NICHE INTERNATIONAL, MUMBAI V. ACIT CIR 15(2), MUMBAI

ITA 2258/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3294 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MISHRA
• Section: 143(3); 142(1); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI AMIT SHUKLA, JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO 2258/MUM/2013 ( / ASSESSMENT YEAR: 2008-09) M/S NICHE INTERNATIONAL C/O ANIRUDDHAMODY & CO CHARTERED ACCOUNTANTS FLAT NO.1, A WING, NEELAM CO-OP HSG SOC LTD, OPP. VARAHI MATAJI TEMPLE, NEXT TO MANISH BUILDING, SHANKA LANE, KANDIVALI(W) MUMBAI-400 067. / VS. A.C.IT CIR 15(2) R.NO 113, 1 ST FLOOR, MATRU MANDIR, NANA CHOWK, MUMBAI-400 007. ./ ./PAN/GIR NO. AAEFN 5380J ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI NISHIT GANDHI / RESPONDENT BY : SHRI S.K. MISHRA / DATE OF HEARING : 05/01/2016 !'# / DATE OF PRONOUNCEMENT : 29/01/2016 $% / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 02.01.2013 OF COMMISSIONER OF INCOME TAX (APPEALS)-26, MUMBAI (HE REINAFTER CALLED AS THE CIT(A)) FOR ASSESSMENT YEAR 2008-09. THE ASSESSEE H AS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 2 ITA NO. 2258/MUM/2013 (A.Y. 2008-09) M/S NICHE INTERNATIONAL VS.A.C.IT 1. THE LEARNED CIT (A) HAS ERRED IN LAW AS WELL A S IN FACTS BY REJECTING THE CONTENTIONS OF YOUR APPELLANT THAT BOTH THE EXPENSE S ARE OF DIFFERENT NATURE AND THEY HAVE CORRECTLY DEDUCTED TAX AT SOURCE AS MAY B E APPLICABLE AS PER THE PROVISION OF I.T. ACT,1961 AND THEREFORE, NO DISALL OWANCE IS CALLED FOR OF EXPENSES OF DIFFERENT NATURE BY AGGREGATING THE SAM E AS A SINGLE EXPENSE U/S 194(1). THE LEARNED CIT (A) UNDER THE FACTS AND CIRCUMSTANC ES OF THE CASE OUGHT TO HAVE ACCEPTED THE CLAIM OF YOUR APPELLANT 2. THE LEARNED CIT (A) HAS ERRED IN LAW AS WELL AS IN FACTS BY CONFIRMING AND UPHOLDING THE ORDER OF THE A.O. IN PART BY DIRECTIN G HIM TO RESTRICT THE DISALLOWANCE OF RS. 2,40,000 ONLY U/S 40(A)(IA) WHE N THE A.O. TREATED TWO SEPARATE EXPENSES AS A SINGLE EXPENSE U/S 194(I) AN D DISALLOWED THE AMOUNT IN PROPORTION TO SHORT FALL. 2.1 THE LEARNED CIT (A) HAS ERRED IN LAW AS WELL A S IN FACTS BY BI-FURCATING EXPENSES IN TWO PART FOR THE SHORT DEDUCTION OF TAX AT SOURCE AS A RESULT HE CONFIRMED DISALLOWANCE OF RS.2,40,000 THOUGH, ENDOR SED THE VIEW OF THE A.O. THAT ENTIRE PAYMENT OF DIFFERENT NATURE IS TO BE TR EATED AS RENT U/S 194(1). THE LEARNED CIT (A) UNDER THE FACTS AND CIRCUMSTANC ES OF THE CASE OUGHT NOT TO HAVE DIRECTED TO RESTRICT THE DISALLOWANCE TO AN EX TENT OF RS. 2,40,000 WHEN THE DIFFERENT EXPENSES ENTIRELY TREATED AS A SINGLE EXP ENSES U/S 194(I) AND THEREFORE, HE COULD HAVE ALLOWED DEDUCTION OF ENTIR E EXPENSES IN CASE OF SHORT DEDUCTION OF TAX AS NO PROVISION OF DISALLOWANCE U/ S/40(A)(IA) IS APPLICABLE IN RESPECT OF SHORT DEDUCTION OF TAX. 3. THE LEARNED CIT (A) HAS ERRED IN LAW BY DISMISS ING ADDITIONAL GROUND OF YOUR APPELLANT THAT NO DISALLOWANCE COULD BE MADE U/S 40 (A)(IA) IN RESPECT OF THE AMOUNT OF EXPENSES WHICH ARE NOT PAYABLE AND OUTSTA NDING ON THE LAST DAY OF THE ACCOUNTING YEAR AS THE ENTIRE EXPENSES WERE PAI D DURING THE YEAR AS SUCH THE ISSUE OF YOUR