Gagrat & Co., New Delhi V. ACIT, New Delhi

ITA 3194/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6754 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 19-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N MEENA
• Assessee Lawyers: VIKAS MANDAN
• Keywords: Rule of consistency; TDS; Set aside
• Section: 43B; 40(b); 139(1); 194J; 13; 145; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO. 3194/DEL./2017, A.Y. : 2013-14 M/S. GAGRAT & CO. VS. ACIT SUPREME COURT ADVOCATES, CIRCL E-63(1) PLAZA CINEMA BUILDING, CONNAUGHT CIRCUS NEW DELHI NEW DELHI (PAN : AAAFG1726H) (APPELLANT) (RESPONDE NT) ASSESSEE BY : SH. VIKAS MANDAN, ADV. REVENUE BY : SH. S.N.MEENA, SR. DR DATE OF HEARING : 03.02.2020 DATE OF ORDER : 07.02.2020 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. GAGRAT & CO., NEW DELHI (HEREINAF TER REFERRED TO AS THE REVENUE) BY FILING THE PRESEN T APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 14.03.2017 PASS ED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-20, NEW DELHI QUA THE ASSESSMENT YEARS 2013-14 ON THE GROUNDS INTER ALIA THAT : ITA NO.3194/DEL./2017 2 1. THAT THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEAL) XX NEW DELHI IS BAD IN FACTS AND IN LAW. 2. THAT THE LD. CIT (A) HAS NOT BEEN PLEASED TO APPRECIATE THE EVIDENCE AND OTHER MATERIAL ON RECOR D PROPERLY. 3. THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF STATUTORY LIABILITY OF RS.5,33,700/- ON ACCOUNT OF TDS DEDUCTED U/S 194 J, PAYABLE FOR THE MONTH OF MARCH 2013, WHICH WAS DULY DEPOSITED ON 11 TH APRIL 2013, WRONGLY CONSIDERING IT AS NON APPLICABILITY OF SECTION 43B OF THE INCOME TAX ACT,1961 IN CASE OF APPELLANT, AS THE APPELLANT IS FOLLOWING CASH OF ACCOUNTING UNDER SEC 145 OF THE INCOME TAX ACT, 1961. THE SAME WAS DULY DEPOSITED BY THE APPELLANT WITHIN THE TIME STIPULATED UNDER SEC. 43B THE INCOME TAX ACT, 1961. THEREFORE, NO PART THEREOF OUGHT TO HAVE BEEN DISALLOWED. HENC E THE ADDITION MADE IS ILLEGAL, ARBITRARY, UNJUSTIFIED AN D AGAINST THE FACTS AND BAD IN LAW, MAY KINDLY BE DELETED. 4. THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF PARTNERS SALARY OF RS.4,29,274/- OUT O F THE TOTAL OF PARTNERS SALARY OF RS.57,00,000/- PAID TO RESIDENT PARTNER MR. U. A. RANA, DULY AUTHORIZED AS PER THE SUPPLEMENT D EED OF PARTNERSHIP DATED 27 TH MARCH 2013 OF THE APPELLANT. THEREFORE, THE SAID DISALLOWANCE OF PARTNERS SALARY UNDER SEC TION 40(B) OF THE INCOME TAX ACT, 1961, IS ARBITRARY, UNJUST AND UNWARRANTED, KEEPING IN VIEW THAT UNDER SECTION 40(B) ONLY CONDI TION FOR DISALLOWANCE OF PARTNERS REMUNERATION IS THAT IF IT IS NOT DULY AUTHORIZED BY THE DEED OF PARTNERSHIP. HENCE THE AD DITION MADE IS ILLEGAL, ARBITRARY, UNJUSTIFIED AND AGAINST THE FACTS AND BAD IN LAW, MAY KINDLY BE DELETED. 5. THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF THE EXPENSE IN THE SUM OF RS.26,137/-, OUT OF RS. 1,93,712/- WHICH WERE INCURRED IN RESPECT OF THE TE LEPHONE EXPENSES, THESE EXPENSE WERE INCURRED ONLY IN REGAR D TO AND IN FURTHERANCE OF THE PROFESSIONAL WORK OF THE APPELLA NT FIRM AND NO PART THEREOF OUGHT TO HAVE BEEN DISALLOWED. HENC E, THE ADDITION MADE IS ILLEGAL, ARBITRARY, UNJUSTIFIED AN D AGAINST THE FACTS AND BAD IN LAW, MAY KINDLY BE DELETED. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD/ AMEND/ WITH DRAW OR MODIFY THE GROUNDS OF APPEAL AT THE TIME OF HEAR ING. ITA NO.3194/DEL./2017 3 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUD ICATION OF THE CONTROVERSY AT HAND ARE : M/S. GAGRAT & CO. IS A PARTNERSHIP FIRM OF ADVOCATES, PRACTICING AT SUPREME COURT BY PROFES SION AND DERIVED INCOME FROM BUSINESS OR PROFESSION AND INCO ME FROM OTHER SOURCES. THE ASSESSEE COMPRISING OF TWO PARTNERS NA MELY SH. R.J.GARRAT AND SH. U.A.RANA HAVING SHARE OF PROFIT IN THE FIRM AT 40% AND 60% RESPECTIVELY. AO MADE ADDITION OF RS. 5 ,33,700/- BY WAY OF DISALLOWANCE OF TDS ON THE GROUND THAT THE S AME SHOULD HAVE BEEN PAID DURING THE FINANCIAL YEARS BY THE AS SESSEE AS IT HAS BEEN FOLLOWING CASH SYSTEM OF ACCOUNTING. AO ALSO M ADE ADDITION OF RS. 4,29,274/- OUT OF THE TOTAL OF PARTNERS SAL ARY OF RS. 57,00,000/- ON THE GROUND THAT THE ASSESSEE HAS REV ISED THE PARTNERSHIP DEED JUST FEW DATES BEFORE END OF THE F INANCIAL YEARS FOR ENHANCING THE SALARY OF THE PARTNERS. AO MADE DISAL LOWANCE OF RS. 29,057/- ON ACCOUNT OF TELEPHONE EXPENSES ON ESTIMA TED BASIS ON THE GROUND THAT ASSESSEE HAS NOT MAINTAINED ANY PER SONAL TELEPHONE AND THERE IS AN ELEMENT OF PERSONAL USE IN THE SAME . 3. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) BY WAY OF FILING THE APPEAL WHO HAS CONFIRMED AFORESAID ADDIT IONS BY PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEAL. ITA NO.3194/DEL./2017 4 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO. 1 AND 2 5. GROUND NO. 1 AND 2 ARE GENERAL IN NATURE, HENCE NO NEED SPECIFIC FINDING. GROUND NO. 3 6. LD. AR FOR THE ASSESSEE CHALLENGING THE I MPUGNED ORDER PASSED BY LD. CIT(A) CONTENDED THAT THE TAX DEDUCTE D AT SOURCE BY THE ASSESSEE U/S 194J FOR THE MONTH OF MARCH, 2013 HAVE BEEN DULY PAID ON 11 TH APRIL, 2013 I.E. MUCH BEFORE THE DUE DATE OR BEFOR E THE DUE DATE SPECIFIED IN SUB. SECTION 1 OF SECTION 13 9 OF THE INCOME TAX ACT, AND AS SUCH THERE IS NO DELAY IN DEPOSIT OF THE TDS DEDUCTION. IT IS FURTHER CONTENDED BY LD. AR FOR TH E ASSESSEE THAT U/S 43B THE ASSESSEE IN ORDER TO CLAIM THE DEDUCTIO N OF TDS PAYABLE IS REQUIRED TO DEPOSIT THE TDS DEDUCTED IN THE LAST MONTH OF PREVIOUS YEAR, ON OR BEFORE THE DUE DATE SPECIFI ED IN SECTION139(1) OF THE ACT. HOWEVER, ON THE OTHER HA ND THE LD. DR FOR THE REVENUE RELIED UPON ORDER PASSED BY AO AS W ELL AS CIT(A). ITA NO.3194/DEL./2017 5 6.1 UNDISPUTEDLY THE TDS DEDUCTED BY THE ASSESSEE U /S 194J FOR THE MONTH OF MARCH, 2013 HAS BEEN DULY PAID ON 11 TH MARCH, 2013 WHICH IS WELL BEFORE THE DUE DATE SPECIFIED IN SECT ION139(1) OF THE ACT. WHEN THE ASSESSEE HAS DULY DEPOSITED THE TDS B EFORE FILING THE RETURN OF INCOME FOR THE YEAR UNDER ASSESSMENT, THE SAME IS ALLOWABLE U/S 43B OF THE ACT. NO DOUBT, THE ASSESSE E IS FOLLOWING THE CASH METHOD OF ACCOUNTING AND HAS MADE CASH PAY MENT TO VARIOUS PARTIES AFTER DEDUCTING TDS, THE PORTION OF WHICH HAS BEEN ALLOWED BY THE AO AS DEDUCTIBLE EXPENDITURES, U/S 198 OF THE ACT TAX DEDUCTED AT SOURCE BY THE ASSESSEE AS PER INCOM E TAX ACT IS DEEMED TO BE INCOME RECEIVED BY THE RECIPIENT OF TH E SAID INCOME AND AS SUCH TDS DEDUCTED BY THE ASSESSEE IS DEEMED TO HAVE BEEN RECEIVED BY THE RECIPIENT OF THE INCOME AND AS SUCH IT CANNOT BE HELD THAT THE ASSESSEE HAS NOT PAID THE AMOUNT OF T AX DEDUCTIBLE AT SOURCE ON OR BEFORE THE DUE DATE. SO IT CANNOT BE H ELD THAT THE AFORESAID AMOUNT OF TDS HAS NOT BEEN PAID BY THE A SSESSEE WHILE FOLLOWING THE CASH SYSTEM OF ACCOUNTING. 6.2 HONBLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX XIII VS. NARESH KUMAR IN INCOME TAX APPE AL NO. 24/2013 DECIDED ON 6 TH SEPTEMBER, 2013 AND JUDGMENT OF DELHI HIGH COURT IN THE MATTER OF COMMISSIONER OF INCOME TAX VS. RAJINDER KUMAR IN INCOME TAX APPEAL NO. 65/2013 DEC IDED ON ITA NO.3194/DEL./2017 6 1 ST JULY, 2013 HELD THAT IF THE STATUTORY LIABILITY OF DEPOSITING THE TDS HAS BEEN FULFILLED BEFORE THE DUE DATE OF FILIN G OF THE RETURN U/S 139(1) OF THE ACT, THE SAME ARE ALLOWABLE EXPENSES IN THE YEAR TO WHICH IT RELATES. THIS IS ALSO MANDATE OF SECTION 4 3B OF THE ACT. EVEN OTHERWISE IDENTICAL ISSUE HAS BEEN DECIDED BY THE REVENUE ITSELF IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE IN A.Y. 2008-09, 2010-11 AND 2011-12, SO RULE OF CONSISTENCY HAS TO BE FOLLOWED BY THE REVENUE. 6.3 CO-ORDINATE BENCH OF TRIBUNAL IN CASE OF ASSOCI ATED LAW ADVISERS, ANTRIKSH BHAWAN VS. ACIT, ITA NO. 1122/DE L/2017, A.Y. 2013-14 ON 11.09.2019 DECIDED THE IDENTICAL IS SUE IN FAVOUR OF THE ASSESSEE. SO WE ARE OF THE CONSIDERED VIEW T HAT AO AS WELL AS LD. CIT(A) HAVE ERRED IN MAKING DISALLOWANCE OF RS. 5,33,700/- ON ACCOUNT OF TDS, HENCE, ORDERED TO BE ALLOWED / D ELETED. SO GROUND NO. 3 IS DETERMINED IN FAVOUR OF THE ASSESS EE. GROUND NO. 4 7. AO/ LD. CIT(A) HAVE MADE / CONFIRMED ADDITION OF RS. 4,29,274/- OUT OF PARTNERS SALARY OF RS. 57,00,0 00/- PAID TO MR. U.A. RANA ON THE GROUND THAT PARTNERS SALARY HAS B EEN REVISED JUST BEFORE THE FEW DATES OF THE END OF FINANCIAL YEARS. LD. DR FOR THE REVENUE RELIED BY THE ORDER PASSED BY AO AS WELL AS LD. CIT(A). ITA NO.3194/DEL./2017 7 7.1 UNDISPUTEDLY AS PER CLAUSE 8.1 OF THE PARTNERS HIP DEED DATED 1 ST APRIL, 2011 PARTNERS SALARY IS FIXED AT RS. 48,00, 000/- PER ANNUM HOWEVER, AS PER THE AMENDED PARTNERSHIP DEED DATED 28.03.2013 SALARY OF PARTNER NAMELY SH. U.A.RANA HAS BEEN INCR EASED TO 57,00,000/-. PERUSAL OF PARA 8.2 OF ORIGINAL PARTNE RSHIP DEED AVAILABLE AT PAGE 15 TO 53 OF PAPER BOOK SHOWS THAT IT IS DECIDED IN THE PARTNERSHIP DEED