J.K.Enterprises, CHENNAI V. DCIT, CHENNAI

ITA 2058/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7974 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 02-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-10-2015
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Keywords: Depreciation; Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 2058/MDS/2015 / ASSESSMENT YEAR : 2011-12 M/S. J.K. ENTERPRISES, 20, ALAGESAN ST., WEST TAMBARAM, CHENNAI 600 045. PAN AACFJ9686R ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, NON-CORPORATE CIRCLE-22, CHENNAI. RESPONDENT) / APPELLANT BY : SHRI K. BALASUBRAMANIAN, ADVOCATE TAX CONSULTANT / RESPONDENT BY : SHRI P. RADHAKRISHNAN, JCIT ! / DATE OF HEARING : 02.02.2016 '# ! / DATE OF PRONOUNCEMENT : 15.02.2016 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 28 .8.2015 FOR THE ASSESSMENT YEAR 2011-12. - - ITA 2058/15 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. CIT(APPEALS) ERRED IN CONFIRMING THE DISALLOWAN CE OF ` 60,21,862 MADE UNDER SECTION 40(A)(IA) FOR NON DEDUCTION OF TAX ON INTEREST PAID TO NBCS. 2. CONTRARY TO FACTS AND IN SPITE OF PRODUCING DE TAILS OF INTEREST PAID, CIT(A) ERRED IN HOLDING THAT SEC. 194I IS ATTRACTED TO APPELLANTS CASE. 3. HE FAILED TO APPRECIATE THE RULE OF PRECEDENT T HAT WHERE CONFLICTING JUDICIAL DECISIONS OPERATE, THE R ULE FAVOURABLE TO THE ASSESSEE MUST BE ADOPTED VIDE S.CS DECISION IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD., 88 ITR 9.192 4. HE FAILED TO CONSIDER THE ALTERNATIVE PLEA OF APPLICATION OF 1 ST PROVISO TO SEC.201(1) OF THE ACT. RELIANCE IS PLACED ON DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. ANSAL LANDMARK TOWNSHIP PVT. LTD. (2015) 279 CTR 384 DT. 26/08/2015. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF ` 60,21,862/- UNDER THE HEAD INTEREST PAYMENT TO NBFC AND THE SAME WAS DISALLOWED BY THE AO U/S.40( A)(IA) AS THE SAME AMOUNT WAS PAID WITHOUT DEDUCTION OF TAX. THE ASSESSEES CONTENTION WAS THAT THE PAYMENTS WERE MA DE ON ACCOUNT OF HIRE PURCHASES AND FURTHER STATED THAT T HE AGREED AMOUNT PAYABLE BY THE HIRER IN PERIODICAL INSTALMEN TS COULD NOT BE TREATED AS INTEREST PAYABLE SINCE IT WAS NOT IN RESPECT OF ANY - - ITA 2058/15 3 MONEY BORROWED OR DEBT INCURRED AND HENCE PROVISION S OF SEC.194A REGARDING TDS WERE NOT ATTRACTED IN SUCH T RANSACTIONS. 3.1 THE ASSESSING OFFICER DID NOT ACCEPT THE CONTEN TION OF THE ASSESSEE AND HAD DISALLOWED ` 60,21,862/- U/S.40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE ON THE INTER EST/FINANCE CHARGES PAID TO COMPANIES WHO FINANCED THE PURCHASE OF EQUIPMENTS BY THE ASSESSEE FOR USE IN ITS BUSINESS AS ALSO FOR BUSINESS LOANS. THE AO INVOKED THE PROVISIONS OF S EC.194I OF THE ACT TREATING THE ENTIRE INTEREST/FINANCE CHARGE S PAID AS RENT PAYMENT FOR HIRING EQUIPMENTS BY THE ASSESSEE TO TH E FINANCIAL INSTITUTIONS, TO WHOM THE EQUIPMENTS WERE HYPOTHECA TED. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(APPEALS). 4. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT THE DE CISION OF THE CHENNAI BENCH IN THE CASE OF M/S.THEEKATHIR PRESS IN ITA NO. 2076/MDS/2012 RELIED ON BY THE ASSSSEE, HAS BEE N CHALLENGED BY THE DEPARTMENT BEFORE THE HIGH COURT OF MADRAS AND THE APPEAL IS PENDING. FURTHER, HE OBSERVED TH AT THE INTERPRETATION OF SEC.40(A)(IA) BY THE CALCUTTA HIG H COURT AND GUJARAT HIGH COURT IN FAVOUR OF THE REVENUE, IS THE CORRECT - - ITA 2058/15 4 INTERPRETATION. FURTHER, THE CIT (APPEALS) CONFIRM ED THE ADDITION BY OBSERVING THAT THE HIGH COURTS HAVE DECIDED THE ABOVE ISSUE IN FAVOUR OF THE REVENUE IN THE FOLLOWING RECENT DE CISIONS, WHICH WERE NOT CONSIDERED BY THE TRIBUNAL IN THE AFORESAI D CASE: A) CASE OF SHRI THOMAS GEORGE MUTHOOT V. CLT, KOTT AYAM IN ITA NO.278/2014 DELIVERED BY THE HIGH COURT OF K ERALA AT ERNAKULUM ON 28/8/2014. B) CASES OF P.M.S. DIESELS V. CIT-2, JALANDHAR IN I TA NO.716 OF 2009, TORQUE PHARMACEUTICALS PVT. LTD. V. CIT-L, CHANDIGARH IN ITA NO.130 OF 2012, RANA POLYCOT LTD. V. CIT, CHANDIGARH IN ITA NO.171 OF 2014 AND IND SWIFT LABORATORIES LTD. V. CIT, CHANDIGARH IN ITA NO.188 OF 2014 DELIVERED BY HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ON 29/4/2015. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE SAME ISSUE CAME FOR CONSIDERATIO N IN THE CASE OF THE ASSESSEES GROUP IN DCIT V. M/S. R.S. ENTERP RISES IN ITA NOS.87 & 88/MDS/2015 DATED 20.1.2016, WHEREIN IT WA S HELD AS UNDER: 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THESE CASES, THE CIT(A) PLAC ED RELIANCE ON THE DECISION OF THE SPECIAL BENCH OF IT AT (VIZAG BENCH), IN THE CASE OF MERILYN SHIPPING AND TRANSPORTERS CITED ABOVE AND ALSO ON THE JUDGEMENT OF - - ITA 2058/15 5 THE GUJARAT HIGH COURT IN THE CASE OF VECTOR SHIPPI NG SERVICES P. LTD., CITED SUPRA WHEREIN IT WAS HELD T HAT PROVISIONS OF THE SECTION 40(A)(IA) IS NOT APPLICAB LE WHEN THERE IS NO OUTSTANDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESSMENT YEAR I N RESPECT OF THESE PAYMENTS. THIS APPEAL IS FILED BY THE REVENUE AND THE REVENUE IS NOT ABLE TO PRODUCE ANY EVIDENCE TO SHOW THAT ANY AMOUNT OUTSTANDING TOWARD S OUTSTANDING EXPENSES EITHER IN THE NAME OF SUNDRY CREDITORS OR AS OUTSTANDING EXPENSES AS IT IS OUTSTANDING AT THE END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. HENCE, IN THE ABSE NCE OF ANY MATERIAL TO SUGGEST THAT THE AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, THEN IMPUGNED AMOUNT CANNOT BE DISALLOWED U/S. 40(A)(IA) OF THE A CT. SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENC H OF CHENNAI TRIBUNAL IN THE CASE OF SHRI N.PALANIVEL U VS. ITO, SALEM REPORTED IN [2015] 40 ITR(TRIB.) 325 (CHENNAI). ACCORDINGLY, WE DIRECT THE ASSESSING OFF ICER TO DISALLOW THE ONLY AMOUNT WHICH IS OUTSTANDING AT THE END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR. HENCE, FOR LIMITED PURPOSE TO VERI FY THE OUTSTANDING AMOUNT OUT OF THIS IMPUGNED AMOUNT AT THE END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, WE REMIT THE ISSUE BACK O THE FILE OF THE LD. ASSESSING OFFICER. FURTHER, WE ALSO MAKE IT CLEAR - - ITA 2058/15 6 THAT IF THE ASSESSEE PAID THE TDS BEFORE THE RETURN S FILED U/S.139(1) OF THE ACT, THAT EXPENSES CANNOT B E DISALLOWED. THE LD. ASSESSING OFFICER HAS TO DECIDE THE ISSUE AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE F OR PRODUCING NECESSARY EVIDENCE. THIS GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE, WE ARE INCLINED TO REMIT THE ISSUE TO THE FILE OF THE AO WITH SIMILAR DIRECTION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON MONDAY , THE 15 TH OF FEB., 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 15 TH FEB., 2016. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF. - - ITA 2058/15 7 THE ASSESSING OFFICER HAS MENTIO NED IN THE ASSESSMENT ORDER THAT THE ASSESSE IS ELIGIBLE FOR 1 5% DEPRECIATION ONLY, SINCE HE HAS UTILIZED HIS OWN TR UCKS, FOR CLEARING GARBAGES AND STATED THAT IN CASE OF CIT V S- GUPTA GLOBAL EXIM PVT. LTD. (2008) REPORTED IN 305 ITR132 , THE SUPREME COURT HELD THAT HIGHER DEPRECIATION SHOULD BE ALLOWED ONLY IF THERE IS EVIDENCE THAT THE ASSESSE WAS IN T HE BUSINESS OF HIRING OUT MOTOR VEHICLES. IN THE CASE OF CIT VS, P ARDIP N. DESAI (HUF) (2012) REPORTED IN 341 ITR 277 (GUJ), ASSESSE PURCHASED A TRUCK AND GAVE IT ON LEASE.