M/s KSK Fabricators & Errectors P. Ltd, Calicut V. The ACIT, Calicut

ITA 135/COCH/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96724 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: C B M WARRIER
• Section: 194C; 148

Judgement Text

ITA NO .135/COCH/2015 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO . 135/COCH/2015 (ASST YEAR 2007 - 08 ) M/S KSK FABRICATORS & ERRECTORS P LTD FASEELA BUILDING VATTAPARAMBA CHALIYAM KOZHIKODE VS THE ASST COMM R OF INCOME TAX CIRCLE 2(1), KOZHIKODE ( APPELLANT) (RESPONDENT) PAN NO. AACCK8136C ASSESSEE BY SHRI C B M WARRIER REVENUE BY SHRI K P GOPAKUMAR, SR DR DATE OF HEARING 14 TH OCT 2015 DATE OF PRONOUNCEMENT 15 TH OCT 2015 OR D ER PER GEORGE G EORGE. K. J M: THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 18.12.2014. THE RELEVANT ASSESSMENT YEAR IS 2007 - 08. 2 THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE CIT(A) IS JUSTIFIED IN CO NFIRMING THE DISALLOWANCE OF EXP ENDITURE MADE BY THE AO BY INVOKING PROVISIONS OF SEC. 40(A)(IA) OF THE I T ACT, 1961. 3 THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: ITA NO .135/COCH/2015 2 THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS ENGAGED IN THE BUSINESS OF FABRICATION AN D ERRECTION CONTRACTS. THE ASSESSMENT WAS ORIGINALLY COMPLETED ON 3.12.2009 FIXING A TOTAL INCOME OF RS.10,21,950/ - . SUBSEQUENTLY, NOTICE U/S 148 WAS ISSUED AND REASSESSMENT WAS COMPLETED BY ORDER DATED 22.2.2013 BY ASSESSING TOTAL INCOME AT RS. 59,16,660 / - . IN THE REASSESSMENT, THE AO DISALLOWED AN EXPENDITURE OF RS. 48,86,660/ - BY INVOKING PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. THE DISALLOWANCE WAS FOR THE REASON THAT THESE WERE PAYMENTS MADE TO SUB - CONTRACTORS BY THE ASSESSEE WITHOUT EFFECTING TDS AS REQUIRED U/S 194C OF THE I T ACT. OUT OF THE TOTAL EXPENDITURE AMOUNTING TO RS. 48,86,660/ - , RS 26,71,100/ - WAS PAID BEFORE THE END OF THE FINANCIAL YEAR AND THE BALANCE OF RS. 16,68,695/ - WAS PAYABLE TO VARIOUS PAYEES AS ON THE END OF THE FINANCIAL YEAR . 4 AGGRIEVED BY THE DISALLOWANCE OF EXPENDITURE BY INVOKING PROVISIONS OF SEC. 40(A)(IA), THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE CONTENDED THAT THE AO IS WRONG IN DISALLOWING TH E EXPENDITURE AMOUNTING TO RS. 26,71,100/ - SINCE THE AMOUNT WAS ALREADY PAID TO VARIOUS PARTIES AS ON THE END OF THE FINANCIAL YEAR. THE ASSESSEE CONTENDED THAT SECTION 40(A)(IA) IS APPLICABLE ONLY TO THE AMOUNTS WHICH ARE OUTSTANDING AS PAYABLE ON THE E ND OF THE FINANCIAL YEAR AND WILL NOT EXTEND TO THE EXPENDITURE WHICH ARE ALREADY BEEN PAID. FOR THE ABOVE PROPOSITION, THE ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS VECTOR SHIPPING SERVICES P LTD REPORTED IN 357 ITR 642 ITA NO .135/COCH/2015 3 (ALL). IT WAS FURTHER SUBMITTED THAT THE SLP FILED AGAINST THE JUDGMENT OF THE ALLAHABAD HIGH CURT WAS DISMISSED BY THE HONBLE SUPREME COURT. THE CIT(A), HOWEVER, REJECTED THE CONTENTION RAISED BY THE ASSESSEE AND RELIED ON THE ORDER OF THE COCH IN BENCH OF THE TRIBUNAL IN THE CASE OF M/S HAMEED & CO (ENGINEERS) PVT LTD VS ACIT IN ITA NO. 767/COCH/2013 (ORDER DATED 17.10.2014) AND DISMISSED THE APPEAL OF THE ASSESSEE. 5 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSES SEE FAIRLY SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE RECENT JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THOMAS GEORGE MUTHOOT IN ITA 278 OF 2014 ( JUDGMENT DATED 3,7.2015). THE LD DR PRESENT WAS DULY HEARD. 6 WE HAVE H EARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE SECTION 40(A)(IA) WILL HAVE APPLICATION TO THE EXPENDITURE WHICH ARE ALREADY PAID BEFORE THE END OF THE FINANCIAL YEAR. THE CASE OF THE ASSESSEE IS THAT THE EXPENDITURE WHICH ARE REMAINING PAYABLE AS ON THE END OF THE FINANCIAL YEAR IS ONLY HIT BY THE PROVISIONS OF SEC. 40(A)(IA) AND NOT THE EXPENDITURE WHICH ARE ALREADY PAID. FOR THE ABOVE PROPOSITION, THE ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE VECTOR SHIPPING SERVICES P LTD (SUPRA). HOWEVER, WE NOTICE THAT T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ITA NO .135/COCH/2015 4 THOMAS GEORGE MUTHOOT (SUPRA) HAD CATEGORICALLY HELD THAT SECTION 40(A)(IA) DISALLOWANCE IS ALSO APPLICABLE TO THE EXPENDITURE WHICH ARE PAID DURING FINANCIAL YEAR ALSO. THE RELEVANT FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THOMAS GEORGE MUTHOOT (SUPRA) READ AS FOLLOWS: 17.ANOTHER CONTENTION THAT WAS P RESSED INTO SERVICE WAS THAT THE APPELLANTS HAD ALREADY PAID THE AMOUNT AND THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA),APPLICABLE ONLY IN RESPECT OF THE AMOUNT WHICH ITA.278/14 & CON CASES REMAINS TO BE PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR, IS NOT ATTRACTED. THEREFORE, ACCORDING TO THE APPELLANTS, DISALLOWANCE CANNOT BE SUSTAINED. THIS CONTENTION WAS SOUGHT TO BE SUBSTANTIATED BY RELYING ON THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN COMMISSIONER OF INCOME TAX V. VECTOR SHIPPING SERVICES (P)[(2 013) 3S7 ITR 642(ALL)] . PRIMARILY, THIS CONTENTION SHOULD BE ANSWERED WITH REFERENCE TO THE LANGUAGE USED IN THE STATUTORY PROVISION. SECTION 40(A)(IA) MAKES IT C L EAR THAT THE CONSEQUENCE OF DISALLOWANCE IS ATTRACTED WHEN AN INDIVIDUAL, WHO IS L I ABLE TO DE DUCT TAX ON ANY INTEREST PAYABLE TO A RESIDENT ON WHICH TAX IS DEDUCTIBLE AT SOURCE, COMMITS DEFAULT . THE . LANGUAGE OF THE SECTION DOES NOT WARRANT AN INTERPRETATION THAT IT IS ATTRACTED ONLY IF THE INTEREST REMAINS PAYABLE ON THE LAST DAY OF THE FINANCIA L YEAR. IF THIS CONTENTION IS TO BE ACCEPTED, THIS COURT WILL HAVE TO ALTER THE LANGUAGE OF SECTION 40(A) (IA) AND SUCH AN INTERPRETATION IS NOT PERMISSIBLE. THIS VIEW THAT WE HAVE TAKEN IS SUPPORTED BY JUDGMENTS OF THE CALCUTTA H I GH COURT IN CRESCENT EXPO RTS SYNDICATE AND ANOTHER [ITAT 20 OF ITA . 278/14 & CON CASES 2013] AND THE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V . SIKANDADARKHAN N TUNVAR [ITA NOS . 905 OF 2012 & CONNECTED CASES], WHICH HAVE BEEN RELIED ON BY THE TRIBUNAL. RESULTA NTLY, WE DO NOT FIND ANY MERIT IN THE CONTENTIONS AND QUESTIONS OF LAW ARE ANSWERED AGAINST T H E ASSESSEES. APPEALS ARE ONLY TO BE DISMISSED AND WE DO SO. 7 IN VIEW OF THE DICTUM LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THOMAS GEORGE MUTHOOT (SUPRA), WE HOLD THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. IT IS ORDERED ACCORDINGLY. ITA NO .135/COCH/2015 5 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPE N COURT ON THIS 15 TH DAY OF OCT 2015 . SD/ - SD/ ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 15 TH OCT 2015 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN