Asst.CIT., Central Circle-9, Hyderabad, Hyderabad V. M/s Soma Enterprises Limited, Hyderabad

ITA 1572/HYD/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9006 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Keywords: Non-deduction of tax; Reason to believe

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1 418 /HYD/201 4 : ASSESSMENT YEAR 2006 - 07 ITA NO.1 572 /HYD/201 4 : ASSESSMENT YEAR 2007 - 08 ASST. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE, HYDERABAD V/S. M/S. SOMA ENTERPRISES LTD., HYDERABAD ( PAN - AACCS 8242 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. G.APARNA RAO RESPONDENT BY : NONE DATE OF HEARING 12 . 02 .201 5 DATE OF PRONOUNCEMENT 12.02.2015 O R D E R PER D.MANMOHAN, VICE PRESIDENT : THESE APPEALS ARE FILED AT THE INSTANCE OF THE R E VENUE AND THEY ARE DIRECTED AGAINST THE ORDERS PASSED BY THE COMMISSIONER OF INCOME - TAX( APPEALS) VII, HYDERABAD FOR THE ASSESSMENT YEAR S 2006 - 07 AND 2007 - 08. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CIVIL CONTRACTS. AC C OR D ING TO THE ASSESSING OFFICER, THE ASSESSEE INCURRED AN EXPENDITURE OF RS. 15.54 CRORES IN ASSESSMENT YEAR 2006 - 07 AND RS.25.60 CRORES IN ASSESSMENT YEAR 2007 - 08 TOWARDS INTEREST ON MOBILIZATION AD V ANCES PAID TO VARIOU S JO I NT VENTURES AND SUCH PAYMENTS ARE ATTRACTED BY THE P R OVIS I ON S OF S.194A OF THE A C T. ON THE OTHER HAND, THE CASE OF THE ASSESSEE WAS T HAT T HE ASSESSEE HAS UTILI S E D THE MOBILI S ATION AD V ANCES GIVEN BY THE GOVERNMENT UNDERTAKINGS FOR THE EXECUTION OF CONTR A CTS I TA NO. 1418 &1572 /HYD/2014 M/S. SOMA ENTERPRISES LTD., HYDERABAD 2 TH R OU G H ITS JV. THE CONTRACTEES COLL E C T ED INTEREST FROM THE JV, WHICH IN TURN, COLLECTS IT FROM S OMA TO PAY THE INTEREST DIRECTLY OUT OF ITS FUNDS A ND THE END BENEFICIARY OF INTEREST IS THE CONTRACTEE AND NOT THE JV. 3. THE ASSESSING OFFICER W A S , HOWE V ER, OF TH E OPINION THAT THE P R OVIS I ON S OF S.194A ARE ATTRACTED IN THE IN S TANT CA S E AND FOR SUCH FAILURE TO DEDUCT TAX AT SOU R CE, THE ASSESSEE S CLAIM FOR DEDUC T ION OF INTEREST OF MOBILIZATION ADVANCES, IS NO T ALLOWABLE UN D ER S.40(A)(IA) OF THE AC T. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). TH E COMMISSIONER OF INCOME - TAX(APPEALS) OBSERVED IN PARAS 7. 1 A ND 7.2 OF THE OR D ER PASSED FOR ASSESSMENT YEAR 2006 - 07 AS UNDER - 7.1 THE ISSUE IS WHETHER THE APPELLANT SHOULD HAVE DEDUCTED TAX AT SOURCE ON THE INTEREST PAID ON THE MOBILIZATION ADVANCES RECEIVED BY IT AND IN ABSENCE OF SUCH TAX DEDUCTION AT SOURCE, WHETHER THE INTEREST EXPENDITURE IS DISALLOWABLE IN TERMS OF SECTION 40(A)(IA) R.W.194A. AS FAR AS THE LEGAL ISSUE RAISED REGARDING ISSUAL OF NOTICE U/S. 148, IT IS TO BE STATED THAT AS THE ASSESSEE WAS SEEN AS HAVING A CONTRACTUA L RELATION WITH THE JV AND NOT DIRECTLY WITH THE GOVT AGENCY/UNDERTAKING, THERE WAS A REASON TO BELIEVE THAT THE APPELLANT HAD CLAIMED EXPENDITURE WITHOUT DEDUCTING TDS AND WHICH IT WAS NOT ENTITLED TO. THE ISSUAL OF NOTICE IS THEREFORE UPHELD. 7.2 THE FACTS SHOW THAT THE APPELLANT HAD NEVER PAID THE INTEREST AMOUNT AS SUCH. IT WAS DEDUCTED FROM THE RUNNING CONTRACT WORK BILLS AND ONLY THE BALANCE AMOUNT WAS GIVEN TO IT. SECONDLY, THE ACTUAL PAYERS OF SUCH BILLS (AND ALSO THE ACTUAL GIVERS OF SUC H MOBILIZATION ADVANCE) WERE GOVERNMENT UNDERTAKINGS LIKE KHPC, NHAL OR THE STATE GOVT. IRRIGATION DEPT. THE ENTRIES WERE ROUTED THROUGH JV BUT IT WAS NOT THE JV AS SUCH WHICH EITHER PAID THE ADVANCE OR RECEIVED THE SUBSEQUENT INTEREST PAYMENT. IN FA CT, THE JV ITSELF RECEIVED THE NET BILLS AMOUNTS AS PART OF RUNNING ACCOUNT AFTER ADJUSTMENT OF THE INTEREST ON MOBILIZATION ADVANCE AND PASSED ON THE SAME TO THE APPELLANT AFTER MAKING THE DEBIT AND CREDIT ENTRIES IN ITS BOOKS ON THE APPELLANTS ACCOUNT. THUS, TO HOLD THAT THE APPELLANT PAID INTEREST WITHOUT INTEREST WITHOUT DEDUCTING TDS IS ONLY A TECHNICAL INTERPRETATION. IT IS ALSO SEEN TH AT THE S A ME ISSUE WAS DEALT WITH BY THE HON'BLE ITAT, HYDERABAD (JURI S DI C TIONAL) IN THE CA SE OF M/S. RITWIK SWATI JOINT VENTURE IN THEIR ORDER DATED 18/02/2011 IN ITA NO.719/HYD/2010. I TA NO. 1418 &1572 /HYD/2014 M/S. SOMA ENTERPRISES LTD., HYDERABAD 3 IN SHORT, THE LEARNED CIT(A) FOLLOWED THE DECISION OF THE ITAT IN THE CASE OF M/S. RITWIK SWATI JOINT VENTURE (ITA NO.719/HYD/2010) DATED 18.2.2011 IN HOLDING THAT TECHNICALLY, TH E RE WAS NO AMOUNT OF PAYMENT BY THE ASSESSEE IN ORDER TO INVOKE THE TDS PROVISION S . 5. AGGRIEVED, R E VE N UE IS IN APPEAL BEFORE US. 6. THOUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER PASSED BY TH E ASSESSING OFFICER , NO MATERIAL WHATSO EVER W A S FUR N ISHE D TO SUBMI T THAT THE FACTS IN THE INSTANT CA S E ARE DISTINGUISHABLE. IN OTHER WORDS, THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NO T PLACE BEFORE US THE ORDER OF TH E TRIBUNAL IN TH E CASE OF M/S. RITWIK SWATI J OINT VENTURE (SUPRA), AND COU LD NO T PL A CE ANY MATERIAL ON RECORD TO SUGGEST THAT ON IDENTICAL CIRCUMSTANC E S ANY OTHER VIEW WAS TAKEN BY THE ITAT OR ANY SUPERIOR FORUM ON THIS I S SUE. AS TH E M ATTER STAND S TODAY, THE LEARNED CIT(A) FOLLOWED THE VIEW TAK E N BY THE HYDERABAD BENCH OF THE TRIBUNAL, WHICH WAS CHALLENGED BY THE REVENUE, WITHOUT ANY MATERIAL TO CONTRADICT THE FINDINGS OF THE LEARNED CIT(A). 7. HAVING REGARD TO THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE, WE ARE OF THE VIEW THAT THE ORDERS PASSED BY THE LEARNED CIT(A) DO NOT CALL FOR ANY INTERFERENCE, SINCE THEY ARE IN CONSONANCE WITH THE VIEW TAKEN BY THE TRIBUNAL IN THE CASE OF M/S. RITWAIK SWATI JOINT VENTURE (SUPRA). WE THEREFORE, DISMISS THE APPEAL S FILED BY THE REVENUE. 8. IN THE RESULT, REVENUES APPEAL S ARE DISMISSED. PRONOUNCED ACCORDINGLY AT THE CONCLUSION OF HEARING ON 12.2.2015 SD/ - SD/ - (B.RAMAKOTAIAH) (D.MANMOH AN) ACCOUNTANT MEMBER VICE PRESIDENT DT/ - 12 TH FEBRUARY, 2015 I TA NO. 1418 &1572 /HYD/2014 M/S. SOMA ENTERPRISES LTD., HYDERABAD 4 COPY FORWARDED TO: 1 . M.S, SOMA ENTERPRISES LIMITED, H.NO.2, AVENUE 4, BANJARA HILLS, HYDERABAD 500 034 2. ASST . COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 9 , HYDERABAD 3. 4 COMMISSIONER OF INCOME - TAX(APPEALS) V II , HYDERABAD COMMISSIONER OF INCOME - TAX CENTRAL HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S