M/s Spiral Construction Corpo., JUNAGADH V. The Assistant Commr. Income Tax,Cir-1, JUNAGADH

ITA 256/RJT/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6643 (ITAT-RAJKOT)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: RD LALCHANDANI
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI K. NARSIMHA CHARRY , MEMBER ITA NO. 256 / RJT /201 6 ASS T. YEAR : 200 7 - 0 8 M/S. SPIRAL CONSTRUCTION CORPO 101, SHRADDHA APARTMENT, T.B. HOSPITAL ROAD, JUNAGADH PAN : AAHFS4965M (APPELLANT) VS ACIT, CIRCLE - 1, JUNAGADH (RESPONDENT) APPELLANT BY : SHRI R.D. LALCHANDANI, ADV. RESPONDENT BY : SHRI AVINASH KUMAR, DR DATE OF HEARING : 2 0 /0 3 /201 7 DATE OF PRONOUNCEMENT : 24 /0 3 /201 7 O R D E R PER K. NAR A SIMHA CHARY, MEMBER, JM : THIS IS AN APPEAL AGAINST THE ORDER DATED 1. 3 .201 6 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 3 , RAJKOT (HEREINAFTER REFERRED TO AS LD. CIT(A) ) IN APPEAL NO. CIT(A) - 3/513/13 - 14 . 2. BRIEFLY STATED FACTS ARE THAT , THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSESSMENT YEAR 2007 - 08 WAS COMPLETED ON 29.12.2009 BY DET ERMINING THE TOTAL INCOME AT RS.13,78,050/ - . BUT THE ASSESSING OFFICER 2 ITA NO. 256/RJT/2016 M/S. SPIRAL CONSTRUCTION CORPO SUBSEQUENTLY NOTICED THAT THE ASSESSEE PAID A SUM OF RS.3,74,877/ - TO CERTAIN NON - BANKING FINANCIAL INSTITUTIONS, VIZ. ASHOK LEYLAND FINANCE, KOTAK MAHINDRA FINANCE, TATA FINANCE, 20 TH CENTURY FINANCE, ETC. TOWARDS INTEREST, BUT WITHOUT DEDUCTING THE INCOME - TAX AT THE TIME OF PAYMENT/CREDIT OF SUCH AMOUNT, AS SUCH VIOLATED THE PROVISIONS OF SEC. 194A(1) OF THE ACT. ON THIS, THE ASSESSING OFFICER REOPENED THE PROCEEDINGS BY ISSUING NOTICE U/S 148 OF THE ACT AND MADE AN ADDITION OF RS.3,74,877/ - BY DISALLOWING THE SUM U/S 40(A)(IA) OF THE ACT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BUT THE LD. CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFICER BY WAY OF THE IMPUGNED ORDER. 3. AGGRIEVED BY THE SAID ORDER OF LD. CIT(A), THE ASSESSEE IS BEFORE US IN THIS APPEAL SUBMITTING THAT IN VIEW OF THE AMENDMENT TO SEC. 40(A)(IA) OF THE ACT, INTRODUCED BY THE FINANCE ACT, 2012 EVEN IF THERE IS A FAILURE TO DEDUCT TDS, DISALLOWANCE OF EXPENDITURE CANNOT BE MADE IF THE RECIPIENTS OF THE AMOUNT HAVE TAKEN INTO ACCOUNT THE PAYMENT OF INTEREST WHILE COMPUTING THEIR INCOME. THE LD. AR RELIES ON THE DECISION DATED 20.2.2017 OF THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF SHRI NAVUBHA J. CHAVDA VS. ITO IN IT A NO. 592/RJT/2014 IN SUPPORT OF HIS CONTENTIONS. HOWEVER, THE LD. DR DISPUTES THE SAME STATING THAT UNLESS THE ASSESSEE ESTABLISHES THAT THE RECIPIENTS OF THE AMOUNT HAVE PAID TAXES ON THE IMPUGNED PAYMENTS, THE ASSESSEE CANNOT HAVE THE BENEFIT OF THE AR GUMENTS ADVANCED BY THEM, AS SUCH PRAYED TO DISMISS THE APPEAL. 4. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS RAISED ON EITHER SIDE AND PERUSED THE PAPERS PLACED ON RECORD. IN THE DECISION RELIED 3 ITA NO. 256/RJT/2016 M/S. SPIRAL CONSTRUCTION CORPO UPON BY THE ASSESSEE, IT IS CLEARLY HELD THAT IN VIEW OF INTRODUCTION OF SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT BY THE FINANCE ACT, 2012 W.E.F. 1.7.2012 R.W.S. 201 OF THE ACT, DESPITE THE FAILURE TO DEDUCT THE TDS, DISALLOWANCE OF EXPENDITURE SHOULD NOT BE MADE IF THE RECIPIENTS OF THE AMOUNT HAVE TAKEN INTO ACCOUNT THE AMOUNT OF INTEREST RECEIVED BY THEM WHILE COMPUTING THE INCOME IN THEIR HANDS AND PAID TAXES THEREON. RELIANCE WAS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LANDMARK TOWNSHIP PVT. LTD. , 377 ITR 635 (DELHI) IN SUPPORT OF THIS PROPOSITION. FURTHER, I N THIS CASE ALSO, THE REVENUE HAD NOT REBUTTED THE ASSERTIONS OF ASSESSEE THAT THE RECIPIENTS OF THE INTEREST HAVE DULY PAID THE TAXES ON THE INTEREST AMOUNT RECEIVED BY THEM AND, AS A MATTER OF FACT, THE RECIPIENTS ARE REPUTED COMPANIES AND THE AMOUNT INVOLVED IS ONLY RS.3,74,877/ - . THE FACTS OF THE CASE ARE IDENTICAL AND THE PROPOSITION LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CIT VS. ANSAL LANDMARK TOWNSHIP PVT. LTD. (SUPRA) APPLIES TO THIS CASE ON ALL ITS FOURS. 5. INSOFAR AS THE CONTENTION OF THE DR THAT THE ASSESSEE HAS TO ESTABLISH THAT THE RECIPIENTS OF THE AMOUNT HAVE PAID TAXES ON THE IMPUGNED PAYMENTS IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE HAS TO ESTABLISH THE SAME BY PRODUCTION OF FORM 27BA, AS SUCH WE DEEM IT JUST AND PROPER TO SET ASIDE THE MATTER TO THE FILE OF ASSESSING OFFICER ENABLING THE ASSESSEE TO PRODUCE FORM 27BA AND THE ASSESSING OFFICER TO VERIFY THE SAME TO CONSIDER THE CLAIM OF ASSESSEE. WE, THEREFORE, SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WHO WILL GIVE AN OPPORTUNITY TO THE ASSESSEE TO PRODUCE FORM 27BA AND ON VERIFICATION OF THE SAID FORMS, ASSESSING OFFICER WILL DISPOSE OF THE MATTER ACCORDING TO LAW. 4 ITA NO. 256/RJT/2016 M/S. SPIRAL CONSTRUCTION CORPO 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 T H MARCH , 201 7 . SD/ - SD/ - ( S.V. MEHROTRA ) ACCOUNTANT MEMBER ( K. NARSIMHA CHARRY ) JUDICIAL MEMBER R A J K O T , DATE : 2 4 T H MARCH , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, RAJKOT 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, RAJKOT