The ITO, Ward-9(4), Ahmedabad V. Shri Parasmal Manekchand Jain, Ahmedabad

ITA 2690/AHD/2012

• Counselvise Citation: 269020514 RSA 2012
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 30-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: TUSHAR HEMANI

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . . . . , , , , ! ! ! ! ' #$ ' #$ ' #$ ' #$ , , , , % % % % BEFORE S/SHRI N.S. SAINI, ACCOUNTANT MEMBER AND KUL BHARAT, JUDICIAL MEMBER) ITA NO.2690/AHD/2012 [ASSTT.YEAR : 2008-2009] ITO, WARD-9(4) AHMEDABAD. /VS. SHRI PARASMAL MANEKCHAND JAIN PROP: M/S.PARAG ROADWAYS 35, HIRABHAI MARKET DIWAN BALLUBHAI ROAD KANKARIA, AHMEDABAD 380008. PAN : ACIPJ 8222 F ( (( ('( '( '( '( / APPELLANT) ( (( ()*'( )*'( )*'( )*'( / RESPONDENT) + , - / REVENUE BY : SHRI J.P. JHANGID, SR.DR /$ , - / ASSESSEE BY : SHRI TUSHAR HEMANI '0 , $1/ DATE OF HEARING : 13 TH NOVEMBER, 2013 234 , $1/ DATE OF PRONOUNCEMENT : 22-11-2013 5 / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A )-XV, AHMEDABAD DATED 3.9.2012. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL OF THE RE VENUE IS THAT THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF ` ITA NO.2690/AHD/2012 -2- 8,16,960/- MADE ON ACCOUNT OF INTEREST PAID TO G.E. CAPITAL AND CHOLAMANDLAM FINANCE CO., UNDER SECTION 40(A)(IA) O F THE ACT ON THE GROUND THAT SECTION 40(A)(IA) OF THE ACT WOULD BE ATTRACTED ONLY IN RESPECT OF THE PAYABLE AMOUNT OF EXPENDIT URE AS ON 31 ST MARCH OF THE RELEVANT PREVIOUS YEAR. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, THE AO FOUND THAT DURING THE YEAR CON SIDERATION THE ASSESSEE HAS PAID INTEREST TO G.E. CAPITAL & CHOLAM ANDLAM FINANCE CO. OF ` 8,16,690/- ON WHICH TDS WAS NOT DEDUCTED UNDER SECTION 194A OF THE ACT, AND THEREFORE, BY IN VOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE AO MADE DISALLOWANCE OF INTEREST EXPENDITURE OF ` 8,16,690/-. 4. ON APPEAL BEFORE THE LEARNED CIT(A), THE ASSESSE E ARGUED THAT IN CASE WHERE ANY ASSESSEE TAKES VEHICLE LOAN AND AS PER TERMS AND CONDITIONS OF THE FINANCERS, ASSESSEE HAN DED OVER THE POST DATED CHEQUES FOR THE REPAYMENT OF THE LOAN WI TH INTEREST THEREON, IT WAS DIFFICULT TO DEDUCT THE TDS OUT OF SUCH INTEREST PAYMENT. 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE VACATED THE DISALLOWANCE FOR THE REASO NS THAT VISHAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN TRANSPORT & SHIPPING CO., IN ITA NO.477/VIZ ./2008 HELD THAT PROVISIONS OF SECTION 40(A)(IA) OF THE AC T FOR THE ITA NO.2690/AHD/2012 -3- DISALLOWANCE ON ACCOUNT OF INFRINGEMENT OF SECTION 194A I.E. TDS PROVISIONS IS APPLICABLE TO THOSE EXPENDITURE W HICH REMAINED PAYABLE AS ON THE LAST DATE OF FINANCIAL YEAR AND NOT ON ENTIRE SUCH EXPENDITURE INCURRED DURING THE YEAR BY THE ASSESSEE. 6. THE LEARNED DR ARGUED AND SUBMITTED THAT THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIKANDARKH AN T. TUNVAR IN TAX APPEAL NO.905/2012 ORDER DATED 2.5.20 13 HELD AS UNDER: IN MERILYN SHIPPING 146 TTJ 1 (VIZ) (SB) THE MAJOR ITY HELD THAT AS THE FINANCE BILL PROPOSED THE WORDS 'A MOUNT CREDITED OR PAID' AND AS THE FINANCE ACT USED THE W ORDS AMOUNTS PAYABLE', S 40(A)(IA) COULD ONLY APPLY TO A MOUNTS THAT ARE OUTSTANDING AS OF 31ST MARCH AND NOT TO AM OUNTS ALREADY PAID DURING THE YEAR. THIS VIEW IS NOT CORR ECT FOR TWO REASONS. FIRSTLY. A STRICT READING OF S. 40(A)( IA) SHOWS THAT ALL THAT IT REQUIRES IS THAT THERE SHOULD BE A N AMOUNT PAYABLE OF THE NATURE DESCRIBED, WHICH IS SUCH ON W HICH TAX IS DEDUCTIBLE AT SOURCE BUT SUCH TAX HAS NOT BEEN D EDUCTED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THE PR OVISION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE M UST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. IF TH E ASSESSEE'S INTERPRETATION IS ACCEPTED. IT WOULD LEA D TO A SITUATION WHERE THE ASSESSEE WHO THOUGH WAS REQUIRE D TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUCTION THOUGH MADE IS NOT PAID T O THE GOVERNMENT, WOULD ESCAPE THE CONSEQUENCE ONLY BECAU SE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER ASSESSEE WHO WOULD OTHE RWISE BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUN T REMAINED PAYABLE TILL THE END OF THE YEAR. THERE IS NO LOGIC WHY THE LEGISLATURE WOULD HAVE DESIRED TO BRING ABO UT SUCH IRRECONCILABLE AND DIVERSE CONSEQUENCES. SECONDLY, THE PRINCIPLE OF DELIBERATE OR CONSCIOUS OMISSION IS AP PLIED MAINLY WHEN AN EXISTING PROVISION IS AMENDED AND A ITA NO.2690/AHD/2012 -4- CHANGE IS BROUGHT ABOUT. THE SPECIAL BENCH WAS WRON G IN COMPARING THE LANGUAGE USED IN THE DRAFT BILL TO TH AT USED IN THE FINAL ENACTMENT TO ASSIGN A PARTICULAR MEANI NG TO S. 40(A)(IA). ACCORDINGLY, MERILYN SHIPPING DOES NOT L AY DOWN CORRECT LAW. THE CORRECT LAW IS THAT S. 40(A)(IA) C OVERS NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MA RCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. THEREFORE, IT IS THE SUBMISSIONS THAT THE DECISION OF THE VISHAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN TRANSPORT & SHIPPING CO. (SUPRA), HAS BEEN OVERRULED BY THE JURISDICTIONAL HIGH COURT, HENCE, THE ORDER OF THE CIT(A) SHOULD BE REVERSED AND THAT OF THE AO SHOULD BE RES TORED. 7. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT TH E ISSUE SHOULD BE REMANDED BACK TO THE FILE OF THE LEARNED CIT(A) FOR RE- ADJUDICATING THE ISSUE ON MERIT, AS TO WHETHER THE ASSESSEE IS LIABLE TO DEDUCT TDS UNDER SECTION 194A OF THE ACT ON THE INTEREST PAYMENT MADE ON VEHICLES LOANS OR NOT. H E FURTHER SUBMITTED THAT THE FINANCE ACT, 2012 HAS INSERTED T WO PROVISO TO SECTION 40(A)(IA) OF THE ACT WHICH PROVIDES THAT WH ERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF T HE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201, THEN, FO R THE PURPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE ASSESS EE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISH ING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. THUS, IT WAS THE SUBMISSION OF THE ASSESSEE THAT IF THE PAYEE HAS ITA NO.2690/AHD/2012 -5- PAID TAX ON THE SUM PAID BY THE ASSESSEE BY SHOWING THE SAME AS ITS INCOME IN THE RETURN OF INCOME FILED BY HIM, TH EN NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE IN THE HANDS OF THE ASSESSEE. HE, THEREFORE, SUBMITTE D THAT THE LEARNED CIT(A) SHOULD ALSO CONSIDER THIS PROVISO WH ILE DECIDING THE ISSUE AFRESH. 8. AFTER CONSIDERING RIVAL SUBMISSIONS, WE FIND THA T THE DISALLOWANCE MADE BY THE AO UNDER SECTION 40(A)(IA) OF THE ACT OF INTEREST EXPENDITURE OF ` 8,16,690/- PAID TO G.E. CAPITAL & CHOLAMANDLAM FINANCE CO. WAS DELETED BY THE LEARNED CIT(A) BY FOLLOWING THE DECISION OF THE VISHAKHAPATNAM SP ECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN TRANSPORT & SHIPPING CO. (SUPRA), WHEREIN IT WAS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) WAS APPLICABLE ONLY TO THE AMOUNT PAYABLE AT THE END OF THE YEAR AND NOT TO THE AMOUNT ALREADY PAID DURING THE FINANCIAL YEAR. HOWEVER, WE FIND THAT THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF SIKANDARKHAN T. TUNVAR (SUPRA) HAS OVERRULED THE DECISION OF THE ABOVE SPECIAL BENCH O F THE TRIBUNAL AND HELD THAT SECTION 40(A)(IA) COVERS NOT ONLY AMO UNTS WHICH ARE PAYABLE AS ON 31 ST MARCH OF A PARTICULAR YEAR, BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. WE, THEREFORE , SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE. FURTHER , WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE A SSESSEE THAT THE ISSUE SHOULD BE RESTORED BACK TO THE FILE OF THE LE ARNED AO FOR RE- ADJUDICATING THE SAME AFTER CONSIDERING AMENDMENTS MADE BY THE FINANCE ACT, 2012 THAT IF THE PAYEE PAYS THE TAX ON THE AMOUNT ITA NO.2690/AHD/2012 -6- PAID BY THE ASSESSEE TO HIM BY SHOWING THE RECEIPTS AS ITS INCOME, THEN NO DISALLOWANCE OF EXPENDITURE CAN BE MADE IN THE HANDS OF THE ASSESSEE UNDER SECTION 40(A)(IA) OF THE ACT. T HEREFORE, WE REMAND THE MATTER BACK TO THE FILE OF THE AO TO RE- ADJUDICATE THE ISSUE AFRESH AS PER THE LAW AFTER ALLOWING REASONAB LE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS ALSO D IRECTED TO FILE NECESSARY EVIDENCE AS AND WHEN CALLED UPON TO DO SO BY THE AO. THUS, THIS GROUND OF THE REVENUE IS ALLOWED FOR STA TISTICAL PURPOSE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( ' #$ ' #$ ' #$ ' #$ /KUL BHARAT /JUDICIAL MEMBER . .. . . . . . /N.S. SAINI /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD