MMR Infra, Sabarkantha V. DCIT, Sabarkantha Circle, Himatnagar

ITA 1609/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0953 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-03-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 29-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure; Maximum Marginal Rate; TDS
• Section: 37; 37(1); 201

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 1609/AHD/2018 ( / ASSESSMENT YEAR : 2015-16 ) MMR INFRA D-49, NEW DURGA BAZAR, HIMATNAGAR, DIST. SABARKANTHA 383001 / VS. DY. COMM. OF INCOME TAX SABARKANTHA CIRCLE, HIMATNAGAR ./ ./ PAN/GIR NO. : AAWFM8280A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. DIVATIA , A.R. / RESPONDENT BY : SHRI DILEEP KUMAR , SR. D.R. / DATE OF HEARING 05/03/2020 !'# / DATE OF PRONOUNCEMENT 01/06/2020 $% /O R D E R PER WASEEM AHMED - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-2, AHMEDABAD (CIT(A) IN SHORT) DATED 25/0 5/2018 RELEVANT TO ASSESSMENT YEAR (AY) 2015-16. ITA NO. 1609/AHD/18 [MMR INFRA VS. DCIT] A.Y. 2015-16 - 2 - 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS THAT TH E LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2,34,079/- ON AC COUNT OF INTEREST ON LATE PAYMENT OF TDS UNDER SECTION 201(1A). 3. BRIEFLY STATED FACT IS THAT THE ASSESSEE IS A PA RTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF CONSTRUCTION. THE ASSESSEE DURIN G THE YEAR UNDER CONSIDERATION PAID INTEREST ON LATE DEPOSIT OF TDS FOR RS. 2,34,079/- ONLY. THE ASSESSEE CLAIMED THE SAME AS BUSINESS EXPENSES. THE CONTENTION OF THE ASSESSEE IS THAT THE PROVISION OF SECTION 40(A)(II) OF THE ACT PROHIBITS THE DEDUCTION OF PAYMENT OF TAXES LEVIED ON PROFIT OR G AIN OF THE BUSINESS. HOWEVER TDS IS NOT PAID ON PROFIT OR GAINS OF THE BUSINESS, THEREFORE INTEREST PAID UNDER SECTION 201(1A) IS ALLOWABLE AS BUSINESS EXPENSES A S THE SAME DOES NOT CONSTITUTE THE PART OF THE TAXES WHICH IS LEVIED ON PROFIT OR GAINS OF BUSINESS 4. HOWEVER THE AO DISALLOWED THE CLAIM OF THE ASSES SEE BY HOLDING THAT THE INTEREST PAID ON TDS IS NOT AS ALLOWABLE EXPENSES I N LIGHT OF THE DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF CIT VS. CHENNA I PROPERTIES & INVESTMENT LTD REPORTED IN 105 TAXMAN 346. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LE ARNED CIT (A) WHO CONFIRMED THE ORDER OF THE AO BY HOLDING AS UNDER: 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED INTEREST ON TDS AMOUNTING TO RS.2,34,079/- NOT PAID IN TIME ON THE AROUND THAT S AME IS NOT BUSINESS EXPENDITURE U/S. 37(1) OF THE ACT. THE AO HAS RELIED UPON DECISION O F HONOURABLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHENNAI PROPERTIES & INVESTMENT LTD. 3.4. APPELLANT ON THE OTHER HAND HAS SUBMITTED NOT INTEREST ON LATE PAYMENT OF TDS IS ALLOWABLE U/S. 37 OF THE I. T. ACT, 1961 AND REL IED UPON DECISION OF HONOURABLE ITAT, KOLKATA IN THE CASE OF M/S. NARAYANI ISPAT PVT. LTD . IT IS SEEN FROM THE DECISION OF HONOURABLE MADRAS HIGH COURT IN THE CASE OF CIT VB. CHENNAI PROPERTIES & INVESTMENT LTD. THAT THE HONOURABLE HIGH COURT HAS CLEARLY HEL D THAT INTEREST PAID U/S. 201 (1A) WOULD NOT ASSUME THE CHARACTER OF BUSINESS EXPENDIT URE AND CANNOT BE REGARDED AS COMPENSATORY PAYMENT. THE DECISION OF HONOURABLE KO LKATA TRIBUNAL IN THE CASE OF M/S. NARAYANI ISPAT PVT. LTD. HAS NOT CONSIDERED TH E DECISION OF HONOURABLE MADRAS HIGH COURT. AS HELD BY A FULL COURT DECISION OF HON 'BLE AP HIGH COURT, IN THE CASE OF CIT VS B R CONSTRUCTIONS [(1993) 202 ITR 222 (AP)], A J UDICIAL PRECEDENT CEASES TO BE A BINDING PRECEDENT WHEN IT IS PASSED PER IRRCURIUM. IN VIEW OF THE ABOVE, THE AO HAS CORRECTLY' FOLLOWED THE DECISION OF HONOURABLE MADR AS HIGH COURT (SUPRA) AND ITA NO. 1609/AHD/18 [MMR INFRA VS. DCIT] A.Y. 2015-16 - 3 - DISALLOWED THE INTEREST ON TDS U/S. 37 OF THE I. T. ACT, 1961. THE GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 6. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED AR FOR THE ASSESSEE BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 47 AND SUBMITTED THAT THE KOLKATA T RIBUNAL IN THE CASE OF DCIT VS. NARAYANI ISPAT LIMITED IN ITA N0. 2127/KOL/2014 VIDE ORDER DATED 30-08- 2017 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E. 8. ON THE CONTRARY THE LEARNED DR VEHEMENTLY SUPPOR TED THE ORDER OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD BEFORE US. AT THE OUTS ET WE NOTE THAT THE INTEREST ON DELAYED DEPOSIT OF TDS IS NOT ALLOWABLE DEDUCTIO N IN VIEW OF THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN CASE OF CIT VS. CHENNA I PROPERTIES & INVESTMENT LTD (SUPRA) WHEREIN IT WAS HELD AS UNDER: THE LIABILITY FOR DEDUCTION OF TAX ARISES BY REASO N OF THE PROVISIONS OF THE ACT. UNDER SECTION 201, THE CONSEQUENCE OF FAILURE TO COMPLY W ITH THE SAME RENDERS THAT PERSON LIABLE TO BE DEEMED AS AN ASSESSEE IN DEFAULT WITH ALL THE CONSEQUENCES ATTACHED THERETO. THE LIABILITY TO PAY INTEREST ON THE AMOUN T NOT DEDUCTED OR DEDUCTED, BUT NOT PAID IS DIRECTLY RELATED TO THE FAILURE TO DEDUCT O R REMIT THE AMOUNT. THE AMOUNT REQUIRED TO BE DEDUCTED IS THE AMOUNT PAYABLE AS IN COME-TAX. THE INTEREST PAID FOR THE PERIOD OF DELAY TAKES COLOUR FROM THE NATURE OF THE PRINCIPAL AMOUNT REQUIRED TO BE PAID BUT NOT PAID WITHIN TIME. THE PRINCIPAL AMOUNT HERE WOULD BE THE INCOME-TAX AND THE INTEREST PAYABLE FOR DELAYED PAYMENT IS THE CONSEQU ENCE OF FAILURE TO PAY THE TAX AND IN THE CIRCUMSTANCES, IS IN THE NATURE OF A PENALTY THOUGH NOT DESCRIBED AS SUCH IN SECTION 201(1A). THE FACT THAT THE INCOME-TAX REQUI RED TO BE REMITTED IS NOT INCOME-TAX PAYABLE BY THE ASSESSEE BUT IS ULTIMATELY FOR THE B ENEFIT OF AND TO THE CREDIT OF THE RECIPIENT OF THE INCOME ON WHICH THAT TAX IS PAYABL E, DOES NOT IN ANY MANNER ALTER THE CHARACTER OF THE PAYMENT, NAMELY, ITS CHARACTER AS INCOME-TAX. THE INTEREST PAID UNDER SECTION 201(1A), THEREFORE, WOULD NOT ASSUME THE CH ARACTER OF BUSINESS EXPENDITURE AND COULD NOT BE REGARDED AS A COMPENSATORY PAYMENT . BEFORE PARTING, IT IS IMPORTANT TO NOTE THAT WE HAV E DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF M/S NARAYA NI ISPAT PVT. LTD. (SUPRA) . HOWEVER, WE ARE CHANGING OUR DECISION IN THE PRESEN T CASE FOR THE SIMPLE REASON THAT THE JUDGMENT OF HONBLE MADRAS HIGH COU RT IN CASE OF CIT VS. ITA NO. 1609/AHD/18 [MMR INFRA VS. DCIT] A.Y. 2015-16 - 4 - CHENNAI PROPERTIES & INVESTMENT LTD REPORTED IN 105 TAXMANN 346 WAS NOT BROUGHT TO OUR NOTICE WHILE HEARING THE CASE OF M/S NARAYANI ISPAT PVT. LTD. THERE IS NO AMBIGUITY THAT THE ISSUE IS COVERED AGA INST ASSESSEE BY THE HONBLE MADRAS HIGH COURT IN CASE OF CHENNAI PROPERTIES & I NVESTMENT LTD. (SUPRA). ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE LEARNED CIT-A. HENCE WE DECLINE TO INTERFERE. THUS THE GROUND OF A PPEAL OF THE ASSESSEE IS DISMISSED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. SD/- SD/- (MADHUMITA ROY) (WASEEM AH MED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 01/06/2020 TRUE COPY S. K. SINHA !' #' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. $ / ASSESSEE 3. ) *+ , / CONCERNED CIT 4. ,- / CIT (A) 5. 012 33*+, *+#, 56$)$ / DR, ITAT, AHMEDABAD 6. 289 : / GUARD FILE. BY ORDER / $% , ;/5 *+#, 56$)$ < THIS ORDER PRONOUNCED IN OPEN COURT 01/06/2020