M/s SRS Real Estate Ltd., Faridabad V. ACIT, Faridabad

ITA 2218/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4172 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWANI TANEJA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) (DELHI BENCH G : NEW DELHI) (DELHI BENCH G : NEW DELHI) (DELHI BENCH G : NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.2218/DEL./2010 ITA NO.2218/DEL./2010 ITA NO.2218/DEL./2010 ITA NO.2218/DEL./2010 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007- -- -08) 08) 08) 08) M/S SRS REAL ESTATE LTD., M/S SRS REAL ESTATE LTD., M/S SRS REAL ESTATE LTD., M/S SRS REAL ESTATE LTD., VS. VS. VS. VS. ADDL.CIT, RANG ADDL.CIT, RANG ADDL.CIT, RANG ADDL.CIT, RANGE II, E II, E II, E II, E EE E- -- -18, NEHRU GROUND, N.I.T. 18, NEHRU GROUND, N.I.T. 18, NEHRU GROUND, N.I.T. 18, NEHRU GROUND, N.I.T. FARIDABAD. FARIDABAD. FARIDABAD. FARIDABAD. FARIDABAD. FARIDABAD. FARIDABAD. FARIDABAD. (PAN/GIR NO.AAJCS5656C) (PAN/GIR NO.AAJCS5656C) (PAN/GIR NO.AAJCS5656C) (PAN/GIR NO.AAJCS5656C) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI TANEJA, ADV. ASSESSEE BY : SHRI ASHWANI TANEJA, ADV. ASSESSEE BY : SHRI ASHWANI TANEJA, ADV. ASSESSEE BY : SHRI ASHWANI TANEJA, ADV. REVENUE BY : SHRI KISHORE B.,DR REVENUE BY : SHRI KISHORE B.,DR REVENUE BY : SHRI KISHORE B.,DR REVENUE BY : SHRI KISHORE B.,DR ORDER ORDER ORDER ORDER PER A.D. JAIN: JM PER A.D. JAIN: JM PER A.D. JAIN: JM PER A.D. JAIN: JM THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-0 8, CONTENDING THAT THE CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF `7 LAKHS OUT OF COMMISSION PAID, U/S 40(A)(IA) OF THE I .T. ACT, 1961. 2. THE ASSESSEE COMPANY IS IN THE BUSINESS OF PROMOTION, CONSTRUCTION, DEVELOPMENT AND TRADING IN REAL ESTATE PROJECTS. IT FILED A RETURN OF INCOME SHOWING INCOME OF `3,67,58,515. TH E FINAL TAXABLE INCOME WAS ASCERTAINED AT `3,77,76,730. THE AO MADE A DISALLOWANCE OF `7.50 LAKHS U/S 40(A(IA) OF THE ACT. THE AO EXAMI NED THE DEBIT BALANCE OF `3.55 CRORES UNDER THE HEAD COMMISSION. ON VERIFICATION OF THE DETAILS OF THE COMMISSION, IT WAS FOUND THAT NO TAX HAD BEEN DEDUCTED ON THE FOLLOWING COMMISSIONS: 1. RDX IMPEX & SALES PROMOTION LTD. ` 50,000 2. SRS BUILDCON P. LTD. `7,00,000 3. BY VIRTUE OF THE IMPUGNED ORDER, THE CIT(A) CON FIRMED THE DISALLOWANCE OF `7 LAKHS. I.T.A. NO.2218/DEL./2010 (A.Y. : 2007-08) 2 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 5. CHALLENGING THE IMPUGNED ORDER, THE LD.COUNSEL FO R THE ASSESSEE HAS CONTENDED THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE WRONGLY MADE; THAT THE AMOUNT CONCERNED WAS AN AMOUN T WHICH HAD ALREADY BEEN PAID AND WAS NOT PAYABLE; THAT AS SUCH, T HE PROVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED; THAT THIS VIEW H AS BEEN HELD IN JAIPUR VIDYUT VITRAN NIGAM LTD. VS. DCIT, 26 DTR 79 (JAIPUR); THAT THE CIT(A) HAS ERRED IN NOT FOLLOWING THE SAID DECISION; T HAT THE SAME VIEW HAS BEEN HELD IN K. SRINIVAS NAIDU VS. ACIT, 131 TTJ(H YD.)(UO) 17. 6. THE LD.DR., ON THE OTHER HAND, HAS PACED STRONG RE LIANCE ON THE IMPUGNED ORDER. 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MAT ERIAL ON RECORD. THE ISSUE IS AS TO WHETHER THE DISALLOWANCE WAS WRONGLY MADE AND CONFIRMED U/S 40(A)(IA) OF THE ACT. 8. AS PER SECTION 40(A)(IA) OF THE ACT: NOTWITHSTANDING WITH IN ANY CONTRARY IN SECTIONS 30 TO [38] THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS O F BUSINESS OR PROFESSION, - (A) (IA) ANY.COMMISSIONPAYABLE TO RESIDENT, .FEES..CARRYING OUT ANY WORK (INCLUDING SUPP LY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND AS SUCH TAX HAD NOT BE EN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURN G THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EX PIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION(1) OF SECTION 200 9. IN JAIPUR VIDYUT VITRAN NIGAM LTD.(SUPRA), IT HAS BEEN HELD, INTER ALIA, THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT PROVIDED IN NON- DEDUCTION OF AMOUNT WHICH REMAINS PAYABLE TO A RESIDE NT IN RESPECT OF FEES FOR TECHNICAL SERVICES, ETC.; THAT IT IS NOT APPLI CABLE WHERE I.T.A. NO.2218/DEL./2010 (A.Y. : 2007-08) 3 EXPENDITURE IS PAID; THAT IT IS APPLICABLE ONLY IN CA SES WHERE THE PAYMENTS ARE DUE AND OUTSTANDING; THAT THE WORD PAYA BLE IS NOT DEFINED, THOUGH THE WORD PAID IS DEFINED U/S 43(2) OF THE ACT TO MEAN ACTUALLY PAID OR INCURRED; THAT HENCE, BY IMPLI CATION, THE WORD PAYABLE DOES NOT INCLUDE PAID; THAT THE DIFFEREN CE IN PAID AND PAYABLE IS ALSO THERE IN THE RULES FOR DEPOSITING THE TDS AND ALSO FOR LEVY OF INTEREST U/S 234, WHERE INTEREST IS WORKED OUT ON THE BASIS OF TAX ACTUALLY DEDUCTED AT SOURCE AND NOT ON THE BASIS O F TAX DEDUCTIBLE; THAT EVEN OTHERWISE, SECTION 40(A)(IA) BEING A LEGAL FICTION, IT NEEDS TO BE CONSTRUED STRICTLY IN VIEW OF THE DECISION OF THE H ONBLE SUPREME COURT IN CIT VS. MOTOR INDIA REFRIGERATION INDUSTRY P . LTD. (1985) 115 ITR 711 (SC); THAT EVEN THE CBDT HAS CLARIFIED IN CI RCULAR NO.5 OF 2005 DATED 5.7.05 [197 CTR (STATUTE)1]; AND THAT THE PRO VISIONS OF SECTION 40(A)(IA) ARE TO AUGMENT COMPLIANCE OF TDS PROVISION S IN THE CASE OF RESIDENTS AND TO CURB BOGUS PAYMENTS TO THEM. 10. THE ABOVE RATIO IN JAIPUR VIDYUT VITRAN NIGAM LTD.(SUPRA) HAS BEEN FOLLOWED IN K. SRINIVAS NAIDU (SUPRA). 11. NO DECISION TO THE CONTRARY HAS BEEN CITED BEFORE US. 12. THEREFORE, IN OUR CONSIDERED OPINION, THE CIT(A) ERRED IN NOT FOLLOWING JAIPUR VIDYUG VITRAN NIGAM LTD.(SUPRA). THE CIT(A) HAS HELD, WHILE OBSERVING THAT JAIPUR VIDYUG VITRAN NIGA M LTD. (SUPRA) WAS NOT BINDING ON HIM, AS IT WAS NOT FROM THE JURISDICTIO NAL BENCH OF THE TRIBUNAL, THAT WHETHER THE AMOUNT FOR TDS PURPOSES IS PAID OR PAYABLE, THE PROVISION OF SECTION 40(A)(IA) ARE ATTRACTED IN B OTH CASES, DUE TO THEIR PENAL IMPLICATIONS. HOWEVER, THE CIT(A) HAS NO T CITED ANY DECISION IN FAVOUR OF THIS PROPOSITION AS OPPOSED TO JA IPUR VIDYUG VITRAN NIGAM LTD.(SUPRA). MOREOVER, AS OBSERVED, K. SRINIVAS NAIDU (SUPRA) HAS FOLLOWED JAIPIR VIDYUT VITRAN NIGAM LTD . (SUPRA). EVEN OTHERWISE, IT IS TRITE LAW THAT NOTHING CAN BE ADDED TO OR SUBTRACTED FROM THE BARE PROVISIONS OF A SECTION OF A STATUTE, UN LESS THE CONTEXT IS I.T.A. NO.2218/DEL./2010 (A.Y. : 2007-08) 4 SHOWN TO BE OTHERWISE. THE LEGISLATURE CHOOSES ITS WORDS DELIBERATELY AND SPECIFICALLY. THE EXPRESSION IMPLIED IN SECTION 40 (A)(IA) OF THE ACT, IS PAYABLE AND NOT PAID. IN THE PRESENT CASE, THE COMMISSION INVOLVED UNDISPUTEDLY STANDS PAID. ALSO, AS OBSERVED IN JAIPUR VIDYUT VITRAN NIGAM LTD.(SUPRA), SECTION, 40(A)(IA) IMBIBES A LEGAL FICTION AND IT NEEDS TO BE CONSTRUED STRICTLY. 13. IN VIEW OF THE ABOVE, THE GRIEVANCE OF THE ASSESSEE IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. 14. THEREFORE, THE ORDER OF THE CIT(A) IS CANCELLED AND THE DISALLOWANCE OF COMMISSION PAID, AMOUNTING TO `7 LAKHS IS DELETED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON 25.04.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, APRIL 25, 2011 SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), FARIDABAD. 5.CIT(ITAT), NEW DELHI. AR/ITAT