M/s. Kalyani Carpenter Special Steels Ltd., V. Assistant Commissioner of Income-tax,

ITA 2144/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8444 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 10-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Keywords: Non-deduction of tax; Revenue expenditure; Capital expenditure
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.2144/PN/2013 (ASSESSMENT YEAR : 2010-11) KALYANI CARPENTER SPECIAL STEELS LTD., 72-76, MUNDHWA, PUNE 411 036. PAN : AABCK1779L . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE- 11(1), PUNE. . RESPONDENT ASSESSEE BY : MR. NIKHIL PATHAK DEPARTMENT BY : MR. P. S. NAIK DATE OF HEARING : 20-10-2014 DATE OF PRONOUNCEMENT : 31-10-2014 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)-I, PUNE DA TED 18.09.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 01.02.2013 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2010-11. 2. IN THIS APPEAL, ALTHOUGH ASSESSEE HAS RAISED MUL TIPLE GROUNDS OF APPEAL BUT ESSENTIALLY TWO ISSUES HAVE BEEN RAISED. FIRSTLY, ASSESSEE IS AGGRIEVED WITH THE ACTION OF THE CIT(A) IN CONFIRMI NG THE DISALLOWANCE OF EXPENDITURE OF RS.4,21,028/- MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 40(A)(IA) OF THE ACT. SECONDLY, ASSESSEE I S AGGRIEVED WITH THE ACTION OF THE CIT(A) IN HOLDING THAT EXPENDITURE OF RS.1,8 1,25,541/- INCURRED ON REPLACEMENT OF ROLLING MILL ROLLS IS A CAPITAL EXPE NDITURE AS AGAINST THE REVENUE EXPENDITURE CLAIMED BY THE ASSESSEE. ON BOTH THE I SSUES, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THEY ARE COVERED BY THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR EARLIER ASSESSMENT Y EARS. ITA NO.2144/PN/2013 3. IN SO FAR AS THE DISALLOWANCE OF RS.4,21,028/- M ADE BY INVOKING SECTION 40(A)(IA) OF THE ACT IS CONCERNED, ASSESSEE POINTED OUT THAT THE SAID DISALLOWANCE IS UNSUSTAINABLE BECAUSE IT IS A CASE OF SHORT DEDUCTION OF TAX AT SOURCE AND NOT A CASE OF NON-DEDUCTION OF TAX AT SO URCE. IN THIS CONTEXT, IT HAS BEEN POINTED OUT THAT THERE WAS A SHORTFALL OF RS.4 5,426/- IN TAX DEDUCTED AT SOURCE U/S 194-I FROM PAYMENT OF RENT OF RS.5,51,59 1/- MADE BY THE ASSESSEE. THE RENT ATTRIBUTABLE TO THE SHORTFALL IN DEDUCTION OF TAX WAS WORKED OUT AT RS.4,21,028/-, WHICH WAS ACCORDINGLY DISALLOWED BY THE ASSESSING OFFICER BY INVOKING SECTION 40(A)(IA) OF THE ACT ON A PRO-RATA BASIS. THE CIT(A) HAS ALSO AFFIRMED THE SAID ACTION OF THE ASSESSING OFFICER. 4. THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSE SSMENT YEAR 2007-08 VIDE ITA NO.1577/PN/2011 & OTHERS DATED 12.03.2014 HAS DEALT WITH A SIMILAR CONTROVERSY AND HAS DELETED THE DISALLOWANCE MADE U /S 40(A)(IA) OF THE ACT IN RESPECT OF EXPENDITURE CORRESPONDING TO SHORT DEDUC TION OF TAX AT SOURCE. THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNAL DA TED 12.03.2014 (SUPRA) IS AS UNDER :- 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D AN IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF BHARAT F ORGE LTD. VS. ADDL.CIT. WE FIND THE TRIBUNAL VIDE ITA NO.340/PN/2012 ORDER DATED 30-09-2013 FOR A.Y. 2007-08 HAD DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS. OSTENSIBLY, THE POINT MADE OUT BY THE ASSESSEE, IS TO THE EFFECT THAT SECTION 40(A)(IA) OF THE ACT CAN BE INVOKED ONLY IN CASES WHERE THERE IS A NON-DEDUCTION OF TAX AT SOURCE AND NOT IN CASE S WHERE THERE IS SHORT-DEDUCTION OF TAX AT SOURCE. IN THE PRESENT CA SE, THE CHARGE MADE BY THE ASSESSING OFFICER IS THAT ASSESSEE HAS NOT D EDUCTED TAX AT APPROPRIATE RATE UNDER SECTION 194C OF THE ACT. WIT HOUT GOING INTO THE MERITS OF THE RIVAL CLAIMS, FOR THE PRESENT, IT IS SUFFICIENT TO OBSERVE THAT THE ASSESSEE HAS BEEN HELD TO BE AN ASSESSEE IN DEF AULT FOR THE REASON THAT IT DEDUCTED TAX AT SOURCE ON PAYMENTS M ADE BY WAY OF DIE REPAIRS AND MOTOR REWINDING EXPENSES WHICH WAS LOWE R THAN THE RATE PRESCRIBED IN LAW, AS PER THE VIEW OF THE ASSESSING OFFICER. THE CONTROVERSY IS AS TO WHETHER IN SUCH A SITUATION, P ROVISIONS OF SECTION 40(A)(IA) OF THE ACT CAN BE ATTRACTED SO AS TO DISA LLOW THE ITA NO.2144/PN/2013 CORRESPONDING EXPENDITURE, WHICH ACCORDING TO THE A SSESSING OFFICER HAS SUFFERED DEDUCTION AT LOWER RATE OF TAX AT SOUR CE. 18. TO ANSWER THE AFORESAID CONTROVERSY, ONE MAY N OTICE THE CRUCIAL EXPRESSION IN SECTION 40(A)(IA) OF THE ACT WHICH PRESCRIBES THAT THE EXPENDITURE SPECIFIED THEREIN SHALL BE DISALLOW ED ON WHICH TAX IS 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 IN SUBSECTION (1) OF SECTION 139. C LEARLY, THE PHRASEOLOGY TO SECTION 40(A)(IA) OF THE ACT SEEKS T O DISALLOW AN EXPENDITURE ONLY IN SITUATIONS WHERE THE TAX IS DED UCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION H AS NOT BEEN PAID AS PER THE PERIOD PRESCRIBED THEREIN. THE PHRASEOLO GY USED IN SECTION 40(A)(IA) OF THE ACT CLEARLY REMOVES FROM ITS PURVI EW CASES WHERE TAX HAS BEEN SHORT-DEDUCTED. THEREFORE, THE INFERENCE D RAWN BY THE CIT(A) IS BORNE OUT OF A PLAIN READING OF SECTION 4 0(A)(IA) OF THE ACT. MOREOVER, THE DECISIONS OF THE PUNE BENCH OF THE TR IBUNAL IN THE CASE OF SANDVIK ASIA LTD. VS. JCIT 146 TTJ 644 (PUNE); A ND, ALSO THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF CHANDAB HOY & JASSOBHOY VIDE ITA NO.20/MUM?2010 DATED 08.07.2011 SUPPORT THE AFORESAID PREMISE. THUS, IN THE PRESENT CASE THE PR OVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT ATTRACTED AS THIS IS A CASE OF SHORT- DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF TH E ACT AND NOT A CASE OF NON-DEDUCTION OF TAX AT SOURCE. THE DISALLO WANCE OUT OF DIE REPAIRS AND MOTOR REWINDING EXPENSES IS HEREBY SET- ASIDE. 13.1 RESPECTFULLY FOLLOWING THE DECISION OF THE TRI BUNAL IN THE CASE OF BHARAT FORGE LTD. (SUPRA) AND IN ABSENCE OF ANY CON TRARY MATERIAL BROUGHT TO OUR NOTICE, WE SET-ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE U /S.40(A)(IA) IN RESPECT OF SHORT DEDUCTION OF TAX. GROUNDS OF APPEAL NO.1.1 A ND 1.2 BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 5. FOLLOWING THE AFORESAID PRECEDENT IN THE ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2007-08 AND IN THE ABSENCE OF ANY C ONTRARY DECISION, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AS SESSING OFFICER TO DELETE THE DISALLOWANCE OF RS.4,21,028/- MADE BY INVOKING SECT ION 40(A)(IA) OF THE ACT ON ACCOUNT OF SHORTFALL IN THE DEDUCTION OF TAX AT SOU RCE. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS. 6. IN SO FAR AS THE SECOND ISSUE RELATING TO THE EX PENDITURE INCURRED ON REPLACEMENT OF ROLLING MILL ROLLS IS CONCERNED, THE SAID ISSUE STANDS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL VIDE ITS ORDER DATED 27.08.2012 FOR ASSESSMENT YEAR 2006-07 IN ITA NO.1131/PN/2010. IN ASSESSMENT YEAR 2006-07, IN ASSESSEES OWN CASE, THE TRIBUNAL HELD THAT SUCH EXPENDITURE IS LIABLE TO BE TREATED AS A CAPITAL EXPENDITURE. S IMILAR DECISION HAS ALSO BEEN ITA NO.2144/PN/2013 RENDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 VIDE ITS ORDER DATED 12.03.2014 (SUPRA). I N ORDER TO MAINTAIN CONSISTENCY, FOLLOWING THE DECISIONS OF THE TRIBUNA L IN ASSESSEES OWN CASE, THE ACTION OF THE CIT(A) IN HOLDING THAT THE EXPEND ITURE INCURRED ON REPLACEMENT OF ROLLING MILL ROLLS IS A CAPITAL EXP ENDITURE IS HEREBY AFFIRMED. WE HOLD SO. THUS, ON THIS GROUND ASSESSEE FAILS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2014. SD/- SD/- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 31 ST OCTOBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, 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