Andhra Pradesh Power Finance Corporation Limited , Hyderabad V. Income Tax Officer, Ward-1(2), Hyderabad

ITA 1805/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5690 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 15-01-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 07-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MOHAN REDDY
• Assessee Lawyers: A V RAGHURAM
• Keywords: Charitable institution
• Section: 143(3); 142(1); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 1805 / HYD/201 8 ASSESSMENT YEAR S : 20 1 3 - 1 4 ANDHRA PRADESH POWER FINANCE CORPORATION LTD., VIJAYAWADA. PAN AA DCA0857D VS. INCOME - TAX OFFICER, WARD 1 ( 2 ), HYDERABAD. APPELLANT RESPONDENT A SSESSEE BY: S HRI A.V. RAGHURAM RE VENUE BY: SHRI K. MOHAN REDDY DATE OF HEARING: 1 5 / 0 1 / 201 9 DATE OF PRONOUNCEMENT: 30 / 0 1 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 1 , HYDERABAD, DATED, 1 2 /0 7 /201 8 FOR AY 20 1 3 - 1 4 . 2. BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY , AN AP STATE NON - BANKING FINANCIAL SERVICES, FILED ITS RETURN OF INCOME FOR THE AY 201 2 - 1 3 ON 2 1 /09/201 3 DECLARING INCOME AT NIL. SUBSEQUENTLY, THE CASE WA S SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S 143(2) & 142(1) WERE ISSUED. THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT) BY DETERMINING TOTAL INCOME AT RS. 1,31,22,260/ - . 2 .1 DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT AN AMOUNT OF RS.1,55,28,618L - WAS EXPENDED BY I.T.A. NO. 1805 /HYD/1 8 AP POWER FINANCE CORPORATION LTD., VIJAYAWADA 2 THE ASSESSEE TOWARDS INTEREST ON APPLICATION MONEY AND WAS PAID TO VARIOUS TRUSTS AND ORGANISATIONS. THE ASSESSEE HAS COLLECTED THE MONEY FROM THE BORROWERS AND KEPT IT IN THE BANK ACCOUNT TILL SUCH TIME BONDS ARE ALLOTTED. INTEREST ACCRUED IN THIS INTERVENING PERIOD WAS PAID TO THE BOND HOLDERS. FURTHER, AO FOUND THAT THE INTEREST WAS PAID TILL THE ALLOTMENT OF BONDS ONLY. IN VIEW OF THIS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE DETAILS OF TDS DEDUCTED ON THESE PAYMENTS. THE ASSESSEE SUBMITTED DETAILS OF TAX DEDUCTED AT SOURCE. IT WAS SEEN THAT THE ASSESSEE HAS DEDUCTED TAX AT SOURCE FOR GROSS AMOUNT OF RS.24,06,354/ - ONLY. FURTHER, TAX WAS NOT DEDUCTED ON THE REMAINING AMOUNT OF RS. 1 ,31,22,264/ - . THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ABOVE INTEREST EXPENDITURE ON WHICH TAX WAS NOT DEDUCTED AT SOURCE, SHOULD NOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT. AFTER CO NSIDERING THE REPLY OF THE ASSESSEE, THE AO HELD THAT THE ASSESSEE FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND HENCE, DISALLOWED AN AMOUNT OF RS. 72,25,048/ - AND FOR THE BALANCE AMOUNT OF RS. 58,97,216/ - WAS DISALLOWED ON THE GROUND THAT THE ASSESSEE FAILED TO SUBMIT ANY INFORMATION. THE TOTAL DISALLOWANCE COMES TO RS 1,31,22,264/ - . 3. AGGRIEVED WITH THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) UPHELD THE ADDITION MADE BY THE AO BY OBSERV ING AS UNDER: 7.2 AS SEEN ABOVE, THE APPELLANT HAS SUBMITTED CERTIFICATE FOR EXEMPTION OF TAXABLE INCOME. NO CERTIFICATE HAS BEEN SUBMITTED IN ANY OF THE CASES REGARDING EXEMPTION OF T D S. THE CONTENTION OF THE APPELLANT IS NOT ACCEPTED FOR THE FOLLOWING REASONS: A) OUT OF 62 LIST OF PAYEES , THE APPELLANT HAS GIVEN DETAILS REGARDING 31 PAYEES AND FOR THE REMAINING THE APPELLANT HAS NOT GIVEN ANY SUBMISSIONS. I.T.A. NO. 1805 /HYD/1 8 AP POWER FINANCE CORPORATION LTD., VIJAYAWADA 3 B) THE APPELLANT HAS NOT S UBMITTED ANY DETAILS REGARDING THE AMOUNT ATTRIBUTED TO INTEREST ON APPLICATION MONEY TO VARIOUS TRUSTS AND ORGANISATIONS. IT IS PERTINENT TO NOTE THAT THE INCOME IS EXEMPTED IN RESPECT OF TRUSTS AND THERE IS NO MENTION REGARDING THE T D S PAYMENTS SHOULD NO T BE MADE. C) THE APPELLANT HAS TRIED TO JUSTIFY HIS CONTENTION THAT CHARITABLE TRUST MAY BE REGISTERED U / S.12A AND DEDUCTION U/S.80G ARE EXEMPTED FROM DEDUCTING T D S. IT IS IMPORTANT TO POINT CIRCULAR NO.18/2017 DATED 29.05.2017 WHICH SUPERSEDES EARLIER CIRCULAR NO .4/ 2002 DATED 16.07.2002 AND CIRCULAR NO.7 / 2015 DATED 23.04.2015. THE CIRCULARS CLARIFIES THAT ENTITIES WHOSE INCOME IS EXEMPTED U / S.10 OF THE IT ACT THERE WOULD NO REQUIREMENT FOR TAX DEDUCTION OF SOURCE FROM THE PAYMENTS MADE TO THEM SINCE THE IR INCOME IS ANYWAY EXEMPT FROM TAX. THE ISSUE OF WHETHER EXEMPTION FROM TDS CAN BE EXTENDED TO MORE ENTITIES ON THESE PRINCIPLES AND WHETHER THE EXEMPTION IS NEEDED TO BE WITHDRAWN IN RESPECT OF SOME OF THE EXEMPTED ENTITIES WAS EXAMINED BY THE BOARD. T HE CIRCULAR CLARIFIES AS TO WHICH 17 ENTITIES FOR WHICH TDS NEED NOT BE DEDUCTED. THIS DOES NOT INCLUDE CHARITABLE TRUST. HENCE, THE CONTENTION OF THE APPELLANT THAT ENTITIES HAVING NON - TAXABLE INCOME, TDS NEED NOT BE DEDUCTED IS WRONG. IN BACKGROUND OF THE FINDINGS, THE APPELLANT HAS NOT SUBMITTED COMPLETE INFORMATION REGARDING THE PARTIES TO WHOM INTEREST WAS PAID DURING THE YEAR. ALSO, THE APPELLANT HAS SUBMITTED 28 PARTIES' CONFIRMATIONS THAT THEY ARE NON TAXABLE ENTITIES. UNLESS SPECIFICALLY EXEMPTED FOR TDS, TDS PROVISIONS IS APPLICABLE TO THE TRUST FOR RECEIVING INCOME, AND ALSO WHEN IT MAKES PAYMENTS TO OTHERS, TDS IS APPLICABLE. IN THE PRESENT CASE, THE APPELLANT HAS NOT FOLLOWED DEDUCTION OF TDS, HENCE THE CONTENTION OF THE APPELLANT' IS NOT ACCE PTED. IN THIS BACKGROUND, I DO NOT FIND STRENGTH IN THE APPELLANT'S CONTENTION AND THE ADDITION MADE BY THE ASSESSING OFFICER IS UPHELD. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT (A) DISMISSING THE APPEAL IS NOT ONLY ERRONEOUS BOTH ON FACTS AND IN LAW BUT IS PERVERSE. I.T.A. NO. 1805 /HYD/1 8 AP POWER FINANCE CORPORATION LTD., VIJAYAWADA 4 2. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE PLEA OF THE ASSESSEE THAT ITS CASE FALLS UNDER THE 2ND PROVISO TO SEC .40 (A)(IA ) AND THEREFORE THE DISALLOWANCE OF RS.1,31 , 22,264 IS NOT WARRANTED AND THEREBY ERRED IN UPHOLDING THE DISALLOWANCE ON THE GROUND OF NOT DEMONSTRATING THAT THERE IS NO REQUIREMENT FOR MAKING TDS EVEN ON ENTITIES WHOSE INCOME ARE EXEMPT. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 5. LD. AR SUBMITTED BEFORE US A LIST OF ENTITIES, WHO ARE IN RECEIPT OF INTEREST PAYMENT AND THESE ENTITIES ARE BASICALLY TRUSTS HOLDING PENSION AND GRATUITY FUND, ALSO EXEMPT U/S 10(25). IT IS FORMING PART OF PAPER BOOK (PAGES 6 - 8). HE ALSO BROUGHT TO OUR NOTICE, ASSESSEE HAS SUBMITTED THE INCOME - TAX EXEMPTION CERTIFICATE OF THE ABOVE ENTITIES ALONG W ITH THE RETURN OF INCOME TO HIGHLIGHT THAT THESE ENTITIES ARE EXEMPT FROM INCOME - TAX U/S 10(25). HE FURTHER SUBMITTED THAT THESE ENTITIES ARE EXEMPT FROM TDS PROVISIONS. 6. LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 7. CONSIDERED THE RIVAL SUBMI SSIONS AND PERUSED THE MATERIAL ON RECORD . WE NOTICE FROM THE SUBMISSIONS OF THE ASSESSEE THAT TH E SE UNITS ARE EXEMPT FROM TAX U/S 10(25). HOWEVER, THESE INFORMATIONS WERE NOT SUBMITTED BEFORE THE AO AND NO ONE HAS REALLY VERIFIED THESE INFORMATIONS. THERE FORE, WE DEEM IT FIT TO REMIT THIS MATTER BACK TO AO TO VERIFY THE INFORMATION IN THE LIGHT OF CIRCULAR NO. 18/2017 AND DETERMINE THE ISSUE, DE - NOVO. THEREFORE, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 1805 /HYD/1 8 AP POWER FINANCE CORPORATION LTD., VIJAYAWADA 5 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 30 TH JANUARY , 201 9. KV COPY FORWARDED TO: 1. M/S ANDHRA PRADESH POWER FINANCE CORPORATION LTD., C/O S/SHRI K. VASANTKUMAR, AV RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2 . ITO, WARD 1 ( 2 ), IT TOWERS, AC GUARDS, HYDERABAD . 3 . CIT (A) - 1 , HYDERABAD 4. PR. CIT 1 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE