Deloitte Haskins & Sells, Baroda V. The Income tax Officer,Ward-2(1), Baroda

ITA 3352/AHD/2010

• Counselvise Citation: 335220514 RSA 2010
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-07-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 20-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Opportunity of being heard
• Section: 244A

Judgement Text

, , , , B, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .% %% % . .. .&'( &'( &'( &'(, , , , %) * %) * %) * %) * % ' % ' % ' % ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND A. K. GARODIA, ACCOUNTANT MEMBER) ITA NO.3352 AND 3353 /AHD/2010 [ASSTT.YEAR : 2005-2006 AND 2006-2007] DELOITTE HASKINS & SELLS CHARTERED ACCOUNTANTS 31, NUTAN BHARAT SOCIETY NR. M.K. HIGH SCHOOL ALKAPURI, BARODA 390 007. PAN: AADFD 2337 G /VS. ITO, WARD-2(1) BARODA. ( (( (,- ,- ,- ,- / APPELLANT) ( (( (./,- ./,- ./,- ./,- / RESPONDENT) 01 2 3 %/ ASSESSEE BY : SHRI SANJAY R. SHAH * 2 3 %/ REVENUE BY : SHRI P.L. KUREEL, SR.DR 5 2 16)/ DATE OF HEARING : 30 TH JULY, 2013 7&8 2 16)/ DATE OF PRONOUNCEMENT : 02-08-2013 %9 / O R D E R PER GARODIA, ACCOUNTANT MEMBER: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE, WHICH ARE DIRECTED AGAINST T WO SEPARATE ORDERS OF THE LEARNED CIT(A)-II, BARODA BOTH DATED 18.8.2010 FOR A.Y.2005-2006 AND 2006-2007. BOTH THE APPEALS WERE HEARD TOGETHE R, AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAK E OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y.2005-2006 I.E. ITA NO.3352/AHD/2010. THE GROUNDS RAISED BY THE AS SESSEE ARE AS UNDER: ITA NO.3352 AND 3353 /AHD/2010 -2- 1. THE LEARNED CIT (A) HAS ERRED IN THE INSTANT CA SE IN NOT DIRECTING THE LEARNED ASSESSING OFFICER TO GRANT THE CREDIT O F TAXES PAID IN FOREIGN COUNTRY (KINGDOM OF SAUDI ARABIA) FROM THE PROFESSI ONAL FEES REMITTED TO THE APPELLANT AND OFFERED FOR TAXATION IN INDIA WHILE PROCESSING THE RETURN OF INCOME U/S. 143(1) OF THE ACT. 2. THE LEARNED CIT (A) HAS FAILED TO APPRECIATE THA T, AT THE RELEVANT TIME, THE DOUBLE TAXATION AVOIDANCE AGREEMENT WITH THE KINGDOM OF SAUDI ARABIA WAS A LIMITED TREATY AND NOT A COMPREH ENSIVE TREATY AND, THEREFORE, THE APPELLANT'S CASE WAS COVERED WITHIN THE PURVIEW OF SECTION 91 OF THE ACT AND NOT U/S. 90 OF THE ACT. 3. THE LEARNED CIT (A) HAS FURTHER FAILED TO APPREC IATE THAT SECTION 143(1) OF THE ACT PERMITS ADJUSTMENTS IN RESPECT OF ONLY ARITHMETICAL ERRORS / INCORRECT CLAIMS, APPARENT FROM RECORDS, A ND NOT IN RESPECT OF ISSUES (SUCH AS THE ONE IN THE INSTANT CASE OF DENI AL OF CREDIT OF TAXES PAID IN FOREIGN COUNTRIES) WHICH REQUIRE DELIBERATI ON / INTERPRETATION OF VARIOUS PROVISIONS OF THE ACT. 4. THE LEARNED CIT (A) HAS ERRED IN NOT DIRECTING T HE LEARNED ASSESSING OFFICER TO GRANT INTEREST U/S. 244A OF TH E ACT ON THE AMOUNT OF TAXES PAID IN FOREIGN COUNTRY. 3. IN RESPECT OF GROUND NO.3, A QUERY WAS RAISED BY THE BENCH AT THE VERY BEGINNING, AS TO WHETHER THIS ISSUE WAS RAISED BEFORE THE LEARNED CIT(A), AND WHETHER THE SAME HAS BEEN DECIDED BY TH E LEARNED CIT(A). IN REPLY, IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT AS PER THE GROUNDS RAISED BEFORE THE LEARNED CIT(A), THIS ISSUE WAS RAISED BEFORE HIM ON MERIT AS TO WHETHER THE AO WAS JUSTIFIED IN NOT GRANTING THE CREDIT OF TDS OF RS.1,81,820/-, BUT THIS IS A LEGAL ISSUE, AS TO WHETHER SUCH ADJUSTMENT CAN BE MADE BY THE AO WHILE PASSING THE INTIMATION UNDER SECTION 143(1) OF THE ACT, AND HENCE, THIS CAN BE R AISED AT ANY STAGE. THE BENCH ALSO POINTED OUT THAT EVEN IF THIS GROUND IS ACCEPTED AS A LEGAL GROUND, THEN THE ISSUE HAS TO GO BACK TO THE FILE O F THE LEARNED CIT(A) FOR HIS DECISION ON THIS ASPECT. IN REPLY, THE LEARNED AR OF THE ASSESSEE HAS AGREED TO THIS PROPOSITION. THE LEARNED DR SUPPORT ED THE ORDER OF THE CIT(A). ITA NO.3352 AND 3353 /AHD/2010 -3- 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND T HAT THE GROUND NO.3 RAISED BY THE ASSESSEE IS THIS THAT THE AO COU LD NOT HAVE MADE THIS ADJUSTMENT BY WAY OF DENIAL OF THE CREDIT OF TAX PA ID IN FOREIGN COUNTRY WHILE PASSING INTIMATION UNDER SECTION 143(1) OF TH E I.T.ACT. ON THIS ASPECT, NO SPECIFIC GROUND WAS RAISED BEFORE LD. CI T(A), AND HENCE, THERE IS NO DECISION BY THE LEARNED CIT(A) ON THIS ASPECT . STILL, WE FEEL THAT THIS ISSUE IS A LEGAL ISSUE, HENCE, THIS CAN BE RAISED F OR THE FIRST TIME BEFORE US ALSO, AND THEREFORE, WE DECIDE TO ADMIT THIS GROUND . HOWEVER, SINCE THERE IS NO DECISION OF THE LEARNED CIT(A) ON THIS ASPECT , WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THIS MATTER BACK TO HIS FILE WITH A DIRECTION THAT HE SHOULD DECIDE THIS ASPECT OF THE MATTER, AS TO WHETHER THE AO WAS JUSTIFIED IN MAKING SUCH ADJUSTMENT WHILE PA SSING INTIMATION UNDER SECTION 143(1). THE ASSESSEE HAS TO ARGUE BE FORE THE LEARNED CIT(A) ON THIS ISSUE, AND THEREAFTER, THE LEARNED C IT(A) SHOULD DECIDE THIS ISSUE BY WAY OF SPEAKING ORDER, AFTER GRANTING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. THE GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSE. 5. IN VIEW OF OUR DECISION IN RESPECT OF GROUND NO. 3, OTHER GROUNDS RAISED BY THE ASSESSEE ON MERIT DO NOT CALL FOR ANY ADJUDICATION AT THIS STAGE. AFTER DECIDING THE TECHNICAL ISSUE RAISED B Y THE ASSESSEE BEFORE US, BY WAY OF GROUND NO.3, IF IT IS FOUND BY THE LEARNE D CIT(A) THAT ORDER OF THE AO IS VALID, THEN HE SHOULD DECIDE THE ISSUE AF RESH ON MERIT ALSO. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. 7. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR A. Y.2006-2007 IN ITA NO.3353/AHD/2010. ITA NO.3352 AND 3353 /AHD/2010 -4- 8. THE GROUNDS RAISED IN THIS APPEAL OF THE ASSESSE E ARE AS UNDER: 1. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THA T THE AMENDMENT MADE IN SECTION 40(A)(IA) OF THE ACT BY THE FINANCE ACT, 2010 IS CURATIVE AND HENCE RETROSPECTIVE IN NATURE AND, THEREFORE, N O DISALLOWANCE UNDER THE SAID SECTION IS CALLED FOR IF TAX IS DEDUCTED A T SOURCE DURING THE YEAR AND PAID ON OR BEFORE THE DUE DATE SPECIFIED U/S. 1 39(1) OF THE ACT. 2. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE TRUE NATURE OF ACCOUNT OF M/S. C. C. CHOKSHI & CO. (CCC) WITH T HE APPELLANT IS OF A CURRENT ACCOUNT AND. THEREFORE, THE PAYMENTS MADE O N VARIOUS DATES WERE ERRONEOUSLY PERCEIVED AS ADVANCE PAYMENTS TOWA RDS PROFESSIONAL FEES REQUIRING DEDUCTION OF TAX AT SOURCE (TDS) AT THE POINT OF TIME WHEN SUCH PAYMENTS WERE MADE. 3. THE LEARNED CIT(A) HAS, BASED ON AN ERRONEOUS UN DERSTANDING OF THE 'CASH SYSTEM' OF ACCOUNTING, SUSTAINED THE DISA LLOWANCE OF RS.17,53,564, BEING THE EXCESS OF VARIOUS ADVANCE / ON ACCOUNT PAYMENTS MADE BY THE APPELLANT TO CCC OVER THE AMOU NT OF PROFESSIONAL FEES CREDITED OF RS.99,32,196 TILL FEBRUARY, 2006 B Y INVOKING SECTION 40(A)(IA) R.W.S. 194J OF THE ACT DESPITE THE FACT T HAT THE EXPENDITURE CLAIMED PERTAINED TO THE CREDIT NOTES ISSUED BY THE APPELLANT AND FROM WHICH TAX U/S. 194J OF THE ACT WAS DULY DEDUCTED AN D PAID. WITHOUT PREJUDICE TO OUR CONTENTION THAT NO AMOUNT MERITS DISALLOWANCE BY INVOKING SECTION 40(A)(IA) OF THE ACT IN THE INS TANT CASE, THE LEARNED CIT(A) HAS ERRED IN NOT GIVING APPROPRIATE DIRECTIO N THAT THE AMOUNT OF RS.17,53,564 SHOULD BE ALLOWED AS A DEDUCTION IN TH E SUBSEQUENT ASSESSMENT YEAR SINCE TAX THEREON HAS BEEN DEDUCTED ON 31.03.2006 AND PAID ON 7.4.2006. 9. IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESS EE THAT THIS ISSUE IN THIS YEAR MAY ALSO BE RESTORED BACK TO THE FILE OF THE LEARNED CIT(A) FOR FRESH DECISION IN THE LIGHT OF A RECENT DECISION OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. ROYAL BU ILDERS, IN TAX APPEAL NO.520 OF 2012 DATED 11.2.2013. HE SUBMITTE D A COPY OF THIS JUDGMENT OF THE HONBLE GUJARAT HIGH COURT. THE LE ARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD AND ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENT CITED BY THE ITA NO.3352 AND 3353 /AHD/2010 -5- LEARNED AR OF THE ASSESSEE. WE FIND THAT THE DISAL LOWANCE OF RS.17,53,564/- WAS MADE BY THE AO UNDER SECTION 40( A)(IA) OF THE ACT ON THIS BASIS THAT NO TDS WAS DEDUCTED BY THE ASSESSEE IN RESPECT OF THIS PAYMENT OF RS.17,53,564/-, AND THEREFORE, THE SAME IS REQUIRED TO BE DISALLOWED. IT WAS THE CONTENTION RAISED BY THE AS SESSEE BEFORE THE LEARNED CIT(A) AND ALSO BEFORE US THAT THE ASSESSEE HAD DEDUCTED THE TDS ON THIS PAYMENT ALSO ON 31.3.2006, AND THE PAYMENT OF TDS WAS MADE ON 7.4.2006. BUT HE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THIS CONTENTION BEFORE US. HENCE, WE SET ASIDE THE ORDE R OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO HIS FI LE FOR FRESH DECISION IN LIGHT OF THIS JUDGMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CSE OF CIT VS. ROYAL BUILDERS (SUPRA), AFTER EXAMIN ING THE VERACITY OF THIS CONTENTIONS OF THE ASSESSEE THAT THE TDS WAS D EDUCTED BY THE ASSESSEE AGAINST THIS PAYMENT OF RS.17,53,564/- ON 31.3.2006, AND SUCH TDS WAS PAID BY THE ASSESSEE ON 7.4.2006. IF THE A SSESSEE IS ABLE TO ESTABLISH THAT THE TDS WAS DEDUCTED AND PAID BY THE ASSESSEE IN RESPECT OF THIS PAYMENT OF RS.17,53,564/- ON A DATE BEFORE THE DUE DATE OF FILING OF THE RETURN UNDER SECTION 139(1) OF THE ACT, DISA LLOWANCE MADE BY THE AO SHOULD BE DELETED, AS HAS BEEN HELD BY THE HONB LE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ROYAL BUILDERS (SUPRA) . THE LEARNED CIT(A) SHOULD PASS NECESSARY ORDER AS PER LAW IN LIGHT OF OUR ABOVE DISCUSSIONS AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO BOTH THE SIDES. 11. IN THE COMBINED RESULT BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT ( # ## #. .. .% %% % . .. .&'( &'( &'( &'( /A.K. GARODIA) %) * /ACCOUNTANT MEMBER