DCS BPO (P) Ltd., CHENNAI V. ACIT, CHENNAI

ITA 3114/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90479 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 29-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN IRS
• Assessee Lawyers: K HEMALATHA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.3114/MDS/2014 ( / ASSESSMENT YEAR : 2008-2009) M/S. DCS BPO (P) LTD, NEW NO.1, OLD NO.9, 15 TH STREET, SASTRI NAGAR, ADYAR, CHENNAI 600 020. [PAN: AABCD 7248K] ( &' /APPELLANT) VS THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I(4), CHENNAI 600 034. ( '(&' /RESPONDENT) / APPELLANT BY : MS. K. HEMALATHA, C.A / RESPONDENT BY : SHRI. N. MADHAVAN, IRS, JCIT. /DATE OF HEARING : 17.06.2015 /DATE OF PRONOUNCEMENT : 19.06.2015. ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY ASSESSEE IS DIRECT ED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, CHENNAI , DATED 27.10.2014 FOR THE ASSESSMENT YEAR 2008-2009. I.T.A.NO.3114/MDS/2014. :- 2 -: 2. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE RAI SED THE FOLLOWING GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED I CONFIRMING THE ORDER OF THE ASSESSING OFFICER WHI CH IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME- TAX ACT, 196 (THE ACT) FOR NON DEDUCTION OF TDS ON INTERNET LEASE LINE CHARGES AMOUNTING TO 10,75,479/- ON THE RENTAL ADVANCE ADJUSTED AGAINST RENT AMOUNTING TO 2,15,000/-. 3. WITHOUT PREJUDICE TO GROUND NO.2 ABOVE, THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE DISALLOWANCE U/S.40(A)(IA0 OF THE ACT WITHOUT FOLLO WING THE JURISDICTIONAL ITAT DECISION THEEKATHIR PRESS (ITA NO.2076/MDS/2012) THAT THE DISALLOWANCE U/S.40(A) (IA) OF THE ACT APPLIES TO EXPENDITURE THAT ARE REMAINING PAYABLE AS ON THE BALANCE SHEET DATE AND DOES NOT APPLY TO EXPENDITUR E WHICH IS PAID. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENG AGED IN TRANSCRIPTION BUSINESS. THE ISSUE ADJUDICATED RELAT ES TO DISALLOWANCE U/S.40(A)(IA) FOR NON-DEDUCTION OF TDS ON INTERNET LEASE LINE CHARGES TO THE TUNE OF D10,75,479/-. THE ASSESSEE INCURRED LEASE LINE EXPENDITURE TOWARDS THE USE OF INTERNET TO RELIANCE COMMUNICATION AND BHARATI AIRTEL LTD. THE ASSESSING OFFICER CONT ENDED THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE, AS IS REQUIRED UNDER SECTION 194J, SINCE IT WAS A DEDICATED LEASED LINE PROVIDED TO THE ASSESSEE EXCLUSIVELY FOR THE USE OF THE ASSESSEE CA TERING TO ITS SPECIFIC NEEDS AND IT WAS NOT THE SAME AS A SERVICE PROVIDED TO THE PUBLIC AT LARGE. FURTHER, THE ASSESSING OFFICER HELD THAT EVEN IF THE PAYMENT I.T.A.NO.3114/MDS/2014. :- 3 -: MADE BY THE ASSESSEE MAY NOT QUALIFY TO BE FOR A TE CHNICAL SERVICE, IT HAS TO BE CONSIDERED AS ROYALTY PAYMENTS REQUIRING TDS TO BE DONE IN THE LIGHT OF THE DECISION OF ITAT, DELHI, REPORTED IN 391 ITR 269 . AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. ON APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE DECISION RELIED UPON BY THE ASSESSEE IS NO T APPLICABLE TO THE FACTS OF THE CASE AND HE DECIDED THE CASE AGAINST T HE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. A SIMILAR ISSUE IS CONSIDERED BY THE SPE CIAL BENCH OF THE TRIBUNAL (VIZAG) IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT (2012) 136 ITD 23 (VISAKHAPATNAM) WHEREIN IT WAS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO THE EXPENSES THAT ARE PAYABLE AND OUTSTANDING AT THE END OF THE CLO SE OF THE YEAR RELEVANT TO THE ASSESSMENT YEAR AND NOT TO THE AMOU NT ALREADY PAID. 6. THE SAME VIEW WAS TAKEN BY THE HIGH COURT OF ALLAH ABAD IN THE CASE OF CIT VS. M/S. VECTOR SHIPPING SERVICES (P) LTD IN ITA NO.122 OF 2013 DATED 09.7.2013 BY HOLDING THAT SEC 40(A)(IA) IS NOT I.T.A.NO.3114/MDS/2014. :- 4 -: APPLICABLE WHEN THERE IS NO OUTSTANDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESSMENT YEAR A ND SLP FILED BY THE REVENUE IN SUPREME COURT OF INDIA IN CC NO.8068/20 14 DATED 02.07.2014 IS ALSO DISMISSED. BEING SO, IN OUR OPIN ION AN AMOUNT OUTSTANDING AT THE END OF THE CLOSE OF THE ASSESSME NT YEAR IS NOT TO BE ALLOWED U/S.40(A)(IA) OF THE ACT. WE DIRECT THE ASS ESSING OFFICER TO DISALLOW ONLY THAT AMOUNT WHICH IS OUTSTANDING AT T HE END OF THE CLOSE OF THE ASSESSMENT YEAR. WITH THESE OBSERVATIONS, W E ARE REMITTING THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I TA NO.3114/MDS/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 19TH DAY OF JUNE, 2015, AT CHENNAI. SD/- SD/- ( ! ' ) (CHALLA NAGENDRA PRASAD) # / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' /CHENNAI. #$ /DATED:19.06.2015. KV $% &' (' /COPY TO: 1. ) APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. '+, - /DR 6. ,. / /GF. I.T.A.NO.3114/MDS/2014. :- 5 -: