ACIT, CHENNAI V. M/s. Shanthi Logistics Pvt Ltd., CHENNAI

ITA 1636/CHNY/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68755 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Retrospective amendment
• Section: 143(3); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 1636/MDS/2010 & C.O. NO. 133/MDS/2010 ( IN ITA NO. 1636/MDS/2010 ) ASSESSMENT YEAR 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-VI(2), AAYAKAR BHAVAN, NEW BLOCK, 121, M.G.ROAD, 7 TH FLOOR, CHENNAI 600 034. VS M/S. SHANTHI LOGISTICS PVT. LTD., NO. 72, NAINIAPPAN STREET, MANNADY, CHENNAI-600 001. [PAN: AAFCS 3448 G] (A PPELLANT) (RESPONDENT/CROSS OBJECTOR) REVENUE BY : SHRI SHAJI P. JACOB, ADDL.CIT ASSESSEE BY : SHRI V.S. JAYAKUMAR, ADVOCATE DATE OF HEARING : 26-09-2013 DATE OF PRONOUNCEMENT : 26-09-2013 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE PRESENT APPEAL WITH CROSS OBJECTIONS HAS BEEN R EMITTED BACK TO THE TRIBUNAL BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE I.T.A. NO. 1636/MDS/2010 C.O. NO. 133/MDS/2010 :- 2 -: ORDER DATED 02-04-2012. THE HONBLE HIGH COURT HAS REMANDED THE MATTER BACK TO THE TRIBUNAL TO CONSIDER THE APP LICABILITY OF THE CIRCULAR NO. 01/2009 DATED 27-03-2009 AND THE AMENDMENT BROUGHT IN BY THE FINANCE ACT, 2008 IN SECTION 40(A )(IA) IN THE FACTS OF THE CASE. 2. THE APPEAL IS FILED BY THE REVENUE IMPUGNING THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, CHENNAI DATED 29-07-2010 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 7-08. THE ISSUE IN THE APPEAL IS WHETHER THE BENEFIT OF TDS A MOUNT DEPOSITED WITH GOVERNMENT EXCHEQUER AFTER THE DUE D ATE, BUT BEFORE THE DUE DATE OF FILING OF THE RETURN IS TO B E ALLOWED TO THE ASSESSEE IN AY. 2007-08? 3. THE FACTS IN BRIEF ARE: THE ASSESSEE FILED ITS R ETURN OF INCOME FOR THE AY. 2007-08 DECLARING LOSS OF ` 2,73,707/-. DURING THE COURSE OF SCRUTINY ASSESSMENT U/S. 143(3) OF TH E INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT), THE ASSESSING OFFICER DIS-ALLOWED A SUM OF ` 3,42,30,735/- U/S. 40(A)(IA) FOR DELAY IN REMITTANCE OF TAX DEDUCTED AT SOURCE. THE ASSES SEE IS I.T.A. NO. 1636/MDS/2010 C.O. NO. 133/MDS/2010 :- 3 -: ENGAGED IN THE BUSINESS OF TRANSPORTATION OF GOODS. THE ASSESSEE HAD DEDUCTED TDS @ 1.12% FOR THE SUB-CONTR ACT TRANSPORT HIRE CHARGES ON 31-03-2007 BUT REMITTED T HE AMOUNT TO THE GOVERNMENT EXCHEQUER ON 07-07-2007 THAT IS BEYO ND THE DUE DATE OF REMITTING THE TAX DEDUCTED AT SOURCE BUT BE FORE THE DUE DATE OF FILING OF RETURN OF INCOME. THE ASSESSING OFFICER HELD THAT SINCE THE TDS AMOUNT WAS PAID IN THE NEXT YEAR, THE AMOUNT OF ` 3,42,30,735/- IS DIS-ALLOWED U/S. 40(A)(IA) IN THE AY. 2007-08. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE C IT(APPEALS) IN VIEW OF THE AMENDMENT BROUGHT IN BY THE FINANCE ACT, 2008, WHICH MITIGATES THE RIGOURS OF SECTION 40(A)(IA) AN D THE CBDT CIRCULAR NO. 01/2009 ALLOWED THE CLAIM OF THE ASSES SEE AND DELETED THE DIS-ALLOWANCE U/S. 40(A)(IA) FOR DELAY IN REMITTANCE OF TAX DEDUCTED AT SOURCE. 4. THE REVENUE PREFERRED AN APPEAL BEFORE THE TRIBU NAL IMPUGNING THE ORDER OF THE CIT(APPEALS). THE ASSE SSEE ALSO FILED CROSS-OBJECTIONS AGAINST THE ORDER OF CIT(APP EALS) STATING THAT THE CIT(APPEALS) HAS ERRED IN NOT TAKING INTO CONSIDERATION I.T.A. NO. 1636/MDS/2010 C.O. NO. 133/MDS/2010 :- 4 -: THE FACTUAL ASPECT THAT EACH TRANSACTION OF HIRE CH ARGES WAS LESS THAN ` 20,000/-. THEREFORE, THERE WAS NO OBLIGATION ON TH E PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE AND AS SUCH TH ERE IS NO VIOLATION OF TDS PROVISIONS. IN THE FIRST ROUND OF LITIGATION, THE TRIBUNAL VIDE ORDER DATED 10-02-2012, ALLOWED THE APPEAL OF THE REVENUE AND D ISMISSED THE CROSS-OBJECTIONS OF THE ASSESSEE. AGGRIEVED AG AINST THE ORDER OF THE TRIBUNAL, ASSESSEE WENT IN APPEAL BEFO RE THE HONBLE MADRAS HIGH COURT. THE HONBLE HIGH COURT VIDE ORD ER DATED 02-04-2012 REMANDED THE MATTER BACK TO THE TRIBUNAL FOR DECIDING THE ISSUE AFRESH. 5. BOTH THE SIDES HEARD. IT IS AN UN-DISPUTED FACT THAT AMOUNT OF TAX DEDUCTED AT SOURCE BY THE ASSESSEE ON 31-03- 2007 HAS BEEN REMITTED TO THE GOVERNMENT EXCHEQUER ON 07-07- 2007, I.E., AFTER THE DUE DATE AS SPECIFIED U/S.200 OF THE ACT BUT BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. THE LD . COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON CBDT CIRCULAR NO. 0 1/2009 DATED 27-03-2009. I.T.A. NO. 1636/MDS/2010 C.O. NO. 133/MDS/2010 :- 5 -: 6. SECTION 40(A)(IA) WAS INTRODUCED IN THE STATUTE WITH A VIEW TO AUGMENT THE COMPLIANCE WITH THE TDS PROVISIONS AND A PROVISION THEREFORE WAS MADE THEREIN TO DISALLOW THE EXPENSES FOR WHICH TAX WAS NOT DEDUCTED AT SOURCE AND/OR THE TAX HAVING BE EN DEDUCTED AT SOURCE WAS NOT PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT WITHIN THE TIME PRESCRIBED IN SECTION 200(1). IT WA S ALSO PROVIDED THAT IF A DEDUCTION IS SUBSEQUENTLY MADE TOWARDS TA X AND PAID AFTER THE TIME-LIMIT, THE ASSESSEE WOULD BE ENTITLE D TO CLAIM DEDUCTION IN THE YEAR IN WHICH PAYMENT IS ACTUALLY MADE. THIS CREATED A GENUINE AND APPARENT HARDSHIP TO THE ASSE SSEES ESPECIALLY IN RESPECT OF TAX DEDUCTED AT SOURCE IN THE LAST MONTH OF THE PREVIOUS YEAR, THE DUE DATE FOR PAYMENT OF WHIC H AS PER THE TIME SPECIFIED IN SECTION 200(1) WAS IN THE NEXT YE AR. WITH A VIEW TO MITIGATE THIS HARDSHIP, SECTION 40(A)(IA) WAS AM ENDED BY THE FINANCE ACT, 2008 AND THE PROVISIONS SO AMENDED REA D AS UNDER : 'NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO NS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD `PROFITS AND GAINS OF BUS INESS OR PROFESSION - I.T.A. NO. 1636/MDS/2010 C.O. NO. 133/MDS/2010 :- 6 -: (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, R OYALTY, FEES FOR 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-B AND SUCH TAX HAS NOT BE EN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID,- (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 ; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR : PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED- I.T.A. NO. 1636/MDS/2010 C.O. NO. 133/MDS/2010 :- 7 -: (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE ; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM S HALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF T HE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID.' 7. THE ABOVE AMENDMENTS MADE BY THE FINANCE ACT, 20 08 THUS PROVIDED THAT NO DISALLOWANCE UNDER SECTION 40 (A)(IA) SHALL BE MADE IN RESPECT OF THE EXPENDITURE INCURRED IN T HE MONTH OF MARCH IF THE TAX DEDUCTED AT SOURCE ON SUCH EXPENDI TURE HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF THE RETU RN. WHILE PROPOSING THIS AMENDMENT, IT WAS EXPLAINED BY THE F INANCE MINISTER THAT THE TAXPAYER WILL NOW GET A TIME PERI OD OF SIX MONTHS FOR DEPOSITING THE TAX DEDUCTED AT SOURCE IN RESPEC T OF EXPENDITURE INCURRED IN THE MONTH OF MARCH SO AS TO ESCAPE THE DISALLOWANCE OF THE SAID EXPENDITURE UNDER SECTION 40(A)(IA). THE FINANCE MINISTER ALSO MADE IT CLEAR THAT THIS PROPO SED AMENDMENT HAS TO BE GIVEN RETROSPECTIVE EFFECT FROM THE ASSES SMENT YEAR 2005-06. I.T.A. NO. 1636/MDS/2010 C.O. NO. 133/MDS/2010 :- 8 -: 8. THE CBDT CIRCULAR NO. 01/2009 DATED 27-03-2009 F URTHER CLARIFIES THE AMENDMENT CARRIED OUT IN THE FINANCE ACT, 2008. THE RELEVANT EXTRACT OF THE CIRCULAR IS RE-PRODUCED HER EIN BELOW: EXPLANATORY NOTES TO THE PROVISIONS OF THE FINANCE ACT, 2008 - CIRCULAR NO.1/2009, DATED 27-3-2009 12. AMENDMENT TO THE PROVISIONS OF SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 OF THE INCOME-TAX ACT 12.1 AS PER THE PROVISIONS OF SUB-CLAUSE (IA) OF CL AUSE (A) OF SECTION 40, ANY INTEREST, COMMISSION, BROKERAGE, FE ES FOR PROFESSIONAL SERVICES, FEES FOR TECHNICAL SERVICE P AYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK, RENT AND ROYALTY ON WHICH TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DUR ING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTIO N 200 SHALL NOT BE ALLOWED AS DEDUCTION. HOWEVER, THE SUM IS AL LOWED AS A DEDUCTION IN THE YEAR OF ACTUAL PAYMENT OF THE TD S. 12.2 TO MITIGATE ANY HARDSHIP CAUSED BY THE ABOVE P ROVISIONS OF SECTION 40 WHILE MAINTAINING TDS DISCIPLINE, THE ACT HAS AMENDED PROVISIONS OF SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40. THE AMENDMENT ALLOWS ADDITIONAL TIME (TILL DUE DATE OF FILING OF RETURN OF INCOME) FOR DEPOSIT OF TDS PERT AINING TO DEDUCTIONS MADE FOR THE MONTH OF MARCH SO THAT DISA LLOWANCE UNDER SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 I S NOT ATTRACTED IN SUCH CASES. THUS WHERE THE LAST DATE F OR FILING THE I.T.A. NO. 1636/MDS/2010 C.O. NO. 133/MDS/2010 :- 9 -: RETURN OF INCOME IN CASE OF A TAXPAYER (DEDUCTOR) I S 30TH SEPTEMBER, HE WILL GET ADDITIONAL TIME OF SIX MONTH S (APRIL TO SEPTEMBER) FOR DEPOSITING THE TAX DEDUCTED AT SOURC E ON AN EXPENDITURE INCURRED OR PAYMENT MADE IN THE MONTH O F MARCH SO AS TO ESCAPE DISALLOWANCE UNDER SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40. 12.3 APPLICABILITY - THIS AMENDMENT HAS BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT FROM 1ST APRIL , 2005 AND SHALL ACCORDINGLY APPLY FOR ASSESSMENT YEAR 2005-06 AND SUBSEQUENT ASSESSMENT YEARS. A PERUSAL OF THE CIRCULAR WOULD MAKE IT ABSOLUTELY CLEAR THAT THE AMENDMENT WAS MADE APPLICABLE WITH RETROSPECTIVE EF FECT FROM 1 ST APRIL, 2005. IN VIEW OF THE FACTS AND CIRCUMSTANC ES OF THE CASE AND THE AMENDMENT BROUGHT IN BY THE FINANCE ACT, 20 08 AND THE CBDT CIRCULAR NO. 01/2009 DATED 27-03-2009, WE HOLD THAT THE DIS-ALLOWANCE MADE U/S. 40(A)(IA) BY THE ASSESSING OFFICER HAS BEEN RIGHTLY DELETED BY THE CIT(APPEALS). THE ORDE R OF THE CIT(APPEALS) IS WELL REASONED. THERE IS NO MERIT I N THE APPEAL OF THE REVENUE, THEREFORE, THE APPEAL OF THE REVENUE I S DISMISSED. I.T.A. NO. 1636/MDS/2010 C.O. NO. 133/MDS/2010 :- 10 - : 9. IN THE CROSS-OBJECTIONS, THE ASSESSEE HAS RAISED A PLEA THAT EACH TRANSACTION OF HIRE CHARGES WAS LESS THAN ` 20,000/- AND AS SUCH THE ASSESSEE WAS UNDER NO OBLIGATION TO DEDUCT TAX AT SOURCE. WE FIND THAT THIS PLEA WAS NEITHER RAISED BEFORE THE ASSESSING OFFICER OR THE CIT(APPEALS). NOW, AT SEC OND APPELLATE STAGE BEFORE TRIBUNAL, THE ASSESSEE CANNOT RAISE TH IS FRESH PLEA. THE CROSS-OBJECTIONS OF THE ASSESSEE ARE DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL A S THE CROSS-OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON THURSDAY, THE 26 TH SEPTEMBER, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VI KAS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 26 TH SEPTEMBER, 2013 TNMM COPY TO: ASSESSEE/AO/CIT(A)/CIT/DR