Shruti Medical Institute, Pune V. Income-tax Officer, Pune

ITA 1487/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9771 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 23-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1487/PN/2011 (ASSESSMENT YEAR: 2007-08) SHRUTI MEDICAL INSTITUTE KEM HOSPITAL CAMPUS RASTA PETH, PUNE-411 011 PAN AASFS 8247 H .. APPELLANT VS. I.T.O. WARD 5(1) PUNE RESPONDENT APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SHRI S.K. SINGH, CIT DR DATE OF HEARING: 14-11-2012 DATE OF PRONOUNCEMENT:20-11-2012 ORDER PER G.S. PANNU, A.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III PUNE D ATED 31-1-2011 WHICH, IN TURN, HAS ARISEN FROM ORDER DATED 29-12-2 009 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSM ENT YEAR 2007-08. 2. IN THIS APPEAL, THE SOLITARY DISPUTE RELATES TO THE DISALLOWANCE OF RS. 46,92,094/- BY INVOKING SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT ASSESSEE HAD NOT DEDUCTED THE REQUISITE TAX AT SOURCE ON THE IMPUGNED AMOUNT REPRESENTING SERVICE CHARGES PAID TO KEM HOSPITAL. 3. IN BRIEF, THE FACTS ARE THAT ASSESSEE IS A PARTN ERSHIP FIRM CARRYING ON THE BUSINESS OF RUNNING A DIAGNOSTIC CE NTRE IN THE PREMISES OF KEM HOSPITAL, PUNE. THE ASSESSEE PAID A SUM OF RS. 46,92,084/- AS SERVICE CHARGES TO KEM HOSPITAL FOR USE OF THE PREMISES FOR RUNNING A DIAGNOSTIC CENTRE. THE ASSE SSING OFFICER 2 ITA NO. 1487/PN/2011 SHRUTI MEDICAL INSTITUTE A.Y. 2007-08 HELD THAT IT WAS A PROFESSIONAL ARRANGEMENT AND THE PAYMENT MADE FELL WITHIN THE AMBIT OF SEC. 194-J OF THE ACT, WHI CH REQUIRED DEDUCTION OF TAX AT SOURCE ON SUCH PAYMENT. OBSERVI NG THAT THE ASSESSEE HAS FAILED TO DEDUCT THE REQUISITE TAX AT SOURCE ON THE PAYMENT OF RS. 46,92,084/- BEING SERVICE CHARGES, T HE ASSESSING OFFICER HAS DISALLOWED THE SAID SUM BY INVOKING PRO VISION OF SEC. 40(A)(IA) OF THE ACT. 4. IN APPEAL BEFORE THE CIT(A), ASSESSEE CONTENDED THAT THE AMOUNT OF RS. 46,92,084/- PAID BY THE ASSESSEE DUR ING THE YEAR UNDER CONSIDERATION TO KEM HOSPITAL WAS TO BE UNDER STOOD AS RENT WITHIN THE MEANING OF SEC. 194-I OF THE ACT ON WHIC H, THERE WAS NO REQUIREMENT TO DEDUCT TAX AT SOURCE AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE AMOUNT BY INVOKING SEC. 40(A)(IA) OF THE ACT. IN ANY CASE, IT WAS SUBMITTE D THAT THE IMPUGNED SUM DID NOT FALL WITHIN THE AMBIT OF FEES FOR PROF ESSIONAL SERVICES AS CONTEMPLATED IN SEC. 194-J OF THE ACT AND THEREFORE , THE ASSESSING OFFICER ERRED IN HOLDING THAT THE ASSESSEE FAILED T O DEDUCT TAX AT SOURCE U/S 194-J OF THE ACT. THE CIT(A) HAS NOT UP HELD THE AFORESAID SUBMISSIONS OF THE ASSESSEE. ACCORDING T O HIM, THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT THE IMPUGNED PAYMENT MADE BY THE ASSESSEE TO KEM HOSPITAL WAS IN THE NAT URE OF FEES FOR PROFESSIONAL SERVICES AS CONTEMPLATED U/S 194-J OF THE ACT AND ON ITS FAILURE OF THE ASSESSEE TO DEDUCT THE REQUISITE TAX AT SOURCE. THE IMPUGNED EXPENDITURE WAS DISALLOWABLE U/S 40(A)(IA) OF THE ACT. AGAINST SUCH A DECISION OF THE CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WITHOUT PREJUDICE TO THE ASSESSEES PLEA THAT THE IMPUGNED PAYMENTS TO KEM HOSPITAL WERE OUTSIDE THE PROVISION S OF DEDUCTION OF TAX AT SOURCE, NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT WAS 3 ITA NO. 1487/PN/2011 SHRUTI MEDICAL INSTITUTE A.Y. 2007-08 MERITED, INASMUCH AS, THE ENTIRE AMOUNT WAS ACTUALL Y PAID BY 31-3-2007 AND NOTHING REMAINED OUTSTANDING AS AT TH E END OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND FOR THE AFORESAID REASON, SECTION 40(A)(IA) OF THE ACT COULD NOT BE INVOKED. IN SUPPORT OF THE PROPOSITION, RELIANC E HAS BEEN PLACED ON THE DECISION OF SPECIAL BENCH OF VISHAKHAPATNAM TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (146 TTJ 1) ( SB) VISHAKHAPATNAM. FURTHER TO SUBSTANTIATE THE POSITI ON THAT THE AMOUNT HAS ACTUALLY BEEN PAID, A REFERENCE WAS MADE TO THE DISCUSSION CONTAINED IN PARA 5.3 OF THE ORDER OF TH E CIT(A) IN THIS REGARD. 6. ON THE OTHER HAND, THE LEARNED DR APPEARING FOR THE REVENUE HAS NOT CONTROVERTED THE FACTUAL MATRIX THAT THE IM PUGNED AMOUNT WAS ACTUALLY PAID TO KEM HOSPITAL DURING THE YEAR I TSELF AND NO AMOUNT WAS OUTSTANDING AS AT 31-3-2007. HOWEVER, T HE LEARNED DR SUBMITTED THAT THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT ARE APPLICABLE ALSO TO THE AMOUNTS ACTUALLY PAID DURING THE YEAR SO LONG AS THE REQUIRED TAX WAS NOT DEDUCTED AT SOURCE. IT WAS POINTED OUT THAT IN THE PRESENT CASE, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON PAYMENT MADE TO KEM HOSPITAL FOR SERVICE CHARGES IN TERMS OF SEC. 194-J OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE SHORT POINT RAISED BY THE ASSESSEE IS TO THE EFFECT THAT SEC. 40(A)(IA) OF THE ACT IS INAPPLICABLE IN THE INSTANT CASE FOR THE REA SON THAT THE AMOUNT IN QUESTION HAS ACTUALLY BEEN PAID DURING THE YEAR ITSELF AND NO AMOUNT IS OUTSTANDING AS AT 31-3-2007. NOTABLY, SE C. 40(A)(IA) OF THE ACT MANDATES THAT THE EXPENDITURE SPECIFIED THE REIN SHALL NOT BE ALLOWED AS DEDUCTION IN CASES WHERE THE TAX DEDUCTI BLE AT SOURCE AS 4 ITA NO. 1487/PN/2011 SHRUTI MEDICAL INSTITUTE A.Y. 2007-08 PER CHAPTER XVII-B OF THE ACT ON SUCH PAYMENT, HAS NOT BEEN DEDUCTED BY THE ASSESSEE OR AFTER DEDUCTION HAS NOT BEEN PAID WITHIN THE PERIOD PRESCRIBED. THE CASE MADE OUT BY THE ASSESSEE IS THAT SEC. 40(A)(IA) OF THE ACT REFERS TO AMOUNTS PAYABLE AND NOT TO AMOUNT ACTUALLY PAID DURING THE YEAR. AS PER THE AS SESSEE, THE AMOUNT IN QUESTION I.E. SERVICE CHARGES TO KEM HOSP ITAL AMOUNTING TO RS. 46,92,084/- IS NOT OUTSTANDING AS ON 31-3-20 07 AND THEREFORE, EVEN IF THE REQUISITE TAX HAS NOT BEEN DEDUCTED AT SOURCE ON SUCH PAYMENTS SUCH EXPENDITURE COULD NOT BE DISALLOWED U /S 40(A)(IA) OF THE ACT AS THE AMOUNTS HAVE BEEN ACTUALLY PAID. TH IS STAND OF THE ASSESSEE IS IN LINE WITH THE DECISION OF SPECIAL BE NCH OF VISHAKHAPATNAM TRIBUNAL IN THE CASE OF MERILYN SHIP PING & TRANSPORTS (SUPRA). FOLLOWING THE SAME, WE SET ASI DE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELE TE THE ADDITION. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . DECISION PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER 2012. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 20 TH NOVEMBER 2012 ANKAM COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT (A) III PUNE 4. THE CIT- III PUNE 5. THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T. A.T., PUNE. BY ORDER //TRUE COPY// SR. P.S. I.T.A.T., PUNE