The Jammu & Kashmir Bank Ltd, Srinagar V. The Addl. Commissioner of Icome-tax, Jammu

ITA 241/ASR/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1312 (ITAT-AMRITSAR)
• Duration Of Justice: 5 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-06-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M P SINGH
• Keywords: Business expenditure; TDS
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. VIKRAM SINGH YADAV , ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.241/ASR/2014 ASSESSMENT YEAR:2 006-07 THE JAMMU & KASHMIR BANK LTD., M.A. ROAD, SRINAGAR [PAN:AAACT6167G] VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE-1, JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY: SH. JOGINDER SINGH (C.A) RESPONDENT BY: SH. M. P. SINGH (CIT- DR) DATE OF HEARING: 11.06.2019 DATE OF PRONOUNCEMENT: 14.06.2019 ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORD ER OF LD. CIT(A), JAMMU DATED 12.02.2014 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING SOLE GROUND OF APPEAL:- THAT THE WORTHY CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE LD. A.O FOR MAKING A DISALLOWANCE OF RS.14,38,914/- IN RESPECT OF ANNUAL TECHNICAL SUPPORT CHARGES PAID DURING THE YEAR P ERTAINING TO AN EARLIER YEAR. THE WORTHY CIT(A) IS UNJUSTIFIED IN REJECTING THE CONTENTION OF THE APPELLANT THAT TAX ON THIS SUM WAS DE DUCTED AND DEPOSITED IN THE YEAR UNDER CONSIDERATION AND AS PER PR OVISO TO SEC. 40(A)(IA) WHERE IN RESPECT OF ANY SUM TAX HAS BEEN DED UCTED AND PAID IN SUBSEQUENT YEAR THEN SUCH SUM HAS TO BE ALLOWED AS DEDU CTION IN THE PREVIOUS YEAR IN WHICH SUCH SUM HAS BEEN PAID. ITA NO.241 /ASR/2014 (A.Y.2006-07) THE JAMMU & KASHMIR BANK LTD. VS. ACIT 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE HAS MADE PAYMENT TO M/S INFOSYS TECHNOLOGY ON 25.07.200 5 WHICH REPRESENTS ANNUAL TECHNICAL SUPPORT (ATS) CHARGES FOR FIN ANCIAL YEAR 2004-05 AGAINST ORACLE 6 PROCESSORS AT DATA CENTRE, GURGAON WHICH WAS CLAIMED BY THE COMPANY IN THE FINANCIAL YEAR 2005-06 RELEVANT T O IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICE HELD THAT THE SAID EXPENDITURE CANNOT BE ALLOWED AS AN EXPENDITURE FOR THE YEAR UNDER CONSIDERATION SINC E IT RELATES TO AN EARLIER YEAR AND SINCE THE ANNUAL MAINTENANCE CONTRACTS A RE ENTERED INTO IN ADVANCE, THE ASSESSEE HAD FULL KNOWLEDGE THAT THE EXPEN DITURE HAS ACCRUED AND MERELY BECAUSE THE PAYMENT HAS BEEN MADE IN THE YE AR WILL NOT MAKE IT AN ALLOWABLE EXPENDITURE FOR THE ASSESSMENT YEAR 2006-0 7. IN VIEW OF THE SAME, THE EXPENDITURE AMOUNTING TO RS. 14,38,934/- WA S DISALLOWED TREATING THE SAME AS PRIOR PERIOD EXPENDITURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. ON APPEAL, THE LD. CIT(A) OBSERVED THAT THE LIABI LITY TOWARDS PAYMENT OF THESE CHARGES WAS ASCERTAINABLE AS ON 31.03.2005 AND WA S IN THE KNOWLEDGE OF THE MANAGEMENT OF THE BANK AND THEREFO RE, IT SHOULD HAVE BEEN PROVIDED FOR IN THE BOOKS OF ACCOUNTS. FURTHER, T HE CONTENTION OF THE ASSESSEE BANK THAT SINCE IT HAS DEDUCTED & PAID TAXES THEREO N IN THE INSTANT YEAR, THEN SUCH SUM HAS TO ALLOWED AS DEDUCTION IN THE YEAR UNDER CONSIDERATION WAS ALSO FOUND ACCEPTABLE. AGAINST THE SAID FINDING OF THE LD. CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 4. DURING THE COURSE OF HEARING, THE LD. AR SUBMITTED THAT AS PER PROVISO TO SECTION 40(A)(IA) WHERE IN RESPECT OF ANY EXPENDITUR E, WHERE ANY TAX HAS BEEN DEDUCTED AND PAID IN THE SUBSEQUENT YEAR, THEN SU CH SUM HAS TO ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF THE PR EVIOUS YEAR IN WHICH SUCH SUM HAS BEEN PAID. IT WAS SUBMITTED THAT IT IS NOT IN DISPUTE THAT THE ITA NO.241 /ASR/2014 (A.Y.2006-07) THE JAMMU & KASHMIR BANK LTD. VS. ACIT 3 TAX HAS BEEN DEDUCTED ON 25.07.2005 AS EVIDENCED BY FO RM 16A PLACED ON RECORD AS PART OF ASSESSEES PAPER AND THEREFORE, SUCH CLAIM SHOULD BE ALLOWED IN THE IMPUGNED ASSESSMENT YEAR. IT WAS FURTHER SUBMITTED THAT A SIMILAR ISSUE HAS ARISEN IN CASE OF ASSESSEE BANK FOR A.YS 20 10-11 AND 2011- 12 WHEREIN THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 28.02.2017 (IN ITA NO. 74 & 137/ASR./2015 AND ITA NO. 76ASR./2015) AND R ATIO THEREOF APPLIES EQUALLY IN THE INSTANT CASE. IN THE SAID CASE, THE COORD INATE BENCH HAS HELD AS UNDER:- 30. THE ANSWER TO THE OBJECTION/OBSERVATION OF THE LD . CIT(A), AS CORRECTLY CONTENDED IS TO BE FOUND IN COMMISSIONER OF IN COME TAX VS. SMCC CONSTRUCTION, DELHI, 320 ITR 534(DEL). THE HON'BLE HIGH COURT, IN THAT CASE, UPHELD THE OBJECTIONS/FINDINGS OF THE TRI BUNAL THAT BECAUSE OF SECTION 40(A)(IA) OF THE ACT, THE DEDUCTION H AS TO BE ALLOWED IN COMPUTING THE INCOME OF THE PREVIOUS YEAR I N WHICH SUCH TDS HAS BEEN PAID; THAT SECTION 40(A)(IA) STARTS WITH NO N-OBSTANTE CLAUSE, WHICH IS TO THE EFFECT THAT SECTION 40 OVERRIDES THE PROVISIONS OF SECTIONS 30 TO 38; THAT THE AMOUNTS WHICH MAY OTHERWISE B E ALLOWABLE AS BUSINESS EXPENDITURE AS PER THE PROVISIONS OF SECTIONS 30 TO 38 AND WHICH IS CHARGEABLE TO TAX IN THE HANDS OF THE RECEIPI ENT, WOULD NOT BE ALLOWED AS A DEDUCTION, UNLESS THE REQUISITE AMOUNT OF TAX HAS BEEN DEDUCTED ON THE SAID AMOUNT; THAT THUS, MERELY PASSING A DEBIT ENTRY OF THESE EXPENSES IN THE BOOKS OF ACCOUNT, WOULD NOT BE S UFFICIENT FOR CLAIMING THE DEDUCTION IN THE PRESENT ACCOUNT IN THE CON CERNED YEAR AND THEN ALSO, THE DEDUCTION WOULD NOT BE ADMISSIBLE, UNLESS TAX HAS BEEN PAID ON SUCH AMOUNT; AND THAT THE PROVISO TO SECTIO N 40(A)(IA) MAKES IT CLEAR THAT IF TAX HAS BEEN DEDUCTED IN THE SUB SEQUENT YEAR AND PAID, THEN DEDUCTION WOULD BE ALLOWED IN THAT YE AR. ITA NO.241 /ASR/2014 (A.Y.2006-07) THE JAMMU & KASHMIR BANK LTD. VS. ACIT 4 31. OBVIOUSLY, THOUGH IT MAY BE IMPORTANT FOR ACCOUNTI NG PURPOSES, PASSING OF A DEBIT ENTRY IN THE BOOKS OF ACCOUNT, CONCERNI NG THE EXPENSES IN THE YEAR IN WHICH THE EXPENSES WERE INCURRED, FOR THE PURPOSES OF SECTION 40(A)(IA) OF THE IT ACT, IT IS NOT DE TERMINATIVE OF THE DEDUCTIBILITY- PARTICULARLY THE YEAR THEREOF. THE PROVISO TO SECTION 40(A)(IA), AS CONSIDERED BY THE HON'BLE DELHI HIGH COURT , IS UNAMBIGUOUS. IRRESPECTIVE OF THE DEBIT ENTRY HAVING NOT BEEN MADE IN THE YEAR OF INCURRENCE OF THE EXPENDITURE, THE DEDUCTI ON NEEDS TO BE ALLOWED IN THE YEAR IN WHICH THE TAX ON THE EXPENSE I S DEDUCTED AND PAID, PARTICULARLY WHEN THE GENUINENESS OF THE EXPENDI TURE, I.E. ADMISSIBILITY OF THE DEDUCTION IS NOT IN DISPUTE. THI S, EVIDENTLY, IS THE RATIONALE BEHIND SMCC (SUPRA). 5. THE LD. CIT DR IS HEARD WHO HAS RELIED ON THE ORD ER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE REGARDING THE ADMISSIBILITY OF THE EXPENDITURE AS HAS BEEN INCURRED FOR THE PURPOSES OF BUSI NESS. IT IS ALSO NOT IN DISPUTE THAT THE SUBJECT PAYMENT IS LIABLE FOR TDS A ND THE ASSESSEE BANK HAS ACTUALLY DONE THE TDS AND DEPOSITED THE SAME WHILE MAKING THE PAYMENT ON 25.07.2005 DURING THE F.Y 2005-06 RELEVA NT TO IMPUGNED ASSESSMENT YEAR. THEREFORE, EVEN IF THE EXPENDITURE IS HELD TO BE A PRIOR PERIOD EXPENDITURE, AS PER THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT, THE YEAR OF ADMISSIBILITY OF THE SAID EXPENDITURE IS THE YE AR IN WHICH THE TDS HAS BEEN DEDUCTED AND DEPOSITED. THEREFORE, GOING BY THE CLEAR LANGUAGE OF SECTION 40(A)(IA) AND FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE (SUPRA), THE EXPENSES DESERVED TO BE ALLO WED TO THE ASSESSEE BANK AND THE ADDITION SO MADE IS DIRECTED TO BE D ELETED. ITA NO.241 /ASR/2014 (A.Y.2006-07) THE JAMMU & KASHMIR BANK LTD. VS. ACIT 5 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.06.2019. SD/- SD/- (N.K.CHOUDHRY) ( VIKRAM SINGH YADAV ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14.06.2019 GANESH KR. PS COPY OF THE ORDER FORWARDED TO: THE JAMMU & KASHMIR BANK LTD., M.A. ROAD, SRINAGAR (2) THE ACIT, RANGE 1, JAMMU (3) THE CIT(A), JAMMU (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER