M.C.Ranganathan & Co., CHENNAI V. ITO, CHENNAI

ITA 1346/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5304 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 25-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A SUSHMA HARINI
• Keywords: Non-deduction of tax
• Section: 143(3); 201(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1346/CHNY/2017 ( / ASSESSMENT YEAR: 2013-14) M/S. M.C. RANGANATHAN & CO., 147/1, SECOND FLOOR, G.N. CHETTY ROAD, T. NAGAR, CHENNAI 600 017. VS THE INCOME TAX OFFICER, NON-CORPORATE WARD 1(3), CHENNAI. PAN: AAEFM7466Q ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MS. A. SUSHMA HARINI, ADVOCATE / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT /DATE OF HEARING : 08.02.2018 /DATE OF PRONOUNCEMENT : 16.04.2018 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-2, CHENNAI, DATED 21.03.2017 IN ITA NO.247/CIT(A)-2/20 15-16 FOR THE ASSESSMENT YEAR 2013-14 PASSED U/S.250(6) R.W.S . 143(3) OF THE ACT. 2 THE ASSESSEE HAS RAISED FOUR GROUNDS IN ITS APPE AL HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN 2 ITA NO.1346/CHNY/2017 CONFIRMING THE ORDER OF THE LD.AO WITH RESPECT TO A DDITION OF RS.1,80,000/- INVOKING THE PROVISIONS OF SECTION 40 (A)(IB) OF THE ACT 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A FIRM, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 ON 30.09.2013 ADMITTING TOTAL INCOME OF RS.26,70,300/- . INITIALLY THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT AND SUBS EQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTIC E U/S.143(2) OF THE ACT WAS ISSUED ON 02.09.2014. FINALLY ASSES SMENT ORDER WAS PASSED U/S.143(3) OF THE ACT ON 29.02.2016 WHER EIN THE LD.AO MADE SEVERAL ADDITIONS AMONGST WHICH ONE OF T HE ADDITION PERTAINS TO DISALLOWANCE OF EXPENDITURE INVOKING SE CTION 40(A)(IB) OF THE ACT TOWARDS NON-DEDUCTION OF TAX FOR THE PAY MENT MADE TO NRI. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT, IT WA S OBSERVED THAT THE ASSESSEE FIRM HAD PAID RENT OF RS.1,80,000 /- TO SHRI N. VENKAT RAMANI WHO WAS A NRI RESIDING IN SWE DEN WITHOUT DEDUCTION OF TAX AT SOURCE. ON QUERY IT WAS SUBMIT TED BY THE ASSESSEE FIRM THAT THE RENT OF RS.1,80,000/- WAS PA ID TO SHRI VENKAT RAMANI IN INDIA WHICH WAS REMITTED IN HIS HD FC BANK 3 ITA NO.1346/CHNY/2017 ACCOUNT. IT WAS FURTHER SUBMITTED THAT SHRI VENKAT RAMANI HAD INFORMED THE ASSESSEE FIRM THAT THE BANK HAD DEDUCT ED TDS ON ITS FIXED DEPOSIT INTEREST. SINCE THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON THE PAYMENT OF RENT TO SHRI VENKAT RAMANI , WHO IS A NON-RESIDENT, THE LD.AO INVOKED THE PROVISIONS OF S ECTION 195 OF THE ACT AND THEREBY INVOKING THE PROVISIONS OF SECT ION 40A(IB) OF THE ACT AND THEREBY DISALLOWED THE CLAIM OF EXPENDI TURE INCURRED TOWARDS RENT OF RS. 1,80,000/-. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE LD.AO BY OBSERVING AS UNDER:- 5.5. A CAREFUL PERUSAL OF THE PROVISIONS OF THE PR OVISO TO SECTION 40(A)(IA) READ ALONGWITH THE PROVISO TO SECTION 201(1) OF THE ACT, MAKES IT VERY CLEAR THAT THE REPRIEVE PROVIDED TO AN ASSESSEE WHO FAILS TO EFFECT TDS, IN THE FORM OF FILING OF CERTIFICATE FROM AN ACCOUNTANT IN FORM 26A, CERTIFYING THAT THE PAYEE HAS DULY TAKEN INTO ACCOUNT THE SUM WITH RESPECT TO WHICH TDS WAS NOT MADE, IN HIS RETURN OF INCOME, IS APPLI CABLE ONLY IN RESPECT OF PAYMENTS MADE TO RESIDENTS. IT IS PERTINENT TO NOTE THAT THERE IS NO SUCH CORRESPONDING PROVISION IN THE ACT, WITH RESPECT TO PAYMENTS MADE TO NON- RESIDENTS, WITHOUT EFFECTING TDS. IN OTHER WORDS, T HE APPELLANT, HAVING MADE THE PAYMENT OF RENT OF RS.1,80,000/- TO A NON- RESIDENT, CANNOT TAKE RECOURSE TO CLAIMING, THAT THE APPELLANT IS NOT AN ASSESSEE IN DEFAULT, AS PER THE PROVISIONS OF SECTION 201(1) AND ITS PROVIS O. HENCE, THE SUBMISSIONS MADE BY THE APPELLANT AND TH E FILING OF CERTIFICATE IN FORM 26A FILED, DO NOT SERVE THE PURPOSE OF GRAN TING RELIEF TO THE APPELLANT SINCE THE PAYMENT OF RENT WITHOUT TDS, IT SELF IS MADE TO AN NRI, SHRI N. VENKATA RAMANI. THE PROVISIONS OF SECTION 40(A)(IA)OF THE ACT ARE SQUARELY APPLICABLE TO THE PAYMENT OF RENT OF RS.1, 80,000/- MADE BY THE APPELLANT-FIRM TO AN NRI WITHOUT TDS AND HENCE, THE ENTIRE EXPENDITURE OF RS.1,80,000/- IS EXIGIBLE TO TAX AS PER THE CLEAR P ROVISIONS OF SECTION 40(A)(I)(B) OF THE ACT. THE ADDITION OF RS.1,80,000 /- IS HENCE CONFIRMED. THIS GROUND IS DISMISSED. 4 ITA NO.1346/CHNY/2017 5. BEFORE US THE LD.AR SUBMITTED THAT THE NRI SHR I VENKAT RAMANI HAD FILED HIS RETURN OF INCOME IN THE RELEVA NT ASSESSMENT YEAR AND PAID THE TAX. THEREFORE RELYING IN THE DEC ISION OF THE HONBLE APEX COURT IN THE CASE TRANSMISSION CORPORA TION OF AP & OTHER VS. ITO REPORTED IN 239 ITR 587, THE LD.AR AR GUED BY STATING THAT, WHEN THERE IS NO TAX LIABILITY IN THE CASE OF THE RECIPIENT OF THE RENT THEN THE PROVISIONS OF SECTION 195 OF THE ACT CANNOT BE INVOKED. IT WAS THEREFORE PLEADED THAT THE ADDITION MADE BY THE LD.AO MAY BE DELETED. THE LD.DR ON THE OTHER HAND R ELIED ON THE ORDERS OF THE LD.REVENUE AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. WE FIND MERIT IN THE SUBM ISSIONS OF THE LD.AR. WHEN THE RECIPIENT OF THE RENT WHO IS A NRI HAS PAID TAX IN INDIA AND THERE IS NO OUTSTANDING DEMAND FROM THE R EVENUE THEN THE PROVISIONS OF SECTION 195 CANNOT BE INVOKED AS HELD BY THE HONBLE APEX COURT IN THE CASE CITED SUPRA . HENCE RESPECTIVELY FOLLOWING THE DECISION OF THE HONBLE APEX COURT WE HEREBY DIRECT THE LD.AO TO VERIFY WHETHER THE RECIPIENT OF THE RE NT SHRI VENKAT RAMANI HAS FILED HIS RETURN OF INCOME AND PAID TAX THEN DELETE THE ADDITION MADE BY INVOKING THE PROVISIONS OF SECTION 195 AND 5 ITA NO.1346/CHNY/2017 40A(IA) OF THE ACT. IF FOUND OTHERWISE, PASS APPRO PRIATE ORDER IN ACCORDANCE WITH MERITS AND LAW. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED ON THE 16 TH APRIL, 2018 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER #$ /CHENNAI, %& /DATED 16 TH APRIL, 2018 RSR & () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF