ACIT, Ernakulam V. M/s.Muthoot Finance Ltd, Cochin

ITA 154/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77477 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K K JOHN
• Keywords: Depreciation
• Section: 6

Judgement Text

1 ITA NO.24/COCH/2014 ITA NO.154/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 24/COCH/2014 (ASSESSMENT YEAR 2009-10) M/S MUTHOOT FINANCE LTD VS ADDL CIT, CIR.1 MUTHOOT CHAMBERS RANGE-1, KOCHI BANERJEE ROAD, ERNAKULAM PAN : AAECA5986G (APPELLANT) (RESPONDENT) I.T.A NO. 154/COCH/2014 (ASSESSMENT YEAR 2009-10) ACIT, CIR.1(2) VS M/S MUTHOOT FINANCE LTD CIR.1(2), KOCHI ERNAKULAM (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R SREENIVASAN RESPONDENT BY : SHRI K.K. JOHN, SR DR DATE OF HEARING : 15-07-2014 DATE OF PRONOUNCEMENT : 25-07-2014 O R D E R PER N.R.S. GANESAN (JM) BOTH ASSESSEE AND REVENUE FILED THE APPEALS AGAINS T THE VERY SAME ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2009-10, TH EREFORE, WE HEARD THE SAME TOGETHER AND DISPOSE OF THE APPEALS BY THIS CO MMON ORDER. 2 ITA NO.24/COCH/2014 ITA NO.154/COCH/2014 2. LET US FIRST TAKE ASSESSEES APPEAL IN ITA NO.24 /COCH/2014. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 3. SHRI R SREENIVASAN, THE LD.REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE IS A NON BANKING FINANCIAL COMPAN Y ENGAGED ITSELF IN PROVIDING GOLD LOAN AND OTHER ALLIED INVESTMENT ACT IVITIES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS PAID TO NON RE SIDENT FOR PROVIDING ENGINEERING SITE SERVICES WITHOUT DEDUCTING TAX AT THE TIME OF PAYMENT. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE HA S NOT CLAIMED THE PAYMENT OF RS. 22,85,946 TO THE NON RESIDENT AS EXP ENDITURE. THE QUESTION OF DISALLOWANCE U/S 40(A)(IA) WOULD ARISE ONLY WHEN THE ASSESSEE CLAIMS PAYMENT AS EXPENDITURE. SINCE THE ASSESSEE CAPITALISED THE PAYMENT AND CLAIMED ONLY DEPRECIATION, ACCORDING TO THE LD.REPRESENTATIVE, THERE IS NO QUESTION OF ANY DISALLOWANCE U/S 40(A)( IA) OF THE ACT. ON A QUERY FROM THE BENCH WHETHER THE DISALLOWANCE WAS T O BE MADE U/S 40(A)(IA) OR 40(A)(I), THE LD.REPRESENTATIVE CLARIF IED THAT THE DISALLOWANCE WAS MADE BY THE LOWER AUTHORITY U/S 40(A)(IA) AND S ECTION 40(A)(I) WAS NOT TAKEN INTO CONSIDERATION. READING THE PREAMBLE OF SECTION 40, THE LD.REPRESENTATIVE SUBMITTED THAT THE DEDUCTION WAS NOT ALLOWED IN COMPUTING INCOME CHARGEABLE TO TAX IN CASE TAX DEDU CTIBLE AT SOURCE HAS NOT BEEN DEDUCTED. IN THIS CASE, ACCORDING TO THE LD.REPRESENTATIVE, 3 ITA NO.24/COCH/2014 ITA NO.154/COCH/2014 ADMITTEDLY TAX WAS NOT DEDUCTED AND THE PAYMENT WAS MADE TO NON RESIDENT INDIAN. THE ASSESSEE IS NOT CLAIMING AS D EDUCTION FOR COMPUTING THE INCOME CHARGEABLE TO TAX. ONCE THE ASSESSEE HA S NOT DEDUCTED FOR THE PURPOSE OF COMPUTING THE INCOME CHARGEABLE TO T AX, THERE IS NO QUESTION OF ANY DISALLOWANCE. ACCORDING TO THE LD. REPRESENTATIVE, THE DISALLOWANCE COULD BE CONSIDERED ONLY IN CASE THE A SSESSEE CLAIMED DEDUCTION WHILE COMPUTING THE INCOME CHARGEABLE TO TAX. 4. ON THE CONTRARY, SHRI K.K. JOHN, THE LD.DR SUBMI TTED THAT ADMITTEDLY, THE ASSESSEE MADE PAYMENT TO NON RESIDENT FOR PROVI DING TECHNICAL SERVICES. THEREFORE, THE PAYMENT MADE TO NON RESID ENT IS TAXABLE IN INDIA. HENCE THE ASSESSEE IS LIABLE TO DEDUCT TAX AT THE T IME OF PAYMENT. ADMITTEDLY, THE TAX WAS NOT DEDUCTED. THEREFORE, T HE ASSESSING OFFICER DISALLOWED THE ENTIRE PAYMENT MADE BY THE ASSESSEE AS PROVIDED IN SECTION 40(A)(IA) OF THE ACT. ON A QUERY FROM THE BENCH WHEN THE ASSESSEE HAS NOT CLAIMED THE PAYMENT MADE TO NON RE SIDENT INDIAN AS EXPENDITURE CAN THERE BE A DISALLOWANCE FOR NON DED UCTION OF TAX AT THE TIME OF PAYMENT, THE LD.DR COULD NOT CLARIFY THE PO SITION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH 4 ITA NO.24/COCH/2014 ITA NO.154/COCH/2014 THE PROVISIONS OF SECTIONS 40(A)(I) AND 40(A)(IA) O F THE ACT WHICH READ AS FOLLOWS: 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SE CTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION,- (A) IN THE CASE OF ANY ASSESSEE- (I)ANY INTEREST (NOT BEING INTEREST ON A LOAN ISSUE D FOR PUBLIC SUBSCRIPTION BEFORE THE 1 ST DAY OF APRIL, 1938), ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDE R THIS ACT, WHICH IS PAYABLE,- (A) OUTSIDE INDIA; OR (B) IN INDIA TO A NON-RESIDENT, NOT BEING A COMPANY OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCT ION, HS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESC RIBED UNDER SUB-SECTION (1) OF SECTION 200: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCTED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSE QUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 200, SUCH SUM SHALL BE ALLOW ED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID. 5 ITA NO.24/COCH/2014 ITA NO.154/COCH/2014 EXPLANATION.- FOR THE PURPOSES OF THIS SUB-CLAUSE,- (A) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXP LANATIN 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; (B) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SA ME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB- SECTION (1) OF SECTION 9; (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, R OYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I-B SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID NON OR BEFORE THE DUE DATE SPECIFIED IN SUB- SECTION (1) OF SECTION 139: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER TH E DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, S UCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE IN COME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION.- FOR THE PURPOSES OF THIS SUB-CLAUSE.- (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECT ION 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE S AME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB- SECTION (1) OF SECTION 9; 6 ITA NO.24/COCH/2014 ITA NO.154/COCH/2014 (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME M EANING S IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANATION III TO SECTION 194C; (V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) TO THE EXPLANATION TO SECTION 194-I; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 CLAUSE (VI) OF SUB-SECTION (1) OF SEC TION 9; 6. THE PAYMENT MADE TO NON RESIDENT FOR TECHNICAL S ERVICES PROVIDED TO THE ASSESSEE IS ADMITTEDLY TAXABLE IN INDIA, THEREF ORE, THE ASSESSEE IS BOUND TO DEDUCT TAX. THE ASSESSEE CAN CLAIM THE SA ME AS EXPENDITURE. HOWEVER, SUCH CLAIM OF EXPENDITURE COULD BE ALLOWED ONLY IN CASE THE ASSESSEE DEDUCTS THE TAX AT THE TIME OF PAYMENT. I N THIS CASE, THE ASSESSEE CLAIMS THAT DEDUCTION WAS NOT CLAIMED AS E XPENDITURE WHILE COMPUTING THE INCOME CHARGEABLE TO TAX. THE CIT(A) OBSERVED THAT IRRESPECTIVE OF THE FACT THAT WHETHER THE ASSESSEE HAS CLAIMED AS DEDUCTION OR NOT DISALLOWANCE HAS TO BE MADE SINCE TAX WAS NOT DEDUCTED. BOTH THE AUTHORITIES BELOW HAVE NOT EXAMINED WHETHE R THE AMOUNT PAID TO THE NON RESIDENT WAS DEDUCTED WHILE COMPUTING THE I NCOME CHARGEABLE TO TAX OR NOT. IN ORDER WORDS, EVEN THOUGH THE ASSESS EE CLAIMS THAT THE PAYMENT TO NON RESIDENTS WAS NOT CLAIMED AS EXPENDI TURE WHILE COMPUTING TAXABLE INCOME, THE SAME WAS NOT EXAMINED BY ANY OF THE AUTHORITIES 7 ITA NO.24/COCH/2014 ITA NO.154/COCH/2014 BELOW. THE LANGUAGE OF SECTION 40 CLEARLY SAYS THA T THE AMOUNT PAID TO NON RESIDENT ON WHICH TAX WAS NOT DEDUCTED SHALL NO T BE DEDUCTED WHILE COMPUTING THE INCOME CHARGEABLE TO TAX. THEREFORE, IF THE ASSESSEE HAS NOT DEDUCTED THE AMOUNT CLAIMING AS EXPENDITURE WHI LE COMPUTING THE CHARGEABLE INCOME, THERE IS NO NECESSITY FOR FURTHE R DISALLOWANCE. IN OTHER WORDS, IF THE ASSESSEE HAS NOT CLAIMED THE PAYMENT TO NON RESIDENT AS EXPENDITURE AND NOT DEDUCTED WHILE COMPUTING THE IN COME CHARGEABLE TO TAX, THERE IS NO QUESTION OF FURTHER DISALLOWANCE B Y THE AUTHORITIES. HOWEVER, THE FACT NEEDS TO BE EXAMINED WHETHER THE ASSESSEE HAS CLAIMED THE PAYMENT AS DEDUCTION OR NOT? SINCE NO MATERIAL IS AVAILABLE ON RECORD WITH REGARD TO COMPUTATION OF INCOME, THI S TRIBUNAL COULD NOT RECORD A FINDING WHETHER THE ASSESSEE CLAIMED THE S AME AS DEDUCTION OR NOT? AS ARGUED BY THE LD.REPRESENTATIVE FOR THE ASS ESSEE. ACCORDINGLY, THE ORDERS OF LOWER AUTHORITIES ARE SET ASIDE AND THE I SSUE IS REMITTED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AND FIND OUT WHETHER THE ASSESSEE CLAIMED EXPENDITU RE OF RS.22,85,946 SAID TO BE PAID TO NON RESIDENT AS DEDUCTION WHILE COMPUTING THE INCOME CHARGEABLE TO TAX OR NOT? THEREAFTER, THE ASSESSIN G OFFICER SHALL DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY. 8 ITA NO.24/COCH/2014 ITA NO.154/COCH/2014 7. NOW COMING TO THE DEPARTMENTAL APPEAL, THE ONLY ISSUE ARISES FOR CONSIDERATION IS CONTRIBUTION MADE TO STAFF WELFARE ACCOUNT. 8. WE HEARD SHRI K.K. JOHN, THE LD.DR AND SHRI R SR EENIVASAN, THE LD.REPRESENTATIVE FOR THE ASSESSEE. THE CIT(A), BY FOLLOWING THE ORDER OF THIS TRIBUNAL FOR THE ASSESSMENT YEARS 2004-05 AND 2006-07 DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE LD.REP RESENTATIVE FOR THE ASSESSEE FILED COPY OF THE ORDER OF THIS TRIBUNAL F OR THE ASSESSMENT YEAR 2006-07. THIS TRIBUNAL BY FOLLOWING THE EARLIER OR DER FOR ASSESSMENT YEAR 2004-05 CONFIRMED SIMILAR ORDER OF CIT(A). SINCE T HE FACTS ARE ADMITTEDLY IDENTICAL TO THAT OF ASSESSMENT YEAR 2004-05 AND 20 06-07 AND THE CIT(A) FOLLOWED THE ORDERS FOR ASSESSMENT YEAR 2004-05 AND 2006-07, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ACC ORDINGLY, THE SAME IS CONFIRMED. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH _____ JULY, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 25 TH JULY, 2014 PK/- 9 ITA NO.24/COCH/2014 ITA NO.154/COCH/2014 COPY TO: 1. M/S MUTHOOT FINANCE LTD, MUTHOOT CHAMBERS, BANER JEE ROAD, ERNAKULAM 2. ADDL CIT, CIR.1, RANGE-1, KOCHI 3. THE COMMISSIONER OF INCOME-TAX, KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-II, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH