Bonfiglioli Transmission Pvt Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2040/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9332 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 29-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 05-10-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: N C PRABHAKAR; V PADMANABAN
• Keywords: Retrospective amendment
• Section: 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2040/MDS/2015 / ASSESSMENT YEAR : 2006-07 M/S BONFIGLIOLI TRANSMISSIONS P. LTD PLOT NO.AC-7AC-11, SIDCO INDUSTRIAL ESTATE THIRUMUDIVAKKAM CHENNAI VS . THE ASSTT. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 1(2) CHENNAI [PAN AABCB 1675 N ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI N.C.PRABHAKAR, ADVOCATE & SHRI V. PADMANABAN, CA /RESPONDENT BY : SHRI A.B KOLI, JCIT / DATE OF HEARING : 29 - 0 3 - 2016 ! / DATE OF PRONOUNCEMENT : 19 - 05 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHENNA I, DATED 27.7.2015 AND PERTAINS TO ASSESSMENT YEAR 2006-07 . 2. SHRI N.C. PRABHAKAR, LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERATION IS DIS ALLOWANCE MADE BY THE ITA NO.2040/15 :- 2 -: ASSESSING OFFICER U/S 40(A)(IA) OF THE ACT FOR SHO RT DEDUCTION OF TAX U/S 194C AND 194J OF THE ACT. ACCORDING TO THE LD . COUNSEL, THE ASSESSEE MADE SHORT DEDUCTION OF TAX U/S 194C AND 194J OF THE ACT TO THE EXTENT OF ` 1193/- AND ` 3070/-, RESPECTIVELY. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDITURE OF ` 1,21,050/- U/S 40(A)(IA) OF THE ACT. ACCORDING TO THE LD. COUNSEL , DISALLOWANCE U/S 40(A)(IA) OF THE ACT CAN BE MADE ONLY IF THE TAX WA S NOT DEDUCTED. WHEN THE ASSESSEE HAS DEDUCTED TAX PARTIALLY, THER E CANNOT BE ANY DISALLOWANCE U/S 40(A)(IA) OF THE ACT, THEREFORE, DISALLOWANCE MADE BY THE AUTHORITIES BELOW IS NOT JUSTIFIED. 3. ON THE CONTRARY, SHRI A.B. KOLI, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ADMITTEDLY, THERE WAS SHORT DEDUCTION OF TAX AS PRESCRIBED U/S 194C AND 194J OF THE ACT, THEREFORE, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW ON PRO-RATA BASIS PROPORTIONATE TO THE SHORT DEDUCTION. ACCORDING TO THE LD. DR, THE ASSESSEE IS EXPECTED TO DEDUCT TAX AS PRESCRIBED U /S 194C AND 194J OF THE ACT. WHEN THE ASSESSEE FAILED TO DEDUCT TA X AS PRESCRIBED UNDER THE STATUTORY PROVISION, THE ENTIRE EXPENDITU RE OUGHT TO HAVE BEEN DISALLOWED. IN THIS CASE, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW PROPORTIONATELY, THEREFORE, THE A SSESSEE CANNOT HAVE ANY GRIEVANCE AT ALL. ITA NO.2040/15 :- 3 -: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT . AN IDENTICAL ISSUE WAS CONSIDERED BY THE COCHIN BENCH OF THIS TRIBUNAL IN APOLLO TYRES LTD. V. DCIT IN I.T.A. NO.31 & 74/COCH/2010 DATED 2 9 TH MAY, 2013. THE COCHIN BENCH FOUND THAT FOR SHORT DEDUCTION OF TAX, THERE CANNOT BE ANY DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. IN FACT, THE COCHIN BENCH OBSERVED AS FOLLOWS:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHE R SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIONS OF SECTI ON 40(A)(IA) OF THE ACT, WHICH READS AS FOLLOWS: (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNT S PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPP LY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX I S DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED I N SUB-SECTION (1) OF SECTION 139: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFT ER THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTIO N 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. ITA NO.2040/15 :- 4 -: EXPLANATION.- FOR THE PURPOSES OF THIS SUB-CLAUSE.