The ACIT,Anand Range, Anand V. Prayas Engineering Limited, Anand

ITA 2722/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9937 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Question of law
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA NO: 2722/AHD/2011 (ASSESSMENT YEAR: 2008-09) THE ACIT, ANAND CIRCLE, ANAND V/S PRAYAS ENGINEERING LTD., ANAND SAJITRA ROAD, VALLABHVIDYANAGAR, ANAND (APPELLANT) (RESPONDENT) PAN: AABCP5134E APPELLANT BY : SHRI KEYUR PATEL, SR. D.R . RESPONDENT BY : SHRI M.K. PATEL, A.R. ( )/ ORDER DATE OF HEARING : 16-12-2015 DATE OF PRONOUNCEMENT : 01 -01-2016 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-IV, BARODA DATED 04.08.2011 FOR A.Y. 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. ITA NO. 2722 /AHD/2011 . A.Y. 2008-09 2 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF MANUFACTURING AND SUPPLYING OF BELT CONVEYER SPARES AND ENGINEERI NG JOB WORK. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2008-09 ON 29.0 9.2008 DECLARING TOTAL INCOME AT RS. 14,25,26,488/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 01.11.2010 AND THE TOTAL INCOME WAS DETERMINED AT R S. 15,20,02,830/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 04.08.2011 ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), RE VENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 80,98,770/- U/S 40 (A)(IA) OF THE ACT, IN RESPECT OF PAYMENT MADE TO AKAAISH MECHATRONICS LTD., COMPLETE LY OVERLOOKING THE FACT THAT AS PER PROVISIONS OF SECTION 40(A)(IA), THE TAX IS TO BE DEDUCTED AT SOURCE UNDER CHAPTER XVIIB WHICH PRESCRIBES DIFFERENT RATE UNDER DIFFERE NT SECTIONS AND IN THE INSTANT CASE, THE ASSESSEE DEDUCTED TAX AT A LOWER RATE THAN PRES CRIBED U/S 194J OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 2,44,438/- MADE U/ S 40(A)(IA) OF THE ACT, IN RESPECT OF PAYMENT MADE TO ELECON INFORMATION TECHNOLOGY LTD., COMPLETELY OVERLOOKING THE FACT THAT AS PER PROVISIONS OF SECTION 40(A)(IA), T HE TAX IS TO BE DEDUCTED AT SOURCE UNDER CHAPTER XVIIB WHICH PRESCRIBES DIFFERENT RATE UNDER DIFFERENT SECTIONS AND IN THE INSTANT CASE, THE ASSESSEE DEDUCTED TAX AT A LO WER RATE THAN PRESCRIBED U/S 194J OF THE ACT. 4. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THE SOLI TARY ISSUE IS WITH RESPECT TO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD MADE PAYMENT OF RS. 1,34,97,950/- TO AKAAISH MECHAT RONICS LTD. (AML) ITA NO. 2722 /AHD/2011 . A.Y. 2008-09 3 AND HAD DEDUCTED TDS U/S. 194C OF THE ACT. A.O WAS OF THE VIEW THAT ASSESSEE WAS REQUIRED TO DEDUCT TDS UNDER 194J AND NOT UNDER 194C AS ACCORDING TO HIM THE SERVICES RENDERED BY AML TO TH E ASSESSEE WERE IN THE NATURE OF TECHNICAL SERVICES AND THEREFORE PROVISIO NS OF SECTION 194J WERE APPLICABLE. HE ALSO NOTED THAT IN ANOTHER GROUP CON CERN I.E. ELECON ENGINEERING COMPANY LTD, WHILE MAKING SIMILAR PAYME NTS, IT HAD DEDUCTED TDS UNDER 194J. HE WAS THEREFORE OF THE VIEW THAT S INCE ASSESSEE HAS FAILED TO DEDUCT TDS UNDER 194J, THE EXPENDITURE WAS LIABL E FOR DEDUCTION U/S. 40(A)(IA) AND ACCORDINGLY DISALLOWED 3/5 TH OF THE TOTAL PAYMENT AND THE DISALLOWANCE WAS THUS WORKED OUT TO RS. 80,98,770/- . HE ALSO NOTICED THAT DURING THE YEAR, ASSESSEE HAS MADE PAYMENT TO EXPRE SS TRANSPORT PVT. LTD. (ETPL) WHICH WAS CLEARING AND FORWARDING AGENT OF T HE ASSESSEE AND THE PAYMENTS BY THE ASSESSEE INCLUDED RS. 11,33,134/- O N WHICH ASSESSEE HAD NOT DEDUCTED TDS. A.O WAS OF THE VIEW THAT PAYMENT MADE TO CLEARING AND FORWARDING AGENT EVEN ON ACCOUNT OF REIMBURSEMENT I S SUBJECTED TO TDS. HE THEREFORE CONCLUDED THAT SINCE ON THE REIMBURSEM ENT, ASSESSEE HAD NOT DEDUCTED TDS, THE AMOUNT OF EXPENDITURE WAS LIABLE FOR DISALLOWANCE U/S. 40(A)(IA) OF THE ACT AND ACCORDINGLY DISALLOWED RS. 11,33,134/-. A.O ALSO NOTICED THAT ASSESSEE HAD MADE PAYMENTS TO ELECON I NFORMATION TECHNOLOGY LTD. AND THE PAYMENTS INCLUDED RS. 4,07,397/- TOWAR DS UTP CABLE LAYING CHARGES ON WHICH ASSESSEE HAD DEDUCTED TDS UNDER 19 4C. A.O WAS OF THE VIEW THAT ASSESSEE SHOULD HAVE DEDUCTED TDS U/S. 19 4J OF THE ACT. HE THEREFORE HELD THAT SINCE THE ASSESSEE HAS NOT DEDU CTED TDS UNDER 194J DISALLOWED 3/5 TH OF RS. 4,07,397/- AND WORKED OUT THE DISALLOWABLE AMOUNT TO RS. 2,44,438/-. HE THUS MADE AGGREGATE DISALLOWA NCE OF RS. 94,76,342/- U/S. 40(A)(IA) OF THE ACT. AGGRIEVED BY THE ORDER O F A.O., ASSESSEE CARRIED ITA NO. 2722 /AHD/2011 . A.Y. 2008-09 4 THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 0 4.08.2011 ALLOWED THE APPEAL OF THE ASSESSEE. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS N OW IN APPEAL BEFORE US. 7. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THAT I DENTICAL ISSUES AROSE IN THE CASE OF ASSESSEE FOR A.Y. 07-08 AND LD. CIT(A) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. AGAINST THE ORDER OF LD. CI T(A), REVENUE PREFERRED APPEAL BEFORE HONBLE ITAT. HONBLE ITAT VIDE ORDE R DATED 29.04.2014 IN ITA NO. 2826 OF 2010 DISMISSED THE APPEAL OF THE RE VENUE AND AGAINST THE ORDER OF HONBLE ITAT, REVENUE PREFERRED APPEAL BEF ORE HONBLE GUJARAT HIGH COURT. HONBLE GUJARAT HIGH COURT IN TAX APPEA L NO. 1237 OF 2014 ORDER DATED 17.11.2014 DISMISSED THE APPEAL OF THE REVENUE. HE PLACED ON RECORD THE COPY OF THE ORDER OF TRIBUNAL AS WELL AS HONBLE HIGH COURT. HE THEREFORE SUBMITTED THAT SINCE THE FACTS OF THE CAS E IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF A.Y. 07-08, THE ORDER OF L D. CIT(A) NEEDS TO BE UPHELD AND THE APPEAL OF REVENUE BE DISMISSED. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DI SALLOWANCE OF EXPENSES U/S. 40(A)(IA) OF THE ACT. WE FIND THAT LD. CIT(A) WHILE DECIDING THE APPEAL HAD NOTED THAT IDENTICAL ISSUE AROSE IN THE CASE OF ASSESSEE FOR A.Y. 2007-08 AND HE FOLLOWING THE ORDER OF HIS PRED ECESSOR FOR A.Y. 2007-08 DELETED THE ADDITION MADE A.O. WE FURTHER FIND THAT THE ORDER OF LD. CIT(A) FOR A.Y.07-08 WAS UPHELD BY THE CO-ORDIN ATE BENCH OF TRIBUNAL AND AGAINST WHICH REVENUE HAD PREFERRED AP PEAL BEFORE HONBLE ITA NO. 2722 /AHD/2011 . A.Y. 2008-09 5 GUJARAT HIGH COURT, HONBLE GUJARAT HIGH COURT IN T AX APPEAL NO. 1237 OF 2014 (SUPRA) DISMISSED THE APPEAL OF THE REVENUE BY HOLDING AS UNDER:- 3. HEARD THE LEARNED ADVOCATE APPEARING FOR THE APPELL ANT-REVENUE AND CONSIDERED THE SUBMISSIONS. LEARNED ADVOCATE APPEARING FOR THE APP ELLANT HAS CONTENDED THAT THE CIRCULAR ISSUED BY CBDT IS VERY CLEAR AND THE ISSUE IS GOVERNED BY SECTION 194J. THE LEARNED CIT(A) AS WELL AS ITAT, WHILE CONSIDERING T HE QUESTION HAS OBSERVED IN PARA- 17 AS UNDER: 17. AFTER HEARING BOTH THE PARTIES AND PERUSING TH E RECORD, WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT IN RESPECT OF PAYMENT M ADE BY ASSESSEE TO M/S. ELECON INFORMATION TECHNOLOGY LTD. (EITL) AND M/S. AKAAISH MECHATONICS LTD. (AML) THESE WAS SHORT DEDUCTION OF TAX AND THEREFORE THE RATIO OF THE TRIBUNAL IN THE CASE OF APOLLO TYPES LTD. V. DCIT AND UE TRADE CORPORATION (INDIA) LTD. IS DIRECTLY APPLICABLE TO THE FACTS OF THIS CASE. IN THE CASE O F UE TRADE CORPORATION V. DCIT, THE HONBLE TRIBUNAL IN SIMILAR FACTS HAS HELD AS UNDER :- 6.WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE TAX AUDIT REP ORT IN FORM NO. 3CD PLACED AT PAGES 20 TO 49 OF THE PAPER BOOK. ANNEXURE-XIV O F THE TAX AUDIT REPORT GIVES THE DETAILS OF TAX DEDUCTIBLE UNDER VARIOUS SECTIONS OF THE ACT. PAGE 1 OF ANNEXURE-XIV GIVES THE DETAILS OF PAYMENTS ON WHICH TAX HAS NOT BEEN DEDUCTED AT ALL. THE TOTAL AMOUNT OF EXPENDITURE IS AT RS.7 ,32,827/-. PAGES 2 TO 6 OF ANNEXURE-XIV GIVE THE DETAILS WHERE THERE IS A S HORTFALL DUE TO LESSER DEDUCTION THAN REQUIRED TO BE DEDUCTED. THE TOTAL AMOUNT OF EXPENSES IS AT RS. 20,24,455/- ON WHICH SHORTFALL OF TAX AT RS. 3,26,011/- HAS BEE N WORKED OUT BY THE TAX AUDITORS: PAGE 3 OF THE ANNEXURE GIVES THE DETAILS WHERE TAX HAS BEEN DEDUCTED BUT NOT PAID TO THE CREDIT OF THE CENTRAL GOVERNMEN T, THE ASSESSEE HAS ADDED BACK THE EXPENDITURE ON WHICH TAX WAS DEDUCTIBLE BUT NO TAX WAS DEDUCTED AT ALL AND ALSO WHERE TAX WAS DEDUCTED AT SOURCE BUT NOT PAID TO THE CREDIT OF CENTRAL GOVERNMENT AMOUNTING TO RS. 20,16,778/-. DETAILS OF SUCH EXPENDITURE IS GIVEN AT PAGE 1 AND PAGE 3 OF THE ANNEXURE-XIV TO THE TAX AU DIT REPORT. THE LD. AR OF THE ASSESSEE HAS CLAIMED THE BENEFIT OF TWO DECISIONS, ONE BY THE KOLKATA BENCH AND OTHER BY THE MUMBAI BENCH OF ITAT. IN THE CASE OF D CIT VS. CHANDABHOY S ITA NO. 2722 /AHD/2011 . A.Y. 2008-09 6 JASSOBHOY (SUPRA) THE ASSESSEE MADE PAYMENT TO THE CONSULTANTS BY WAY OF SALARY AFTER DEDUCTION OF TAX AT SOURCE UNDER SEC. 192 AND CLAIMED THE DEDUCTION FOR THE SAME. THOSE CONSULTANTS WERE WORKING FOR A PERIOD O F TWO YEARS WITH THE ASSESSEE. HOWEVER, THE AO APPLIED THE PROVISIONS OF SEC. 194J . IN THIS CASE IT WAS HELD THAT PROVISIONS OF SEC. 192 WERE APPLICABLE TO THE FACTS OF THE CASE. ANOTHER DECISION RELIED UPON BY THE ASSESSEE IS OF KOLKATA BENCH IN THE CASE OF DCIT VS. S.K. TEKRIWAL (SUPRA) . IN THIS CASE ALSO THE DIFFERENCE IN SHORTFALL WAS DUE TO THE APPLICABILITY OF PROVISIONS. THE ASSESSEE HAS DEDUC TED TAX AT SOURCE U/S. 194C WHEREAS ACCORDING TO THE ASSESSING OFFICER PROVISIO NS OF SECTION 1941 ARE APPLICABLE. THUS THE ASSESSEE'S CASE IS COVERED BY THE DECISIONS OF THE TRIBUNAL REFERRED TO ABOVE. NO DOUBT ASSESSEE IS IN DEFAULT AS PER PROVISIONS OF SEC. 201 BUT DISALLOWANCE OF THE EXPENDITURE IS NOT PERMISSI BLE U/S. 40(A)(IA), RESPECTFULLY FOLLOWING THE PRECEDENTS IT IS HELD HAT DISALLOWANC E OF RS. 20,24,455/- IS NOT JUSTIFIED. THE ASSESSING OFFICER IS DIRECTED TO DEL ETE THE ADDITION. IN VIEW OF THE ABOVE, THE ORDER PASSED BY LD. CIT(A ) DELETING THE ADDITIONS OF RS. 60,60,960/- AND RS. 8,86,940/- IS HEREBY UPHELD. BO TH THESE GROUNDS OF REVENUE ARE DISMISSED. 4. IN THAT VIEW OF THE MATTER, THE SAME VIEW IS CONFI RMED BY THE TRIBUNAL IN ITS ORDER, AND THEREFORE, WE ARE IN COMPLETE AGREEMENT WITH TH E ORDER PASSED BY THE TRIBUNAL. NO SUBSTANTIAL QUESTION OF LAW IS MADE OUT AND THE APPEAL IS DEVOID OF ANY MERITS AND DESERVES TO BE DISMISSED. HENCE, THIS APPEAL IS DIS MISSED. 9. BEFORE US, REVENUE COULD NOT POINT OUT ANY DISTINGU ISHING FEATURE IN THE FACTS FOR THE YEAR UNDER CONSIDERATION AND THAT OF A.Y. 07-08 WHEREIN SIMILAR DISALLOWANCE WERE MADE BY A.O AND THE SAME WERE DELETED BY LD. CIT(A) AND THE ORDER OF LD. CIT(A) WAS UPHELD BY TH E CO-ORDINATE BENCH OF TRIBUNAL AND HONBLE HIGH COURT. WE THEREFORE RE SPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT CITED HE REIN (SUPRA), FIND NO ITA NO. 2722 /AHD/2011 . A.Y. 2008-09 7 REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D THUS THE GROUNDS OF REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 01- 01 - 2016. SD/- SD/- (S.S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD