M/s. Nageshwar Construction, Pune V. Income-tax Officer,

ITA 202/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88963 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI
• Section: 143(3); 194C; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.202/PN/2014 (ASSESSMENT YEAR : 2007-08) M/S NAGESHWAR CONSTRUCTION, A/P PATAS, TAL. DAUND, DIST. PUNE 413 801. PAN : AADFN6575G . APPELLANT VS. INCOME TAX OFFICER, WARD 5(4), PUNE. . RESPONDENT ASSESSEE BY : MR. MAHAVIR JAIN DEPARTMENT BY : MR. D. S. KOTHARI DATE OF HEARING : 07-01-2015 DATE OF PRONOUNCEMENT : 20-02-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 01.11.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 24.12.2009 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2007-08. 2. IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL :- 1] THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [C IT(A)] HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.27,83,200 /- MADE U/S 40(A)(IA) ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED U/S 194C HAD PAID TO THE CREDIT OF GOVERNMENT WITHIN THE PRESCRIBED TIME LIMIT. 1.1] THE LD. CIT(A) AS WELL AS LD. ASSESSING OFFICE R (AO) HAS FAILED TO APPRECIATE THAT THIS IS A CASE OF LATE DEDUCTION OF TAX AND NOT A CASE WHERE TDS IS NOT DEDUCTED OR DEPOSITED TO THE CREDIT OF G OVERNMENT. 2] WITHOUT PREJUDICE, THE LD. CIT(A) AS WELL AS LD. AO BOTH HAVE FAILED TO APPRECIATE THAT THE DISALLOWANCE U/S 40(A )(IA) OF THE ACT IS ATTRACTED IN THE CASE OF AMOUNT PAYABLE ALONE. NO DISALLOWANC E IS WARRANTED FOR THE AMOUNT ALREADY PAID BEFORE THE END OF THE YEAR. ITA NO.202/PN/2014 2.1] THE RELIANCE IS PLACED ON THE DECISION OF VIZA G TRIBUNAL, SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRA NSPORTS VS. ADDL. CIT (20 TAXMAN.COM 244) AND THE DECISION OF THE ALLAHABAD H IGH COURT IN THE CASE OF CIT VS. M/S VECTOR SHIPPING SERVICES (P) LTD. 3. IN THIS APPEAL, ALTHOUGH ASSESSEE HAS RAISED MUL TIPLE GROUNDS OF APPEAL BUT THE SOLITARY DISPUTE IS WITH REGARD TO A DISALLOWANCE OF RS.27,83,200/- MADE BY THE ASSESSING OFFICER BY INV OKING SECTION 40(A)(IA) OF THE ACT. 4. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD MADE PAYMENTS TO M/S MAHIMA C ONSTRUCTION WITHOUT DEDUCTION OF TAX AT SOURCE AS PER THE REQUIREMENT O F SECTION 194C OF THE ACT AND THEREFORE HE INVOKED SECTION 40(A)(IA) OF THE A CT AND DISALLOWED AN AMOUNT OF RS.27,83,200/- ON THIS COUNT. 5. THE CIT(A) NOTICED THAT THE ASSESSEE HAD MADE PA YMENT OF RS.27,80,000/- TO M/S MAHIMA CONSTRUCTION ON 09.01. 2007 THROUGH HIS BANK ACCOUNT. THE ASSESSEE EXPLAINED THAT THE TAX WAS N OT DEDUCTED AT THE TIME OF PAYMENT BUT WHEN THE AFORESAID RECIPIENT RAISED INV OICE ON THE ASSESSEE WHICH WAS ADJUSTED BY THE ASSESSEE IN THE MONTH OF MARCH, 2007, IT DEDUCTED THE REQUISITE TAX AT SOURCE U/S 194C OF THE ACT AND DEPOSITED SUCH TAX INTO GOVERNMENT ACCOUNT ON 27.04.2007. ON THE BASIS OF THE AFORESAID, THE PLEA OF THE ASSESSEE WAS THAT SINCE IT HAD CREDITED THE ACCOUNT OF M/S MAHIMA CONSTRUCTION IN THE MONTH OF MARCH, 2007 AND AT THA T TIME ASSESSEE DEDUCTED THE REQUISITE TAX AT SOURCE, IT HAD TIME TILL THE D ATE OF FILING OF RETURN SPECIFIED IN SECTION 139(1) OF THE ACT TO DEPOSIT SUCH TAX IN TH E GOVERNMENT ACCOUNT. THEREFORE, ASSESSEE CONTENDED THAT NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT WAS REQUIRED TO BE MADE. ITA NO.202/PN/2014 6. THE CIT(A), HOWEVER, HELD THAT ASSESSEE WAS OBLI GED TO DEDUCT THE TAX AT THE TIME OF PAYMENT AS THE SAID EVENT WAS EARLIE R THAN THE DATE ON WHICH ASSESSEE CREDITED THE ACCOUNT OF THE RECIPIENT. TH E CIT(A) REFERRED TO SECTION 194C OF THE ACT TO SAY THAT THE LIABILITY TO DEDUCT THE TAX AT SOURCE IS AT THE TIME OF CREDIT OF THE SUM TO THE ACCOUNT OF THE CONTRACT OR OR AT THE TIME OF PAYMENT THEREOF, WHICHEVER IS EARLIER. THEREFORE, ACCORDIN G TO THE CIT(A), IN THIS CASE, SINCE THE PAYMENT WAS MADE TO M/S MAHIMA CONSTRUCTI ON ON 11.01.2007 WHICH WAS EARLIER THAN THE MONTH OF MARCH, 2007 WHE N ASSESSEE CREDITED THE ACCOUNT OF THE CONTRACTOR, THEREFORE THE ASSESSEE W AS REQUIRED TO DEPOSIT THE TAX DEDUCTED AT SOURCE INTO THE GOVERNMENT ACCOUNT BEFORE THE END OF THE PREVIOUS YEAR UNDER CONSIDERATION IN ORDER TO ESCAP E THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. AS A RESULT, CIT(A) SUSTAINE D THE DISALLOWANCE BUT RESTRICTED IT TO RS.27,80,000/- I.E. TO THE EXTENT OF ACTUAL PAYMENT MADE TO M/S MAHIMA CONSTRUCTION IN CONTRAVENTION OF SECTION 40( A)(IA) OF THE ACT AS AGAINST RS.27,83,200/- MADE BY THE ASSESSING OFFICER. 7. IN THIS BACKGROUND, ASSESSEE IS IN FURTHER APPEA L BEFORE US. WE FIND THAT THE FACTS IN THE PRESENT CASE LIE IN A NARROW COMPASS. QUITE CLEARLY, IN THE PRESENT CASE, THE TAX HAS BEEN DEPOSITED TO THE ACC OUNT OF THE CENTRAL GOVERNMENT AFTER THE CLOSE OF THE PREVIOUS YEAR I.E . ON 27.04.2007, BUT BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTIO N 139 OF THE ACT FOR FILING OF RETURN FOR THE IMPUGNED ASSESSMENT YEAR. SECTION 4 0(A)(IA) OF THE ACT WAS AMENDED BY THE FINANCE ACT, 2010 W.E.F. 01.04.2010 TO SAY THAT NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT SHALL BE MADE IN CASE TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER X AND SUCH TAX HAS NOT BEEN DE DUCTED AND OR AFTER DEDUCTION IT HAS BEEN DEPOSITED ON OR BEFORE DUE D ATE SPECIFIED IN SUB- SECTION (1) OF SECTION 139 OF THE ACT. IN OUR VIEW , THE AFORESAID AMENDMENT COVERS THE PRESENT CONTROVERSY WHEREBY ASSESSEE HAS DEPOSITED THE TAX TO THE CREDIT OF THE CENTRAL GOVERNMENT BEFORE THE DUE DA TE SPECIFIED IN SUB-SECTION ITA NO.202/PN/2014 (1) OF SECTION 139 OF THE ACT. THE AFORESAID AMEND MENT HAS BEEN MADE BY FINANCE ACT, 2010 W.E.F. 01.04.2010 BUT THE SAME HA S BEEN HELD TO BE CLARIFICATORY IN NATURE AND RETROSPECTIVE IN OPERAT ION BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NARESH KUMAR, 263 ITR 56 (DELHI). THEREFORE, IT IS APPLICABLE IN THE CONTEXT OF THE INSTANT ASSESSMENT YEAR ALSO. 8. AS A CONSEQUENCE, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION O F RS.27,80,000/-. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED, AS ABOVE. ORDER PRONOUNCED ON 20 TH FEBRUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 20 TH FEBRUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE