P M Narayana , Moodbidri V. Income Tax Officer Ward-2(2), Mangalore

ITA 1586/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8227 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-03-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 11-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS K SURYAWANSHI
• Assessee Lawyers: EDMOND DSOUZA
• Keywords: Opportunity of being heard; Retrospective amendment; Competent authority
• Section: 40(a)(ia); 201(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO . 1586 / BANG/201 8 ASSESSMENT YEAR : 201 2 - 13 SHRI P.M. NARAYANA, PROP. SHRINGAR WINE PARLOUR & NISHMITHA MOTORS, 162B(8), NISHMITHA TOWERS, MAIN ROAD, NEAR BUS STAND, MOODBIDRI. PAN: ACMPM8273D VS. THE INCOME TAX OFFICER, WARD 2 (2), MANGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI EDMOND D SOUZA, CA RESPONDENT BY : SHRI VIKAS K. SURYAWANSHI, ADDL. CIT (DR) DATE OF HEARING : 1 3 . 1 2 .2018 DATE OF PRONOUNCEMENT : 31 . 1 2 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT(A)-10, BANGALORE DATED 12.02.2018 FOR ASSES SMENT YEAR 2012-13. 2. THE GROUND RAISED BY THE ASSESSEEIS AS UNDER. 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED INCOME-TAX OFFICER, GROSSLY ERRED IN DISALLOWING THE APPELLANTS CLAIM OF RS. 15,92,916.00 BEING THE INTE REST PAID ON LOANS TO M/S SUNDARAM FINANCE LIMITED, CHENNAI INVOKING T HE PROVISIONS OF SECTION 40A(IA) OF THE INCOME-TAX ACT, 1961, WHEN T HERE WERE BINDING DECISIONS OF THE HONOURABLE INCOME-TAX APPELLATE TR IBUNAL, BENGALURU BENCHES ALLOWING SUCH DEDUCTION. 3. THE APPELLANTS CLAIM BEFORE THE LEARNED COMMISSI ONER OF INCOME- TAX (APPEALS) FOR ALLOWING THE INTEREST PAID TO M/S SUNDARAM FINANCE LIMITED WITHOUT DEDUCTING TAX AT SOURCE, INVOKING T HE PROVISIONS OF THE SECOND PROVISO TO SECTION 40A(IA) OF THE ACT WH ICH DEEMS THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF THE RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO AS THE APPELLANT ALTHOUGH NOT DEDU CTED TAX AT SOURCE BUT COMPLIED WITH THE CONDITIONS PRESCRIBED BY THE FIRST PROVISO TO SUB SECTION (1) OF SECTION 201. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) , BENGALURU FAILED TO APPRECIATE THAT THE APPELLANT HAS ALTHOUG H NOT DEDUCTED TAX ITA NO. 1586/BANG/2018 PAGE 2 OF 6 AT SOURCE AND PAID TO CENTRAL GOVERNMENT ON THE INT EREST PAID BY IT TO THE LENDER M/S SUNDARAM FINANCE LIMITED, BUT IN VIE W OF THE PROVISIONS OF SECOND PROVISO TO SECTION 40A(IA) REA D WITH THE FIRST PROVISO TO SUB SECTION (1) OF SECTION 201, THE APPE LLANT IS ENTITLED TO BE TREATED THAT THE ASSESSEE HAS DEEMED TO HAVE DED UCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. 5. THE APPELLANT HAVING FILED WITH THE COMMISSIONER OF INCOME-TAX (APPEALS), COPY OF FORM NO. 26A ALONG WITH ANNEXURE A ISSUED BY M/S BRAHMAYYA& CO. CHARTERED ACCOUNTANTS, AND THE S AME HAVING BEEN RECEIVED BY THE COMMISSIONER OF INCOME-TAX (AP PEALS) ON 02- 02-2018 MUCH BEFORE THE ORDER PASSED BY THE COMMISS IONER, THE REJECTION OF THE CLAIM OF INTEREST IS NOT IN ACCORD ANCE WITH LAW. 6. THE FIRST APPELLATE AUTHORITY OUGHT TO HAVE ALLO WED DEDUCTION OF AMOUNT OF INTEREST PAID TO THE LENDER AS THE APPELL ANT HAS COMPLIED WITH THE PROVISIONS OF SECOND PROVISO TO SECTION 40 A(IA) AND THE PROVISO TO SUB SECTION (1) OF SECTION 201 READ WITH RULE 31 ACB AND ALSO FILED THE FORM NO. 26A AND THE ANNEXURE A THER ETO TO THE COMPETENT AUTHORITY AND A COPY THEREOF FURNISHED TO THE COMMISSIONER OF INCOME-TAX (APPEALS). 7. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAVING RECEIVED THE FORM NO. 26A AND THE ANNEXURE A THERETO OUGHT TO HA VE ALLOWED THE APPELLANTS CLAIM FOR ALLOWANCE OF INTEREST PAID WIT HOUT DEDUCTION OF TAX AT SOURCE. 8. THE COMMISSIONER OF INCOME-TAX ERRED IN REJECTIN G THE CLAIM OF ALLOWANCE OF INTEREST PAID TO M/S SUNDARAM FINANCE LIMITED WITHOUT DEDUCTION OF TAX AT SOURCE ON THE GROUND THAT THE P ROVISION WHICH THE APPELLANT WANTS TO TAKE BENEFIT OF CAME INTO FORCE WITH EFFECT FROM 01- 04-2013 AND AS THIS AMENDMENT WAS NOT RETROSPECTIVE , THE APPELLANT CANNOT TAKE BENEFIT OF THE SAME AND HENCE, THE APPE LLANTS PLEA IN THIS REGARD WAS REJECTED. 9. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED I N QUOTING THE FIRST PROVISO TO SECTION 40A(IA) IN THE APPELLATE O RDER STATING THE CLAIM OF THE APPELLATE IS UNDER THE FIRST PROVISO, WHEREAS THE APPELLANTS CLAIM WAS UNDER THE SECOND PROVISO TO SE CTION 40A(IA). 10. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) FAILED TO NOTE THAT, THE SECOND PROVISO TO SECTION 40A(IA) INTRODU CED BY THE FINANCE ACT 2012 WITH EFFECT FROM 01-04-2013, IS ONLY A CLARIFICATORY/DECLARATORY AND CURATIVE PROVISION AN D HAS RETROSPECTIVE EFFECT FROM 01-04-2005 FROM THE DATE OF WHICH SUB C LAUSE (IA) OF SECTION 40A WAS INSERTED BY THE FINANCE (NO. 2) ACT , 2004. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLA NT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO OR DER FOR THE REFUND OF THE INSTITUTION FEE AS PART OF THE COSTS. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THIS SUBMISSION WAS MADE BEFORE CIT(A) AS NOTED BY HIM IN PARA 5.2 OF HIS OR DER THAT THE DEDUCTEE M/S. SUNDARAM FINANCE HAS ALREADY FILED ITS RETURN OF INCOME AND PAID TAXES ITA NO. 1586/BANG/2018 PAGE 3 OF 6 ON THE AMOUNT OF RS. 15,92,960/- ON WHICH THE ASSES SEE FAILED TO DEDUCT TAX. BUT IN SPITE OF THIS, THE ISSUE WAS DECIDED B Y CIT (A) AGAINST THE ASSESSEE BUT NOW THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE DELHI HIGH COURT RENDER ED IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P.) LTD. AS REPORTED IN [2015] 61 TAXMANN.COM 45 (DELHI). HE SUBMITTED A COPY OF THI S JUDGEMENT WHICH IS AVAILABLE ON PAGES 20 TO 24 OF PAPER BOOK. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER PARAS 5.1 TO 5.2 OF HIS OR DER AND THEREFORE, THESE PARAS ARE REPRODUCED HEREINBELOW FOR READY REFERENC E. 5.1 I HAVE GONE THROUGH THE SUBMISSION OF THE APPEL LANT, STATEMENT OF FACTS AND GROUNDS OF APPEAL. I HAVE ALSO PERUSED TH E ASSESSMENT ORDER. ON THE BASIS OF THE MATERIALS AVAILABLE ON R ECORD I PROCEED TO DISPOSE OF THE APPEAL AS BELOW. 5.2 DISALLOWANCE U/S 40(A)(IA) IN THE APPEAL PROCEEDINGS THE A/R STATED THAT THE D EDUCTEE, M/S SUNDARAM FINANCE HAS ALREADY FILED ITS RETURN O F INCOME AND PAID TAXES ON THE AMOUNT OF RS.15,92,960/- ON WHICH THE APPELLANT FAILED TO DEDUCT TAX. THE A/R SUBMITTED AS UNDER: IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) IT IS SUBM ITTED THAT THE DEDUCTEE M/S SUNDARAM FINANCE LTD. HAS DECLARED THE INCOME RECEIVED FROM THE APPELLANT, I.E. INTEREST ON THE L OAN BORROWED AMOUNTING TO RS.15,92,960)- AND ALSO PAID THE APPRO PRIATE TAX THEREON AND FILED ITS RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2012-13. THE DEDUCTEE M/S SUNDARAM FINANCE LTD. HAS ISSUED / PROMISED TO ISSUE A CERTIFICATE AS REQUIRED BY SECT ION 201(1) WHICH IS PRODUCED HEREWITH WILL BE PRODUCED SHORTLY. HENC E THE ADDITION MAKE MAY KINDLY BE DELETED. IN THIS REGARD, IT CAN BE NOTED THAT DURING THE FIN ANCIAL YEAR 2011-12 RELEVANT TO THE A.Y. 2012-13 THERE WAS NO SUCH PROV ISION TO THE EFFECT THAT IF THE DEDUCTEE HAS PAID TAX ON THE AMOUNT ON WHICH TAX WAS NOT DEDUCTED WILL BE ALLOWABLE AS A DEDUCTION. SECTION 40(A)(IA) IN THE FINANCIAL YEAR 2011-12 READ AS UNDER: AMOUNTS NOT DEDUCTIBLE. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC TIONS 30 TO [38], THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION',- (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT, ROYALTY,] FEES FOR ITA NO. 1586/BANG/2018 PAGE 4 OF 6 PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-8 AND SUCH TAX HAS NOT BE EN DEDUCTED OR, AFTER DEDUCTION, [HAS NOT BEEN PAID ON OR BEFOR E THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 :] [PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TA X HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139,,SUCH SUM SHALL BE ALLOWED AS A DEDU CTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX H AS BEEN PAID.] THE PROVISION WHICH THE APPELLANT WANTS TO TAKE BEN EFIT OF CAME INTO FORCE W.E.F. 01.04.2013. AS THIS AMENDMENT WAS NOT RETROSPECTIVE THE APPELLANT CANNOT TAKE BENEFIT OF THE SAME. THEREFOR E, THE APPELLANT'S PLEA IN THIS REGARD, IS REJECTED. IN GROUND NO. 4, 5 AND 6 THE APPELLANT HAS RAISED T HE GROUND THAT THE AMOUNT OF INTEREST WAS PAID DURING THE YEAR WHEREAS SECTION 40(A)(IA) IS APPLICABLE TO THE AMOUNT WHICH REMAINS 'PAYABLE' AT THE END OF THE FINANCIAL YEAR. IN THE CASE OF PALAM GAS SERVICE VS . CIT, CIVIL APPEAL NO. 5512 OF 2017 THE HON'BLE SUPREME COURT H AS SETTLED THE 'PAID' VS 'PAYABLE' DEBATE. THE HON'BLE SUPREME COU RT HAS HELD THAT PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME-TAX A CT, 1961 ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH WAS OUTSTAN DING AT THE END OF THE RELEVANT PREVIOUS YEAR, BUT TO THE ENTIRE EXPEN DITURE WHICH BECAME LIABLE FOR PAYMENT AT ANY POINT DURING THE YEAR UND ER CONSIDERATION INCLUDING THE AMOUNT WHICH WAS PAID BEFORE THE END OF THE RELEVANT PREVIOUS YEAR. IN VIEW OF THE ABOVE MENTIONED JUDGE MENT THERE IS NO MERIT IN THE GROUND TAKEN BY THE APPELLANT. IN THE RESULT, THE GROUNDS OF APPEAL RELATING TO TH E DISALLOWANCE U/S 40(A)(IA) FAIL. THE ADDITION OF RS.15,92,960/- STAN DS CONFIRMED. 5. FROM THE ABOVE PARAS REPRODUCED FROM THE ORDER O F CIT(A), IT IS SEEN THAT THIS WAS SUBMITTED BY ASSESSEE BEFORE CIT(A) THAT T HE DEDUCTEE M/S. SUNDARAM FINANCE LTD. HAS ISSUED / PROMISED TO ISSU E A CERTIFICATE AS REQUIRED BY SECTION 201(1) WHICH IS PRODUCED HEREIN BELOW / WILL BE PRODUCED SHORTLY. THERE IS NO FINDING OF CIT(A) AS TO WHETH ER THIS CLAIM OF THE ASSESSEE IS CORRECT THAT RETURN OF INCOME WAS FILED BY M/S. SUNDARAM FINANCE LTD. AND TAX HAS BEEN PAID BY THAT PARTY. THE ORDER OF CIT(A) IS ON THIS BASIS THAT THE AMENDMENT IN SECTION 40A(IA) IS W.E.F. 01.04.2013 AND THEREFORE, IN THE PRESENT YEAR BEING 2012-13, THE A SSESSEE DOES NOT GET THE BENEFIT OF THIS AMENDMENT WHICH HAS BEEN HELD TO BE NOT RETROSPECTIVE BUT ITA NO. 1586/BANG/2018 PAGE 5 OF 6 AS PER THIS JUDGEMENT OF HONBLE DELHI HIGH COURT R ENDERED IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P.) LTD. (SUPRA), THIS WAS HELD THAT THE SECOND PROVISO TO SECTION 40A(IA) OF IT ACT IS DECLARATORY AND CURATIVE IN NATURE AND SHOULD BE GIVEN RETROSPECTIVE EFFECT FRO M 1 ST APRIL 2005. HENCE ON THIS ASPECT, THE ASSESSEE DESERVES THE REL IEF BUT BEFORE THAT, THE FACTUAL ASPECT HAS TO BE EXAMINED AS TO WHETHER RETURN OF INCOME WAS FILED BY DEDUCTEE M/S. SUNDARAM FINANCE LTD. OR NOT AND WHETHER THE IMPUGNED AMOUNT PAID BY ASSESSEE TO THAT PARTY HAS BEEN INCLUDED BY THAT PARTY IN ITS INCOME. TO EXAMINE THIS FACTUA L ASPECT, WE RESTORE BACK THE MATTER TO THE FILE OF CIT(A) WITH THE DIRE CTION THAT IF IT IS FOUND FACTUALLY CORRECT THAT M/S. SUNDARAM FINANCE LTD. H AS FILED RETURN OF INCOME FOR RELEVANT YEAR AFTER INCLUDING THIS AMOUN T OF RS. 15,92,960/- RECEIVED BY THAT PARTY FROM PRESENT ASSESSEE AND TA X HAS BEN PAID BY THAT PARTY I.E. M/S. SUNDARAM FINANCE LTD. THEN NO DISALLOWANCE IS CALLED FOR IN THE PRESENT CASE. THE CIT(A) SHOULD PASS NE CESSARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDIN G REASONABLE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST DECEMBER, 2018. /MS/ ITA NO. 1586/BANG/2018 PAGE 6 OF 6 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.