THAT : 8.2 THE ANNUAL REMUNERATION AS PER QUANTUM SPECIFIED IN CLAUSE 8.1 MAY BE DRAWN IN SUCH INSTALMENTS AS MAY BE DECIDED BY THE PARTNERS FROM TIME TO TIME. 7.2 THEN PERUSAL OF THE SUPPLEMENTARY PARTNERSHIP DEED DATED 27.03.2013 AVAILABLE AT PAGE 12 TO 14 OF THE PAPER BOOK SHOWS THAT PARTNERS SALARY HAS BEEN ENHANCED WITH EFFECT FROM 1 ST APRIL, 2012 TO RS. 57,00,000/-. ACCORDINGLY ASSESSEE HAS CLAIME D PARTNERS SALARY WITH EFFECT FROM 1 ST APRIL AND PLACED ON FILE THE COPY OF LEDGER AVAILABLE AT PAGE 61 OF THE PAPER BOOK. WHEN IT IS UNDISPUTED FACT THAT OUT OF TWO PARTNER NAMELY MR. R.J.GAGRAT AND MR. UJJWAL A. RANA ONLY ONE PARTNER IS ACTIVE PARTN ER AND IS DERIVING SALARY AND NO SALARY IS BEING DRAWN BY MR. R.J. GAGRAT, THEY HAVE MUTUALLY AGREED TO DECIDE THE SALARY OF T HE ACTIVE PARTNERS. WHEN THE SALARY OF THE PARTNER HAS BEEN E NHANCED IN ACCORDANCE WITH LAW AND HAS BEEN CLAIMED AS SUCH, E NHANCED ITA NO.3194/DEL./2017 8 AMOUNT OF RS. 4,29,274/- DISALLOWED BY THE AO/ LD. CIT(A) IS NOT SUSTAINABLE IN THE EYES OF LAW HENCE, ORDERED TO BE ALLOWED. SO THE ADDITION MADE BY AO AND CONFIRMED BY THE LD. CIT(A) IS ORDERED TO BE DELETED. CONSEQUENTLY GROUND NO. 4 RAISED BY THE ASSESSEE IS ALLOWED. GROUND NO. 5 8. ASSESSEE HAS CLAIMED TELEPHONE EXPENSES OF RS. 1 ,93,712/- IN THE PROFIT AND LOSS ACCOUNT OUT OF WHICH AO HAS DISALLOWED 15% I.E. RS. 29,057/- ON ACCOUNT OF PERSONAL USE. HOWEV ER, LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE OF TELEPHONE EXPENS ES AT 10%. THE LD. AR FOR THE ASSESSEE CONTENDED THAT IN THE EARLI ER YEARS A.Y. 2011-12, LD. CIT(A) HAD RESTRICTED THE DISALLOWANC E TO 8% OF THE TOTAL CLAIM ON ACCOUNT OF PERSONAL NATURE OF THE EX PENSES. 9. WE ARE OF THE CONSIDERED VIEW THAT KEEPING IN VIEW THE FACT THAT AS AGAINST THE GROSS RECEIPT OF RS. 5.93 CRORE , ASSESSEE HAS CLAIMED TELEPHONE EXPENSES OF RS. 1,93,712/- WHICH IS MERELY 0.32% OF THE GROSS RECEIPTS, WE ARE OF THE CONSIDE RED VIEW THAT LD. CIT(A) IN A.Y. 2011-12 HAS RIGHTLY RESTRICTED THE P ERSONAL NATURE OF TELEPHONE EXPENSES OF THE ASSESSEE TO 8% OF THE TOTAL CLAIM. SO THE REVENUE IS REQUIRED TO FOLLOW THE RULE OF CONSI STENCY AND AS SUCH PERSONAL NATURE OF TELEPHONE EXPENSES OF THE ASSESSEE IS ITA NO.3194/DEL./2017 9 RESTRICTED TO 8% OF THE TOTAL CLAIM. SO GROUND NO. 5 IS PARTLY DETERMINED IN FAVOUR OF THE ASSESSEE. 9. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE PRESENT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 7 TH DAY OF FEBRUARY, 2020. SD/- SD/- (N.K.BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 7 TH DAY OF FEBRUARY, 2020 BR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-20, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI. DATE OF DICTATION 03/02/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 03/02/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ITA NO.3194/DEL./2017 10 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER