M/s. Bharath Exporters, Hyd, Hyderabad V. ACIT, Circl-6(1), Hyderabad

ITA 1969/HYD/2011

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8754 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 14-05-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH PADUCHURI
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Earning of tax free income; Retrospective amendment; Question of law; TDS; Set aside
• Section: 143(3); 40(a)(ia); 201(1); 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE S MT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S . RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 1969 /HYD/201 1 ASSESSMENT YEAR: 20 0 8 - 09 M/S BHARAT EXPORTERS, HYDERABAD. PAN AADFB2948R V S. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 6 ( 1 ), HYDERABAD. ( ASSESSEE ) (RESPONDENT) ASSESSEE BY : SHRI P. MURALI MOHAN RAO REVENUE BY : S HRI DINESH PADUCHURI DATE OF HEARING : 1 4 - 0 5 - 201 9 DATE OF PRONOUNCEMENT : 12 - 0 7 - 2019 O R D E R PER S . RIFAUR RAHMAN , A .M. : BRIEF FACTS OF THE CASE ARE, T H E APPEAL IS RECALLED VIDE ORDER DATED 17/10/2017 IN M.A. NO. 44/HYD/2017, WHICH WAS FILED BY THE REVENUE, WHEREIN THE BENCH HAS HELD AS UNDER: 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN VIEW OF THE SUBSEQUENT DECISION OF THE HONBLE SUPREME COURT OF INDIA, IN THE CASE OF PALAM GAS SERVICE CITED SUPRA, THERE IS A MISTAKE APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL. ACCORDINGLY, WE RECALL OUR ORDER DATED 31/03/2017 PASSED IN ITA NO. 1969/HYD/2011 AND DIRECT THE REGISTRY TO POST THE APPEAL FOR HEARING ON PRIORITY BASIS AND ISSUE THE NECESSARY NOTICE OF HEARING TO THE PARTIES ACCORDINGLY. 2. IN THE M.A. THE REVENUE HAS STATED AS FOLLOWS: APPEAL FILED BY MIS. BHARAT EX PORTERS FOR THE ASST. YEAR 2008 - 09 WAS ALLOWED BY THE HON'BLE ITAT, BENCH - A, HYDERABAD IN ITA NO. 1969/HYD/2011 ON 31.03.2017, HOLDING THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE FOR THE AMOUNTS PAID DURING THE FINANCIAL YEAR. TO ARRIVE A T THIS 2 ITA NO. 1969 /H/ 1 1 M/S BHARAT E XPORTERS, HYD. DECISION, THE HON'BLE BENCH RELIED ON THE DECISIONS OF THE CO - ORDINATE BENCH IN THE CASE OF MIS. AGA PUBLICATIONS LIMITED, THE SPECIAL BENCH DECISION IN THE CASE OF MIS. MERILYN SHIPPING AND TRANSPORT AND HON'BLE ALLAHABAD HIGH COURT'S DECISION IN T HE CASE OF MIS. VECTOR SHIPPING SERVICES (P) LIMITED. 02. IN THIS CONTEXT, ATTENTION OF THE HON'BLE BENCH IS INVITED TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M / S. PAL A M GAS SERVICE, REPORTED IN 81 TAXMAN N 43, WHEREIN IT WAS HELD THAT 'WHEN THE ENTIRE SCHEME OF OBLIGATION TO DEDUCT THE TAX AT SOURCE AND PAYING IT OVER TO THE GOVERNMENT IS READ HOLISTICALLY, IT CANNOT BE HELD THAT THE WORD 'PAYABLE' OCCURRING IN SECTION 4 0(A)(IA) OF THE IT ACT REFERS TO THOSE CASES ONLY WHERE THE AMOUNT IS YET TO BE PAID AND DOES NOT COVER THE CASES WHERE THE AMOUNT IS ACTUALLY PAID'. ACCORDINGLY, SEC. 40(A)(IA) OF THE IT ACT COVERS NOT ONLY THOSE CASES WHERE THE AMOUNT IS 'PAYABLE' BUT AL SO WHEN