ACIT, CHENNAI V. M/s. Eskay Designs, CHENNAI

ITA 1951/CHNY/2012

• Counselvise Citation: 195121714 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NO.1951/MDS/12 ASSESSMENT YEAR : 2009-10 THE ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE XV CHENNAI VS M/S ESKAY DESIGNS NO.25, 1 ST STREET, CENOTOPH ROAD TEYNAMPET, CHENNAI 600 018 [PAN AAAFE 1480C ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : NONE DATE OF HEARING : 03-12-2013 DATE OF PRONOUNCEMENT : 09-12-2013 O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2009- 10, IS DIRECTED AGAINST THE ORDER OF THE COMMISSION ER OF INCOME-TAX (APPEALS)-XII, CHENNAI, DATED 23.7.2012, PASSED IN APPEAL NO.553/2011-12, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT). I.T.A.NO. 1951/12 :- 2 -: 2. IN THE COURSE OF HEARING, THE REVENUE SUBMITS THAT ITS GRIEVANCE IS IN TWO FOLDED I.E THE CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ASSESS THE RENTAL INCOME ON P ROPERTY TAKEN ON LEASE BY THE ASSESSEE AND THEREAFTER IN SUB-LETTIN G IT ON COMMERCIAL BASIS UNDER THE HEAD INCOME FROM HOUSE PROPERTY F ROM BUSINESS INCOME; AS DONE BY THE ASSESSING OFFICER. THE OTH ER PLEA OF THE REVENUE IS THAT THE CIT(A) HAS WRONGLY DELETED THE DISALLOWANCE FOR NON-DEDUCTION OF TDS U/S 40(A)(IA) OF THE ACT AMOU NTING TO ` 41,000/-. 3. NONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE IN SPITE OF RPAD NOTICE DATED 3.10.2013. HENCE, IT IS PROCEEDE D EX-PARTE. 4. THE ASSESSEE IS A FIRM ENGAGED IN ARCHITECTURE B USINESS. ON 18.9.2009, IT HAD FILED ITS RETURN DISCLOSING IN COME OF ` 3,69,76,790/- WHICH WAS SUMMARILY PROCESSED. 5. IN THE COURSE OF SCRUTINY, THE ASSESSING OFFICER FOUND THE ASSESSEE TO HAVE DECLARED INCOME FROM HOUSE PROPERT Y BY FIRST TAKING ON LEASE THE PROPERTIES AND THEREAFTER SUB-LETTING THEM. IN THE ASSESSMENT ORDER DATED 30.12.2011, HE HELD THAT SIN CE THE ASSESSEE WAS NOT OWNER OF THE PROPERTY, IN VIEW OF SECTION 2 69UA(F), ITS CONTENTION THAT THE RECEIPTS IN QUESTION HAD TO BE DECLARED AS INCOME I.T.A.NO. 1951/12 :- 3 -: FROM HOUSE PROPERTY COULD NOT BE ACCEPTED. IN AS SESSING OFFICERS OPINION, THE ASSESSEE WAS INVOLVED IN BUSINESS OF LEASING PROPERTIES. IN THIS MANNER, HE CONSIDERED THE RENT PAID OF ` 33,85,467/- AND TREATED BALANCE AMOUNT OF ` 90,02,160/- AS BUSINESS INCOME. OUT OF THIS, SINCE THE ASSESSEE HAD ALREADY OFFERED A SUM OF ` 63,01,512/-, THE REMAINING SUM OF ` 27,00,648/- STOOD ADDED IN THE RETURNED INCOME. 6. IN ASSESSEES APPEAL, THE CIT(A) HAS RELIED UPON T HE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2007-08 HOLDI NG SIMILAR RECEIPT AS INCOME FROM HOUSE PROPERTY AND DELETED THE ADDITI ON. THEREFORE, THE REVENUE HAS RAISED THE INSTANT GROU ND. 7. WE HAVE HEARD THE REVENUE AND PERUSED THE CASE FILE . SO FAR AS THE FINDINGS UNDER CHALLENGE OF THE CIT(A) I N PRINCIPLE ARE CONCERNED, IN THE ABSENCE OF ANY DISTINCTION ON FAC TS POINTED OUT BY THE REVENUE VIS--VIS FACTS OF ASSESSMENT YEAR 2007 -08 , WE SEE NO REASON TO ADOPT A DIFFERENT APPROACH IN THE IMPUGNE D ASSESSMENT YEAR. AT THE SAME TIME, WE FIND FORCE IN THE CON SEQUENTIAL ARGUMENT OF THE REVENUE THAT SINCE PRESENT IS AN ISSUE OF HE AD OF INCOME I.E THE ASSESSING OFFICER HAD TREATED THE RECEIPTS IN Q UESTION AS BUSINESS INCOME AND THE CIT(A) UNDER THE HEAD INCOME FROM HOUSE PROPERTY, I.T.A.NO. 1951/12 :- 4 -: THE ASSESSING OFFICER HAS TO EXAMINE THE CASE AFRES H FOR THE PURPOSE OF APPROPRIATE COMPUTATION. IN OUR VIEW, THIS CONS EQUENTIAL ARGUMENT DESERVES TO BE ACCEPTED SINCE AT THE TIME OF COMPUT ING THE INCOME UNDER THE HEAD HOUSE PROPERTY THE CASE OF THE AS SESSEE HAS TO BE CONSIDERED FOR THE PURPOSE OF DEDUCTIONS U/S 24 OF THE ACT. SO, WE RESTORE THIS GROUND TO THE ASSESSING OFFICER FOR LI MITED PURPOSE OF COMPUTING THE ASSESSEES INCOME IN VIEW OF OUR A BOVE DISCUSSION. 8. NOW, WE COME TO THE SECOND GROUND OF THE REVENUE REGARDING DISALLOWANCE U/S 40(A)(IA) FOR NON-DEDUC TION OF TDS. IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THE ASSESSEE TO HAVE MADE PROFESSIONAL PAYMENTS WITHOUT DEDUCTION O F TDS. THEREFORE, HE ADDED THE IMPUGNED SUM OF ` 41,000/- IN ITS INCOME. 9. IN LOWER APPELLATE PROCEEDINGS, THE CIT(A) HAS TAK EN INTO CONSIDERATION THE CASE LAW OF MERILYN SHIPPING & TR ANSPORTS VS. ADDL. CIT 20 TAXMAN.COM 244) (VIZAG SB) AND HELD THAT THE DISALLOWANCE COULD ONLY BE MADE QUA THE AMOUNT WHICH WAS PAYABLE AS ON 31.3.2009 AND NOT QUA THAT STOOD PAID. IN LIGHT AF ORESAID, THE ISSUE STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICE R. 10. BEFORE US, THE SOLE ARGUMENT OF THE REVENUE IS THAT PAID AND PAYABLE DISTINCTION DRAWN BY THE CIT(A) WHILS T ISSUING AFORESAID I.T.A.NO. 1951/12 :- 5 -: DIRECTIONS TO THE ASSESSING OFFICER ON THE BASIS OF SPECIAL BENCH DECISION (SUPRA) IS NO LONGER SUSTAINABLE IN VIEW OF THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS M D. JAKIR HOSSAIN MONDAL DATED 4.4.2013 IN I.T.A.NO. 31 OF 2013 AND GUJARAT HIGH COURTS DECISION IN THE CASE OF CIT VS SIKANDARKHAN N. TUNVAR, 33 TAXMAN.COM 133. IN THIS BACKDROP, WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN I.T.A.NO. 2076/MDS/2012 DATED 18.9.2013 IN THE CASE OF ITO VS M/S THEEKATHIR PRESS [AUTHORED B Y ONE OF US, DR.O.K.NARAYANAN, VP] HAS HELD THAT SINCE THERE IS VARIATION OF DECISIONS ON PAID AND PAYABLE ISSUE IN VIEW OF THE FACT THAT THE HON'BLE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT HAVE DECIDED THE QUESTION IN FAVOUR OF THE REVENUE AND THE HON'BLE A LLAHABAD HIGH COURT IN THE CASE OF CIT VS M/S VECTOR SHIPPING SER VICES (P) LTD HAS PROCEEDED IN FAVOUR OF THE ASSESSEE, THE CASE LAW OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS VEGETABLE PRODUCTS LTD. , 88 ITR 192 WOULD APPLY SO AS TO DECIDE THE ISSUE IN ASSESSEES FAVO UR. THE RELEVANT FINDINGS READ AS FOLLOWS: 2. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS DISA LLOWED THE CLAIM OF CERTAIN EXPENDITURE MADE BY THE ASSESSEE U NDER SECTION 40(A)(IA) ON THE GROUND THAT TAX HAS NOT BEEN DEDUC TED AT SOURCE AND PAID TO THE CREDIT OF GOVERNMENT OF INDIA. BUT, TH E COMMISSIONER OF INCOME-TAX(APPEALS) DELETED THE DISALLOWANCE STATIN G THAT THE AMOUNT PAYABLE ALONE WOULD ATTRACT THE DISALLOWANCE UNDE R SECTION 40(A)(IA) AND THE AMOUNT ALREADY PAID WOULD NOT ATTRACT THE A BOVE PROVISION. I.T.A.NO. 1951/12 :- 6 -: THE REVENUE IS AGGRIEVED AND, THEREFORE, THIS SECON D APPEAL BEFORE US. 3. THE INCOME-TAX APPELLATE TRIBUNAL, VISAKHAPATNAM -SPECIAL BENCH, HAD HELD IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT, 16 ITR (TRIB) 1, THAT THE PROVISIONS OF SECTION 40(A)(IA) DO APPLY ONLY TO THOSE AMOUNTS REMAINED PAYABLE BY THE END OF THE PREVIOUS YEAR AND THE SAID PROVISIONS DO NOT APPLY TO THE AMOUNTS ALREADY PAID BY THE ASSESSEE BEFORE THE CLOSE OF TH E RELEVANT PREVIOUS YEAR. IN THAT WAY, THE ORDER OF THE COMMISSIONER O F INCOME- TAX(APPEALS) IN THE PRESENT CASE IS CONDUCIVE TO TH E DECISION OF THE SPECIAL BENCH. THE VERY SAME VIEW HAS BEEN UPHELD BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. M/S. VE CTOR SHIPPING SERVICES(P) LTD. THE HONBLE ALLAHABAD HIGH COURT , THROUGH THEIR JUDGMENT DATED 9-7-2013 IN ITA NO.122 OF 2013, HAS HELD THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT IS GOOD LAW. IN THAT WAY, THE PRESENT APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 4. BUT, AT THE SAME TIME, THE LEARNED JOINT COMMISS IONER OF INCOME-TAX APPEARING FOR THE REVENUE HAS RELIED ON THREE OTHER JUDGMENTS RENDERED BY THE HONBLE CALCUTTA HIGH COU RT AND GUJARAT HIGH COURT, IN WHICH THEIR LORDSHIPS HAVE HELD THAT THE LAW STATED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ME RILYN SHIPPING & TRANSPORTS VS. ADDL.CIT WAS NOT ACCEPTABLE. THE HO NBLE CALCUTTA HIGH COURT, THROUGH THEIR JUDGMENT DELIVERED ON 3 RD APRIL, 2013 IN ITA NO.20 OF 2013 IN THE CASE OF CIT VS. CRESCENT EXPOR T SYNDICATES, HAS HELD THAT THE ORDER OF THE SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL.CIT IS NOT A CCEPTABLE. THE SAME VIEW HAS AGAIN BEEN REPEATED BY THE HONBLE CA LCUTTA HIGH COURT IN THE CASE OF CIT VS. MD. JAKIR HOSSAIN MOND AL, THROUGH THEIR JUDGMENT DELIVERED ON 4 TH APRIL, 2013 IN ITA NO.31 OF 2013. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S IKANDARKHAN N.TUNVAR, 33 TAXMAN.COM.133, HAS ALSO HELD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) DOES NOT DISTINGUISH BETWEE N AMOUNTS PAID AND PAYABLE. IN VIEW OF THE ABOVE JUDGMENTS OF T WO HIGH COURTS, THE LEARNED OFFICER CONTENDED THAT THE APPEAL OF TH E REVENUE NEEDS TO BE ALLOWED. 5. WE FIND THAT THE JUDGMENT OF THE HONBLE ALLAHAB AD HIGH COURT IS IN FAVOUR OF THE ASSESSEE. AT THE SAME TIME, WE FIND THAT THE ORDERS OF THE CALCUTTA HIGH COURT AND THE GUJARAT HIGH COU RT ARE AGAINST THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE RULE OF JUDIC IAL PRECEDENCE DEMANDS THAT THE VIEW FAVOURABLE TO THE ASSESSEE MU ST BE ADOPTED, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD., 88 ITR 192. FOLLOWING THE ABOVE FUNDAMENTAL RULE DECLARED BY THE HONBLE SUPREME CO URT, WE HAVE TO I.T.A.NO. 1951/12 :- 7 -: FOLLOW THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH C OURT, WHICH IS IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) APPLIES ONLY TO THOSE AMOUN TS PAYABLE AND NOT TO THOSE AMOUNTS PAID. ACCORDINGLY, WE UPHOL D THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IN THE PRESENT CASE. THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISS ED. IN VIEW THEREOF, WE ALSO HOLD THAT THE CIT(A) HAS R IGHTLY DIRECTED THE ASSESSING OFFICER TO EXAMINE THE ASSESSEES CLAIM ON THE BASIS OF PAID AND PAYABLE ISSUE AS STATED HEREINABOVE. SO, THE RELEVANT GROUNDS OF THE REVENUE ARE DECIDED IN FAVOUR OF THE ASSESSEE. 11. THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTI CAL PURPOSES. ORDER PRONOUNCED ON MONDAY, THE 09 TH OF DECEMBER, 2013, AT CHENNAI SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S. S. GODARA) JUDICIAL MEMBER DATED: 09 TH DECEMBER, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR