Asst.CIT, Circle 1, Nashik V. Fortuna Engineering Pvt. Ltd., Nashik

ITA 1387/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6725 (ITAT-PUNE)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 01-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1387/PN/2013 (ASSESSMENT YEAR : 2009-10) ACIT CIRCLE-1, NASHIK .. APPELLANT VS. FORTUNA ENGINEERING PVT. LTD., E-109, MIDC, AMBAD, DIST : NASHIK-422010 .. RESPONDENT PAN NO.AAACF2767Q ASSESSEE BY : SHRI C.H. NANIWADEKAR REVENUE BY : SHRI S.P. WALIMBE DATE OF HEARING : 30-04-2014 DATE OF PRONOUNCEMENT : 01-05-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 25- 04-2013 OF THE CIT(A)-I, NASHIK RELATING TO ASSESSM ENT YEAR 2009-10 2. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A)- I, NASHIK WAS JUSTIFIED IN DELETING THE ADDITION ON A CCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION OF PF OF RS.47,625. 2.1 FACTS OF THE CASE IN BRIEF, ARE THAT THE ASSESS ING OFFICER MADE ADDITION OF RS.47,625/- ON ACCOUNT OF DELAYED PAYMENT OF EMPLOY EES CONTRIBUTION TO PF BEYOND DUE DATE AS PER P.F. ACT SINCE THE PAYMENT H AS BEEN MADE ON 16-06- 2008 AS AGAINST THE DUE DATE OF PAYMENT OF 15-06-20 08. 2 2.2 BEFORE CIT(A) IT WAS ARGUED THAT THE PAYMENT HA S BEEN MADE WITHIN THE GRACE PERIOD OF 5 DAYS ALLOWED UNDER THE RELEVANT A CT, THEREFORE, NO DISALLOWANCE IS CALLED FOR. IT WAS FURTHER ARGUED THAT SINCE THE PAYMENT HAS BEEN MADE BEFORE THE DUE DATE OF FILING OF THE RETU RN U/S.139(1) NO DISALLOWANCE IS CALLED FOR IN VIEW OF VARIOUS DECI SIONS. 2.3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF CIT VS. AMI LTD. REPORTED IN 321 ITR 508 DELETED THE ADDITI ON. 2.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 3. AFTER HEARING BOTH THE SIDES, WE FIND NO INFIRMI TY IN THE ORDER OF THE CIT(A). THE COORDINATE BENCHES OF THE TRIBUNAL ARE TAKING THE CONSISTENT VIEW THAT EMPLOYEES CONTRIBUTION TOWARDS PF & ESIC , IF PAID BEFORE THE DUE DATE OF FILING OF THE RETURN, ARE ALLOWABLE AS DEDU CTION AND NO DISALLOWANCE CAN BE MADE. WE FIND AN IDENTICAL ISSUE HAD COME UP BE FORE THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF GHATGE PATIL TRANSPO RTERS VS. ACIT VIDE ITA NO.340 AND 341/PN/2010 FOR A.YRS. 2003-04 AND 2004- 05. 3.1 WE FIND THE TRIBUNAL VIDE ORDER DATED 29-07-201 1 HAS DISCUSSED THE ISSUE AT PARA 9 AND 10 OF THE ORDER AND UPHELD THE ORDER OF THE LD.CIT(A) IN DELETING THE ADDITION BY OBSERVING AS UNDER : 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS, THE AFORESAI D GROUND IS DISPOSED OFF AS UNDER. IN SO FAR AS THE EMPLOYERS CONTRI BUTION TOWARDS ESI, PF AND PENSION FUND IS CONCERNED, THE SAME HAVING BEEN PAID BEFORE THE DUE DATE AFTER FILING OF THE RETURN UNDER SECTION 13 9(1) OF THE ACT, IT IS ALLOWABLE IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA). SO FAR AS EMPLOYEES CONTRIBUTI ON TOWARDS ESI, PF AND PENSION FUND IS CONCERNED, HERE ALSO, WE FIND THAT OUR CO-ORDINATE BENCH IN THE CASE OF JASRA GRAPHICS P LTD. (SUPRA), FOLLOWING THE RA TIO OF THE HONBLE DELHI HIGH COURT IN THE CASE OF AIMIL LTD. (SUPRA) HAS UPHEL D THE PLEA OF THE ASSESSEE. 