APPELLANT IS COVERED BY THE ORDER OF THE ITAT IN THE CASE OF MERILYN SHIPPING & TRANSPORT VIS ADDL. CIT RGI VISA KHAPATNAM REPORTED IN (2012) 20TAXMANN.COM 244 (VISAKHAPATNAM) (SB) , MER ELY BECAUSE THE ORISA HIGH COURT HAS STAYED THE ORDER OF THE ITAT. 3 ITA NO. 2258/MUM/2013 (A.Y. 2008-09) M/S NICHE INTERNATIONAL VS.A.C.IT THE LEARNED CIT(A) OUGHT NOT TO HAVE DISMISSED THE GROUND OF YOUR APPELLANT BECAUSE OF STAY GRANTED ON OPERATION OF ITAT ORDER SINCE, THE STAY IS APPLICABLE TO THE PARTY CONCERNED IN THAT APPEAL. THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS PRAYED THAT NECESSARY RELIEF AS MAY BE DEEMED FIT AND PROPER UNDER THE FA CTS AND CIRCUMSTANCES OF THE CASE BE GRANTED. WITHOUT PREJUDICED TO THE ABOVE 1. THE ORDER OF THE LEARNED A.O. AS PARTIALLY CONF IRMED BY THE LEARNED CIT(A) BE DECLARED WITHOUT JURISDICTION AS MUCH AS THE A.O HA S NO JURISDICTION TO DETERMINE AN APPLICABILITY OF TDS PROVISION TO PART ICULAR TRANSACTION WHILE MAKING DISALLOWANCE U/S 40(A)(IA) BECAUSE THERE IS A SEPARATE JURISDICTION IN EXISTENCE TO INTERPRET THE MATTER OF APPLICABILITY OF TDS PROVISION AND ASSESSMENT THEREOF. THE A.O OUGHT TO HAVE RESTRICTED HIS POWER TO DISAL LOWANCE OF EXPENSES FOR NON DEDUCTION OF TAX AT SOURCE WITHOUT INTERPRETING THE PROVISION AND ITS' APPLICABILITY TO TRANSACTION WHEN SEPARATE MACHINERY FOR THE PURPOSE IS EXISTED. 2. THAT THE AMENDMENT BROUGHT IN THE INCOME TAX AC T U/S. 40(A)(IA) AND OTHER PROVISIONS IN RELATION TO TDS BY FINANCE ACT, 2012 ARE REMEDIAL AND CURATIVE IN NATURE HENCE, BE DECLARED HAVING RETROSPECTIVE EFFE CT. SINCE, THE PAYEE FILED THEIR RETURN OF INCOME FOR THE YEAR CONSIDERATION A ND DISCHARGE THEIR TAX LIABILITY AND THEREFORE, NO DISALLOWANCE BE MADE UN DER THE AMENDED PROVISION. THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS PRAYED THAT NECESSARY RELIEF AS MAY BE DEEMED FIT AND PROPER UN DER THE FACTS AND CIRCUMSTANCES OF THE CASE BE GRANTED. 2. THE COMMON ISSUE RAISED IN ALL THE GROUNDS OF AP PEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.2,40,000/- BY THE CI T(A) BY IGNORING THE FACT THAT THE AO HAD WRONGLY APPLIED THE PROVISION OF SECTION 40( A)(IA) OF THE ACT IN RESPECT OF RENT PAID TO TWO PERSONS @ RS. 1,20,000/- EACH FOR TWO O FFICES TAKEN ON RENT . 4 ITA NO. 2258/MUM/2013 (A.Y. 2008-09) M/S NICHE INTERNATIONAL VS.A.C.IT 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED I TS RETURN OF INCOME ON 28.09.2008 DECLARING TOTAL INCOME OF RS.31,27,620/-. DURING TH E YEAR THE ASSESSEE PAID RENT OF RS. 2,40,000/- FOR TWO OFFICES NO 605 AND 606 RENTE D FROM SHRI ROOCHIR SANGHVI AND SHI ROOSHABH SANGHVI AND RENT WAS PAID @ RS. 1,20,0 00/- FOR EACH OFFICE. THE CASE OF THE ASSESSEE WAS SELECTED UNDER CASS AND STATUTORY NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE DULY ISSUED AND SERVED ON THE ASSESSEE . THE LD. AO FRAMED THE ASSESSMENT U/S 143(3) VIDE ORDER DATED 20.12.10 BY MAKING ADDITIONS U/S 40(A)(IA) OF RS.4,36,800/- ON ACCOUNT OF NON DEDUCTION OF TDS O N RENT AND SHORT DEDUCTION OF TDS ON SERVICE CHARGES U/S 194I OF THE ACT FOR TH E REASONS THAT THE TDS SHOULD HAVE BEEN DEDUCTED @ 10% UNDER THE PROVISION OF 194(I) O F THE ACT AND THE ASSESSEE KNOWING THE SPLIT THE TOTAL AMOUNT INTO RENT AND SE RVICE CHARGES IN ORDER TO CIRCUMVENT THE PROVISIONS OF TDS. 4. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE CIT(A) WHO PARTLY ALLOWED BY THE CIT(A) BY HOLDING THAT THE ASSESSEE HAS RIGHTLY DEDUCTED THE TDS @ 2% ON SERVICE CHARGES U/S 194C AND AO WAS WRONG IN HOLDING THAT THE TDS WAS REQUIRED TO BE DEDUCTED U/S 194I A ND NOT U/S 194C THEREBY SUSTAINING THE ADDITION TO THE EXTENT OF RS. 2,40,0 00/- ON ACCOUNT OF RENT PAID. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE AUT HORITIES BELOW. 5 ITA NO. 2258/MUM/2013 (A.Y. 2008-09) M/S NICHE INTERNATIONAL VS.A.C.IT 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAD PAID RENT TO TWO PERS ONS FROM WHOM THE ASSESSEE HAD TAKEN TWO OFFICES NAMELY 605 AND 606 ON RENT AND RE NT FOR EACH OFFICE WAS RS.1,20,000/- AND WAS ACCORDINGLY PAID RS. 1,20,000 /- TO MR. RUCHIR SANGHVI FOR OFFICE NO 605 AND RS. 1,20,000/- TO MR. RUSHAB SANGHVI FOR OFFICE NO 606 WHICH IS BELOW THE LIMIT AS PROVIDED BY THE PROVISIONS OF SE CTION 194I OF THE ACT FOR DEDUCTION OF TAX AT SOURCE. THE PROVISIONS OF SECTION 194I AR E REPRODUCED BELOW. 194-I. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HI NDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO [A RESIDEN T] ANY INCOME BY WAY OF RENT, SHALL AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THER EOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER M ODE, WHICHEVER IS EARLIER, [DEDUCT INCOME-TAX THEREON AT THE RATE OF- [(A) TWO PERCENT FOR THE USE OF ANY MACHINERY OR PL ANT OR EQUIPMENT; AND (B) TEN PERCENT FOR THE USE OF ANY LAND OR BUILDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) OR FURNITURE OR FITTINGS:]] PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, T HE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKE LY TO BE 6 ITA NO. 2258/MUM/2013 (A.Y. 2008-09) M/S NICHE INTERNATIONAL VS.A.C.IT CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE A FORESAID PERSON TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEE D [ONE HUNDRED AND EIGHTY THOUSAND RUPEES]: 5. THUS, IT IS CLEAR FROM ABOVE THAT FOR THE PURPOS E OF DEDUCTION OF TAX AT SOURCE UNDER PROVISION OF SECTION 194I OF THE ACT THE ANNU AL RENT HAS PAID OR CREDITED TO ONE PERSON HAS TO RS.1,80,000/- WHEREAS IN THE CASE BEF ORE US THE RENT PER PERSON WAS ONLY PAID OF RS.1,20,000/- WHICH IS BELOW THE LIMIT SPEC IFIED IN THIS SECTION. IN VIEW OF THESE FACTS , THE PROVISION OF SECTION 194I ARE NO T APPLICABLE IN THE PRESENT CASE AND THE DISALLOWANCE MADE BY THE AO BY APPLYING THE PRO VISION OF SECTION 40(A)(IA) OF THE ACT CANNOT BE SUSTAINED. WE, THEREFORE, DELETE THE ADDITION OF RS. 2,40,000/-BY REVERSING THE FINDING OF THE CIT(A) ON THIS POINT. THE AO IS DIRECTED ACCORDINGLY. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2016 SD/- SD/- (AMIT SHUKLA) (RAJESH KUMAR) &' $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ( ) MUMBAI; *$ DATED :29.01.2016 PS. ASHWINI 7 ITA NO. 2258/MUM/2013 (A.Y. 2008-09) M/S NICHE INTERNATIONAL VS.A.C.IT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI