SMC Investments Advisors Ltd, New Delhi V. ACIT, circle-24(1), New Delhi

ITA 2905/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0349 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 04-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return; TDS
• Section: 143(3); 40(a)(ia); 201(1); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-2, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER AND SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO.2905/DEL/2019 ASSESSMENT YEAR: 2015-16 (THROUGH VIDEO CONFERENCING) SMC INVESTMENTS ADVISORS LTD., 11/5-B, 3 RD FLOOR, PUSA ROAD, NEW DELHI 110 005 PAN NO. AABCS 8068 C VS. ACIT CIRCLE- 24 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY MS. RANO JAIN, ADVOCATE RESPONDENT BY SH. R. K. GUPTA, SR. DR DATE OF HEARING: 17 /06/2020 DATE OF PRONOUNCEMENT: 22 /06/2020 ORDER PER ANIL CHATURVEDI, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 06.02.2019 OF THE COMMISSION OF INCOME TAX (A)- XXV, NEW DELHI RELATING TO ASSESSMENT YEAR 2015-16. 2. THE RELEVANT FACTS AS CULLED FROM THE MATERIAL ON RECORDS ARE AS UNDER: PAGE | 2 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF SEBI REGISTERED PORTFOLIO MANAGEMENT SERVICES AND OTHER WEALTH MANAGEMENT SERVICES, PROPRIETARY TRADING IN COMMODITIES AND SECURITIES. THE ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2015-16 ON 24.09.2015 DECLARING NIL INCOME. THEREAFTER, ASSESSEE FILED REVISED RETURN OF INCOME ON 18.11.2016 DISCLOSING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 30.10.2017 AND THE TOTAL INCOME WAS DETERMINED AT RS.16,64,700/-. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO VIDE ORDER DATED 06.02.2019 IN APPEAL NO.10257/18-19 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD, BOTH IN THE EYE OF LAW AND ON THE FACTS. 2(I). ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE DISALLOWANCE OF AN AMOUNT OF RS. 14,78,846/- ON ACCOUNT OF REIMBURSEMENT OF INTEREST CHARGES, RENT, ELECTRICITY AND WATER CHARGES, INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. (II). THAT THE DISALLOWANCE HAS BEEN CONFIRMED IGNORING THE FACT THAT ON REIMBURSEMENT OF EXPENDITURE, PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF LD AO IN NOT ALLOWING THE SET OFF OF THE BROUGHT FORWARD LOSSES ASSESSED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. PAGE | 3 4. BEFORE US AT THE OUTSET LD. AR SUBMITTED THAT THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE SOLE CONTROVERSY WHICH NEEDS TO BE ADJUDICATED IS WITH RESPECT TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTED THAT ASSESSEE HAD CLAIMED TO HAVE INCURRED EXPENSES OF RS.49,29,488/- ON ACCOUNT OF REIMBURSEMENT OF EXPENSES WHICH WAS PAID TO M/S. SMC COMTRADE LIMITED, ONE OF THE RELATED PARTY. AO NOTED THAT ASSESSEE HAD NOT DEDUCTED ANY TDS ON THE SAID AMOUNT. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASONS FOR NON- DEDUCTION OF TDS TO WHICH THE ASSESSEE INTER ALIA SUBMITTED THAT THE PROVISION OF SECTION 194I ARE NOT APPLICABLE AS IT WAS A MERE CASE OF REIMBURSEMENT OF EXPENSES. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO AO. HE WAS OF THE VIEW THAT THE ASSESSEE SHOULD HAVE DEDUCTED TDS U/S 194I. HE WAS FURTHER OF THE VIEW THAT FAILURE TO DEDUCT THE TDS U/S 194I WOULD ATTRACT THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. HE ACCORDINGLY WORKED OUT THE DISALLOWANCE AT 30% OF THE EXPENSES CLAIMED AND THUS DISALLOWED RS.14,78,846/-. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO UPHELD THE ORDER OF THE AO. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW BEFORE US. PAGE | 4 6. BEFORE US LEARNED AR SUBMITTED THAT RS.49,29,488/- WAS REIMBURSED BY THE ASSESSEE TO ITS SISTER CONCERN M/S. SMC COMTRADE LIMITED ON ACCOUNT OF RENT, ELECTRICITY, WATER AND INTERNET ETC. SHE SUBMITTED THAT SMC COMTRADE HAD TAKEN THE PREMISES ON LEASE AND THE RENT AND OTHER EXPENSES WERE PAID BY THE SMC COMTRADE LTD. TO THE OWNER OF THE PROPERTY. SHE FURTHER SUBMITTED THAT SINCE ASSESSEE HAD SHARED THE PREMISES WITH SMC COMTRADE, IT HAD REIMBURSED THE PORTION OF THE EXPENSES AGGREGATING TO RS.49,29,488 (THE DETAILS OF WHICH LISTED AT PAGE 2 OF THE SYNOPSIS FILED BY THE ASSESSEE). SHE SUBMITTED THAT SMC COMTRADE HAD DULY DEDUCTED THE REIMBURSED AMOUNT RECEIVED BY IT FROM THE ASSESSEE FROM THE TOTAL EXPENSES INCURRED BY IT AND HAD CLAIMED ONLY THE REMAINING PORTION AS ITS EXPENDITURE. SHE SUBMITTED THAT AS PER SECOND PROVISO TO SECTION 40(A)(IA), IF THE PAYEE INCLUDES THE AMOUNT RECEIVED BY IT IN ITS INCOME AND PAY DUE TAXES, THE ASSESSEE IS NOT TREATED AS ASSESSEE IN DEFAULT AND NO DISALLOWANCE U/S 40(A)(IA) COULD BE MADE. SHE SUBMITTED THAT IN THE PRESENT CASE SINCE SMC COMTRADE HAS TAKEN INTO ACCOUNT THE AMOUNTS REIMBURSED BY THE ASSESSEE TO IT BY DEDUCTING THE SAME FROM THE EXPENSES CLAIMED BY IT AND HAS ALSO PAID THE DUE TAXES, THE ASSESSEE CANNOT BE TREATED AS ASSESSEE IN DEFAULT AS PER THE PROVISO TO SECTION 201(1) AND THEREFORE, NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT. SHE, THEREFORE, SUBMITTED THAT THE DISALLOWANCE MADE BY THE AO BE DELETED. PAGE | 5 7. LD. DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. BEFORE US THE LEARNED AR HAS SUBMITTED THE BREAKUP OF THE REIMBURSEMENT OF EXPENSES MADE BY ASSESSEE TO SMC COMTRADE OF RS.49,29,488/- WHICH ARE AS UNDER: ELECTRICITY EXPENSES 10,57,491/- TELEPHONE EXPENSES 18,725/- INTERNET EXPENSES 1,02,450/- OFFICE RENT 37,32,097/- LEASELINE 18,725/- 49,29,488/- 9. BEFORE US IT IS ASSESSEES CLAIM THAT THE EXPENSES WERE REIMBURSED TO M/S. SMC COMTRADE AND SMC COMTRADE HAS ALREADY CONSIDERED THE EXPENSES RECEIVED BY IT FROM THE ASSESSEE IN THE RETURN OF INCOME FILED BY IT AND HAS ALSO PAID THE TAX THEREON. WE FIND THAT THERE IS NO FINDING BY THE LOWER AUTHORITIES TO THE EFFECT THAT THE AMOUNTS THAT HAS BEEN PAID BY THE ASSESSEE TO SMC COMTRADE HAS BEEN INCLUDED BY SMC COMTRADE IN ITS RETURN OF INCOME AND TAXES THEREON HAS BEEN PAID BY IT. WE FIND THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD. REPORTED IN (2015) 377 ITR 635 HAS HELD THAT INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT PAGE | 6 IS DECLARATORY AND CURATIVE IN NATURE AND TO BE RETROSPECTIVE WITH EFFECT FROM 1ST APRIL 2005. IT HAS FURTHER HELD THAT AS THE PAYEE/RESIDENT HAS FILED ITS RETURN OF INCOME DISCLOSING THE PAYMENT RECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HAS ALSO PAID TAXES ON SUCH INCOME, THEN NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT. AS OBSERVED BY US HEREINABOVE, THAT THERE IS NO FINDING BY THE LOWER AUTHORITIES TO THE EFFECT OF THE INCLUSION BY THE PAYEE I.E. SMC COMTRADE OF THE AMOUNTS RECEIVED FROM THE ASSESSEE AS ITS INCOME AND PAYMENT OF TAXES ON SUCH AMOUNTS. IN SUCH SITUATION WE ARE OF THE VIEW THAT THE AFORESAID CONTENTION OF THE AR NEEDS VERIFICATION AT THE END OF AO. WE, THEREFORE, RESTORE THE ISSUE TO THE FILE OF THE AO TO VERIFY THE CONTENTION OF THE ASSESSEE IN LINE WITH THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOWNSHIP (P) LTD (SUPRA). IF THE ASSESSEES CONTENTION IS FOUND CORRECT THEN NO DISALLOWANCE U/S 40(A)(IA) IS CALLED FOR. FROM THE DETAILS OF THE EXPENSES FURNISHED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE PROVISION OF SECTION 194I WOULD ONLY BE APPLICABLE TO THE OFFICE RENT AMOUNTING TO RS.37,32,097/- AND NOT TO OTHER EXPENSES. WE, THEREFORE, ALSO DIRECT THE AO TO KEEP THE AFORESAID FACT INTO CONSIDERATION WHILE DECIDING THE ISSUE. THE ASSESSEE IS DIRECTED TO FILE ALL THE REQUIRED DETAILS CALLED FOR BY THE AO ON THE ISSUE. NEEDLESS TO STATE THAT AO SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THE GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . PAGE | 7 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22.06.2020 SD/- SD/- (BHAVNESH SAINI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER *PRITI YADAV, SR.PS* DATE:- 22.06.2020 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI