ITO, Tambaram V. Meera Suryaprabhu, CHENNAI

ITA 2845/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96074 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 12-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Keywords: Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2845/MDS/2014 / ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER OLD BUSINESS WARD I(3)/NCW- 22(3) CHENNAI VS. SMT. MEERA SURYAPRABHU 233/234 ASHTALAKSHMI NAGAR SECOND EXTN. 5 TH STREET VARADARAJAPURAM MUDICHUR, CHENNAI 600 048 [PAN AAEPM 8016 G ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT /RESPONDENT BY : NONE / DATE OF HEARING : 12 - 08 - 2015 ! / DATE OF PRONOUNCEMENT : 04 - 09 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, CHENN AI, DATED 10.6.2014 AND PERTAINS TO ASSESSMENT YEAR 2008-09. 2. THE NOTICE OF HEARING WAS SERVED ON THE ASSESSEE B Y RPAD. THE REGISTRY HAS PLACED ON RECORD THE POSTAL ACKNOW LEDGMENT AS A PROOF OF SERVICE OF NOTICE ON THE ASSESSEE. INSPI TE OF RECEIPT OF NOTICE ITA NO. 2845/14 :- 2 -: OF HEARING, THE ASSESSEE HAS NOT CHOSEN TO APPEAR BEFORE THIS TRIBUNAL WHEN THE APPEAL WAS TAKEN UP FOR HEARING. THEREFOR E, WE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PROCEEDED TO DI SPOSE OF THE APPEAL ON MERIT. 3. THE ONLY ISSUE ARISES FOR CONSIDERATION IS ESTIMATI ON OF PROFIT AT 8%. 4. SHRI A.V. SREEKANTH, LD. DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED ` 8,46,000/- TOWARDS PAYMENT OF RENT, AND FREIGHT CHARGES OF ` 9,06,400/- FOR NON-DEDUCTION OF TAX U/S 40(A)(IA) OF THE ACT. THE ASSESSING OF FICER ALSO DISALLOWED A SUM OF ` 4,47,871/- TOWARDS DISCOUNT CLAIMED BY THE ASSESS EE. ACCORDING TO THE LD. DR, THE ASSESSEE DEDUCTED A S UM OF ` 4,47,870.87 AND CLAIMED THE SAME AS DISCOUNT. WHEN THE ASSESSING OFFICER CALLED FOR THE DETAILS, THE ASSESSEE CLAIM ED THAT IT WAS AN EXPENDITURE INCURRED BY THE ASSESSEE WHICH IS TO B E REIMBURSED FROM M/S AV THOMAS LEATHER AND ALLIED PRODUCTS P. LTD. IN FACT, IT WAS INCURRED BY THE ASSESSEE ON BEHALF OF M/S AV THOMA S LEATHER AND ALLIED PRODUCTS P. LTD, THEREFORE, TDS NEED NOT BE DEDUCTED. HOWEVER, THE ASSESSING OFFICER FOUND THAT IT IS NOT AN EXPENDITURE ALLOWABLE IN THE HANDS OF THE ASSESSEE. THE ASSE SSEE HAS NOT INCLUDED THE RECEIPT ON ACCRUAL BASIS. THE ASSESS EE HAS NOT OFFERED ITA NO. 2845/14 :- 3 -: THE RECEIPT FOR TAXATION, THEREFORE, THE ASSESSING OFFICER MADE AN ADDITION OF ` 4,47,871/-. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IN FACT, THE ASSESSEE DEBITED A SUM OF ` 4,47,871/- AS DISCOUNT. THE ASSESSEE EXPLAINED BEFORE THE LOWER AUTHORITIES THAT THESE ARE REIMBUR SEMENT MADE BY M/S AV THOMAS LEATHER AND ALLIED PRODUCTS P. LTD, T HEREFORE, THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT IS NOT APP LICABLE. THE CIT(A) FOUND THAT THE INCOME HAS TO BE ESTIMATED AT 8% OF THE TOTAL RECEIPTS, THEREFORE, THERE CANNOT BE ANY FURTHER DISALLOWANC E. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF 40(A)(IA) OF THE ACT. ANY PAYMENT OF INTEREST, COMMISSION OR BROKERAGE, ROYAL TY ETC. TO A RESIDENT WITHOUT DEDUCTION OF TAX ON WHICH TAX IS T O BE DEDUCTED THEN THE SAME HAS TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT. IN THIS CASE, THE CIT(A) SAYS THAT THE ASSESSEE RECEIVED REIMBUR SEMENT FROM M/S AV THOMAS LEATHER AND ALLIED PRODUCTS P. LTD. HOWE VER, THE NATURE OF REIMBURSEMENT IS NOT AVAILABLE ON RECORD. THE PURP OSE FOR WHICH THE ASSESSEE INCURRED THE EXPENDITURE IS ALSO NOT AVAIL ABLE ON RECORD. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT UND ER THE SCHEME OF INCOME-TAX ACT, 1961 THE PERSON WHO IS RESPONSIBLE FOR MAKING THE PAYMENT IS LIABLE TO DEDUCT TAX. IF THE ASSESSEE INCURRED THE EXPENDITURE WHICH IS IN THE NATURE OF INTEREST, COM MISSION, BROKERAGE, ITA NO. 2845/14 :- 4 -: RENT ETC. FOR WHICH THE TAX IS DEDUCTIBLE, THEN THE ASSESSEE HAS TO NECESSARILY DEDUCT TAX EVEN THOUGH THE EXPENDITURE WAS CLAIMED TO BE INCURRED ON BEHALF OF M/S AV THOMAS LEATHER AND ALL IED PRODUCTS P. LTD. IN THE CASE BEFORE US, THE NATURE OF THE EXPE NDITURE INCURRED BY THE ASSESSEE ON BEHALF OF M/S AV THOMAS LEATHER AN D ALLIED PRODUCTS P. LTD IS NOT AVAILABL ON RECORD. THEREFORE, THE M ATTER NEEDS TO BE RE- EXAMINED BY THE ASSESSING OFFICER. THE CIT(A) FURT HER FOUND THAT SINCE THE PROFIT WAS ESTIMATED AT 8%, NO FURTHER DI SALLOWANCE IS REQUIRED U/S 40(A)(IA) OF THE ACT. SECTION 40 OF THE ACT STARTS WITH NON-OBSTANTE CLAUSE, THEREFORE, 40(A)(IA) OF THE AC T IS APPLICABLE EVEN IN CASE WHERE THE PROFIT WAS ESTIMATED. IN OTHER W ORDS, SEC. 40(A)(IA) OF THE ACT IS AN INDEPENDENT PROVISION WHICH REQUIR ES DISALLOWANCE OF THE EXPENDITURE INCURRED BY THE ASSESSEE FOR NON-D EDUCTION OF TAX AT SOURCE WHICH IS OTHERWISE ALLOWABLE AS EXPENDITURE. THEREFORE, EVEN THOUGH THE PROFIT WAS ESTIMATED AT 8%, THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT SEC. 40(A)(IA) OF THE ACT W OULD BE APPLICABLE IN RESPECT OF THE PAYMENT MADE BY THE ASSESSEE WITHOU T DEDUCTING TAX AT SOURCE. 6. THE CIT(A) FURTHER FOUND THAT THE JOB WORK AGREEMEN T WITH M/S AV THOMAS LEATHER AND ALLIED PRODUCTS P. LTD CO NTAINS THE DETAILS OF JOB WORK, TERMS AND CONDITIONS, PAYMENT MODES ET C. THE COPY OF THE AGREEMENT IS NOT AVAILABLE ON RECORD BEFORE THI S TRIBUNAL. THE ITA NO. 2845/14 :- 5 -: CIT(A) FURTHER FOUND THAT TDS CERTIFICATE CONTAINS CONTRACT VALUE AT HIGHER AMOUNT. IN THE ABSENCE OF ANY MATERIAL, TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ESTIMATION OF PROFIT AL SO NEEDS TO BE EXAMINED BY THE ASSESSING OFFICER. IT IS NOT KNOWN HOW THE CIT(A) HAS ESTIMATED THE PROFIT AT 8% WITHOUT REJECTING TH E BOOKS OF ACCOUNT. IN THOSE CIRCUMSTANCES, THE ISSUE OF ESTIMATION OF PROFIT IS ALSO REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER I N THE LIGHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSESSEE AND THE REAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONAB LE OPPORTUNITY TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2015, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 4 TH SEPTEMBER, 2015 RD ITA NO. 2845/14 :- 6 -: &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF