Assistant Commissioner of Income-tax, Central Circle-2, Nashik V. M/s. Zeal Infra Projects Private Limited, Nashik

ITA 159/PUN/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2837 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Assessee Lawyers: P S SHINGTE
• Keywords: Retrospective amendment; Tax effect; TDS
• Section: 143(3); 40(a)(ia); 148

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER . / ITA NO.159/PUN/2019 / ASSESSMENT YEAR : 2012-13 THE ASST.COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 2, NASHIK. . / APPELLANT V/S M/S. ZEAL INFRA PROJECTS PVT. LTD., SUYOJIT HEIGHTS, OPP. RAJIV GANDHI BHAVAN, SHARANPUR ROAD, NASHIK 422003. PAN : AAACZ3017F. . / RESPONDENT ASSESSEE BY : SHRI P.S. SHINGTE. REVENUE BY : SHRI M.K. VERMA. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE OR DER OF COMMISSIONER OF INCOME TAX (A) 12, PUNE DATED 10.09.201 8 FOR THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE ENGAGED AS BUILDER AND DEVELOPER. THE ASSESSMENT IN THE CASE OF ASSESSEE FOR A .Y. 2012-13 WAS INITIALLY FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 28.03.2015 AND THE TOTAL INCOME WAS ASSESSED AT RS.41,680/-. THERE AFTER, THE / DATE OF HEARING : 04.06.2019 / DATE OF PRONOUNCEMENT: 07.06.2019 2 ITA NO.159/PUN/2019 CASE WAS RE-OPENED BY ISSUING NOTICE U/S 148 OF THE ACT . THEREAFTER, ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE ACT VID E ORDER DT.30.12.2016 AND THE TOTAL INCOME WAS DETERMINED AT RS.4 1,680/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MAT TER BEFORE LD.CIT(A) WHO VIDE ORDER DATED 10.09.2018 (IN APPEAL NO.PN/CI T(A)- 12/10333/2017-18) GRANTED SUBSTANTIAL RELIEF TO THE ASSES SEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APP EAL AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING RELIEF ON NON-DEDUCTION OF TDS ON INTEREST OF RS.4,69,57,184/- BY HOLDING THE AMENDMENT TO SEC.40 (A)(IA) FROM 01.04.2013 AS RETROSPECTIVE IN NATURE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) ERRED IN HOLDING THE SECOND PROVISO TO SECTION 40(A )(IA) IS RETROSPECTIVE IGNORING THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF PRUDENTIAL LOGISTICS AND TRANSPORTS VS. ITO (2014) 51 TAXMAN.COM 426. 3. BOTH THE GROUNDS BEING INTER-CONNECTED ARE CONSIDE RED TOGETHER. 4. AO NOTICED THAT ASSESSEE HAD TAKEN UNSECURED LOAN FROM M/S. SUN INFRASTRUCTURE PVT. LTD., AND HAD PAID INTEREST OF RS.4 ,69,57,184/- ON WHICH TDS WAS NOT DEDUCTED BY THE ASSESSEE. AO WA S OF THE VIEW THAT NON-DEDUCTION OF TDS ON PAYMENT OF INTEREST ATTRAC TS PROVISIONS OF SEC.40(A)(IA) OF THE ACT AND ACCORDINGLY, THE INTEREST WAS LIABLE TO BE DISALLOWED. THE ASSESSEE WAS ASKED TO SHOW AS TO WHY T HE INTEREST EXPENSE NOT BE DISALLOWED. TO THE QUERY OF AO, ASSESSEE MADE SUBMISSIONS INTER-ALIA STATING THAT THE INTEREST PAID BY TH E ASSESSEE TO M/S. SUN INFRASTRUCTURE PVT. LTD., HAS BEEN CONSIDERED BY IT IN ITS PROFIT AND LOSS ACCOUNT IN THE RETURN OF INCOME FILED BY IT . IT WAS THEREFORE SUBMITTED THAT THE PROVISIONS OF SEC.40(A)(IA) OF TH E ACT ARE 3 ITA NO.159/PUN/2019 NOT APPLICABLE. THE SUBMISSION OF THE ASSESSEE WAS NOT FOU ND ACCEPTABLE TO THE AO AS HE WAS OF THE VIEW THAT THE SE COND PROVISO TO SEC.40(A)(IA) OF THE ACT COMES INTO EFFECT FROM 01.04.2013 I.E., FOR A.Y. 2013-14 ONWARDS AND NOT APPLICABLE TO THE YEAR UNDER C ONSIDERATION. HE ACCORDINGLY DISALLOWED THE INTEREST EXPENSES OF RS.4,69,5 7,184/- U/S 40(A)(IA) OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSE SSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO AFTER RELYING ON THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PVT. LTD., REPORTED IN (2015) 377 ITR 635 AND OTH ER DECISIONS CITED IN HIS ORDER DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE BY OBSERVING AS UNDER : 3.1 I HAVE CONSIDERED THE MATERIALS PLACED BEFORE ME . BRIEF FACTS ARE THAT THE APPELLANT WHILE RETURN OF INCOME U./S 139(1) ON 30.09 . 2012 TOTA L INCOME O F RS . 41,680/- WHICH WAS ACCEPTED BY THE AO I N T H E ORDER PASSED U/S 143 ( 3 ) O N 28.03.2015. THEREAFTER, THE AO NOTICED THAT THE APP ELLANT HAD PA I D IN TEREST O N UNSECURED LOAN AMOUNTING TO RS. 4,69,57,184/- TO M/S. SUN INFRASTRUCTURE P VT . L TD. ON WHICH APPELLANT FAILED TO DEDUCT TDS AS PER PROVISIONS OF SECTION 194A OF THE IT ACT. TH E AO NOTED THAT NON DEDUCTION OF TDS WAS VIOLAT I ON OF P R OV I SIO N S O F SECTION 40(A)(IA) THEREFORE, IT WAS NOT AN ALLOWAB L E EXPENSES . HENCE , THE AO REOPENED THE ASSESSMENT PROCEEDING U/S 147 OF THE IT ACT AFTER OBTA INING APPROVAL FROM THE CONCERNED AUTHO R ITY. IN RESPONSE TO NOTICE ISSUED U/S 14 8 DATED 25.02.2016, THE APPELLANT FILED RETURN OF INCOME ON 14 . 03.2016 DECLAR I NG TOTAL INCOME OF RS. 41,680/-. DURING THE REASSESSMENT PROCEED IN GS ON BE IN G ASKED AS TO WHY THE INTEREST EXPENSES OF RS . 4,69 , 57 , 18 4/- S H O UL D N OT BE DISALLOWED U/S 40(A)(IA), THE APPELLANT SUBM I TTED THAT THE SAID EXPE N SES CA NN OT BE DISALLOWED FOR NON DEDUCTION OF TDS SINCE THE APPELLANT HAD NOT DEB I TED T HE INTEREST EXPENSES IN THE P & L A/C INSTEAD THE INTEREST EXPENSES WAS CAPITALIZED BY ADDING THE VALUE OF CLOSING WIP. THE APPELLANT FURTHER CONTENDED THE IN TEREST PAID TO M/S SUN INFRASTRUCTURE PVT . LTD. WAS DU L Y ACCOUNTED FOR IN T H E R E TURN FILED BY THE SAID COMPANY THEREFORE THE APPELLANT WAS NOT AN ASS ESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) TO SECTI ON 201, HENCE THE ASSESSEE WAS NOT LIABLE FOR DISALLOWANCE U/S 40(A)(IA).THE AO REJECTED THE BOTH ARGUMENTS OF THE APPELLANT . THE AO NOTED THAT CAPITALIZATION OF INTEREST EXPENSES ONLY DEFERS THE CLAIM OF EXPENSES AND NOT GIVING UP OF CLAIM OF SUCH EXPENSES. THE AO ALSO NOTED THAT PROV ISIONS OF SECTION 201 FOR NOT TREATING AN ASSESSEE AS ASSESSEE IN DEFAULT IN CASE WHERE THE RECEIVER OF INTEREST HAD SHOWN THE AMOUNT OF INTERE ST RECEIVED IN THE RETURN OF INCOME FILED AND PAID TAXES ON IT CAME IN EFFECT FROM 1 ST APRIL, 2013 WHICH IS APPLICABLE FROM AY 2013-14, THE ASSES SMENT YEAR UNDER CONSIDERATION IS AY 2012-13 TO WHICH THE SAID PROVI SO OF SECTION 201 IS NOT APPLICABLE. THE AO ACCORDINGLY DISALLOWED THE A MOUNT OF RS. 4 ITA NO.159/PUN/2019 4,69,57,184/- AS PER THE PROVISIONS OF SECTION 40(A )(IA) AND SINCE THE APPELLANT ADDED THE EXPENSES TO THE CLOSING WIP, TH E AO REDUCED THE VALUE OF WIP DISALLOWING CLAIM OF INTEREST COST INC LUDED IN WIP IN SUBSEQUENT YEARS. DURING THE APPELLATE PROCEEDINGS THE APPELLANT REITERATED THAT THE AMENDMENT TO SECTION 201 CAME IN 01 . 04.2013 WHICH WAS A RETROSPECTIVE AMENDMENT, CLARIFICATORY IN NAT URE TO REMOVE THE HARDSHIP OF DOUBLE TAXATION. THE INTEREST EARNED BY M/S SUN INFRASTRUCTURE PVT . LTD. FROM THE APPELLANT COMPANY WAS DULY SHOWN BY SUN INFRASTRUCTURE PVT . LTD. IN THE RETURN OF INCOME FILED AND TAXES PAID O N THE INTEREST RECEIVED, THEREFORE, THE AMENDED PROVI SION OF SECTION 201 WOULD APPLY AND NO DISALLOWANCE U/S 40(A)(IA) WAS WARRANTED. THE APPELLANT IN SUPPORT OF THE CONTENTIONS RAISED RELI ED ON THE DECISION OF PUNE TRIBUNAL IN THE CASE OF ACIT VS BHAVOOK CHANDR APRAKASH TRIPATHI, ITA NO.1372/PN/2013 DATED 18-03-2015 AND ITO VS. M/S GAURIMAL MAHAJAN & SONS VIDE ITA NO.1852/PN/2012 DATED 06.01 .2014, AND OF AGRA TRIBUNAL IN THE CASE OF RAJIV KUMAR AGARWAL VS . ACIT , ITA NO. 3371AGRAL2013 DATED 29/0512013 AS WELL AS HIGH COUR T OF DELHI IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P.) LTD., ITA NO. 160 OF 2015 DATED 26/0812015. I HAVE CONSIDERED THE DOCUMENTS P LACED BEFORE ME. THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL L AND MARK TOWNSHIP (P) LTD. (SUPRA) HELD THAT THE SECOND PROVISO TO SE CTION 40(A)(IA) IS DECLARATORY AND CURATIVE AND IT HAS RETROSPECTIVE E FFECT FROM 01.04.2005. THE HONBLE DELHI HIGH COURT WHILE DECIDING THE ISS UE HELD AS UNDER : 3. XXXX . . 16. XXXX THE HON'BLE DELHI HIGH COURT IN THE ABOVE MENTIO N ED J U D G MENT C AT E G O RI C ALLY HELD THAT AS REGARDS THE RATIONALE BEHI N D THE INSERTION OF T H E SECO N D P R O VI SO TO SECTION 40(A)(IA) OF THE ACT WAS THAT THE SAID P R OVISO IS DECLARATO R Y AND C U RA TIVE AND HAS RETROSPECTIVE EFFECT FROM 1ST APRIL 2005 . THEREFORE , CONSIDERING THE R ATIO OF TH I S JUDGMENT OF HON'BLE DELHI HIGH COURT THE APPELLANT'S CASE I S COVERED WITH THE AMENDMENT CAME ON 01.04.2013 FO R PROVIS I ONS OF SEC TI O N 20 1 A ND SEC TION 40(A)(IA) CONSIDERING THE APPELLANT BE I NG N OT AN ASSESSEE I N D E FAUL T IN CASE WHERE THE EXPENSES DEBITED WAS INCLUDED BY THE RECEIVER IN TH E RETURN OF INCOME FILED AND ' TAX WAS PAID THEREON. SINCE, THE SUN INFRASTRUCTURE PVT . LTD. HAS INCLUDED THE AMOUNT OF INTEREST INCOME OF RS. 4 ,69,57,184/- RECEIVED FROM THE APPELLANT IN THE RETURN OF INCOME FILED AN D PAID TAXES ON THE SAME, THE APPELLANT CANNOT BE HELD AS ASSESSEE IN D EFAULT U/S 201 OF THE IT ACT AND WAS NOT LIABLE FOR DISALLOWANCE U/S 40(A )(IA) IN VIEW OF THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD. (SUPRA) HOLDING THE AMENDMENT TO SECTION 201 AND 40(A)(IA) INTRODUCED ON 01.04.2013 WAS CLARIFICATOR Y AND CURATIVE IN NATURE AND WAS APPLICABLE RETROSPECTIVELY FROM 01.0 4.2005 I . E. FROM THE PERIOD OF INSERTION OF THE SECTION 40(A)(IA). THE A O IS DIRECTED TO DELETE THE DISALLOWANCE MADE U/S 40(A)(IA) OF RS. 4,69,57,184/- REDUCING THE VALUE OF CLOSING WIP. GROUND RAISED BY THE APPELLANT IS HERE BY ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE ME. 5 ITA NO.159/PUN/2019 5. BEFORE ME, LD.D.R. SUPPORTED THE ORDER OF AO AND LD.CI T(A). LD.A.R. ON THE OTHER HAND SUBMITTED THAT IN PRINCIPAL THE A PPEAL FILED BY THE REVENUE NEEDS TO BE DISMISSED ON ACCOUNT OF LOW- TAX EFFECT. HE FURTHER SUBMITTED THAT EVEN ON MERITS, LD.CIT(A) HAS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION IN THE CA SE OF CIT VS. ANSAL LAND MARK TOWNSHIP PVT. LTD., (SUPRA) AND THE AFOR ESAID DECISION HAS ALSO BEEN FOLLOWED BY ITAT, PUNE BENCH IN V ARIOUS OTHER DECISIONS. HE SUBMITTED THAT THERE IS NO CONTRARY BINDING DECISION IN REVENUES FAVOUR. HE THUS SUPPORTED THE ORDER OF LD.CIT(A). 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT. IT IS THE CASE OF REVENUE THAT ON THE INTEREST O F RS.4,69,57,184/- THAT WAS PAID BY THE ASSESSEE TO M/S. SU N INFRASTRUCTURE PVT. LTD., THE NECESSARY TDS WAS NOT DE DUCTED BY THE ASSESSEE AND THEREFORE PROVISIONS OF SEC.40(A)(IA) OF THE ACT ARE APPLICABLE. ASSESSEES CASE IS THAT THE AFORESAID INTEREST PAID BY THE ASSESSEE HAS BEEN CONSIDERED AS INCOME BY M/S. SUN INFR ASTRUCTURE PVT. LTD., IN ITS RETURN OF INCOME AND HAS ALSO PAID TAXES O N THE SAME AND THEREFORE RELYING ON THE DECISION OF CIT VS. ANSAL LA ND MARK TOWNSHIP PVT. LTD., (SUPRA) WHEREIN IT HAS HELD THAT INSERTION OF SECOND PROVISO TO SEC.40(A)(IA) OF THE ACT IS DECLARATORY AND CURAT IVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 01.04.2005. I FIND THAT LD.CIT(A) RELYING ON THE DECISION IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PVT. LTD., (SUPRA) HAS GIVEN A FINDING THAT M/S. SUN INFRASTRUCTURE PVT. LTD., HAS INCLUDED THE AMOUNT OF INTERE ST PAID BY THE ASSESSEE IN ITS RETURN OF INCOME AND HAS PAID TAXES ON THE SAME. 6 ITA NO.159/PUN/2019 CONSIDERING THE AFORESAID FACTS, I AM OF THE VIEW THAT LD.C IT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO AND IN SUCH CIRCUMSTANCES, I FIND NO REASON TO INTERFERE WITH THE ORD ER OF LD.CIT(A). THUS, THE GROUNDS OF REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 7 TH DAY OF JUNE, 2019. SD/-- ( ANIL CHATURVEDI ) ' / ACCOUNTANT MEMBER PUNE; DATED : 7 TH JUNE, 2019. YAMINI #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-12, PUNE. PR. CIT, CENTRAL, NAGPUR. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &' , / ITAT, PUNE.