IT IS 'PAID' AND TAX HAS NOT BEEN DEDUCTED ON THE SAME. THE HON'BLE SUPREME COURT IN THE ABOVE DECISION HAS OPINED THAT THE ALLAHABAD HIGH COURT IN THE CASE OF MIS VECTOR SHIPPING SERVICES (P) LTD DID NOT DECIDE THE QUESTION OF LAW CORRECTLY AND AC CORDINGLY HAS OVERRULED THE JUDGMENTS OF ALLAHABAD HIGH COURT IN THE CASE OF MIS VECTOR SHIPPING SERVICES (P) LTD. 4. IN THIS CONTEXT, ATTENTION OF THE HON'BLE BENCH IS INVITED TO THE BOARD'S INSTRUCTION NO. 1466, WHEREIN IT IS CLARIFIED THAT 'A MISTAKE ARISING AS A RESULT OF SUBSEQUENT INTERPRETATION OF LAW BY THE SUPREME COURT WOULD CONSTITUTE A MISTAKE APPARENT FROM THE RECORDS'. 05 . IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT AND THE BOARD'S INSTRUCTION, IT IS REQUESTED THAT THE ORDER DT. 31.03.2017 MAY KINDLY BE RE - CONSIDERED AND NECESSARY MODIFICATION ORDERS MAY BE ISSUED. IN VIEW OF THE ABOVE FACTUAL MATRIX, THE APPEAL IS RECALLED TO DECIDE THE ISSUE AS UNDER: 3. FOR THE SAKE OF CLARITY, THE ENTIRE CONTENTS PASSED IN THE ORIGINAL ORDER DATED 31/03/2017 ARE AS UNDER: 2 . BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM AND FILED ITS RETURN OF INCOME FOR THE AY 2008 - 09 ON 29/09/2008 DECLARING TOTAL INCOME OF RS. 77,56,410/ - . THE ASSESSMENT WAS COMPLETED BY THE AO U/S 143(3) ON 19/11/2010 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 1,14,36,504/ - AS 3 ITA NO. 1969 /H/ 1 1 M/S BHARAT E XPORTERS, HYD. AGAINST THE RETURNED INCOME OF RS. 77,56,410/ - MAKING THE DISALLOWANCES OF RS. 36,80,094/ - U/S 40(A)(IA) OF THE ACT, WHICH IS THE SUBJECT MATTER IN THE APPEAL. 2.1 T HE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED EXPENDITURE ON THE FOLLOWING HEADS: FUMIGA TION, PHYTOSANITARY & OTHER CHARGES RS. 24,04,649 LOADING & HANDLING CHARGES AGENCY CHARGES RS. 12,75,445 TOTAL RS.36,80,094 =========== HE NOTICED THAT THE ASSESSEE HAD NOT EFFECTED DEDUCTION OF TAX AT SOURCE ON PAYMENTS MAD E TOWARDS THE ABOVE EXPENDITURE. IT WAS CONTENDED BEFORE HIM THAT TDS ON AGENCY CHARGES WAS NOT MADE AS THE AMOUNT HAD BEEN PAID TO SHIPPING AGENTS. H OWE VER, THE ASSESSING OFFICER OPINED THAT SHIPPING AGENTS ARE INDEPENDENT CONTRACTORS AND THEREFORE, LIA BL E FOR TDS, INCLUDING ON THE PAYMENTS TO A CARRIER OF GOODS, AS PUT FORTH BY THE C B DT IN CIRCULAR NO. 71 DTD. 12.9.1995. SINCE SUCH TDS HAD NOT BEEN MADE, HE HELD THAT THE PROVISIONS OF SEC. 40(A)( I A) WERE APPLICABLE. ACCORDINGLY, THE EXPENSES TOTALLING RS, 36,80,094/ - WAS DISALLOWED. 3 . AGGRIEVED WITH THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE FIRM HAD ADMITTED THAT IT HAD NOT DEDUCTED TAX AT SOURCE IN RESPECT OF LOADING AND HANDLING CHARGES, AGENCY CHARGES AMOUNTING TO RS. 12,75,445/ - , WHICH WERE SUBJECT TO T D S, AS THE AMOUNTS WERE PAID TO THE AGENTS AS PART OF THEIR CONTRACT. HOWEVER, THE ' AS SESSEE CONTENDED THAT THE REMAINING AMOUNTS I.E . , FUMIGATION AND OTHER CHARGES AMOUNTING TO RS. 24,04,649/ - WERE ONLY REIMBURSEMENT OF EXPENDI TURE INCURRED ON BEHALF OF THE ASSESSEE AND WERE NOT PART OF THE AGENT'S SERVICES TO THE ASSESSEE . THEREFORE, IT WAS CLAIMED THAT TDS WAS NOT REQUIRED TO BE DEDUCTED ON SUCH EXPENSES. 3 .1 THE REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT SEC. 40(A)( I A) APPLIES ONLY IN CASES OF AMOUNTS 'PAYABLE' AND NOT IN RESPECT OF AMOUNTS 'P AID', AS HELD IN THE CASES OF M/ S. TE JA CONSTRUCTIONS VS. ACIT (ITA NO. 308/HYD/2009). M/S. JAIPUR VIDYUT VITARAN NIGAM LTD. VS. DCIT (26 DTR 79) AND K SRINIV A SA NAIDU VS. ACIT (719/HYD / 209). HE AVERRED THAT THE CBDT IN THEIR CIRCULAR NO.5 OF 2005 DTD, 25.07.2005 HAVE ALSO CLARIFIED THAT THE PROVISIONS OF SEC. 40 ( A ) (IA) ARE MEANT TO AUGMENT THE COMPLIANCE OF TDS PROVISIONS IN CASES OF RESIDENTS AND TO COVER PAYMENTS TO THEM. HE ALSO AVERRED THAT IN THE ASSESSEE 'S CASE FOR THE A. Y. 2 0 07 - 08 ALSO, THE ABOVE EXPENSES WERE A LL OWED. 4 ITA NO. 1969 /H/ 1 1 M/S BHARAT E XPORTERS, HYD. 4 . THE CIT( A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CONFIRMED THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) OF THE ACT. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING 8 GROUNDS OF APPEAL, THE SUM AND SUBSTANCE OF WHICH IS AGAINST THE ADDITION OF RS. 36,80,094/ - U/S 40(A)(IA) OF THE ACT. 6. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISIONS VARIOUS COURTS OF LAWS AND DECISIONS OF ITAT INCLUDING THE DECI SION OF THE COORDINATE BENCH OF ITAT, HYDERABAD IN THE CASE OF M/S AGA PUBLICATIONS LTD. IN ITA NO. 249/HYD/2013, ORDER DATED 26/08/2016 (WHERE BOTH THE MEMBERS ARE PARTY). 7. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. AS SUBMITTED BY THE LD. AR OF THE ASSESSEE, THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISIONS OF ITAT. THE COORDINATE BENCH OF ITAT, HYDERABAD IN THE CASE OF M/S AGA PUBLIC ATIONS LTD., (SUPRA), HAS HELD AS UNDER: 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT WHILE FILING THE PAPER BOOK, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CERTIFIED THAT ALL THE RELEVANT DOCUMENTS WERE FILED BEFORE THE AO AND THE CIT (A). BUT WE DO NOT FIND ANY DISCUSSION ABOUT THESE DOCUMENTS IN THE ORDERS OF THE AO AND THE CIT (A). THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORT VS. ADD. CIT (SUPRA) HAS CLEARLY HELD THAT THE PROVISIONS OF SECTION 40( A)(IA) ARE NOT APPLICABLE TO THE PAYMENTS ALREADY MADE BY THE ASSESSEE BY THE END OF THE RELEVANT FINANCIAL YEAR. FURTHER, THE SECOND PROVISO TO SECTION 40(A)(IA) PROVIDES THAT DISALLOWANCE U/S 40(A)(IA) CANNOT BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE A N ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SECTION 201(1) OF THE ACT. THE FIRST PROVISO TO SUBSECTION (I) OF SECTION 201 PROVIDES THAT A PERSON WHO IS LIABLE TO MAKE TDS BUT FAILS TO DO SO, SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT, IF THE REC IPIENT HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 AND HAS OFFERED THE INCOME AND HAS PAID TAXES THEREON AND HAS FURNISHED A CERTIFICATE TO THIS EFFECT. THOUGH THESE PROVISIONS ARE STATED TO BE APPLICABLE WITH EFFECT FROM 1.4.2013, THE COORDINATE BENCH OF THIS TRIBUNAL AT BANGALORE IN THE CASE OF DCIT VS. ANANDA MARKALA REPORTED IN (2014) 150 ITD 323 (BANG.) HAS HELD THAT THIS 5 ITA NO. 1969 /H/ 1 1 M/S BHARAT E XPORTERS, HYD. PROVISO IS APPLICABLE WITH RETROSPECTIVE EFFECT. IN VIEW OF THE DOCUMENTS FILED BY THE ASSESSEE BEFORE US TO DEMONSTRATE TH AT THE PAYEES HAVE OFFERED THE SAID INCOME TO TAX IN THEIR HANDS, WE DEEM IT FIT AND PROPER TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMAND THE ISSUE TO THE FILE OF THE AO FOR RECONSIDERATION AND VERIFICATION OF THE DETAILS FILED BY THE ASSESSE E. IF THE AO FINDS THAT THE RECIPIENTS HAVE OFFERED THE SAID INCOME TO TAX IN THE RELEVANT A.Y, THEN NO DISALLOWANCE SHALL BE MADE IN THE CASE OF THE ASSESSEE. FURTHER, THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRA NSPORT (SUPRA), WHICH HAS BEEN AFFIRMED BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD AND ALSO THE ORDER OF THE HON'BLE APEX COURT DISMISSING THE REVENUES APPEAL AGAINST THE SAME, WE ALSO HOLD THAT IF THE PAYMENTS ARE ALREADY MADE BY THE END OF THE RELEVANT FINANCIAL YEAR, NO DISALLOWANCE SHALL BE MADE. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE COORDINATE BENCH, WE HOLD THAT SINCE THE PAYMENTS HAVE ALREADY BEEN PAID BY THE ASSESSEE IN THE AY UNDER CONSIDERATION NO DISALLOWANCE CAN BE MADE. THEREFORE, WE DIRECT THE AO TO DELETE THE ADDITION MADE U/S 40(A)(IA). 4 . WITH THE ABOVE BACK GROUND, THE ASSESSEE FILED A DDITIONAL GROUNDS OF APPEAL AS UNDER: 10. AS PER THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF NATIONAL THERMAL POWER CO. LTD VS. CIT (1998) 229 ITR 383 (SC) THE ITAT HAS JURISDICTION TO EXAMINE ANY QUESTION OF LAW THOUGH NOT RAI SED BEFORE THE CIT(A) BUT IS RAISED BEFORE THE IT AT FOR THE FIRST TIME. 11. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT SINCE THE APPENANT HAS NOT BEEN TREATED AS A DEEMED DEFAULTER AND NO ORDER UNDER SECTION 201(1) OF THE ACT HAS BEEN PASSED IN THE A PPE LLA NT'S CASE, THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT IS NOT VALID FOR THE ASSESSMENT YEAR UNDER CONSIDERATION . 12. THE LD. CLT(A) OUGHT TO HAVE APPRECIATED THAT THE AMOUNT OF EXPENDITURE ON WHICH TDS HAS NOT BEEN MADE HAS ALREADY BE EN SHOWN BY THE RECIPIENT AS INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IN WHICH CASE THE DISALLOWANCE OF EXPENDITURE LEADS TO DOUBLE TAXATION. 6 ITA NO. 1969 /H/ 1 1 M/S BHARAT E XPORTERS, HYD. 1 3. WITHOUT PREJUDICE TO OTHER GROUNDS, THE LD. CLT(A) OUGHT TO HAVE APPRECIATED T THAT THE EXPENSES O F RS. 24,04,649/ REPRESENT ONLY REIMBURSEMENT OF EXPENSES WHEREBY THERE IS NO REQUIREMENT OF TDS TO BE MADE. 14. WITHOUT PREJUDICE TO OTHER GROUNDS, THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT ANY DISALLOWANCE OF EXPENSES IN THE APPE LL ANT'S CASE WI1LL EAD TO INCREASE IN INCOME WHICH IS EXEMPT UNDER SECTION 10 B OF THE ACT, ON THE GROUND THAT THE ASSESSEE IS AN EXPORT ORIENTED UNIT. 15. WITHOUT PREJUDICE TO OTHER GROUNDS, THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT ANY PAYMENT MADE TO THE AGENTS OF FO REIGN SHIPPING COMPANIES WI L L NOT ATTRACT TDS AS PER BOARD CIRCULAR NO.723 DATED 19.09.1995. 16. THE APPELLANT MAY ADD OR ALTER OR AMEND OR MODIFY OR SUBSTITUTE OR DELETE OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME O F HEARING OF THE APPEAL. 5. SINCE THE ISSUE INVOLVED IS QUESTION OF LAW AND ALL THE MATERIAL REQUIRED FOR DISPOSAL IS AVAILABLE ON RECORD, WE ADMIT THE ADDITIONAL GROUND RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC LTD. VS. CI T, 229 ITR 383. 6. IN THE ABOVE ADDITIONAL GROUNDS OF APPEAL, ASSESSEE RAISED THE FOLLOWING QUESTIONS: A) ASSESSEE HAS NOT BEEN FOUND AS DEEMED DEFAULTER U/S 201(1) OF THE ACT. B) THE DISALLOWED EXPENDITURES WERE ALREADY DECLARED AS INCOME BY THE RECIPIENT AND PAID DUE TAX. C) THE EXPENDITURES INCURRED WERE REIMBURSEMENT, HENCE, NO TDS PROVISIONS APPLICABLE. D) ANY DISALLOWANCE MADE WILL INCREASE THE INCOME OF THE ASSESSEE AND I T IS ALLOWABLE AS EXEMPT INCOME U/S 10B. E) ANY PAYMENT MADE TO AGENTS OF FOREIGN SHIPPING COMPANY, WILL NOT ATTRACT TDS AS PER BOARD CIRCULAR NO. 723/19.09.1995. 7 ITA NO. 1969 /H/ 1 1 M/S BHARAT E XPORTERS, HYD. 7. ON THE OTHER HAND, LD. DR SUBMITTED THAT GROUND NOS. 12 & 13 ARE NOT RELEVANT AS THE ASS ESSEE HAS NOT SUBMITTED ANY EVIDENCE IN SUPPORT OF SUCH CLAIM. FURTHER, HE SUBMITTED THAT THE AO HAS CLEARLY BROUGHT ON RECORD THAT ASSESSEE HAS NOT DEDUCTED TDS AND IT HAS VIOLATED THE TDS PROVISIONS AND SUBMITTED THAT THE AMENDMENT TO SECTION 201(1) WAS EFFECTIVE FROM 01/04/2013 AND THE ASSESSMENT PROCEEDINGS SHOULD HAVE BEEN PENDING AT THAT POINT OF TIME. EVEN ASSESSEE HAS NOT FILED ANY FORM 26A IN SUPPORT OF ITS CLAIM. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICED THAT ASSESSEE MADE THE PAYMENTS TO SHIPPING AGENTS TOWARDS FUMIGATION, OTHER CHARGES, LOADING HANDLING CHARGES. THESE PAYMENTS WE RE NOT PAID TO THE SHIPPING COMPANIES BUT SERVICES OF AGENTS, IN TURN, AGENTS GET THESE SERVICES FROM OTHER AGENCIES. IT IS ONL Y REIMBURSEMENT OF EXPENDITURE TOWARDS SHIPPING CLEARANCE. HOWEVER, SUCH PAYMENTS MAY NOT ATTRACT TDS PROVISIONS AS THESE SERVICES ARE NOT RENDERED BY THE SHIPPING AGENTS, HOWEVER, THE PAYMENTS ARE MADE BY THE ASSESSEE AND IT IS ASSESSEES RESPONSIBILITY T O MAKE SURE THAT IN CASE THESE SERVICES ARE RENDERED BY AGENTS OR REIMBURSEMENT, IT HAS TO MAKE PROPER DOCUMENTATION. AS THESE TRANSACTIONS ARE DEBATABLE WHETHER IT ATTRACTS TDS PROVISIONS DEPENDING UPON QUALITY OF DOCUMENTATION MAINTAINED BY ASSESSEE. 8 .1 AS FAR AS THE PRESENT ISSUE IS CONCERNED, ASSESSEE HAS NOT MADE ANY TDS, INITIALLY ASSESSEE CLAIMED BENEFIT RELYING ON MERILYN SHIPPING DECISION. NOW, ASSESSEE CLAIMS THAT ASSESSEE WAS NOT DECLARED AS ASSESSEE IN DEFAULT, SECTION 40(A)(IA) CANNOT BE INV OKED. IT IS AGREED FACT THAT AT THAT POINT OF TIME, ACT WAS NOT AMENDED. 8.2 COMING BACK TO PRESENT APPEAL AND ADDITIONAL GROUND RAISED BY THE ASSESSEE, WE NOTICED THAT ASSESSEE HAS RAISED GROUNDS THAT ASSESSEE WAS NOT DECLARED AS ASSESSEE IN DEFAULT, EX PENDITURES ARE REIMBURSABLE AND EXPENDITURES ARE ALREADY DECLARED AS INCOME BY THE 8 ITA NO. 1969 /H/ 1 1 M/S BHARAT E XPORTERS, HYD. RECIPIENT. HOWEVER, LD. DR SUBMITTED THAT THESE CLAIMS OF THE ASSESSEE ARE NOT PROVED BEFORE ANY TAX AUTHORITIES. 8.3 IN OUR VIEW, THE LEGISLATURE BESTOWED DUTY ON ASSESSE E TO DEDUCT TAX FROM THE PAYMENT MADE TO THE SERVICE PROVIDERS AGAINST THE PROFIT THEY ARE LIKELY TO GET IN THE DECLARED TRANSACTION. ASSESSEE HAS TO DEDUCT AND REMIT THIS DEDUCTION IN THE CENTRAL GOVT. ACCOUNT IN FAVOUR OF THE SERVICE PROVIDE R I.E. RECIPI ENT. THE RECIPIENT WILL DECLARE THE INCOME IN ITS RETURN OF INCOME AND TAKE THE CREDIT AGAINST THE PAYMENT BY THE ASSESSEE AT THE TIME OF MAKING PAYMENT OR MAKING CREDIT. WHEN THE ASSESSEE FAILS TO DEDUCT TAX FROM THE PAYMENT MADE TO THE SERVICE PROVIDER, THE LIABILITY ON THE ASSESSEE IS TO DEMONSTRATE THAT THE OTHER PERSON I.E. THE RECIPIENT HAS DECLARED THE ABOVE PAYMENT AS INCOME IN HIS RETURN OF INCOME AND PAID THE DUE TAX. THIS IS, AS PER THE AMENDMENT MADE IN THE SECTION 40(A)(IA) AND SECTION 201(1) O F THE ACT. THIS AMENDMENT CAME IN FINANCE ACT, 2012. EVEN THOUGH, THE DECISIONS IN CASES LIKE ANSAL LAND MARK (377 ITR 635) ARE RETROSPECTIVE IN NATURE APPLICABLE FROM THE INCEPTION OF SECTION 40(A)(IA). HOWEVER, IN OUR VIEW, THESE AMENDMENTS WERE INTRODUC ED W.E.F. 01/04/2013, BUT, THE ASSESSMENTS WERE COMPLETED BEFORE SUCH AMENDMENT. BUT, AT THAT POINT OF TIME, THE FAMOUS LAND MARK JUDGEMENT IN THE CASE OF HINDUSTAN COCO COLA CASE (163 TAXMAN 55) WAS HELD TO BE RULE OF LAW. THEREFORE, APPLYING THE RATIO OF ABOVE DECISION, WHEN THE ASSESSEE DEMONSTRATES THAT THE RECIPIENT DECLARES THE PAYMENT RECEIVED FROM ASSESSEE AS THEIR INCOME, IT IS NOT PROPER FOR THE DEPARTMENT TO MAKE DISALLOWANCE, AS IT AMOUNTS TO DOUBLE TAXATION. THE LIABILITY IS RESTRICTED TO INTEREST U/S 201(1A) OF THE ACT. 8.4 IN THE GIVEN CASE, AS SUBMITTED BY LD. DR THAT ASSESSEE HAS NOT BROUGHT ON RECORD THAT THE RECIPIENT HAS ALREADY DECLARED THE SAME AS INCOME IN THEIR RETURN OF INCOME. FOR THE SAKE OF JUSTICE, WE DEEM IT FIT AND PROPER TO REM IT THIS ISSUE BACK TO THE FILE OF AO TO VERIFY THE 9 ITA NO. 1969 /H/ 1 1 M/S BHARAT E XPORTERS, HYD. SUBMISSIONS OF ASSESSEE AND ACCORDINGLY ALLOW THE CLAIM OF THE ASSESSEE. 8.5 ANOTHER GROUND RAISED BY THE ASSESSEE IS THAT EVEN AO MAKES DISALLOWANCE U/S 40(A)(IA), THE PROFIT WILL INCREASE AND THE INCR EASED PROFIT IS ELIGIBLE TO BE CLAIMED U/S 10B. THIS ISSUE IS ALSO REMITTE D BACK TO THE FILE OF AO TO VERIFY THE ASSESSEES CLAIM AND ALLOW THE SAME AS PER LAW. 8.6 ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 12 TH J ULY, 2019 SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 12 TH JU LY , 2019. KV COPY TO: - 1) M/S BHARAT EXPORTERS, C/O SHRI P. MURALI & CO., CAS, 6 - 3 - 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500 082. 2) A C IT, CIRCLE 6 ( 1 ), HYD 3) CIT (A) - IV , HYDERABAD 4 CIT - III HYDERABAD 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6) GUARD FILE