NO. 1492/KOL/2015 FO R THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 15 :- 15. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE CIT(A) HAS HELD THAT THE SECOND PROVISO TO SEC.40(A )(IA) OF THE ACT WILL APPLY IN THE PRESENT CASE AND THAT APPLICABILITY OF THE S ECOND PROVISO TO I.T.A. NO. 1300/KOL./2015 ASSESSMENT YEAR: 2006-2007 PAGE 3 OF 4 SEC.40(A)(IA) OF THE ACT WHICH WAS INTRODUCED BY TH E FINANCE ACT, 2012 W.E.F. 1.4.2013 WAS RETROSPECTIVE IN OPERATION AND WAS TO APPLY W.E.F. 1-4-2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTIO N 40(A ) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004. THE HONBLE DELHI HI GH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (I) PVT.LTD., IN ITA N O.160/2015 JUDGMENT DATED 26.8.2015 HAS TAKEN THE VIEW THAT THE INSERTI ON OF THE SECOND PROVISO TO SEC.40(A)(IA) OF THE ACT IS RETROSPECTIVE AND WILL APPLY FROM 1.4.2005. ONCE IT IS HELD THAT THE ASSESSEE IS ENTITLED TO THE BENEFI T OF 2ND PROVISO TO SEC.40(A)(IA) OF THE ACT, THE CIT(A) OUGHT TO HAVE DIRECTED THE AO TO VERIFY WHETHER THE RECIPIENTS HAVE INCLUDED THE RECEIPTS P AID BY THE ASSESSEE IN THEIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME. TO THE EXTENT THE RECIPIENTS FROM THE ASSESSEE HAVE SO INCLUDED T HE SUM IN THEIR RETURNS OF INCOME AND FILED THE SAME, NO DISALLOWANCE U/S.40(A )(IA) OF THE ACT OUGHT TO HAVE BEEN SUSTAINED BY THE CIT(A). THE CIT(A) OUGHT TO HAVE ALSO DIRECTED THE AO THAT IN CASE THE RECIPIENT PARTIES ARE NOT COOPE RATING IN PROVIDING DETAILS, THE AO SHOULD CALL FOR THE INFORMATION U/S. 133(6) OR 131 OF THE ACT, FOR VERIFICATION OF THE SAME. IN THIS REGARD WE ALSO FI ND THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS OF ASSESSMENT PARTICULARS OF THE RECIPIENTS OF PAYMENT FROM THE ASSESSEE. THE AO THEREFORE SHOULD NOT HAVE ANY DIFFICULTY IN MAKING THE REQUIRED VERIFICATION. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) TO THE EXTENT TO WHICH HE HAD SUSTAINED THE ORDER OF THE AO ON THE DISALLOWANCE U/S.40(A)(IA) OF THE ACT AND REMAND TH E ISSUE TO THE AO TO VERIFY WHETHER THE RECIPIENTS HAVE INCLUDED THE RECEIPTS P AID BY THE ASSESSEE IN THEIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME. TO THE EXTENT THE RECIPIENTS FROM THE ASSESSEE HAVE SO INCLUDED T HE SUM IN THEIR RETURNS OF INCOME AND FILED THE SAME, NO DISALLOWANCE U/S.40(A )(IA) OF THE ACT SHOULD BE MADE BY THE AO. IN CASE THE RECIPIENT PARTIES ARE N OT COOPERATING IN PROVIDING DETAILS, THE AO SHOULD BE DIRECTED TO CAL L FOR THE INFORMATION U/S. 133(6) OR 131 OF THE ACT, FOR VERIFICATION OF THE S AME. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. ABHOY CHARAN BAKSHI (SUPRA), I RESTORE THE ISSUE IN VOLVED IN GROUND NO. 2 OF THIS APPEAL TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECTION AS GIVEN BY THE TR IBUNAL IN THE SAID CASE. GROUND NO. 2 OF THE ASSESSEES APPEAL IS ACCORDINGL Y TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 2 1, 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 21 ST DAY OF SEPTEMBER, 2016 I.T.A. NO. 1300/KOL./2015 ASSESSMENT YEAR: 2006-2007 PAGE 4 OF 4 COPIES TO : (1) M/S. MAK ISPAT INDIA PVT. LIMITED, P-34, INDIA EXCHANGE PLACE, 4 TH FLOOR, KOLKATA-700 001 (2) INCOME TAX OFFICER, WARD-3(4), KOLKATA, AAYAKAR BHAWAN, 7 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-1, KOLKAT A; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.