UE Trade Corporation (India) Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 2303/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61698 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 01-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA S PURI
• Assessee Lawyers: RUCHI LUT HRA CAS
• Keywords: Non-deduction of tax; Difference of opinion
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H: NEW DELHIA BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T. A. NO.2303/DEL/2011 ASSESSMENT YEAR : 2007-08 UE TRADE CORPORATION (INDIA) LTD., DY. COMMISSIONE R OF I.TAX, 1-C, VANDHNA BUILDING, VS. CIRCLE-18(1), NEW DELH I. 11 TOLSTOY MARG, NEW DELHI . PAN/GIR NO.AAACU5216A. (APPELLANT) (RESPONDEN T) APPELLANT BY : SHRI RAJAN BHATIA & MS. RUCHI LUT HRA, CAS RESPONDENT BY : MS. REENA S. PURI, CIT-DR. O R D E R PER K.D. RANJAN, ACCOUNTAT MEMBER: THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 200 7-08 ARISES OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S)-XXI, NEW DELHI. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE RE PRODUCED AS UNDER:- 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) (CIT(A) IS BAD IN LAW AND ON THE FACTS OF THE CASE. 2(A). THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMI NG THE DISALLOWANCE OF EXPENSE OF RS.2,024,455/- U/S 40(IA ) OF THE INCOME TAX ACT BY WRONGLY INTERPRETING THE PROVISIO NS OF INCOME TAX ACT AND DISREGARDING THE FACTS ON RECORD . (B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE PROVISIONS OF THE SECTION 40(IA) ARE NOT APPLICABLE, AS IT ONLY P ROHIBITS THE 2 DISALLOWANCE WHEN THE TAX HAS NOT BEEN DEDUCTED AT SOURCE AND NOT WHERE TAX HAS BEEN DEDUCTED BUT AT LOWER RATE O F INCOME TAX/SURCHARGE. (C) WITHOUT PREJUDICE TO ABOVE AND ALTERNATIVELY TH E PROPORTIONATE ALLOWANCE OF EXPENDITURE SHOULD BE DI RECTED TO BE ALLOWED. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO CONF IRMING THE DISALLOWANCE OF EXPENSES OF RS.20,24,455/- UNDER SE C. 40(A)(IA) OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN TRADING IN AGRICULTU RAL PRODUCTS. IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08 W HICH IS UNDER CONSIDERATION THE ASSESSEE WAS IN PROCESS OF WINDIN G UP AND THE ONLY STOCK LEFT OF YELLOW PEAS WAS SOLD FROM THE CALCUTTA OFFI CE WHICH WAS ALSO SHUT DOWN IN OCTOBER, 2006. SOME LEFT OVER STOCK OF PIS TACHIO WAS SOLD OFF FROM DELHI OFFICE. DURING THE COURSE OF ASSESSMENT PROC EEDINGS FROM THE TAX AUDIT REPORT IN FORM NO.3CD THE ASSESSING OFFICER N OTED THAT THE TAX AUDITOR HAD QUANTIFIED THE AMOUNT OF 40,41,233/- DISALLOWAB LE UNDER SEC. 40(A)(IA) OF THE ACT. HOWEVER, IN COMPUTATION OF INCOME THE ASS ESSEE HAD ADDED BACK ONLY RS.20,16,778/-. THE REMAINING AMOUNT OF RS.20 ,24,455/- WAS THEREFORE, DISALLOWED BY THE ASSESSING OFFICER. 3. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSE SSING OFFICER OUGHT TO HAVE ALLOWED EXPENDITURE ON WHICH TAX HAS BEEN D EDUCTED AND SHOULD 3 HAVE DISALLOWED THE EXPENDITURE ON WHICH NO TAX HAS BEEN DEDUCTED. THEREFORE, THE LEARNED AR OF THE ASSESSEE CONTENDED THAT NO DISALLOWANCE SHOULD HAVE BEEN MADE. ALTERNATIVELY, IT WAS ARGUE D THAT PROPORTIONATE DISALLOWANCE OF RS.15,75,239/- SHOULD HAVE BEEN MAD E. 4. THE LEARNED CIT(A) ON EXAMINATION OF THE CONTENT ION OF THE ASSESSEE OBSERVED THAT THERE WAS NO SCOPE FOR MAKING PROPORT IONATE DISALLOWANCE UNDER SEC. 40(A)(IA) ON THE GROUND THAT SECTION CLE ARLY APPLIES WHERE THERE IS LOWER DEDUCTION OF TAX AND AS SUCH TAX HAS NOT BEEN PAID BEFORE THE DUE DATE, DISALLOWANCE HAS TO BE MADE. WHEN TAX AUDITOR HAS POINTED OUT THE FIGURES IN 3CD REPORT AND OUT OF THE SAME, A PORTION HAD BE EN ADDED BACK, THE SAME PROVISION IS ATTRACTED ON THE REMAINING PART ALSO. THEREFORE, THERE WAS SCOPE OF MAKING PROPORTIONATE DISALLOWANCE. THE LEARNED CIT(A) ACCORDINGLY UPHELD THE DISALLOWANCE MADE BY THE AO. 5. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMIT TED THAT THE ASSESSEE HAD MADE PAYMENT AFTER DEDUCTING LOWER TAX IN RESPE CT OF CERTAIN ITEMS. THE ASSESSEE HAD NOT INCLUDED SURCHARGE ON PROFESSIONAL CHARGES OF RS.56,000/- AND RENT OF RS.1,96,000/-. AS REGARDS STORAGE CHAR GES OF RS.16,90,982/- AS PER THE ASSESSEE, THE TDS IS TO BE DEDUCTED UNDER S EC. 194C WHEREAS THE AO HAS APPLIED PROVISIONS OF SEC. 194-I. SIMILARLY WI TH REFERENCE TO SURVEY FEE OF RS.81,473/-, THE ASSESSEE HAD APPLIED PROVISIONS OF SEC. 194-C WHEREAS AS 4 PER AO, THE PROVISIONS OF SEC. 194-J HAVE BEEN APPL IED. THE LEARNED AR OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF ITA T, MUMBAI BENCH `C IN THE CASE OF DCIT VS. CHANDABHOY & JASSOBHOY, 17 TA XMANN.COM 158 (MUM.) FOR THE PROPOSITION THAT PROVISIONS OF SEC. 40(A)(IA) CAN BE INVOKED ONLY IN EVENT OF NON-DEDUCTION OF TAX AT SOURCE BUT NOT FOR LESSER DEDUCTION OF TAX AT SOURCE. HE ALSO PLACED RELIANCE ON THE D ECISION OF KOLKATA BENCH `B IN THE CASE OF DCIT VS. S.K. TEKRIWAL, 15 TAXMA N,COM 289 (KOL.) FOR THE PROPOSITION THAT IF THERE IS SHORTFALL IN DEDUCTION OF TAX AT SOURCE DUE TO ANY DIFFERENCE OF OPINION AS TO TAXABILITY OF ANY ITEM OR NATURE OF PAYMENTS FALLING UNDER VARIOUS TDS PROVISIONS, ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE-IN-DEFAULT UNDER SEC. 201 BUT NO DISALLOWA NCE CAN BE MADE BY INVOKING PROVISIONS OF SECTION 40(A)(IA). ON THE O THER HAND, THE LEARNED CIT(DR) STRONGLY OBJECTED TO THE PROPOSITION MADE B Y THE ASSESSEE. SHE SUBMITTED THAT IN TAX AUDIT REPORT, THE TAX AUDITOR HAS QUANTIFIED THE AMOUNT WHICH IS IN VIOLATION OF PROVISIONS OF SEC. 40(A)(I A). THEREFORE, THE LEARNED CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE. SHE ALSO SUBMITTED THAT THERE IS NO CONCEPT OF ALLOWANCE OF DEDUCTION ON PR OPORTIONATE BASIS AS SUGGESTED BY THE LEARNED AR OF THE ASSESSEE. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE TAX AUDIT REPORT IN 5 FORM NO.3CD PLACED AT PAGES 20 TO 49 OF THE PAPER B OOK. ANNEXURE-XIV OF THE TAX AUDIT REPORT GIVES THE DETAILS OF TAX DE DUCTIBLE UNDER VARIOUS SECTIONS OF THE ACT. PAGE 1 OF ANNEXURE-XIV GIVES THE DETAILS OF PAYMENTS ON WHICH TAX HAS NOT BEEN DEDUCTED AT ALL. THE TOT AL AMOUNT OF EXPENDITURE IS AT RS.7,32,827/-. PAGES 2 TO 6 OF ANNEXURE-XIV GIVE THE DETAILS WHERE THERE IS A SHORTFALL DUE TO LESSER DEDUCTION THAN R EQUIRED TO BE DEDUCTED. THE TOTAL AMOUNT OF EXPENSES IS AT RS.20,24,455/- ON WH ICH SHORTFALL OF TAX AT RS.3,26,011/- HAS BEEN WORKED OUT BY THE TAX AUDITO RS. PAGE 3 OF THE ANNEXURE GIVES THE DETAILS WHERE TAX HAS BEEN DEDUC TED BUT NOT PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT. THE ASSESSEE HAS ADDED BACK THE EXPENDITURE ON WHICH TAX WAS DEDUCTIBLE BUT NO TAX WAS DEDUCTED AT ALL AND ALSO WHERE TAX WAS DEDUCTED AT SOURCE BUT NOT PAID TO THE CREDIT OF CENTRAL GOVERNMENT AMOUNTING TO RS.20,16,778/-. DETAIL OF SUCH EXPENDITURE IS GIVEN AT PAGE 1 AND PAGE 3 OF THE ANNEXURE-XIV TO T HE TAX AUDIT REPORT. THE LEARNED AR OF THE ASSESSEE HAS CLAIMED THE BENE FIT OF TWO DECISIONS, ONE BY THE KOLKATA BENCH AND OTHER BY THE MUMBAI BENCH OF ITAT. IN THE CASE OF DCIT VS. CHANDABHOY & JASSOBHOY (SUPRA) THE ASSE SSEE MADE PAYMENT TO THE CONSULTANTS BY WAY OF SALARY AFTER DEDUCTION OF TAX AT SOURCE UNDER SEC. 192 AND CLAIMED THE DEDUCTION FOR THE SAME. THOSE CONSULTANTS WERE WORKING FOR A PERIOD OF TWO YEARS WITH THE ASSESSEE . HOWEVER, THE AO 6 APPLIED THE PROVISIONS OF SEC. 194-J. IN THIS CASE IT WAS HELD THAT PROVISIONS OF SEC. 192 WERE APPLICABLE TO THE FACTS OF THE ASS ESSEES CASE. ANOTHER DECISION RELIED UPON BY THE ASSESSEE IS OF KOLKATA BENCH IN THE CASE OF DCIT VS. S.K. TEKRIWAL (SUPRA). IN THIS CASE ALSO THE D IFFERENCE IN SHORTFALL WAS DUE TO THE APPLICABILITY OF PROVISIONS. THE ASSESS EE HAS DEDUCTED TAX AT SOURCE U/S 194C WHEREAS ACCORDING TO THE ASSESSING OFFICER PROVISIONS OF SECTION 194I ARE APPLICABLE. THUS THE ASSESSEES C ASE IS COVERED BY THE DECISIONS OF THE TRIBUNAL REFERRED TO ABOVE. NO DO UBT ASSESSEE IS IN DEFAULT AS PER PROVISIONS OF SEC. 201 BUT DISALLOWANCE OF T HE EXPENDITURE IS NOT PERMISSIBLE U/S 40(A)(IA). RESPECTFULLY FOLLOWING THE PRECEDENTS IT IS HELD THAT DISALLOWANCE OF RS.20,24,455/- IS NOT JUSTIFIE D. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8. THIS DECISION IS PRONOUNCED IN THE OPEN COURT ON 18 TH MAY, 2012. SD/- SD/- (U.B.S. BEDI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH MAY, 2012. 7 ITA NO.2303/DEL/2011 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.