3 SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL, FOLLO WING THE DECISION OF OUR CO- ORDINATE BENCH, THE ASSESSEE HAS TO SUCCEED ON THIS ASPECT ALSO. 10. BEFORE PARTING, WE MAY REFER TO A PLEA RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THERE IS A DISTINCTI ON BETWEEN THE EMPLOYERS CONTRIBUTION TOWARDS PF, ESI AND PENSION FUND AND THA T OF THE EMPLOYEES CONTRIBUTION IN SO FAR AS ITS ALLOWABILITY IS CONCERNE D. IT HAS BEEN POINTED OUT THAT THE PROVISIONS OF SECTION 43B DO NOT APPLY WHILE EVALUATING THE ALLOWABILITY OF EMPLOYEES CONTRIBUTION AND THAT SUCH DISTINCTION H AS BEEN NOTED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GODA VARI (MANNAR) SAHAKARI SAKHAR KARKHANA LTD. 212 CTR 384 (BOM). THE AFORESAI D PLEA OF THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS OPPOSED BY THE LEARNED COUNSEL FOR THE ASSESSEE BY POINTING OUT THAT THE JUDGMENTS OF THE HON BLE DELHI HIGH COURT IN THE CASE OF AIMIL LTD. (SUPRA) AND ALSO THAT OF THE HO NBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LAKHANI RUBBER WORKS (SUPRA) ARE DIRECTLY ON THE POINT OF DEDUCTIBILITY OF EMPLOYEES CONTRIBUTIONS TO WARDS PF/ESI AND THE SAME ARE BASED ON THE RATIO OF THE JUDGMENT RENDERED BY T HE HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA). THE PLEA SE T-UP BY THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS BEEN CONSIDERED BY US AND THAT THE SAME DOES NOT HELP THE CASE OF THE REVENUE IN THE PRESENT CASE. FIRSTLY, THE DISTINCTION SOUGHT TO BE MADE OUT ON THE BASIS OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODAVARI (MANNAR) SAHAKARI SAKH AR KARKHANA LTD. (SUPRA) IS MISPLACED. THE QUESTION BEFORE THE HONBLE HIGH COU RT WAS AS TO WHETHER THE TRIBUNAL WAS RIGHT IN LAW IN DIRECTING TO ALLOW THE CLAIM IN RESPECT OF DELAYED PAYMENT OF PF, IF IT HAS BEEN PAID UPTO THE DATE OF FILING OF THE RETURN OF INCOME, IGNORING THE FACT THAT AMENDMENT TO THE PROVISIONS OF SECTION 43B WAS MADE WITH EFFECT FROM THE ASSESSMENT YEAR 2004-05 AND PRIOR TO THAT PERIOD, SUCH CONTRIBUTION WAS TO BE ALLOWED ONLY WHEN THE SAME IS P AID BEFORE THE DUE DATE OF EFFECTIVE MONTH. THE HONBLE BOMBAY HIGH COURT H ELD THAT THE OMISSION OF THE SECOND PROVISO TO SECTION 43B OF THE ACT BY THE F INANCE ACT, 2003 DID NOT OPERATE RETROSPECTIVELY AND, THEREFORE, IT DID NOT C OVER THE PERIODS PRIOR TO ASSESSMENT YEAR 2004-05. QUITE CLEARLY, THIS ASPECT HAS B EEN SUBSEQUENTLY REVERSED BY THE HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD.(SUPRA). IN OUR VIEW, THE POINT SOUGHT TO BE MADE OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BASED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODAVARI (MANNAR) SAHAKARI SAKHAR KARKHANA LTD. IS MISPLACED AND SUCH A SITUATION HAS NOT BEEN DEALT WITH BY THE HONBLE HIGH COURT. MOREOVER, OUR CO-ORDINATE BENCH IN THE CASE O F JASRA GRAPHICS P LTD (SUPRA) HAS ALREADY FOLLOWED THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF AIMIL LTD. (SUPRA) WHICH HAD DEALT WITH T HE ALLOWABILITY OF AMOUNTS RELATING TO EMPLOYEES CONTRIBUTION TOWARDS PF AND ES I. THE HONBLE DELHI HIGH COURT IN THE CASE OF AIMIL LTD. (SUPRA) SPECIFICALLY D EALT WITH SUCH AMOUNTS AND HELD THAT THE SAME WERE ALLOWABLE IF PAID BEFORE THE DUE DATE OF FILING OF THE RETURN, FOLLOWING THE RATIO OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA). NOTABLY, SIMILAR A SPECT HAS BEEN CONSIDERED BY THE HONBLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF LAKHANI RUBBER WORKS (SUPRA). UNDER THESE CIRCUMSTANCES, WHERE PRECEDENTS OF HIGHER COURT DIRECTLY ON THE POINT ARE AVAILABLE WITH NO C ONTRARY DECISION THEREOF, WE THEREFORE FIND NO REASONS TO ACCEPT THE PLEA SET-UP B Y THE LEARNED DEPARTMENTAL REPRESENTATIVE. IN THE RESULT, FOLLOWING THE JUDICIAL DISCIPLINE, WE CONCUR WITH THE DECISION OF OUR CO-ORDINATE BENCH IN THE CASE OF JASRA GRAPHICS P. LTD., (SUPRA) AND HOLD THAT EVEN EMPLOYEES CONTRIBUTION TO WARDS PF/ESI AND PENSION FUND WHICH ARE PAID BEFORE THE DUE DATE OF F ILING OF THE RETURN ARE ALLOWABLE. 