M/s. Jaisu Trading and Shipping Ltd., Adipur-Kutch V. The Additional Commissioner of Income Tax, GFandhidham Range, GANDHIDHAM

ITA 350/RJT/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67238 (ITAT-RAJKOT)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG N E
• Assessee Lawyers: KALPESH DOSHI N
• Keywords: Difference of opinion; Corroborative evidences
• Section: 143(3); 194C

Judgement Text

E , IN THE INCOME TAX APPELLATE TRIBU N AL; RAJKOT BENCH, RAJKOT. A.. O, R O . . O , O BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAVA, AM IT A NO . 350 /RJT/20 1 2 I I / ASSESSMENT YEAR 200 8 - 09 M/S. JAISU DREDGING & SHIPPING LTD., C/O. KALPESH S. DOSHI & CO., CHARTERED ACCOUNTANTS, 411, COSMO COMPLEX, MAHILA COLLEGE CIRCLE, RAJKOT - 360001 PAN: AAACJ9589J ( 0 / APPEL LANT) VS. THE ACIT, GANDHIDHAM CIRCLE, GANDHIDHAM - KUTCH OU0 / RESPONDENT IT A NO .450/RJT/2012 I I / ASSESSMENT YEAR 2008 - 09 THE ACIT, GANDHIDHAM CIRCLE, GANDHIDHAM - KUTCH ( 0 / APPELLANT) VS. M/S. JAISU DREDGING & SHIPPING LTD., PAN: AAACJ9589J OU0 / RESPONDENT IN / ASSESSEE BY SHRI. KALPESH DOSHI N / REVENUE BY SHRI. ANKUR GARG N E / DATE OF HEARING 19 . 03 .201 3 N E / DATE OF PRONOUNCEMENT 19.4. 2013 / ORDER A.. O, R O / T. K. SHARMA, J. M. THESE CROSS - APPEALS ARE AGAINST THE COMMON ORDER DATED 1.5.2012 FOR THE ASSESSMENT YEAR 200 8 - 09 . THESE CROSS APPEALS WERE REPRESENTED BY COMMON REPRESENTATIVE AND WERE HEARD TOGETHER . FOR THE SAKE OF CONVENIENCE, THESE APPEALS ARE BEING DECIDED BY THIS COMMON ORDER. ITA NO.350/RJT/2012 2. THE GROUND RAISED BY THE ASSESSEE IN ITS APPEAL IS THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED THE DISALLOWANCE OF MEMBERSHIP FEE OF RS.2,41,163/ - . ITA NO.350/RJT/2012 ITA NO.450/RJT/2012 2 3 . FACTS RELATING TO THE CONTROVERSY INVOLVED IN THIS GROUND ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 11.09.2008 DECLARING THE TOTAL INCOME AT RS.1,14,83,900/ - . THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 24.12.2010. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DREDGING AND SHIPPING AND DERIVES INCOME FROM DREDGING, BUNKERS RECEIPTS, CHARTER HIRE INCOME ETC. THE AO FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE NOTICED THAT THE ASSESSEE HAS PAI D MEMBERSHIP FEES OF RS.5,78,792/ - . ON PERUSAL OF THE DETAILS, THE AO OBSERVED THAT THE SAME IS PAID TO PIANC - BELGIUM AS PER INVOICE NO.7195 DATED 10.4.2007 THE DETAILS OF WHICH ARE AS UNDER : 1. PLATINUM MEMBERSHIP FEE OF - 500 0 EURO PIANC (FROM 1.6.2006 THROUGH 31.5.2007) 2. PLATINUM MEMBERSHIP FEE OF PIANC (FROM 1.6.2007 THROUGH 31.5.2008 - 5000 EURO THE AO NOTICED THAT THE EXPENDITURE PARTLY PERTAINS TO PRECEDING YEAR I.E. FOR THE PERIOD FROM 1.6 .2006 TO 31.3.20 0 7 I.E. 10 MONTHS. ACCORDINGLY HE DISALLOWED THE PROPORTIONATE EXPENDITURE I. E . RS.5,78,792/24 X 12 = RS.2,41,163/ - BEING PERTAINS TO THE PREVIOUS YEAR. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) , TH E ASSESSEE FILED DETAILS OF EXPENSES INCURRED FOR MEMBERSHIP FEES TO PIANC - BELGIUM WHICH IS FORMING PART OF THE APPELLATE ORDER AT PAGE S 7 AND 9 AND AFTER CONSIDERING THE SUBMISSIONS AND DETAILS, THE LD. CIT(A) VIDE PARAGRAPH 6.1 CONFIRMED THE ACTION O F THE AO BY HOLDING AS UNDER : 6.1 I HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND HAVE ALSO GONE THROUGH THE CONTENTS OF THE CASE LAWS RELIED UPON BY THE APPELLANT. I HAVE ALSO SEEN THE SUPPORTING EVIDENCES FILED FOR CLAIMING THE EXPENDITURE PAID TO PIAN C - BELGIUM. FROM THE FACTS AS AVAILABLE ON RECORD, IT IS EVIDENT THAT THE APPELLANT HAS NOT PROVIDED ANY COPY OF AGREEMENT OR ANY OTHER DOCUMENTARY EVIDENCE TO SUGGEST THAT T HE LIABILITY HAS ACCRUED. THE CA S E LAWS RELIED UPON BY THE APPELLANT ARE ALSO DISTINGUISHABLE ON THE FACTS AS THE SAME PERTAINS TO VERY OLD PROVI SIONS OF THE ACT I.E.AY1959 - 60, 1968 - 69 ETC. IN VIEW OF THESE FACTS , THE ACTION OF THE AO IS UPHELD AND THIS GROUND OF APPEAL IS DISMISSED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), T HE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. ITA NO.350/RJT/2012 ITA NO.450/RJT/2012 3 4. BEFORE US, THE SHRI KALPESH DOSHI, THE LD. AR OF THE ASSESSEE APPEARED AND REITERATED THE SAME CONTENTIONS AS MADE BEFORE THE LD. CIT(A) IN ADDITION TO THAT THE LD. AR OF THE ASSESSEE SUBMITTED THE SU BSCRIPTION WAS PAID IN THE ASSESSMENT YEAR. THIS MEMBERSHIP FEES HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THIS EXPENDITURE HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT ON ACTUAL BASIS. HE FURTHER SUBMITTED THAT THE RECOGNIZED PRINCIPLE OF ACCOUNTING THAT THE LIABILITY OF EXPENSES ACCRUES WHEN SUCH LIABILITIES ARE CRYSTALIZED . HE SUBMITTED THAT THE INVOICES WERE RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND PAYMENT THEREOF HAS ACTUALLY BEEN MADE DURING THE YEA R UNDER APPEAL. IN SUPPORT OF THIS CONTENTION, THE LD. AR RELIED ON THE FOLLOWING DECISIONS : A) CIT V/S SOUTHERN ROADWAYS LTD. (2004)265 ITR 404 (MAD) B) NONSUCH TEA LTD V/S CIT (1975) 98 ITR 189 (SC) C) SAURASHTRA CEMENT & CHEMICAL INDUSTRIESL LTD V/ S CIT (1995) 213 ITR523 (GUJ) D) CIT V/S EXXON MOBIL LUBRICANTS (P) LTD (2010) 328 ITR 17 (DEL) 5. ON THE OTHER HAND, THE LD. DR CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE COULD NOT PRODUCE ANY AGREEMENT M ADE WITH THE PIANC - BELGIUM THAT THIS ORGANIZATION IS IMPARTING ANY TRAINING TO THE DIRECTORS OF THE CO MPANY PRIOR TO ISSUE OF INVOICE. EVEN BEFORE THE TRIBUNAL, THE ASSESSEE IS UNABLE TO PRODUCE THE SAME, THEREFORE, VIEW TAKEN BY THE LD. CIT(A) BE U PHELD. 6. RIVAL SUBMISSIONS WERE HEARD. IN THE INVOICE DATED 10.4.2007, PIANC - BELGIUM HAS STATED THAT THESE INVOICES FOR THE PERIOD FROM 1.6.2006 THROUGH 31.5.2007 AND FROM 1.6.2007 THROUGH 31.5.2008. IT APPEARS THAT THE ASSESSEE IS ENJOYING THE MEMBE RSHIP OF PIANC - BELGIUM. IT IS WELL SETTLED LAW THAT MEMBERSHIP IS PAID ON RECEIPT OF INVOICES FROM THE CONCERNED ORGANIZATION. M/S PIANC - BELGIUM HAS ISSUED THE INVOICE IN QUESTION ON 10.4.2007 WHICH IS FALLING IN THE PREVIOUS YEAR ITA NO.350/RJT/2012 ITA NO.450/RJT/2012 4 RELEVANT TO THE ASSESSME NT YEAR UNDER APPEAL. THEREFORE, AS PER THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIAL LTD V/S CIT (SUPRA), THE EXPENDITURE IN QUESTION IS ALLOWABLE UNDER THE ASSESSMENT YEAR UNDER APPEAL. WE ACCORDINGLY, DIRECT THE AO TO ALLOW THE SAME. ITA NO.450/RJT/2012 7 . GROUND TAKEN BY THE REVENUE IN THIS APPEAL READS AS UNDER : THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT OF RS.16,20,000 8 . THE FACTS RELATING TO CONTROVERSY INVOLVED IN THE AFORESAID GROUND AR E THE AO DISALLOWED BOTH THE HIRE CHARGES AMOUNTING TO RS.16,20,000/ - U/S 40(A)(IA) PAID TO M/S. JAISU & CO., ON THE GROUND THAT THE ASSESSEE HAS DEDUCTED TAX AT 1% ONLY IN RESPECT OF THE ABOVE PAYMENTS A GAINST WHICH THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT THE RATE OF 10% AS PROVIDED U/S 194 - I(A) OF THE ACT. ON APPEAL, THE LD. CIT(A), IN THE IMPUGNED ORDER DELETED THE SAID DISALLOWANCE FOR THE DETAILED REASO NS GIVEN IN PARAGRAPH 5.1 WHICH READS AS UNDER : 5.1 I HAVE CONSIDERED THE RIVAL SUBMISSIONS . FOR MAKING THE DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40(A)(IA), THE FOLLOWING CONDITIONS ARE REQUIRED TO BE SATISFIED : - A. THE ASSESSEE HAS CLAIMED EX PENDITURE FOR COMPUT8IG INCOME CHARGEABLE TO TAX U/S 30 TO 38 OF THE IT ACT, B. THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE AS PER PROVISIONS OF CHAPTER XVII - B OF THE IT ACT. C. SUCH TAX HAS NOT BEEN DEDUCTED OR, D. AFTER DEDUCTION , THE SAME HAS NOT BEEN PAID WITHIN THE DUE DATE IN THE INSTANT CASE, IT IS APPARENT FROM THE FACTS THAT THE APPELLANT HAS DEDUCTED TAX @ 1% AS PER PROVISIONS OF SECTION 194C AS AGAINST UNDER SECTION 194 - I AS HELD BY THE AO. THUS, IT IS NOT A CASE WH EREIN IT CAN BE SAID THAT THE APPELLANT DID NOT DEDUCT TAX ON THE PAYMENT MADE. FROM PLAIN READING OF THE RELEVANT PROVISIONS , IT IS CLEAR THAT THE PROVI SIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY IN THOSE C A SES WHERE EITHER THE ASSESSEE HAS FAILED TO DEDUCT TAX OR HAS DEDUCTED TAX BUT DID NOT PAY WITHIN THE STIPULATED PERIOD. IF BOTH THE CONDITIONS ARE SATISFIED THEN ONLY SUCH PAYMENT CAN BE DISALLOWED U/S 40(A)(IA) . HOWEVER, WHERE TAX HAS BEEN DEDUCTED, EVEN UNDER WRONG IMPRESSION UNDER WRONG PROV ISIONS OF TDS, ITA NO.350/RJT/2012 ITA NO.450/RJT/2012 5 PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED. HERE IN THIS CASE, EVEN THERE IS NO ALLEGATION THAT THE TDS DEDUCTED AT 1% HAS NOT BEEN DEPOSITED WITH THE GOVERNMENT ACCOUNT. THIS SECTION 40(A)(IA) OF THE ACT REFERS ONLY TO TH E DUTY TO DEDUCT TAX AND SUBSEQUENT PAYMENT TO GOVERNMENT ACCOUNT . IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILITY OF ANY ITEM OR NATURE OF PAYMENT FALLING UNDER VARIOUS TDS PROVISIONS , THE APPELLANT CAN BE DECLARED T O BE AN ASSESSEE IN DEFAULT U/S 201 OF THE ACT BUT NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. IN VIEW OF THESE FACTS, THE AO IS DIRECTED TO DELETE THE ADDITION SO MADE. THIS GROUND O F APPEALS IS THUS ALLOWED AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 9 . BEFORE US THE LD.DR CONTENDED THAT THE ASSESSEE HAS HIRE BOATS FOR CARRYING OUT THE DREDGING WORK INTERIOR SIDE IN MID OF SEA FOR WHICH THE ASSESSEE HAS PAI D THE AMOUNT OF RS.16,20,000/ - AND THE ASSESSEE HAS TO DEDUCT THE TDS AT THE RATE OF 10% ON THE PAYMENT MADE TO THE M/S JAISU AND CO. WHEREAS THE ASSESSEE HAD DEDUCTED THE TAX AT THE RATE OF 1% OF THE AMOUNT SO PAID BY INVOKING THE PROVISIONS OF SECTIO N 194C, WHEREAS THE AO HAS APPLIED THE PROVISIONS OF SECTION 194 - I AND DISALLOWED THE WHOLE PAYMENT OF RS.16,20,000/ - . THE LD. CIT(A) DELETED THE ADDITION MADE BY THE AO ON THE GROUND THAT THE ASSESSEE DEDUCTED THE TAX AT 1% UNDER THE WRONG IMPRESSION THAT IN THE PRESENT CASE THE PROVISIONS OF SECTION 194C ARE APPLICABLE AND NOT 194 - I. THEREFORE, THE LD. DR CONTENDED THAT THE DEDUCTION SHOULD BE MADE AT THE RATE OF 10% AND NOT AT THE RA T E OF 1% OF THE PAYMENT MADE TO M/S JAISU AND CO.. THEREFORE, THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF AO BE RESTORED. 10. ON THE CONTRARY, THE LD.AR OF THE ASSESSEE POINTED OUT THAT THE BOATS WERE TAKEN ON HIRE AND PAID AMOUNT OF RS.16,20,000/ - AND IT IS AN SUBCONTRACT SINCE BOATS BELONGS TO DIFFERENT COMPA NY AND WE HAVE PAID ONLY THAT PART OF PAYMENT. HE REITERATED THE SAME CONTENTIONS AS SUBMITTED BEFORE THE LD. CIT(A). IN SUPPORT OF THIS HE RELIED ON THE FOLLOWING DECISIONS : A) DCIT V/S S.K.TEKRIWAL (2011) 48 SOT 515 (KOL) ITA NO.350/RJT/2012 ITA NO.450/RJT/2012 6 B) ITO V/S PREMIER M EDICAL SUPP. & STORES (2012) 53 SOT 263 (KOL) C) SANDVIK ASIA LTD. V/S JCIT (2012) 49 SOT 554 (PUNE) AND D) ACIT V/S LALIT KALRA (2012) 33 CCH 087 DEL TRIB AND RELIED ON THE ORDER OF THE LD. CIT(A). 11. AFTER HAVING HEARD BOTH THE PARTIES AND ON PERUSAL OF RECORDS AS WELL AS THE DECISIONS CITED BY THE LD. AR, WE FIND THAT THE ASSESSEE HAS DEDUCTED THE TAX @ 1% AND THE AO WAS OF THE OPINION THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT 10%. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS DEDUCTED TAX @ 1 % AS PER PROVISIONS OF SECTION 194C AS AGAINST UNDER SECTION 194 - I AS HELD BY THE AO. THUS, IT IS NOT A CASE WHEREIN IT CAN BE SAID THAT THE ASSESSEE DID NOT DEDUCT TAX ON THE PAYMENT MADE. FROM PLAIN READING OF T HE RELEVANT PROVISION S , IT IS CLEAR THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY IN THOSE CASES WHERE EITHER THE ASSESSEE HAS FAILED TO DEDUCT TAX OR HAS DEDUCTED TAX BUT DID NOT PAY WITHIN THE STIPULATED PERIOD . IF BOTH THE CONDITIONS ARE SATISFIED THEN ONLY SUCH PAYMENT CA N BE DISALLOWED U/S 40(A)(IA). HOWEVER, WHERE TAX HAS BEEN DEDUCTED, EVEN UNDER WRONG IMPRESSION UNDER WRONG PROVISIONS OF TDS, PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED. HERE IN THIS CASE, EVEN THERE IS NO ALLEGATION THAT THE TDS DE DUCTED AT 1% HAS NOT BEEN DEPOSITED WITH THE GOVERNMENT ACCOUNT. THIS SECTION 40(A)(IA) OF THE ACT REFERS ONLY TO THE DUTY TO DEDUCT TAX AND SUBSEQUENT PAYMENT TO GOVERNMENT ACCOUNT. IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILITY OF ANY ITEM OR NATURE OF PAYMENT FALLING UNDER VARIOUS TDS PROVISIONS , THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT U/S 201 OF THE ACT BUT NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT. W E ALSO FIND THAT THE DECISION RELIE D ON BY THE ASSESSEE SUPPORT THE VIEW OF THE LD. CIT(A). THEREFORE, FOLLOWING THE RATIO LAID DOWN BY THE CO - ORDINATE BENCHES OF T HE TRIBUNAL AS MENTIONED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE LD. CIT(A). ACCORDINGLY WE CONFIRM HIS ORDER ON THIS ISSUE. THIS GROUND TAKEN BY THE REVENUE, IS THEREFORE, DISMISSED. ITA NO.350/RJT/2012 ITA NO.450/RJT/2012 7 12. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER IS PRONOUNCED IN THE OPE N COURT ON THE DATE MENTIONED HEREINABOVE. SD SD ( .. / D. K. SRIVASTAVA) ( E.. I / T. K. SHARMA) AT0 / ACCOUNTANT MEMBER / JUDICIAL MEMBER / ORDER DATE 19.4 .2012 /RAJKOT SRL RJ / COPY OF ORDER FORWARDED TO: - 1. 0 / APPELLANT - . 2. OU0 / RESPONDENT - 3. / CONCERNED CIT . 4. - / CIT (A) . 5. O, E , / DR, ITAT, RAJKOT 6. I / GUARD FILE. / BY ORDER , SENIOR PRIVATE SECRETARY TRUE COPY E , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.