KANHAIYALAL KALYANMAL, Jaipur V. DCIT, Jaipur

ITA 172/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5232 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 25-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R DS DAGUR CIT DHK
• Assessee Lawyers: RAJEEV PANDEY
• Keywords: Business income; Non-deduction of tax

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.172/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 KANHIYALAL KALYANMAL, K.K. HOUSE, BHART MATA PATH, JAMNALAL BAJAJ MARG, C-SCHEME, JAIPUR CUKE VS. THE DCIT, CIRCLE-6, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACFK 9796 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJEEV PANDEY (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.DS. DAGUR.( ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02.08.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 03/08/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-II, JAIPUR DATED 01.01.2016 WHEREIN THE ASSESSEE HAS T AKEN THE FOLLOWING EFFECTIVE GROUND OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE ON ACCOUNT OF INTEREST PAID TO NON-BANKING FINANCE (NBFC) COMPANY OF RS. 3,48,284/-INSPITE OF THE FACT THAT ASSESSEE SUBMITTED FORM NO. 26A PRESCRIBED UNDER RU LE 31ACB ISSUED BY THE NBFC COMPANIES STATING THAT IN RESPECT OF IN COME RECEIVED FROM ASSESSEE THE SAME IS INCLUDED IN THEIR TAXABLE INCO ME AND THEREBY ERRED IN NOT FOLLOWING PROVISIONS OF LAW (S.201 OF I.T. A CT., 1961). ITA NO. 172/JP/16 KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE-6, J AIPUR 2 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE HAS PAID INTEREST OF RS. 2,45,340/- TO BMW FINANCIAL SERVICES AND RS.1,02,94 4/- TO TATA CAPITAL AGAINST CAR LOAN AGGREGATING TO RS.3,48,284/- DURING THE Y EAR UNDER CONSIDERATION. AS PER AO, THE TDS LIABILITY HAS ARISEN CONSEQUENT UPO N THE PAYMENT OF INTEREST AND THE ASSESSEE HAS FAILED TO FULFIL HIS OBLIGATI ON BY DEDUCT TDS ON SUCH PAYMENT, ACCORDINGLY AS PER PROVISIONS OF SECTION 4 0(A)(IA) OF THE INCOME TAX ACT, 1961, HE DISALLOWED THE ABOVE AMOUNT OF RS.3,4 8,284/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 2.1 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD CIT(A) AND SUBMITTED THAT WHERE IT IS HELD THAT THE PAYMENT OF FINANCIAL CHARGES IS INTEREST, THEN ASSESSEE SUBMITS THAT ON SUCH INTEREST/FINANCIAL CHARGES, INCOME HAS BEEN DISPLAYED AND DECLARED BY BMW FINANCE SERVICES AND TATA CAPITAL AND THE PROVISIONS OF SECTION 40(A )(IA) WILL NOT BE APPLICABLE AS THE RECIPIENT NBFCS HAVE DECLARED INCOME ON RECEIPT OF INTEREST/FINANCIAL CHARGES AND HAVE PAID TAXES OVER SUCH INCOME. IN S UPPORT, THE ASSESSEE FIRM SUBMITS CERTIFICATES IN PRESCRIBED FORM 26A ISSUED TO ASSESSEE FIRM BY THE FINANCE COMPANIES UNDER RULE 31ACB TO PROVE THAT BO TH THE NBFCS WHO HAVE RECEIVED FINANCIAL CHARGES HAVE SUBMITTED ROI IN WHICH THE AFORESAID AMOUNT OF FINANCIAL CHARGES ARE INCLUDED AND THEREFORE, NO THING IS TO BE DISALLOWED U/S 40(A)(IA) OF IT ACT, 1961 R.W.S. 201 OF IT ACT, 196 1. 2.2 THE LD. CIT(A) HOWEVER DIDNT AGREE WITH THE C ONTENTIONS OF THE ASSESSEE AND HAS GIVEN HER FINDINGS STATING THAT: IN THE RECENT JUDGEMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THOMAS GEORGE MUTHOOT VS. CIT KOTTAYAM 2015 (63 TAX MAN.COM 99) (KERELA) IT HAS BEEN CLEARLY HELD THAT THE SECOND PROVISO TO SECTION 40(A)(IA) INTRODUCED W.E.F. 01.04.2013 IS ONLY PROS PECTIVE. IT HAS FURTHER ITA NO. 172/JP/16 KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE-6, J AIPUR 3 BEEN HELD THAT THE FACT THAT THE RECIPIENT HAS SUBS EQUENTLY PAID TAX WILL NOT ABSOLVE PAYEE FROM CONSEQUENCE OF DISALLOWANCE U/S 40(A)(IA). BASED ON THE FACTS AS DISCUSSED ABOVE AND IN VIEW OF THE DECISIONS DISCUSSED AS ABOVE, ADDITION MADE BY THE AO, ON ACCOUNT OF DISAL LOWANCE OF INTEREST EXPENDITURE U/S 40(A)(IA), IS SUSTAINED. GROUND NO . 2 IS DISMISSED . 2.3 DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE LIMITED POINT OF DISPUTE RELATES TO DISALLOWANCE MADE BY LD. AO O N ISSUE OF NON-DEDUCTION OF TAX FOR PAYMENT MADE. THE LD. AO HAS DISALLOWED INT EREST PAID TO NBFC AMOUNTING TO RS. 3,48,284/- AS THE SAME IS INTEREST ON VEHICLE FINANCE OF TATA FINANCE AND BMW FINANCE AND SINCE TDS WAS NOT DEDUC TED AT SOURCE U/S 194A OF INCOME TAX ACT, 1961. SECTION 40(A)(IA) WAS INVO KED AND ENTIRE AMOUNT WAS DISALLOWED. THE LD. CIT(A) HAS CONFIRMED THE SAME HOLDING THAT THE 2 ND PROVISO TO S.40(A)(IA) INTRODUCED W.E.F. 01.04.2013 IS ONLY PROSPECTIVE. LD. CIT(A) ALSO HELD THAT THE FACT THAT THE RECIPIENT HAVE SUBSEQUE NTLY PAID DOES NOT ABSOLVE PAYEE FROM CONSEQUENCE OF DISALLOWANCE U/S 40(A)(IA ). THE LD. CIT(A) HAS DISREGARDED THE PROVISION AND LAW ON THE SUBJECT LA ID OUT BY HONBLE SUPREME COURT IN CASES REPORTED AS HINDUSTAN COCA COLA AND BEVERAGES PVT. LTD. 293 ITR 226(SC) AND ELI-LILLY 312 ITR 25 (SC.). THE LD AR FURTHER SUBMITTED THAT THE LEGISLATION IS APPLICABLE ON ALL PENDING ASSESSMENT AFTER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA R EPORTED AS 293 ITR 226 (SC). THE LD AR ALSO RELIES ON DECISIONS OF: COMMISSIONER OF WEALTH TAX VS. SHARVAN KUMAR SWARU P AND SONS (1994) 210 ITR 886 (SC), CIT VS. RATHI GUM INDUS TRIES(1995) 213 ITR 98 (RA J.), AND CIT VS. ANSAL LAND TOWNSHIP PVT. LTD. 234 TAXMAN 82 5 (DEL.) 2.4 THE LD DR IS HEARD WHO HAS RELIED UPON THE ORDE R OF LOWER AUTHORITIES AND THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN CASE OF PMS ITA NO. 172/JP/16 KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE-6, J AIPUR 4 DIESEL (374 ITR 562) AND HONBLE KERALA HIGH COURT IN THE CASE OF THOMAS GEORGE MUTHOOT (SUPRA). 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE HONBLE SUPREME COURT IN HINDUSTAN COCA COLA BEVERAGE PVT. LTD (SUPRA) HAS HELD THAT WHERE DEDUCTEE, RECIPIENT OF INCOME, HAS ALREADY PAID TAXES ON AMOUNT RECEIVED FROM DEDUCTOR, DEPART MENT ONCE AGAIN CANNOT RECOVER TAX FROM DEDUCTOR ON SAME INCOME BY TREATIN G DEDUCTOR TO BE ASSESSEE-IN-DEFAULT FOR SHORTFALL IN ITS AMOUNT OF TAX DEDUCTED AT SOURCE. 2.6 THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN CASE OF PMS DIESEL (SUPRA) IS IN THE CONTEXT OF APPLICABILITY O F PROVISIONS OF SECTION 40A(IA) TO AMOUNT PAID/PAYABLE DURING THE FINANCIAL YEAR AND T HUS DOESNT SUPPORT THE CASE OF THE REVENUE. 2.7 REGARDING DECISION OF HONBLE KERALA HIGH COURT S DECISION IN THE CASE OF THOMAS GEORGE MUTHOOT(SUPRA) AND HONBLE DELHI HIGH COURT IN CASE OF ANSAL LAND TOWNSHIP PVT. LTD. (SUPRA), THERE ARE CONFLICT ING DECISIONS ON THE ISSUE OF RETROSPECTIVITY OF SECOND PROVISIO TO SECTION 40A(I A). THE QUESTION THAT ARISES FOR CONSIDERATION IS WHERE THERE IS NO DECISION OF A JURISDICTIONAL HIGH COURT AND THERE ARE CONFLICTING VIEWS OF THE DIFFERENT HI GH COURT, WHICH VIEW SHOULD BE FOLLOWED. IN THIS REGARD, WE DRAW SUPPORT FROM THE JUDGEMENT OF HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. (1972) 88 ITR 192 (SC) WHEREIN THE HONBLE SUPREME COURT HAS LAID DOWN THE PRINCIPLE THAT F TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVIS IONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADO PTED. RECENTLY, AN IDENTICAL MATTER CAME UP BEFORE THE COORDINATE RAIP UR BENCH IN THE CASE OF RKP COMPANY VS. ITO WARD-1, KORBA IN ITA NO. 106/RP R/2016 DATED 24.06.2016 WHEREIN THE COORDINATE BENCH HAS HELD TH E SECOND PROVISO TO SECTION 40A(IA) TO BE RETROSPECTIVE IN NATURE NOTIN G THE CONFLICTING DECISIONS OF ITA NO. 172/JP/16 KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE-6, J AIPUR 5 HONBLE KERALA HIGH COURT AND HONBLE DELHI HIGH CO URT AND FOLLOWING THE PRINCIPLES LAID DOWN IN CASE BY THE HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. 2.8 IN VIEW OF THE ABOVE DISCUSSIONS, WE REMIT THE MATTER TO THE FILE OF THE AO FOR LIMITED VERIFICATION OF FORM NO. 26A PRESCRI BED UNDER RULE 31ACB ON THE ASPECT AS TO WHETHER RECIPIENT OF PAYMENT HAS I NCLUDED THE SAME IN THEIR COMPUTATION OF BUSINESS INCOME OFFERED TO TAX AND, IF FOUND TO BE SO, DELETE THE DISALLOWANCE IN QUESTION. WITH THESE DIRECTION S, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03/08 /2016. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 08/ 08/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S KANHAIYALAL KALYANMAL, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CIRCLE-6, JAIPUR 3. VK;DJ VK;QDR@ CIT II, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-II, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.172 /JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 172/JP/16 KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE-6, J AIPUR 6