Amorphos Chemicals P.Ltd, Delhi V. DCIT, Circle-2(2), New Delhi

ITA 2570/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4955 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P SINGH SENIOR
• Assessee Lawyers: AMOL SINHA ASHVINI KUMAR; NITIN GULATI S
• Keywords: Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2570/DEL./2018 (ASSESSMENT YEAR : 2013-14) AMORPHOS CHEMICALS PVT. LTD., VS. DCIT, CIRCLE 2 (2),\ E-1/15, SECOND FLOOR, SECTOR 7, NEW DELHI. ROHINI, NEW DELHI 110 085. (PAN : AAACA4938L) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI AMOL SINHA, ASHVINI KUMAR & NITIN GULATI, ADVOCATES REVENUE BY : SHRI B.P. SINGH, SENIOR DR DATE OF HEARING : 16.10.2018 DATE OF ORDER : 23.10.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. AMORPHOS CHEMICALS PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FIL ING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATE D 19.01.2018 PASSED BY LD. CIT (APPEALS)-32, NEW DELHI QUA THE A SSESSMENT YEAR 2013-14 ON THE GROUNDS INTER ALIA THAT :- 1. THE ORDER PASSED BY CIT (A) -32 IS BAD IN LAW AND VOID AB-INITIO. ITA NO.2570/DEL./2018 2 2. THE CIT (A)-I HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.12,89,711/- ON THE APPELLANT BY THE RESPONDENT UNDER THE HEAD OF FINANCE COST CLAIMED T O THE TUNE OF RS.L,87,14,112/-. THE DETAILED LIST O F CHARGES PAID TO DIFFERENT BANKS AND FINANCIAL INSTITUTIONS WERE SUBMITTED TO THE ASSESSING OFFICE R AT THE TIME OF ASSESSMENT PROCEEDINGS. THE LEARNED ASSESSING OFFICER HAS DISALLOWED THE SUM ON ACCOUNT OF NON DEDUCTION OF TDS ON THE PAYMENT MADE TO FINANCIAL INSTITUTIONS. IN RESPECT OF DISALLOWANCE IT IS SUBMITTED THAT SAID LOANS WERE RAISED IN THE NAME O F ASSESSEE COMPANY AND HAVE BEEN UTILIZED FOR BUSINES S PURPOSE ONLY. THESE COMPANIES ARE WELL KNOWN FINANC E COMPANIES ENGAGED IN THE BUSINESS OF FINANCING BUSINESS AND ARE IN THE NATURE OF FINANCIAL INSTITU TIONS. FURTHER ASSESSEE COMPANY HAS PAID INTEREST TO WELL KNOWN FINANCE COMPANIES AS SHOWN IN THE ORDER PASSE D BY THE A.O. WE ARE ASSUMING THAT THOSE SAID COMPAN IES FILED THEIR RETURNS ON REGULAR BASIS. ONCE THE SAID COMPANIES HAVE SHOWN THE INTEREST RECEIVED IN THEIR BOOKS OF ACCOUNT AND PAID LIABILITIES OF INCOME TAX AS CALCULATED, THEN THERE IS NO QUESTION OF DISALLOWAN CE AS MADE BY THE ASSESSING OFFICER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : THE ASSESSEE IS INTO THE BUSINESS OF TRADING OF CHEMICALS SPECIALLY CONSTRUCTION CHEMICA L RAW MATERIAL AND IS ALSO INTO TRADING OF POLYESTER FILM ON A VER Y SMALL SCALE AND THE ASSESSEE HAS ALSO RECEIVED COMMISSION ON SALES MADE ON CONSIGNMENT BASIS. AO NOTICED FROM THE PROFIT & LO SS ACCOUNT THAT THE ASSESSEE HAS INCURRED FINANCE COST OF RS.1,87,1 4,112/- TOWARDS INTEREST AND THE ASSESSEE WAS CALLED UPON TO FURNIS H THE DETAIL OF PAYMENT OF INTEREST AND DEDUCTION OF TAX. DETAILS FURNISHED BY THE ITA NO.2570/DEL./2018 3 ASSESSEE SHOW THAT IT HAS MADE PAYMENT OF RS.12,89, 711/- TO VARIOUS PARTIES WITHOUT DEDUCTION OF TAX AT SOURCE. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE, AO PROCEEDED TO CONCLUDE THAT ASSESSEE HAS COMMITTED DEFAULT U/S 194A OF THE INCO ME-TAX ACT, 1961 (FOR SHORT THE ACT) AND CONSEQUENTLY EXPENDI TURE OF RS.12,89,711/- HAS BEEN DISALLOWED U/S 40(A)(IA) OF THE ACT. 3. ASSESSEE CARRIED THE MATTER BY WAY OF APPEAL BEF ORE THE LD. CIT (A) WHO HAS CONFIRMED THE DISALLOWANCE BY DISMI SSING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME U P BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. ADMITTEDLY, THE ASSESSEE COMPANY HAS MADE PAYMEN T TOWARDS INTEREST TO NON-BANKING FINANCIAL CORPORATI ON (NBFC) WITHOUT DEDUCTING TDS THEREON AND THE LOANS WERE RA ISED IN THE NAME OF THE ASSESSEES COMPANY ITSELF WHICH WAS UTI LIZED FOR BUSINESS PURPOSE ONLY. IT IS ALSO NOT IN DISPUTE T HAT THE COMPANIES ARE WELL-KNOWN FINANCE COMPANIES ENGAGED IN THE BUS INESS OF FINANCING AND AS SUCH ARE FINANCIAL INSTITUTIONS. IT IS THE CASE OF THE ITA NO.2570/DEL./2018 4 ASSESSEE THAT INTEREST WAS PAID TO WELL-KNOWN FINAN CE COMPANIES WHO ARE NBFCS EXCEPT TWO COMPANIES. 6. IT IS CONTENDED BY LD. AR FOR THE ASSESSEE THAT IT IS UNDERSTANDABLE THAT THE SAID COMPANIES HAVE FILED T HEIR RETURNS ON REGULAR BASIS AND HAVE SHOWN THE INTEREST RECEIVED IN THEIR BOOKS OF ACCOUNT AND PAID DUE LIABILITIES OF INCOME-TAX AND IN SUCH CIRCUMSTANCES, NO DISALLOWANCE CAN BE MADE AND RELI ED UPON THE CASES OF COORDINATE BENCHES OF THE TRIBUNAL IN SHRI AZMATH ULLA VS. ACIT ITA NO.144/BANG/2017 DATED 07.06.2017 AND ITO VS. DR. JAIDEEP KUMAR SHARMA (2014) 52 TAXMANN.COM 42 0 (DELHI-TRIB.) DECIDED BY FOLLOWING THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN CASE OF CIT VS. NARESH KUMAR 362 ITR 256 AND REACHED THE CONCLUSION THAT SECTION 40(A)(IA) OF THE ACT SHALL HAVE RETROSPECTIVE EFFECT AND IN CASE THE RECIPIENT OF INTEREST IN QUESTION HAVE ALREADY CONSIDERED THE SA ME FOR COMPUTING THEIR INCOME OFFERED TO TAX THEN DISALLOW ANCE U/S 40(A) (IA) IS NOT ATTRACTED. 7. NO DOUBT, THE ASSESSEE HAS NOT FILED DETAIL OF A NY SUCH MATERIAL IF THE RECIPIENT OF INTEREST IN QUESTION A CCOUNTED FOR THE INTEREST RECEIVED IN THEIR ACCOUNT AND PAID DUE LIA BILITIES OF THE INCOME-TAX, BUT TAKING THE CONTENTIONS RAISED BY AS SESSEE ON ITS FACE VALUE AS ALL THE COMPANIES EXCEPT TWO ARE WELL -KNOWN NBFC, ITA NO.2570/DEL./2018 5 THE ISSUE IN QUESTION IS REMANDED BACK TO THE AO TO VERIFY THE CONTENTIONS RAISED BY THE ASSESSEE AND IN CASE, HE IS SATISFIED THAT THE CONCERNED NBFCS HAVE INCLUDED THIS INCOME IN CO MPUTATION OF THEIR INCOME OFFERED TO TAX, THEN IT WOULD BE DEEME D TO COMPLY WITH THE PROVISIONS CONTAINED U/S 40(A)(IA) OF THE ACT. SO, IN CASE NBFCS ARE FOUND TO HAVE SHOWN THE INTEREST RECEIVED IN THEIR BOOKS OF ACCOUNT AND PAID DUE LIABILITIES OF THE IN COME-TAX FOR COMPUTATION OF INCOME THEN NO DISALLOWANCE CAN BE M ADE U/S 40(A)(IA) OF THE ACT. CONSEQUENTLY, APPEAL FILED B Y THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 23 RD DAY OF OCTOBER, 2018. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 23 RD DAY OF OCTOBER , 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-32, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.