Team HR Services Ltd., New Delhi V. DCIT, New Delhi

ITA 1870/DEL/2012

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7924 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 23-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Assessee Lawyers: PUR USHOTTAM ANAND
• Keywords: Opportunity of being heard; Additional evidence; Non-deduction of tax; Bad and doubtful debts
• Section: 43B; 40(a)(ia); 37(1); 28

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH D, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 1870/DEL/2012 ASSESSMENT YEAR: 2008-09 TEAM HR SERVICES LTD., H - 3, C - BLOCK, COMMUNITY CENTRE, NARAINA RESIDENTIAL AREA, NEW DELHI. PAN- AACCT 2148K (APPELLANT) VS. DCIT, CIRCLE 16(1), NEW DELHI. (RESPONDENT) APPELLANT BY SH. NAGESHWAR RAO, ADVOCATE AND SH. PURUSHOTTAM ANAND, ADVOCATE RESPONDENT BY SMT. NAINA SOIN KAPIL, SR. DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-XI, NEW DELHI DATED 25.01.2012 FOR THE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS : 1) THAT THE APPELLATE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS)-XI, NEW DELHI (HERE-IN-AFTER REFERRED TO AS THE CIT (APPEALS)) IS BAD IN LAW AND WRONG ON FACTS. 2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(A) HAS ERRED IN ENHANCING THE INCOME OF THE APPE LLANT BY RS. DATE OF HEARING 20.11.2018 DATE OF PRONOUNCEMENT 08 .01.2019 ITA NO. 1870/DEL/2012 2 19,53,827/- HOLDING THAT TAX WAS NOT DEDUCTED AT SO URCE ON VARIOUS COMPONENTS OF MANAGERIAL REMUNERATION. AS A MATTER OF FACT, FRINGE BENEFIT TAX HAD BEEN PAID IN RESPECT OF CERTAIN COMP ONENTS AND THEREFORE THE SAME WERE NOT CHARGEABLE TO TAX AGAIN IN THE HA NDS OF EMPLOYEES. 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING WRITE OFF OF TDS AMO UNTING TO RS. 21,25,720/- BY HOLDING THAT TDS IS A STATUTORY LEVY OF TAX AND NOT TAXABLE INCOME WITHOUT APPRECIATING THE FACT THAT TDS IS PAR T OF INCOME AND IS TAXED BY WAY OF GROSSING UP OF INCOME AND IS THEREF ORE A RECOVERABLE DEBT. 4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEANED CIT(A) HAS ERRED IN NOT ALLOWING THE CLAIM OF PROFES SIONAL TAX OF RS. 5,23,102/- OUT OF RS. 5,26,693/-UNDER SECTION 43B W HICH WAS DEPOSITED BEFORE THE DUE DATE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME ON 30.09.2008 DECLARING LOSS OF RS.97,72,598/- AND THE RETURN WAS REVISED ON 30.03.2010 DECLARING TOTAL LOSS OF RS.76,39,310/-. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE A SSESSEE. DURING THE CURSE OF SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PAID MANAGERIAL REMUNERATION OF RS.19,53,827/- TO THE DI RECTORS OF THE COMPANY WITHOUT DEDUCTION OF TAX AT SOURCE. IN RESPONSE TO THE QUESTIONNAIRE ISSUED, THE ASSESSEE SUBMITTED AS UNDER : THE TAX AUDITORS REMARKS REGARDING NON-DEDUCTION OF TAX AT SOURCE OF RS.6,64,106/- ON MANAGERIAL REMUNERATION OF RS.19,5 3,827/- IS NOT FULLY PROPER. THE DETAILS OF AMOUNT OF RS.19,53,827/- IS E NCLOSED. MANY OF THE COMPONENTS SUCH AS MEDICAL, ENTERTAINMENT ETC. WERE SUBJECT TO FBT AND HENCE, WERE NOT TO BE TAXED IN THE HANDS OF THE DIR ECTOR. ITA NO. 1870/DEL/2012 3 THE COMPANY HAS PAID FRINGE BENEFIT TAX (FBT) ON THE VARIOUS COMPONENTS OF SALARY PAID TO MR. ABHINAV DHAWAN (MD ) AS PER DETAILS OF FBT (ENCLOSED) PAID BY THE COMPANY. IT IS FURTHER SU BMITTED THAT DISALLOWANCE FOR NON-DEDUCTION OF TAX AT SOURCE IS NOT APPLICABLE IN THE CASE OF SALARY U/S. 40(A)(IA). 3. THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISS IONS OF THE ASSESSEE OBSERVING THAT THE COMPONENTS OF SUCH PAYMENTS WERE AS MEDICAL, REIMBURSEMENT, UNIFORM, ENTERTAINMENT EXPENSES, SEC URITY GUARD PAYMENTS, ELECTRICITY CHARGES AND REPAIR TO FURNITURE. THE AS SESSING OFFICER ALSO RELIED ON THE REPORT OF TAX AUDITORS THAT THE ASSESSEE HAD NO T DEDUCTED TAX AT SOURCE TO THE TUNE OF RS.6,64,606/- ON THE PAYMENT OF MANAGER IAL REMUNERATION. THE TAX AUDITORS HAVE REPORTED AFTER VERIFICATION OF RECORD S. ACCORDINGLY, HE DISALLOWED THE EXPENDITURE CLAIMED AS MANAGERIAL RE MUNERATION AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON FURTHER SCRUTINY OF ACCOUNTS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEBITED IN THE PROFIT AND LOS S ACCOUNT ADVANCE WRITTEN OFF AMOUNTING TO RS.21,94,951/-. IT CONSISTS THE FO LLOWING DETAILS : ADVANCE WRITTEN OFF RS.21,25,720/- MISC. BALANCE WRITTEN OFF RS.69,231.28 IN RESPECT OF ADVANCE WRITTEN OFF, THE ASSESSEE SUB MITTED THAT THIS AMOUNT OF RS.21,25,720/- WAS A TDS RECOVERABLE IN THE ASSESSM ENT YEARS 2004-05 & 2005-06, WHICH WAS IRRECOVERABLE AND SUGGESTED BY T HE AUDITOR FOR WRITE OFF ITA NO. 1870/DEL/2012 4 IN THE CURRENT ASSESSMENT YEAR. THE ASSESSING OFFIC ER OBSERVED THAT THIS WRITTEN OFF AMOUNT IS NOT SATISFYING THE CONDITION AS PER SECTION 36(2) OF THE IT ACT AND THAT THIS AMOUNT RELATES TO TDS AND IS ONE OF THE MODE OF TAX PAYMENT. AS A MATTER OF FACTS, IT IS AN ADVANCE TAX PAYMENT. THEREFORE, WRITE OFF ADVANCE TAX PAYMENT IS NOT COVERED BY THE PROVISIONS OF SEC TION 36(2) OF THE ACT. ACCORDINGLY, HE ADDED A SUM OF RS.21,25,620/- OF TH E TOTAL INCOME OF THE ASSESSEE. 5. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESS EE HAS DEBITED INTO THE PROFIT AND LOSS ACCOUNT, PROFESSIONAL TAX PAYMENT O F RS.5,26,693/-, BUT UPTO THE DUE DATE OF FILING OF RETURN OF INCOME, IT WAS NOT DEPOSITED AND THE ASSESSEE WAS UNABLE TO PRODUCE ANY EVIDENCE REGARDI NG PROOF OF PAYMENT TILL DATE OF ASSESSMENT THAT THIS AMOUNT HAS ALREADY BEE N PAID UPTO THE DATE OF FILING OF RETURN OF INCOME. ACCORDINGLY, THE AO DIS ALLOWED THIS CLAIM AS PER SECTION 43B OF THE IT ACT. 6. AGGRIEVED FROM THE ABOVE ORDER, THE ASSESSEE APP EALED BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE DETAILED SUBMISSI ONS OF THE ASSESSEE UPHELD THE ADDITION MADE ON ACCOUNT OF NON-DEDUCTION OF TD S ON MANAGERIAL REMUNERATION AND ADVANCE WRITTEN OFF, BUT RESTRICTE D THE ADDITION MADE ON ACCOUNT OF PROFESSIONAL TAX PAID TO RS.5,23,102/- I N SPITE OF CHALLAN PRODUCED BY THE ASSESSEE BEFORE HIM. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. ITA NO. 1870/DEL/2012 5 7. THE LD. AR RELIED ON THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED A PAPER BOOK CONTAINING 124 PAGES. HE SUBMITTED THAT THE PAYMENTS MADE AS REMUNERATION TO THE DIRECTORS ARE SUBJECTED TO FBT WHICH HAS BEEN PAID AT THE APPLICABLE RATE IN WHICH FBT P ROVISIONS ARE APPLIED. THEREFORE, IT CANNOT BE DISALLOWED IN THE HANDS OF THE COMPANY ONLY FOR NON- DEDUCTION OF TDS. THE LD. AR ALSO PRAYED TO SEND TH E MATTER BACK TO THE ASSESSING OFFICER FOR VERIFICATION OF NATURE OF PAY MENTS ALREADY CONSIDERED FOR THE PURPOSE OF FBT. IN RESPECT OF ADVANCE WRITTEN OFF OF RS.21,25,720/-, HE SUBMITTED THAT THIS TAX PAYMENT PERTAINS TO ASSESSM ENT YEARS 2004-05 AND 2005-06 WHICH HAS ALREADY BEEN CREDITED INTO THE PR OFIT AND LOSS ACCOUNT AND CORRESPONDING TDS HAS NOT BEEN CLAIMED AS TAX PAYME NT. STILL, THIS AMOUNT IS APPEARING IN THE BALANCE SHEET AS ADVANCE AND NO AN Y TAX BENEFIT HAS BEEN TAKEN. HE ALSO PRAYED FOR VERIFICATION OF THIS MATT ER BEFORE THE ASSESSING OFFICER. 8. FURTHER, IN RESPECT OF PROFESSIONAL TAX PAID, IT WAS SUBMITTED THAT THE CHALLANS WERE NOT AVAILABLE AT THE TIME OF ASSESSME NT BUT THE SAME WAS PLACED BEFORE THE LD. CIT(A) AS ADDITIONAL EVIDENCE WHICH HAS BEEN ACCEPTED BY HIM BUT DID NOT GIVE BENEFIT AS PER SECTION 43B OF THE IT ACT. THEREFORE, HE URGED TO SEND THIS MATTER TOO TO THE FILE OF ASSESSING OFFIC ER FOR VERIFICATION. ITA NO. 1870/DEL/2012 6 9. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE ASSESSING OFFICER AND OBJECTED TO THE REQUEST OF THE ASSESSING OFFICE R FOR SENDING BACK THE MATTER TO THE ASSESSING OFFICER. THE ASSESSEE WAS G IVEN AMPLE OPPORTUNITY DURING THE ASSESSMENT PROCEEDINGS FOR PRODUCING THE REQUISITE DETAILS, BUT HE WAS UNABLE TO PRODUCE THE SAME. HE ALSO SUBMITTED T HAT THE TDS HAS NOT BEEN DEDUCTED ON THE PAYMENTS MADE TO THE DIRECTORS WHIC H ATTRACTS THE TDS PROVISION AS PER SECTION 40(A)(IA) OF THE ACT. MERE LY FRINGE BENEFIT TAX PAID IS NOT SUFFICIENT FOR ALLOWABILITY OF EXPENDITURE. IN RESPECT OF ADVANCE WRITTEN OFF, HE SUBMITTED THAT THE TAX PAYMENT CANNOT BE CONSIDE RED AS PER PROVISIONS OF SECTION 36(2). ONCE, THE ASSESSEE HAS TAKEN BENEFIT OF TDS FOR DISCHARGING OF INCOME-TAX LIABILITY AND IF IT IS APPEARING AS TDS IN THE BALANCE SHEET, IT WOULD NOT BE PART OF THE BAD DEBTS. FURTHER, IT PERTAINS TO ASSESSMENT YEAR 2004-05 AND 2005-06, THEREFORE, IT WOULD BE CONSIDERED AS A PRIOR PERIOD EXPENDITURE WHICH IS NOT ALLOWABLE AS PER SECTION 37(1) FOR COM PUTING CURRENT YEARS TAXABLE INCOME OF THE ASSESSEE. THE ASSESSING OFFIC ER HAS, THEREFORE, RIGHTLY MADE THE ADDITIONS. 10. AFTER HEARING BOTH THE SIDES AND PERUSING THE E NTIRE MATERIALS AVAILABLE ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, WE ARE OF THE OPINION THAT IT WILL MEET THE ENDS OF JUSTICE IF ALL THE THREE ISSU ES INVOLVED IN THIS APPEAL ARE SENT BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THEM AFRESH IN ACCORDING WITH LAW. THE ASSESSING OFFICER WHILE DEC IDING THE ISSUE SHALL EXAMINE THE NATURE OF PAYMENTS MADE TO THE DIRECTOR S WHETHER IT WAS PAYMENT IN THE NATURE OF MANAGERIAL REMUNERATION OR NOT AS PER TERMS & CONDITIONS OF EMPLOYMENT. THE ASSESSEE IS DIRECTED TO PRODUCE RELEVANT BILLS AND VOUCHERS FOR THE PAYMENTS MADE. THE ASSESSING O FFICER SHALL FURTHER ITA NO. 1870/DEL/2012 7 EXAMINE WHETHER THE AMOUNT OF RS.21,25,720/- WAS CO NSIDERED AS INCOME BY THE ASSESSEE IN THE ASSESSMENT YEARS 2004-05 AND 20 05-06 OR NOT AND IF THE ABOVE AMOUNTS HAVE BEEN ADJUSTED TOWARDS THE CALCUL ATION OF INCOME TAX LIABILITY, THEN THE ASSESSEE WILL NOT BE ELIGIBLE F OR ANY BENEFIT AND IF IT IS FOUND OTHERWISE, THE ASSESSING OFFICER SHALL PROCEED TO A CCEPT IT AS BAD DEBT IF THE ASSESSEE SATISFIES THE CONDITIONS OF SECTION 36(2). IT IS FURTHER TO ADD THAT IF THE ASSESSEE HAS NOT CONSIDERED THE AFORESAID AMOUNT AS INCOME IN ASSESSMENT YEARS 2004-05 AND 2005-06, THE ASSESSING OFFICER SH ALL EXAMINE THE ISSUE AS PER PROVISIONS OF SECTION 28 OF THE IT ACT. THE ASS ESSING OFFICER IS FURTHER DIRECTED TO VERIFY THE CHALLAN AND IF IT IS FOUND I N ORDER AS PER SECTION 43B, THE ASSESSEE SHALL BE GIVEN CREDIT THEREOF. NEEDLESS TO SAY, THE ASSESSEE SHALL BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. ACCORD INGLY, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JAN. 2019. SD/- SD/- (BHAVNESH SAINI) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08.01.19 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI