DCIT, Cochin V. M/s.Geojit Investment Services Ltd, Cochin

ITA 318/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81350 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 27-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Keywords: Difference of opinion

Judgement Text

1 ITA NO.318/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 318/COCH/2014 (ASSESSMENT YEAR 2006-07) DY.CIT, CIR.1(2) VS M/S GEOJIT INVESTMENT SERVI CES KOCHI LTD, FINANCE TOWERS, KALOOR KOCHI-17 PAN : AABCG2328J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M ANIL KUMAR, CIT RESPONDENT BY : NONE DATE OF HEARING : 02-09-2014 DATE OF PRONOUNCEMENT : 17-10-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II, KOCHI DARTED 27-01-2014 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. NOTICE OF HEARING WAS ISSUED BY RPAD TO THE ASSE SSEE; HOWEVER, THE SAME WAS RETURNED WITH AN ENDORSEMENT LOCKED BY THE POSTAL AUTHORITIES. THEREFORE, WE HEARD THE LD.DR AND PRO CEED TO DISPOSE OF THE APPEAL ON MERIT. 2 ITA NO.318/COCH/2014 3. SHRI M ANIL KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX U/S 194C, 194H AND 194J OF THE ACT. THO UGH THE ASSESSEE DEDUCTED SUBSTANTIAL AMOUNT OF TAX TO THE EXTENT OF RS. 7,40,042, THE ASSESSEE FAILED TO DEDUCT TAX TO THE EXTENT OF RS.2 7,814. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE U/S 40(A)(IA) OF THE ACT. REFERRING TO THE PROVISIONS OF SECTION 40(A)( IA) OF THE ACT THE LD.DR SUBMITTED THAT THE EXPENDITURE WHICH IS OTHERWISE A LLOWABLE CANNOT BE ALLOWED UNLESS THE ASSESSEE DEDUCTED TAX AT SOURCE UNDER THE RELEVANT PROVISIONS OF THE ACT. THEREFORE, THE ASSESSING OF FICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD.DR AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DIS PUTE THAT THE ASSESSEE HAS DEDUCTED TAX TO THE EXTENT OF RS.7,40,042. THE ASS ESSEE FAILED TO DEDUCT TAX TO THE EXTENT OF RS.27,814. THEREFORE, IT IS N OT A CASE OF NON DEDUCTION OF TAX; IT IS A CASE OF SHORT DEDUCTION. THE CIT(A ), AFTER REFERRING TO THE DECISION OF THIS TRIBUNAL IN APOLLO TYRES LTD VS DC IT 36 CCH 122 ALLOWED THE CLAIM OF THE ASSESSEE. THIS TRIBUNAL, IN FACT, EXAMINED THE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT I N A CASE OF SHORT DEDUCTION OF TAX IN THE CASE OF APOLLO TYRES LTD (SUPRA) AND OBSERVED AS FOLLOWS: 3 ITA NO.318/COCH/2014 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON REC ORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, WHICH READS AS FOLLOW S: (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FE ES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHI CH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1 ) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION.- FOR THE PURPOSES OF THIS SUB-CLAUSE.- 4 ITA NO.318/COCH/2014 (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE S AME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB- SECTION (1) OF SECTION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANATION III TO SECTION 194C; (V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) TO THE EXPLANATION TO SECTION 194-I; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; THEREFORE, SECTION 40(A)(IA) ENABLES THE ASSESSING OFFICER TO DISALLOW ANY PAYMENT TOWARDS INTEREST, COMMISSIO N OR BROKERAGE, FEE FOR PROFESSIONAL SERVICE, FEES FOR T ECHNICAL SERVICE ETC. ON WHICH TAX IS DEDUCTIBLE AT SOURCE U NDER CHAPTER XVIIB AND IF SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID. 9. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIO NS OF SECTION 201(1A) WHICH READS AS FOLLOWS: 5 ITA NO.318/COCH/2014 (1A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SE CTION (1), IF ANY SUCH PERSON, PRINCIPAL OFFICER OR COMPA NY AS IS REFERRED TO IN THAT SUB-SECTION DOES NOT DEDUCT THE WHOLE OR ANY PART OF THE TAX OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS ACT, HE OR IT SHALL BE LIABLE TO PAY SIMPLE INTEREST,- (I) AT ONE PER CENT FOR EVERY MONTH OR PART OF A MO NTH ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS DEDUCTED; AND (II) AT ONE AND ONE-HALF PER CENT FOR EVERY MONTH O R PART OF A MONTH ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTED TO THE DATE ON WHICH SUCH TAX IS ACTUALLY PAID, AND SUCH INTEREST SHALL BE PAID BEFORE FURNISHING T HE STATEMENT IN ACCORDANCE WITH THE PROVISIONS OF SUB- SECTION (3) OF SECTION 200.) SECTION 201(1A) ENABLES THE ASSESSING OFFICER TO LE VY INTEREST IN CASE THE TAX WAS NOT DEDUCTED EITHER WH OLLY OR PARTLY OR AFTER DEDUCTION IT WAS NOT PAID AS REQUIR ED UNDER THE ACT. IN FACT, THE PROVISIONS OF SECTION 201(1A ) WAS AMENDED BY FINANCE ACT, 2001 WITH RETROSPECTIVE EFF ECT 6 ITA NO.318/COCH/2014 FROM 01-04-1962 AFTER THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN P.V. RAJAGOPAL (SUPRA) 10. AS RIGHTLY POINTED OUT BY THE LD.SENIOR COUNSEL FOR THE ASSESSEE IN SECTION 201(1A) THE LEGISLATURE INT ENDED TO LEVY INTEREST EVEN IN CASE OF SHORT DEDUCTION OF TAX. IN OTHER WORDS, IF ANY PART OF THE TAX WHICH REQUIRED TO BE DEDUCTED WAS FOUND TO BE NOT DEDUCTED THEN INTEREST U/S 201(1A) CAN BE LEVIED IN RESPECT OF THAT PART OF TH E AMOUNT WHICH WAS NOT DEDUCTED. WHEREAS THE LANGUAG E OF SECTION 40(A)(IA) DOES NOT SAY THAT EVEN FOR SHO RT DEDUCTION DISALLOWANCE HAS TO BE MADE PROPORTIONATE LY. THEREFORE, THE LEGISLATURE HAS CLEARLY ENVISAGED IN SECTION 201(1A) FOR LEVY OF INTEREST ON THE AMOUNT ON WHICH TAX WAS NOT DEDUCTED WHEREAS THE LEGISLATURE HAS OMITTE D TO DO SO IN SECTION 40(A)(IA) OF THE ACT. IN OTHER WO RDS, THE PROVISIONS OF SECTION 40(A)(IA) DOES NOT ENABLE THE ASSESSING OFFICER TO DISALLOW ANY PROPORTIONATE AMO UNT FOR SHORT DEDUCTION OR LESSER DEDUCTION. 11. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF P.V. RAJAG OPAL (SUPRA). WHILE CONSIDERING THE PROVISIONS OF SECTI ON 201 WHICH STOOD FOR THE ASSESSMENT YEARS 1989-90 TO 199 3- 94, THE ANDHRA PRADESH HIGH COURT FOUND THAT THERE IS NOTHING IN THE SECTION TO TREAT THE EMPLOYER AS THE 7 ITA NO.318/COCH/2014 DEFAULTER WHERE THERE IS A SHORTFALL IN THE DEDUCTI ON OF TAX AT SOURCE. FOR THE PURPOSE 5OF CONVENIENCE, WE ARE REPRODUCING BELOW PARAGRAPHS 34 AND 35 OF THE JUDGM ENT OF THE ANDHRA PRADESH HIGH COURT: 34. .. WE MAY NOW READ THE PROVISIONS OF SECTION 201. CONSEQUENCES OF FAILURE TO DEDUCT OR PAY.- (1) IF ANY SUCH PERSON AND IN THE CASES REFERRED TO IN SEC TION 194, THE PRINCIPAL OFFICER AND THE COMPANY OF WHICH HE IS THE PRINCIPAL OFFICER DOES NOT DEDUCT OR AFTER DEDU CTING FAILS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS A CT, HE OR IT SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENC ES WHICH HE OR IT MAY INCUR, BE DEEMED TO BE AN ASSESS EE IN DEFAULT IN RESPECT OF THE TAX: PROVIDED THAT NO PENALTY SHALL BE CHARGED UNDER SEC TION 221 FROM SUCH PERSON, PRINCIPAL, OFFICER OR COMPANY UNLESS THE ASSESSING OFFICER IS SATISFIED THAT SUCH PERSON OR PRINCIPAL OFFICER OR COMPANY, AS THE CASE MAY BE , HAS WITHOUT GOOD AND SUFFICIENT REASONS FAILED TO DEDUC T AND PAY THE TAX. (1A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SEC TION (1), IF ANY SUCH PERSON, PRINCIPAL OFFICER OR COMPA NY AS IS REFERRED TO IN THAT SUB-SECTION DOES NOT DEDUCT OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UN DER THIS 8 ITA NO.318/COCH/2014 ACT, HE OR IT SHALL BE LIABLE TO PAY SIMPLE INTERES T AT FIFTEEN PER CENT PER ANNUM ON THE AMOUNT OF SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACTUALL Y PAID. (2) WHERE THE TAX HAS NOT BEEN PAID AS AFORESAID AF TER IT IS DEDUCTED, THE AMOUNT OF THE TAX TOGETHER WITH THE AMOUNT OF SIMPLE INTEREST THEREON REFERRED TO IN SU B- SECTION (1A) SHALL BE A CHARGE UPON ALL THE ASSETS OF THE PERSON, OR THE COMPANY, AS THE CASE MAY BE, REFERRE D TO IN SUB-SECTION (1). 35. THIS SECTION HAS TWO LIMBS, ONE IS WHERE THE EMPLOYER DOES NOT DEDUCT THE TAX AND THE SECOND WHE RE AFTER DEDUCTING THE TAX FAILS TO REMIT IT TO THE GO VERNMENT. THERE IS NOTHING IN THIS SECTION TO TREAT THE EMPLO YER AS THE DEFAULTER WHERE THERE IS A SHORTFALL IN THE DED UCTION. THE DEPARTMENT ASSUMES THAT WHERE THE DEDUCTION IS NOT AS REQUIRED BY OR UNDER THIS ACT, THERE IS A DEFAUL T. BUT THE FACT IS THAT THIS EXPRESSION AS REQUIRED BY OR UNDER THIS ACT GRAMMATICALLY REFERS ONLY TO THE DUTY TO PAY THE TAX THAT IS DEDUCTED AND CANNOT REFER TO THE DUTY T O DEDUCT THE TAX. SINCE THIS IS A PENAL SECTION, IT HAS TO BE STRICTLY CONSTRUED AND IT CANNOT BE ASSUMED THAT THERE IS A DUTY TO DEDUCT THE TAX STRICTLY IN ACCORDANCE WITH THE COMPUTATION UNDER THE ACT AND IF THERE IS ANY SHORT FALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILITY O F ANY ITEM 9 ITA NO.318/COCH/2014 THE EMPLOYER CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT. 12. AFTER CONSIDERING THE PROVISIONS OF SECTION 201 (1A) BEFORE AMENDMENT BY FINANCE ACT, 2001, THE ANDHRA PRADESH HIGH COURT FOUND THAT AS REQUIRED UNDER TH IS ACT DOES NOT REFER TO MEAN TO DEDUCT TAX IN ACCORD ANCE WITH COMPUTATION UNDER THE ACT. IN FACT, THE PARLI AMENT AMENDED THE SECTION 201(1A) AFTER THIS JUDGMENT OF ANDHRA PRADESH HIGH COURT BY INCORPORATING THE WORD S THE WHOLE OR ANY PART OF TAX BY FINANCE ACT, 2001 . THE DIVISION BENCH OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF CHANDABHOY AND JASSOBHOY (SUPRA) HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE. THE MUMBA I BENCH FOUND THAT SHORT DEDUCTION OF TDS, IF ANY, CO ULD HAVE BEEN CONSIDERED AS LIABILITY UNDER THE INCOME- TAX ACT AS DUE FROM THE ASSESSEE. THEREFORE, THE DISALLOWANCE OF THE ENTIRE EXPENDITURE, WHOSE GENUINENESS WAS NOT DOUBTED BY THE ASSESSING OFFICE R IS NOT JUSTIFIED. A SIMILAR VIEW WAS ALSO TAKEN BY TH E KOKATTA BENCH OF THIS TRIBUNAL IN THE CASE OF CIT VS M/S S. K. TEKRIWAL (SUPRA). IN THIS CASE, ON APPEAL BY THE R EVENUE, THE CALCUTTA HIGH COURT CONFIRMED THE ORDER OF THE KOLKATTA BENCH OF THE TRIBUNAL. 10 ITA NO.318/COCH/2014 13. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SECTION 40(A)(IA) DOES NOT ENVISAGE A SITUATION WHERE THERE WAS SHORT DEDUCTIO N / LESSER DEDUCTION AS IN CASE OF SECTION 201(1A) OF T HE ACT. THERE IS AN OBVIOUS OMISSION TO INCLUDE SHORT DEDUC TION / LESSER DEDUCTION IN SECTION 40(A)(IA) OF THE ACT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT IN CASE OF SHORT / LESSER DEDUCTION OF TAX, THE ENT IRE EXPENDITURE WHOSE GENUINENESS WAS NOT DOUBTED BY TH E ASSESSING OFFICER, CANNOT BE DISALLOWED. ACCORDING LY, THE ORDERS OF LOWER AUTHORITIES ARE SET SIDE AND THE EN TIRE DISALLOWANCE IS DELETED. 6. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CO NSIDERED VIEW THAT PROVISIONS OF SECTION 40(A)(IA) IS NOT APPLICABLE T O THE CASE OF THE ASSESSEE. THEREFORE, WE DO NOT SEE ANY INFIRMITY I N THE ORDER OF CIT(A). ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH OCTOBER, , 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 17 TH OCTOBER, 2014 PK/- 11 ITA NO.318/COCH/2014 COPY TO: 1. DY.CIT, CIR.1(2), ERNAKULAM 2. M/S GEOJIT INVESTMENT SERVICES LTD, FINANCE TOWE RS, 5 TH FLOOR, KALOOR, KOCHI 682 017 3. THE COMMISSIONER OF INCOME-TAX, KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-II, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH