M/s. Mahagujarat Silk Selection, Ahmedabad V. The Income Tax Officer, Ward-10(3), Ahmedabad

ITA 253/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9209 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 24-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 40(a)(ia); 201

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.253/AHD/2014 ( / ASSESSMENT YEAR : 2009-10) M/S.MAHAGUJARAT SILK SELECTION NOBLES-A OPP. NEHRU BRIDGE ASHRAM ROAD, AHMEDABAD / VS. THE INCOME TAX OFFICER WARD-10(3) AHMEDABAD $ ./ ./ PAN/GIR NO. : AAGFM 5457 M ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : -NONE- ($'* ) / RESPONDENT BY : SHRI DHARMVIR YADAV, SR.DR +,*- / DATE OF HEARING 21/02/2017 ./0*- / DATE OF PRONOUNCEMENT 23/02/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XVI, AHM EDABAD DATED 12/11/2013 FOR THE ASSESSMENT YEAR ASSESSMENT YEAR (AY) 2009-10. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDE R:- ITA NO.253/AHD/ 2014 MAHAGUJARAT SILK SELECTION VS. ITO ASST.YEAR 2009-10 - 2 - 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW A ND FACT OF THE CASE BY CONFIRMING THE ADDITION OF RS.6,67,387/- U/S 40(A)( IA)'. A PRAYER SHOULD BE MADE FOR DELETION AFTER TAKING R ELEVANT GROUND AS UNDER: 'THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.6, 67,387/- MADE U/S 40(A)(IA) IN RESPECT OF THE INTEREST PAID TO THE NO N BANKING FINANCIAL CORPORATION TO BE DELETED ON THE BASIS OF THE AMEND MENT MADE IN SECTION 40(A)(IA) OF THE INCOME-TAX ACT, WHICH ARE AS FOLLO W - AS PER AMENDMENT IN SECTION 40(A)(IA) OF THE INCOME -TAX ACT TO PROVIDE THAT DISALLOWANCE OF BUSINESS EXPENSES PAYABLE TO RESIDENT PAYEE DUE TO NON- DEDUCTION OF TDS WILL NOT BE MADE IF THE PAYER IS NOT CONSIDERED AS AN 'ASSESSEE IN DEFAULT' UNDER FIRST PROVISO TO SECTIO N 201(1). AS PER FIRST PROVISO TO SECTION 201(1), A PAYER WHO FAILS TO DEDUCT TDS FROM THE AMOUNT PAID TO A RESIDENT OR ON THE AMOUNT CREDITED TO THE ACCOUNT O F A RESIDENT SHALL NOT BE DEEMED TO BE AN 'ASSESSEE IN DEFAULT', IF SUCH RESI DENT: O HAS FURNISHED HIS RETURN OF INCOME UNDER SECT ION 139; O HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INC OME IN SUCH RETURN OF INCOME; AND O HAS PAID TAX DUE ON THE INCOME DECLARED BY HI M IN SUCH RETURN OF INCOME AND THE TAX PAYER FURNISHES A CERTIFICATE TO THIS E FFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. THUS AS PER THE ABOVE AMENDMENT IN SECTION 40(A)(IA ) OF THE INCOME TAX ACT OUR ASSESSEE IS NOT CONSIDER AS AN 'ASSESSEE IN DEF AULT' AS THE ABOVE MENTIONED PARTY HAD FURNISH THEIR RETURN & TAKEN IN TO ACCOUNT AMOUNT PAID TO THEM BY WAY OF INTEREST & PAID THE TAX ON T HE SAME. AND AT THE END THE APPELLANT SHOULD CRAVE LEAVE FOR VARIATION OR WITHDRAWAL OF GROUNDS OF APPEAL AS UNDER: 'THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER VA RY AND / OR WITHDRAW ANY OR ALL THE ABOVE GROUNDS OF APPEAL.' ITA NO.253/AHD/ 2014 MAHAGUJARAT SILK SELECTION VS. ITO ASST.YEAR 2009-10 - 3 - 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN THE B USINESS OF TRADING IN SAREES AND DRESS MATERIALS. IN THE COURSE OF SCRUT INY ASSESSMENT UNDER S.143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER R EFERRED TO AS 'THE ACT') FOR THE RELEVANT AY 2009-10, THE ASSESSING OF FICER (AO) FOUND THAT ASSESSEE HAS PAID INTEREST TO CERTAIN PARTIES WHERE TDS HAS NOT BEEN DEDUCTED. IT WAS SUBMITTED BY ASSESSEE IN THE DEFE NCE THAT INTEREST PAID TO CERTAIN PARTIES ARE FOLLOWING BANKING REGULATION S AND THEREFORE NO DEDUCTION WAS REQUIRED TO BE MADE. THE AO HOWEVER, DID NOT FIND THE CONTENTIONS OF THE ASSESSEE AS TENABLE AND INVOKED SECTION 40(A)(IA) FOR NON-DEDUCTION OF TDS ON EXPENSES INCURRED TOWARDS I NTEREST PAYMENTS. THE CIT(A) IN FIRST APPEAL GRANTED PARTIAL RELIEF. 4. AGGRIEVED BY THE DISALLOWANCE SUSTAINED BY THE CIT(A) UNDER S.40(A)(IA), THE ASSESSEE IS IN SECOND APPEAL BEFOR E THE TRIBUNAL. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY APPLICATION FOR SEEKING ADJOURNMENT HAS BEEN FILED. MR.DHARMVIR YADAV APPEARED FOR THE REVENUE. ACCORDINGLY, THE MATTER IS PROCEEDED EX-PARTE . ITA NO.253/AHD/ 2014 MAHAGUJARAT SILK SELECTION VS. ITO ASST.YEAR 2009-10 - 4 - 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. THE SHORT QUESTION THAT ARISES FOR OUR CONSIDERATION IS WHETH ER DISALLOWANCE MADE UNDER S.40(A)(IA) IS JUSTIFIED IN THE FACTS OF THE CASE. WE OBSERVE THAT IF THE RECIPIENTS PAYEES HAVE TAKEN INTO ACCOUNT THE IMPUGNED SUM OF INTEREST RECEIVED FROM THE ASSESSEE HITHERTO WHILE COMPUTING INCOME IN THEIR HANDS AND PAID TAXES THEREON, THE DISALLOWANC E OF EXPENDITURE OUGHT NOT TO HAVE BEEN MADE IN VIEW OF THE SECOND PROVISO TO SECTION 40(A)(IA) INTRODUCED BY FINANCE ACT, 2012, W.E.F. 01/07/2012 R.W.S. 201 DESPITE FAILURE TO DEDUCT TDS BY THE ASSESSEE. THE AFORESA ID VIEW HAS BEEN PROPOUNDED IN LONG LINE OF JUDICIAL PRECEDENTS. TH E LATEST DECISION ON THE ISSUE IS IN THE CASE OF CIT VS. ANSAL LAND MARK TOW NSHIP PVT.LTD. REPORTED AT 377 ITR 635 (DELHI). THUS, IN THE BACK DROP OF THE AFORESAID DECISION OF THE HONBLE DELHI HIGH COURT, WE HOLD T HAT DISALLOWANCE UNDER S.40(A)(IA) CANNOT BE FASTENED ON THE ASSESSE E WHERE THE RECIPIENTS HAVE DISCHARGED TAX OBLIGATION ON THE CORRESPONDING INTEREST INCOME RECEIVED BY THEM. IN THIS VIEW OF THE MATTER, WE D EEM IT EXPEDIENT TO REMIT THE MATTER BACK TO THE FILE OF THE AO TO SATI SFY ITSELF THAT THE RESPECTIVE RECIPIENTS HAVE DULY INCLUDED THE INTERE ST PAYMENTS MADE BY THE ASSESSEE IN DISPUTE IN THEIR RETURN OF INCOME. SUITABLE OPPORTUNITY SHALL BE PROVIDED TO THE ASSESSEE WHILE DECIDING TH E ISSUE. THE MATTER IS ACCORDINGLY RESTORED BACK TO THE FILE OF AO. WE DI RECT ACCORDINGLY. ITA NO.253/AHD/ 2014 MAHAGUJARAT SILK SELECTION VS. ITO ASST.YEAR 2009-10 - 5 - 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED EX-PARTE FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 23/ 02/2017 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 23 / 02 /2017 4..+,.+../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 567- 8- / CONCERNED CIT 4. 8- ( ) / THE CIT(A)-XVI, AHMEDABAD 5. 9:-+67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. <, / GUARD FILE. / BY ORDER, (9-- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 21.2.17 (DICTATION-PAD 8- PA GES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 21.2.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.23.2.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23.2.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER