The ITO, Ward-2(1), Baroda V. Shri Pradumansinh S.Rathod, Baroda

ITA 2474/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94425 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 06-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Section: 143(3); 148

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE-PRESIDENT AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO.2474/AHD/2012 WITH CO NO.25/AHD/2013 / ASSESSMENT YEAR: 2006-2007 ITO, WARD - 2(1) BARODA. VS SHRI PRADUMANSING S. RATHOD 302, MANGALYA FLATS 79, ALKAPURI SOCIETY ALKAPURI, BARODA 390 007. PAN : ABLPR 1032 K ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI NARENDRA SINGH, SR.DR ASSESSEE BY : NONE / DATE OF HEARING : 08/09/2015 / DATE OF PRONOUNCEMENT: 11/09/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.CIT(A)-II, BARODA DATED 8.8.2012 PASSED FOR THE ASSTT.YEAR 2006-07. 2. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, TH E ASSESSEE HAS FILED CROSS-OBJECTION BEARING NO.25/AHD/2013. NOTI CE OF HEARING IN THE APPEAL AS WELL AS CO WAS SERVED UPON THE ASSESSEE T HROUGH REGISTERED POST. BUT, INSPITE OF SERVICE OF NOTICE, NONE HAS PRESENT ON BEHALF OF THE ASSESSEE. WITH THE ASSISTANCE OF THE LEARNED DR, W E HAVE GONE THROUGH THE RECORD CAREFULLY AND PROCEED TO DECIDE THE APPE AL AS WELL AS CO EX PARTE QUA THE ASSESSEE. 3. SOLITARY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 18,77,140/- WHICH WAS ITA NO.2474/AHD/2012 WITH CO 2 ADDED BY THE AO WITH THE AID OF SECTION 40(A)(IA) O F THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE ASSEESSEE FAILED T O DEDUCT TDS ON THE RENTAL PAID BY HIM TO GUJARAT STATE ROAD TRANSPORT CORPORATION (GSRTC). 4. IN THE CO, THE ASSESSEE HAS NOT RAISED ANY SPECI FIC GROUNDS OF APPEAL. THE ASSESSEE HAS FILED CO RUNNING INTO 5 P AGES, WHICH IS ARGUMENTS IN SUPPORT OF THE ORDER OF THE CIT(A). S UB-SECTION 4 OF SECTION 254 PROVIDES AN OPPORTUNITY TO THE RESPONDE NT TO FILE CO IN THE APPEAL FILED BY AN APPELLANT AGAINST ANY PART OF IM PUGNED ORDER. SUCH CO WOULD BE VERIFIED IN THE PRESCRIBED MANNER EQUIV ALENT TO AN APPEAL. THE ASSESSEE HAS NOT IMPRINTED HIS GRIEVANCE AGAINS T ANY PART OF THE ORDER PASSED BY THE CIT(A), THEREFORE, THE CO IS NO T MAINTAINABLE IN THE PRESENT FORM. THESE ARE ARGUMENTS ONLY, WHICH WE W ILL CONSIDER WHILE DISPOSING OF THE APPEAL OF THE REVENUE. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ON 30.12.2006 DECLARING TOTAL INCOME OF RS.1 1,92,463/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE AND ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT ON 28.11.2008 DETERMINING TOTAL INCOME AT RS.12 ,16,496/-. THE AO HAS REOPENED THE ASSESSMENT BY ISSUANCE OF NOTICE U NDER SECTION 148 ON THE GROUND THAT HE HAS RECEIVED INFORMATION THAT THE ASSESSEE FAILED TO DEDUCT TDS ON THE PAYMENT MADE TO GSRTC. ON SCR UTINY OF THE ACCOUNT, IT REVEALED TO THE AO THAT THE ASSESSEE HA S TAKEN A SHOP ON RENT FROM THE GSRTC AND PAID RENT TO THE TUNE OF RS .18,77,140/-. BUT, ACCORDING TO THE AO, THE ASSESSEE WAS REQUIRED TO D EDUCT TDS ON THE RENT PAID BY HIM, AND SINCE HE FAILED TO DEDUCT TDS , HE IS NOT ENTITLED FOR RENTAL EXPENDITURE. HE MADE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE RENTAL EXPENDITURE. IN THIS WAY, THE LD.AO MADE AN ADDITION OF RS.18,77,140/-. ITA NO.2474/AHD/2012 WITH CO 3 6. DISSATISFIED WITH THE ACTION OF THE AO, THE ASSE SSEE CARRIED THE MATTER BEFORE THE LD.CIT(A). THE LD.CIT(A) HAS DEL ETED THE DISALLOWANCE BY OBSERVING AS UNDER: 3.3.1. I HAVE CONSIDERED THE SUBMISSIONS OF THE LE ARNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFIC ER. FROM THE TERMS OF THE LICENSE AGREEMENT BETWEEN THE ASSESSEE AND GSRTC, IT IS SEEN THAT THE ASSESSEE HAS OBTAINE D THE RIGHT TO RUN A REFRESHMENT ROOM AND TO PROVIDE SPECIFIC ITEM S OF EATABLES IN THE PREMISES OF THE GSRTC. NO TENANCY RIGHT GETS CREATED BY VIRTUE OF THIS LICENSE AGREEMENT. THE ASSESSEE CAN RUN ONLY THE SPECIFIED BUSINESS FROM THAT PREMISES AND CANNOT US E IT FOR ANY OTHER PURPOSE. THE PREMISES HAS BEEN PROVIDED ONLY FOR RUNNING THE SPECIFIED BUSINESS. IT IS UNDISPUTED THAT THE L ICENSOR HAS GIVEN IN WRITING TO THE ASSESSEE THAT SINCE THEIR INCOME WAS EXEMPT FROM TAX, NO TDS WAS LIABLE TO BE DEDUCTED. IT IS B ECAUSE OF THESE REASONS THAT THE ASSESSEE DID NOT DEDUCT TAX ON THE PAYMENTS MADE BY IT TO THE LICENSOR. DURING THE COURSE OF AP PELLATE PROCEEDINGS, CONFIRMATION FROM ANOTHER LICENSE HOLD ER SIMILARLY PLACED AT BHARUCH BUS DEPOT WAS SUBMITTED, AND THE SAID PARTY HAS ALSO CONFIRMED OF NOT HAVING DEDUCTED TDS ON TH E LICENCE FEES PAID BY THEM. THUS ON MERITS, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS ON THE PAYMENT OF LICENSE FEE MADE BY IT TO THE GSRTC. 3.3.2. THE AUTHORIZED REPRESENTATIVE HAS ALSO CITED THE DECISION OF SPECIAL BENCH OF VISAKHAPATNAM ITAT IN THE CASE OF MARILYN SHIPPING & TRANSPORT 136 ITD 23 (VISHAKHAPATNAM) (S B) IN WHICH IT HAS BEEN CLEARLY HELD THAT PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON 31ST MARCH AND IT CANNOT BE INVOKED TO DISALL OW EXPENDITURE WHICH HAS ACTUALLY BEEN PAID DURING THE PREVIOUS YE AR WITHOUT DEDUCTION OF TDS. THIS IS DECISION OF THE SPECIAL B ENCH OF VISAKHAPATNAM ITAT HAS ALSO BEEN FOLLOWED BY THE JU RISDICTIONAL AHMEDABAD IT AT AND HAS BINDING PRECEDENT VALUE. IT IS UNDISPUTED THAT THE ENTIRE LICENCE FEES HAS BEEN PA ID BY THE ASSESSEE DURING THE YEAR ITSELF AND NOTHING IS OUTS TANDING AT THE END OF THE YEAR. HENCE IN THE PRESENT CASE NOTHING IS DISALLOWABLE UNDER SECTION 40(A)(IA) EVEN IF THE LICENCE FEE IS CONSIDERED TO BE IN THE NATURE OF RENT AS ALLEGED BY THE ASSESSING O FFICER. 7. THE LD.DR AT THE OUTSET CONTENDED THAT THE HONB LE GUJARAT HIGH COURT HAD OVERRULED SPECIAL BENCH OF TRIBUNAL (VISA KHAPATNAM) DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORT VS. ACI T, 136 ITD 23 (SB). ITA NO.2474/AHD/2012 WITH CO 4 THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF CIT VS SIKANDARKHAN N. TUNVAR IS REPORTED IN 357 ITR 312. THE ASSESSEE IN ITS SUBMISSIONS FILED BEFORE THE CIT(A) HAS CONTENDED T HAT AS PER CIRCULAR NO.699 DATED 30.1.1995, THE GSRTC IS EXEMPT FROM TA X BEING AN INSTRUMENTALITY OF THE STATE GOVERNMENT, AND THEREF ORE, THE PAYMENT MADE TO THE STATE GOVERNMENT ARE NOT REQUIRED TO BE SUBJECTED TO TDS. WE FIND THAT THE LD.FIRST APPELLATE AUTHORITY HAS F OLLOWED THE ORDER OF THE ITAT, SPECIAL BENCH IN THE CASE OF MERILYN SHIP PING & TRANSPORT (SUPRA). ACCORDING TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT, THE ORDER OF THE CIT(A) IS NOT SUSTAINABLE ON THIS POINT. APART FROM THIS POINT, THE LD.CIT(A) HAS MADE A MENTION OF THE ALTE RNATIVE SUBMISSIONS OF THE ASSESSEE, BUT HAS NOT CONCLUSIVELY DELETED T HE DISALLOWANCE ON THAT FOLD OF SUBMISSIONS. THEREFORE, IN THE INTERE ST OF JUSTICE, WE DEEM IT APPROPRIATE TO SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE LD.CIT(A) FOR RE-ADJUDICATION. THE LD.FIRST APPELLATE AUTHORITY SHALL PROVIDE DUE OPPORTUNITY OF HEARING TO THE ASSESSEE, AND THEREAFTER, RE-ADJUDICATE THE ISSUE IN DISPUTE. IT IS NEEDLESS TO SAY THAT THE OBSERVATIONS MADE BY US WILL NOT IMPAIR AND INJ URE THE CASE OF THE AO AND WILL NOT CAUSE ANY PREJUDICE TO THE DEFENCE/ EXPLANATION OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE AND CRO SS OBJECTION OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 11 TH SEPTEMBER, 2015 AT AHMEDABAD. SD/- SD/- (G.D. AGRAWAL) VICE-PRESIDENT (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 11/09/2015