M/s. Rajendra Stores, Hubli V. ITO, Shimoga

ITA 215/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9423 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 13-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: V SRINIVASAN
• Keywords: TDS

Judgement Text

PAGE 1 OF 7 ITA NO.215/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N L KALRA, A.M. AND SHRI GEORGE GEORGE K, J.M. ITA NO.215/BANG/2009 (ASST. YEAR 2005-06) M/S RAJENDRA STORES, ANAND BHAVAN BUILDING, STATION ROAD, HUBLI-580 020. - APPELLANT VS THE INCOME TAX OFFICER, WARD-1(3), HUBLI. - RESPONDENT APPELLANT BY : SHRI V SRINIVASAN RESPONDENT BY : SMT. V S SREELEKHA O R D E R PER N L KALRA : THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF LEARNED CIT(A), HUBLI DATED 18TH NOVEMBER, 2008. 2. THE FIRST GRIEVANCE OF THE APPELLANT IS THAT TH E LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOW ANCE OF RS.54,804/- IN RESPECT OF INTEREST PAID TO THE PART NERS IN THEIR REPRESENTATIVE CAPACITY ON THE GROUND THAT THE APPEL LANT HAS NOT DEDUCTED TAX BEFORE MAKING THE SAID CREDIT. PAGE 2 OF 7 ITA NO.215/BANG/2009 2 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CRE DITED INTEREST TO THE ACCOUNTS OF THE FOLLOWING PARTNERS AS UNDER:- 1) N K THAKIKAR (HUF) RS.27,402/- 2) MASTER ROHIT THAKKAR (MINOR) RS.20,644/- 3) MASTER YOGESHN THAKKAR (MINOR) RS.6,001/- NO TDS WAS DEDUCTED IN RESPECT OF CREDIT OF ABOVE I NTEREST. THE AO REQUIRED THE ASSESSEE TO SHOW-CAUSE AS TO WH Y THE EXPENDITURE OF INTEREST BE NOT DISALLOWED U/S 40A(I A). BEFORE THE AO IT WAS CONTENDED THAT THE DEPOSITS HAVE BEEN MADE BY PARTNER SHRIN K THAKKAR IN REPRESENTATIVE CAPACITY. TDS PROVISIONS ARE NOT APPLICABLE TO INTEREST PAID ON P ARTNERS CAPACITY. SINCE THE ASSESSEE WAS NOT REQUIRED TO DE DUCT TAX AT SOURCE AND THEREFORE, INTEREST CANNOT BE DISALLOWED U/S 40A(IA). THE AO DID NOT ACCEPT THE ARGUMENTS OF THE ASSESSEE . ACCORDING TO THE ASSESSING OFFICER, SHRI N K THAKKA R AS PARTNER IS SEPARATE AND DISTINCT FROM N K THAKKAR (HUF), MA STER ROHIT THAKKAR AND MASTAR YOGESH N THAKKAR. THE AO THEREF ORE DISALLOWED THE INTEREST OF RS.54,804/-. 2.2 THE LEARNED CIT(A) HELD THAT THERE IS NO PROVI SION FOR NOT DEDUCTING THE TAX IF A PARTNER IN A REPRESE NTATIVE CAPACITY MAKES DEPOSITS IN THE FIRM. THEREFORE, THE ADDITION OF RS.54,804/- WAS CONFIRMED. PAGE 3 OF 7 ITA NO.215/BANG/2009 3 2.3 BEFORE US, THE LEARNED AR DREW OUR ATTENTION T O SECTION 194A(3)(IV). AS PER THIS PROVISION, TAX IS NOT REQUIRED TO BE DEDUCTED AT SOURCE IF INTEREST IS CREDITED OR PA ID BY A FIRM TO A PARTNER OF THE FIRM. THE LEARNED AR SUBMITTED TH AT THE HUF OF SHRI N K THAKKAR IS REPRESENTED BY SHRI N K THAKK AR AND SHRI N K THAKKAR IS A PARTNER IN THE FIRM. SHRI N K THAKKAR HAS MADE DEPOSITS IN THE NAME OF THE MINOR SONS. THUS, THE INTEREST, WHICH IS BEING CREDITED BY THE FIRM, IS TO THE PARTN ER IN THE REPRESENTATIVE CAPACITY. HENCE, THE ASSESSEE FIRM W AS NOT LIABLE TO DEDUCT TAX AT SOURCE. WHEN THE TAX WAS NOT REQ UIRED TO BE DEDUCTED THEN THE PROVISIONS OF SECTION 40A CANNOT BE INVOKED. 2.4 ON THE OTHER HAND, THE LEARNED DR SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. 2.5 WE HAVE HEARD BOTH THE PARTIES. AS PER THE PARTNERSHIP ACT, AN INDIVIDUAL CAN BE A PARTNER. T HE PARTNERSHIP ACT DOES NOT RECOGNIZE THE PARTNER IN A REPRESENTAT IVE CAPACITY. HENCE, IF AN ASSESSEE IS A PARTNER IN A REPRESENTAT IVE CAPACITY THEN FOR PARTNERSHIP ACT, THE INDIVIDUAL IS A PARTN ER. HOWEVER, THE CONVERSE IS NOT TRUE. EXPLANATION TO SECTION 40B HAS PROVIDED THAT IN CASE A PARTNER IS A PARTNER IN THE REPRESENTATIVE CAPACITY THEN INTEREST PAID TO THAT INDIVIDUAL IS NO T TO BE CONSIDERED AS INTEREST PAID TO THE PARTNER. IN THE INSTANT CASE, THE INTEREST PAID TO THE PARTIES REFERRED-ABOVE IS NOT AN INTEREST PAID TO THE PARTNER. PAGE 4 OF 7 ITA NO.215/BANG/2009 4 2.6 THE HON'BLE MADRAS HIGH COURT IN THE CASE OF I TO V ARIHANT TRUST AND OTHERS 214 ITR 306 HELD THAT IF THE TRUST HAS BEEN ASSESSED IN THE STATUS OF INDIVIDUAL THEN THE SAME STATUS IS TO BE ACCEPTED FOR THE PURPOSE OF SECTION 194A. THUS, THE INCOME, WHICH IS BEING ASSESSED IN THE STATUS O F HUF, IS TO BE ACCEPTED WHILE THE PERSON CONCERNED IS A PARTNER IN THE INDIVIDUAL CAPACITY. HENCE, THE ACTION OF THE LEARN ED CIT(A) IN CONFIRMING THE ADDITION OF RS.54,804/- IS UPHELD. 3. THE SECOND GRIEVANCE OF THE APPELLANT IS THAT T HE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOW ANCE OF RS.87,418/- BEING INTEREST PAID TO VARIOUS PERSONS ON ACCOUNT OF FAILURE OF THE APPELLANT TO DEDUCT TAX AT SOURCE. 3.1 BEFORE THE AO IT WAS CONTENDED THAT IN RESPECT OF INTEREST OF RS.87,418/- CREDITED TO VARIOUS PERSONS , THE ASSESSEE HAS OBTAINED FORM NO.15G FROM THE SAID PERSONS. IN VIEW OF OBTAINING FORM NO.15G, THE ASSESSEE WAS NOT REQUIRE D TO DEDUCT TAX AT SOURCE. THE AO WAS OF THE OPINION THAT THE PERSONS CONCERNED ARE RELATIVES OF THE PARTNERS AND THEREFO RE, IT WAS NOT DIFFICULT FOR THE ASSESSEE TO OBTAIN FORM NO.15G AT ANY TIME. IT IS TRUE THAT THE DATE OF DECLARATION MENTIONED BY TH E DECLARANT IS 31ST MARCH, 2005. HOWEVER, THE AO WAS OF THE OP INION THAT THESE WERE NOT OBTAINED ON 31ST MARCH, 2005. FOR A RRIVING AT SUCH A CONCLUSION, THE AO MENTIONED THAT THE ASSESS EE IS REQUIRED TO SUBMIT COPY OF FORM NO.15G TO THE COMMIS SIONER OR PAGE 5 OF 7 ITA NO.215/BANG/2009 5 CHIEF COMMISSIONER OF INCOME-TAX IN THE FIRST WEEK OF THE MONTH SUCCEEDING THE MONTH BY WHICH THE ACCOUNTING YE AR IS ENDED. THESE FORMS WERE NOT SUBMITTED TO THE CHIEF COMMISSIONER OR COMMISSIONER. THE LEARNED AO THERE FORE DISALLOWED THE INTEREST OF RS.87,418/-. 3.2 THE LEARNED CIT(A) OBSERVED THAT THE INTIMATIO N OF OBTAINING FORM NO.15G WAS NOT SUBMITTED TO THE CONC ERNED CCIT OR CIT BY THE ASSESSEE. IN ABSENCE OF ANY SUCH EVIDE NCE, IT CANNOT BE ACCEPTED THAT FORM NO.15G WAS OBTAINED BE FORE THE DUE DATE. 3.3 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE HAS FILED COPIES OF THE DECLARATION BEFORE THE AO. IT IS NOT DISPUTED BY THE AO THAT THE DATE MENTIONED IN FORM NO.15G IS 31ST MARCH, 2005. THE ASSESSEE HAS ESTABLISHED BEFORE THE AO THAT THE INCOME OF THE PERSONS WHO FURNISHED FORM N O.15G IS BELOW THE TAXABLE LIMIT. MOREOVER, THE ASSESSEE HA S FILED THE TAX AUDIT REPORT. THE AUDITOR HAS NOT POINTED OUT ANY OMISSION IN RESPECT OF DEDUCTING TAX AT SOURCE. THE AO COULD H AVE EXAMINED THE DECLARANT TO ESTABLISH THAT FORM NO.15G WAS NOT SIGNED ON THE DATE AS MENTIONED IN THE DECLARATION. HENCE, N ON SUBMISSION OF SUCH DECLARATION TO THE CIT OR CCIT CANNOT BE TA KEN AS AN EVIDENCE THAT THE DECLARANT HAS NOT SIGNED FORM NO. 15G AS ON 31ST MARCH, 2005. IN VIEW OF DECLARATIONS RECEIVED BY THE ASSESSEE, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT T AX AT SOURCE PAGE 6 OF 7 ITA NO.215/BANG/2009 6 AND THEREFORE, THE AMOUNT OF RS.87,418/- COULD NOT HAVE BEEN DISALLOWED U/S 40A. WE RELY ON THE DECISION OF THIS BENCH IN THE CASE OF M/S SHRI VENKATESHWARA STEEEL TRADERS IN IT A NO.721/BANG/2008 IN WHICH THE TRIBUNAL VIDE ORDER D ATED 12TH DECEMBER, 2008 UNDER IDENTICAL CIRCUMSTANCES DELETE D THE DISALLOWANCE U/S 40A(IA). HENCE, THE ADDITION OF RS .87,418/- IS DELETED. 4. THE THIRD GRIEVANCE OF THE APPELLANT IS THAT TH E LEARNED CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE D ISALLOWANCE OF RS.1,17,000/- IN RESPECT OF INTEREST PAID TO M/S JA LRAM ENTERPRISES. 4.1 THE AO HAS NOTICED THAT THE TAX DEDUCTED AT SOURCE IN RESPECT OF INTEREST CREDITED IN THE ACCOU NT OF M/S JALRAM ENTERPRISES HAS BEEN PAID ON 12TH MAY, 2005. SUCH TAX WAS REQUIRED TO BE PAID ON OR BEFORE 7TH APRIL, 200 5. THEREFORE, THE AO DISALLOWED THE SUM OF RS.1,17,000 /- U/S 40A. 4.2 WE HAVE HEARD BOTH THE PARTIES. SECTION 40A(I A) HAS BEEN AMENDED WITH EFFECT FROM 1/4/2005 BY THE FI NANCE ACT, 2008 TO PROVIDE THAT NO DISALLOWANCE SHOULD BE MADE IN CASE THE TAX DEDUCTED AT SOURCE HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF THE RETURN. IN THE INSTANT CASE, THIS CO NDITION STANDS SATISFIED. LOOKING TO THE AMENDMENT MADE IN SECTIO N 40A(IA), WE HOLD THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING A SUM OF RS.1,17,000/-. THE DISALLOWANCE MADE IS DEL ETED. PAGE 7 OF 7 ITA NO.215/BANG/2009 7 5. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13TH AUGUST, 2009 . SD/- SD/- (GEORGE GEORGE K) (N L KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED:13/8/2009 COPY TO :- 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT(A) CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR 6. GF 7. GF, ITAT, DELHI BENCH BY ORDER MSP/10/8/ ASSISTANT REGISTRAR, ITAT, BANGALORE.