Inter Asia, CHENNAI V. ITO, Chettur

ITA 3045/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7784 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 28-10-2016
• Court: TRIBUNAL
• Department Lawyers: K RAVI JT
• Assessee Lawyers: G BASKAR
• Keywords: Business income; Depreciation; Non-deduction of tax; Unabsorbed depreciation
• Section: 143(3); 234B; 194C; 147

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C/SMC, CHENNAI , ! BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ITA NO.3045/MDS/2016 ' # $%# / ASSESSMENT YEAR : 2007-08 INTER ASIA, 557, ANNA SALAI, TEYNAMPET, CHENNAI 600 018. [PAN: AABFI 6553M] ( &' /APPELLANT) VS. INCOME TAX OFFICER, CORPORATEWARD-3(4), CHENNAI 600 034. ( ()&' /RESPONDENT) &' * + /APPELLANT BY : SHRI G.BASKAR, ADVOCATE ()&' * + /RESPONDENT BY : SHRI K.RAVI, JT. CIT , $ * - /DATE OF HEARING : 17.01.2017 .% * - /DATE OF PRONOUNCEMENT : 23.02.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-4, CHENNAI (C IT(A) FOR SHORT) DATED 30.08.2016, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S. 143(3) R/W. S. 147 OF THE INCOME TAX ACT, 1961 (TH E ACT HEREINAFTER) DATED 31.03.2015 FOR ASSESSMENT YEAR (AY) 2007-08. 2 ITA NO.3045/MDS/2016 (AY 2007-08) INTER ASIA V. ITO 2. THE APPEAL RAISES THREE ISSUES, EACH OF WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST ISSUE IS THE DISALLOWANCE U/S. 40(A)(IA) IN THE SUM OF . 1,24,355/- ON ACCOUNT OF ADMITTED NON-DEDUCTION OF TAX AT SOURCE ON ADVERTISEMENT EXPENDITURE, EXIGIBLE TO TAX DEDUCTION AT SOURCE U/ S. 194C OF THE ACT. THE ASSESSEES ONLY CASE BEFORE US WAS BY RELYING ON TH E DECISION OF MERILYN SHIPPING & TRANSPORTS V. ADD. CIT [2012] 16 ITR (TRIB)(VISH)(SB), WHICH IS CLAIMED TO HAVE BEEN CONFIRMED BY THE APEX COURT IN CIT V. VECTOR SHIPPING SERVICES P. LTD. [2013] 357 ITR 642 (ALL). 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE DECISION IN MERILYN SHIPPING (SUPRA) CAN NO LONGER BE CONSIDERED AS A BINDING JUDICIAL PRECEDENT IN VIEW OF THE DECISIONS IN CIT V. CRESCENT EXPORT SYNDICATE [2013] 94 DTR 81 (CAL); CIT V. SIKANDARKHAN N. TUNVAR [2013] 357 ITR 312 (GUJ); AND P.M.S DIESELS V. CIT [2015] 374 ITR 562 (P&H), BESIDES OTHERS. THE RATIONALE OF THE USE OF THE WORD PAYABLE IN S . 40(A)(IA), INSTEAD OF PAID, HAS ALSO BEEN EXPLAINED BY THE TRIBUNAL IN SEVERAL DECISIONS, VIZ. ASST. CIT V. RAVIRAJ RELEEMPAADU [2014] 29 ITR (TRIB) 387 (MUM), THE RELEVANT PART OF WHICH WE MAY EXTRACT FOR READY REFERENCE, AS UNDER: (PG. 393-394 OF THE REPORTS) A PAYMENT WOULD, IN FACT, NOT IMPACT EITHER THE DE DUCTIBILITY OF THE TAX AT SOURCE IN ITS RESPECT, WHICH WE HAVE EXPLAINED TO BE THE STAR TING POINT FOR THE INVOCATION OF THE SECTION, OR THE DEDUCTION OF THE AMOUNT (I.E., ON W HICH TAX BECOMES DEDUCTIBLE) IN COMPUTING THE BUSINESS INCOME U/S.28, AND TOWARD WH ICH THE DISALLOWANCE U/S.40(A)(IA) WOULD APPLY. THIS IS AS IT IS ONLY TH E AMOUNT PAYABLE THAT IS RELEVANT. WE SAY SO AS WHERE AN AMOUNT IS PAID WITHOUT IT BEI NG PAYABLE, THE SAME WOULD ONLY BE IN THE NATURE OF AN ADVANCE. ACCORDINGLY, THE SA ME WOULD NOT BE ADMISSIBLE FOR DEDUCTION IN THE FIRST PLACE. THE QUESTION OF APPLI CABILITY OR OTHERWISE OF SECTION 40(A)(IA) WOULD THEREFORE NOT ARISE, WHICH IS APPLI CABLE ONLY TO SUMS OTHERWISE DEDUCTIBLE. THIS WOULD ALSO AT ONCE CLARIFY THE USE OF THE WORD PAYABLE IN THE PROVISION AS AGAINST THE WORDS CREDITED OR PAID I N THE FINANCE BILL PRECEDING IT . THAT IS, INASMUCH AS THE PAYMENT WITHOUT THE AMOUNT PAID BEING PAYABLE IS OF NO CONSEQUENCE EITHER AS TO ITS DEDUCTIBILITY PER SE OR AS TO ITS DEDUCTIBILITY WITH REFERENCE TO SECTION 40(A)(IA), THE WORD PAID STO OD OMITTED, WITH THE WORD CREDITED BEING PARI MATERIA WITH THE WORD PAYABLE; THE LATTER, RATHER, CONVE YING IT CLEARLY TO BE A LIABILITY QUA A DEDUCTIBLE EXPENSE. THIS, TO OUR MIND, EXPLAINS THE 3 ITA NO.3045/MDS/2016 (AY 2007-08) INTER ASIA V. ITO RATIONALE OF THE OMISSION OF THE WORD PAID IN THE ENACTMENT, WHICH THOUGH THE COURTS, AS WE SHALL PRESENTLY SEE, HAVE HELD AS NOT A RELEVANT FACTOR, PARTICULARLY WHERE THE PROVISION IS UNAMBIGUOUS AND CLEARLY WORD ED. (EMPHASIS BY ITALICS, OURS) FURTHER, AS EXPLAINED BY THE TRIBUNAL IN MANY A CAS E, AS IN ITO V. PRATIBHUTI VINIYOG LTD. (IN ITA NO.1689/MUM/2011 DATED 22.08.2014), THE ISS UE OF PAID AND PAYABLE, OCCURRING IN S. 40(A)(IA), IS NOT TH E RATIO OF THE DECISION IN VECTOR SHIPPING (SUPRA). THE DISMISSAL OF THE SLP BY THE REVENUE A GAINST IT, WHICH EVEN OTHERWISE CANNOT BE SAID AS SETTLING THE LAW, UNLESS BY A SPEAKING ORDER, WOULD THEREFORE BE OF NO MOMENT. NO ARGUMENTS, MUCH LESS MATERIALS, STAND ADVANCED TO SUBSTANTIATE THE CLAIM OF NON-APPLICATI ON OF S. 194C OF THE ACT, PRECLUDING APPLICATION OF S. 40(A)(IA). THE DISALLO WANCE THERE-UNDER IS ACCORDINGLY CONFIRMED. WE DECIDE ACCORDINGLY. 4. THE SECOND ISSUE ARGUED IN THE INSTANT APPEAL IS THE DENIAL OF THE CARRY FORWARD OF BUSINESS LOSS OF . 3,12,752/- FOR AY 2005-06 ON THE BASIS THAT THE ASSESSED INCOME FOR THE IMMEDIATELY SUCCEEDING YEAR , I.E., AY 2006-07, WAS HIGHER THAN THAT SUM. THE SAME FOUND CONFIRMATION I N APPEAL FOR THE SAME REASON. 5. BEFORE US, IT WAS SUBMITTED THAT THE GROUND ON W HICH THE CARRY FORWARD IS DISALLOWED HOLDS NO LONGER AS THE ADDITION MADE IN ASSESSMENT (FOR AY 2006- 07) WAS DELETED BY THE FIRST APPELLATE AUTHORITY, W HOSE ORDER BECAME FINAL IN VIEW OF S. 268A OF THE ACT; THE REVENUES APPEAL AG AINST THE SAME HAVING BEEN SINCE DISMISSED BY THE TRIBUNAL (IN ITA NO.1268/MDS /2015 DATED 10.07.2015), PLACING A COPY OF THE SAME AS WELL AS THE COPY OF T HE ACKNOWLEDGEMENT AND THE STATEMENT OF INCOME (FOR THE CURRENT YEAR) ON RECOR D. THE RESULT IS THAT, HE WOULD CONTEND, THAT THE SAID LOSS WOULD STAND TO BE ADJUSTED (SET OFF) AGAINST THE INCOME FOR THE CURRENT YEAR. THE LD. DR WOULD SUBMI T THAT THE CONTROVERSY COULD 4 ITA NO.3045/MDS/2016 (AY 2007-08) INTER ASIA V. ITO ONLY BE RESOLVED WITH REFERENCE TO THE ASSESSMENT R ECORDS, SO THE SAME MAY BE RESTORED FOR BEING EXAMINED BY THE ASSESSING OFFICE R (AO) IN LIGHT THEREOF. 6. THOUGH THE RETURN OF INCOME FOR THE CURRENT YEAR CLAIMS A BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION AT . 5,44,796/- AND . 16,409/- RESPECTIVELY, IT IS CLEAR THAT IT IS THE LOSS AS AS SESSED FOR AY 2005-06, CLAIMED AT . 3,12,752/-, THAT SHALL FORM THE BASIS FOR ITS CA RRY FORWARD FOR BEING SET OFF. THE QUANTUM AND THE NATURE OF THE LOSS THAT COULD B E CARRIED FORWARD SHALL ONLY BE AS FINALLY ASSESSED. FURTHER, IT IS ONLY THE AMO UNT THAT SURVIVES ITS ADJUSTMENT AGAINST INCOME FOR AY 2006-07, THAT COULD BE CARRIE D FORWARD TO THE CURRENT YEAR. EVEN IF THE ENTIRE ADJUSTMENT MADE TO THE RET URNED INCOME IN ASSESSMENT (FOR AY 2006-07) STANDS DELETED BY THE FIRST APPELL ATE AUTHORITY, I.E., ASSUMING SO, WHOSE ORDER ATTAINS FINALITY IN VIEW OF S. 268A , THE VERY FACT OF THE INCOME FOR THAT YEAR BEING ASSESSED AT A POSITIVE SUM IMPL IES THAT NO LOSS FOR AY 2005- 06 SURVIVES FOR BEING SET OFF INASMUCH AS A POSITIV E SUM COULD ONLY BE AFTER GIVING EFFECT TO ITS SET OFF AGAINST INCOME FOR THA T YEAR, THE INTERVENING YEAR. THIS IS SUBJECT TO AN EXCEPTION, I.E., WHERE THE NATURE OF THE INCOME (FOR AY 2006-07) AND LOSS (FOR AY 2005-06) ARE DIFFERENT, SO THAT TH EIR MUTUAL ADJUSTMENT IS NOT PERMISSIBLE UNDER THE PROVISIONS OF CHAPTER VI OF T HE ACT. NOTABLY, THE LD. AR MADE NO SUCH PLEA. THE SAME, HOWEVER, IS A MATTER O F RECORD. IN OUR VIEW, THE LAW IN THE MATTER BEING WELL SETTLED, THE ASPECT OF THE CARRY FORWARD AND SET OFF OF LOSS FOR AY 2005-06 IS, EVEN AS STATED BY THE LD . DR, BEST RESTORED TO THE FILE OF THE AO FOR ADJUDICATION IN ACCORDANCE WITH LAW. THE AO SHALL DETERMINE THE BROUGHT FORWARD LOSS (INCLUDING DEPRECIATION) FOR A Y 2005-06 ACCORDINGLY, AND SET IT OFF AGAINST THE INCOME FOR ALL THE YEARS UP TO CURRENT YEAR IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF LAW, SPECIFYING THE AMOUNTS TO BE CARRIED FORWARD. NEEDLESS TO ADD, HE SHALL ALLOW THE ASSESS EE AN OPPORTUNITY TO STATE ITS CASE. I DECIDE ACCORDINGLY. 5 ITA NO.3045/MDS/2016 (AY 2007-08) INTER ASIA V. ITO 7. VIDE THE NEXT GROUND OF APPEAL, THE ASSESSEE IMP UGNS THE NON DIRECTION BY THE LD. CIT(A) TO THE AO TO LEVY INTEREST U/S. 234B IN ACCORDANCE WITH S. 234B(3) IN-AS-MUCH AS THE INSTANT ASSESSMENT IS BY WAY OF REASSESSMENT. WE OBSERVE NO CORRESPONDING GROUND/S OF APPEAL BEFORE THE LD. CIT(A), SO THAT HIS ORDER CANNOT BE ASSAILED ON THAT SCORE. THE ASSESSE E HOWEVER HAS RAISED A LEGAL ISSUE, WHICH THEREFORE WOULD REQUIRE BEING ADDRESSE D. THE TERMS OF S. 234B(3) COME INTO PLAY WHERE ON ACCOUNT OF REASSESSMENT OR RE-COMPUTATION THE AMOUNT ON WHICH INTEREST IS PAYABLE U/S. 234B(1) IS INCREA SED. THIS IS APPLICABLE IN THE PRESENT CASE AS THE INCOME ASSESSED STANDS INCREASE D WITH REFERENCE TO THAT ASSESSED EARLIER PER S. 143(3) VIDE ORDER DATED 10. 12.2009. THE ASSESSEES GROUND IS MAINTAINABLE AND VALID. THE AO IS ACCORDI NGLY DIRECTED THE LEVY OF INTEREST U/S. 234B ON THE ADDITIONAL TAX ARISING ON REASSESSMENT IN TERMS OF S. 234B(3) OF THE ACT. I DECIDE ACCORDINGLY. 8 IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY AL LOWED. ORDER PRONOUNCED ON FEBRUARY 23, 2017 AT CHENNAI . SD/- ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, / /DATED, FEBRUARY 23, 2017. EDN 0 * ('-12 32%- /COPY TO: 1. &' /APPELLANT 5. 2$45 ('-' /DR 2. ()&' /RESPONDENT 6. 56# 7 /GF 3. , 8- ( )/CIT(A) 4. , 8- /CIT