ACIT Circle-5(2), Ahmedabad V. M/s. Positive Print Sign Graphics, Ahmedabad

ITA 1743/AHD/2018

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The case involves the Assistant Commissioner of Income Tax, Circle-5(2), Ahmedabad as the appellant and M/s. Positive Print Sign Graphics as the respondent. The dispute centered on the disallowance of interest expenses amounting to Rs.11,85,187 under Section 40(a)(ia) of the Income Tax Act, 1961, due to alleged non-compliance with TDS provisions. The CIT(A) had earlier deleted this addition, a decision which the Revenue appealed against. The Tribunal's decision affirmed the CIT(A)'s ruling, supported by judicial precedents that recognized the retrospective applicability of the second proviso to Section 40(a)(ia).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124715 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-06-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 02-08-2018
• Other Referred Cases: Dr. Jaydeep Sharma 52 taxmann.com 420 Delhi High court
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINITA BHURA
• Keywords: Retrospective amendment; Non-deduction of tax; TDS
• Section: 139; 143(3); 40(a)(ia); 201(1); 194A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ I. T. A. No . 1 743/Ahd/20 18 ( नधा रण वष / A ss es sment Year : 2012-13) A s s is ta nt C o mm is s io ne r of I n co me T ax C ir cl e - 5 ( 2 ) , A h me d a ba d बनाम/ Vs . M/s. Positive Print Sign Graphics B a se m en t, G o ya l T o w e r , O p p . G ulb a i T ek ra Po lic e C h ow ki , A mb a w a d i , A h m e da b ad थायी लेखा सं./जीआइआर सं./P A N/ G I R N o . : A A H FP 8 5 0 4 B (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri Mukesh Jain, Sr. DR यथ क ओर से/Respondent by : Smt. Vinita Bhura, A.R. स ु नवाई क तार ख / D a t e o f H e a r i ng 06/06/2023 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 09/06/2023 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the Revenue is directed against the order dated 03.05.2018 passed by the Ld. Commissioner of Income Tax (Appeals)- 5, Ahmedabad arising out of the order dated 13.10.2017 passed by the ACIT, Circle-5(2), Ahmedabad under section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2012-13. ITA No. 1743/Ahd/2018 (ACIT vs. M/s. Positive Print Sign Graphics) A.Y.– 2012-13 - 2 - 2. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. 3. The deletion of addition of Rs.11,85,187/- made on account of disallowance of interest expenses under Section 40(a)(ia) of the Act is subject matter before us. 4. The brief facts leading to the case is this that the assessee filed its return of income on 29.09.2012 declaring total loss at Rs.54,77,546/-, which was finalized under Section 143(3) of the Act on 29.12.2014 determining total loss at Rs.52,45,628/-. Subsequently, notice under Section 263 of the Act was issued and finalized under order dated 17.03.2017, whereby and whereunder, the Ld. AO was directed to disallow the payment of interest of Rs.11,85,187/- to M/s. Bajaj Finance Ltd. under Section 40(a)(ia) of the Act as the assessee failed to comply TDS as per statutory provision. 5. During the year under consideration, the assessee has debited interest of Rs.25,37,178/- to P&L Account which included interest of Rs.11,85,187/- paid to M/s. Bajaj Finance Ltd., a Non-Banking Finance Company and therefore liable to deduct tax under Section 194A of the Act on interest payment. Since, the same was not done, the Ld. AO applied the provision of Section 40(a)(ia) of the Act and disallowed the same. 6. The case of the assessee is this that the 2 nd Proviso to Section 40(a)(ia) of the Act r.w. Proviso to Section 201(1) of the Act prescribes no disallowance of expenses under Section 40(a)(ia) of the Act can be made unless the assessee has been treated as assessee in default under Section ITA No. 1743/Ahd/2018 (ACIT vs. M/s. Positive Print Sign Graphics) A.Y.– 2012-13 - 3 - 201(1) of the Act for its failure to deduct tax at source from the payment made on account of interest. It was further the case of the assessee is this that in the event if the amount paid by payer have been included by the payee in its return of income for relevant assessment year, filed under Section 139 of the Act and has paid the tax due on the income declared in such return, to the extent recipient from such assessee is included the sum in his return of income and filed the same, no disallowance under Section 40(a)(ia) of the Act can be made by the Ld. AO in view of the 2 nd Proviso to Section 40(a)(ia) r.w.s. First Proviso to Section 201(1) of the Act. Apart from that it was contended by the assessee that the 2 nd Proviso to Section 40(a)(ia) of the Act inserted by Finance Act, 2012 and on furnishing of certificate in Form 26A as prescribed under Proviso to Section 201(1) r.w. Rule 31ACB of IT Rules, no disallowance under Section 40(a)(ia) of the Act can be made. In fact, the 2 nd Proviso to Section 40(a)(ia) of the Act has been inserted in the statute by the Finance Act, 2012 w.e.f. 01.04.2013 having retrospective effect from 01.04.2005. Keeping in view of this particular aspect of matter, the Ld. CIT(A) passed the following order while deleting the addition made by the Ld. CIT(A): “4.5. Facts of the case and the submissions are considered. The only ground on which the AO has disallowed the interest payment is that the second proviso to section 40(a)(ia) of the Act has been inserted in the statute by the Finance Act, 2012 w.e.f. 1.4.2013 thus it is applicable from the A.Y. 2013-14 and therefore, it is not relevant in the present case as the assessment year involved is A.Y. 2012-13. The appellant has furnished certificate as prescribed under proviso to section 201(1) r.w. rule 31 ACB of the I.T. rules before the A.O. and no adverse remarks regarding this has been made by the A.O. in the assessment order. In several decisions given by the High Courts and ITAT it is held that the second proviso to section 40(a)(ia) is having retrospective effect from 1.4.2005. In the case of Dr. Jay deep Sharma 52 taxmann.com 420 Delhi High court has held as under:- "No disallowance would be made u/s 40(a)(ia), if recipient of payment in question has filed return of income and paid taxes in stipulated time. In view of the second proviso to section 40(a)(ia) having retrospective effect from 01.04.2005, asserting ITA No. 1743/Ahd/2018 (ACIT vs. M/s. Positive Print Sign Graphics) A.Y.– 2012-13 - 4 - officer should verify whether payees had filed their returns of income & paid due taxes and if they had done so, no disallowance u/s 40(a)(ia) is called for, " Considering the above judicial pronouncements I am of the opinion that second proviso to section 40(a)(ia) is not applicable in the case of the assessee and no disallowance u/s.40(a)(ia) of the Act can be made in the case of the appellant. Accordingly the disallowance made by the AO is deleted and grounds of appeal are allowed.” 7. The question before us is as to whether the 2 nd Proviso to Section 40(a)(ia) of the Act is having retrospective effect from 01.04.2005 has also already dealt with by the Ld. CIT(A) with an affirmative view supported by the judgment passed by the Hon’ble Delhi High Court in case of Dr. Jaydeep Sharma 52 taxman.com 420 (Delhi). Thus, the order passed by the Ld. CIT(A) is found to be just and proper without any ambiguity so as to warrant interference. The same is, therefore, upheld. 8. In the result, Revenue’s appeal is dismissed. This Order pronounced on 09/06/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 09/06/2023 True Copy S. K. SINHA आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad