SVR Stone Crushers, Nellore, Nellore V. ITO, Ward-1, Gudur, Gudur

ITA 154/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2671 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-08-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 01-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Assessee Lawyers: P RAVI SESHAGIRI RAO
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER I.T.A. NO. 154/HYD/2017 ASSESSMENT YEAR: 2010-11 SVR STONE CRUSHERS, NELLORE [PAN: ABBFS0005P] VS THE INCOME TAX OFFICER, WARD-1, GUDUR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. RAVI SESHAGIRI RAO, AR FOR REVENUE : SHRI V. SREEKAR, DR DATE OF HEARING : 29-08-2017 DATE OF PRONOUNCEMENT : 07-09-2017 O R D E R PER INTURI RAMA RAO, A.M. : THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-TIR UPATI, DATED 05-12-2016 FOR THE AY. 2010-11. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE AO IS NOT JUSTIFIED IN DISALLOWING FINANCE CHARGES U/SEC.40(A)(IA) OF THE INCOME-TAX ACT FOR THE ALLEGED NON-PAYMENT O F TDS AS CONTEMPLATED BY THE PROVISIONS OF SEC. 194A OF THE INCOME-TAX AC T. 2. THE LEARNED COMMISSIONER OF INCOME-TAX APPEALS O UGHT NOT TO HAVE DISMISSED THE APPEAL ON THE FOLLOWING GROUNDS VIZ. (I) AMENDMENT TO SEC.40(A)(IA) BY THE FINANCE ACT 2 010 ARE RETROSPECTIVE IN OPERATION. I.T.A. NO. 154/HYD/2017 :- 2 - : (II) THE APPELLANT HAS NOT FILED ADDITIONAL GROUNDS BUT ONLY THESE CLAIMS ARE MADE AS PART OF WRITTEN SUBMISSIONS. THEY ARE N OT ADJUDICATED UPON. THE ISSUES AS PER THE GROUNDS IN FORM 35 ARE ADJUDI CATED, AS ABOVE. (III) HENCE INVOKING THE PROVISIONS UNDER SEC.40(A) (IA) ARE CORRECTLY RESORTED TO BY THE AO AND ACCORDINGLY ADDITION UPHELD. 3. THE APPELLANT SUBMITS THAT THE ISSUE INVOLVED IN THE INSTANT CASE ADDITION OF INCOME IS BY WAY OF DISALLOWANCE OF FIN ANCE CHARGES MADE DURING THE YEAR AND THE PROVISIONS OF SEC.40(A)(IA) ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON 31 ST MARCH EVERY YEAR. THIS CONTENTION MAY BE TREATED AS ADDITIONAL GROUND AND PRAY FOR ADMISSION OF THE GROUND. THE APPELLANT RELIED ON THE FOLLOWING CITATIONS:- (I) MERELY SHIPPING AND TRANSPORTS VS. ADDITIONAL C OMMISSIONER OF INCOME TAX VIDE ITAT VISAKHAPATNAM BENCH. (II) THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE I , UDIPI VS. ANANDA MARAKALE THE BANGALORE BENCH ITAT B' BENCH IN INC OME-TAX APPEAL NO.1584 (BANGALORE) OF 2012. (III) THE ITAT A BENCH IN THE CASE OF AMIT NARESH SINHA (ITA NO.4154/MUMBAI /2013 DATED 10-9-2014) WHERE IN THE BENCH HAS TAKEN THE VIEW THAT IF AN AMOUNT IS PAID, DISALLOWANCE UN DER SECETION 40(A)(IA) IS NOT PERMISSIBLE. THE FIRST APPELLATE AUTHORITY HAS ACTED IN UTTER DISREGARD TO THE PROVISIONS AND DID NOT PASS ANY SPEAKING ORD ER. 4. FOR THESE AND OTHER REASONS AS MAY BE URGED AT T HE TIME OF HEARING OF THE APPEAL THE ADDITIONS MADE BY WAY OF DISALLOWANC E OF FINANCE CHARGES MADE DURING THE YEAR OF ACCOUNT MAY BE SET ASIDE AN D ALLOW THE APPEAL. 2. BRIEFLY, FACTS OF THE CASE ARE THAT THE APPELLANT IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF QUARRYING AND CRUSHING OF ROCK BOULDERS, FILED RETURN OF INCOME FO R THE AY. 2010- 11 ON 23-09-2010 DISCLOSING TOTAL INCOME OF RS. 2 LA KHS. AFTER PROCESSING THE SAID RETURN OF INCOME UNDER THE PROVISI ONS OF SECTION 143(1) OF THE INCOME TAX ACT [ACT], THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED BY THE ITO, WARD-I, GUDUR, VIDE ORDER DT. 21-03-2013, PASSED U/S. 143(3) OF THE ACT AT I.T.A. NO. 154/HYD/2017 :- 3 - : A TOTAL INCOME OF RS. 6,17,641/-. WHILE DOING SO, THE LD.AO DISALLOWED THE FINANCE CHARGES PAID TOWARDS MACHINERY TO THE FINANCIAL INSTITUTIONS VIZ., M/S. TATA CAPITAL SERVICE S LIMITED OF RS. 3,51,133/- AND M/S. DANDAPANI FINANCE RS. 36,862/- ON THE GROUND THAT THE APPELLANT HAD NOT DEDUCTED TAX AT SOURCE ON THESE PAYMENTS INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 3. BEING AGGRIEVED ON APPEAL BEFORE THE CIT(A), THE C IT(A) HAD DISMISSED THE APPEAL VIDE IMPUGNED ORDER HOLDING THAT THE APPELLANT HAD NOT FILED ANY EVIDENCE IN SUPPORT OF THE CONTENTION THAT PAYMENT IS IN THE NATURE OF FINANCE CHARGES PAID IN TERMS OF HIRE PURCHASE AGREEMENTS WITH THOSE TWO NBFCS FURTHER, THE CIT(A) ALSO NOT ACCEPTED THE CONTENTION OF THE APPELLAN T THAT IN VIEW OF THE RULING OF THE SPECIAL BENCH OF THE TRIBUNA L IN THE CASE OF MERILYN SHIPPING AND TRANSPORT LTD., VS. ACIT REPORTE D AS 136 ITD 23 (SB) [16 ITR 1] (SB)(VISAKHA.)(TRIB.) , NO DISALLOWANCE WAS CALLED FOR. BEING AGGRIEVED, THE APPELLANT IS IN APP EAL BEFORE US IN THE PRESENT APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL IS WHETHER THE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT IS WARRAN TED HAVING REGARD TO THE FACT OF THE CASE THAT THE PAYMENTS WERE MADE IN THE NATURE OF HIRE CHARGES PAID TO THE NBFCS. IN OTHER WO RDS, IT IS THE CONTENTION OF THE APPELLANT THAT THE PAYMENTS WERE IN THE NA TURE OF HIRE PURCHASE FINANCE CHARGES WHICH ARE NOT IN THE N ATURE OF INTEREST AS DEFINED WITHIN THE MEANING OF THE PROVISIONS OF SECTION 2(28A) OF THE ACT. THOUGH THE LD.CIT(A) WAS CORRECT IN UPHOLDING THE DISALLOWANCE ON THE GROUND THAT THE RULING OF THE S PECIAL I.T.A. NO. 154/HYD/2017 :- 4 - : BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT LTD., VS. ACIT REPORTED AS 136 ITD 23 (SB) [16 ITR 1] (SB)(VISAKHA.)(TRIB.) IS NO LONGER GOOD LAW IN THE LIGHT OF THE RECENT DECISION OF THE HON'BLE APEX COURT IN THE CASE OF M/S. PALAM GAS SERVICE VS. CIT [394 ITR 300] BUT THIS ISSUE IS REQUIRED TO BE EXAMINED WHETHER THE SUBJECT PAYMENTS ARE IN THE NATURE OF INTEREST OR HIRE PURCHASE FINANCE CHARGES. IN THE LIG HT OF THE CLARIFICATION ISSUED BY THE CBDT VIDE INSTRUCTION NO. 1425 DT. 16- 11-1981 THAT THE HIRE PURCHASE FINANCE CHARGES ARE NO T IN THE NATURE OF INTEREST AS DEFINED U/S. 2(28A) OF THE ACT. T HE MATTER REQUIRES VERIFICATION TO EXAMINE WHETHER THE FINANCE CH ARGES ARE PAID IN TERMS OF THE HIRE PURCHASE AGREEMENTS IN THE F ORM OF THE HIRE PURCHASE CHARGES, IF SO, THERE IS NO LIABILITY ON THE PART OF THE APPELLANT TO DEDUCT TAX AT SOURCE U/S. 194A OF THE ACT A ND THEREFORE, NO CONSEQUENT DISALLOWANCE U/S. 40(A)(IA) IS REQUIRED TO BE MADE. THEREFORE, WE REMIT THE MATTER BACK TO THE FILE OF AO TO VERIFY WHETHER THE SUBJECT PAYMENTS ARE MADE UNDER THE H IRE PURCHASE AGREEMENTS AND IF SO, DELETE THE ADDITION OR OTHERWISE TO EXAMINE WHETHER THE SUBJECT PAYMENTS FALL WITHIN THE D EFINITION OF INTEREST AS DEFINED U/S. 2(28A) OF THE ACT. 5. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH SEPTEMBER, 2017 SD/- SD/- (D. MANMOHAN) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 7 TH SEPTEMBER, 2017 TNMM I.T.A. NO. 154/HYD/2017 :- 5 - : COPY TO : 1. SVR STONE CRUSHERS, C/O. K. PANDU RANGAIAH, B.A. , B.L., ADVOCATE, D.NO. 5-1-679, STONEHOUSEPET, NELLO RE. 2. THE INCOME TAX OFFICER, WARD-1, GUDUR, NELLORE D IST., 3. CIT (APPEALS)-TIRUPATI. 4. PR.CIT-TIRUPATI. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.