Deputy Commissioner of Income-tax, Satara Circle, Satara V. Shriram Jawahar Shetkari Sahakari Sakhar Udyog, Phaltan

ITA 337/PUN/2021

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax, Satara Circle, against Shriram Jawahar Shetkari Sah. Sakhar Udyog concerning the assessment year 2012-2013. The appeal was against the order of the National Faceless Appeal Centre (NFAC), which had deleted certain disallowances made by the Assessing Officer under Section 40(a)(ia) of the Income Tax Act, 1961. The primary issues were the disallowance of Rs.9,57,19,886 and Rs.71,98,707, which were initially disallowed by the Assessing Officer but later deleted by the CIT(A). The Tribunal's decision was influenced by a previous ruling on similar facts and legal provisions, leading to the rejection of the first disallowance. However, due to procedural irregularities in handling additional evidence for the second disallowance, the Tribunal remanded the matter back to the Assessing Officer for a fresh examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137356 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowedPartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 18-12-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 22-08-2021
• Other Referred Cases: CIT Vs. DLF Commercial Project Corporation, CIT Vs. Karma Energy Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; TDS; Set aside
• Section: 143(3); 40(a)(ia); 194C; 264; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA.No.337/PUN./2021 Assessment Year 2012-2013 The DCIT, Satara Circle, Satara, Manjunath Manor, Opp. Science College, Sadar Bazar, Satara PIN – 415 001. vs. Shriram Jawahar Shetkari Sah. Sakhar Udyog, At Post-Phaltan, Tal-Phaltan, Dist. Satara PIN – 415 523 PAN AACAS5389M (Appellant) (Respondent) For Revenue : Shri Rajeev Kumar For Assessee : Shri Prasanna Joshi Date of Hearing : 19.12.2022 Date of Pronouncement : 05.01.2023 ORDER PER SATBEER SINGH GODARA, J.M. This Revenue’s appeal for assessment year 2012- 2013, arises against the National Faceless Appeal Centre [in short “NFAC”], Delhi’s order dated 17.03.2021, in Din & Order No.ITBA/NFAC/S/250/2020-21/1031546928 (1), involving proceedings under Section 143(3) of the Income Tax Act, 1961 (in short “the Act”). 2. Heard both the parties. Case file perused. 3. The Revenue raises the following substantive grounds in the instant appeal : 2 ITA.No.337/PUN./2021 Shriram Jawahar Shetkari Sah Sakhar Udyog, Post Phaltan, Dist. Satara. 1) “The CIT(A) erred both on facts and in law in passing the order. 2) The CIT(A) erred in deleting the addition made by the Assessing Officer on account of disallowance of Rs.9,57,19,886/- u/s 40(a)(ia) of the I.T. Act, 1961 holding that the payment made under a contract to Shriram SSK on which tax was deductible at source u/s.194C of the I.T. Act, 1961 was not in nature of income but was an expenditure which was reimbursed. 3) The CIT(A) erred in not appreciating the fact that payments made to Shriram SSK in the nature of salary & wages were for a contract work. 4) The CIT(A) erred in deleting the addition made by the Assessing Officer on account of disallowance of Rs.71,98,707/- u/s.40(a)(ia) by accepting additional evidence in violation of provisions of Rule 46A of the Income Tax Rules without recording reason for doing so and without allowing the Assessing Officer an opportunity to examine the said additional evidence. 5) For these and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 6) The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the 3 ITA.No.337/PUN./2021 Shriram Jawahar Shetkari Sah Sakhar Udyog, Post Phaltan, Dist. Satara. course of the appellate proceedings before the Hon'ble Tribunal.” 4. Coming to the Revenue’s first and foremost substantive ground seeking to revive sec.40(a)(ia) disallowance of Rs.9,57,19,886/-, it emerges during the course of hearing that the instant issue is covered by this tribunal’s coordinate bench’s order in taxpayer’s appeal ITA.No.430/PUN./2015 dated 07.06.2019 for assessment year 2010-11 against the department which reads as follows: “7. We have heard the rival submissions and perused the material on record. The issue in the present appeal is with respect to disallowance u/s 40(a)(ia) of the Act. It is assessee's case that as per the Memorandum of Understanding (MOU) entered between two parties name Shriram SSK Ltd., and Jawahar Shetkari Sahakari Sakhar Kharkhana Ltd., Shriram SSK was required to depute its employees for running the sugar plant and for which the assessee was required to reimburse the salary / wages of the employees deputed by it. As per the terms of agreement, assessee had reimbursed the wages to Shriram SSK Ltd., on cost to cost basis, without any element of profit and Shriram SSK in turn 4 ITA.No.337/PUN./2021 Shriram Jawahar Shetkari Sah Sakhar Udyog, Post Phaltan, Dist. Satara. had disbursed the salary/wages to the concerned employees. The aforesaid contentions of assessee have not been controverted by Revenue. The argument of Revenue is that on the salary/wages that has been paid /reimbursed by assessee to Shriram SSK Ltd., assessee should have deducted TDS u/s 194C and since assessee had failed to deduct TDS, provisions of Sec.40(a)(ia) of the Act are applicable and therefore expenses cannot be allowed as deduction. The contention of the assessee as noted above that the payments made by assessee to Shriram SSK Ltd., is on cost-to-cost basis, has no element of profits, has not been controverted by Revenue. In such a situation, we are of the view that when the amounts that have been paid are by way of ITA No.430/PUN/2015 reimbursements without any element of profits or mark up, then the provisions of Sec.40(a)(ia) of the Act are not applicable. For our aforesaid view, we find support by the decision of Hon'ble Delhi High Court in the case of CIT Vs. DLF Commercial Project Corporation (2015) 379 ITR 538 (Del) wherein the Hon'ble High Court has held reimbursement of expenses cannot be regarded as revenue receipts and hence tax need not be deducted at source from such payments. We also find the Hon'ble 5 ITA.No.337/PUN./2021 Shriram Jawahar Shetkari Sah Sakhar Udyog, Post Phaltan, Dist. Satara. Bombay High Court in the case of CIT Vs. Karma Energy Ltd. (2015) 375 ITR 264 (Bom) has held that when the payments made to a group company was not in the nature of income but was expenditure which was reimbursed then disallowance u/s 40(a)(ia) of the Act was not warranted. Relying on the aforesaid decisions, we are of the view that in the present case, AO was not justified in invoking the provisions of Sec.40(a)(ia) of the Act. We therefore set aside the order of AO on this issue and thus the grounds of assessee are allowed.” 5. The Revenue is fair enough in not pinpointing any distinction on facts or law in the impugned twin assessment years qua the instant former issue. We thus adopt judicial consistency to reject the Revenue’s instant first and foremost grievance raised herein. 6. Next comes to second issue of sec.40(a)(ia) disallowance of Rs.71,98,707/- made by the Assessing Officer and deleted in the CIT(A)'s order allegedly after admitting the assessee’s additional evidence in violation of Rule 46A of Income Tax Rules. Faced with the situation of additional evidence’s submissions, we deem it appropriate that larger interest of justice would be met in case the Assessing Officer re-examines the same after affording 6 ITA.No.337/PUN./2021 Shriram Jawahar Shetkari Sah Sakhar Udyog, Post Phaltan, Dist. Satara. adequate opportunities to the taxpayer in consequential proceedings. Ordered accordingly. 7. No other ground or argument has been pressed before us. 8. Delay of 22 days in filing of the instant appeal on 23.08.2021 is condoned since falling Covid-2019 pandemic outbreak period. 9. This Revenue’s appeal is partly allowed for statistical purposes. Order pronounced in the open Court on 05.01.2023. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 05 th January, 2023 VBP/- Copy to 1. The appellant 2. The respondent 3. The Ld. CIT(A) concerned. 4. The CIT concerned 5. D.R. ITAT, Pune “B” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches Pune.