Biswanath Agarwala, Kolkata V. ACIT, Circle - 43, KOLKATA, Kolkata

ITA 1843/KOL/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9497 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 28-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BAIJNATH SINGH
• Keywords: Business expenditure
• Section: 40(a)(ia); 37

Judgement Text

1 ITA NO. 1843/KOL/2018 BISWANATH AGARWALA, AY 2013-14 , A(SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL A (SMC) BENCH: KOLKATA ( ) BEFORE . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 1843/KOL/2018 ASSESSMENT YEAR: 2013-14 BISWANATH AGARWALA (PAN: ACYPA5189L) VS. ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-43, KOLKATA APPELLANT RESPONDENT DATE OF HEARING 19.12.2018 DATE OF PRONOUNCEMENT 19.12.2018 FOR THE APPELLANT SHRI SOUMITRA CHOUDHURY, ADVOCATE FOR THE RESPONDENT SHRI BAIJNATH SINGH, ADDL. CIT ORDER THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-13, KOLKATA DATED 16.07.2018 FOR AY 2013-14. 2. GROUND NO. 1 IS GENERAL IN NATURE SO DISMISSED. 3. GROUND NO. 2 IS AGAINST THE ACTION OF THE LD. CI T(A) IN CONFIRMING THE DISALLOWANCE OF RS.39,964/- MADE BY THE AO WHICH WAS CLAIMED BY THE ASSESSEE TO HAVE SPENT AS DONATION AND SUBSCRIPTION, WHICH ACCORDING TO AO WA S NOT RELATED TO BUSINESS EXPENDITURE AND SO, HE DISALLOWED THE SAME U/S. 37 OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAME. AGGRIEVED, ASSESSEE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE FROM PERUSAL OF PAGE 6 OF THE PAPER BOOK THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON ACCOUNT OF SUBSCRIPTION AND DONATION WHICH ARE IN THE NATURE OF CHANDA WHICH ARE PETTY PAYMENTS OF RS. 151/-, RS.500/- ETC . WHICH COMES TO RS.39,964/- WHICH WAS DISALLOWED BY THE AO U/S. 37 OF THE ACT. WE NOTE T HAT SIMILAR CLAIM MADE BY THE ASSESSEE WAS ALLOWED BY THE HONBLE JURISDICTIONAL HIGH COUR T IN CIT VS. BATA INDIA LTD. 201 ITR 2 ITA NO. 1843/KOL/2018 BISWANATH AGARWALA, AY 2013-14 884 (CAL) WHEREIN THE HONBLE HIGH COURT HAS TAKEN NOTE THAT THIS SUBSCRIPTION AND DONATION IN THE NATURE OF CHANDA IS REQUIRED FOR PEACEFUL AND SMOOTH FUNCTIONING OF THE BUSINESS AND, THEREFORE, IS AN ALLOWABLE EXPENDITURE, THEREF ORE, RESPECTFULLY FOLLOWING THE SAME RATIO, WE ALLOW THE CLAIM OF THE ASSESSEE. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED 5. GROUND NOS. 3 TO 6 ARE AS UNDER: 3. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I .T.(A) WAS WRONG IN DITTOING THE ORDER OF THE A.O. AND CONFIRMING THE DISALLOWANCE OF 20% OF MOTO R CAR EXPENSE, AMOUNTING TO RS.21,153/- OUT OF TOTAL EXPENDITURE CLAIMED AT RS. 1,05,765/ - ON ESTIMATE BASIS WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN DITTOING THE ORDER OF THE A.O. AND CONFIRMING THE DISALLOWANCE OF 10% OF TELE PHONE CHARGES AMOUNTING TO RS.25,583/- OUT OF TOTAL EXPENDITURE CLAIMED AT RS.2,55,825/- O N ESTIMATE BASIS WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN DITTOING THE ORDER OF THE A.O. AND CONFIRMING THE DISALLOWANCE OF 10% OF TRAV ELLING AND CONVEYANCE EXPENSES AMOUNTING TO RS. 15,783/ - OUT OF TOTAL EXPENDITURE CLAIMED AT 1~S.1,57,828/- ON ESTIMATE BASIS WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLE GAL. 6. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN DITTOING THE ORDER OF THE A.O. AND CONFIRMING THE DISALLOWANCE OF 20% OF BASA EXPENSES AMOUNTING TO RS.44,615/- OUT OF TOTAL EXPENDITURE CLAIMED AT RS.2,23,075/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 6. WE NOTE THAT ALL THE AFORESAID DISALLOWANCE ARE AD HOC DISALLOWANCE MADE BY AO OF 20% AND 10% OF EXPENSES CLAIMED BY THE ASSESSEE, WH ICH ACCORDING TO AO IS NOT PERMISSIBLE AS PER LAW. THE EXPENDITURE CLAIMED AR E ON ACCOUNT OF CAR EXPENSES, TELEPHONE EXPENSES AND TRAVELLING AND CONVEYANCE EXPENSES. I N CASE, IF THE ASSESSEE HAD NOT SUPPORTED ITS EXPENDITURE WITH BILLS/VOUCHERS ETC., THE AO WA S AT LIBERTY TO DISALLOW ITEM WISE EXPENDITURE CLAIMED BY THE ASSESSEE. WE NOTE THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT AND SO, WITHOUT REJECTING THE BOOKS OF ACCO UNT, THE AO CANNOT ENTER INTO THE ARENA TO UNDERTAKE ESTIMATION OF THE CLAIM FOR DISALLOWAN CE WHICH ACTION OF AO IS PER SE ARBITRARY AND, THEREFORE, WE ARE INCLINED TO DELETE THE ADDIT ION. THESE GROUNDS OF APPEAL OF ASSESSEE ARE ALLOWED. 7. GROUND NO. 7 IS AGAINST THE ACTION OF THE LD. CI T(A) IN CONFIRMING THE ACTION OF THE AO INVOKING SECTION 40(A)(IA) OF THE ACT AND DISALL OWANCE OF RS.1,19,874/- FOR NON- 3 ITA NO. 1843/KOL/2018 BISWANATH AGARWALA, AY 2013-14 DEDUCTION OF TDS. THE AO NOTED THAT NO TDS HAS BEE N DEDUCTED BY THE ASSESSEE FROM FOUR PARTIES IN RESPECT OF THE EXPENSES UNDER THE HEAD I NTEREST EXPENSES, SO HE DISALLOWED THE SAID AMOUNT. ON APPEAL, THE LD. CIT(A) CONFIRMED THE AC TION OF THE AO. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. AR DREW OUR ATTENTION TO PAGE NOS. 2 9 TO 35 OF THE PAPER BOOK WHICH ARE FORM 15G OF THE FOUR PARTIES WHICH THOUGH WERE PLAC ED BEFORE THE AUTHORITIES BELOW HAS NOT BEEN GIVEN ANY CREDENCE AND THE DISALLOWANCE WAS OR DERED FOR NON-DEDUCTION OF TDS. WE NOTE THAT A SIMILAR ISSUE WAS CONSIDERED BY THE COO RDINATE BENCH OF THIS TRIBUNAL BOMBAY BENCH IN THE CASE OF KARWAT STEEL TRADERS VS. ITO, ITA NO. 6822/MUM/2011 FOR AY 2008- 09 DATED 10.07.2013 WHEREIN A SIMILAR ISSUE AROSE A ND THE TRIBUNAL HELD AS UNDER: 4. WE HAVE CONSIDERED THE ISSUE. THE PROVISIONS O F SECTION 40(A)(IA) ARE AS UNDER ;- 40. AMOUNTS NOT DEDUCTIBLE NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION',- (A) IN THE CASE OF ANY ASSESSEE-- (I) . (I A.) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT , ROYALTY,] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB- CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WO RK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, [HAS NOT BEE N PAID,-- ( REST NOT EXTRACTED.) ( EMPHASIS SUPPLIED) 4.1 AS CAN BE SEEN FROM ABOVE PROVISION, THE AMOUNT CANNOT BE ALLOWED AS DEDUCTION ONLY IN THE EVENT WHEN TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER-XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION HAS N OT BEEN PAID. IN THIS CASE, THE ASSESSEE WAS TO DEDUCT TAX UNDER PROVISIONS OF SECTION 194A. SEC TION 194A IS FURTHER QUALIFIED BY THE PROVISIONS OF SECTION 197A(LA) WHEREIN IF A PERSON FURNISHES A DECLARATION IN WRITING IN PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANN ER TO THE EFFECT THAT TAX ON HIS ESTIMATED TOTAL INCOME IS TO BE INCLUDED IN COMPUTING HIS TOT AL INCOME WILL BE NIL, THERE IS NO NEED TO DEDUCT TAX THE ASSESSEE HAS RECEIVED SUCH FORMS AS PRESCRIBED FROM THOSE PERSONS TO WHOM INTEREST WAS PAID/BEING PAID AND ACCORDINGLY NO A.Y .08-09 KARWAT STEEL TRADERS DEDUCTION OF TAX WAS TO BE MADE IN SUCH CASES. THE DEFAULT FOR N ON- FURNISHING OF THE DECLARATIONS TO THE CIT PRESCRIBED MAY RESULT IN INVOKING PENALTY PROVI SIONS U/S. 272A(2)(F), FOR WHICH SEPARATE PROVISION/PROCEDURE WAS PRESCRIBED UNDER THE ACT. H OWEVER, ONCE FORM 15G/FORM 15H WAS RECEIVED BY THE PERSON RESPONSIBLE FOR DEDUCTING TA X, THERE IS NO LIABILITY TO DEDUCT TAX. ONCE THERE IS NO LIABILITY TO DEDUCT TAX, IT CANNOT BE C ONSIDERED THAT TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AS PRESCRIBED U/S.40(A)(IA). T HE PROVISIONS OF SECTION 40(A)(IA) CAN ONLY BE INVOKED IN A CASE WHERE TAX IS DEDUCTIBLE AT SOU RCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID. NO SUCH DEFAULT OCCURRED IN THIS CASE. ACCORDINGLY, WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 40(A) (IA) ARE NOT APPLICABLE TO THE FACTS OF THE CASE. BOTH THE ASSESSING OFFICER AND CIT(A) ERRED I N CONSIDERING THAT NON-FILING OF FORM 15H INVITES DISALLOWANCE U/S. 40(A)(IA). 4 ITA NO. 1843/KOL/2018 BISWANATH AGARWALA, AY 2013-14 9. SINCE THE ASSESSEE HAS FILED FORM 15G WHICH IS P LACED FROM PAGES 28 TO 35 OF THE PAPER BOOK, WE ARE OF THE CONSIDERED OPINION THAT P ROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT INVOCABLE IN THE FACTS OF THE CASE. BOTH THE AO AS WELL AS THE LD. CIT(A) ERRED IN TAKING NOTE OF THE FORM 15G AND ORDERED DISALLOWANC E U/S. 40(A)(IA) OF THE ACT, WHICH WAS NOT WARRANTED, SO WE ORDER THE DELETION OF DISALLOW ANCE. THEREFORE, THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19TH DECE MBER, 2018. SD/- (A. T. VARKEY) JUDICIAL MEMBER DATED: 19TH DECEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT SHRI BISWANATH AGARWALA, 52/1/2, STRAND ROAD, 1 ST FLOOR, KOLKATA-700 007. 2 RESPONDENT ACIT, CIRCLE-43, KOLKATA. 3 4 5 CIT(A)-13, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR