DCIT (TDS) 2(2), MUMBAI V. PORTLAND INDIA OUTDOOR ADVERTISING PLTD, MUMBAI

ITA 1741/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3414 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 13-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Non-deduction of tax
• Section: 201(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.1741/M/14 ( / ASSESSMENT YEAR: 2009-10) DY. COMMISSIONER OF INCOME TAX (TDS) 2(2), R.NO.703, 7 TH FLOOR, SMT.K.G.MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI - 400002 / VS. PORTLAND INDIA OUTDOOR ADVERTISING PRIV ATE LTD. 8 TH FLOOR, COMMERZ INTERNATIONAL BUSINESS PARK, OBEROI GARDEN CITY, OFF. WESTERN EXPRESS HIGHWAY, GOREGAON (E), MUMBAI - 400063 ./ ./PAN/GIR NO. : AABCP1311M ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 16.12.2015 /DATE OF PRONOUNCEMENT: 23.03.2016 ! / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER DATED 20.12.2013 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)13, MUMBAI [HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)] RELEVANT TO THE A.Y.2009-10. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS:- ASSESSEE BY: MS. AARTI VISSANJI DEPARTMENT BY: SHRI AKHILENDRA P. YADAV ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 2 I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CTS OF THE CASE AND DECIDING THE APPEAL OF THE ASSESSEE ON THE BASIS OF DECISION OF HONBLE ITAT IN THE CASE OF M/ S. PFIZER LTD. WHICH IS NOT ACCEPTED BY THE DEPARTMENT AND THE DEPARTMENT HAS FILED FURTHER APPEAL IN THE CASE OF M/S. PFIZER LTD. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE NON DEDUCT ION OF TAX BY HOLDING THAT IN VIEW OF DISALLOWANCE U/S. 40(A)(IA), NO DEMAND CAN BE RAISED U/S.201(1) OF TH E I.T.ACT WITHOUT APPRECIATING THE INTENT & SPIRIT OF SECTION 40(A)(IA) VIS-A-VIS TDS PROVISIONS UNDER CHAPTER XVII OF THE ACT. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)HAS ERRED IN NOT APPRECIATING THE FAC TS THAT DISALLOWANCE OF EXPENSES IN COMPUTATION OF TAX ABLE INCOME IN ACCORDANCE TO PROVISIONS OF SECTION 40(A) (IA) IS TEMPORARY, THE SAID EXPENSES ARE PAID TO THE CRE DIT OF GOVERNMENT. HOWEVER, TDS PROVISIONS PROVIDES FOR COLLECTING TAX ON INCOME OF THE DEDUCTEE. THEREFOR E, THE DISALLOWANCE BY ITSELF DOES NOT ABSOLVE THE ASSESSE E OF THE CONSEQUENCE FOR FAILURE TO DEDUCT AND PAY TAX U NDER ANY TDS PROVISIONS. IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DEMAND OF RS.24,03,458/- (INCLUSIVE OF INTEREST), WITHOUT PRO PERLY APPRECIATING THE FACTUAL & LEGAL MATRIX OF THE CASE AS CLEARLY BROUGHT OUT BY THE A.O. IN ORDER U/S.201(1)&201(1A) OF THE I.T.ACT, 1961. 3. IN BRIEF THE REVENUE IS AGGRIEVED BY THE ORDER O F LEARNED CIT(A) IN DELETING THE NON DEDUCTING THE OF TAX BY HOLDING THAT IN VIEW OF THE DISALLOWANCE U/S.40(A)(IA) OF THE OF TH E INCOME TAX ACT, 1961 ( IN SHORT THE ACT), NO DEMAND CAN BE RAISED U/S.201(1) R.W.S 40(A)(IA) VIS A VIS TDS PROVISIONS UNDER CHAPTER XVII OF THE ACT. ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 3 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND HAVE GONE THROUGH THE RECORD CAREFULLY. THE LEARNED REPRESENTATIVE OF THE DEPAR TMENT HAS ARGUED THAT THE LEARNED CIT(A) HAS EARNED IN DECIDING THE MATTER OF CONTROVERSY ON THE BASIS OF THE CASE DECIDED BY THE HONBLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I.E. PFIZER LT D. 55 SOT 277 (2013). IT IS ALSO ARGUED THAT THE SAID ORDER HAS BEEN CHALLENGED THEREFORE, THE DECISION GIVEN BY THE LEARNED CIT(A) ON THE BASIS OF SAID DECISION IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE. WHEREAS ON THE OTHER HAND THE LEARNED REPRE SENTATIVE OF THE ASSESSEE REFUTED THE SAID CONTENTION. BEFORE DECID ING THE MATTER OF CONTROVERSY, IT IS NECESSARY TO ADVERT THE OPERATIO N PART OF THE ORDER OF LEARNED CIT(A) IN QUANTUM ON RECORD. THE FINDIN G OF LEARNED CIT(A) IS HEREBY MENTIONED BELOW:- 3.7. I HAVE CONSIDERED THE ISSUE AND ALSO GONE THROUGH THE CASE LAWS CITED BY THE APPELLANT. THERE IS NO DISPUTE THAT THE APPELLANT THEMSELVES DISALLOWED THESE EXPENSES U/S.40(A)(IA) OF THE ACT. THE AO HAS NOT MADE ANY FURTHER DISALLOWANCE U/S.40(A)(IA) FOR THESE EXPENSES. FURTHER, THOUGH APPELLANT HAS STATED THAT THE EXPENSES WHICH WERE SOFTWARE LICENSE FEES, PROFESSIONAL AND CONSULTANCY FEES, OUTSOURCED BUSINESS SYSTEM AND OUTSOURCED I. T. SERVICES WERE PROVISIONAL IN NATURE BY TAKING ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 4 GENERAL PLEA THAT THESE EXPENSES WERE BASED ON CERTAIN ESTIMATIONS AND ASSUMPTIONS, HOWEVER HAVE NOT SUPPORTED THEIR CLAIM BY AN DOCUMENTARY EVIDENCE. DESPITE BEING ASKED FOR THE SAME. IT IS PLEADED THAT OUT OF TOTAL SUCH EXPENSES DEBITED AND DISALLOWED U/S.40(A)(IA) AMOUNTING TO RS.85,53,719/-, ON THE EXPENSES AMOUNTING TO RS.28,21,000/- IN SUBSEQUENT YEAR; TAX DEDUCTED AND PAID TO THE CREDIT OF CENTRAL GOVERNMENT MEANING THEREBY THE DEFAULT HAS OCCURRED AND HENCE EXPENSES WERE DISALLOWED IN THE INSTANT YEAR AND WERE CLAIMED IN THE YEAR WHEN THE TAXES WERE DEDUCTED AND PAID. THE APPELLANTS ARGUMENT IS THAT SINCE THEY HAVE DEDUCTED AND PAID THE EXES ON THE AMOUNT OF RS.28,21,000/- AND HENCE LIABILITY TO DEDUCT TAX AT SOURCE, AND TO PAY TO THE CREDIT OF CENTRAL GOVERNMENT ALSO AROSE IN THE SUBSEQUENT YEAR AND HENCE THEY ARE NOT DEFAULTER FOR LEVY OF INTEREST U/S.201(1) AND 201(1A). IT CAN NOT BE DISPUTED THAT THE LIABILITY AROSE IN THE VERY PY AS THE AMOUNTS WERE CREDITED IN THE ACCOUNT OF CONCERNED PARTIES OR PAID TO THEM WHICHEVER WAS EARLIER AND IT IS ONLY THE TAX WAS DEDUCTED OR PAID ON THE SAME IN THE SUBSEQUENT YEAR. IN VIEW OF THE THIS ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 5 SECTION 201(1) IS VERY MUCH AT ATTRACTED AS THE TAX WAS REQUIRED TO BE DEDUCTED AT THE TIME OF CREDIT/PAYMENT WHICHEVER WAS EARLIER. HENCE I AM NOT IN AGREEMENT WITH APPELLANT ON THIS FOR THE REASON THAT ACT FASTENS THE LIABILITY AT THE TIME OF CREDIT OR PAYMENT WHICHEVER IS EARLIER. HERE APPELLANT HAS CREDITED AMOUNT OF RS.28,21,000/- IN P.Y. RELEVANT TO A.Y.2009-10 AND HENCE DEDUCTION OF TAX SUBSEQUENTLY WILL NOT ABSOLVE THEM FROM LEVY OF INTEREST U/S.201(1) AND 201(1A) OF THE ACT. FURTHER, FOR THE BALANCE AMOUNT OF RS.56,72,719/- THOUGH CLAIMED THE APPELLANT HAVE FAILED TO SHOW THAT ENTRIES WERE NOT CREDITED IN RESPECTIVE PARTIES INDIVIDUAL ACCOUNTS AND ALSO FAILED TO SHOW THAT THEY WERE REVERSED IN A PARTICULAR YEAR SUBSEQUENTLY. THUS IN PRINCIPLE ACTION OF A.O. IS UPHELD FOR THE LEVY OF INTEREST TREATING AS ASSESSEE IN DEFAULT FOR THE ENTIRE AMOUNT OF RS.85,53,719/- 3.8 NOW COMING TO THE DECISION AS CITED ABOVE I FIND THE CASE OF PIPAVAV (SUPRA) IS NOT APPLICABLE IN THE CASE OF APPELLANT AS HERE IS NOT PROVED BY APPELLANT THAT RECIPIENT WERE NOT KNOWN AND PAYMENT WAS GOVERNED OR HELD UP ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 6 BY ANY REGULATION AND SO LIABILITIES WERE UNCERTAIN, ESTIMATED AND ADHOC IN NATURE. HOWEVER, THE DECISION GIVEN IN CASE OF PFIZER LIMITED VS. ITO (TDS) (ITA NO.1667/MUM/2010)(MUM) DATED 31 ST OCTOBER 2012, WHICH WAS GIVEN IN THAT CASE FOR A.Y.2007-08 IS IN FAVOUR. THE RELEVANT PART OF THE SAME IS REPRODUCED AS UNDER:- IT IS UNDISPUTED THAT THE TAXPAYER HAD MADE PROVISI ON FOR EXPENSES WHICH WERE DISALLOWED UNDER SECTION 40(A)(I)/40(A)(IA) OF THE ACT WHILE FILING ITS INCO ME-TAX RETURN. AS PER THE JOURNAL ENTRIES PASSED, ONCE TH E INDIVIDUAL PAYEE WAS IDENTIFIED, ALL THE PROVISIONS RELATING TO TAXES DEDUCTED AT SOURCE (TDS) WERE APPLICABLE. THE MUMBAI TRIBUNAL I HAS HELD THAT PROVISIONS OF TDS ARE NOT APPLICABLE IN THE ABSENCE OF ANY IDENTIFIABLE PAYEE. AS THE PAYEE WAS NOT IDENTIFIABLE AT THE TIME OF MAKING PROVISIONS, TDS IS NOT REQUIRED TO BE DEDUCTED. THE ENTIRE PROVISIONS WER E WRITTEN BACK IN THE NEXT YEAR AND THE ACTUAL AMOUNT S PAID/CREDITED WERE SUBJECTED TO TDS WHICH WAS UNDISPUTED. WHERE AN AMOUNT WAS DISALLOWED UNDER SECTION 40(A)(I)/40(A)(IA) ON THE BASIS OF THE AUDI T REPORT OF THE CHARTERED ACCOUNTANT, THE TAXPAYER CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT UNDER S ECTION 201(1) OF THE ACT IN RESPECT OF SAME AMOUNT AGAIN. IF THE REVENUES CONTENTION WAS TO BE ACCEPTED, THEN DISALLOWANCE UNDER SECTION 40(A)(I)/40(A)(IA) CANNO T BE ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 7 MADE AND THE PROVISIONS OF SECTION 40(A)(I)/40(A)(I A) TO THAT EXTENT MAY BECOME OTIOSE. CONCLUSION: PROVISIONS OF TDS ARE NOT APPLICABLE IF THE PAYEE I S NOT IDENTIFIABLE. ASSESSEE CANNOT BE TREATED AS AN ASS ESSEE IN DEFAULT UNDER SECTION 201(1) OF THE ACT, IF THE AMOUNTS ARE DISALLOWED UNDER SECTION 40(A)(I)/40(A) (IA) OF THE ACT. 3.9. IT IS NOTED THAT THE WHOLE PREMISE OF THAT DECISION THAT WHEN DISALLOWANCES WERE MADE BY APPELLANT THEMSELVES, INTEREST U/S.201(1) AND 201(1A) OF THE ACT IS NOT LEVIABLE ACTUALLY, HAS BEEN BROUGHT IN THE SECTION 201(1) IN THE FINANCE ACT 2012 ITSELF, AS PROVISO; HOWEVER W.E.F.1.7.2012. SAME IS REPRODUCED AS UNDER. THE SECTION 201(1) AND 201(1A) SAYS AS UNDER:- CONSEQUENCES OF FAILURE TO DEDUCT OR PAY- 1) WHERE ANY PERSON INCLUDING PRINCIPAL OFFICER OF A C OMPANY:- A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WIT H THE PROVISIONS OF THIS ACT; OR B) REFERRED TO IN SUB-SECTION (IA) OF SECTION 192, BEI NG AN EMPLOYER, DOES NOT DEDUCT, OR DOES NOT PAY, OR AFTE R SO DEDUCTING FAILS TO PAY, THE WHOLE OR ANY PART OF TH E TAX, AS REQUIRED BY R UNDER THIS ACT, THEN SUCH PERSON, SHA LL WITHOUT ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 8 PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY IN CUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF S UCH TAX. 2. PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPA L OFFICER OF A COMPANY, WHO FAILS TO DEDUCT, THE WHOLE OR ANY PA RT OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPT ER ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO T HE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT:- I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139; II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME AND III) HAS PAID THE TAX DUE ON THE INCOME DECLARED B Y HIM IN SUCH RETURN OF INCOME AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. 4.1. BY GOING THROUGH THE SAID ORDERS IT IS APPAREN T THAT THE LEARNED CIT(A) HAS DECIDED THE MATTER OF CONTROVERS Y ON THE BASIS OF ORDER PASSED BY THE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. PFIZER LTD., 330 ITR 62 (BOM.). THE FINDING OF THE SAID CASE IS ALSO MENTIONED BELOW:- 4.2 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT AS WELL AS THE FACTS OF THE CASE. IT IS SEEN THAT AN AMOUNT OF RS.5,49,796/- WAS QUANTIFIED BY THE CHARTERED ACCOUNTANTS OF THE APPELLANT IN THE TAX AUDIT REPORT FOR ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 9 DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. THEREFORE, WHILE FILING THE RETURN OF INCOME, THE APPELLANT SUO MOTO DISALLOWED AN AMOUNT OF RS.5,50,000/- IN THE COMPUTATION OF INCOME. THUS, THE APPELLANT DID NOT CLAIM THE DEDUCTION IN REGARD TO THESE EXPENSES INCURRED. THE APPELLANTS CONTENTION IS THAT THE PROVISIONS OF SECTION 201 DO NOT APPLY TO ITS CASE BECAUSE THE AMOUNT OF RS.5,50,000/- HAS BEEN SUO MOTO DISALLOWED, WHILE FILING THE RETURN OF INCOME. I AGREE WITH THE CONTENTION OF THE APPELLANT IN THIS REGARD. 4.3. IN THE CASE OF PFIZER LTD. VS. ITO (SUPRA), CITED BY THE APPELLANT, THE ASSESSEE HAD SUO- MOTO DISALLOWED THE ENTIRE AMOUNT OF THE PROVISION CREATED UNDER SECTIONS 40(A)(I)/40(A)(IA), ON ACCOUNT OF NON-DEDUCTION OF TAX. IN THESE CIRCUMSTANCES, BECAUSE THE ASSESSEE HAD NOT CLAIMED ANY SUCH EXPENDITURE IN THE RELEVANT YEAR, THE HONBLE ITAT, MUMBAI HELD THAT THE ASSESSEE CANNOT BE SUBJECTED TO THE PROVISIONS OF TDS UNDER SECTION 201(1). THE CASE OF THE APPELLANT IS IDENTICAL ON FACTS TO THE CASE OF PFIZER LTD. HENCE, THE APPELLANT CANNOT BE TREATED TO BE IN DEFAULT UNDER SECTION 201 FOR ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 10 NON-DEDUCTION OF TAX AT SOURCE IN VIEW OF THE SAID FACT THAT THE AMOUNT OF RS.5,50,000/- HAS BEEN SUO MOTO DISALLOWED BY THE APPELLANT UNDER SECTION 40(A)(IA) OF THE ACT IN THE RETURN OF INCOME. THE DEMAND OF RS.11,98,849/- RAISED BY THE AO IS THEREFORE NOT JUSTIFIED AND THE SAME IS HEREBY DELETED. 4.2 THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IS QUITE SIMILAR WITH THE FACTS AND CIRCUMSTANCES OF THE CAS E CITED AS CIT VS. PFIZER LTD., 330 ITR 62 (BOM.). NOTHING MATERI AL WAS PRODUCED BEFORE US WHICH IS CONTRARY TO THE SAID FI NDINGS. IN VIEW OF THE SAID CIRCUMSTANCES WE ARE OF THE VIEW THAT T HE LEARNED CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICI OUSLY AND CORRECTLY WHICH DOES NOT REQUIRED TO BE INTERFERE W ITH AT THIS APPELLATE STAGE. ACCORDINGLY, THE APPEAL OF THE RE VENUE IS HEREBY ORDER TO BE DISMISSED 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2016. SD/- SD/- (D.KARUNAKARA RAO) (AMARJIT SINGH) / ACCOUNTANT MEMBER # $ /JUDICIAL MEMBER % & MUMBAI; ' DATED : 23 RD MARCH, 2016 MP MP MP MP ITA NO.1741/MUM/2014 ASSESSMENT YEAR: 2009-10 11 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ( ) / THE CIT(A)- 4. ( / CIT 5. )* + $$,- , ,- , % & / DR, ITAT, MUMBAI 6. + ./ 0 / GUARD FILE. / BY ORDER, ) $ //TRUE COPY// % / & ' (DY./ASSTT. REGISTRAR) , % & / ITAT, MUMBAI