Filatex Fashions, Hyderabad, Hyderabad V. ACIT, Circle-17(1), Hyderabad, Hyderabad

ITA 268/HYD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7454 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 31-12-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Keywords: Non-deduction of tax
• Section: 40(a)(ia); 201(1)

Judgement Text

ITA NO 268 OF 2017 FILATEX FASHIONS LTD HYDERABAD. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.268/HYD/2017 (ASSESSMENT YEAR: 2012-13) M/S.FILATEX FASHIONS LTD HYDERABAD PAN: AABCF0122A VS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 17(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI DHARMESH SHAH FOR REVENUE : SHRI NILANJAN DEY, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2012-13 AGAIN ST THE ORDER OF THE CIT (A)-5, HYDERABAD, DATED 30.11. 2016. 2. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CI T (A) IN CONFIRMING THE ADDITION OF RS.44,98,000 MADE BY THE AO U/S 40(A)(IA) OF THE ACT. ACCORDING TO THE ASSESSEE, TH IS SUM OF RS.44,98,000 CONSISTS OF (I) RENT AMOUNT OF RS.10, 80,000; (II) INTEREST OF RS.30,59,020; AND (III) LEGAL AND OTHER PROFESSIONAL CHARGES OF RS.3,59,000, FROM WHICH, THE ASSESSEE DI D NOT DEDUCT THE TDS, BUT ACCORDING TO THE ASSESSEE, ALL ARE ALL OWABLE DEDUCTIONS AS THE PROVISIONS OF SECTION 40(A)(IA) A RE NOT APPLICABLE DATE OF HEARING : 31.12.2018 DATE OF PRONOUNCEMENT : 11.01.2019 ITA NO 268 OF 2017 FILATEX FASHIONS LTD HYDERABAD. PAGE 2 OF 4 TO THESE PAYMENTS. THE ASSESSEE, HAS ACCORDINGLY HA S RAISED THE GROUNDS OF APPEAL. 3. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE MADE A LEGAL ARGUMENT THAT THE ASSESSEE HA S NOT BEEN TREATED AS AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT FOR THE ABOVE PAYMENTS AND IN ACCORDANCE WITH THE SECOND PR OVISO TO SECTION 40(A)(IA) OF THE ACT, NO DISALLOWANCE U/S 4 0(A)(IA) CAN BE MADE. IN SUPPORT OF HIS CONTENTION, HE PLACED RELIA NCE UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ANSAL LAND MARK TOWNSHIP P LTD REPORTED IN 377 ITR 635 WHICH HAS SUBSEQUENTLY BEEN FOLLOWED IN A NUMBER OF CASES AND THE HON'BLE SUPREME COURT HAS DISMISSED THE SLP IN THE CASE OF PR.CIT VS. TIRUPATI CONSTRUCTION. THEREFORE, ACCORD ING TO HIM, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT B E INVOKED IN THIS CASE. 4. ALTERNATIVELY, THE LEARNED COUNSEL FOR THE ASSES SEE ALSO RELIED UPON THE SUBSEQUENT AMENDMENT TO SECTION 40( A)(IA) OF THE ACT WHEREIN THE DISALLOWANCE CAN BE OF ONLY 30% OF THE AMOUNTS PAID WITHOUT MAKING TDS AND HE RELIED UPON THE DECI SION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SHRI BH ANWAR LAL CHOUDHARY VS. ACIT (D.B. ITA NO.360/2017) DATED 15. 02.2018 WHEREIN THE HON'BLE HIGH COURT HAS HELD THE AMENDME NT TO BE RETROSPECTIVE IN NATURE. THEREFORE, HE SUBMITTED TH AT IF THE TRIBUNAL WERE TO HOLD THAT THE PROVISIONS OF SECTIO N 40(A)(IA) WERE APPLICABLE TO THE FACTS ON HAND, THEN THE DISALLOWA NCE SHOULD BE RESTRICTED AS PER THE AMENDED PROVISIONS. ITA NO 268 OF 2017 FILATEX FASHIONS LTD HYDERABAD. PAGE 3 OF 4 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE HON'BLE DELHI HIGH COUR T IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP P LTD (SUPRA) HAS HELD THAT SINCE THE PAYEES HAVE FILED THE RETURNS AND OFFERED THE SUM TO TAX, THE ASSESSEE COULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT AND NO DISALLOWANCE COULD BE MADE U/S 40(A)(IA) OF THE ACT . THE HON'BLE DELHI HIGH COURT HAS HELD THE AMENDMENT TO BE RETRO SPECTIVE IN NATURE. RESPECTFULLY FOLLOWING THE SAID DECISION, T HE COORDINATE BENCH OF THIS TRIBUNAL (TO WHICH BOTH OF US ARE SIG NATORIES) HAS HELD THAT WITHOUT TREATING THE ASSESSEE AS AN ASSE SSEE IN DEFAULT U/S 201(1), PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE ARE INCLINED TO DELETE THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE A CT. FOR THE SAKE OF READY REFERENCE, THE RELEVANT PARAS IN THE CASE OF VISHU INTERNATIONAL LTD V. DCIT IN ITA NO.488 & 621/HYD/2 013 DATED 12.11.2014 ARE REPRODUCED HEREUNDER: 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSE L FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE COMPANY HAS NOT BEE N TREATED AS THE ASSESSEE IN DEFAULT UNDER S.201(1) OF THE ACT F OR ITS FAILURE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE ON ACCOU NT OF AUDIT FEE AND THEREFORE, NO DISALLOWANCE CAN BE MADE ON ACCOU NT OF AUDIT FEE, AS PER THE SECOND PROVISO TO S.40(A)(IA). ALTHOUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT THE SAID SECOND PROVISO HAS BEEN INSERTED IN THE STATUTE BY THE FINANCE ACT , 2012 WITH EFFECT FROM 1.4.2013, IT IS NOTED, THE SAME HAS BEE N TREATED AS RETROSPECTIVELY APPLICABLE FROM 1.4.2005 BY THE COO RDINATE BENCH(BANGALORE) OF THIS TRIBUNAL IN THE CASE OF G. SHANKAR V/S. ACIT(ITA NO.1832/BANG/2013 FOR ASSESSMENT YEAR 2005 -06). WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AS SESSING OFFICER FOR THE ITA NO 268 OF 2017 FILATEX FASHIONS LTD HYDERABAD. PAGE 4 OF 4 LIMITED PURPOSE OF VERIFYING AS TO WHETHER THE ASSE SSEE COMPANY IS TREATED AS AN ASSESSEE IN DEFAULT UNDER S.201(1) OF THE ACT FOR ITS FAILURE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MA DE ON ACCOUNT OF AUDIT FEE. IF IT IS FOUND ON SUCH VERIFICATION THAT NO ORDER UNDER S.201(1) IS PASSED TO THIS EFFECT, THE ASSESSING OF FICER IS DIRECTED TO DELETE THE DISALLOWANCE MADE UNDER S.40(A)(IA) ON A CCOUNT OF AUDIT FEE. GROUNDS NO.2 AND 3 OF THE ASSESSEE'S APPEAL AR E ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ASSESSEES APPEAL IS ACCORDINGLY ALLOWED WITH SIMIL AR DIRECTIONS. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY, 2019. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 11 TH JANUARY, 2019. VINODAN/SPS COPY TO: 1 M/S.FILATEX FASHIONS LTD, MAYFAIR GARDEN APT. FLA T NO.201, H.NO.8-2-682/3A ROAD NO.12, BANJARA HILLS, HYDERABA D 500034 2 ACIT, CIRCLE 17(1) SIGNATURE TOWERS, KONDAPUR, HY DERABAD 3 CIT (A)-5 HYDERABAD 4 PR. CIT 5, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER