Sri S Basavaraja , Harpanahalli V. Assistant Commissioner of Income TAx Circle- 1, Bellary

ITA 1888/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7610 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 20-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHOK KULKARNI

Judgement Text

ITA.1888/BANG/2017 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NO.1888/BANG/2017 (ASSESSMENT YEAR : 2013-14) SHRI. S. BASAVARAJA, CLASS-I CIVIL CONTRACTOR, D NO.739, KOTTUR ROAD, HARAPANAHALLI 583 131 .. APPELLANT PAN : AFGPB7902R V. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE - 1, BELLARY .. RESPONDENT ASSESSEEE BY : SHRI. ASHOK KULKARNI, ADVOCATE REVENUE BY : DR. P. V. PRADEEP KUMAR, ADDL. CIT HEARD ON : 05.07.2018 PRONOUNCED ON : 20.07.2018 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE ASSESSEEE, AN I NDIVIDUAL, AGAINST THE ORDER OF THE CIT (A)), GULBARGA, DT.26. 07.2017, FOR THE ASSESSMENT YEAR 2013-14, ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : ITA.1888/BANG/2017 PAGE - 2 2) THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALLOWED THE EXPENDITURE IN A SUM OF RS.1,28,300/- TOWARDS CONTRACTORS BENEVOLENT FUN D AS CLAIMED BY THE APPELLANT. 3) THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPEAL IS THE CONTINUATION OF THE ASSESSMENT PROCEEDINGS AND THE POWERS OF THE APPELLATE AUTHORITY ARE CO-TERMINUS W ITH THE JURISDICTION OF THE ASSESSING OFFICER IN ASCERTAINI NG THE CORRECT STATUTORY LIABILITY. 4) THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF IN TEREST PAID TO NBFC IN A SUM OF RS.8,04,193/- U/S.40(A)(IA ) OF THE ACT. 5) THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE NBFC H AS OFFERED THE INTEREST PAID BY THE APPELLANT AS ITS I NCOME, THEREFORE THE DISALLOWANCE OF INTEREST IS NOT IN AC CORDANCE WITH THE PROVISIONS OF THE ACT. 2. WITH RESPECT TO GROUNDS 2 AND 3, IT WAS THE CONT ENTION OF THE ASSESSEE THAT THE AO HAD DISALLOWED THE EXPENDITURE UNDER THE HEADING CONTRACTORS BENEVOLENT FUND (CBF) FOR AN AMOUNT OF RS.1,28,300/- STATING THAT THE EXPENDITURE IS NOT A LLOWABLE U/S.37 OF THE ACT. 3. BEFORE US THE LD. AR HAS SUBMITTED THAT THE ASSE SSEE IS A FIRST CLASS CIVIL CONTRACTOR DOING CIVIL WORK FOR GOVERNM ENT UNDERTAKINGS, AS PER THE NOTIFICATION ISSUED BY THE GOVERNMENT OF KARNATAKA. THE ASSESSEE IS DEDUCTING THE NBFC IN THE RUNNING BILLS . FOR THAT PURPOSES, OUR ATTENTION WAS DRAWN TO THE NOTIFICATI ON ISSUED BY THE GOVERNMENT OF KARNATAKA ON 18.01.2007 AND THE CORRI GENDUM ITA.1888/BANG/2017 PAGE - 3 ISSUED THERETO. IT WAS SUBMITTED THAT THE AUTHORIT IES BELOW, WITHOUT VERIFYING , HAD DISALLOWED THE AMOUNTS. IT WAS SUB MITTED THAT THE AO HAS NOT VERIFIED FROM THE ACTUAL RUNNING BILL DE SPITE SUBMITTING THE ACCOUNTS AND HAS ONLY RECONCILED THE ACCOUNTS W ITH THE HELP OF TDS DEDUCTED BY THE GOVERNMENT AUTHORITIES. 4. ON THE OTHER HAND, THE LD. DR HAS RELIED ON THE ORDER PASSED BY THE LOWER AUTHORITIES 5. WE HAVE GONE THROUGH THE RECORD AND CONSIDERED T HE ARGUMENTS MADE BY BOTH THE PARTIES. I0N OUR VIEW T HE CONTRACTOR IS UNDER AN OBLIGATION TO DEDUCT TAX BY NOTIFICATION I SSUED BY THE GOVERNMENT OF KARNATAKA, DT.18.1.2007 TO MAKE THE P AYMENT OF CBF WHICH IS EQUIVALENT TO 1% OF THE ESTIMATED COST OF THE CONTRACT AND THEREFORE THIS IS AN EXPENDITURE WHICH IS WHOLL Y AND SOLELY RELATED TO THE BUSINESS OF THE ASSESSEE. HOWEVER I N OUR VIEW, WHETHER ACTUALLY THIS AMOUNT IS SPENT BY THE ASSESS EE FOR THE PURPOSES OF BUSINESS IS REQUIRED TO BE VERIFIED BY THE A O WITH REFERENCE TO THE BILLS / RUNNING BILLS SUBMITTED BY THE ASSESSEE. IN VIEW OF THE ABOVE, WE REMAND THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY WHETHER THE ASSESSEE HAD MADE THE CONTRIBUTION TO CBF IN PURSUANCE TO THE NOTIFICATIO N DT.18.1.2007 OR THE CORRIGENDUM ISSUED. IF THE PAYMENT OF CBF IS M ADE IN ACCORDANCE WITH THE SAID NOTIFICATION THEN THE SAME SHALL BE ALLOWED AFTER VERIFICATION. 5. THE NEXT GROUND IS WITH RESPECT TO THE DISALLOWA NCE MADE BY THE AO OF THE INTEREST PAID TO NBFC OF AN AMOUNT OF RS.8,04,193/- ITA.1888/BANG/2017 PAGE - 4 U/S.40(A)(IA) OF THE ACT. IN THIS REGARD, IT WAS S UBMITTED BY THE ASSESSEEE BEFORE US THAT THE ASSESSEEE HAD PAID THE INTEREST ON LOANS AND THE ASSESSEE HAD RECEIVED THE CONFIRMATION LETT ER FROM THE SAID NBFC TO PROVE THE PAYMENT OF INTEREST ON THE LOAN A MOUNT. HOWEVER COPIES OF THE SAID CONFIRMATION WAS SUBMITT ED TO THE CIT (A). THE CIT (A) HAS NOT VERIFIED THE STATEMENT SO SUBMITTED BEFORE HIM AND HAS CONFIRMED THE ORDER PASSED BY THE AO. 6. THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAD M ERELY MADE THE PAYMENT OF INTEREST TO NBFC AND IT HAD OFFERED THE INTEREST PAYMENT AS INCOME IN THE RESPECTIVE RETURN OF INCOM E FOR WHICH CONFIRMATION HAS ALSO BEEN FILED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE ISSUE IS ALSO COVERED IN FAVOUR OF THE ASS ESSEE. IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE MATTER OF CITIC ORP ____ AND ALSO IN THE MATTER OF AZMATHULLA V. ACIT [ITA144/BANG/20 17, DT.07.06.2017]. 7. ON THE OTHER HAND THE LD. DR SUBMITTED THAT THE DOCUMENT AND CERTIFICATE SUBMITTED BY THE ASSESSEE BEFORE TH E CIT (A)) ARE REQUIRED TO BE VERIFIED AND THEN ONLY CLAIM OF THE ASSESSEE CAN BE ALLOWED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. SINCE THE ASSESSEE HAS FILED THE CONFIRMATION LETTE R IN PROOF OF PAYING THE INTEREST AGAINST LOANS GIVEN BY NBFC AND THEREFORE IN THE FITNESS OF THINGS, IT IS REQUIRED THAT THE FACT S ARE REQUIRED TO BE VERIFIED BY THE AO AFTER AFFORDING OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. IN THE LIGHT OF THE ABOVE, WE REMAND THI S ISSUE ALSO TO THE ITA.1888/BANG/2017 PAGE - 5 FILE OF THE AO TO VERIFY WHETHER THE ASSESSEE HAD P AID INTEREST TO NBFC OR NOT AND WHETHER THE NBFC HAD SHOWN THE INTE REST AS INCOME IN ITS BOOKS OF ACCOUNT AND RETURN OF INCOME . IF IT HAS BEEN DONE THEN THE AO SHALL ALLOW THE AMOUNT OF RS.8,04, 193/-. 9. IN THE LIGHT OF THE ABOVE, THE APPEAL OF THE ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DAY OF JULY, 2018. SD/- SD/- (INTURI RAMA RAO) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBE R BENGALURU DATED : 20.07.2018 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.