Prayaas Automation Pvt. Ltd., Kolkata V. DCIT, Circle -6, Kolkata, Kolkata

ITA 1516/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4226 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 20-07-2016
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Principle of natural justice
• Section: 143(3)

Judgement Text

1 ITA NO.1516/KOL/2016 PRAYAAS AUTOMATION (P) LTD., AY 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S. S. VISWAN ETHRA RAVI, JM] I.T.A NO. 1516/KOL/2016 ASSESSMENT YEAR: 2009-10 PRAYAAS AUTOMATION (P) LTD. VS. DEPUTY COMMISSION ER OF INCOME-TAX, (PAN: AADCP0104A) CIRCLE-6, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 21.11.2016 DATE OF PRONOUNCEMENT: 30.11.2016 FOR THE APPELLANT: SHRI MIRAJ D. SHAH, A.R FOR THE RESPONDENT: MD. GHAYAS UDDIN, JCIT, SR . DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-2, KOLKATA VIDE APPEAL NO. 1159/CIT(A)-2/2014-15 DATED 04.05.2016. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-6, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR AY 2009-10 VIDE HIS ORDER DATED 29.12.2011. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL OF A SSESSEE IS AS TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE O F RS.1,30,000/- MADE U/S. 40(A)(IA) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AS SESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF INDUSTRIAL, ELECTRICAL AND ELECTRO NIC ITEMS. DURING THE YEAR THE ASSESSEE PAID RENT OF RS.1,30,000/- TO ITS KASBA MARKETING O FFICE WITHOUT DEDUCTION OF TAX AT SOURCE. THE AO INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR VIOLATION OF PROVISIONS OF SECTION 194-I OF THE ACT AND DISALLOWED A SUM OF RS .1,30,000/- IN THE ASSESSMENT. BEFORE THE LD. CIT(A), THE ASSESSEE STATED THAT A SUM OF R S.96,000/- ALONE WAS PAID AS RENT AND THE DIFFERENCE OF RS.34,000/- WAS PAID AS MAINTENANCE A ND ELECTRICITY CHARGES TO THE LANDLADY FOR WHICH IT ALSO PRODUCED THE COPY OF THE RENT AGREEME NT IN SUPPORT OF ITS CONTENTION. THE SAID RENT AGREEMENT CLEARLY STIPULATED A MONTHLY RENT OF RS.8000/- AND PAYMENT OF MAINTENANCE 2 ITA NO.1516/KOL/2016 PRAYAAS AUTOMATION (P) LTD., AY 2009-10 AND ELECTRICITY CHARGES BY THE TENANT I.E. THE ASSE SSEE ON ADVANCE BASIS. THIS CLAUSE WAS UNDERSTOOD BY THE LD. CIT(A) AS SINCE THE ELECTRICI TY AND MAINTENANCE CHARGES ARE PAID BY THE ASSESSEE IN ADVANCE, IT ALSO TAKES THE CHARACTE R OF RENT AND ACCORDINGLY IT EXCEEDS THE LIMIT PRESCRIBED U/S. 194-I OF THE ACT IN THE SUM O F RS.1,20,000/- AND ACCORDINGLY, CONFIRMED THE DISALLOWANCE U/S. 40(A)(IA) OF THE AC T. 2.2. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLATE ORDER PASSED WAS IN VIOLATION OF PRINCIPALS OF NATURAL JUSTICE HENCE IS BAD IN LAW AND BE QUASHED. 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE DISALLOWANCE OF RS.1,30,000/- BY INVOKING PROVISION OF SECTION 40(A)(IA) OF THE I T ACT 1961 IS NOT JUSTIFIED HENCE THE SAME BE DELETED. 2.3. DURING THE COURSE OF HEARING THE LD. AR ARGUE D THAT THE LD. CIT(A) CLEARLY MISUNDERSTOOD THE LANGUAGE OF THE CLAUSE MENTIONED IN THE RENT AGREEMENT. THE RELEVANT CLAUSE OF THE RENT AGREEMENT ONLY STIPULATED THAT T HE TENANT HAS TO PAY THE MONTHLY RENT, MAINTENANCE AND ELECTRICITY CHARGES IN ADVANCE I.E. WHICH IS PAYABLE AT THE BEGINNING OF THE MONTH. HE ALSO STATED THAT THE ELECTRICITY CHARGE S IS AGREED TO BE PAID ON A FIXED AMOUNT OF RS.500/- PER MONTH WHEREAS THE MAINTENANCE IS ONLY REIMBURSEMENT OF MONIES PAID BY THE LANDLADY TO THE ASSOCIATION. HENCE, THE SAME WOULD NOT TAKE THE CHARACTER OF RENT. IF THE SAID PAYMENT IS EXCLUDED, THE ASSESSEE FALLS BELOW THE LIMIT PRESCRIBED U/S. 194-I OF THE ACT FOR DEDUCTION OF TAX AT SOURCE. IN RESPONSE TO THI S, THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF LD. CIT(A) WHEREIN A FINDING HAS BEEN GIVE N THAT ASSESSEE HAD DELIBERATELY SPLIT THE TOTAL RENT INTO RENT AND MAINTENANCE CHARGES IN ORD ER TO AVOID TDS. 2.4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THRO UGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE COPY OF THE RENT AGREEMENT THAT THE RENT IS PAYABLE IN ADVANCE TOGETHER WITH THE MAINTENANCE CHARGES AND ELECTRICI TY CHARGES PAYABLE BY THE TENANT TO THE LANDLADY. WE FIND LOT OF FORCE IN THE ARGUMENT OF THE LD. AR THAT THE MAINTENANCE CHARGES IS ONLY REIMBURSEMENT OF DUES PAID BY THE LANDLADY TO THE ASSOCIATION WHICH MAINTAINS THE BUILDING. WE ALSO FIND THAT THE ELECTRICITY CHARGE S PAID BY THE ASSESSEE TENANT TO THE LANDLADY IS REIMBURSEMENT OF ELECTRICITY CHARGES P AYABLE BY THE LANDLADY TO THE ELECTRICITY DEPARTMENT. HENCE, THE SAME WOULD NOT TAKE THE CHA RACTER OF RENT WITHIN THE MEANING OF SECTION 194-I OF THE ACT. HENCE, WHAT IS LEFT IS O NLY MONTHLY RENT OF RS.8000/- WHICH FALLS 3 ITA NO.1516/KOL/2016 PRAYAAS AUTOMATION (P) LTD., AY 2009-10 BELOW THE TAX DEDUCTION LIMIT PRESCRIBED U/S. 194-I OF THE ACT, HENCE, WE HOLD THAT THERE IS NO VIOLATION OF SECTION 194-I OF THE ACT AND CONSEQ UENTLY NO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT COULD NOT BE MADE. ACCORDINGLY, THE GROUND S RAISED BY ASSESSEE ARE ALLOWED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.11.201 6 SD/- SD/- (S.S. VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED :30TH NOVEMBER, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT PRAYAAS AUTOMATION (P) LTD., C/O, D. J. SHAH & CO. KALYAN BHAVAN, 2, ELGIN ROAD, KOLKATA-700 020. 2 RESPONDENT DCIT, CIRCLE-6, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKAT A BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .