Sujana Towers Limited, Hyderabad, Hyderabad V. DCIT, Circle-3(2), Hyderabad, Hyderabad

ITA 1682/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2630 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 13-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Business expenditure; Earning of tax free income; Corroborative evidences
• Section: 43B; 143(3); 14A; 201(1)

Judgement Text

` THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1682/HYD/2016 ASSESSMENT YEAR: 2012-13 SUJANA TOWERS LTD., HYDERABAD. PAN AAKCS 7820 F VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(2), HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 40/HYD/2017 ASSESSMENT YEAR: 2012-13 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(2), HYDERABAD. VS. SUJANA TOWERS LTD., HYDERABAD. PAN AAKCS 7820 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. MURALI MOHAN RAO REVENUE BY : SMT. SUMAN MALIK DATE OF HEARING : 26-07-2017 DATE OF PRONOUNCEMENT : 30-08-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE ARE CROSS APPEALS BY ASSESSEE AS WELL A S REVENUE AGAINST THE ORDER OF CIT(A) 3, HYDERABAD DATED 17 /10/2016 FOR AY 2012-13. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF RE-ROLLED STEEL PR ODUCTS, TRADING IN STEEL COMPONENTS AND CONSTRUCTION OF TELECOM TOWERS . IT FILED RETURN OF INCOME ON 02/08/2013 DECLARING INCOME OF RS. 10,21, 52,570/- UNDER NORMAL PROVISIONS AND RS. 9,75,07,581/- U/S 115JB. SCRUTINY 2 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. ASSESSMENT U/S 143(3) WAS COMPLETED ON 31/03/2015 B Y MAKING FOLLOWING DISALLOWANCES: 1. DISALLOWANCE U/S 40(A)(IA) RS. 13,87,735/- 2. DISALLOWANCE U/S 43B RS. 4,91,109/- 3. DISALLOWANCE U/S 14A RS. 35,01,474/- 4. DISALLOWANCE OF DONATIONS RS. 61,450/- 5. DISALLOWANCE OF INTEREST ON TDS RS. 48 7/-. 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE THE CIT(A) AGAINST THE SAID DISALLOWANCES, THE CIT(A) D ELETED THE DISALLOWANCES U/S 40(A)(IA) AND 14A AND CONFIRMED T HE OTHER DISALLOWANCES MADE U/S 43B, TOWARDS DONATIONS AND T OWARDS INTEREST ON TDS. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US AGAINST THE CONFIRMATION OF DISALLOWANCES AND THE REVENUE IS IN APPEAL BEFORE US AGAINST THE DELETION OF DISA LLOWANCES U/S 40(A)(IA) AND 14A. THEREFORE, WE PROCEED TO DISPOSE OF BOTH THE APPEALS AS UNDER: ITA NO. 1682/HYD/2016 BY THE ASSESSEE 5. GROUND NOS. 2 TO 4 ARE RELATING TO DISALLOWANCE U/S 43B OF THE ACT OF RS. 4,91,109/-. 