INDOCAP GENERAL INDUSTRIES, MUMBAI V. ITO 20(1)-3, MUMBAI

ITA 220/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48674 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 09-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 08-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VANDANA SAGAR
• Assessee Lawyers: BIKASH KUMAR BOGI
• Keywords: Retrospective amendment
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 220/MUM/2010 (ASSESSMENT YEAR: 2005-06) M/S. INDOCAP GENERAL INDUSTRIES INCOME TAX OFFICER - 20(1)(3) 14, SARVODAYA IND. ESTATE ROOM NO. 607, 6TH FLOOR MAHAKALI CAVS ROAD, ANDHERI (E) VS. PIRAMAL CHAMBER, PAREL MUMBAI 400093 MUMBAI 400012 PAN - AAAFI 7220 E APPELLANT RESPONDENT APPELLANT BY: SHRI BIKASH KUMAR BOGI RESPONDENT BY: SMT. VANDANA SAGAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XXX1, MUMBAI DATED 28.10.2009. THE ONLY ISSUE RAISED IN 6 GROUNDS IS WITH REFERENCE TO DISALLOWANCE OF A SUM OF ` 3,74,855/- PAID AS LABOUR CHARGES UNDER SECTION 40A(IA). 2. BRIEFLY STATED, AS ASSESSEE PAID LABOUR CHARGES, W HICH WERE CREDITED IN THE BOOKS OF ACCOUNT ON 31 ST MARCH 2005 EVENTHOUGH THE BILLS WERE DATED PRIOR TO THAT AND THE AMOUNT OF THE SAID LABOUR CHARGES WERE DEDUCTED AS PER THE PROVISIONS AND PAID. THE TOTAL LABOUR CHARGES PAID WERE TO THE TUNE OF ` 5,70,479/-. IT IS ASSESSING OFFICERS CONTENTION TH AT THE ENTIRE AMOUNT WAS PAID TO M/S. APURVA PRINT INDUSTRIES P. LTD., WHICH IS A SISTER CONCERN AND THE BILLS WERE FOR THE PERIOD 02.04.200 4 TO 25.03.2005 AND ASSESSEE SHOULD HAVE DEDUCTED TAX AS AND WHEN THE B ILLS WERE RAISED AND SINCE ASSESSEE HAS NOT PAID TAX AS PER PROVISIONS O F SECTION 40A(IA) THE ENTIRE AMOUNT WAS TO BE DISALLOWED. THE CIT(A), HOWEVER, E XAMINED ASSESSEES CONTENTIONS AND ALLOWED THE AMOUNTS PAID PERTAINING TO THE PAYMENTS OF ITA NO. 220/MUM/2010 M/S. INDOCAP GENERAL INDUSTRIES 2 MARCH DEDUCTED AND PAID IN THE MONTH OF MARCH. HOWE VER, THE CIT(A) HAS NOT ALLOWED THE PAYMENTS PERTAINING TO EARLIER MONT HS STATING THAT THE AMOUNTS WERE NOT PAID WITHIN THE DUE DATES BEFORE T HE END OF THE PREVIOUS YEAR. HE CONFIRMED AN AMOUNT OF ` 3,74,855/-. 3. IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT T HE ENTIRE AMOUNT PAID TO M/S. APURVA PRINT INDUSTRIES P. LTD. WERE OUTSTANDING AS ON 31.03.2005 AND WAS CREDITED TO THE PARTY ON THAT DA TE AND SINCE EACH BILL WAS LESS THAN ` 20,000/- PROVISIONS OF SECTION 196C ARE STRICTLY NO T APPLICABLE BUT STILL THE ASSESSEE HAS DEDUCTED THE AMOUNTS AND PAID THE AMOUNT BEFORE FILING THE RETURN. THE LEARNED COUNSE L REFERRED TO THE FACTS AND THEN SUBMITTED THAT THE HON'BLE ITAT AHMEDABAD BENCH IN THE CASE OF KANUBHAI RAMJIBHAI VS. ITO 49 DTR (AHD) (TRIB) 70 C ONSIDERED THE ISSUE OF TAX DEDUCTION ON CONTRACTUAL PAYMENTS AND ALLOWED T HE PAYMENTS IF THE TDS WERE DEDUCTED AND PAID BEFORE THE DUE DATE OF FILIN G OF RETURN HOLDING THAT AMENDMENT BROUGHT BY FINANCE ACT, 2010 IS REMEDIAL IN NATURE AND IS APPLICABLE RETROSPECTIVELY W.E.F. 01.04.2005. HE FU RTHER SUBMITTED THAT THE HON'BLE ITAT MUMBAI B BENCH IN THE CASE OF BAPUSA HEB NANASAHEB DHUMAL VS. ACIT 43 DTR (MUM) (TRIB) 374 CONSIDERED THE PROVISIONS OF SECTION 194C AND HELD THAT ON SIMILAR FACTS PROVISI ONS OF CHAPTER XVII ARE RELEVANT ONLY FOR ASCERTAINING THE DEDUCTIBILITY OF TAX AT SOURCE AND NOT FOR THE ACTUAL DEDUCTION AND THEREFORE SINCE THE ASSESS EE HAS DEDUCTED TAX IN THE LAST MONTH OF THE PREVIOUS YEAR AND DEPOSITED BEFORE THE DUE DATE FOR FILING OF RETURN, THIS ITSELF IS NOT COVERED UNDER THE CLAUSE (A) OF SECTION 40A(IA). 4. THE LEARNED D.R., HOWEVER, RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A). 5. WE HAVE PERUSED THE ISSUE AND EXAMINED THE CONTENTI ONS. THERE IS NO DENIAL OF THE FACT THAT THE ASSESSEE HAS DEBITED THE TOTAL AMOUNT OF ` 5,70,479/- TO VARIOUS PARTIES EVENTHOUGH AN AMOUNT OF ` 3,76,941/- ITA NO. 220/MUM/2010 M/S. INDOCAP GENERAL INDUSTRIES 3 PERTAINS TO M/S. APURVA PRINT INDUSTRIES P. LTD. TH E A.O. DISALLOWED THE ENTIRE AMOUNT PAID BUT THE CIT(A), AFTER EXAMINING THE FACTS, ALLOWED THE BALANCE OF THE AMOUNT BUT CONFIRMED THE DISALLOWANC E ON THE PAYMENT MADE TO THE ABOVE CONCERN ON THE PRETEXT THAT THE ASSESS EE HAS NOT DEDUCTED TDS AS PER PROVISIONS OF SECTION 194C AND NOT PAID THE SAME AS REQUIRED UNDER SECTION 40A(IA). THEREFORE, HE CONFIRMED THE DISALL OWANCE. THERE IS NO DISPUTE WITH REFERENCE TO DEDUCTION OF TAX AND PAYM ENT OF TDS BEFORE FILING THE RETURN. SINCE THE BILLS WERE RAISED IN THE COUR SE OF WHOLE YEAR THE A.O. AND THE CIT(A)S CONTENTION WAS THAT THE ASSESSEE S HOULD HAVE DEDUCTED THE TAX AS AND WHEN THE BILLS WERE RECEIVED. IT IS THE CONTENTION OF THE ASSESSEE THAT THESE AMOUNTS WERE PAID ONLY IN THE MONTH OF M ARCH AND THE ENTIRE TDS WAS DEPOSITED ON OR BEFORE 31.03.2005 AND PAID SUBSEQUENTLY ON 28.05.2005 THEREFORE, NO DISALLOWANCE CAN BE MADE U NDER SECTION 40A(IA). 6. IN THE CASE OF KANUBHAI RAMJIBHAI VS. ITO (SUPRA) T HE FACTS ARE SIMILAR TO THE ASSESSEE WHERE THE A.O. DISALLOWED T HE PAYMENTS UNDER SECTION 194C WHICH WAS CREDITED IN RESPECTIVE DATES DURING THE YEAR BUT TDS WAS MADE SUBSEQUENTLY AND PAID BEFORE FILING ON RETURN. ON THESE FACTS, LEGAL PROVISIONS WERE EXAMINED AND HELD AS U NDER: - THE AMENDMENTS BROUGHT OUT IN S. 40(A)(IA) FROM TI ME-TO-TIME WERE CLARIFICATORY AND WHEN AN AMENDMENT IS DECLARATORY AND CLARIFICATORY IN NATURE, THE PRESUMPTION AGAINST ITS RETROSPECTIV ITY IS NOT APPLICABLE AND AMENDMENTS OF THIS KIND ONLY DECLARE. IT IS NO DOUBT TRUE THAT, ORDINARILY, A STATUTE, AND PARTICULARLY WHEN THE SA ME HAS BEEN MADE APPLICABLE WITH EFFECT FROM A PARTICULAR DATE SHOUL D BE CONSTRUED PROSPECTIVELY AND NOT RETROSPECTIVELY. BUT THIS PRI NCIPLE WILL NOT BE APPLICABLE IN A CASE WHERE THE PROVISION CONSTRUED IS MERELY EXPLANATORY, CLARIFICATORY OR DECLARATORY. IT CANNO T BE DISPUTED THAT THE OBJECT OF THE EXPLANATION IS TO EXPLAIN THE MEA NING AND INTENDMENT OF THE ACT ITSELF. THE PROVISIONS OF S. 40(A)(IA) AS AMENDED BY THE FINANCE ACT, 2010 W.E.F. 1 ST APRIL, 2010,L WHICH HAS NEWLY BEEN INSERTED BY THE FINANCE (NO. 2) ACT, 2004, W.E .F. 1 ST APRIL, 2005 TO S. 40 IS REMEDIAL IN NATURE, DESIGNED TO ELIMINA TE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE TAXPAYERS AND WHICH MADE THE PROVISION UNWORKABLE OR UNJUST I N A SPECIFIC SITUATION, AND IS OF CLARIFICATORY NATURE AND, THER EFORE, HAS TO BE ITA NO. 220/MUM/2010 M/S. INDOCAP GENERAL INDUSTRIES 4 TREATED AS RETROSPECTIVE W.E.F. 1 ST APRIL, 2005, THE DATE ON WHICH S.40(A)(IA) HAS BEEN INSERTED BY THE FINANCE (NO. 2 ) ACT, 2004. 7. SIMILARLY, IN THE CASE OF BAPUSAHEB NANASAHEB DHUMA L VS. ACIT (SUPRA) ON SIMILAR FACTS AS THAT OF ASSESSEE, THE I TAT MUMBAI B BENCH HELD AS UNDER: - THE CONDITION FOR ALLOWABILITY OF THE DEDUCTION I S PRESCRIBED UNDER S. 40(A)(IA) ITSELF AND PROVISIONS OF CHAPTER XVII AN D S. 194C UNDER CHAPTER XVII-B AT THAT RELEVANT POINT OF TIME ARE R ELEVANT ONLY FOR THE PURPOSES OF ASCERTAINING THE DEDUCTIBILITY OF THE T AX ON THE PAYMENT. ONCE, THE NATURE OF PAYMENT IS FALLING UNDER THE P ROVISIONS OF CHAPTER XVII/VII-B THEN THE DISALLOWANCE UNDER S. 4 0(A)(IA) SHALL BE AS PER THE CONDITION AS PROVIDED UNDER THIS SECTION ITSELF. THE PROVISO TO S. 40(A)(IA) MAKES IT FURTHER CLEAR THAT EVEN IN THE CASE WHEN THE TAX HAS BEEN DEDUCTIBLE AS PER THE PROVISIONS OF CHAPTER XVII BUT DEDUCTED IN THE SUBSEQUENT YEAR OR DEDUCTED DURING THE LAST MONTH OF PREVIOUS YEAR BUT PAID AFTER THE DUE DATE UNDER S. 139(1) OR DEDUCTED DURING THE OTHER MONTH OF THE PREVIOUS Y EAR EXCEPT LAST MONTH BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR THEN THE SAID SUM SHALL NOT BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR BUT ALLOWED IN THE PREVIOUS YEAR IN WHICH THE SAID TAX HAS BEEN PAID. IF THE CONDITION OF DEDUCTION AND PA YMENT PRESCRIBED UNDER CHAPTER XVII/XVII-B ARE APPLICABLE FOR DISALL OWANCE OF THE DEDUCTION UNDER S. 40(A)(IA) THEN THE PROVISIONS O F S. 40(A)(IA) WILL BE RENDERED AS MEANINGLESS, ABSURDITY AND OTIOSE. AS PER THE PROVISIONS OF S. 40(A)(IA) THE DEDUCTION IS DISALLO WED ONLY IN THE CASE WHEN EITHER NO TAX WAS DEDUCTED OR IT WAS NOT PAID AFTER DEDUCTION. BUT WHEN THE TAX IS DEDUCTED MAY BE BELATEDLY AND D EPOSITED BELATEDLY THEN DEDUCTION IS ALLOWABLE IN THE PREVIO US YEAR IN WHICH IT WAS SO DEPOSITED. THEREFORE, IF THE PROVISIONS OF S. 194C WITH RESPECT TO THE TIME OF DEDUCTION AND PAYMENTS ARE APPLIED FOR THE DISALLOWANCE UNDER S. 40(A)(IA) THEN THERE WILL BE NO PURPOSE OR OBJECT FOR PROVIDING THE CERTAIN CONDITIONS OF ACTU AL DEDUCTION OF TAX AND PAYMENT OF TAX UNDER S. 40(A)(IA). THE PROVISI ONS OF CHAPTER XVII ARE RELEVANT ONLY FOR ASCERTAINING THE DEDUCTIBILIT Y OF THE TAX AT SOURCE AND NOT FOR THE ACTUAL DEDUCTION AND PAYMENT FOR ATTRACTING THE PROVISIONS OF S. 40(A)(IA). SINCE IN THE CASE IN HAND WHEN THE ASSESSEE HAD DEDUCTED THE TAX IN THE LAST MONTH OF THE PREVIOUS YEAR I.E., MARCH 2005 AND DEPOSITED THE SAME BEFORE THE DUE DATE OF FILING OF THE RETUNE UNDER S. 139(1) THEN IT IS COVERED UN DER CL. A OF S. 40(A)(IA). THEREFORE WHEN THE ASSESSEES CASE COVER ED UNDER THE MAIN PROVISIONS OF EXISTING LAW THEN ONE NEED NOT TO GO TO THE ISSUE OF PROSPECTIVE OR RETROSPECTIVE EFFECT OF THE AMENDMEN T IN THE PROVISIONS ITA NO. 220/MUM/2010 M/S. INDOCAP GENERAL INDUSTRIES 5 BY THE FINANCE ACT, 2010. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE CLAIM OF THE DEDU CTION OF THE ASSESSEE IS ALLOWED. 8. IN VIEW OF THE LEGAL PRINCIPLES CONSIDERED IN THE A BOVE ORDERS, WE ARE OF THE OPINION THAT NO DISALLOWANCE UNDER SECTI ON 40(A)(IA) CAN BE MADE WHEN THE ASSESSEE HAS DEDUCTED THE TAX IN THE LAST MONTH OF THE PREVIOUS YEAR, I.E. MARCH 2005 AND DEPOSITED THE SAME BEFORE THE DUE DATE FOR FILING THE RETURN UNDER SECTION 139(1). IN VIEW OF THIS, A SSESSEES GROUNDS ARE CONSIDERED ALLOWED. THE A.O. IS DIRECTED TO ALLOW T HE AMOUNT. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 27 TH APRIL 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXI, MUMBAI 4. THE CIT XX, MUMBAI CITY 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.