11. THUS, THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ASPECT IS REVERSED AND THE GROUND OF APPEAL TAKEN BY T HE ASSESSEE IS ALLOWED. 4 3.2 SINCE THE ASSESSEE IN THE INSTANT CASE HAS ADMI TTEDLY PAID THE EMPLOYEES CONTRIBUTION TO PF BEFORE THE DUE DATE OF FILING OF THE RETURN U/S.139(1), THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE COORDINATE BENCH OF THE TRIBUNAL CITED (SUPRA) WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, THE SAME IS UPHELD AND THE GRO UND RAISED BY THE REVENUE IS DISMISSED. 4. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UN DER : 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD.CIT(A)- I, NASHIK WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 9,62,829/- TOTAL INCOME U/S.40(A)(IA) ON ACCOUNT OF NON-DEDUCTION OF TDS U/S. 194C. 4.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON SBI FACTORS AND COMMERCIAL SERVICES PVT. LTD . HE OBSERVED THAT THE ASSESSEE HAS PAID TOTAL AMOUNT OF RS.69,07,280/- TO M/S. SBI FACTORS AND COMMERCIAL SERVICES PVT. LTD. OUT OF WHICH TDS WAS DEDUCTED ON THE AMOUNT OF RS.59,44,451/-. NO TDS HAS BEEN DEDUCTED ON THE REMAINING AMOUNT OF RS.9,62,829/-. HE, THEREFORE, ASKED THE ASSESSEE T O EXPLAIN AS TO WHY NO TAX HAS BEEN DEDUCTED ON THE ABOVE AMOUNTS U/S.194A OF THE INCOME TAX ACT. IN RESPONSE TO THE SAME THE ASSESSEE SUBMITTED AS UNDE R : 'THE COMPANY HAS AN ARRANGEMENT [CALLED 'BILL (DEBT ) PURCHASE'] WITH SBI FACTOR AND COMMERCIAL SERVICE PVT. LTD. THE CHARGES PAID TO SBI FACTORS &, COMMERCIAL SERVICES LTD ARE FOR BILL DISCOUNTING OF SALES INVOICES ON THE BASIS OF BILLS OF EXCHANGE. THE COMPANY HAD MERELY DISCOU NTED THE BILL OF EXCHANGE FOR EARLY RECOVERY OF SALE PROCEEDS. CBDT CIRCULAR NO. 65DATED 02.09.71 (COPY ENCLOSED AS ANNEXURE IIIA) WHEREIN IT IS EXPLAINED THAT TDS PROVISION ARE NOT APPLICABLE FOR SUCH TYPE OF BILL PURCHASE ARRANGEME NT. INCOME EARNED BY THE PURCHASE OF BILL I.E DIFFERENCE BETWEEN THE BILL AM OUNT AND PRICE PAID BY THE PURCHASER FOR THE BILL IS NOT AN INTEREST INCOME LI ABLE TO TDS U/S.L94AAS PER THE SAID CIRCULAR. SECONDLY IN ANY CASE THIS BEING BILL DISCOUNTING FACILITY THE DISCOUNTING CHARGES ARE NOT COVERED BY THE DEFINITI ON OF INTEREST GIVEN U/S.2(28A) INCOME TAX ACT. UNLIKE DEFINITION OF, ' INTEREST' U/S.2(7) OF THE INTEREST TAX ACT SECTION 2(28A) OF THE INCOME TAX ACT DO ES NOT SPECIFICALLY INCLUDE DISCOUNTING CHARGES ON BILLS OF EXCHANGE. FOR TH IS PROVISION WE RELY ON THE ITAT INDORE BENCH DECISION BEARING ITA .NO.398/IN D/2009 (COPY ENCLOSED AS ANNEXURE III-B). BASED ON VARIOUS DECISIONS IT WAS HELD THAT 'DISCOUNTING CHARGES ON THE BILLS OF EXCHANGE IS NOT IN T HE NATURE OF INTEREST'. 5 AS THE DEBTORS ARE PURCHASED BY SBI FACTORS & COMMERCIAL SER VICES LTD. WHICH ARE REALIZED AFTER SOME TIME, THE DIFFERENCE BETWEEN INVOICE VALUE AND AMOUNT RECEIVED FROM SBI FACTORS CANNOT TAKE COLOUR OF IN TEREST. UNDER THESE CIRCUMSTANCES (IN OUR OPINION) THE PROVISION OF SECTION 40(A)(IA) SIMPLY DO NOT GET TRIGGERED EVEN IF TDS IS NOT MADE. HOWEVER W E WOULD LIKE TO INFORM THAT, TAKING A CAUTIOUS VIEW, WE HAVE DEDUCTED TDS OF RS.13,47 ,023 ON THE DISCOUNTING CHARGES AGGREGATING TO RS.59,44,451/- AND PAID T HE SAME TO GOVERNMENT TREASURY ON 06-05-2009 (COPY OF PAID CHALLANS AR E ENCLOSED AS ANNEXURE-IIIC. KINDLY NOTE THAT TDS OF RS.13,47,023/- WAS MA DE IN THE MONTH OF MARCH 2009 & THEREFORE IN THE TERMS OF PROVIS ION OF THE THEN SECTION 40(A)(IA), NO DISALLOWANCE IS CALLED FOR IF THE PAYMENT OF TD S IS MADE PRIOR TO EXPIRY OF TIME PRESCRIBED U/S.139(1). HENCE IN ANY CASE WI THOUT PREJUDICE TO OUR CLAIM THAT ACTUALLY NO TDS (PROVISION OF SECTION 194 A) IS REQUIRED TO BE MADE AND NO DISALLOWANCE U/S.40(A)(IA) IS CALLED FOR, THE AMO UNT DISALLOWED U/S.40(A)(IA) CANNOT EXCEED THE SUM OF RS.9,62,829/- ON WHICH NO TDS IS MADE AND PAID. 5. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE ON THE GROUND THA T THE ASSESSEE ITSELF HAS DEDUCTED THE TDS ON THE AMOUNTS OF RS.59,44,451/- T REATING THE SAID AMOUNT AS PAYMENT OF INTEREST. THE ASSESSEE HAS ALSO PAID TD S TO THE CREDIT OF GOVERNMENT ACCOUNT AND FILED TDS RETURN IN FORM NO. 26Q. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE HAS MADE PAYMENT TO SBI FACTORS AND COMMERCIAL SERVICES PVT. LTD. WHICH IS NBFC IN NATU RE OF INTEREST. THE ASSESSEE HAS NOT DISCOUNTED THE BILL WITH ANY BANK, THEREFORE, THE ASSESSEE WAS LIABLE TO MAKE THE DEDUCTION U/S.194A FOR MAKING PA YMENT TO M/S. SBI FACTORS AND COMMERCIAL SERVICES PVT. LTD. REJECTING THE VA RIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND OBSERVING THAT THE ASSESSEE HAS NOT DEDUCTED THE TDS ON THE PAYMENT OF RS.9,62,829/- U/S.194A OF THE INCOME TAX ACT THE ASSESSING OFFICER DISALLOWED THE SAME U/S.40(A)(IA) OF THE IN COME TAX ACT. 6. IN APPEAL THE LD.CIT(A) DELETED THE DISALLOWANCE BY HOLDING AS UNDER : 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE APPELLANT CO MPANY DRAWS BILLS OF EXCHANGE ON ITS CUSTOMERS AND THESE BILLS ARE DISCOUNTED BY THE APPELLANT FROM SBI FACTORS AND COMMERCIAL SERVICES PVT. LTD. AND AFT ER DEDUCTING DISCOUNTING CHARGES THE AMOUNT IS TRANSFERRED TO THE BANK ACCOUNT OF THE APPELLANT. THE RELATIONSHIP IS THAT OF BILL DISCOUNTING AND BY NO STRE TCH OF IMAGINATION CAN IT BE TERMED AS INTEREST. THE ASSESSEE DENIES ANY LIABILITY U/S. 194A. CONSEQUENTLY, THERE IS NO QUESTION OF MAKING ANY DISALLOWANCE U/S.40( A)(IA). ALTERNATIVELY, 6 THE ENTIRE PAYMENT OF RS.69,07,280/- HAS BEEN PAID BE FORE THE END OF THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR AND THERE IS NO OUTSTANDING ON THE CLOSURE OF THE PREVIOUS YEAR. THEREFORE, THE DISALLOW ANCE OF RS.9,62,829/- IS UNWARRANTED AND IS DIRECTED TO THE DELETED. THIS GRO UND OF APPEAL IS ALLOWED. 6.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RELI ED ON THE ORDER OF THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE HAS ALREADY DEDUCTED TAX ON PART OF THE PAYMENT, THEREFORE, IT CANNOT SAY THAT THE PROVISIONS OF SECTION 194A ARE NOT APPLICABLE TO THE REMAINING AMOUNT. THE AS SESSEE HAS NOT DISCOUNTED THE BILL WITH ANY BANK. THE VARIOUS DECISIONS RELI ED ON BY THE ASSESSEE BEFORE THE CIT(A) ARE NOT APPLICABLE TO THE FACTS OF THE P RESENT CASE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 8. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND WHILE SUPPORTING THE ORDER OF THE CIT(A) RELIED ON THE DECISION OF THE K OLKATA BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M.K.J ENTERPRISES LTD. REFE RRING TO THE SAID DECISION THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO CBDT CIRCULAR NO.65 DATED 02-09-1971 WHICH READS AS UNDE R : I AM DIRECTED TO INVITE A REFERENCE TO THE BOARDS CIRCULAR NO. 48, DATED 7 TH NOVEMBER, 1970 [F. 275/195/70-ITJ]. THE BOARD HAS BE EN REQUESTED TO RECONSIDER THE VIEWS GIVEN IN THAT CIRCULAR. AFTER A CAREFUL EXAMINATION OF THE LEGAL POSITION THE BOARD IS OF THE VIEW THAT TO, THE FOLLOWING EXTENT THE EARLIER VIEWS NEED A MODIFICATION. WHERE THE SUPPLIER OF GOOD S MAKES OVER THE USANCE BILL/HUNDI TO HIS BANK WHICH DISCOUNTS THE SAME AND CRE DITS THE NET AMOUNT TO THE SUPPLIERS ACCOUNT STRAIGHTAWAY WITHOUT WAITING F OR REALIZATION OF THE BILL ON DUE DATE, THE PROPERTY IN THE USANCE BILL/HUNDI PASSES ON TO THE BANK AND THE EVENTUAL COLLECTION ON DUE DATE IS A RECEIPT BY THE BANK ON ITS OWN BEHALF OF THE SUPPLIER. FOR SUCH CASES OF IMMEDIATE DISCOUNTING THE N ET PAYMENT MADE BY THE BANK TO THE SUPPLIERS IN THE NATURE OF A PRICE PAID F OR THE BILL. SUCH A PAYMENT CANNOT TECHNICALLY BE HELD AS INCLUDING INTEREST AND THEREFORE NO TAX NEED BE DEDUCTED AT SOURCE FROM SUCH PAYMENTS BY THE BANK. FUR THER, THE BUYER NEED NOT DEDUCT ANY TAX FROM THE PAYMENT MADE BY HIM ON DUE DATE TO THE BANK IN RESPECT OF SUCH DSCOUNTED BILL INASMUCH AS THESE PAYMENT S ARE TO A BANK OR A BANKING COOPERATIVE SOCIETY, CONFIRMING TO THE EXEMP TION GRANTED BY SECTION 194A(3)(III)(A) OF THE INCOME-TAX ACT, 1961. 7 8.1 REFERRING TO THE SAID ORDER HE DREW THE ATTENTI ON OF THE BENCH TO PARA 7 OF THE ORDER WHERE AN IDENTICAL ISSUE HAS BEEN DECI DED IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL FILED BY THE REVENUE. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSESSING OFFI CER IN THE INSTANT CASE MADE ADDITION OF RS.9,62,829/- U/S.40(A)(IA) ON THE GROU ND THAT ASSESSEE HAS NOT DEDUCTED TDS U/S.194A ON ACCOUNT OF SUCH PAYMENT TO SBI FACTORS AND COMMERCIAL SERVICES PVT. LTD. ACCORDING TO THE ASSE SSING OFFICER SUCH PAYMENT IS IN NATURE OF INTEREST TO NBFC AND THEREF ORE THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S.194A. IT IS ALSO THE C ASE OF THE REVENUE THAT OUT OF THE TOTAL PAYMENT OF RS.69,07,280/- THE ASSESSEE HA S DEDUCTED TAX ON THE AMOUNT OF RS.59,44,451/- AND SUCH TAX HAS BEEN PAID TO THE CREDIT OF THE CENTRAL GOVT. AND THE ASSESSEE ITSELF HAS FILED FOR M NO.26Q. THEREFORE, THERE IS NO REASON AS TO WHY THE ASSESSEE SHOULD NOT DEDU CT TAX AT SOURCE ON THE REMAINING AMOUNT OF RS.9,62,829/-. WE FIND THE LD. CIT(A) DELETED THE DISALLOWANCE ON THE GROUND THAT SUCH PAYMENT TO SBI FACTORS AND COMMERCIAL SERVICES PVT. LTD. IS FOR BILL DISCOUNTING AND THE SAME CANNOT BE TERMED AS INTEREST AND THEREFORE THE ASSESSEE IS NOT LIABLE T O DEDUCT TAX U/S.194A. ALTERNATIVELY, THE LD.CIT(A) HAS ALSO DELETED THE A DDITION ON THE GROUND THAT NO AMOUNT WAS PAYABLE AT THE END OF THE YEAR AND TH EREFORE THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. 9.1 SO FAR AS THE APPLICABILITY OF PROVISIONS OF SE CTION 40(A)(IA) IN A CASE WHERE NO AMOUNT IS PAYABLE AT THE END OF THE YEAR I S CONCERNED, THE SAME HAS TO BE DECIDED AGAINST THE ASSESSEE IN VIEW OF THE CONS ISTENT VIEW OF THE COORDINATE BENCHES OF THE TRIBUNAL WHERE IT HAS BEE N HELD THAT PROVISIONS OF 8 SECTION 40(A)(IA) ARE APPLICABLE EVEN IF NO AMOUNT IS PAYABLE AT THE END OF THE YEAR ( VIDE SHRI VINAY ASHWINIKUMAR JONEJA VS. ITO VIDE ITA NO.1514/PN/2012 ORDER DATED 22-10-2013). HOWEVER, THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE FINDINGS GI VEN BY THE LD.CIT(A) THAT THE ASSESSEE COMPANY DRAWS BILLS OF EXCHANGE ON ITS CUSTOMERS AND THESE BILLS ARE DISCOUNTED BY THE ASSESSEE FROM SBI FACTORS AND COMMERCIAL SERVICES PVT. LTD. AND AFTER DEDUCTING DISCOUNTING CHARGES THE AM OUNT IS TRANSFERRED TO THE BANK ACCOUNT OF THE ASSESSEE AND THEREFORE THE RELA TIONSHIP IS THAT OF BILL DISCOUNTING AND BY NO STRETCH OF IMAGINATION IT CAN BE TERMED AS INTEREST. 9.2 WE FIND THE KOLKATA BENCH OF THE TRIBUNAL IN TH E CASE OF M.K.J. ENTERPRISES (SUPRA) WHILE DECIDING SOMEWHAT SIMILAR ISSUE HAS OBSERVED AS UNDER : 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH F ACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE IS A DEL CREDERE AGENT OF MUKUND LTD. MUKUND LTD. IS A COMPANY PRODUCING STEEL AND ASSESSEE IS SELLING STEEL PRODUCTS PRODUCED BY MUKUND LTD. AS A DEL CREDER E AGENT. FROM THE FACTS OF THE CASE, IT IS CLEAR THAT THE SALE BILLS ARE ISSUED B Y MUKUND LTD. IN THE NAME OF THE CUSTOMERS BUT ON THEM IT IS MENTIONED THAT THE PA YMENT FOR BILL IS GUARANTEED AND UNDER-WRITTEN BY THE ASSESSEE MKJ ENTERP RISES LTD., AS PER DEL CREDERE ARRANGEMENT/AGREEMENT. AS PER THIS ARRANGEMEN T, THE PAYMENT TO MUKUND LTD. IS TO BE MADE BY THE ASSESSEE AFTER COLLECTI NG FROM THE CLIENTS, WHO HAVE PURCHASED STEEL OF MUKUND LTD. THROUGH ASSESSEE. IN SUCH CIRCUMSTANCES, THE BILL OF PURCHASE FOR WHICH PAYMENT IS TO BE RECEI VED BY THE ASSESSEE ARE TO BE DISCOUNTED WITH A FINANCE FROM LALJI FINANCIAL. W HEN THE BILLS ARE DISCOUNTED, M/S. LALJI FINANCIAL PASSED THE SAME TO THE ASSESSEE AFTER DEDUCTING ITS DISCOUNTING/FACTORING CHARGES. THESE DISCOUNTING/FACTOR ING CHARGES ARE CLAIMED BY THE ASSESSEE AS EXPENDITURE. WHETHER THIS EXPENDITURE OF DISCOUNTING/FACTORING CHARGES IS IN THE NATURE OF INTE REST OR NOT? THE PROVISION OF SECTION 2(28A) OF THE ACT DEFINES THE DEFINITION O F INTEREST, WHICH READS AS UNDER: 28A. INTEREST MEANS INTEREST PAYABLE IN ANY MANNER IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED (INCLUDING A DEPOSIT, CLA IM OR OTHER SIMILAR RIGHT OR OBLIGATION) AND INCLUDES ANY SERVICE FEE OR OTHER C HARGE IN RESPECT OF THE MONEYS BORROWED OR DEBT INCURRED OR IN RESPECT OF ANY CRED IT FACILITY WHICH HAS NOT BEEN UTILISED. AS PER SECTION 2(28A) OF THE ACT INTEREST PAYABLE IN A NY MANNER IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED INCLUDES ANY SERV ICE, FEE OR OTHER CHARGES IN RESPECT OF MONEYS BORROWED OR DEBT INCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED. IT IS, T HUS, SEEN THAT INTEREST EITHER MEANS SUM PAYABLE IN RESPECT OF ANY MONEY BORROWED OR DEBT INCURRED. IN THE INSTANT CASE, IT WAS NOT A CASE OF DEBT INCURRED OR MO NEYS BORROWED. IN FACT, IT 9 WAS A CASE WHERE THE ASSESSEE HAD MERELY DISCOUNTED SALE CO NSIDERATION RECEIVABLE ON SALE OF GOODS. IT WAS NOT A CASE WHERE AN Y MONEY HAD BEEN BORROWED OR DEBT HAD BEEN INCURRED. IT WAS ALSO NOT A CASE WHERE ANY SERVICE, FEE OR EITHER CHARGE HAD BEEN PAID IN RESPECT OF MON EY BORROWED OR DEBT INCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAD NOT BEEN UTILIZED. IT WAS NOT A CASE WHERE SECTION 2(28A) OF THE ACT COULD BE I NVOKED. FURTHER, WE CAN DEAL WITH THIS ISSUE FROM ANOTHER ANGLE I.E. THE INTER EST TAX ACT, 1974. AS PER SECTION 2(7) OF THE INTEREST TAX ACT, INTEREST MEANS I NTEREST ON LOANS AND ADVANCES MADE IN INDIA AND INCLUDES - (A) COMMITMENT CHARGES ON UNUTILIZED PORTION OF ANY CREDIT SANCTIONED FOR BEING AVAILED O F IN INDIA; AND (B) DISCOUNT ON PROMISSORY NOTES AND BE DRAWN OR MADE IN INDIA. THU S, WHERE THE LEGISLATURE WAS CONSCIOUS OF THE FACT THAT EVEN THE DISC OUNT OF BILLS OF EXCHANGE WAS TO BE INCLUDED WITHIN THE DEFINITION OF INTEREST, THE SAME WAS BASICALLY SO PROVIDED FOR. HOWEVER, UNDER THE SCHEME OF THE ACT, THE WORD INTEREST DEFINED UNDER SECTION 2(28A) DOES NOT INCLUDE THE DISCOUNTING CHARGES ON DISCOUNTING OF BE. THOUGH THE CIRCULAR NO. 65 WAS RENDERED IN RE LATION TO DEDUCTION OF TAX UNDER SECTION 194A OF THE ACT, YET IN RESPECT OF PAY MENT TO A RESIDENT, THE SAME WOULD BE RELEVANT EVEN FOR THE PURPOSE OF CONSIDERING WHETHER THE DISCOUNT SHOULD BE TREATED AS INTEREST OR NOT. THE CBDT HAD OP INED THAT WHERE THE SUPPLIER OF GOODS MAKES OVER THE USANCE OF BILL/HUNDI T O HIS BANK WHICH DISCOUNTS THE SAME AND CREDITS THE NET AMOUNT TO THE SUP PLIERS ACCOUNT STRAIGHTAWAY WITHOUT WAITING FOR REALIZATION OF THE BILL ON DUE DATE, THE PROPERTY IN THE USANCE OF BILL/HUNDI PASSES ON TO THE BANK AND T HE EVENTUAL COLLECTION ON DUE DATE IS A RECEIPT BY THE BANK ON ITS OWN BEHALF AND NOT ON BEHALF OF THE SUPPLIER. FOR SUCH CASES OF IMMEDIATE DISCOUNTING, THE N ET PAYMENT MADE BY THE BANK TO THE SUPPLIER IS IN THE NATURE OF A PRICE PAID FOR THE BILL. SUCH PAYMENT CANNOT TECHNICALLY BE HELD AS INCLUDING ANY INTEREST AND, THEREFORE, NO TAX NEED TO BE DEDUCTED AT SOURCE FROM SUCH PAYMENT BY THE BAN K. 9.3 RESPECTFULLY FOLLOWING THE DECISION OF THE KOLK ATA BENCH OF THE TRIBUNAL CITED (SUPRA) AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) WE FIND NO INFIRMITY IN HIS ORDER HOLDING THAT THE AMO UNT PAID TO SBI FACTORS AND COMMERCIAL SERVICES PVT. LTD. IS TOWARDS BILL DISCO UNTING AND THE SAME CANNOT BE TERMED AS INTEREST. ACCORDINGLY, THE ORDER OF L D.CIT(A) ON THIS ISSUE IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISM ISSED. 10. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS U NDER : 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD.CIT(A)- I, NASHIK WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 97,411/- ON ACCOUNT OF EXPENSES IN NATURE OF INTEREST PERTAINING TO EARLIER P ERIOD. 10.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSE SSEE HAS PAID RS.97,411/- ON 29-04-2008 AS INTEREST TO OTHERS WHICH PERTAINS TO THE EARLIER YEAR. THE AUDITOR IN HIS AUDIT REPORT ALSO HAS POINTED OUT TH E ABOVE EXPENDITURE AS 10 PERTAINING TO THE PRIOR PERIOD. HE, THEREFORE, ASK ED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE DISALLOWED. IN RESPONSE TO THE SAME THE ASSESSEE REPLIED AS UNDER : THE COMPANY HAS PURCHASED MACHINERY (INSPECTION EQUIP MENT) FROM ACCURATE ENGINEERS ON INSTALMENT BASIS. HOWEVER, THE TERMS OF IN STALMENT AND RATE OF INTEREST WAS NOT FIXED TILL 31-03-2008. THE PAYMENT OF INTEREST ALONG WITH INSTALMENT DUE WAS PAID ON AS PRIOR PERIOD EXPENSES WHIL E COMPUTING TAXABLE INCOME. FURTHER, IT IS TO EXPLAIN THAT EVEN IF THE PROVISION FOR INTEREST MIGHT HAVE BEEN MADE IN F.Y. 2007-08 THE SAME IS NOT ALLOWA BLE EXPENDITURE AS THE TDS WAS NOT DEDUCTED IN THAT YEAR. NOW IN CURRENT Y EAR AS THE ASSESSEE HAS DEDUCTED THE TDS AND PAID THE SAME DURING CURRENT FI NANCIAL YEAR THE SAME IS ALLOWED AS A EXPENDITURE TAKEN INTO CONSIDERATION PR OVISION OF SECTION 40(A)(IA). 11. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND REJECTED THE CLAIM AND MA DE ADDITION OF RS.97,411/- TO THE TOTAL INCOME. WHILE DOING SO, HE OBSERVED T HAT THE ASSESSEE ITSELF HAS ADMITTED THAT IT COULD HAVE MADE PROVISION FOR THE INTEREST PAYABLE TO M/S. ACCURATE ENGINEERS. SINCE THE ASSESSEE HAS NOT DED UCTED THE TDS IT HAS NOT CLAIMED THE SAME AS DEDUCTION IN THE EARLIER ASSESS MENT YEAR. THE ASSESSEE HAS NOT FURNISHED SUFFICIENT REASON AS TO WHY IT HAS NO T CLAIMED THE DEDUCTION IN THE EARLIER ASSESSMENT YEAR. HE ACCORDINGLY MADE THE D ISALLOWANCE. 12. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED AS UND ER : COMPANY HAS INCURRED EXPENSE ON ACCOUNT OF INTEREST O F RS.97,411/- PAID TO ACCURATE ENGINEERS PERTAINING TO THE PERIOD JAN 20 08 TO MARCH 2008. IN ABSENCE OF ANY COMMUNICATION AND FINALIZATION OF TER MS OF REPAYMENT AND RATE OF INTEREST WITH ACCURATE ENGINEERS, THE INTEREST WAS N OT PROVIDED IN THE BOOKS OF ACCOUNT FOR THE FINANCIAL YEAR ENDED ON 31-03-20 08. DURING THE ASSESSMENT YEAR IN QUESTION PERTAINING TO F.Y. 2008-09 THE TERM S WERE FINALIZED AND INTEREST WAS DEBITED IN CURRENT FINANCIAL YEARS PROFIT & LOSS A/C. NECESSARY TDS WAS MADE AND PAID IN F.Y. 2008-09 AND ON THE BASIS OF PROVISIONS OF SEC.40(A0(IA) THE SAME WAS NOT DISALLOWED WHILE COMPUTING TAXABLE INCOME. IGNORING THIS FACT AN ADDITION OF RS. 97,411/- IS M ADE ON ACCOUNT OF EXPENSES PERTAINING TO PRIOR PERIOD. IT WAS ALSO BROUGHT TO THE NOTICE OF LD. A.O. THAT AS THE TERMS WITH THE SUPPLIER WERE NOT FINALISED TILL 31.03.2008, THE COMPANY WAS NOT AWARE OF ITS LIABILITY ON ACCOUNT OF INTERE ST ETC. THE EXPENSES WERE NOT PROVIDED IN THE BOOKS OF ACCOUNTS AND ALSO TDS WAS ALSO NOT MADE. EVEN IF THE PROVISION MIGHT HAVE BEEN MADE IN EARLIER FINAN CIAL YEAR DUE TO NON DEDUCTION OF TDS BY APPLYING PROVISIONS OF SECTION 40 (A)(IA) EXPENSES ARE GOING TO BE DISALLOWED. FURTHER IT WILL BE SEEN THA T THE RATE OF TAX APPLICABLE TO 11 THE COMPANY WILL BE SAME IN A.Y.2008-09 AND 2009-10 . THERE IS NO LOSS OF REVENUE. IN CASE OF CIT VS. VISHNU INDUSTRIAL GASES (DELHI H IGH COURT ITR NO. 229/1988 ENCLOSED AS ANNEXURE I). THE COURT HELD THAT THE QU ESTION AS TO THE YEAR IN WHICH A DEDUCTION IS ALLOWABLE MAY BE MATERIAL WHEN THE RATE OF TAX CHARGEABLE IS DIFFERENT IN DIFFERENT YEARS. THE COU RT OPINED THAT WHERE TAX IS LEVIED AT A UNIFORM RATE, IT IS IMMATERIAL WHETHER THE DEDUCTION IS ALLOWED IN ONE ASSESSMENT YEAR OR ANOTHER. THE TAX DEPARTMENT IS NOT AT LOSS IN ANY EVENT. THE HIGH COURT ALSO OBSERVED THAT THE TAX DE PARTMENT SHOULD RESTRAIN ITSELF FROM RAISING POINTS WHICH DO NOT AFFECT THE TAXABILITY OF THE ASSESSEE OR THE TAX THAT THE DEPARTMENT IS LIKELY TO COLLECT FR OM THE ASSESSEE IN ONE YEAR OR OTHER. IN VIEW OF THIS THE ADDITION MADE ON ACCOUNT OF PRI OR PERIOD EXPENSE MAY PLEASE BE DELETED'. 13. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE DEDUCTION ON THE GROUND THAT THE ASSESSEE HAS D EMONSTRATED BEFORE HIM THAT THE IMPUGNED LIABILITY HAS BEEN CRYSTALLISED DURING THE IMPUGNED ASSESSMENT YEAR AND TDS HAS BEEN MADE DURING THE YEAR, THEREFO RE, IT IS AN ALLOWABLE EXPENDITURE. 13.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND MERIT IN THE SUBMI SSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT EVEN IF THE SAME WAS CLAIMED AS E XPENDITURE IN THE PRECEDING YEAR, THE ABOVE AMOUNT WOULD HAVE BEEN ADDED IN THE PRECEDING YEAR AND THE SAME WOULD HAVE BEEN ALLOWED AS DEDUCTION IN THE IM PUGNED ASSESSMENT YEAR ONLY SINCE TAX HAS BEEN DEDUCTED AT SOURCE DURING T HE IMPUGNED ASSESSMENT YEAR. THEREFORE, THIS IS REVENUE NEUTRAL AND THERE IS NO LOSS TO THE REVENUE. IN THIS VIEW OF THE MATTER, WE FIND NO INFIRMITY IN TH E ORDER OF THE CIT(A) DELETING THE ADDITION. WE ACCORDINGLY UPHOLD THE SAME AND T HE GROUND RAISED BY THE REVENUE IS DISMISSED. 12 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED PRONOUNCED IN THE OPEN COURT ON 01-05-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 01 ST MAY, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, NASHIK 4 CIT-I, NASHIK 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE