THE ACIT, Guntur V. Gude Venkata Krishna Rao, Guntur

ITA 211/VIZ/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9025 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SATYANANDHAM
• Assessee Lawyers: D L NARASIMHA RAOADV
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HONBLE JUDICIAL MEMBER & SHRI G. MANJUNATHA, HONBLE ACCOUNTANT MEMBER ITA NO. 211/VIZ/2015 (ASST. YEAR : 2010-11) ACIT, CIRCLE-2(1), GUNTUR. VS. SRI GUDE VENKATA KRISHNA RAO, D.NO. 4-2-17/8, 18 TH LANE, CHANDRAMOULI NAGAR, GUNTUR. PAN NO. AHEPG 4373 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.L. NARASIMHA RAOADV. DEPARTMENT BY : SHRI T. SATYANANDHAM SR.DR DATE OF HEARING : 12/04/2017. DATE OF PRONOUNCEMENT : 21/04/2017. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, GUNTUR, DATED 23/03/2015 FOR THE ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS IN THE BUSINESS OF TRANSPORT CONTRACT WORKS AND ALSO RUNNING PETROL BUNK, FILED HIS RETURN OF INCOME BY ADMITTING TOTAL INCOME OF 30,15,890/-. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) AND AFTER DUE PROCESS, ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). IN THE ASSESSMENT ORDER, ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS 2 ITA NO.211/VIZ/2015 (GUDE VENKATA KRISHNA RAO) PAID FINANCE CHARGES TO CITY CORPORATION FINANCE OF 2,13,377/- AND RELIANCE CAPITAL OF 7,99,399/-, TATA FINANCE OF 35,54,624/-, BUT NOT DEDUCTED ANY TDS ON SUCH PAYMENTS. THEREFORE, ASSESSING OFFICER HAS DISALLOWED THE ENTIRE PAYMENTS MADE TO THE THREE PARTIES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3 . ON APPEAL, LD. CIT(A) BY FOLLOWING THE DECISION OF THE SPECIAL BENCH, ITAT VISAKHAPATNAM IN THE CASE OF M/S . MERILYN SHIPPING & TRANSPORTS VS. ACIT (136 ITD 23) DIRECTED THE ASSESSING OFFICER THAT IF THE AMOUNTS ALREADY PAID BEFORE 31 ST MARCH, THE SAME MAY BE DISALLOWED AND IF THE AMOUNTS PAID AFTER 31 ST MARCH, THE SAME HAS TO BE ALLOWED. WITH THIS OBSERVATION, LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO WORK OUT THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED HEREUNDER:- 8.2 HERE IT IS IMPORTANT TO DISCUSS THE APPLICABILITY OF SECTION 40(A)(IA) TO THE FACTS OF THE CASE. IF AMOUNT IS ACTUALLY PAID AND TAX IS NOT DEDUCTED UNDER THE ABOVE SECTION, THE SECTION 40(A)(IA) IS NOT APPLICABLE. AS PER THE DECISION IN THE CASE OF MERLYN SHIPPING & TRANSPORT LIMITED 136 ITD 23 (SC); 146 TTJ 1 (VIZAG) THAT AS SECTION 40(A)(IA) REFERS TO AMOUNT PAYABLE ONLY THE OUTSTANDING AMOUNT OR THE PROVISION FOR EXPENSES AS OF 31 ST MARCH (AND NOT THE AMOUNT ALREADY PAID DURING THE YEAR) IS LIABLE FOR DISALLOWANCE IF TDS IS NOT DEDUCTED. FURTHER, IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES PVT. LTD., 357 ITR 642 (ALL.), THE ALLAHABAD HIGH COURT HELD THAT SECTION 40(A)(IA) REFERS TO AMOUNT PAYABLE ONLY THE OUTSTANDING AMOUNT OR THE PROVISIONS FOR EXPENSE AS OF 31 ST MARCH (AND NOT THE AMOUNT ALREADY PAID DURING THE YEAR) IS LIABLE FOR DISALLOWANCE IF TDS IS NOT DEDUCTED AND FURTHER HELD THAT ABOVE SECTION IS NOT APPLICABLE, FOR THE AMOUNTS PAID BEFORE 31 ST MARCH, LATER WHEN THE DEPT. FILED A SLP AGAINST THE HIGH COURT ORDER IN SUPREME COURT OF INDIA, THE SUPREME COURT DISMISSED THE SLP FILED BY THE DEPARTMENT. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO WORK OUT 40(A)(IA) ADDITION BASED ON PAYABLE. 3 ITA NO.211/VIZ/2015 (GUDE VENKATA KRISHNA RAO) 4. ON BEING AGGRIEVED, THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. THE DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER, WHEREAS LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A) AND ALSO PLACED RELIANCE ON THE ORDER OF SPECIAL BENCH, ITAT, VISAKHAPATNAM IN THE CASE OF M/S.MERILYN SHIPPING & TRANSPORTS (SUPRA). 6 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 7 . THE ONLY ISSUE INVOLVED IN THIS APPEAL IS DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. WE FIND THAT THE VERY SAME ISSUE HAS BEEN CONSIDERED BY THE SPECIAL BENCH, ITAT, VISAKHAPATNAM IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA), WHEREIN IT HAS BEEN HELD AS UNDER:- WHEN S. 40(A)(IA) WAS PROPOSED TO BE INSERTED BY THE FINANCE BILL 2004, IT APPLIED TO ANY AMOUNT CREDITED OR PAID. HOWEVER, WHEN ENACTED BY THE FINANCE ACT 2004, IT APPLIED ONLY TO AMOUNT PAYABLE. THE WORDS CREDITED/ PAID AND PAYABLE HAVE DIFFERENT CONNOTATIONS AND THE LATTER REFERS TO AN AMOUNT WHICH IS UNPAID. THE CHANGE IN LANGUAGE BETWEEN THE BILL AND THE ACT IS CONSCIOUS AND WITH A PURPOSE . THE LEGISLATIVE INTENT IS CLEAR THAT ONLY THE OUTSTANDING AMOUNT OR THE PROVISION FOR EXPENSE (AND NOT THE AMOUNT ALREADY PAID) IS LIABLE FOR DISALLOWANCE IF TDS IS NOT DEDUCTED. ALSO, S. 40(A)(IA) CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN GENUINE AND ADMISSIBLE EXPENSES CAN BE DISALLOWED FOR WANT OF TDS. A LEGAL FICTION HAS TO BE LIMITED TO THE AREA FOR WHICH IT IS CREATED. CONSEQUENTLY, S. 40(A)(IA) CAN APPLY ONLY TO EXPENDITURE WHICH IS PAYABLE AS OF 31ST MARCH AND DOES NOT APPLY TO EXPENDITURE WHICH HAS BEEN ALREADY PAID DURING THE YEAR. 8 . IN VIEW OF THE AFORESAID DECISION OF THE SPECIAL BENCH, ITAT VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), WE 4 ITA NO.211/VIZ/2015 (GUDE VENKATA KRISHNA RAO) FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF APRIL, 2017. SD/- SD/- (G. MANJUNATHA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 ST APRIL, 2017. VR/- COPY TO: 1. THE ASSESSEE - SRI GUDE VENKATA KRISHNA RAO, D.NO. 4-2- 17/8, 18 TH LANE, CHANDRAMOULI NAGAR, GUNTUR. 2. THE REVENUE - ACIT, CIRCLE-2(1), GUNTUR. 3. THE PCIT, GUNTUR. 4. THE CIT(A)-1, GUNTUR. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BY ORDER 5 ITA NO.211/VIZ/2015 (GUDE VENKATA KRISHNA RAO)