Bharat Forge Ltd, Pune V. ACIT Rg -1, Pune

ITA 340/PUN/2012

• Counselvise Citation: 34024514 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 20-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S C SARANGI
• Keywords: Earning of tax free income; Non-deduction of tax; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.340/PN/2012 (ASSESSMENT YEAR : 2007-08) BHARAT FORGE LTD., MUNDHWA, PUNE 411 036 PAN : AAACB8519L . APPELLANT VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE 1, PUNE . RESPONDENT APPELLANT BY : MR. NIKHIL PATHAK RESPONDENT BY : MR. S. C. SARANGI DATE OF HEARING : 23-09-2013 DATE OF PRONOUNCEMENT : 30-09-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 11.08.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 10.12.2009 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2007-08. 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD T O THE ACTION OF THE CIT(A) IN SETTING-ASIDE THE ISSUE REGARDING THE DISALLOWAN CE UNDER SECTION 14A OF THE ACT TO THE FILE OF THE ASSESSING OFFICER. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE WAS FOUND TO HAVE EARNED DIVIDEND INCOME O F RS.16,20,65,249/- WHICH WAS EXEMPT UNDER SECTION 10(34) OF THE ACT. I N THE RETURN OF INCOME FILED ASSESSEE HAD NOT SHOWN ANY INADMISSIBLE EXPEN DITURE AGAINST THE AFORESAID EXEMPT INCOME IN TERMS OF SECTION 14A OF THE ACT. THE ASSESSING OFFICER, HOWEVER, WAS OF THE OPINION THAT THE PROVI SIONS OF RULE 8D OF THE ITA NO.340/PN/2012 A.Y. 2007-08 INCOME TAX RULES, 1962 (IN SHORT THE RULES) READ WITH SECTION 14A OF THE ACT WAS ATTRACTED AND THEREFORE HE DISALLOWED A SUM OF RS.1,15,20,158/- BEING 0.5% OF AVERAGE INVESTMENTS AS AMOUNT DISALLOWABLE IN TERMS OF RULE 8D OF THE RULES OUT OF THE INDIRECT EXPENSES. THE CIT(A) NOTED THAT APPLICATION OF RULE 8D OF THE RULES WAS CONTRARY TO THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD . VS. DCIT (2010) 328 ITR 81 (BOM.) WHEREIN IT WAS OPINED THAT RULE 8D OF THE RULES WAS APPLICABLE ONLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. THE CIT(A ) FURTHER NOTICED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAD SUO MOTTO OFFERED FOR DISALLOWANCE A SUM OF RS.20,96,382/- OUT OF SPECIFI C FINANCE AND ACCOUNTS PERSONNEL SALARIES AND OTHER COSTS, WHICH WERE ALLO CABLE TO THE EARNING OF EXEMPT DIVIDEND INCOME. AFTER NEGATING THE ACTION O F THE ASSESSING OFFICER TO APPLY RULE 8D OF THE RULES FOLLOWING THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD . (SUPRA), THE CIT(A) SET- ASIDE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO RECOMPUTE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT, WITH AN OBSERVATION THAT THE DISALLOWANCE WOULD NOT BE LESS THAN RS.20,96,382/-, WHICH HAS BEEN OFFERED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEED INGS. NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A), ASSESSEE IS IN FURTHE R APPEAL BEFORE US. 3. BEFORE US, THE PRINCIPAL GRIEVANCE OF THE ASSESS EE IS THAT THE CIT(A) ERRED IN NOT APPRECIATING THAT NO DISALLOWANCE WAS REQUIRED TO BE MADE UNDER SECTION 14A OF THE ACT INASMUCH AS THE ASSESSEE HAD POINTED OUT THAT NO SEPARATE STAFF OR EMPLOYEES WERE DEPLOYED FOR MANAG EMENT OF MUTUAL FUND INVESTMENTS, WHICH HAD GIVEN RISE TO THE IMPUGNED E XEMPT DIVIDEND INCOME. IT WAS ALSO POINTED OUT THAT THERE WAS NO SEPARATE ADM INISTRATIVE COSTS INCURRED IN RELATION TO THE EXEMPT DIVIDEND. FURTHER, IT WAS POINTED OUT THAT THE INVESTMENTS IN MUTUAL FUND WERE MAINLY OUT OF THE F UNDS RAISED BY WAY OF GLOBAL DEPOSITORY RECEIPTS (GDRS) WHICH IS NOTHING BUT EQUITY AND HENCE THERE IS NO INTEREST COST INCURRED IN RELATION TO T HE EARNING OF EXEMPT DIVIDEND ITA NO.340/PN/2012 A.Y. 2007-08 INCOME. NOTWITHSTANDING THE PRINCIPAL PLEA, THE LEA RNED COUNSEL POINTED OUT THE DISALLOWANCE WORKED OUT BY THE ASSESSEE WAS FAI R AND PROPER, REFERENCE WAS MADE TO THE WORKINGS PLACED AT PAGE 53 OF THE P APER BOOK. AS PER THE SAID WORKING, THE ASSESSEE APPORTIONED THE SALARY C OSTS RELATING TO SPECIFIC FINANCE/ACCOUNTS PERSONNEL AND OTHER COSTS IN PROPO RTION TO THE PERCENTAGE OF DIVIDEND INCOME VIS--VIS THE TOTAL INCOME OF THE A SSESSEE, THEREBY DEPICTING AN AMOUNT OF RS.20,96,382/- WHICH COULD BE ATTRIBUT ABLE TO THE EARNING OF EXEMPT DIVIDEND INCOME. IT WAS CONTENDED THAT IN CA SE THE TRIBUNAL DOES NOT ALLOW THE PLEA THAT NO DISALLOWANCE AT ALL IS MERIT ED, THEN THE DISALLOWANCE BE RESTRICTED TO RS.20,96,382/- INSTEAD OF UPHOLDING C IT(A)S ACTION OF SETTING- ASIDE THE MATTER TO THE ASSESSING OFFICER. 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS RELIED UPON THE ORDER OF THE CI T(A) IN SUPPORT OF THE CASE OF THE REVENUE. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. OSTENSIBLY, HAVING REGARD TO THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (SUPRA) IT IS CLEAR THAT RULE 8D OF THE RULES CANNOT BE INVOKED IN THE PRESENT ASSESSMENT YEAR TO DETERM INE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT AS THE SAME IS APPLICA BLE FROM ASSESSMENT YEAR 2008-09 ONWARDS. THEREFORE, INVOKING OF RULE 8D OF THE RULES BY THE ASSESSING OFFICER HAS BEEN RIGHTLY SET-ASIDE BY THE CIT(A). 6. FURTHER, IN OUR VIEW, HAVING REGARD TO THE DISCU SSION MADE BY THE ASSESSING OFFICER IN PARA 6.3 OF THE ASSESSMENT ORD ER, IT IS FOUND THAT HE WAS NOT SATISFIED WITH THE PLEA OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO EARNING OF THE EXEMPT INCOM E. THE SATISFACTION SO RECORDED BY THE ASSESSING OFFICER, IN OUR VIEW, DES ERVES TO BE UPHELD AND NO COGENT ARGUMENTS TO THE CONTRARY HAVE BEEN ADVANCED BY THE APPELLANT BEFORE ITA NO.340/PN/2012 A.Y. 2007-08 US. IN SO FAR AS THE AMOUNT OF DISALLOWANCE UNDER S ECTION 14A OF THE ACT IS CONCERNED IN THIS ASSESSMENT YEAR, IN THE ABSENCE O F RULE 8D OF THE RULES, THE SAME IS REQUIRED TO BE CALCULATED ON A REASONAB LE BASIS; AND, IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE ITSELF C OMPUTED SUCH DISALLOWANCE AT RS.20,96,382/- OUT OF THE SALARIES AND GENERAL EXPENSES. NOTABLY, IN SO FAR AS THE INTEREST COST IS CONCERNE D, ASSESSEE OFFERED AN EXPLANATION TO THE EFFECT THAT THE INVESTMENTS IN Q UESTION WERE MADE OUT OF THE GDRS WHICH DID NOT CARRY ANY INTEREST COST AND SUCH EXPLANATION HAS BEEN ACCEPTED INASMUCH AS NO DISALLOWANCE OUT OF INTERES T EXPENDITURE WAS MADE BY THE ASSESSING OFFICER. THEREFORE, FOR THE PRESEN T, WE ARE CONCERNED WITH THE DETERMINING THE AMOUNT OF DISALLOWANCE UNDER SE CTION 14A OF THE ACT OUT OF GENERAL EXPENSES. IN THIS BACKGROUND, WE HAVE EX AMINED THE WORKINGS MADE BY THE ASSESSEE, A COPY OF WHICH HAS BEEN PLAC ED AT PAGE 53 OF THE PAPER BOOK. IN TERMS THEREOF THE EXPENSES OUT OF SP ECIFIC FINANCE/ACCOUNTS PERSONNEL SALARIES AND OTHER EXPENSES RELATING TO T ELEPHONE EXPENSE, PRINTING, ETC. HAVE BEEN PROPORTIONATELY ALLOCATED TO THE EXE MPT INCOME ON THE BASIS OF THE RATIO OF THE EXEMPT INCOME VIS--VIS THE TOTAL INCOME OF THE ASSESSEE. NOTABLY, WHILE REJECTING SUCH CALCULATION, ASSESSIN G OFFICER HAS NOT ADVANCED ANY REASON AND EVEN BEFORE US, THERE IS NO ARGUMENT TAKEN AS TO HOW THE CALCULATION OF DISALLOWANCE UNDER SECTION 14A WORKE D OUT BY THE ASSESSEE IS UNREASONABLE OR INCORRECT. THEREFORE, CONSIDERING T HE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT WORKING MADE BY THE ASSES SEE TO DETERMINE EXPENSES ATTRIBUTABLE TO EARNING OF EXEMPT INCOME A T RS.20,96,382/- IS FAIR AND REASONABLE AND CAN BE APPLIED SO AS TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THEREFORE, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DISALLOW A SUM OF R S.20,96,382/- AS AN EXPENDITURE INCURRED FOR EARNING OF THE EXEMPT INCO ME IN TERMS OF SECTION 14A OF THE ACT. 7. THUS, ON THIS GROUND, ASSESSEE PARTLY SUCCEEDS. ITA NO.340/PN/2012 A.Y. 2007-08 8. THE SECOND ISSUE IN THIS APPEAL IS WITH REGARD T O A DISALLOWANCE OF RS.33,85,562/- BEING ONE TIME PAYMENT FOR SOFTWARE LICENSES, WHICH WAS HELD BY THE ASSESSING OFFICER TO BE CAPITAL EXPENDITURE NOT REVENUE EXPENDITURE, AS CLAIMED BY THE ASSESSEE. 9. IN THIS CONNECTION, THE DETAILS OF THE COMPUTER SOFTWARE EXPENSES IN DISPUTE AMOUNTING TO RS.33,85,562/- READS AS UNDER :- SR NO NAME OF THE PARTY PARTICULARS AMOUNT 1 SONATA INFORMATION TECHNOLOGY OFFICE PRO WIN 32 LICENSES 23,08,305 2 SOFTCELL TECHNOLOGIES AUTOCAD LT FULL VERSION 2,4 9,000 3 PARAMETRIC TECHNOLOGIES PRO ENGINEERING FOUNDATION 3,00,196 4 DESIGNTECH SYSTEMS 21 HYPERWORKS- HYPERMESH 3,60, 000 5 ANSYS SOFTWARE ANSYS MECHANICAL 7.0 1,68,059 10. THE ASSESSING OFFICER HAD DISALLOWED OF RS.37 ,72,107/- OUT OF COMPUTER SOFTWARE EXPENSES TREATING THE SAME TO BE CAPITAL EXPENDITURE, OUT OF WHICH THE CIT(A) ALLOWED RS.3,86,545/- AS REVEN UE EXPENDITURE AND THE BALANCE OF RS.33,85,562/- WAS TREATED AS CAPITAL E XPENDITURE; AS DETAILED ABOVE. BEFORE US, THE LEARNED COUNSEL HAS MADE A SO LITARY PLEA BASED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. RAYCHEM RPG LTD. (2011) 64 DTR 57 (BOM) TO POINT OUT THAT W HERE THE SOFTWARE ACQUIRED BY THE ASSESSEE DID NOT FORM PART OF THE P ROFIT-MAKING APPARATUS, THE SAME WAS LIABLE TO BE ALLOWED AS REVENUE EXPENDITU RE. CONSIDERING THE AFORESAID JUDGEMENT OF THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF RAYCHEM RPG LTD. (SUPRA), WE FIND THAT THE EXPENDIT URE INCURRED BY THE ASSESSEE OF RS.23,08,305/- IN ORDER TO ACQUIRE THE OFFICE PRO WIN 32 LICENSES SOFTWARE IS LIABLE TO BE CONSIDERED AS A REVENUE E XPENDITURE. OSTENSIBLY, THE APPELLANT IS ENGAGED IN THE MANUFACTURE AND SALE OF STEEL FORGINGS, ETC. AND THE IMPUGNED SOFTWARE IS TO FACILITATE TRADING OPER ATIONS OR ENABLING IT TO CONDUCT ITS BUSINESS PROFITABLY AND IS NOT A PART O F PROFIT-MAKING APPARATUS. IN SO FAR AS THE OTHER EXPENDITURE ON SOFTWARES AMOUNT ING TO RS.10,77,255/- ARE CONCERNED, THE LEARNED COUNSEL FAIRLY POINTED OUT T HAT THE SAME PERTAINED TO ITA NO.340/PN/2012 A.Y. 2007-08 THE MANUFACTURING ACTIVITY BEING CARRIED ON AND THE REFORE THE SAME, IN OUR VIEW, IS LIABLE TO BE CONSIDERED AS CAPITAL EXPENDI TURE FOLLOWING THE RATIO OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RAYCHEM RP G LTD. (SUPRA). THUS, IN CONCLUSION, WE DIRECT THE ASSESSING OFFICER TO D ELETE THE ADDITION OF RS.23,08,305/- AND SUSTAIN THE BALANCE OF RS.10,77, 255/-. ON THIS GROUND, ASSESSEE PARTLY SUCCEEDS. 11. THE LAST GROUND IN THIS APPEAL IS WITH REGARD T O A DISALLOWANCE OF RS.39,22,912/- MADE BY THE ASSESSING OFFICER INVOKI NG SECTION 40(A)(IA) OF THE ACT. THE LOWER AUTHORITIES HAVE MADE THE DISALLOWAN CE ON THE GROUND THAT THE REQUISITE TAX WAS NOT DEDUCTED AT SOURCE ON SUCH PA YMENTS AND THEREFORE, THE CORRESPONDING EXPENDITURE WAS DISALLOWABLE IN TERMS OF SECTION 40(A)(IA) OF THE ACT. 12. THE FIST LIMB OF THE DISALLOWANCE IS WITH REGAR D TO AN EXPENDITURE OF RS.3,50,000/- ON ACCOUNT OF DIRECTOR SITTING FEES. THE ASSESSEE DID NOT DEDUCT ANY TAX AT SOURCE ON SUCH PAYMENTS. AS PER T HE ASSESSING OFFICER, IN TERMS OF SECTION 194J OF THE ACT, TAX WAS DEDUCTIBL E AT SOURCE ON SUCH PAYMENTS, BEING PAYMENTS IN THE NATURE OF PROFESSIO NAL SERVICES. IN THIS CONNECTION, THE LEARNED COUNSEL POINTED OUT THAT IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 VIDE ITA NO. 1357/PN/20 10 DATED 31.01.2013 THE TRIBUNAL HELD THAT NO TAX WAS REQUIRED TO BE DE DUCTED UNDER SECTION 194J OF THE ACT IN RELATION TO THE PAYMENT OF DIRECTOR S ITTING FEES. FOLLOWING THE SAID DECISION, A COPY OF WHICH HAS BEEN PLACED ON RECORD , WE HOLD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT IS NOT WARRANTED. ACCORDINGLY, THE SAME IS DIRECTED TO BE DELETED. 13. THE SECOND LIMB OF THE DISALLOWANCE IS WITH RES PECT TO A SUM OF RS.86,948/- REPRESENTING TESTING INSPECTION FEES PA ID. IN THIS CONTEXT, THE ASSESSING OFFICER NOTED THAT THE TAX WAS REQUIRED T O BE DEDUCTED UNDER ITA NO.340/PN/2012 A.Y. 2007-08 SECTION 194J OF THE ACT, BEING PAYMENTS FOR PROFESS IONAL SERVICES WHEREAS THE ASSESSEE HAD DEDUCTED THE TAX IN TERMS OF SECTION 1 94C OF THE ACT TREATING THE SAME TO BE CONTRACTUAL PAYMENTS. SINCE AS PER T HE ASSESSING OFFICER, THERE WAS A SHORTFALL IN DEDUCTION OF TAX AT SOURCE , HE, THEREFORE, DISALLOWED THE CORRESPONDING EXPENDITURE OF RS.86,948/- BY IN VOKING SECTION 40(A)(IA) OF THE ACT. 14. BEFORE US, THE LEARNED COUNSEL POINTED OUT THAT THE TRIBUNAL IN ITS ORDER DATED 31.01.2013 (SUPRA) IN THE ASSESSEES OWN CASE , HELD THAT THE ACTION OF THE ASSESSEE IN DEDUCTING THE TAX UNDER SECTION 194 C IN RELATION TO THE PAYMENTS BY WAY OF TESTING INSPECTION FEE WAS JUSTI FIED. FOLLOWING THE AFORESAID DECISION, THEREFORE, IT HAS TO BE HELD TH AT THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE IN DEDUCTING THE TAX AT SOURCE UNDER SECTION 194C OF THE ACT IN THE PRESENT CASE AND THEREFORE, THE ASSESSIN G OFFICER WRONGLY INVOKED SECTION 40(A)(IA) OF THE ACT TO MAKE THE DISALLOWAN CE, WHICH IS HEREBY DELETED. 15. THE THIRD LIMB OF THE DISALLOWANCE IS AN AMOUNT OF RS.20,68,111/- REPRESENTING CRANE HIRE CHARGES. IN THIS REGARD ALS O, THE ONLY DIFFERENCE BETWEEN THE ASSESSEE AND THE REVENUE IS THE SECTION UNDER WHICH THE TAX WAS LIABLE TO BE DEDUCTED AT SOURCE. ASSESSEE DEDUC TED THE TAX UNDER SECTION 194C OF THE ACT WHEREAS THE ASSESSING OFFICER OPINE D THAT THE TAX WAS DEDUCTIBLE UNDER SECTION 194J OF THE ACT. FOR THE S AID REASON THE EXPENDITURE WAS DISALLOWED BY INVOKING SECTION 40(A)(IA) OF THE ACT. ON THIS ASPECT ALSO THE ASSESSEE HAS RELIED UPON THE ORDER OF THE TRIBU NAL DATED 31.01.2013 (SUPRA) IN OWN CASE TO SUPPORT THE STAND TO THE EFF ECT THAT TAX WAS DEDUCTIBLE UNDER SECTION 194C OF THE ACT ON CRANE HIRE CHARGES . FOLLOWING THE SAID PRECEDENT, IN ASSESSEES OWN CASE, WE FIND THAT THE ASSESSING OFFICER ERRED IN MAKING THE IMPUGNED DISALLOWANCE UNDER SECTION 40(A )(IA) OF THE ACT. THE SAME IS LIABLE TO DELETED, WE HOLD SO. ITA NO.340/PN/2012 A.Y. 2007-08 16. THE OTHER TWO LIMBS OF THE DISALLOWANCE ARE OUT OF DIE REPAIRS AND MOTOR REWINDING EXPENSES AMOUNTING TO RS.2,63,260/- AND 2,54,609 RESPECTIVELY. IN BOTH THESE CASES THE DISALLOWANCE WAS MADE UNDER SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT ASSESSEE HA D SHORT DEDUCTED THE TAX AT SOURCE. THE POINT MADE OUT BY THE ASSESSEE IS THE S ECTION 40(A)(IA) CAN BE INVOKED ONLY IN CASE OF NON-DEDUCTION OF TAX AT SOU RCE BUT NOT IN CASES WHICH INVOLVE SHORT-DEDUCTION TAX AT SOURCE. 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. OSTENSIBLY, THE POINT MADE OUT BY THE ASSESSEE, IS TO THE EFFECT TH AT SECTION 40(A)(IA) OF THE ACT CAN BE INVOKED ONLY IN CASES WHERE THERE IS A N ON-DEDUCTION OF TAX AT SOURCE AND NOT IN CASES WHERE THERE IS SHORT-DEDUCT ION OF TAX AT SOURCE. IN THE PRESENT CASE, THE CHARGE MADE BY THE ASSESSING OFFI CER IS THAT ASSESSEE HAS NOT DEDUCTED TAX AT APPROPRIATE RATE UNDER SECTION 194C OF THE ACT. WITHOUT GOING INTO THE MERITS OF THE RIVAL CLAIMS, FOR THE PRESENT, IT IS SUFFICIENT TO OBSERVE THAT THE ASSESSEE HAS BEEN HELD TO BE AN AS SESSEE IN DEFAULT FOR THE REASON THAT IT DEDUCTED TAX AT SOURCE ON PAYMENTS M ADE BY WAY OF DIE REPAIRS AND MOTOR REWINDING EXPENSES WHICH WAS LOWE R THAN THE RATE PRESCRIBED IN LAW, AS PER THE VIEW OF THE ASSESSING OFFICER. THE CONTROVERSY IS AS TO WHETHER IN SUCH A SITUATION, PROVISIONS OF SE CTION 40(A)(IA) OF THE ACT CAN BE ATTRACTED SO AS TO DISALLOW THE CORRESPONDING EX PENDITURE, WHICH ACCORDING TO THE ASSESSING OFFICER HAS SUFFERED DEDUCTION AT LOWER RATE OF TAX AT SOURCE. 18. TO ANSWER THE AFORESAID CONTROVERSY, ONE MAY NO TICE THE CRUCIAL EXPRESSION IN SECTION 40(A)(IA) OF THE ACT WHICH PR ESCRIBES THAT THE EXPENDITURE SPECIFIED THEREIN SHALL BE DISALLOWED ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BE EN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE D ATE SPECIFIED IN SUB- SECTION (1) OF SECTION 139. CLEARLY, THE PHRASEOLOGY TO SECTION 40(A)(IA) OF THE ACT SEEKS TO DISALLOW AN EXPENDITURE ONLY IN SI TUATIONS WHERE THE TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDU CTED OR AFTER DEDUCTION ITA NO.340/PN/2012 A.Y. 2007-08 HAS NOT BEEN PAID AS PER THE PERIOD PRESCRIBED THER EIN. THE PHRASEOLOGY USED IN SECTION 40(A)(IA) OF THE ACT CLEARLY REMOVES FRO M ITS PURVIEW CASES WHERE TAX HAS BEEN SHORT-DEDUCTED. THEREFORE, THE INFEREN CE DRAWN BY THE CIT(A) IS BORNE OUT OF A PLAIN READING OF SECTION 40(A)(IA) O F THE ACT. MOREOVER, THE DECISIONS OF THE PUNE BENCH OF THE TRIBUNAL IN TH E CASE OF SANDVIK ASIA LTD. VS. JCIT 146 TTJ 644 (PUNE); AND, ALSO THE MUMBAI B ENCH OF THE TRIBUNAL IN THE CASE OF CHANDABHOY & JASSOBHOY VIDE ITA NO.20/M UM?2010 DATED 08.07.2011 SUPPORT THE AFORESAID PREMISE. THUS, IN THE PRESENT CASE THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT ATTRACTED AS THIS IS A CASE OF SHORT-DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT AND NOT A CASE OF NON-DEDUCTION OF TAX AT SOURCE. THE DISALLOWANCE OUT OF DIE REPAIRS AND MOTOR REWINDING EXPENSES IS HEREBY SET-ASIDE. 19. RESULTANTLY, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 30 TH SEPTEMBER, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE