ACIT, CHENNAI V. Red Brick Realtors Pvt. Ltd., CHENNAI

ITA 1372/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86308 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 20-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: V CHANDRASEKAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 1372/MDS/2013 ( / ASSESSMENT YEAR: 2008-09) THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-IV(2) 46,NUNGAMBAKKAM HIGH ROAD, CHENNAI-34. VS M/S. RED BRICK REALTORS PVT. LTD. NEW NO.2,OLD NO.6, DR.B.N.ROAD, T.NAGAR, CHENNAI-600 017. PAN:AAACR3587L ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.MADHAVAN, JCIT /RESPONDENT BY : MR. V.CHANDRASEKAR, ADVOCATE /DATE OF HEARING : 19 TH JANUARY, 2015 /DATE OF PRONOUNCEMENT : 13 TH FEBRUARY, 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)-I, CHENNAI DATED 14.03.2013 FOR THE ASSESSMENT YEAR 2008-09. 2. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE AC T IN RESPECT OF PROFESSIONAL FEES PAID WITHOUT DEDUCTION OF TAX AT SOURCE. THE ASSESSING OFFICER WHILE COMPLETING THE 2 ITA NO.1372 /MDS/2013 ASSESSMENT DISALLOWED ` 18,00,000/- PAID TOWARDS ARCHITECT FEES AS THE ASSESSEE DID NOT DEDUCT TDS ON SUCH PAY MENT AND THEREFORE, ASSESSING OFFICER DISALLOWED THE SAI D AMOUNT UNDER SECTION 40(A)(IA) OF THE ACT. ON APPEAL, COMM ISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE DECISION OF S PECIAL BENCH OF THE TRIBUNAL (VISAKHAPATNAM BENCH) IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT (136 I TD 23) (SB), DELETED THE DISALLOWANCE AS THESE AMOUNTS WE RE ALREADY PAID BEFORE THE END OF THE YEAR, THEREFORE PROVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED. 3. COUNSEL FOR THE ASSESSEE PLACES RELIANCE ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND ALS O THE ORDER OF THIS TRIBUNAL IN THE CASE OF ITO VS.THEEKA THIR PRESS IN ITA NO.2076/MDS/2012 DATED 18.9.2013 WHEREIN THE TRIBUNAL HELD THAT NO DISALLOWANCE IS WARRANTED WHE N THE PAYMENTS WERE MADE BY THE ASSESSEE BY THE END OF TH E ACCOUNTING YEAR, IN VIEW OF VARIOUS DECISIONS OF H IGH COURTS ON THIS ISSUE. 4. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER O F THE ASSESSING OFFICER IN DISALLOWING THE ARCHITECT FEES FOR NON- DEDUCTION OF TDS. 3 ITA NO.1372 /MDS/2013 5. ON GOING THROUGH THE ORDERS OF LOWER AUTHORITIES , AND THE DECISIONS OF THIS TRIBUNAL, WE FIND THAT THE I SSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE INASMUCH AS THE PROVISIONS OF SECTION 40(A)(IA) HAVE NO APPLICATIO N WHEN THE AMOUNTS WERE PAID BY THE ASSESSEE BEFORE THE END OF THE ACCOUNTING YEAR. THE CO-ORDINATE BENCH OF THIS TRIB UNAL IN THE CASE OF ITO VS. THEEKATHIR PRESS (SUPRA) HELD AS UNDER:- 2. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF CERTAIN EXPENDITURE MADE BY THE ASSESSEE UNDER SECTION 40(A)(IA) ON THE GROUND THAT TAX HAS NOT BEEN DEDUCTED AT SOURCE AND PAID TO THE CREDIT OF GOVERNMENT OF INDIA. BUT, THE COMMISSIONER OF INCOME- TAX(APPEALS) DELETED THE DISALLOWANCE STATING THAT THE AMOUNT PAYABLE ALONE WOULD ATTRACT THE DISALLOWANCE UNDER SECTION 40(A)(IA) AND THE AMOUNT ALREADY PAID WOULD NOT ATTRACT THE ABOVE PROVISION. THE REVENUE IS AGGRIEVED AND, THEREFORE, THIS SECOND APPEAL BEFORE US. 3. THE INCOME-TAX APPELLATE TRIBUNAL, VISAKHAPATNAM-SPECIAL BENCH, HAD HELD IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT, 16 ITR (TRIB) 1, THAT THE PROVISIONS OF SECTIO N 40(A)(IA) DO APPLY ONLY TO THOSE AMOUNTS REMAINED PAYABLE BY THE END OF THE PREVIOUS YEAR AND THE SAID PROVISIONS DO NOT APPLY TO THE AMOUNTS ALREADY PAID BY THE ASSESSEE BEFORE THE CLOSE OF THE RELEVANT PREVIOUS YEAR. IN THAT WAY, THE ORDER OF THE COMMISSIONER OF INCOME- TAX(APPEALS) IN THE PRESENT CASE IS CONDUCIVE TO THE DECISION OF THE SPECIAL BENCH. THE VERY SAME VIEW HAS BEEN UPHELD BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. M/S. VECTOR SHIPPING SERVICES(P) LTD. THE HONBLE ALLAHABAD HIGH COURT, THROUGH THEIR JUDGMENT DATED 9-7- 2013 IN ITA NO.122 OF 2013, HAS HELD THAT THE 4 ITA NO.1372 /MDS/2013 DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT IS GOOD LAW. IN THAT WAY, THE PRESENT APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 4. BUT, AT THE SAME TIME, THE LEARNED JOINT COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENUE HAS RELIED ON THREE OTHER JUDGMENTS RENDERED BY THE HONBLE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT, IN WHICH THEIR LORDSHIPS HAVE HELD THAT THE LAW STATED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL.CIT WAS NOT ACCEPTABLE. THE HONBLE CALCUTTA HIGH COURT, THROUGH THEIR JUDGMENT DELIVERED ON 3 RD APRIL, 2013 IN ITA NO.20 OF 2013 IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATES, HAS HELD THAT THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL.CIT IS NOT ACCEPTABLE. THE SAME VIEW HAS AGAIN BEEN REPEATED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. MD. JAKIR HOSSAIN MONDAL, THROUGH THEIR JUDGMENT DELIVERED ON 4 TH APRIL, 2013 IN ITA NO.31 OF 2013. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDARKHAN N.TUNVAR, 33 TAXMAN.COM.133, HAS ALSO HELD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) DOES NOT DISTINGUISH BETWEEN AMOUNTS PAID AND PAYABLE. IN VIEW OF THE ABOVE JUDGMENTS OF TWO HIGH COURTS, THE LEARNED OFFICER CONTENDED THAT THE APPEAL OF THE REVENUE NEEDS TO BE ALLOWED. 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 HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD., 88 ITR 192. FOLLOWING THE ABOVE FUNDAMENTAL RULE DECLARED BY THE HONBLE SUPREME COURT, WE HAVE TO FOLLOW THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT, 5 ITA NO.1372 /MDS/2013 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. ACCORDINGLY, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) IN THE PRESENT CASE. THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 6. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPH OLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) O N THIS ISSUE AND REJECT THE GROUNDS RAISED BY THE REVENUE. 7. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS T HAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOW ING RELIEF OF ` 3,80,075/- TOWARDS LAND LEVELLING EXPENSES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT N OTICED THAT ASSESSEE HAS DEBITED ` 15,20,300/- IN THE PROFIT AND LOSS ACCOUNT TOWARDS SAND CHARGES. THE ASSESSEE WAS REQ UIRED TO PRODUCE EVIDENCE IN SUPPORT OF THE SAID EXPENDIT URE. BUT THE ASSESSEE DID NOT COMPLY WITH THE REQUEST OF THE ASSESSING OFFICER. THEREFORE IN THE ABSENCE OF ANY PROPER EVIDENCES FURNISHED BY THE ASSESSEE, 50% OF THE CHA RGES AMOUNTING TO ` 7,60,150/- WAS DISALLOWED BY THE ASSESSING OFFICER. ON APPEAL, COMMISSIONER OF INCOME TAX (APP EALS) CONSIDERING THE SUBMISSIONS OF ASSESSEE DELETED 50% OF 6 ITA NO.1372 /MDS/2013 ` 7,60,150/- AND THE BALANCE 50% IS DISALLOWED AGAINS T WHICH THE REVENUE IS IN APPEAL BEFORE US. 8. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT ASSESSE E HAS NOT PRODUCED ANY EVIDENCE FOR HAVING INCURRED A NY EXPENSES AND THEREFORE ASSESSING OFFICER WAS RIGHT IN DISALLOWING 50% OF THE SAID EXPENSES. THE COMMISSIO NER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN FURTHER RE DUCING THE EXPENSES TO 50% 9. COUNSEL FOR THE ASSESSEE RELIES ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 10. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES. THE ASSESSING OFFICER DISALLOWED 50% OF THE SAND EX PENSES STATING THAT ASSESSEE HAS NOT PRODUCED PROPER EVIDE NCE IN SUPPORT OF THE EXPENSES. THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESS EE WHERE THE ASSESSEE SUBMITTED THAT EVIDENCES WERE PR ODUCED AND THESE EXPENSES WERE INCURRED FOR LEVELLING THE ACCESS ROAD TO A PROPERTY WHICH WAS SOLD FROM WHICH COMMIS SION INCOME WAS ALSO RETURNED BY THE ASSESSEE. THE 7 ITA NO.1372 /MDS/2013 COMMISSIONER OF INCOME TAX (APPEALS) ALSO CONSIDERE D THAT INVOICES ARE SELF-MADE. CONSIDERING THESE SUBMISSI ONS, THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO 50% OF ` 7,60,150/- TO ` 3,80,075/-. ON READING OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WE DO NOT FIND ANY GOOD REASON TO INTERF ERE WITH THE SAME. THE ORDER OF THE COMMISSIONER OF INCOME T AX (APPEALS) ON THIS ISSUE IS SUSTAINED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 13 TH DAY OF FEBRUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 13 TH FEBRUARY, 2015 SOMU 12 32 / COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .