DGP Steel Star Engineering Pvt. Ltd., Asansol V. DCIT, Circle - 6, , Kolkata

ITA 2288/KOL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9872 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 06-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Keywords: Non-deduction of tax; TDS
• Section: 143(3); 40(a)(ia); 22

Judgement Text

ITA NO. 2288/KOL/2018, A.Y. 20 10-2011 DGP STEEL STAR ENGG. PVT. LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA [VIRTUAL COURT HEARING] BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT & SHRI A.T. VARKEY, JUDICIAL MEMBER I.T.A. NO. 2288/KOL/2018 ASSESSMENT YEAR: 2010-2011 DGP STEEL STAR ENGG. PVT. LIMITED,................. ....................APPELLANT G.T. ROAD, USHAGRAM, P.O. ASANSOL, ASANSOL-713303, DIST. PASCHIM BARDHAMAN, WEST BENGAL [PAN:AABCD0084F] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ...............RESPONDENT CIRCLE-6, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069 APPEARANCES BY: SHRI SUMIT GHOSH, A.R., APPEARED ON BEHALF OF THE A SSESSEE SHRI SUPRIYO PAL, ADDL. CIT , APPEARED ON BEHALF OF THE REVENUE DATE OF CONCLUDING THE HEARING : JULY 22, 2021 DATE OF PRONOUNCING THE ORDER : JULY 22, 2021 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATA DATED 16.08.2018 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF RS.8,95,334/- MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LD. CIT(APPEALS) UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF ENGINEERING AND CONSTRUCTION WORK. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 09.10.2010 DECLARING ITA NO. 2288/KOL/2018, A.Y. 20 10-2011 DGP STEEL STAR ENGG. PVT. LIMITED 2 TOTAL INCOME OF RS.48,15,183/-. AS NOTED BY THE ASS ESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE- COMPANY HAD HIRED EQUIPMENT DURING THE YEAR UNDER CONSIDERATION AND P AID AN AMOUNT OF RS.8,95,334/- ON ACCOUNT OF HIRE CHARGES WITHOUT DE DUCTING TAX AT SOURCE AS REQUIRED UNDER SECTION 194I OF THE ACT. HE, THER EFORE, REQUIRED THE ASSESSEE-COMPANY TO EXPLAIN AS TO WHY THE HIRE CHAR GES OF RS.8,95,334/- PAID FOR THE EQUIPMENT SHOULD NOT BE DISALLOWED BY INVOKING THE PROVISION OF SECTION 40(A)(IA). IN REPLY, THE FOLLO WING EXPLANATION WAS OFFERED BY THE ASSESSEE:- DURING THE PERIOD UNDER PRINCIPAL EMPLOYER/CONTRAC TEE M/S. NAGARJUNA CONSTRUCTION COMPANY LTD HAS DEDUCTED AN AMOUNT OF RS.10,07,350/- FROM GROSS PAYMENT AGAINST BILL AFTE R DEDUCTION OF DUE TDS ON TOTAL GROSS VALUE AND THEREAFTER AN A MOUNT OF RS.1,12,016/- HAS BEEN RETURNED TO US FOR EXCESS DE DUCTION ON ACCOUNT OF HIRING CHARGES OF EQUIPMENTS. AFTER ADJU STING AN AMOUNT OF RS.8,95,334/- HAS BEEN DEBITED IN OUR TRA DING ACCOUNT UNDER THE HEAD OF EQUIPMENT HIRE CHARGES. N OW THE QUESTION REGARDING THE REASON FOR NON DEDUCTION OF TDS ON RS.8,95,334/ - WHICH IS CHARGED IN OUR TRADING A/C UNDER THE HEAD OF EQUIPMENT HIRE CHARGES, THE LEGAL PROVISION FOR DEDUCTION OF TDS ARISES AT THE TIME OF MAKING PAYME NT OR AT TILE TIME OF CREDIT OF SUCH INCOME ON THE ACCOUNT OF PAY EE WHICHEVER IS EARLIER. IN THE INSTANT CASE NEITHER WE ARE MAKI NG ANY PAYMENT TOWARDS ANY PAYEE NOR CREDITED ANY PAYMENT TO THE PAYEE'S ACCOUNT. AS SUCH THERE ARISES NO QUESTION O F DEDUCTION OF TDS. THE SECOND POINT IS THAT OUR PRINCIPAL EMPLOYE R/CONTRACTEE HAS ALREADY DEDUCTED TAX AT SOURCE UPON THE GROSS V ALUE OF BILL WHICH INCLUDES THE VALUES OF SUCH DEDUCTIONS IS MAD E AT TIME OF MAKING PAYMENT. AS SUCH FILE DEDUCTION AMOUNT AGAIN ST THE EQUIPMENT HIRE CHARGES HAS ALREADY SUFFERED TAX. TH E PROVISION OF SECTION 40(A)(1) IS NOT APPLICABLE IN THIS INSTA NT CASE. 3. THE ASSESSING OFFICER DID NOT FIND THE EXPLANATI ON OFFERED BY THE ASSESSEE TO BE ACCEPTABLE AND PROCEEDED TO DISALLOW THE EQUIPMENT HIRED OF RS.8,95,334/- UNDER SECTION 40(A)(IA) IN THE ASS ESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 15.03.2013 . THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EQUIPME NT HIRE CHARGES BY INVOKING THE PROVISION OF SECTION 40(A)(IA) WAS CHA LLENGED IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS) AND THE SUBMISSIO NS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSI NG OFFICER WERE REITERATED ON BEHALF OF THE ASSESSEE-COMPANY BEFORE THE LD. CIT(APPEALS) ITA NO. 2288/KOL/2018, A.Y. 20 10-2011 DGP STEEL STAR ENGG. PVT. LIMITED 3 IN SUPPORT OF ITS CASE THAT THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) WAS NOT SUSTAINABLE. THE LD . CIT(APPEALS), HOWEVER, DID NOT FIND MERIT IN THE SAME AND PROCEED ED TO CONFIRM THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) FOR THE F OLLOWING REASONS GIVEN IN THE IMPUGNED ORDER:- THE AO HAS MENTIONED THAT THE ASSSSEE HAS HIRED TH E EQUIPMENT AND PAID HIRE CHARGES. I ALSO UNDERSTAND FROM THE SUBMISSION OF THE AR OF THE APPELLATE THAT NO ACTUA L PAYMENT WAS MADE BUT IT WAS ADJUSTED FROM THE PAYMENT DUE F ROM THE NCC LTD. I FIND THAT, IT IS VERY MUCH AS EQUAL AS P AYMENT MADE FOR HIRED CHARGES FOR EQUIPMENT. THE AR OF THE APPELLATE FILED HIS REPLY AND SUBMITT ED THAT DURING THE COURSE OF EXECUTION OF CONTRACT JOB, IT WAS UNDISPUTED FACTS THAT THE APPELLANT UTILIZED THE MA CHINE AND EQUIPMENT OF THE PRINCIPAL CONTRACTOR NCC LTD AT TH E SITE OF WORK AGAINST WHICH NO SEPARATE HIRE CHARGES OR RENT WAS ACTUALLY PAID BY THE APPELLANT TO ITS PRINCIPAL NCC LTD. THE APPELLATE HAS FURTHER SUBMITTED THAT THE NCC LTD DE DUCTED OF RS 8,95,334/- FROM THE BILL ON ACCOUNT OF EQUIPMENT HIRE CHARGES. THE ADJUSTMENT OF HIRE CHARGES FROM THE BILL IS EQU ALLING TO PAYMENT OF HIRE CHARGES. THEREFORE, THE APPELLATE I S ASSESSEE IN DEFAULT AS THE TDS WAS NOT DEDUCTED FROM THE HIRED CHARGES OF EQUIPMENT. IN VIEW OF ABOVE, I AGREE WITH THE VIEW AS TAKEN BY THE AO IN THE MATTER. KEEPING IN VIEW OF THE FACTS AS MENTIONED ABOVE, IN THE ABSENCE OF ANY COGENT MATERIAL EVIDEN CE, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ASSESSING OF FICER AND THE SAME IS HEREBY UPHELD. IN VIEW OF ABOVE, THESE GROU NDS OF APPEAL ARE DISMISSED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE FIRST CO NTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE AMOUNT OF RS.8,95,334/- ON ACCOUNT OF HIRE CHARGES OF EQUIPMENT WAS DEDUCTED B Y THE PRINCIPAL CONTRACTOR NCC LIMITED FROM THE AMOUNT PAYABLE TO T HE ASSESSEE- COMPANY AND SINCE THERE WAS ACTUALLY NO PAYMENT DIR ECTLY MADE BY THE ASSESSEE-COMPANY ON ACCOUNT OF HIRE CHARGES, THERE WAS NO REQUIREMENT ITA NO. 2288/KOL/2018, A.Y. 20 10-2011 DGP STEEL STAR ENGG. PVT. LIMITED 4 OF DEDUCTION OF TAX AT SOURCE AND THE QUESTION OF D ISALLOWANCE UNDER SECTION 40(A)(IA) COULD NOT ARISE. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. AS RIGHTLY HEL D BY THE AUTHORITIES BELOW, THE AMOUNT IN QUESTION ON ACCOUNT OF HIRE CH ARGES FOR EQUIPMENT WAS PAYABLE BY THE ASSESSEE-COMPANY TO M/S. NCC LIM ITED AND EVEN THOUGH IT WAS ADJUSTED BY NCC LIMITED AGAINST THE A MOUNT PAYABLE TO THE ASSESSEE-COMPANY, SUCH ADJUSTMENT WAS NOT POSSIBLE WITHOUT CREDITING THE SAID AMOUNT TO THE ACCOUNT OF NCC LIMITED. THE PROVISION OF SECTION 194I THUS WAS CLEARLY ATTRACTED AND THE ASSESSEE-CO MPANY WAS LIABLE TO DEDUCT TAX AT SOURCE FROM THE AMOUNT IN QUESTION TO WARDS EQUIPMENT HIRE CHARGES. SINCE THERE WAS A FAILURE ON ACCOUNT OF TH E ASSESSEE-COMPANY TO COMPLY WITH THIS REQUIREMENT, THE PROVISION OF SECT ION 40(A)(IA) WAS RIGHTLY INVOKED BY THE ASSESSING OFFICER. WE, HOWEV ER, FIND MERIT IN THE ALTERNATIVE CONTENTION RAISED BY THE LD. COUNSEL FO R THE ASSESSEE THAT THE AMOUNT OF EQUIPMENT HIRE CHARGES IN QUESTION HAVING BEEN ALREADY OFFERED TO TAX BY NCC LIMITED, THE ASSESSEE-COMPANY CANNOT BE TREATED AS ASSESSEE IN DEFAULT FOR NON-DEDUCTION OF TAX AT SOU RCE FROM THE SAID PAYMENT AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTHAN COCA COLA BEVERAGES PVT. LIMITED VS.- CIT (293 ITR 226) AND THERE IS NO QUESTION OF MAKING DISALLOWANCE UNDER SECTION 40(A) (IA). AS RIGHTLY CONTENDED BY THE LD. D.R., THIS CLAIM MADE BY THE L D. COUNSEL FOR THE ASSESSEE SPECIFICALLY FOR THE FIRST TIME BEFORE THE TRIBUNAL, HOWEVER, REQUIRES VERIFICATION AND THE MATTER MAY, THEREFORE , BE SENT BACK TO THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF THIS V ERIFICATION. WE ACCORDINGLY RESTORE THIS ISSUE TO THE FILE OF THE A SSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE CLAIM OF THE ASSES SEE THAT THE CONCERNED PAYEE M/S. NCC LIMITED HAS ALREADY PAID TAX ON THE AMOUNT IN QUESTION PAID BY THE ASSESSEE ON ACCOUNT OF EQUIPMENT HIRE C HARGES AND ALLOWING APPROPRIATE RELIEF TO THE ASSESSEE ON SUCH VERIFICA TION KEEPING IN VIEW THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F HINDUSTHAN COCA COLA BEVERAGES PVT. LIMITED (SUPRA). ITA NO. 2288/KOL/2018, A.Y. 20 10-2011 DGP STEEL STAR ENGG. PVT. LIMITED 5 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 22, 2021 . SD/- SD/- (A.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER VICE-PRESIDENT KOLKATA, THE 22 ND DAY OF JULY, 2021 COPIES TO : (1) DGP STEEL STAR ENGG. PVT. LIMITED, G.T. ROAD, USHAGRAM, P.O. ASANSOL, ASANSOL-713303, DIST. PASCHIM BARDHAMAN, WEST BENGAL (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKA TA, (4) COMMISSIONER OF INCOME TAX , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR P.S./DDO, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.