DCIT (TDS) RG 2(1), MUMBAI V. MEGASAVE TRADING P.LTD, MUMBAI

ITA 2215/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92879 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR YOGESH KAMAT

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - B,BENCH , , BEFORE S/SH. JOGINDER S INGH,JUDICI AL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.22 15 /MUM/2013, / ASSESSMENT YEAR - 20 09 - 1 0 DCIT (TDS) - 2(1)ROOM NO.702, 7TH FLOOR,SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING CHARNI ROAD, MUMBAI - 400 002. VS M/S. MEGASAVE TRADING PVT. LTD. B/201, PRATIK INDUSTRIAL ESTATE, NEAR FORTIS HOSPITAL, GOREGAON LINK RD. NAHUR(W),MUM BAI - 51. PAN:AADCM 4672 L ( / A PPELLANT ) ( / RESPONDENT ) /ASSESS EE BY : NONE / REVENUE BY : DR. YOGESH KAMAT - DR / DATE OF HEARING : 18 - 0 6 - 2015 / DATE OF PRONOUNCEMENT : 18 - 06 - 20 15 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 26.12.2012 OF CIT(A) - 1 4 THE ASSESSI NG OFFICER(AO), HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACTS OF THE CASE AND DECIDING THE APPEAL OF THE ASSESSEE ON THE BASIS OF DECISION OF HON' BLE ITAT IN THE CASE OF M/S. PFIZER LTD. WHICH IS NOT ACCEPTED BY THE DEPARTMENT AND THE DEPARTMENT IS IN THE PROCESS OF FILING FURTHER APPEAL IN THE CASE OF M/S. PFIZER LTD. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING THE ASSESSEE'S CONTENTION THAT THE AMOUNT COVERED BY 'PROVISION FOR EXPENSES' WERE NOT CREDITED TO THE ACCOUNT OF ANY OF THE PAYEES BUT WAS CREDITED TO 'PROVISION FOR EXPENSES', THEREFORE TDS PROVISION WERE NOT APPLICABLE WITHOUT APPRECIATING THE PROVISIONS OF EXPLANATION (II) TO SECTION 194 I, WHICH READS AS UNDER: - ' WHEN ANY INCOME IS CREDITED TO ANY ACCOUNT, WHETHER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH I NCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY'. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E AMOUNT OF NON DEDUCTION OF TAX DETERMINED U/S. 201 (1) AND CONSEQUENTIAL INTEREST U/S. 201 (1A) BY HOLDING THAT NO TAXES REQUIRED TO BE DEDUCTED UNDER RESPECTIVE SECTIONS ON YEAR END PROVISION MADE FOR EXPENSES WITHOUT APPRECIATING THAT THE AO HAS DET ERMINED THE NON DEDUCTION BY DISCUSSING AT LENGTH VARIOUS ISSUES IN THE ORDER U/S. 201(1)/201(1A). 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE NON DEDUCTION OF TAX BY HOLDING THAT IN VIEW OF DISALLO WANCE U/S. 40(A)(IA), NO DEMAND CAN BE RAISED U/S. 201 (1) R.W.S 194 I OF THE I.T. ACT WITHOUT APPRECIATING THE INTENT & SPIRIT OF SECTION 40A(IA) VIS - A - VIS TDS PROVISIONS UNDER CHAPTER XVII OF THE ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACTS THAT DISALLOWANCE OF EXPENSES IN COMPUTATION OF TAXABLE INCOME IN ITA NO.2215/MUM/13 - MEGASAVE 2 ACCORDANCE TO PROVISIONS OF SECTION 40A9IA0 IS TEMPORARY, THE SAID EXPENSES BECOME ALLOWABLE IN NEXT ASSESSMENT YEAR IN WHI CH TDS ON SAID EXPENSES ARE PAID TO THE CREDIT OF GOVERNMENT. HOWEVER, TDS PROVISIONS PROVIDES FOR COLLECTING TAX ON INCOME OF THE DEDUCTEE. THEREFORE, THIS DISALLOWANCE BY ITSELF DOES NOT ABSOLVE THE ASSESSEE OF THE CONSEQUENCE FOR FAILURE TO DEDUCT AND P AY TAX UNDER ANY TDS PROVISIONS 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DEMAND OF RS.10,51 ,680/ - WITHOUT PROPERLY APPRECIATING THE FACTUAL & LEGAL MATRIX OF THE CASE AS CLEARLY BROUGHT OUT BY TH E A.O. IN ORDER U/S. 201 (1) & 201 (1A) OF THE I.T. ACT, 1961. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE INTEREST OF RS.2,52,403/ - LEVIED U/S. 201 (1A) ON THE ISSUE OF PROVISION OF EXPENSES AS THE DEMAND RAISED IN RESPECT OF NON DEDUCTION OF TDS ON THESE EXPENSES HAS BEEN DELETED BY HIM AND INTEREST DELETION IS CONSEQUENTIAL TO QUANTUM DELETION OF SHORT DEDUCTION WHICH IS THE SUBJECT MATTER OF FURTHER APPEAL. 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY AT THE TIME OF THE HEARING OF THE CASE OR THEREAFTER. 3. THE ORDER OF THE CIT(A) BEING ERRONEOUS BE SET ASIDE AND LD. A.O'S ORDER BE RESTORED. AS PER THE AO, INFORMATION WA S RECEIV ED THAT THE ASSESSEE - COMPANY HAD NOT COMPLIED WITH TDS PROVISIONS OF THE THE ACT AND ACCORDINGLY AN AMOUNT OF 46. 41 / - LACS WAS DISALLOWED U/S. 40(A)(IA) OF THE ACT.A NOTICE WAS ISSUED TO THE ASSESSEE DIRECTING IT TO PRODUCE DETAILS OF EXPENDITURE DISALLOW ED AND DETAILS OF TDS DEDUCTED AND DEPOSITED. AS PER AO , ASSESSEE DID NOT SUBMIT ANY REPLY IN THIS REGARD. HE TREATED THE ASSESSEE IN DEFAU L T AS P ER T H E PROV ISION OF S. 194 I OF THE ACT AND CALCULATED TDS PAYABLE U/S. 201 (1) AT RS.10.51 LACS AND INTEREST PA YABLE U/S. 201(1A) OF THE ACT @ 1% FOR A PERIOD OF 24 MONTHS AT RS. 2.25 LACS. THE AO FINALLY RAISED DEMAND OF RS. 13, 04, 083/ - , VIDE HIS ORDER DT.30.3.2011. 2. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE F IRST APPELLATE AUTHO RITY (FAA).BEFORE HIM, IT WAS CONTENDED THAT IT HAD MADE PROVISIONS OF EXPENSES (ADMINISTRATIVE EXPENS ES A ND PROF ESSIONAL FEES AMOUNTING TO RS. 46,64,129/ - DURING THE YEAR UNDER CONSIDERATION ) , THAT AM OUN T OF PROV ISION WAS CALCULATED ON ESTIMATE BASIS, THAT N O TAX WAS DED UCTED ON EXPENSES PROVIDED FOR, THAT THE DISPUTED AMOUNT WAS DISALLOWED AS PER THE PROV ISIONS OF S.40(A ) (IA) WHILE FILING THE RETU R N OF INCOME, THAT THE ACTUAL BILLS WERE RECEIVED AND PAYMENTS WERE MADE IN THE SUCCEEDING YEAR ,THAT THE AM OUN T FO R WHICH BILLS WERE REC EIVED WAS RS. 63.15 LACS, THAT THE TAX ON RS. 63. 15 / LAKHS WAS DEDUCTED AND PAID TO THE GOV ERNMENT DURING THE AY . 20 10 - 11, THAT WHILE FILING QUARTERLY TDS RETURNS THE ABOVE SAID AMOUNTS WERE CONSIDERED IN THE THIRD AND FOURTH QUARTER O F AY 2010 - 11, THAT DURING THE YEAR UNDER APPEAL IT HAD INCURRED A SUM OF RS. 4.17 CR ORES T OWARDS RENT , THAT IT HAD DEDUCTED DUE TDS AND DEPOSITED WITH GOV ERNMEN T, THAT THE AUDITORS HAD VERIFIED THE FACT AND HAD NOT GIVEN ANY ADVERSE COMMEN T IN THEIR AUDIT R EPORT, THAT IN COMPUTATION OF INCOME THE ASSESSEE HAD DISALLOWED THE PROV ISIONS OF EXPENSES AMOUNTING TO RS. 46.41 LACS, THAT THE ASSESSEE WAS NOT IN DEFAULT FOR NON - DEDUCTION OF TAX AT SOURCE U/S. 201(1)/201(1A). THE ASSESEE RELIED UPON THE CASE OF PFIZER LT D. (28 TAXMANN.17). 3. AFTER CONSIDERING THE SUBMISSION OF THE ASSESEEE AND THE ORDER OF THE AO , THE FAA HELD THAT IF THE ASSESSEE HAD DISALLOWED EXPENSES U/S. 40(A)(IA) IN THE COMPUTATION OF TOTAL INCOME AND DID NOT DEDUCT TAX AT SOURCE HE COULD NOT BE HEL D LIABLE FOR PAYING TAXES, THAT THE TDS PROVISIONS WERE INTRODUCED TO RECOVER THE T AX IN THE YEAR IN WHICH INCOME WAS EARNED, THAT WHEN EXPENSES WERE DISALLOWED THEY WOULD RESULT IN INCREASE IN TAXABLE INCOME, THAT THE INCOME TAX RATE WAS ITA NO.2215/MUM/13 - MEGASAVE 3 MUCH HIGHER THAN THE TDS RATE. THE FAA HELD THAT THE ASSESSEE HAD SUO - MOT U DISALLOWED THE EXPENSES TO THE TUNE OF RS. 46.41 LACS U/S. 40(A)(IA) IN THE YEAR UNDER APPEAL, THAT WHEN THE ACTUAL BILL FOR HIGHER AMOUNT WAS RECEIVED IT WAS PAID IN THE SUCCEEDING ASSESSMENT YEAR A T AN AMOUNT OF RS. RS.63.1 5 LACS AFTER DEDUCTING THE TAX, THAT TAX DEDUCTED AT SOURCE WAS DEPOSITED TO THE CREDIT OF THE GOV ERNMENT. RELYING UPON THE ORDER OF PFIZER LTD. (S UPRA ), HE HELD THAT THE ASSESSEE COULD NOT BE TREATED AS ASSESSEE IN DEFAULT AS PER PROV ISIO N OF S. 201/201(1A). F INALLY HE DELETED THE DEMAND RAISED BY THE AO. 4 . BEFORE US, D EPARTMENTAL REPRESENTATIVE ( DR ) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. NONE APPEARED FOR THE ASSESSEE. WE HAVE PERUSED THE MATERIAL ON RECORD.WE FIND THAT TH E ASSESSEE ITSELF HAD DISALLOWED THE EXPENSES CLAIMED UNDER THE HEAD PROVISIONS MADE ,THAT IN THE NEXT ASSESSMENT YEAR IT REC EIVED B ILLS AND DEDUCTED TAX WITH REGARD TO PAYMENT MADE UNDER THE HEAD ADMINISTRATIVE EXPEN SES ETC., THAT THE ASSESSEE HAD NOT CLAI MED ANY EXPENDITURE DURING THE YEAR UNDER CONSID ERATION. IN THESE CIRCUMSTANCES,IN OUR OPINION, THE FAA HAD RIGHTLY HELD THAT THERE WAS NO CONTRAVENTION OF TDS PROVISIONS. WE FU RTHER FIND THAT IN THE MATTER OF PFIZER LTD. (SUPRA), THE TRIBUNAL HAD HELD THAT TDS WAS NOT REQUIRED TO BE DEPOSITED WITH GOV ERNMENT IN CASES WHERE NO CLAI M OF EXPENDITURE HAS BEEN MADE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWING THE ABOVE JUDGMENT OF PFIZER LTD (SUPRA ), WE CONFIRM THE ORDER OF THE FAA.E FFECTIVE GROUND OF APPEAL IS DECIDED AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH ,JUNE,2015. 1 8 , 2015 SD/ - SD/ - ( / JOGINDER S INGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 18 .06.2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.