5.1 THE FACTS RELATING TO THIS GROUND ARE THAT THE AO NOTICED THAT AN AMOUNT OF RS. 4,91,109/ WAS SHOWN AS OUTSTANDING TO WARD BONUS PAYABLE ON PERUSAL OF STATUTORY LIABILITIES. ON BEI NG ASKED BY THE AO TO SUBMIT THE PAYMENT DETAILS, THE ASSESSEE FAILED TO FURNISH THE SAME. THE AO OBSERVED THAT AS PER THE PROVISIONS OF SECTION 43B(C) OF IT ACT, ANY SUM REFERRED TO IN CLAUSE (II) OF SU B-SECTION (1) OF SECTION 36, IS NOT AN ALLOWABLE DEDUCTION UNLESS SU CH SUM IS PAID BEFORE THE DUE DATE FOR FILING OF RETURN U/S 139(1) OF THE ACT. SINCE THE 3 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. ASSESSEE FAILED TO FURNISH THE DETAILS OF PAYMENT, AO DISALLOWED THE SAID AMOUNT OF RS. 4,91,109/- U/S 43B OF THE ACT. 5.2 WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E CIT(A), THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH THE PAYMENT DET AILS. 5.3 BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE AO HAS MADE THE DISALLOWANCE WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE IS MAINTAINING ALL THE SUPPORTING EVIDENCES WITH RE SPECT TO LIABILITIES. IN THIS CONNECTION, HE INVITED THE BENCH ATTENTION TO THE COPY OF THE LEDGER EXTRACT FILED AT PAGE 50 OF THE PAPER BOOK T O SUBMIT THAT IT IS ONLY A OPENING BALANCE AND THE EXPENSES NOT RELATIN G TO THIS AY. ASSESSEE HAS PAID THE BONUS. IN THIS CONNECTION HE RELIED ON THE FOLLOWING CASES: 1. SKYLARK GMC (P) LTD., 97 TAXMAN 41 2. SOHAN SINGH JOGINDER SINGH, 1 SOT 147 5.4 LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 5.5 CONSIDERING THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL FACTS ON RECORD. ON VERIFICATION OF ACCOUNT STATEME NT SUBMITTED BY THE ASSESSEE, THE COMPANY HAS CREATED PROVISION OF RS. 21,81,852/- DURING AY 2010-11 AND DURING THIS AY ASSESSEE HAS P AID RS. 16,90,723/- AND BALANCE OF RS. 4,91,109/- WAS KEPT UNPAID. THE SAME AMOUNT WAS DISALLOWED BY AO. SINCE, THE ASSESSEE H AS NOT CREATED ANY PROVISION THIS YEAR, THERE IS NO QUESTION OF CL AIMING ANY EXPENDITURE IN THE CURRENT AY. HENCE, IN OUR VIEW, AO WAS NOT JUSTIFIED IN DISALLOWING THE OUTSTANDING AMOUNT OF EARLIER AY. IN THE CASE LAW SUBMITTED BY THE LD. AR, THE BENCHES OF IT AT AT AHMEDABAD AND JODHPUR HAVE DELETED SUCH ADDITIONS. SINCE, THE FACTS IN THE CASE UNDER CONSIDERATION ARE SIMILAR TO THE FACTS OF THE ABOVE DECISIONS, WE DIRECT THE AO TO DELETE THE ABOVE ADDITION. ACCO RDINGLY, GROUND NOS. 2 TO 4 ARE ALLOWED. 4 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. 6. AS REGARDS GROUND NOS. 5 & 6 RELATING TO DISALLO WANCE OF DONATION AMOUNTING TO RS. 61,450/-, THE AO DISALLOW ED THIS AMOUNT AS THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE AND THE SAME WAS CONFIRMED BY THE CIT(A) WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE HIM BY HOLDING THAT THE ASSESSEE HAD NOT PRO DUCED ANY PROOF OF PAYMENT OR ANY EVIDENCE REGARDING ALLOWABILITY O F THE SAME U/S 80G. 6.1 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. EVEN BEFORE US, THE ASSESSEE FAILED TO S UBMIT ANY EVIDENCE NOR EXPLANATION TO SUBSTANTIATE ITS CLAIM. THEREFORE, WE CONFIRM THE ACTION OF THE CIT(A) IN UPHOLDING THE A CTION OF THE AO IN DISALLOWING THE CLAIM OF ASSESSEES DONATION. GROUN D NOS. 5 & 6 ARE DISMISSED. 7. AS REGARD GROUND NOS. 7 & 8 RELATING TO INTEREST ON TDS AMOUNTING TO RS. 487/-, THE AO OBSERVED THAT IT WAS NOTICED FROM THE DETAILS IN RELATION TO THE CLAIM OF INTEREST EXPEND ITURE, AN AMOUNT OF RS. 487/- TOWARDS INTEREST ON TDS WAS INCLUDED. R ELYING ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT VS. CHENNAI PROPERTIES & INVESTMENTS LTD., 239 ITR 435, THE AO HELD THAT INTEREST PAID UNDER SECTION 201(1A) CANNOT ASSUME THE CHARAC TER OF BUSINESS EXPENDITURE AND IS NOT ALLOWABLE DEDUCTION. HENCE, HE DISALLOWED THE SAID AMOUNT. 7.1 ON APPEAL, THE CIT(A) OBSERVED THAT ACCORDING T O SECTION 201(1A), THE ASSESSEE WHO HAS NOT DEDUCTED TDS/DEDU CTED BUT HAS NOT PAID TDS TO GOVT. IN TIME HAS TO PAY INTEREST A T PRESCRIBED RATES. SUCH INTEREST HAS NOTHING TO DO WITH THE BUSINESS C ARRIED ON BY THE ASSESSEE AND IF SUCH INTEREST IS ALLOWED U/S 37, IT IMPLIES THAT THE DEPARTMENT WILL BE COLLECTING LESS INTEREST THAN WH AT IS MANDATED U/S 201(1A). IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT (A) CONFIRMED THE ACTION OF THE AO. 5 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. 7.2 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. AS SUBMITTED AND RELIED BY LD. AR ON THE COORDINATE BENCH DECISION IN ITA NO. 1768/HYD/2012 IN THE CASE OF M/ S TAKSHEEL SOLUTIONS LTD. VS. ACIT, THE BENCH HAS OBSERVED THA T INTEREST ON TDS IS NOT INTEREST PAID ON INCOME TAX PER SE. HOWEVER, WE FIND THAT THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CH ENNAI PROPERTIES AND INVESTMENT LTD., 235 ITR 435 HAS HELD AS UNDER: THE LIABILITY TO PAY INTEREST ON THE AMOUNT NOT DE DUCTED OR DEDUCTED BUT NOT PAID IS DIRECTLY RELATED TO THE FAILURE TO DEDU CT OR REMIT THE AMOUNT. THE AMOUNT REQUIRED TO BE DEDUCTED IS THE AMOUNT PAYABL E AS INCOME-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 INTERES T PAYABLE FOR DELAYED PAYMENT IS THE CONSEQUENCE OF FAILURE TO PAY THE TA X AND IN THE CIRCUMSTANCES, IN THE NATURE OF A PENALTY THOUGH NO T DESCRIBED AS SUCH IN SUB-S. (1A) OF S. 201. THE FACT THAT THE INCOME-TAX REQUIRED TO BE REMITTED WAS NOT INCOME-TAX PAYABLE BY THE ASSESSEE, BUT IS ULTIMATELY FOR THE BENEFIT OF AND TO THE CREDIT OF THE RECIPIENT OF TH E INCOME ON WHOSE BEHALF THAT TAX IS PAYABLE DOES NOT IN ANY MANNER ALTER TH E CHARACTER OF THE PAYMENT, NAMELY, ITS CHARACTER AS INCOME TAX. AS ALREADY NOTICED THE PAYMENT OF INTEREST TAKES CO LOUR FROM THE NATURE OF THE LEVY WITH REFERENCE TO WHICH SUCH INTEREST IS P AID AND THE TAX REQUIRED TO BE BUT NOT PAID IN TIME, WHICH RENDERED THE ASSESSE E LIABLE FOR PAYMENT OF INTEREST WAS IN THE NATURE OF A DIRECT TAX AND SIMI LAR TO THE INCOME-TAX PAYABLE UNDER THE IT ACT. THE INTEREST PAID UNDER S . 201(1A), THEREFORE, WOULD NOT ASSUME THE CHARACTER OF BUSINESS EXPENDIT URE AND CANNOT BE REGARDED AS A COMPENSATORY PAYMENT AS CONTENDED BY COUNSEL FOR THE ASSESSEE. INCOME-TAX IS NOT ALLOWABLE AS BUSINESS EXPENDITURE . THE AMOUNT DEDUCTED AS TAX IS NOT AN ITEM OF EXPENDITURE. THE AMOUNT NO T DEDUCTED AND REMITTED HAS THE CHARACTER OF TAX AND HAS TO BE REMITTED TO THE STATE AND CANNOT BE UTILISED BY THE ASSESSEE FOR ITS OWN BUSINESS. 7.3 RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY T HE HONBLE MADRAS HIGH COURT IN THE SAID CASE, WE UPHOLD THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 487/- MADE BY TH E AO. ACCORDINGLY, GROUND NOS. 7 & 8 RAISED BY THE ASSESS EE ARE DISMISSED. 8. AS REGARDS GROUND NO. 9 RELATING TO DISALLOWANCE ON ACCOUNT OF MAT CREDIT U/S 115JAA OF RS. 1,36,34,330/-, THE AO OBSERVED THAT IN 6 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. THE COMPUTATION OF INCOME UNDER NORMAL PROVISIONS, THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS. 1,36,34,330/- TOWARDS MAT CREDIT U/S 115JAA PERTAINING TO THE AY 2010-11. HOWEVER, FOR T HE AY 2010-11, THE INCOME WAS ESTIMATED BY REJECTING THE BOOKS OF ACCOUNT AND TAX UNDER NORMAL PROVISIONS WERE CONSIDERED. IN VIEW OF THE ABOVE OBSERVATIONS, THE AO WAS OF THE VIEW THAT THERE WOU LD BE NO MAT CREDIT AVAILABLE TO THE ASSESSEE TO BE CARRIED FORW ARD FROM THE AY 2010-11 AND HENCE, HE HELD THAT THE ASSESSEE IS NOT ENTITLED FOR THE SAID CLAIM U/S 115JAA AT RS. 1,36,34,330/-. ACCORDI NGLY, HE DISALLOWED THE SAME. 8.1 THE CIT(A) CONFIRMED THE ACTION OF THE AO. 8.2 BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAS C LAIMED AN AMOUNT OF RS. 1,36,34,330/- TOWARDS MAT CREDIT U/S 115JAA PERTAINING TO AY 2010-11. HE SUBMITTED THAT HOWEVER , FOR THE AY 2010-11, THE INCOME WAS ESTIMATED BY REJECTING BOOK S OF ACCOUNT. HE SUBMITTED THAT THE AO OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE HAS FILED APPEAL BEFORE THE ITAT FOR AY 20 10-11 AND APPEAL IS ALLOWED FOR THE STATISTICAL PURPOSES VIDE ITA NO . 1621/HYD/2014 ORDER DATED 18/03/2015. HE BROUGHT TO OUR NOTICE TH E CONSEQUENTIAL ORDER PASSED BY AO RELATING TO AY 2010-11, AS PER W HICH, THE ASSESSMENT WAS COMPLETED BY ADOPTING (MAT) 115 JB P ROVISIONS. HENCE, ASSESSEE IS ELIGIBLE TO CLAIM THE MAT CREDIT . 8.3 LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 8.4 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. FROM THE RECORDS AND CONSEQUENTIAL ORDER SUBMITTED BY LD. AR THAT THE CONSEQUENTIAL ORDER WAS PASSED FOR AY 2 010-11 ON 15/04/2016 AND DETERMINED THE TAXABLE INCOME BY ADO PTING MAT PROVISIONS, THE CONSEQUENTIAL ORDER IS PLACED ON RE CORD. ACCORDINGLY, WE DIRECT THE AO TO GIVE MAT CREDIT TO THE EXTENT A VAILABLE TO THE 7 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. ASSESSEE IN THIS AY. ACCORDINGLY, THIS GROUND RAISE D BY THE ASSESSEE IS ALLOWED. 9. AS REGARDS GROUND NOS. 10 & 11 RELATING TO DISAL LOWANCE OF DIVIDEND DISTRIBUTION TAX OF RS. 50,400/-, THE AO O BSERVED THAT IT WAS CERTIFIED FROM THE AUDIT REPORT THAT AN AMOUNT OF R S. 50,400/- WAS SHOWN TO HAVE NOT BEEN PAID AS PER THE PROVISION U/ S 115-O OF IT ACT. FURTHER, HE OBSERVED THAT THE TAX ON DISTRIBUTED DI VIDEND IS YET TO BE PAID BY THE ASSESSEE AS VERIFIED IN AST-OLTAS. HE, THEREFORE, ADDED THE SAID AMOUNT OF RS. 50,400/- TO THE INCOME OF TH E ASSESSEE. 9.1 SINCE THE ASSESSEE DID NOT SUBMIT ANY PROOF OF PAYMENT DURING THE APPEAL PROCEEDINGS, THE CIT(A) CONFIRMED THE AD DITION MADE BY THE AO. 9.2 LD. AR SUBMITTED THAT THE AO OUGHT TO HAVE APPR ECIATED THE FACT THAT DIVIDEND DISTRIBUTION TAX (DDT) IS TAX ON DIVIDEND WHICH IS PART OF THE PROFIT, WHICH WAS SUBJECTED TO TAX. THE SAME CANNOT BE ADDED AGAIN AS INCOME OF THE ASSESSEE. SECONDLY, TH E DIVIDEND IS DECLARED AFTER ANNUAL GENERAL MEETING AND WILL BE P AID ON OR AFTER SUCH APPROVAL IN AGM. IN THIS CASE, THE MEETING WAS HELD ON 30 TH SEPTEMBER AND CAN BE PAID AFTER FILING THE RETURN. HENCE, THE DISALLOWANCE MADE BY THE AO IS NOT PROPER. 9.3 LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 9.4 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. WE FIND THAT THE AO HAS DISALLOWED THE DIVIDEND DISTRIBUTION TAX RELYING ON THE AUDIT REPORT. THE A SSESSEE HAS NOT PAID THE DDT CONSIDERING THE FACT THAT THE DIVIDEND HAS TO BE APPROVED IN AGM AND THE DATE OF REMITTANCE SUBSEQUE NT TO FILING RETURN OF INCOME. ALSO DDT IS NOT AN EXPENDITURE BU T A TAX ON THE PROFIT WHICH WAS ALREADY SUFFERED TAX. THIS CAN NEV ER BE TERMED AS EXPENDITURE. HENCE, IT CANNOT BE DISALLOWED. ACCORD INGLY, GROUND NOS. 10 & 11 RAISED BY THE ASSESSEE ARE ALLOWED. 8 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. 9.5 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 40/HYD/2017 BY THE REVENUE 10. GROUND NOS. 1 & 7 ARE GENERAL IN NATURE, HENCE, NEED NO ADJUDICATION. 11. GROUND NOS. 2 & 3 ARE RELATING TO DISALLOWANCE MADE U/S 14A READ WITH RULE 8D(2)(III) OF RS. 35,01,474/-. 11.1 THE ASSESSEE HAD MADE INVESTMENT OF RS. 139,98 ,68,058/- IN DIGITECH BUSINESS SYSTEM LTD., DURING THE YEAR. THE ASSESSEE HAD CLAIMED FINANCE COST OF RS. 132,24,17,038/-. THE AO ACCEPTED THAT NO BORROWED FUNDS WERE USED FOR THE PURPOSE OF INVESTM ENT BUT HELD THAT IT MUST HAVE INCURRED SOME ADMINISTRATIVE EXPENSES FOR MAKING HUGE INVESTMENTS THEREFORE HE DISALLOWED 0.5% OF AVERAGE VALUE OF INVESTMENTS IN ACCORDANCE WITH RULE 8D(2)(III) AS U NDER: FINANCE COST 132,24,17,038 OPENING INVESTMENTS 139,98,68,058 AVERAGE INVESTMENTS 70,02,94,858 0.5% OF AVERAGE INVESTMENTS 35,01,474 TOTAL DISALLOWANCE U/S 14A 35,01,474 11.2 BEFORE THE CIT(A), THE AR SUBMITTED THAT NO DI VIDEND INCOME WAS EARNED, THEREFORE, NO DISALLOWANCE CAN BE MADE U/S 14A. HE RELIED ON THE DECISION OF ITAT, HYDERABAD IN THE CA SE OF PRATISHTA INDUSTRIES LTD., IN ITA NO. 1302/HYD/2015, DATED 24 /09/2016. FURTHER, THE LD. AR SUBMITTED THAT FOR THE PURPOSE OF COMPUT ING DISALLOWANCE UNDER RULE 8D(2)(III) ONLY DIVIDEND YIELDING INVEST MENTS ARE TO BE CONSIDERED AND NOT ALL INVESTMENTS AND SINCE THE IN VESTMENT DID NOT YIELD ANY DIVIDEND, NO DISALLOWANCE CAN BE MADE. FO R THIS PROPOSITION, HE RELIED ON THE DECISION IN THE CASE OF REI AGRO LTD. VS. DCIT, 35 TAXMAN.COM 404 (KOLKOTA TRIBUNAL AND ALSO ON ACB INDIA LTD. VS. ACIT, 62 TAXMAN.COM 71 (DELHI). 9 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. 11.3 CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE, DELETED THE ADDITION MADE BY THE AO U/S 14A FOLLOWI NG THE JURISDICTIONAL TRIBUNAL IN THE CASE OF M/S PRATISHT A INDUSTRIES LTD. (SUPRA). 11.4 AGGRIEVED BY THE DECISION OF CIT(A), THE REVEN UE IS IN APPEAL BEFORE US. 11.5 LD. DR PLACED RELIANCE ON THE ORDER OF AO AND ALSO FILED A CIRCULAR NO. 5/2014, DATED 11 TH FEBRUARY, 2014 ISSUED BY THE CBDT CLARIFICATION REGARDING DISALLOWANCE OF EXPENSES U/ S 14A IN CASES WHERE CORRESPONDING EXEMPT INCOME HAS NOT BEEN EARN ED DURING FY. 11.6 ON THE OTHER HAND, THE LD. AR BESIDES RELYING ON THE ORDER OF CIT(A), PLACED RELIANCE ON THE FOLLOWING CASES: 1. CHEMINVEST LTD., 61 TAXMAN 118 (DEL.) 2. PRATISHTA INDUSTRIES LTD., 1302/HYD/2015 3. ACB INDIA LTD., 62 TAXMAN 71 4. REI AGRO LTD., 35 TAXMAN, 404 5. MADHUCON INFRA LTD., 410/HYD/2015 6. AMBIENCE PROPERTIES 12. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL FACTS ON RECORD. THE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS BENCHES OF THIS TRIBUNAL AND TH E DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA) WHEREIN THE HONBLE COURT HELD THAT SECTION 14A WIL L NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE AO U/S 14A OF THE ACT. GROUND NOS. 2 & 3 RAISED BY THE REVENUE ARE DISMISSED. 13. AS REGARDS GROUND NOS. 4 TO 6 RELATING TO DISAL LOWANCE U/S 40(A)(IA) OF THE ACT, THE AO DISALLOWED AN AMOUNT O F RS. 13,87,735/- 10 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. ON THE GROUND THAT TDS WAS NOT DEDUCTED ON THE AMOU NT PAID TOWARDS AUDIT FEES. 13.1 BEFORE THE CIT()A), THE ASSESSEE CONTENDED TH AT THE AMOUNT WAS NOT PAYABLE AS ON THE LAST DAY OF FINANCIAL YEA R THEREFORE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE FOLLOWING THE DECISION OF MERILYN SHIPPING AND TRANSPORTS. FURTHE R, IT WAS CONTENDED THAT AS NO ORDER U/S 201(1) WAS PASSED, N O DISALLOWANCE U/S 40(A)(IA) CAN BE MADE. 13.2 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE, THE CIT(A) OBSERVED THAT AS PER THE BALANCE SHEET OF THE ASSES SEE UNDER THE HEAD OTHER CURRENT LIABILITIES, THE FOLLOWING ITEM S ARE INCLUDED: INTEREST ACCRUED AND DUE ON BORROWINGS 142,382,26 0 ADVANCES FROM CUSTOMERS 264,211,469 DUE TO STATUTORY AUTHORITIES 17,550,143 OTHER CURRENT LIABILITIES 151,856,967 REFERRING TO THE ABOVE, THE CIT(A) OBSERVED THAT TH E ASSESSEE DID NOT SUBMIT FURTHER SPLIT UP OF THE ABOVE LIABILITIES AN D, THEREFORE, IT IS NOT POSSIBLE TO CONCLUDE WHETHER THE AUDIT FEE WAS ALRE ADY PAID DURING THE YEAR OR WAS PAYABLE AS ON 31/03/2012. HE, THERE FORE, OPINED THAT THE AO MAY PLEASE NOTE THAT THE PROVISIONS OF SECTI ON 40(A)(IA) ARE APPLICABLE ONLY WHEN THE AMOUNT IS PAYABLE AS ON 31 /03/12. REFERRING TO THE DECISION OF ITAT, HYDERABAD IN THE CASE OF M/S VISU INTERNATIONAL LTD., ITA NO. 488 & 621/HYD/13, DATED 12/11/2014, THE CIT(A) HELD THAT 40(A)(IA) DISALLOWANCE CAN BE MADE ONLY IF THE AMOUNT WAS PAYABLE AS ON 31/03/2012 AND ORDER U/S 2 01(1) IS PASSED TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT. 13.3 AGGRIEVED BY THE DECISION OF CIT(A), THE REVEN UE IS IN APPEAL BEFORE US. 13.4. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. IT IS NOTICED THAT AO HAS VERIFIED THE AUDIT 11 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. FEE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS. 30,6 7,153/- AND EXPRESSED THAT ASSESSEE HAS NOT FURNISHED THE DETAI LS OF TAX COMPLIANCE TO THE EXTENT OF RS. 13,87,735/-. HE HAS NOT CLARIFIED, WHETHER THE AMOUNT WAS PAID OR OUTSTANDING AT THE Y EAR END. THE CIT(A) HAS OPINED THAT THERE IS NO OUTSTANDING LIAB ILITY OR COULD BE ESTABLISHED FROM THE BALANCE SHEET THAT IT IS OUTST ANDING AT THE YEAR END. HOWEVER, LD. CIT(A) HAS GIVEN RELIEF TO THE AS SESSEE BY RELYING ON THE CASE MERILYN SHIPPING (SUPRA). BUT IN THE RE CENT DECISION OF HONBLE SUPREME COURT, THE RATIO OF MERILYN SHIPPIN G CASE WAS REVERSED. HOWEVER, LD. CIT(A) HAS GIVEN RELIEF TO A SSESSEE NOT ONLY RELYING ON MERILYN SHIPPING BUT ALSO REFERRING TO P ROVISIONS OF SECTION 201(1), AS PER WHICH, ORDER MUST BE PASSED TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT. HOWEVER, REVENUE HAS OBJECT ED ONLY ON THE GROUND OF PAID/PAYABLE ISSUE. CONSIDERING THE LATES T DEVELOPMENT ON PAID/PAYABLE ISSUE, WE ACCEPT THE DEPARTMENT CONTEN TION BUT AT THE SAME TIME, THE ISSUE OF 201(1) WAS NOT RAISED BY RE VENUE. HENCE, WE ALLOW THE GROUND RAISED BY THE REVENUE IN THIS CASE BUT REVENUE HAS NOT FILED ANY GROUND ON 201(1) ISSUE, WE RESTRAIN F ROM ADJUDICATING ON THE 201(1) ISSUE. ACCORDINGLY GROUND NOS. 4 TO 6 RA ISED BY THE REVENUE ARE ALLOWED. 14. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. 15. TO SUM UP, APPEAL OF THE ASSESSEE AS WELL AS T HE APPEAL OF THE REVENUE ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN ) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 30 TH AUGUST, 2017. KV 12 ITA NOS. 1682 /HYD/2016 & 40/H/17 SUJANA TOWERS LTD. COPY TO:- 1) M/S SUJANA TOWERS LTD., 18, NAGARJUNA HILL, PUNJ AGUTTA, HYDERABAD. 2) DCIT, CIRCLE 3(2), 7 TH FLOOR, SIGNATURE TOWERS, KONDAPUR, HYD. 3) CIT(A) 3, HYDERABAD 4) PR. CIT - 3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE