Arvind Murjani Brands Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-1, Ahmedabad

ITA 2382/AHD/2011

• Counselvise Citation: 238220514 RSA 2011
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 20-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH SR D R
• Assessee Lawyers: V R CHOKSI

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ././ ./ ITA NO. 2382/AHD/2011 / ASSESSMENT YEAR: 2008-09 ARVIND MURJANI BRANDS PVT LTD ARVIND MILLS PREMISES, NARODA ROAD, AHMEDABAD PAN : AAECA 3768 J V/S. ACIT, CIRCLE-1, AHMEDABAD / // / (APPELLANT) ! ! ! ! / // / (RESPONDENT) ASSESSEE(S) BY : SHRI V.R. CHOKSI, AR REVENUE BY : SHRI DINESH SINGH, SR. DR. '# $ %&'/ // / DATE OF HEARING : 01/06/2015 () $ %&' / // / DATE OF PRONOUNCEMENT: 05/06/2015 *+ *+ *+ *+/ // / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS DIRE CTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX(APPEALS )-VI, AHMEDABAD DATED 26.07.2011, PERTAINING TO ASSESSMENT YEAR 200 8-09. 2. THE FIRST GROUND OF THE ASSESSEES APPEAL READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPELLANT COMPANY IS NOT ENTITLED TO DEDUCTION OF RS.3,34,815/- BEING EMPLOYEES CONTRIBUTION TO P ROVIDENT FUND, ON THE GROUND THAT THE SAME WAS DEPOSITED BY THE APPEL LANT COMPANY BEYOND THE TIME LIMIT PRESCRIBED UNDER THE PROVIDENT FUND ACT. 3. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE WAS FAIR ENOUGH TO ADMIT THAT THIS ISSUE IS COVERED AGA INST THE ASSESSEE BY THE ITA NO. 2382/AHD/2011 ARVIND MURJANI BRANDS PVT LTD VS. ACIT FOR AY 2008-09 2 DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION, REPORTED IN (2014 ) 366 ITR 170 (GUJ). RESPECTFULLY FOLLOWING THE SAME, WE REJECT GROUND N O.1 OF THE ASSESSEES APPEAL. 4. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UN DER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.5,51,327/- MADE BY THE ASSESSING OFFICER BY DISALLOWING PROVISION FOR CESS ON ROYALTY. 5. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY LD. COUNSEL THAT DURING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT Y EAR UNDER CONSIDERATION THE ASSESSEE HAS CREATED A PROVISION OF RS.5,51,327 /- ON ACCOUNT OF CESS ON ROYALTY. HOWEVER, IN THE SUBSEQUENT YEAR, THE CESS WAS NOT REQUIRED TO BE PAID BY THE ASSESSEE AND THEREFORE, THIS PROVISION WAS REVERSED AND OFFERED TO TAX IN THE SUBSEQUENT YEAR. HE, THEREFORE, SUBMI TTED THAT THE ASSESSEE HAS NO OBJECTION IN DISALLOWANCE OF CESS IN THE YEAR UN DER CONSIDERATION; HOWEVER, THE SAME INCOME CANNOT BE TAXED DOUBLY BEC AUSE IN THE SUBSEQUENT YEAR THE ASSESSEE HAS ALREADY REVERSED T HE PROVISION AND OFFERED THE INCOME. HE, THEREFORE, SUBMITTED THAT IF THE A DDITION IS SUSTAINED IN THE YEAR UNDER CONSIDERATION, THEN IN THE SUBSEQUENT YE AR IN WHICH THE ASSESSEE HAS OFFERED THE INCOME, NO ADDITION SHOULD BE MADE. 6. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. SO FAR AS TH E ALLOWABILITY OF PROVISION OF RS.5,51,327/- IN THE YEAR UNDER CONSIDERATION IS CONCERNED, THE ASSESSEES ITA NO. 2382/AHD/2011 ARVIND MURJANI BRANDS PVT LTD VS. ACIT FOR AY 2008-09 3 COUNSEL HAS FAIRLY SUBMITTED THAT THE CESS WAS ULTI MATELY NOT PAYABLE AND THEREFORE, IN SUBSTANCE, THERE WAS NO LIABILITY OF CESS ON THE ROYALTY. IN THE ABOVE CIRCUMSTANCES, IN OUR OPINION, THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IS FU LLY JUSTIFIED. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASS ESSEE HAS REVERSED THE PROVISION IN THE SUBSEQUENT YEAR AND OFFERED THE SA ME AMOUNT I.E. RS.5,51,327/-. THEREFORE, IF THE ADDITION IS SUSTA INED IN THIS YEAR, THEN SUITABLE DIRECTION MAY BE GIVEN IN THE OTHER YEAR W HEREIN THIS PROVISION IS REVERSED. HOWEVER, THE LD. COUNSEL FOR THE ASSESSE E HAS NOT FILED ANY SUPPORTING DOCUMENT IN SUPPORT OF HIS CONTENTION TH AT THE PROVISION IS REVERSED IN THE SUBSEQUENT YEAR AND THE INCOME IS O FFERED. HE HAS NOT EVEN MENTIONED THE ASSESSMENT YEAR IN WHICH THE PROVISIO N IS REVERSED. IN THE ABOVE CIRCUMSTANCES, WE DECLINE TO ISSUE ANY DIRECT ION SO FAR AS THE OTHER YEAR IS CONCERNED. HOWEVER, THE ASSESSEE WILL BE AT LIBERTY TO PUT UP THE PROPER CLAIM IN THE YEAR IN WHICH THE PROVISION IS REVERSED AND THE INCOME IS OFFERED. WITH THIS REMARK, WE SUSTAIN THE ADDITI ON OF RS.5,51,327/- MADE BY THE ASSESSING OFFICER IN THE YEAR UNDER CONSIDER ATION BY WAY OF DISALLOWING THE PROVISION. ACCORDINGLY, THE GROUND NO.2 OF THE ASSESSEES APPEAL IS REJECTED. 8. GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UN DER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER THAT THE APPELLANT FIRM IS NOT ENTITLED TO GET CREDIT FOR TDS OF RS.9,62,952/- 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. THE ASSESSING OFFICER DID NOT ALLOW THE CREDIT OF TDS ON THE GROUND THAT THE TAX HAS BEEN DEDUCTED ON THE RENT R ECEIVED BY THE ASSESSEE. THE ASSESSEE HAS NOT OFFERED THE RENT AS THE INCOME OF THE ASSESSEE AND THEREFORE, THE CREDIT FOR TDS CANNOT BE ALLOWED. TH E SAME IS SUSTAINED BY ITA NO. 2382/AHD/2011 ARVIND MURJANI BRANDS PVT LTD VS. ACIT FOR AY 2008-09 4 THE CIT(A). HOWEVER, WE FIND THAT THE IDENTICAL IS SUE IS CONSIDERED BY THE ITAT MUMBAI BENCH IN THE CASE OF THE ASSESSEE FOR A SSESSMENT YEAR 2007- 08, VIDE ITA NO.6708/MUM/2010, WHEREIN THE ITAT DIR ECTED THE ASSESSING OFFICER TO ALLOW THE CREDIT FOR THE TAX DEDUCTED AT SOURCE WITH THE FOLLOWING FINDINGS:- 15. THUS IT EMERGES THAT THE MAJOR FUNCTION OF SEC TION 199 IS TO ALLOW CREDIT FOR TAX DEDUCTED AT SOURCE TO THE PAYEE. THE MODUS OPERANDI FOR THE DISCHARGE OF SUCH FUNCTION IS IN-BUILT IN THE SECTION ITSELF. IT IS DONE BY FINDING OUT THE YEAR IN WHICH THE INCOME ON WHICH TAX WAS DEDUCTED, IS ASSESSABLE TO TAX. IT IS QUITE NATURAL THAT THE CREDIT FOR TAX DEDUCTED A T SOURCE FROM THE AMOUNT OF INCOME SHOULD BE ALLOWED SIMULTANEOUS WITH THE EVEN T OF CHARGEABILITY OF SUCH INCOME TO TAX. SO ONCE THE YEAR OF CHARGEABILI TY OF THE AMOUNT RECEIVED IN THE NATURE OF INCOME IS DETERMINED, THE CREDIT F OR TAX DEDUCTED HAS TO BE ALLOWED TO THE PAYEE IN SUCH YEAR. THIS IS THE ONLY MANDATE OF SECTION 199. THIS SECTION BASICALLY DEALS WITH THE QUESTION OF D ETERMINATION OF THE YEAR IN WHICH THE CREDIT FOR THE TAX DEDUCTED AT SOURCE SHO ULD BE ALLOWED. THE OBJECT OF THIS SECTION IS TO AVERT THE SITUATION OF CLAIMI NG CREDIT OF THE TAX DEDUCTED AT SOURCE IN THE YEAR OF ASSESSEE'S CHOICE. THAT IS WHY IT HAS BEEN MADE CLEAR THAT THE CREDIT SHOULD BE ALLOWED IN THE YEAR IN WH ICH THE INCOME ON WHICH SUCH TAX HAS BEEN DEDUCTED, IS ASSESSABLE SO AS TO MAKE IT EXPLICITLY CLEAR THAT THE ASSESSEE MAY NOT CLAIM THE CREDIT FOR SUCH TAX DEDUCTED AT SOURCE IN AN EARLIER OR A LATER YEAR. ONCE THE QUESTION IS DECID ED THAT THE INCOME IS CHARGEABLE IN A PARTICULAR YEAR IN THE HANDS OF THE PAYEE, THEN THE SCOPE OF SECTION EXTINGUISHES INASMUCH AS THERE REMAINS NO D OUBT IN ALLOWING CREDIT FOR SUCH TAX TO THE PAYEE IN THE RELEVANT YEAR. AFT ER THAT THERE CANNOT BE ANY DISPUTE THAT THE CREDIT SHOULD HAVE BEEN ALLOWED IN A LATER OR AN EARLIER YEAR. IT IS FOR THIS REASON THAT WHEN THE QUESTION HAS BE EN DETERMINED THAT THE INCOME HAS ACCRUED OR RECEIVED IN ONE YEAR THEN IT SHOULD BE ASSESSED IN THAT YEAR AND CREDIT FOR TAX DEDUCTED AT SOURCE SHOULD B E ALLOWED IN THAT YEAR ALONE. A PROBLEM MAY ARISE IN GIVING EFFECT TO THE PRESCRIPTION OF SECTION 199 (THAT IS, ALLOWING CREDIT OF TAX DEDUCTED AT SOURCE TO THE PAYEE) IF THE QUESTION IS DETERMINED THAT THE AMOUNT RECEIVED IS NOT AT AL L AN INCOME ASSESSABLE TO TAX EITHER IN THE YEAR OF RECEIPT OR IN ANY EARLIER OR LATER YEAR. SUCH PROBLEM HAS ARISEN IN THE PRESENT CASE. IT IS NOTICED THAT THE AMOUNT OF RENT HAS SUFFERED DEDUCTION OF TAX AT SOURCE AT TWO STAGES B UT INCOME IS CHARGEABLE TO TAX ONLY ONCE AND THAT TOO NOT IN THE HANDS OF THE ASSESSEE. THE REVENUE HAS RECEIVED THE TAX DUE ON SUCH RENT BY WAY OF DEDUCTI ON OF TAX AT SOURCE MADE BY M/S ARVIND BRANDS LIMITED, WHO EVENTUALLY PAID T HE NET AMOUNT OF RENT TO THE LANDLORDS AFTER DUE DEDUCTION OF TAX AT SOUR CE. THE AO HAS UNEQUIVOCALLY HELD THAT THE AMOUNT IS NOT CHARGEABL E TO TAX IN THE HANDS OF THE ASSESSEE. THE FINDING OF THE AO IS NOT THAT SUC H RECEIPT IS LIABLE TO TAX IN ITA NO. 2382/AHD/2011 ARVIND MURJANI BRANDS PVT LTD VS. ACIT FOR AY 2008-09 5 THE HANDS OF THE ASSESSEE IN A LATER OR AN EARLIER YEAR. RATHER IT IS THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS NOT AT ALL CHARG EABLE TO TAX EITHER IN THE CURRENT YEAR OR IN AN EARLIER OR A LATER YEAR. IF T HE AO HAD HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE AS CHARGEABLE TO TA X IN A LATER OR AN EARLIER YEAR, THEN OF COURSE, THE ASSESSEE COULD NOT HAVE V ALIDLY CLAIMED THE CREDIT FOR TAX DEDUCTED AT SOURCE AGAINST ITS INCOME FOR THE C URRENT YEAR. AS THE AMOUNT ON WHICH TAX WAS DEDUCTED AT SOURCE IS NOT AT ALL C HARGEABLE TO TAX, THEN THE COMMAND OF SECTION 199 WILL HAVE TO BE HARMONIOUSLY AND PRAGMATICALLY READ AS PROVIDING FOR ALLOWING CREDIT FOR THE TAX D EDUCTED AT SOURCE IN THE YEAR OF THE RECEIPT OF THE AMOUNT, ON WHICH TAX WAS DEDUCTED AT SOURCE. IF THE VIEW POINT CANVASSED BY THE REVENUE IS ACCEPTED AND THE ASSESSEE IS NOT ALLOWED CREDIT FOR THE TAX DEDUCTED AT SOURCE, AN A RDUOUS SITUATION WILL ARISE. THE AMOUNT OF TAX DEDUCTED AT SOURCE WILL REMAIN IN LIMBO . THE REVENUE WILL NEVER BE IN POSITION TO ALLOW CREDIT FOR SUCH TAX BECAUSE THE AMOUNT IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AND IT CANNOT RETAIN SUCH AMOUNT WITH IT IN CONTRAVENTION OF ARTICLE 265 OF T HE CONSTITUTION OF INDIA. TO CIRCUMVENT SUCH A SITUATION, THE ONLY POSSIBLE S OLUTION IS TO ALLOW CREDIT FOR THE TAX DEDUCTED AT SOURCE TO THE PAYEE OF THE AMOUNT IN THE YEAR FOR WHICH SUCH TAX WAS DEDUCTED AND THE AMOUNT WAS PAID AFTER DEDUCTION OF TAX AT SOURCE. AS IN THE PRESENT CASE THE ASSESSEE RECE IVED THE AMOUNT AFTER DEDUCTION OF TAX AT SOURCE FROM GUYS & GALS AND SUC H AMOUNT IS NOT ADMITTEDLY CHARGEABLE TO TAX IN ITS HANDS, WE HOLD THAT THE CREDIT FOR THE TAX DEDUCTED AT SOURCE SHOULD BE ALLOWED IN THE INSTANT YEAR. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND DIRECT T HAT THE CREDIT FOR THE TAX DEDUCTED AT SOURCE AMOUNTING TO RS.8,77,881 BE ALLO WED TO THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER CONSIDERATION. 10. ADMITTEDLY, THE FACTS OF THE YEAR UNDER CONSIDE RATION ARE IDENTICAL. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DEC ISION OF THE ITAT IN ASSESSEES OWN CASE, DIRECT THE ASSESSING OFFICER T O ALLOW THE CREDIT FOR THE TAX DEDUCTED AT SOURCE, AMOUNTING TO RS.9,62,952/-. 11. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 5 TH JUNE, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (G.D. AGRAWAL) VICE-PRESIDENT AHMEDABAD; DATED 05/06/2015 BIJU T., PS ITA NO. 2382/AHD/2011 ARVIND MURJANI BRANDS PVT LTD VS. ACIT FOR AY 2008-09 6 *+ $ %, -*,% *+ $ %, -*,% *+ $ %, -*,% *+ $ %, -*,%/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. % '. / CONCERNED CIT 4. '. ( ) / THE CIT(A) 5. ,12 % , , / DR, ITAT, AHMEDABAD 6. 24 5# / GUARD FILE . *+' *+' *+' *+' / BY ORDER, TRUE COPY 6 66 6/ // / 7 7 7 7 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD