JEHANGIR HC JEHANGIR, MUMBAI V. ADDL.C.I.T.-12(3), MUMBAI

ITA 1643/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88243 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 03-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIDANAND DUBEY
• Assessee Lawyers: F V IRANI
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 1643/MUM/2011 (ASSESSMENT YEAR : 2006-07) MR. JEHANGIR HC JAHANGIR, READYMONEY MANSION, 43 VEER NARIMAN ROAD, MUMBAI -400 001 .: PAN: AEOPJ 6023 P VS ADDL. COMMISSIONER INCOME TAX RANGE -12(3), MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI F V IRANI RESPONDENT BY : SHRI SACHIDANAND DUBEY !' # $% /DATE OF HEARING : 03-12-2014 &'( # $% / DATE OF PRONOUNCEMENT : 06-02-2015 * + * + * + * + O R D E R , -'' , -'' , -'' , -'' '. '. '. '. , : :: : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-23, MUMBAI, DATED 15.12.2010, WHEREIN THE SOLITARY ISSU E PERTAINS TO DISALLOWANCE MADE U/S 40(A)(I). 2. THE ASSESSEE IS A BUILDER ENGAGED IN THE DEVELOPMENT AND CONSTRUCTION OF RESIDENTIAL AND COMMERCIAL PROJECTS, THROUG H THE PROJECT MANAGER, M/S GODREJ PROPERTIES LTD. IN 1998, THE ASSESSEE CONVERTED A PLOT OF LAND AT SHIVAJI NAGAR, PUNE IN SIT AND WIDE AGREEMENT WITH M/S GODREJ PROPERTIES LTD CONS TRUCTED THREE BUILDINGS, ETERNIA, C, SHERWOOD AND ELEINIA C. 3. IN THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THA T AS PER CLAUSE 8(B) OF PROJECT DEVELOPMENT AGREEMENT, GODREJ PROPERTIES LTD. SHALL BE PAID BY WAY OF FEES, AN AMOUNT EQUAL TO 25% OF THE NET REALIZATION IN EACH PROJECT. MR. JEHANGIR HC JAHANGIR ITA 1643/M/2011 2 4. AS A RESULT, THE ASSESSEE PAID TO GPL RS. 1,81,29,209/- WITHOUT DEDUCTING TAS BY DEBITING THE SAME AS DEVELOP MANAGER FEE. THE AO CALLED FOR AN EXPLANATION AS TO WHY THE AMOUNT SHOULD NOT BE DISALLOWED U/S 40(A)(IA). 5. AS THERE WAS NO SPECIFIC REPLY WAS GIVEN BY THE ASSE SSEE, THE AO HELD THAT PAYMENT OF FEE MADE TO PROJECT MANAGE R WAS ACTUALLY A PAYMENT TO THE CONTRACTOR, WHICH SHOULD HAV E BE TREATED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 194C . SINCE NO TAX HAS BEEN DEDUCTED AT SOURCE, THE AO DISALLOWED RS. 1,81,29,209/-. 6. AGAINST THIS FINDING OF THE AO, THE ASSESSEE APPROACHE D THE CIT(A) AND SUBMITTED THAT IN THE RELEVANT PROVISION, AS RELIED UPON BY THE AO, DOES NOT INCLUDE THE PAYMENT MADE BY THE INDIVIDUAL. THE CIT(A) CONSIDERING THIS SUBMISSIONS OF THE AR HELD, WHILE THE APPELLANT HAS NOT SHOWN SUFFICIENT CAUSE AS TO WHY THE SAID ADDITIONAL GROUND WAS NOT INCLUDED IN THE GROUNDS FILED WITH THE ORIGINAL APPEAL, IT IS F OUND THAT THE APPELLANT HAS MISCONSTRUED THE PROVISIONS OF TH E ACT. IN TERMS OF THE ARRANGEMENT, THE APPELLANT WAS THE 'CONTRACTOR' AND M/S GPIL WAS THE RESIDENT TO WHOM PAYMENT WAS BEING MADE ON WHICH TAX WAS TO BE DEDUCTED AT SOURCE, AND M/S GPIL IS DEFINITELY INCL UDED IN THE PERSONS LISTED AT (A) TO (J) OF SECTION 194C (1). AS PER LAW APPLICABLE FOR ASSESSMENT YEAR 2006-07, WHILE A N INDIVIDUAL OR AN HUF WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 194C, THE PROVISO TO SUBSECTIO N (2) PROVIDED THAT WHERE AN INDIVIDUAL OR AN HUF WHOSE T OTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LI MIT IS SPECIFIED UNDER SECTION 44 AB, SUCH INDIVIDUAL OR H UF IS LIABLE TO DEDUCT INCOME TAX UNDER SECTION 194C. THE APPELLANT'S TURNOVER/GROSS RECEIPTS/TOTAL SATE, ADMITTEDLY EXCEEDS RS. 40 LAKHS AND THE APPELLANT H AS IN FACT SUBMITTED TAX AUDIT REPORT UNDER SECTION 44 AB OF THE I.T. ACT. IN VIEW OF THI5 POSITION, THE ACTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE UNDER SECT ION 40A(IA) FOR NON-DEDUCTION OF TAX AT SOURCE UNDER SE CTION 194C, IS IN ORDER AND IS CONFIRMED. MR. JEHANGIR HC JAHANGIR ITA 1643/M/2011 3 7. AGAINST THIS ORDER OF THE CIT(A), THE ASSESSEE IS IN APP EAL BEFORE THE ITAT. 8. BEFORE US, THE ASSESSEE PLACED THE COPY OF THE AGREE MENT ENTERED INTO BY THE ASSESSEE AND GPL AND SUBMITTED TH AT THE ISSUE IS COVERED BY THE PROVISO TO SECTION 194C(1), WHERE THE LEGISLATURE IN THE RELEVANT PERIOD HAD EXEMPTED THE PAYME NT MADE BY THE INDIVIDUAL OR HUF. 9. THE AR, THEREFORE, SUBMITTED THAT WHEN THE EXPENSE AS SUCH HAD BEEN HELD TO BE GENUINE, DISALLOWANCE CANNOT BE MADE ON A TECHNICAL GROUND, WHICH ITSELF DID NOT MANDATE THE AS SESSEE TO DEDUCT TAS. 10. THE AR, THEREFORE, SUBMITTED THAT THE DISALLOWANCE BE DELETED. 11. THE DR PLACED RELIANCE ON THE ORDERS OF THE REVENUE AUTHORITIES. 12. WE HAVE HEARD THE ARGUMENTS AND HAVE CONSIDERED THE ORDERS OF THE REVENUE AUTHORITIES. CLEARLY, THE REVENUE AUTHORITIES FELL IN ERROR IN INTERPRETING THE RELEVANT PROVISIO N OF THE ACT, I.E. THE PROVISION ON WHICH THE AUTHORITIES LAY THEIR CASE PERTAINED TO CLAUSE (K), WHICH IN THE RELEVANT ASSESSMENT Y EAR WAS NOT IN THE STATUTE, WHICH CAME IN ONLY VIA THE FINANC E ACT, 2007, W.E.F. 01.06.2007. HENCE THE RIGORS OF SECTION 194C DID NOT ATTRACT. 13. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON TH IS ISSUE AND DIRECT THE AO TO DELETE THE DISALLOWANCE MADE AT RS. 1,81,29,209/- MADE U/S 40(I)(IA) OF THE ACT. MR. JEHANGIR HC JAHANGIR ITA 1643/M/2011 4 14. IN THE RESULT, THE APPEAL AS FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH FEBRUARY, 2015. SD/- SD/- ( ) ( ) * * * * * * * * (SANJAY ARORA) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 6 TH FEBRUARY, 2015 $/ COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT(A) -23, MUMBAI. 4) THE CIT-XII, MUMBAI/CIT - XII, MUMBAI. 5) -'12 $! I , , / THE D.R. I BENCH, MUMBAI. 6) 23. 4 COPY TO GUARD FILE. *+! / BY ORDER / / TRUE COPY / / 5 / 6 7 , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *9:6! '.!. *CHAVAN, SR.PS