SHRI BIPINCHANDRA KANTILAL SHAH, THANE V. ACIT 26(1), THANE

ITA 3766/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55257 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Non-deduction of tax
• Section: 154

Judgement Text

1 ITA NO. 3766/MUM/2010 (ASST YEAR 2005-06) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R S SYAL , AM & SHRI VIJAY PAL RAO, JM ITA NO. 3766/MUM/2010 (ASST YEAR 2005-06) SHRI BIPINCHANDRA KANTILAL SHAH OPP SHALIMAR PACKAGING POKHRAM ROAD I - UPVAN, DIST THANE 40 66 VS THE DYCOMMR OF INCOME TAX CIR 1 THANE (APPELLANT) (RESPONDENT) PAN NO. SPZPZ1489M ASSESSEE BY SHRI K SHIVRAM REVENUE BY SHRI P C MAURYA DT.OF HEARING 29 TH AUG 2011 DT OF PRONOUNCEMENT 16 TH SEPT 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 20.1.2010 PASSED U/S 154 OF THE CIT(A) FOR THE AY 2005-06. 2 THE ASSESSEE HAS RAISED THE ONLY GROUND AS UNDER; I) THE LD CIT(A) ERRED IN NOT RECTIFYING THE MISTAKE U/S 154 APPARENT ON RECORD, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD MADE THE PAYMENT OF TDS DEDUCTED, BEFORE FILING OF THE RETURN. II) THE LD CIT(A) FAILED TO CONSIDER THE RETROSPECTIV E AMENDMENT MADE BY FINANCE ACT, 2008 IN SECTION 40(A)(IA) W.R.E.F ASSE SSMENT YEAR 2005-06 AND THUS DISALLOWANCE MAD U/S 40A(IA) ON THE GROUND THA T TDS DEDUCTED WAS NOT PAID WITHIN DUE DATE MAY BE DELETED. 2.1 WHILE PASSING THE ASSESSMENT ORDER U/S 143(3), THE ASSESSING OFFICER ADDED BACK AN AMOUNT OF RS. 6,15,536/- FOR VIOLATION OF P ROVISIONS OF SEC. 40(A)(IA) OF THE I T ACT AS TDS WAS DEDUCTED BUT DEPOSITED IN THE GOVER NMENT ACCOUNT BEYOND THE TIME PRESCRIBED IN SEC. 200(1). 2 ITA NO. 3766/MUM/2010 (ASST YEAR 2005-06) 2.2 ON APPEAL, THE CIT(A), WHILE PASSING THE ORDER DATED 30.1.2009 CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN RESPECT OF THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE I T ACT AND SUBSEQUENTLY THE ASSESSEE FILED PET ITION U/S 154 OF THE I T ACT WHICH HAS BEEN DISMISSED BY THE CIT(A) VIDE IMPUGNED ORDE R. 3 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AGAINST THE ASSESSMENT ORD ER ON 11.2.2008 AND IN THE MEANWHILE, THE LAW WAS AMENDED BY FINANCE ACT 200 8 WITH RETROSPECTIVE EFFECT FROM 1.4.2005. HE HAS FURTHER SUBMITTED THAT AS P ER THE PROVISIONS OF SEC. 40(A)(IA) DISALLOWANCE CAN BE MADE ONLY WHEN TDS IS NOT DEP OSITED WITH THE GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILING OF THE RETUR N. THUS, THE LD CIT(A) COMMITTED AN ERROR OF NOT CONSIDERING THE AMENDED PROVISIONS OF SEC. 40(A)(IA) OF THE IT ACT WHILE PASSING THE IMPUGNED ORDER. 3.1 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THA T THE SCOPE OF SEC. 154 IS VERY LIMITED AND THE RELIEF CLAIMED BY THE ASSESSEE IN T HE PETITION FILED U/S 154 IS NOT IN THE NATURE OF ANY APPARENT ERROR OR MISTAKE WHICH CAN B E RECTIFIED U/S 154. HE HAS FURTHER SUBMITTED THAT EVEN U/S 40(A)(IA), THE CON DITIONS OF DEPOSITING OF TDS BEFORE THE DUE DATE OF FILING OF RETURN IS APPLICABLE ONL Y ON THE CASES WHEN THE TDS IS DEDUCTED IN THE LAST MONTH OF THE PREVIOUS YEAR. 4 WE HAVE CONSIDERED THE RIVAL CONTENTION AND RELEV ANT MATERIAL ON RECORD. AS MANIFEST FROM THE ORDER OF THE CIT(A) DATED 13.2.20 09 U/S 251 AND THEREAFTER ORDER DATED 20.1.2010 PASSED U/S 154 OF THE I T ACT, TH E LD CIT(A) FAILED TO CONSIDER THE AMENDED PROVISIONS OF SEC. 40(A)(IA) OF THE I T ACT AND THE DEDUCTION DISALLOWED BY THE ASSESSING OFFICER BY TAKING TIME LIMIT PRESCRI BED U/S 200(1) WAS CONFIRMED. 3 ITA NO. 3766/MUM/2010 (ASST YEAR 2005-06) THEREFORE, IN OUR CONSIDERED OPINION, PROVISIONS OF LAW AS APPLICABLE WHILE PASSING THE ORDER AMOUNTS TO ERROR TO BE RECTIFIED U/S 154 OF THE ACT. THE PROVISIONS AS STOOD AT THE RELEVANT POINT OF TIME U/S 40(A)(IA) ARE AS UNDER: '40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SS . 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION, (A) IN THE CASE OF ANY ASSESSEE (I) ............... (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, R OYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTI BLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDU CTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID, (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR, ON OR B EFORE THE DUE DATE SPECIFIED IN SUB-S. (1) OF S. 139; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR : PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTI NG THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAI D. EXPLANATIONFOR THE PURPOSES OF THIS SUB-CLAUSE, (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME M EANING AS IN CL. (I) OF THE EXPLANATION TO S. 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE S AME MEANING AS IN EXPLN. 2 TO CL. (VII) OF SUB-S. (1) OF S. 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME M EANING AS IN CL. (A) OF THE EXPLANATION TO S. 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLN . III TO S. 194C; (V) RENT SHALL HAVE THE SAME MEANING AS IN CL. (I ) TO THE EXPLANATION TO S. 194-I; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EX PLN. 2 TO CL. (VI) OF SUB-S. (1) OF S. 9;' 4.1 IT IS CLEAR FROM THE PROVISION OF SEC. 40(A)IA) THAT THIS PROVISION HAS BEEN INSERTED BY THE LEGISLATURE TO ENSURE THE DEDUCTION AND DEPOSIT OF TDS AND FAILING THE SAME WOULD ATTRACT THE CONSEQUENCE AS PROVIDED UNDER THIS SECTION ITSELF. AS 4 ITA NO. 3766/MUM/2010 (ASST YEAR 2005-06) PER SUB CLAUSE (IA) OF SEC. 4O, IF THE TAX HAS BEEN DEDUCTED ON THE AMOUNT BUT HAS NOT BEEN PAID WITHIN THE PERIOD AS PRESCRIBED UNDER THIS PROVISION, THEN, THE SAID DEDUCTION IS NOT ALLOWABLE. THE TIME LIMIT OF DEPOS IT OF SUCH TAX DEPENDS UPON THE POINT OF TIME OF ITS DEDUCTION. THE DEDUCTION OF T AX HAS BEEN DIVIDED IN TERMS OF TIME PERIOD AND IF IT HAS BEEN DEDUCTED IN THE LAST MONTH OF THE PREVIOUS YEAR THEN, THE ASSESSEE IS ALLOWED TO DEPOSIT THE SAME IN THE GOVERNMENT ACCOUNT ON OR BEFORE THE DUE DATE OF FILING OF THE RETURN AS PER THE PROVISION OF SEC. 139(1). IN OTHER CASES WHERE THE TAX HAS BEEN DEDUCTED PRIOR TO THE LAST MONTH OF THE PREVIOUS YEAR THEN THE SAME HAS TO BE DEPOSITED IN THE GOVERNMENT ACCOUNT BEFORE THE LAST DAY OF THE PREVIOUS YEAR. THEREFORE, THE CONDITIONS OF ALLOWABILITY ARE PRESCRIBED UNDER THE PROVISIONS OF SEC. 40(A)IA) ITSELF AND THE PRO VISIONS OF SEC. 200(1)/201 ARE NOT RELEVANT FOR THE PURPOSE OF DISALLOWANCE OF DEDUCTI ON. 4.2 AS PER THE PROVISIONS OF SEC. 40(A)(IA) DEDUCTI ON IS DISALLOWED ONLY IN THE CASE WHEN EITHER NO TAX DEDUCTION OR IT WAS NOT PAID AFTER THE DEDUCTION. HOWEVER, WHEN THE TAX IS DEDUCTED AND ALSO DEPOSITE D BELATEDLY THEN, DEDUCTION IS ALLOWABLE IN THE PREVIOUS YEAR IN WHICH IT WAS SO D EPOSITED. THEREFORE, FOR DISALLOWANCE OF DEDUCTION U/S 40(A)(IA), THE CONDIT IONS PRESCRIBED U/S 200(1)/201 HAS NO ROLE TO PAY BECAUSE IN THAT CASE, SECTION 40 (A)(IA) WOULD BECOME OTIOSE. UNDISPUTEDLY, THE ASSESSEE DEPOSITED THE TAX IN THE GOVERNMENT ACCOUNT BEFORE THE DATE OF FILING OF THE RETURN AS PER PROVISIONS OF S EC. 139(1) OF THE ACT. THUS, DEDUCTION IS ALLOWABLE, IF THE TAX HAS BEEN DEDUCTED IN THE L AST MONTH OF THE PREVIOUS YEAR. ACCORDINGLY, THE CLAIM OF THE ASSESSEE IS TO BE AL LOWED SUBJECT TO VERIFICATION OF THE FACT THAT TAX HAS BEEN DEPOSITED BY THE ASSESSEE ON LY IN THE MONTH OF PREVIOUS YEAR AS INDICATED ABOVE. 5 ITA NO. 3766/MUM/2010 (ASST YEAR 2005-06) 5 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 16TH DAY OF SEPT 2011. SD/- SD/- ( R S SYAL ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 16 TH SEPT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI