M/s. Amar Cement SICOP, Kathua V. The Income-tax Officer, Kathua

ITA 156/ASR/2011

• Counselvise Citation: 15620914 RSA 2011
• Duration Of Justice: 1 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: VAIBHAV AGGARWAL
• Keywords: Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.156(ASR)/2011 ASSESSMENT YEAR:2006-07 PAN :AAGFA8148P M/S. AMAR CEMENT SICOP, VS. THE INCOME TAX OFFICER, INDUSTRIAL ESTATE, KATHUA. KATHUA (J&K). (APPELLANT) (RESPONDENT) APPELLANT BY:SH. VAIBHAV AGGARWAL, CA RESPONDENT BY: SH. R.L. CHHANALIA, DR DATE OF HEARING:07/11/2012 DATE OF PRONOUNCEMENT:08/11/2012 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JAMMU, DATED 17.02.2011 FOR THE ASSESSMENT YEAR 20 06-07. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A), JAMMU HAS ERRED BOTH QUEST ION OF LAW AND FACTS IN UPHOLDING THE DISALLOWANCE OF THE EXPENSES OF RS.1,48,788/- PAID AS INTEREST TO M/S. TATA FINANCE CO. BY INVOKING SECTION 40(A)(IA) OF THE ACT. 2. THE LD. CIT(A) HAS ALSO ERRED IN UPHOLDING THE A DDITION AS THE PROVISION OF SECTION 40(A)(IA) WAS NOT APPLICABLE I N THE CASE OF THE APPELLANT AS ALL THE EXPENSES HAS BEEN DULY PAI D DURING THE FINANCIAL YEAR AND NOTHING REMAINED PAYABLE AS ON T HE DATE OF BALANCE SHEET I.E. 31.03.2006. ITA NO.156(ASR)/2011 2 3. THE UPHOLDING OF THE ADDITION IS ILLEGAL AND ARB ITRARY. 4. THE APPELLANT CRAVE LEAVE TO AMEND, ALTER OR ADD ANY GROUNDS OF APPEAL BEFORE THE SAME IS HEARD AND DISPOSED OFF. 2. THE BRIEF FACTS AS PER AOS ORDER ARE REPRODUCED FOR THE SAKE OF CLARITY AS UNDER: DURING EXAMINATION OF VARIOUS LEDGER ACCOUNTS OF T HE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE HAD TAKEN LOAN FOR PURCHASE OF TRUCKS FROM TATA FINANCE LTD. PATHANKOT. THE ASSESSEE WAS PAYING REGULAR INSTALMENTS TO TATA FINANCE LTD. AND AT THE END OF THE F.Y. HAD CREDITED AN AMOUNT OF RS .1,48,788/- BEING INTEREST. THIS AMOUNT OF INTEREST WAS MENTIONED AS BANK INTEREST AND DEBITED TO THE P&L ACCOUNT ALONG WITH THE INTEREST PAID TO THE BANKS UNDER THE PROVISIONS OF SECTION 194A OF THE ACT, TH E ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON THE PAYMENT OF THE INTEREST WHICH HAS NOT BEEN DONE BY THE ASSESSEE. VIDE ORDER SHEET DATED 05.11.2008, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY EXPENDI TURE ON ACCOUNT OF THIS INTEREST MAY NOT BE DISALLOWED UNDER THE PROVI SIONS OF SECTION 40(IA) OF THE ACT. THE ASSESSEE VIDE ORDER SHEET DA TED 11.11.2008 CONTENDED THAT THE PAYMENT OF INTEREST TO TATA FINA NCE IS EXEMPTED FROM TDS BEING A FINANCE INSTITUTION AS DEFINED IN SECTION 194A(3)(III)(F). THE CONTENTION OF THE ASSESSEE IN THIS REGARD IS NOT CORRECT. THE PROVISIONS QUOTED BY THE ASSESSEE DEAL S WITH OTHER INSTITUTION, ASSOCIATION OR BODY WHICH THE CENTRAL GOVERNMENT MAY FOR THE REASONS TO BE RECORDED IN WRITING, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE. THE TATA FINANCE LTD. HAS NOT BE EN NOTIFIED BY THE CENTRAL GOVERNMENT AS REQUIRED UNDER THE PROVISIONS OF SECTION 194A (3)(II)(F) AND ACCORDINGLY, THE ASSESSEE WAS REQUIR ED TO DEDUCT THE TAX AT SOURCE ON THE PAYMENT OF INTEREST MADE TO THEM. THE ASSESSEE IS THUS HIT BY THE PROVISION OF 40(IA). THE PROVISIONS OF SECTION 40(IA) ARE MANDATORY IN NATURE AND DO NOT GIVE ANY LEVERAGE TO THE ASSESSEE ON THIS ACCOUNT. AS REQUIRED UNDER THE PROVISIONS OF S ECTION 40(IA), THE EXPENDITURE OF RS.1,48,788/- ACCORDINGLY DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. AS THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME, THE UNDERSIGNED IS SATIS FIED THAT THIS IS A FIT CASE FOR INITIATION OF PENALTY PROCEEDINGS U/S 271( 1)(C) OF THE ACT AND THE SAME ARE INITIATED SEPARATELY. AS THE ASSESSEE HAS FAILED TO DEDUCT ITA NO.156(ASR)/2011 3 TAX AT SOURCE, ACTION FOR PENALTY PROCEEDINGS U/S 271C SHALL BE INITIATED ON THIS ACCOUNT. 3. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE, MR. VAIBHAV AG GARWAL, CA INVITED OUR ATTENTION TO THE DECISION OF THE ITAT (SPECIAL BENCH) VISAKHAPATNAM IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS, VIS AKHAPATNAM VS. ACIT, RANGE-1, VISAKHAPATNAM, IN ITA NO.477/VIZ/2008 FOR THE ASSESSMENT YEAR 2005-06 DATED 9 TH APRIL, 2012 REPORTED AT 146 TTJ 1, WHERE IT HAS BE EN HELD THAT SECTION 40(A)(IA) OF THE ACT IS APPLICABLE ON LY TO EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED TO DISAL LOW THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE PREVIOUS YEAR, WITHOUT DEDUCTING TAX AT SOURCE. HE ALSO RELIED UPON THE DE CISIONS ITAT, JAIPUR BENCH, IN THE CASE OF JAIPUR VIDYUT VITRAN NIGAM LT D. VS. DCIT (2009) 123 TTJ (JP) 888, ITAT, HYDERABAD BENCH IN THE CASE OF TEJA CONSTRUCTIONS VS. ACIT (2010) 129 TTJ (HYD)(UO) 57 AND ITAT HYDERABAD BENCH IN THE CASE OF K. SRINIVAS NAIDU VS. ACIT, REPORTED IN (2 010) 131 TTJ (HYD) UO) 17, WHICH ARE IN FAVOUR OF THE ASSESSEE. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IN THE PRESENT CASE, THE ASSESSEE HAVING PAID THE I NTEREST TO M/S. TATA FINANCE ITA NO.156(ASR)/2011 4 LTD, WHICH WAS PAYABLE DURING THE FINANCIAL YEAR AN D THE SAME WAS PAID DURING THE FINANCIAL YEAR ITSELF, WHICH WAS NOT PAY ABLE AS AT THE END OF THE YEAR. THEREFORE, THE SAID AMOUNT CANNOT BE A SUBJEC T MATTER OF DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT IN VIEW OF THE DECISIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE. THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE DECISION OF THE ITAT (SPECIAL BENCH) VISAKHAPATNAM IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA) AND OTHER DECISIONS RELIED UPON BY MR. VAIBHAV AGGARWAL HEREINABOVE. TH EREFORE, FOLLOWING THE SAME, WE DIRECT THE AO TO DELETE THE DISALLOWANCE S O MADE. THUS, ALL THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.156(ASR)/2011 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH NOVEMBER, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 8TH NOVEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. AMAR CEMENT SICOP, INDUSTRIAL ES TATE, KATHUA. 2. THE I.T.O. KATHUA. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY