ASST CIT 11(3)(2), MUMBAI V. ZINSER TEXTILE SYSTEMS P.LTD, MUMBAI

ITA 139/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3259 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 08-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D PRABHAKAR
• Keywords: Audit objection; Additional evidence; Tax effect
• Section: 143(3); 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 364/MUM/2015 (ASSESSMENT YEAR : 2009-10) M/S.ZINSER TEXTILE SYSTEMS PVT. LTD. 43, DR. V.B. GANDHI MARG, FORT, MUMBAI 400 021 PAN: AAACZ1594R ..... APPELLANT VS. THE DCIT 8(3) AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 .... RESPONDENT ITA NO. 139/MUM/2015 (ASSESSMENT YEAR : 2009-10) [ THE DCIT 8(3) AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ... APPELLANT VS. M/S.ZINSER TEXTILE SYSTEMS PVT. LTD. 43, DR. V.B. GANDHI MARG, FORT, MUMBAI 400 021 PAN: AAACZ1594R .... RESPONDENT APPELLANT BY : SHRI RUSHABH VORA RESPONDENT BY : SHRI D.PRABHAKAR DATE OF HEARING : 17/8/2016 DATE OF PRONOUNCEMENT : 24/08/2016 2 ITA NO. 364&139/MUM/2015 (ASSESSMENT YEAR : 2009-10) ORDER PER G.S.PANNU,A.M: THE CAPTIONED CROSS-APPEALS FILED BY THE ASSESS EE AND REVENUE PERTAINING TO A.Y. 2009-10 ARE DIRECTED AGAINST AN ORDER PASSED BY LD. CIT(A)-15, MUMBAI DATED 31/10/2014, WHICH IN TURN A RISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 26 /04/2013. 2. IN SO FAR AS THE APPEAL OF THE ASSESSEE IS CONSI DERED, THE SOLITARY GROUND OF APPEAL RAISED READS AS UNDER:- 1. THE HON'BLE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.26,46,416!- BEING ROYALTY PAID BY THE APPELLANT U/S 40( A)(I) OF THE ACT ON THE GROUND THAT THE TAX DEDUCTED AT SOUR CE ON THE PAYMENT MADE U/S 195 OF THE ACT HAS BEEN DEPOSITED BEYOND THE TIME PRESCRIBED U/S 200 OF THE ACT. ON THE FACTS AN D CIRCUMSTANCES OF THE CASE AND IN LAW, THE SAID PAYMENT BEING MADE WITHIN THE TIME PRESCRIBED U/S 200 OF THE ACT, OUGHT NOT TO BE DISA LLOWED AS A DEDUCTION. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT ASSESSEE HAD DEBITED AN AMOU NT OF RS.26,46,416/- IN THE P&L ACCOUNT AS ROYALTY CHARGE S PAID TO M/S. OERLIKON TEXTILE GMBH & CO. THE ASSESSING OFFICER HAS FURTHER NOTICED IN PARA 4 OF THE ASSESSMENT ORDER THAT THE ROYALTY CHARGES WERE PAYABLE FOR THE PERIOD APRIL,2008 TO DECEMBER, 2008 RS.2 2,70,442/- AND FOR JANUARY 2009 TO MARCH 2009 RS.3,75,974/-. THE AS SESSING OFFICER FURTHER NOTES THAT THE DUE DATE OF DEPOSIT OF TDS O F RS.2,27,044/- ON THE FIRST DEPOSIT WAS ON 07/01/2009, WHEREAS THE AC TUAL DATE OF PAYMENT WAS 28/04/2009 AND WITH REGARD TO THE SEC OND PAYMENT, THE DUE DATE OF DEPOSIT OF TDS OF RS.37,594/- WAS 31/5/ 2009, WHEREAS THE ACTUAL DATE OF DEPOSIT WAS ON 31/03/2010. ON TH IS BASIS, ASSESSING 3 ITA NO. 364&139/MUM/2015 (ASSESSMENT YEAR : 2009-10) OFFICER CONCLUDED THAT THE TAX DEDUCTED AT SOURCE W AS DEPOSITED BEYOND THE TIME STIPULATED UNDER SECTION 200 OF THE ACT AND, THEREFORE, THE CORRESPONDING EXPENDITURE OF RS.26,46,416/- WA S LIABLE TO BE DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE CARRIED THE AFORESAID DISALLOWANCE BEFORE THE CIT(A) BY POINTIN G OUT THAT BOTH AMOUNTS WERE CREDITED TO THE ACCOUNT OF THE PAYEE ON 31/3/2009 AND, THUS, THE DUE DATE OF DEPOSIT OF TDS INTO GOVERNMEN T TREASURY WAS 31/05/2009. THE ASSESSEE ALSO POINTED OUT THAT DEP OSIT OF TDS OF RS.2,27,044/- WAS MADE ON 28/04/2009 AND THE BALANC E OF RS.37,594/- WAS MADE ON 14/05/2009, TOTALLING TO RS.2,64,638/-. IN THIS MANNER, ASSESSEE POINTED OUT THAT THE ENTIRE AMOUNT OF TDS ON THE ROYALTY PAYMENT OF RS.26,46,416/- STOOD DEPOSITED BEFORE TH E STIPULATED DATE OF 31/5/2009. IN PARTICULAR, WITH RESPECT TO THE D EPOSIT MADE ON 14/05/2009, ASSESSEE POINTED OUT THAT THE REQUISITE TAX CHALLAN EVIDENCED THE SAME, WHEREAS AT THE TIME OF ASSESSME NT PROCEEDINGS, ASSESSEE HAD INADVERTENTLY ANNEXED CHALLAN OF SERV ICE TAX PAYMENT, WHICH WAS DATED 31/3/2010. IN THIS MANNER, ASSESS EE POINTED OUT THAT THE DATE OF 31/3/2010 HAS BEEN WRONGLY NOTED BY TH E ASSESSING OFFICER, WHICH DESERVES TO BE CORRECTED IN VIEW OF THE TAX CHALLAN DATED 14/05/2009 PLACED BEFORE CIT(A). 4. THE CIT(A) CONSTRUED THE TAX CHALLAN OF RS.37,59 7/- DATED 14/05/2009 AS AN ADDITIONAL EVIDENCE, WHICH WAS NOT BEFORE THE ASSESSING OFFICER AND, THEREFORE, HE REFUSED TO ADM IT THE SAME. SECONDLY, WITH RESPECT TO THE DEPOSIT OF TDS OF RS. 2,27,044/-, WITH RESPECT TO THE ROYALTY PAYMENT OF RS.22,70,442/-, T HE CIT(A) REFERRED TO AN OBSERVATION IN FORM 3CD ISSUED BY THE AUDITOR UN DER SECTION 44AB OF THE ACT, WHICH ACCORDING TO HIM, REFLECTED DEFAULT IN PAYMENT OF TDS 4 ITA NO. 364&139/MUM/2015 (ASSESSMENT YEAR : 2009-10) AMOUNT, THEREFORE, HE UPHELD THE ACTION OF THE ASS ESSING OFFICER ON BOTH THE COUNTS. AGAINST SUCH A DECISION OF THE C IT(A), ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE V EHEMENTLY POINTED OUT THAT THE CIT(A) HAS COMPLETELY MISDIREC TED HIMSELF BY REFERRING TO NOTE-5, ATTACHED TO THE TAX AUDIT REPO RT UNDER SECTION 44AB OF THE ACT INASMUCH AS THE SAME RELATED TO PAYMENT OF PROFESSIONAL FEE AND INVOLVED INADMISSIBILITY OF A SUM OF RS.1,17,30 0/- AND THAT IT MAKES NO REFERENCE TO THE TDS ON THE IMPUGNED ROYALTY PAY MENT. IN THIS CONTEXT, OUR ATTENTION WAS INVITED TO COPY OF THE T AX AUDIT REPORT PLACED IN THE PAPER BOOK, IN PARTICULAR TO THE NOTE NO.5 THEREIN, WHICH HAS BEEN REFERRED BY THE CIT(A). SECONDLY, OUR ATT ENTION WAS ALSO INVITED TO THE CHALLAN DATED 14/5/2009 EVIDENCING T HE DEPOSIT OF TDS OF RS.37,594/-, INTO THE GOVERNMENT TREASURY WITH RESP ECT TO THE PAYMENT OF ROYALTY OF RS.3,75,974/-. THEREFORE, ON THIS BA SIS, IT IS SOUGHT TO BE MADE THAT THE ENTIRE AMOUNT OF TDS OF RS.2,64,638/- CORRESPONDING TO THE ROYALTY PAYMENT OF RS.22,70,442/- + RS.3,75,974 /- TOTALLING TO RS.26,46,416/- HAS BEEN PAID BEFORE THE STIPULATED DATE OF 31/5/2009 AND, THEREFORE, NO DISALLOWANCE UNDER SECTION 40(A) (IA) OF THE ACT IS JUSTIFIED. 6. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE HAS NOT CONTROVERTED ANY OF THE FACTUAL MATRIX BROUGHT OUT BY THE LD. REPRESENTATIVE FOR THE ASSESSEE, BUT HAS PLACED RE LIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND FIND THAT THE LOWER AUTHORITIES HAVE COMPLETELY MISDIRECTED T HEMSELVES IN 5 ITA NO. 364&139/MUM/2015 (ASSESSMENT YEAR : 2009-10) MAKING THE IMPUGNED DISALLOWANCES. QUITE CLEARLY, IT IS NOT IN DISPUTE THAT THE TWO ROYALTY PAYMENT OF RS.22,70,442/- AND RS.3,75,974/-, TOTALING TO RS.26,46,416/- HAVE BEEN CREDITED TO AC COUNT OF THE PAYEE ON 31/3/2009 AND, THEREFORE, THE CORRESPONDING TAX DEDUCTED AT SOURCE (TDS) WAS REQUIRED TO BE DEPOSITED INTO THE GOVERN MENT TREASURY ON OR BEFORE 31/05/2009 IN TERMS OF THE PROVISIONS OF THE ACT. THERE IS NO DISPUTE TO THE AFORESAID FACT-SITUATION AS THE SAME HAS NOT BEEN REPUDIATED BY ANY OF THE LOWER AUTHORITIES. IT IS ALSO NOT IN DISPUTE THAT THE CORRESPONDING TDS ON THE SAID PAYMENTS I.E. RS. 2,27,044/- AND RS.37,957/- HAVE BEEN DEPOSITED IN THE GOVERNMENT TREASURY ON 28/04/2009 AND 14/05/2009 RESPECTIVELY, THUS, COMPL YING WITH THE TIME STIPULATION PROVIDED UNDER THE ACT. THEREFORE, INV OKING OF SECTION 40(A)(IA) OF THE ACT IN THE PRESENT CASE IS FACTUAL LY MISPLACED AND DESERVES TO BE SET-ASIDE. WE HOLD SO. 7.1 SO HOWEVER, BEFORE PARTING, WE MAY REFER TO THE STAND OF THE CIT(A) OF NOT TAKING INTO CONSIDERATION THE TAX PAY MENT CHALLAN FURNISHED BY THE ASSESSEE ON THE GROUND THAT THE SA ID CHALLAN WAS NOT BEFORE THE ASSESSING OFFICER AND THUS IT COULD NOT BE ADMITTED AS ADDITIONAL EVIDENCE. IN OUR CONSIDERED OPINION, TH E APPROACH OF THE CIT(A) IS COMPLETELY MISPLACED, INASMUCH AS, THE TA X CHALLAN IS A PART OF THE RECORDS OF THE DEPARTMENT ITSELF AS THE CHALLAN IS MERELY AN ACKNOWLEDGEMENT OF TAXES RECEIVED BY THE DEPARTMENT . THEREFORE, THE CIT(A) OUGHT TO HAVE TAKEN COGNIZANCE OF THE SAME I N AN APPROPRIATE MANNER. EVEN WITH REGARD TO THE OTHER LEG OF THE T DS OF RS.2,27,044/- DEPOSIT, WHILE CIT(A) DID NOT DISPUTE THE DATE OF D EPOSIT BEING 28/04/2009, BUT HE REFERRED TO NOTE NO.5 TO THE NOT ES TO TAX AUDIT REPORT TO JUSTIFY THE DISALLOWANCE. QUITE CLEARLY, THE AFORESAID STAND OF 6 ITA NO. 364&139/MUM/2015 (ASSESSMENT YEAR : 2009-10) THE CIT(A) IS INCOMPREHENSIBLE, BECAUSE THE NOTES T O THE TAX AUDIT REPORT REFERRED BY HIM DO NOT MAKE ANY REFERENCE TO THE TDS ON ROYALTY PAYMENTS. THUS, ON BOTH THE ASPECTS, WE FIND THAT THE STAND OF THE CIT(A) IS UNSUSTAINABLE. 7.2 IN THE RESULT, WE SET-ASIDE THE ORDER OF THE CI T(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS. 26,46,416/- MADE UNDER SECTION 40(A)(IA) OF THE ACT. THUS, APPEAL O F THE ASSESSEE IS ALLOWED. 8. IN SO FAR AS THE CROSS APPEAL OF THE REVENUE IS CONCERNED, THE SOLITARY DISPUTE RAISED BY THE REVENUE RELATES TO T HE ACTION OF THE CIT(A) IN DELETING AN ADDITION OF RS.26,46,416/- MADE BY T HE ASSESSING OFFICER ON DETERMINATION OF ARM'S LENGTH PRICE OF THE ROYAL TY PAYMENTS. 9. THE CBDT VIDE CIRCULAR NO.21/2015 DATED 10/12/2 015 HAS REVISED THE MONETARY LIMITS FOR FILING OF APPEALS BY THE DE PARTMENT BEFORE THE TRIBUNAL RETROSPECTIVELY. THE TAX EFFECT IN DISPUT E IN THE CAPTIONED APPEAL IS STATED TO BE BELOW THE MONETARY LIMIT OF RS.10.00 LACS SPECIFIED IN THE CBDT CIRCULAR DATED 10/12/2015 (SU PRA). 10. IN THIS BACKGROUND, LD. DEPARTMENTAL REPRESENTA TIVE APPEARING FOR THE REVENUE WAS REQUIRED TO STATE HIS POSITION. HE HAS NOT BROUGHT OUT ANY MATERIAL TO SUGGEST THAT THE CAPTIONED APPE AL IS PROTECTED BY ANY OF THE CIRCUMSTANCES PRESCRIBED IN PARA-8 OF TH E CIRCULAR DATED 10/12/2015 (SUPRA) AND AS A CONSEQUENCE SUCH APPEAL IS LIABLE TO BE TREATED AS WITHDRAWN/NOT PRESSED. THE RELEVANT POR TION OF THE CIRCULAR DATED 10/12/2015 (SUPRA) IS REPRODUCED BELOW:- 7 ITA NO. 364&139/MUM/2015 (ASSESSMENT YEAR : 2009-10) 3.HENCEFORTH APPEALS/SLPS SHALL NOT BE FILED IN CAS ES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER:- SL. NO. APPEALS IN INCOME-TAX MATTERS MONETARY LIMI TS (IN RS.) 1. BEFORE APPELLATE TRIBUNAL 10,00,000 2. BEFORE HIGH COURT 20,00,000 3. BEFORE SUPREME COURT 25,00,000 .................................................. ................................................... ............................ 4. FOR THIS PURPOSE, 'TAX EFFECT' MEANS THE DIFFERE NCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE B EEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME I N RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILED (HEREI NAFTER REFERRED TO AS 'DISPUTED ISSUES'). HOWEVER THE TAX WILL NOT INCLUDE ANY INTE REST THEREON, EXCEPT WHERE CHARGEABILITY OF INTEREST ITSELF IS IN DISPUTE. I N CASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UNDER DISPUTE, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOM E, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED ADDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDU CED IN THE ORDER TO BE APPEALED AGAINST. 8. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISS UES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAI LED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT: (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR (B) WHERE BOARD'S ORDER, NOTIFICATION, INSTRUCTION OR C IRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT, OR (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN A SSETS/ BANK ACCOUNTS. 9. THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE S HALL NOT APPLY TO WRIT MATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME TA X. FILING OF APPEALS IN OTHER DIRECT TAX MATTERS SHALL CONTINUE TO BE GOVER NED BY RELEVANT PROVISIONS OF STATUTE & RULES. FURTHER, FILING OF APPEAL IN CA SES OF INCOME TAX, WHERE THE TAX EFFECT IS NOT QUANTIFIABLE OR NOT INVOLVED, SUC H AS THE CASE OF REGISTRATION OF TRUSTS OR INSTITUTIONS UNDER SECTION 12A OF THE IT ACT, 1961, SHALL NOT BE GOVERNED BY THE LIMITS SPECIFIED IN PARA 3 ABOVE AN D DECISION TO FILE APPEAL IN SUCH CASES MAY BE TAKEN ON MERITS OF A PARTICULAR C ASE. 10. THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/ TRIB UNALS. PENDING APPEALS 8 ITA NO. 364&139/MUM/2015 (ASSESSMENT YEAR : 2009-10) BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWAL NOT PRESSED. APPEALS BEFORE THE SUPREME COURT WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. (UNDERLINED FOR EMPHASIS BY US) 11. WITHOUT GOING INTO THE MERIT OF THE ISSUES RAIS ED IN THE REVENUES APPEAL, IT IS DEEMED TO BE WITHDRAWN/NOT PRESSED AS ITS FILING IS IN CONTRAVENTION OF THE CBDT CIRCULAR DAT ED 10/12/2015(SUPRA). 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLO WED AND THAT OF REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON 24/08/2016 SD/- SD/- (RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 24/08/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// DY./ASSTT. REGISTRAR) ITAT, MUMBAI