- (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTI ON 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE S AME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUBSECTION (1) OF SECTION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTI ON 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANATION III TO SECTION 194C; (V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) TO THE EXPLANATION TO SECTION 194-I; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; THEREFORE, SECTION 40(A)(IA) ENABLES THE ASSESSING OFFICER TO DISALLOW ANY PAYMENT TOWARDS INTEREST, COMMISSION OR BROKERAGE, FEE FOR PROFESSIONAL SERVI CE, FEES FOR TECHNICAL SERVICE ETC. ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVIIB AND IF SUC H TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID. 9. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISION S OF SECTION 201(1A) WHICH READS AS FOLLOWS: (1A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB- SECTION (1), IF ANY SUCH PERSON, PRINCIPAL OFFICER OR COMPANY AS IS REFERRED TO IN THAT SUB-SECTION DOES NOT DEDUCT THE WHOLE OR ANY PART OF THE TAX OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UN DER THIS ACT, HE OR IT SHALL BE LIABLE TO PAY SIMPLE INTEREST,- (I) AT ONE PER CENT FOR EVERY MONTH OR PART OF A MO NTH ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TA X IS DEDUCTED; AND (II) AT ONE AND ONE-HALF PER CENT FOR EVERY MONTH O R PART OF A MONTH ON THE AMOUNT OF SUCH TAX FROM THE ITA NO.2040/15 :- 5 -: DATE ON WHICH SUCH TAX WAS DEDUCTED TO THE DATE ON WHICH SUCH TAX IS ACTUALLY PAID, AND SUCH INTEREST S HALL BE PAID BEFORE FURNISHING THE STATEMENT IN ACCORDANCE WITH THE PROVISIONS OF SUBSECTION (3) OF SECTION 200.) SECTION 201(1A) ENABLES THE ASSESSING OFFICER TO LEVY INTEREST IN CASE THE TAX WAS NOT DEDUCTED EITHER WHOLLY OR PARTLY OR AFTER DEDUCTION IT WAS NOT PAID AS REQUIRED UNDER THE ACT. IN FACT, THE PROVISIONS OF SECTION 201(1A) WAS AMENDED BY FINANCE ACT, 2001 WITH RETROSPECTIVE EFFECT FROM 01-04-1962 AFTER THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN P.V. RAJAGOPAL (SUPRA) 10. AS RIGHTLY POINTED OUT BY THE LD.SENIOR COUNSEL FOR THE ASSESSEE IN SECTION 201(1A) THE LEGISLATURE INTENDED TO LEVY INTEREST EVEN IN CASE OF SHORT DEDUCTION OF TAX. IN OTHER WORDS, IF ANY PART OF THE TAX WHICH REQUIRED TO BE DEDUCTED WAS FOUND TO BE NOT DEDUCTED THEN INTEREST U/S 201(1A ) CAN BE LEVIED IN RESPECT OF THAT PART OF THE AMOUNT WHI CH WAS NOT DEDUCTED. WHEREAS THE LANGUAGE OF SECTION 40(A)(IA) D OES NOT SAY THAT EVEN FOR SHORT DEDUCTION DISALLOWANCE HAS TO BE MADE PROPORTIONATELY. THEREFORE, THE LEGISLATURE HA S CLEARLY ENVISAGED IN SECTION 201(1A) FOR LEVY OF INTEREST ON THE AMOUNT ON WHICH TAX WAS NOT DEDUCTED WHEREAS THE LEGISLATURE HAS OMITTED TO DO SO IN SECTION 40(A)(IA) OF THE ACT. IN OTHER WORDS, THE PROVISIONS OF SECTION 40(A)( IA) DOES NOT ENABLE THE ASSESSING OFFICER TO DISALLOW ANY PR OPORTIONATE AMOUNT FOR SHORT DEDUCTION OR LESSER DEDUCTION. 11. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF P.V. RAJAG OPAL (SUPRA). WHILE CONSIDERING THE PROVISIONS OF SECTIO N 201 WHICH STOOD FOR THE ASSESSMENT YEARS 1989-90 TO 1993-94, THE ANDHRA PRADESH HIGH COURT FOUND THAT THERE IS NOTHI NG IN THE SECTION TO TREAT THE EMPLOYER AS THE DEFAULTER WHER E THERE IS A SHORTFALL IN THE DEDUCTION OF TAX AT SOURCE. FOR T HE PURPOSE OF CONVENIENCE, WE ARE REPRODUCING BELOW PARAGRAPHS 34 AND 35 OF THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT: ITA NO.2040/15 :- 6 -: 34. .. WE MAY NOW READ THE PROVISIONS OF SECTION 201. CONSEQUENCES OF FAILURE TO DEDUCT OR PAY.- (1) IF ANY SUCH PERSON AND IN THE CASES REFERRED TO IN SECTION 194, THE PRINCIPAL OFFICER AND THE COMPANY OF WHICH H E IS THE PRINCIPAL OFFICER DOES NOT DEDUCT OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UND ER THIS ACT, HE OR IT SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE OR IT MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF THE TAX: PROVIDED THAT NO PENALTY SHALL BE CHARGED UNDER SECTION 221 FROM SUCH PERSON, PRINCIPAL, OFFICER OR COMPANY UNLESS THE ASSESSING OFFICER IS SATISFIED THAT SUCH PERSON OR PRINCIPAL OFFICER OR COMPANY, A S THE CASE MAY BE, HAS WITHOUT GOOD AND SUFFICIENT REASONS FAILED TO DEDUCT AND PAY THE TAX. (1A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB- SECTION (1), IF ANY SUCH PERSON, PRINCIPAL OFFICER OR COMPA NY AS IS REFERRED TO IN THAT SUB-SECTION DOES NOT DEDUCT OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS ACT, HE OR IT SHALL BE LIABLE TO PAY SIM PLE INTEREST AT FIFTEEN PER CENT PER ANNUM ON THE AMOUN T OF SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACTUALLY PAID. (2) WHERE THE TAX HAS NOT BEEN PAID AS AFORESAID AFTER IT IS DEDUCTED, THE AMOUNT OF THE TAX TOGETHER WITH THE AMOUNT OF SIMPLE INTEREST THEREON REFERRED TO IN SUBSECTION (1A) SHALL BE A CHARGE UPON ALL THE ASSETS OF THE PERSON, OR THE COMPANY, AS THE CASE MAY BE, REFERRE D TO IN SUB-SECTION (1). 35. THIS SECTION HAS TWO LIMBS, ONE IS WHERE THE EMPLOYER DOES NOT DEDUCT THE TAX AND THE SECOND WHERE AFTER DEDUCTING THE TAX FAILS TO REMIT IT TO T HE GOVERNMENT. THERE IS NOTHING IN THIS SECTION TO TR EAT THE EMPLOYER AS THE DEFAULTER WHERE THERE IS A SHORTFALL IN THE DEDUCTION. THE DEPARTMENT ASSUMES ITA NO.2040/15 :- 7 -: THAT WHERE THE DEDUCTION IS NOT AS REQUIRED BY OR UNDER THIS ACT, THERE IS A DEFAULT. BUT THE FACT IS THAT THIS EXPRESSION AS REQUIRED BY OR UNDER THIS ACT GRAMMATICALLY REFERS ONLY TO THE DUTY TO PAY THE TA X THAT IS DEDUCTED AND CANNOT REFER TO THE DUTY TO DEDUCT THE TAX. SINCE THIS IS A PENAL SECTION, IT HA S TO BE STRICTLY CONSTRUED AND IT CANNOT BE ASSUMED THAT THERE IS A DUTY TO DEDUCT THE TAX STRICTLY IN ACCORDANCE WITH THE COMPUTATION UNDER THE ACT AND I F THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPI NION AS TO THE TAXABILITY OF ANY ITEM THE EMPLOYER CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT. 12. AFTER CONSIDERING THE PROVISIONS OF SECTION 201(1A ) BEFORE AMENDMENT BY FINANCE ACT, 2001, THE ANDHRA PRAD ESH HIGH COURT FOUND THAT AS REQUIRED UNDER THIS ACT DOES NOT REFER TO MEAN TO DEDUCT TAX IN ACCORDANCE WITH COMPU TATION UNDER THE ACT. IN FACT, THE PARLIAMENT AMENDED THE SECTION 201(1A) AFTER THIS JUDGMENT OF ANDHRA PRADESH HIGH CO URT BY INCORPORATING THE WORDS THE WHOLE OR ANY PART O F TAX BY FINANCE ACT, 2001. THE DIVISION BENCH OF THE MUMBAI BENC H OF THIS TRIBUNAL IN THE CASE OF CHANDABHOY AND JASS OBHOY (SUPRA) HAD AN OCCASION TO CONSIDER AN IDENTICAL IS SUE. THE MUMBAI BENCH FOUND THAT SHORT DEDUCTION OF TDS, IF A NY, COULD HAVE BEEN CONSIDERED AS LIABILITY UNDER THE I NCOME-TAX ACT AS DUE FROM THE ASSESSEE. THEREFORE, THE DISALL OWANCE OF THE ENTIRE EXPENDITURE, WHOSE GENUINENESS WAS NOT DO UBTED BY THE ASSESSING OFFICER IS NOT JUSTIFIED. A SIMILA R VIEW WAS ALSO TAKEN BY THE KOKATTA BENCH OF THIS TRIBUNAL IN THE CASE OF CIT VS M/S S.K. TEKRIWAL (SUPRA). IN THIS CASE, ON APPEAL BY THE REVENUE, THE CALCUTTA HIGH COURT CONFIRMED T HE ORDER OF THE KOLKATTA BENCH OF THE TRIBUNAL. 13. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT SECTION 40(A)(IA) DOES NOT ENVISAGE A SI TUATION WHERE THERE WAS SHORT DEDUCTION/LESSER DEDUCTION AS IN CASE OF SECTION 201(1A) OF THE ACT. THERE IS AN OBVIOUS OM ISSION TO INCLUDE SHORT DEDUCTION/LESSER DEDUCTION IN SECTION 40(A)(IA) OF THE ACT. THEREFORE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT IN CASE OF SHORT/LESSER DEDUCTION OF T AX, THE ENTIRE EXPENDITURE WHOSE GENUINENESS WAS NOT DOUBTED BY ITA NO.2040/15 :- 8 -: THE ASSESSING OFFICER, CANNOT BE DISALLOWED. ACCORD INGLY, THE ORDERS OF LOWER AUTHORITIES ARE SET SIDE AND THE EN TIRE DISALLOWANCE IS DELETED. 5. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS UNABLE TO UP HOLD THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MAY, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 19 TH MAY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF