Prith Pal ASI, Asansol V. ITO, Ward-1(1), Asansol, Asansol

ITA 1525/KOL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99727 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 14-07-2014
• Court: TRIBUNAL
• Department Lawyers: MD GHAYASUDDIN JCIT LD
• Assessee Lawyers: ASHOK SWAIKAFCA LD
• Keywords: Retrospective amendment
• Section: 194C

Judgement Text

ITA NO . 1 1525 /KOL/14 SMC - JSR - PRITH PAL,ASI 1 IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH: KOLKATA BEFORE HON BLE SRI J SUDHAKAR REDDY , A M I.T.A NO . 1525 /KOL/201 4 A.Y 200 8 - 09 PRITH PAL, ASI V S. I.T.O W ARD 1(1), KOLKATA PAN: A CJPA 1795P ( APPELLANT ) ( RESPONDENT ) FOR THE APPELLANT/ASSESSEE: SHRI ASHOK SWAIKA,FCA, LD.AR FOR THE RESPONDENT/DEPARTMENT : MD. GHAYAS UDDIN, JCIT / LD. SR. DR DATE OF HEARING: 21 - 08 - 2015 DATE OF PRONOUNCEMENT : 2 7 - 08 - 201 5 ORDER TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX(APPEALS) , KOLKATA DATED 21 - 04 - 2014 FOR THE ASSESSMENT YEAR 200 8 - 09 . 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST THE ORDER OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCE U/S. 40 ( A)(IA) R.W.S 194C OF THE I.T ACT 1961 FOR AN AMOUNT OF RS.1,32,246/ - UNDER THE HEAD OF ACCOUNT OF FREIGHT & CARTAGE. 3. BRIEFLY STATED TH E FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND HAVING HIS INCOME FROM SERVICING OF ENGINES , MAINLY OF KIRLOSKAR AND ALSO SELLS THE SPARE PARTS OF MACHINERY OF VARIOUS TYPES . DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAS INCURRED TRANSPORTAT ION CHARGES FOR AN AMOUNT OF RS.1,32,246/ - , WITHOUT DEDUCTING THE TDS AT SOURCE U/S. 194C. HENCE, THE AO DISALLOWED THE ENTIRE AMOUNT PAID TOWARDS TRANSPORTATION U/S.40(A)(IA) OF THE ACT . AGGRIEVED, A SSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) , WHO HA S UPHELD THE DECISION OF THE AO ON THIS ISSUE. FURTHER, A GGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE ME. 4 . SHRI ASHOK SWAIKA,FCA, LD.AR APPEAR ING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THIS TRANSPORTATION HAS TAKEN PLACE AS A RESULT OF CONTRACT BETWE EN KIRLOSKAR OIL ENGINES LTD AND TRANSPORTER G ATI LTD . HE ALSO SUBMITTED THAT O N PERUSAL OF THE P & L ACCOUNT OF THE ASSESSEE THAT THE ENTIRE PURCHASE OF RS.1,95,85,586.57 IS FROM M/S. KIRLOSKAR OIL ENGINES LTD . THE FREIGHT ITA NO . 1 1525 /KOL/14 SMC - JSR - PRITH PAL,ASI 2 WAS PAID BY M/S. KIRLOSKAR OIL ENGINES LTD AND NO FREIGHT HAD BEEN PAID BY THE ASSESSEE. THE FREIGHT OF RS.1,32,246/ - HAD BEEN PAID, NOT FOR THE GOODS WHICH ARE PURCHASED BY HIM FOR SALE , BUT FOR PROMOTIONAL MATERIAL(PAMPHLETS, DESIGN MANUALS ETC) OF DIESEL ENGINE & SPARES OF DIESEL ENGINE. THEREFORE, NO TAX IS DEDUCTIBLE. THE LD.AR OF THE ASSESSEE HAS ALSO RELIED ON SECOND PROVISO TO S. 40(A)(IA) , WHEREIN THE ITAT, AGRA IN ITA NO.337/AGRA/2013 DATED 29 TH MAY 2013 HELD THAT: - THE ASSESSEE INCURRED EXPENDITURE ON PAYMENT OF INTEREST ON WHICH TDS U/S 194A WAS NOT DEDUCTED. THE AO APPLIED S. 40(A)(IA) AND DISALLOWED THE CLAIM FOR DEDUCTION OF THE EXPENDITURE. THIS WAS CONFIRMED BY THE CIT(A). BEFORE THE TRIBUNAL THE ASSESSEE ARGUED THAT THE SECOND PROVISO TO S. 40(A)(IA), INSERTED BY T HE FINANCE ACT 2012, SHOULD BE TREATED AS CLARIFICATORY & RETROSPECTIVE IN NATURE AND THAT AS THE RECIPIENTS OF THE INTEREST HAVE ALREADY OFFERED THE INTEREST TO INCOME, NO DISALLOWANCE U/S 40(A)(IA) COULD BE MADE. HELD BY THE TRIBUNAL ALLOWING THE APPEAL: THE SECOND PROVISO TO S. 40(A)(IA), INTRODUCED BY THE FINANCE ACT 2013 W.E.F. 01.04.2013, READ WITH S. 201, PROVIDES THAT DESPITE FAILURE TO DEDUCT TDS, DISALLOWANCE OF THE EXPENDITURE SHALL NOT BE MADE IF THE RESIDENT PAYEE HAS (I) FURNISHED HIS RETURN O F INCOME U/S 139, (II) TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH ROI, (III) PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME AND (IV) FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN THE PRESCRIBED FORM. TH E SCHEME OF S. 40(A)(IA) IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. IT IS NOT A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. S. 40(A)(IA), AS IT EXISTED PRIOR TO INSERTION OF SECOND PROVISO THERETO, WENT MUCH BEYOND THE O BVIOUS INTENTIONS OF THE LAWMAKERS AND CREATED UNDUE HARDSHIPS EVEN IN CASES IN WHICH THE ASSESSEE S TAX WITHHOLDING LAPSES DID NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PR OVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFECT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS RETROSPECTIVE IN NATURE EVEN THOUGH IT MAY NOT STATE SO SPECIFICALLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCED. ACCORDINGLY, IT IS HELD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECL ARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 1ST APRIL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004 ( BHARATI SHIPYARD 141 TTJ 129 (SB) APPLIED/ DISTINGUISHED, RAJINDER KUMAR 362 ITR 241 (DEL) APPLIED) ITA NO . 1 1525 /KOL/14 SMC - JSR - PRITH PAL,ASI 3 4.1 HE ALSO RELIED ON THE ORDER OF ITAT KOLKATA SMC BENCH DATED FEBRUARY 26, 2015 IN ITA NO.2269/KOL/2014 AY 2006 - 07 IN THE CASE OF M/S. DESAI TRADING (AGENCY) VS. ITO, W 2(4), ASANSOL, WHEREIN THE ITAT SMC BENCH HAS HELD AS UNDER: - 4. I HAVE CONSIDERED THE SUBMISSION OF LD. SR. D. R. , PERUSED THE ASSESSMENT ORD ER AND THE ORDER OF THE LD. CIT(APPEALS). A PERUSAL OF THE AUDIT REPORT IN THE ASSESSEE S CASE CLEARLY SHOWS THAT THE ASSESSEE IS IN THE BUSINESS OF WHOLESALE MEDICINE, I.E. THE ASSESSEE PURCHASES FROM M/S. CLARIS LIFE SCIENCES LIMITED AND SELL S THE SAME. THE ASSESSEE IS NOT A CONTRACTOR IN RESPECT OF THE TRANSPORTATION OF GOODS. THE COST OF TRANSPORTATION OF THE GOODS, IN FACT, IS PART OF THE COST OF PURCHASES OF THE GOODS BY THE ASSESSEE. ONCE IT IS TREATED AS THE COST OF PURCHASES IN THE HANDS OF THE AS SESSEE, THEN ADMITTEDLY THE SAME C ANNOT BE TREATED AS LIABLE FOR TDS UNDER SECTION 194C. THIS IS IN VIEW OF MY EARLIER DECISION IN THE C ASE OF M/S. DHIRENDRA NATH MONDAL PVT. LTD. IN ITA NO. 617/KOL/2014 DATED 23.02.2015, WHEREIN IT HAS BEEN HELD AS FOLL OWS: - 5. I HAVE CONSIDERED THE SUBMISSIONS AS ALSO THE ASSESSMENT ORDER AND T HE ORDER OF T HE L D. CIT(APPEALS). A PERUSAL OF THE ORDER OF LD. CIT(APPEALS) MO RE SPECIFICALLY THE GROUNDS RAISED BEFORE THE LD. CIT(APPEALS) SHOWS THAT THE ASSESSEE HAS SPEC IFICALLY MENTIONED THAT THE TRANSPORTER IS NOT A CONTRACT OR APPOINTED BY THE ASSESSEE BUT A CONTRACTOR APPOINTED BY THE SUPPLIER COMPANY FOR CA RRYING GOODS AT THE OWNERS (SUPPLIERS) RISK AND INSURANCE TERMS TO THE DESTINATION AT KOLKATA. THE SUPPLIER IS A CONSIGNOR WHO IS SENDING HIS GOODS THROUGH HIS LORRY CONTRACTOR TO THE ASSESSEE - COMPANY, THE CONSIGNEE. THE ASSESSEE - COMPANY IS NO WAY CONNECTED TO THIS WHOLE OPERATION AND THE ASSESSEE CAME TO THE PICTURE WHEN THE GOODS WERE DELIVERED TO HIM AND THEREAFT ER HE BECAME THE OWNER OF THE G O ODS. ONCE T HIS SUBMISSION OF THE ASSESSEE IS CONSIDERED, THEN IT BECOMES QUITE EVIDENT T HAT T HE PAYMENT OF THE TRANSPORT COST BECOMES PART OF THE COST OF PURCHASES OF THE ASSESSEE. THIS IS IN VIEW OF THE DECISION OF THE H ON BLE SUPREME COURT IN THE CASE OF INDIA METERS LIMITED VS. - STATE OF TAMILNADU IN CIVIL APPEAL NO. 1032 - 33 OF 2003 DATED 07.09.20 10 WHEREIN THE HON BLE SUPR EME COURT HAS HELD THAT IF THE OWNERSHIP IN THE GOODS GETS TRANSFERRED AT THE PREMISES OF THE B UYER AND THE SUPPLIER HAS THE OBLIGATION OF TRANSPORTING THE GOODS TO THE PREMISES OF THE BUYER, THEN NOTWITHSTANDING T HE FACT T HAT T HE FREIGHT CHARGES WERE RECOVERED SEPA R ATELY FROM THE BUYER, THE TRANSPORTATION CHARGES SHALL FORM PART OF TURNOVER OF T HE SUPPLIER, I.E. COST OF I.T.A . N O. 2269/KOL./ 20 14 A S SESSMENT YEAR : 20 06 - 2007 PAGE 3 OF 3 PURCHASES FOR THE BUYER . ONCE THIS IS SO, THEN ADMITTEDLY THE PROVISIONS OF TDS IN RESPECT OF THE SAME WOULD NOT APPLY. IN THESE CIRCUMSTANCES, RESPECTFULLY APPLYING THE PRINCIPLES LAID DOWN BY T HE HO ITA NO . 1 1525 /KOL/14 SMC - JSR - PRITH PAL,ASI 4 N BLE SUPREME COURT IN THE CASE OF INDIA METERS LIMITED, THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE LD. CIT(APPEALS) BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT STAN DS DELETED . IN THESE CIRCUMSTANCES, ON IDENTICAL REASONS THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE LD. CIT(APPEALS) STANDS DELETED. 5. THE LD.DR APPEARING ON BEHALF OF THE REVENUE HAS RELIED ON THE ORDERS OF THE LOWER AU THORITIES . 6. RESPECTFULLY FOLLOWING THE PROPOSITION LAID DOWN BY THE CO - ORDINATE BENCH OF THE ITAT KOLKATA IN THE CASE EXTRACTED ABOVE, I SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION THAT NO DISALLOWANCE SHOULD BE MADE, IF THE ASSESSEE FURNISHES EVIDENCE OF M/S. GATI LTD HAVING ACCOUNTED FOR THIS RECEIPT AND IF GATI LTD HAS FILED ITS R.O.I. ACCORDINGLY, THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON THIS ISSUE STANDS DELETED. THIS APPEAL OF THE ASSESSEE ON THIS ISSUE I S ALLOWED. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AS STATED ABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 - 08 - 2015 S D/ - 27/8/15 DATED : 2 7 - 08 - 2015 [ J SUDHAKAR REDDY, ACCOUNTANT MEMBER ] *PP /SR.P.S. COPY OF THE ORDER FORWARDED TO: 1. APPELLANT - SHRI PRITH PAL C/O RAVINDRA PAL, ASI 204/1 SOLAR CHEMICAL ROAD , USHAGRAM, ASANSOL 713303. 2 RESPONDENT : I T O , SAHANA APARTMENTS, LOWER CHELIDNAGA, W 1(1) , ASANSOL 713304. 3 . THE CIT, 4 . THE CIT(A), KOLKATA 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY, / BY ORDER A SSTT. REGISTRAR