ITO, New Delhi V. Sh. Anoop Khandelwal, New Delhi

ITA 18/DEL/2013

• Counselvise Citation: 1820114 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: RAJA KYMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A , NEW DELHI) BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.18 /DEL/2013 ASSESSMENT YEAR : 2008-09 ITO, WARD 27(1), VS. SH. ANOOP KHANDELWAL, NEW DELHI Y-3, 1 ST FLOOR, LOHA MANDI, NARAINA, NEW DELHI-110 028 GIR / PAN:AAEPK2761J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI Y KAKKAR, DR RESPONDENT BY : SHRI RAJA KYMAR, ADV ORDER PER T.S. KAPOOR, AM: THIS IS APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF LD. CIT(A) DATED 19.10.2012. THE REVENUE HAS TAKEN THE FOLLOW ING GROUNDS OF APPEAL: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN; I) DELETING THE ADDITION OF RS.4,70,814/- MADE U/S 40( A)(IA) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF PAYMENT OF INTER EST WITHOUT DEDUCTION OF TDS. II) DELETING THE ADDITION OF RS.5,25,000/- MADE U/S 40( A)(IA) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF PAYMENT OF BROKE RAGE WITHOUT DEDUCTION OF TDS. III) DELETING THE ADDITION OF RS.1,05,157/- OUT OF REBAT E AND DISCOUNT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E DERIVES INCOME FROM THE BUSINESS OF BUILDING MATERIAL, IRON AND STEEL, CEMENTS DURING THE YEAR UNDER CONSIDERATION THROUGH TWO PROPRIETARY CONCERN S M/S. DELHI STEEL AND ITA NO.18./DEL/2013 2 CEMENT AND M/S. MUDIT STEELS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. DISALLOWED THE INTEREST PAID BY M/S. MUDIT STEELS ON LOAN TAKEN FROM VARIOUS INSTITUTIONS AS TDS WAS NOT DEDUCTED ON PAYMENT OF SUCH INTEREST. THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.5,63,654/- AS BROKERAGE EXPENSES IN THE P & L ACCOUNT OF ITS TWO FIRMS. THE A.O. DISALLOWED A SUM OF RS.5.25 LACS ON THE GROUND THAT NO TDS WAS DEDUCTED AND TDS WAS DEDUCTED AT A MUCH LOWER RATE. FURTHER THE A.O. HAS DISALLOWED A SUM OF RS.1,05,157/- DEBITED IN THE P & L ACCOUNT OF M/S. MUDIT STEELS AS REBATE AND DISCOUNT. AGGRIEVED WIT H THE ADDITION, ASSESSEE FILED APPEAL BEFORE LD. CIT(A). LD. CIT(A) AFTER R ELYING UPON VARIOUS CASE LAWS DECIDED THE THREE ISSUES IN FAVOUR OF THE ASSE SSEE BY HOLDING AS UNDER: 4.2 IN GROUND NO.3, THE APPELLANT HAS IMPUGNED THE DISALLOWANCE OF RS.4,70,814/- OUT OF INTEREST PAID BY THE APPELL ANT TO DIFFERENT FINANCIAL INSTITUTIONS ON THE GROUNDS THAT TDS WAS NOT DEDUCTED AND PAID ON THIS AMOUNT. THE DISALLOWANCE HAS APPARENT LY BEEN MADE U/S 40(A)(IA) OF THE ACT OUT OF THE AMOUNT DISALLOWED, A SUM OF RS.3,10,294/- WAS PAID TO M/S. INDIA BULLS FINANCIA L SERVICES LTD.; RS.85,706/- TO M/S. CHOLAMANDALAM DBS FINANCE LTD; AND RS.74,814/- TO M/S. G E MONEY FINANCIAL SERVICES. THE APPELLANT HAS RELIED UPON THE DECISION OF THE SPECIAL BENCH OF IN COME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BENCH IN THE CASE OF MERIL YN SHIPPING AND TRANSPORTS VS ADDL. CIT, RANGE-1, VISHAKHAPATNAM, W HEREIN THE HON'BLE INCOME TAX APPELLATE TRIBUNAL HAS HELD AS U NDER: IT HAS TO BE CONCLUDED THAT, PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE, WHIC H ARE PAYABLE AS ON THE DATE OF 31 ST MARCH EVERY YEAR AND IT CANNOT BE INVOKED TO DISALLOW EXPENDITURE, WHICH HAS BEEN ACTUALLY PAID DURING THE PREVIOUS YEAR WITHOUT DEDUCTION OF TDS. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND I AM OF THE CONSIDERED OPINION THAT THE JUDGEME NT OF HON'BLE ITAT SPECIAL BENCH VISHAKHAPATNAM IS APPLICABLE IN THE CASE OF THE APPELLANT. THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT SECTION 40(A)(IA) OF THE ACT WAS INTRODUCED BY THE FINANCE ACT, 2004 W.E.F. ITA NO.18./DEL/2013 3 01.04.2005 WITH A VIEW TO AUGMENT THE REVENUE THROU GH THE MECHANISM OF TDS. ON A COMPARISON BETWEEN THE PROP OSED FINANCE (NO.2) BILL, 2004 AND FINANCE ACT, 2004, IT IS EVID ENT THAT THE LEGISLATURE HAS REPLACED THE WORD AMOUNTS CREDITED OR PAID(AS MENTIONED IN THE FINANCE BILL) WITH THE WORD PAYAB LE IN THE FINAL ENACTMENT. THE SPECIAL BENCH WAS OF THE OPINION TH AT SUCH A CHANGE WAS DONE WITH A PURPOSE. THUS, INTEND HAS BEEN MAD E CLEAR THAT ONLY THE OUTSTANDING AMOUNT OR THE PROVISION FOR EXPENSE S (LIABLE TO TDS) ARE TO BE DISALLOWED IN THE EVENT OF DEFAULT ON COM PLYING WITH THE TDS PROVISIONS. THE DISALLOWANCES WOULD BE APPLICABLE ONLY IF THE AMOUNT IS PAYABLE, IF THE AMOUNT IS ALREADY PAID, THERE C OULD NOT BE ANY DISALLOWANCE U/S 40(A)(IA). THEREFORE, THE ADDITIO N OF RS.4,70,814/- IS HERBY DELETED. 4.3 IN GROUND NO.4, THE APPELLANT HAS IMPUGNED THE DISALLOWANCE OF RS.5,25,000/- OUT OF BROKERAGE PAID ON ACCOUNT O F ALLEGED NO DEDUCTION/LOWER DEDUCTION OF TAX AT SOURCE. THESE DISALLOWANCES HAVE ALSO APPARENTLY BEEN MADE BY THE A.O. BY INVOKING T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. IN MY CONSIDERED OPI NION, THE DECISION OF HON'BLE ITAT SPECIAL BENCH, VISHAKHAPATNAM, IN THE CASE OF MERILYN SHIPPING AND TRANSPORT (SUPRA) WILL HOLD GOOD IN TH IS ISSUE ALSO, SINCE, THE AMOUNTS OF BROKERAGE HAVE ALREADY BEEN P AID BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION. THE REFORE, THESE AMOUNTS WOULD NOT BE HIT BY THE REGORS OF THE PROVI SIONS OF SECTION 40(A)(IA). THE A.O. HAS NOT DISPUTED THE REASONS F OR PAYMENT OF BROKERAGE OR THE BROKERAGE ITSELF. HE HAS BASICALL Y DISALLOWED THE PAYMENT OF BROKERAGE SINCE TDS WAS EITHER NOT DEDUC TED OR THERE WAS LOWER DEDUCTION OF TDS IN SOME CASES. IN THE LIGHT OF THE DECISION OF HON'BLE ITAT VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORT (SUPRA), THIS ADDITION OFRS.5,25,000/- IS ALSO HEREBY DELETED. 4.4 IN GROUND NO.5, THE APPELLANT HAS IMPUGNED THE DISALLOWANCE OF RS.1,05,157/- OUT OF REBATE & DISCOUNT, CLAIMED BY THE APPELLANT IN HIS PROPRIETORSHIP CONCERN M/S. MUDIT STEELS. THE APPELLANT HAS SUBMITTED THAT HE HAS CLAIMED AN AMOUNT OF RS.3,41, 871/- UNDER THE HEAD REBATES AND DISCOUNT, OUT OF WHICH A SUM OF RS .1,04,757/- (WRONGLY TAKEN BY THE A.O. AT RS.1,05,157/-) PERTAI NS TO THE RATE DIFFERENCE IN THE CASE OF M/S. B.L. GOYAL & CO. TH E A.O. HAS DISALLOWED THIS AMOUNT OF RATE DIFFERENCE CLAIMED I N THE ACCOUNT OF M/S. B.L. GOYAL & CO., STATING THAT THIS AMOUNT WAS WRITTEN OFF AS BAD ITA NO.18./DEL/2013 4 DEBTS AND DEBITED AS REBATE & DISCOUNT, WHICH WAS U NJUSTIFIED AND UNTENABLE. THE APPELLANT HAS SUBMITTED THAT THIS A CTION OF HT A.O. WAS PURELY ARBITRARY, WITHOUT UNDERSTANDING THE NATURE OF THE TRANSACTION AND ITS MERITS. THE APPELLANT SUBMITTED THAT HT TO TAL AMOUNT OF GOODS SOLD TO M/S. B.L. GOYAL & CO. DURING THE YEAR UNDER CONSIDERATION WAS TO THE TUNE OF RS.3,08,39,874/-, ON WHICH THE A MOUNT OF RAT DIFFERENCE WAS ONLY RS.1,04,757/-, I.E. ONLY 0.34%. THIS CLAIM ALSO WAS DULY SUPPORTED WITH THE DETAILS SUBMITTED DURIN G THE COURSE OF PROCEEDINGS ALONG WITH THE COPY OF ACCOUNT OF M/S. B.L. GOYAL & CO., SHOWING THE DEDUCTIONS, AND HENCE, THE APPELLANT CL AIMED THAT THIS DISALLOWANCE WAS TOTALLY UNCALLED FOR. I HAVE CAREF ULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND I AGREE THAT A RATE DIFFERENCE OF 0.,34% IN A TRANSACTION OF MORE THAN RS.3 CRORES IS NOTHING UNUSUAL AND THEREFORE, THE ADDITION OFRS.1,05,757/- IS HERE BY DELETED. 3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE OUTSET, LD. D.R. SUBMITTED THAT LD. CIT(A ) HAS WRONGLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AS THE CASE LAW RELIED UPON BY LD. CIT(A) HAS BEEN OVERRULED BY HON'BLE CALCUTTA HIGH COURT AND IN SUPPORT OF GROUNDS OF APPEAL, HE HEAVILY RELIED UPON THE ASSES SMENT ORDER. 5. LD. A.R. ON THE OTHER HAND SUBMITTED THAT WHILE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS CRECENT EXPORT SYN DICATE 216 TAXMAN 250 AND HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S SIKANDARKHAN N TUNVAR 357 ITR 312 HAS OVERRULED THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS ACIT 136 ITD 23. HOWEVER, THE SPECIAL BENCH DECISION HAS BEEN APPROVED BY HON'BLE ALLAHAB AD HIGH COURT IN CITVS VECTOR SHIPPING SERVICES (P) LTD. 357 ITR 642 AND MOREOVER, SLP FILED BY THE DEPARTMENT AGAINST HON'BLE ALLAHABAD H IGH COURT DECISION IN THE CASE OF VECTOR SHIPPING SERVICES HAS BEEN DISMI SSED BY HON'BLE SUPREME COURT AND THEREFORE, THE HONBLE SUPREME CO URT ORDER HAS BECOME THE LAW ON THIS ISSUE. WITHOUT PREJUDICE TO THE AB OVE, IT WAS SUBMITTED THAT ITA NO.18./DEL/2013 5 IN VIEW OF HON'BLE SUPREME COURT DECISION IN THE CA SE OF CIT VS VEGETABLE PRODUCTS LTD. 88 ITR 192, THE ASSESSEE IS ENTITLED TO APPLICATION OF JUDGEMENT BENEFITING TO IT AND THEREFORE HON'BLE AL LAHABAD HIGH COURT JUDGEMENT SHOULD BE APPLIED TO THE ASSESSEE. 6. AS REGARDS THE REBATE AND DISCOUNTS TAKEN BY REV ENUE IN THE 3 RD GROUND OF APPEAL, LD. A.R. RELIED UPON THE ORDER OF LD. CI T(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THERE ARE CONTRARY JUDGEMENTS OF ALLAHABAD HIGH COURT AS COMPARED TO CALCUTTA AND GU JARAT HIGH COURTS. HOWEVER, APPEAL FILED BY THE DEPARTMENT WITH HONBL E SUPREME COURT AGAINST THE ORDER OF HON'BLE ALLAHABAD HIGH COURT H AS BEEN DISMISSED BY HON'BLE SUPREME COURT IN LIMINE. MOREOVER, AS PER THE HON'BLE SUPREME COURT ORDER IN THE CASES OF VEGETABLE PRODUCTS AS R ELIED UPON BY LD. A. R. IN THE CASE OF CONFLICTING JUDGEMENTS THAT JUDGMENT IS TO BE APPLIED TO AN ASSESSEE WHICH IS BENEFICIAL TO IT. THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD. CIT(A) IN THIS CONTEXT. AS REGARD S THE ISSUE OF REBATE & DISCOUNT, IN OUR VIEW, LD. CIT(A) HAS TAKEN A REASO NED VIEW KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. IN VIEW OF THE ABOVE, THE ORDER OF LD. CIT(A) IS UPHELD AND THEREFORE, APPEAL FILED BY THE REVENUE IS DISMISSED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCT., 2014. SD./- SD./- (DIVA SINGH) (T.S. KA POOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 17 TH OCT., 2014 SP ITA NO.18./DEL/2013 6 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FI LE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER