ACIT 2(3), MUMBAI V. SIMMONDS MARSHALL LTD, MUMBAI

ITA 1686/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101058 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-04-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: AJAY R SINGH
• Keywords: Rule of consistency; Retrospective amendment
• Section: 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER / I .T.A. NO. 1686 & 1687/MUM/2012 ( / ASSESSMENT YEAR : 2006 - 07 & 2007 - 08 THE ACIT - 2(3), AAYAKAR BHAVAN, MUMBAI - 400 020 / VS. M/S. SIMMONDS MARSHALL LTD., APEEJAY CHAMBERS, 5, WALLACE STREET, FORT, MUMBAI - 400 001 ./ ./ PAN/GIR NO. : AABCS 4968B ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI PREMANAND J. / RESPONDENT BY: SHRI AJAY R. SINGH / DATE OF HEARING : 2 1 .0 9 .2015 / DATE OF PRONOUNCEMENT : 2 1 .0 9 .2015 / O R D E R PER N.K. BILLAIYA, AM: TH ESE APPEAL S BY THE REVENUE ARE PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 6, MUMBAI D ATED 1 5 .1 2 .201 1 AND 30.12.2011 PERTAINING TO ASSESSMENT YEAR 200 6 - 0 7 & 2007 - 08 RESPECTIVELY . BOTH THESE APPEALS BY THE REVENUE HAVE COMMON GRIEVANCE, THEREFORE, THEY WERE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA. NO S . 1686 & 1687/M/2012 2 2. REPRESEN TATIVES OF BOTH SIDES AGREED THAT SINCE FACTS ARE IDENTICAL IN BOTH THE IMPUGNED ASSESSMENT YEARS , T HE RESPECTIVE ARGUMENTS WERE HEARD ON THE FACTS OF A.Y. 2006 - 07. 3. THE ASSESSEE IS A MANUFACTURER OF SELF LOCKING NUTS. RETURN FOR THE YEAR DECLARIN G INCOME OF RS. 2,17,71,539/ - WAS FILED ON 22.11.2006. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 3.1. WHILE SCRUTINIZING THE RETURN OF INCOME, THE ASSESSING OFFICER OBSERV ED THAT THE ASSESSEE HAS DEBITED VARIOUS EXPENDITURES UNDER DIFFERENT HEADS OF EXPENSES VIZ., RENT, OPERATING EXPENSES, AGENCY CHARGES, SECURITY EXPENSES AND GARDENING EXPENSES. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURC E ON THESE PAYMENTS. THE ASSESSEE WAS ASKED TO EXPLAIN WHY PROVISIONS OF SEC. 40A(IA) SHOULD NOT BE APPLIED ON THE FACTS OF THE CASE. ON RECEIVING NO PLAUSIBLE REPLY, THE AO PROCEEDED B Y DISALLOWING THE EXPENDITURE AMOUNTING TO RS. 49,57,442/ - U/S. 40A(I A) OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND VEHEMENTLY SUBMITTED THAT THE EXPENDITURES ARE NOTHING BUT REIMBURSEMENT MADE TO ITS SISTER CONCERN. IT WAS CLAIMED THAT PROVISIONS OF SEC. 40A(IA) DO NOT APPLY ON REIMBURSEMENT OF EXPENSES. IN SO FAR AS EXPENDITURE OF RS. 13,05,369/ - IS CONCERNED, IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT SUCH PAYMENT WAS MADE TO GOVERNMENT AGENCIES IN RESPECT OF CUSTOM CHARGES AND AS ITA. NO S . 1686 & 1687/M/2012 3 THE PAYMENT TO GOVERNMENT AGENCY, DO NOT ATTRACT T DS PROVISIONS, NO TDS WAS MADE. 4.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS WITH THE RELATED DOCUMENTARY EVIDENCES, THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. THE REMAND REPORT IS EXHIBITED AT PAGES 185 TO 195 OF THE PAPER BOOK. IN HIS REMAND REPORT, THE AO HAS CATEGORICALLY STATED THAT THE PAYMENTS ARE REIMBURSEMENT OF EXPENSES DUE TO A CONTRACTUAL OBLIGATION AND THEREFORE TDS PROVISIONS SQUARELY APPLY. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE REMAND REPORT, THE LD. CIT(A) WAS CONVINCED THAT THE PROVISIONS OF TDS DO NOT APPLY ON REIMBURSEMENT OF EXPENSES AND SECONDLY TDS PROVISION ALSO DO NOT APPLY WHEN THE PAYMENT IS MADE TO GOVERNMENT AGENCIES. THE LD. CIT(A) DELETED THE DISALLOWANCES. 5. AGGRIEVED BY THIS, T HE REVENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE AO. 7. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL T HAT ON IDENTICAL SET OF FACTS RELATING TO IDENTICAL REIMBURSEMENT OF EXPENSES, NO DISALLOWANCES WERE MADE IN A.YRS 2004 - 05, 2005 - 06, 2008 - 09 AND 2009 - 10. THE LD. COUNSEL FURTHER STATED THAT 2 YEARS PRIOR TO THE IMPUGNED ASSESSMENT YEARS AND 2 YEARS SUBSEQ UENT TO THE IMPUGNED ASSESSMENT YEARS, NO DISALLOWANCES HAVE BEEN MADE, THEREFORE, THE AO HAS VIOLATED THE PRINCIPLES OF CONSISTENCY FOR THE YEAR UNDER CONSIDERATION. THE LD. ITA. NO S . 1686 & 1687/M/2012 4 COUNSEL FURTHER PLACED RELIANCE ON THE DECISIONS OF THE TRIBUNAL IN THE CASE OF ITO VS ISE SECURITIES & SERVICES LTD., IN ITA NO. 6428/M/2010, ACIT VS JAVERI FISCAL SERVICES LTD IN ITA NO. 478/M/2011. 8. HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED TH E RELATED DOCUMENTARY EVIDENCES BROUGHT TO OUR NOTICE AND PLACED BEFORE US IN THE LIGHT OF THE JUDICIAL DECISIONS RELIED UPON BY THE LD. COUNSEL. AFTER CAREFULLY PERUSING THE REMAND REPORT, THE UNDISPUTED FACT WHICH STANDS UNREFUTED IS THAT ALL THE IMPUG NED PAYMENTS ARE NOTHING BUT REIMBURSEMENT OF EXPENSES. THUS IT CAN BE SAFELY CONCLUDED THAT THERE IS NO ELEMENT OF ANY MARGIN OR PROFIT. ON IDENTICAL SET OF FACTS, THE CO - ORDINATE BENCH IN THE CASE OF ISE SECURITIES (SUPRA) HAS CONSIDERED THE DECISION O F THE ANOTHER CO - ORDINATE BENCH IN THE CASE OF UTILITY POWERTECH LTD. IN ITA NO. 2561/M/09 WHICH HAS FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF S I EMENS AKTIONGESE LL SCHAFT 310 ITR 320 WHEREIN THE HONBLE JURISDICTIONAL HIG H COURT HAS HELD THAT REIMBURSEMENT OF EXPENSES CANNOT BE REGARDED AS REVENUE IN THE HANDS OF THE PAYEE, WHILE DECIDING THE ISSUE, THE HONBLE HIGH COURT HAS FOLLOWED THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDUSTRIAL ENGINEERING PROJE CTS PVT. LTD. 202 ITR 1014. 8.1. WHEN THERE IS A DECISION OF THE JURISDICTIONAL HIGH COURT WHICH HAS BEEN FOLLOWED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL, TO MAINTAIN THE RULE OF CONSISTENCY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ITA. NO S . 1686 & 1687/M/2012 5 9. BEFORE PARTING, THE LD. COUNSEL FOR THE ASSESSEE HAS MOVED AN APPLICATION UNDER RULE - 27 IN SUPPORT OF THE DECISION OF THE FIRST APPELLATE AUTHORITY CLAIMING THAT THE VIEW TAKEN BY THE FIRST APPELLATE AU THORITY IS ALSO SUPPORTED BY THE SUBSEQUENT AMENDMENT MADE BY THE FINANCE ACT 2012 INSERTING PROVISO TO SEC. 40A(IA). THE SAID PROVISO READ S AS UNDER: PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII - B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB - SECTION (1) OF SEC. 201, THEN, FOR THE PURPOSE OF THIS SUB - CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PA ID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. 10. PROVISO TO SEC. 2 0 1 IN ITS TURN PROVIDES THAT IF THE PAYEE HAS FURNISHED HIS RETURN OF INCOME U/S. 139 AND HAS TAKEN INTO ACC OUNT, SUCH SUM FOR COMPUTING INCOME AND HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM THEN THE PAYER SHALL NOT BE TREATED AS AN ASSESSEE IN DEFAULT. THE LD. COUNSEL FURTHER BROUGHT TO THE NOTICE OF THE TRIBUNAL THAT THIS PROVISO HAS BEEN HELD TO HAVE RETROSPECTIVE EFFECT BY THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD IN ITA 160 & 161/2015. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. THE HONBLE HIGH COURT OF DELHI HAS HELD THAT THE SECOND PROVISO TO SEC. 40A(IA) IS DECLARATORY AND CURATIVE AND HAS RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005. 11. HOWEVER, SINCE WE HAVE ACCEPTED THE CLAIM OF THE ASSESSEE ON THE BASIS OF MAIN CONTENTIONS OF THE ASSESSEE, HENCE THE ALTERNATE PLEA TAKEN VIDE APPL ICATION UNDER RULE 27 HAS BECOME INFRUCTUOUS AND NEED NO ADJUDICATION AT THIS STAGE. ITA. NO S . 1686 & 1687/M/2012 6 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 21 ST SEPTEMBER , 2015 SD/ - SD/ - ( SANJAY GARG ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 2 1 ST SEPTEMBER , 2015 . . ./ RJ , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI