THE ACIT Circle-1(1), Vijayawada, Vijayawada V. M/s. M.B.M.R Real Estate private Ltd, Penamaluru

ITA 385/VIZ/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0175 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SETHI

Judgement Text

ITA NO.385/VIZAG/2012 M.B.M.R. REAL ESTATE PVT. LTD., PENAMALURU 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.385/VIZAG/2012 ( / ASSESSMENT YEAR : 2008-09 ) ACIT CIRCLE - 1(1) VIJAYAWADA VS. M.B.M.R. REAL ESTATE PVT. LTD. PENAMALURU [ PAN: AAECM 7046F] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI M.K. SETHI, DR '(& ) / RESPONDENT BY : SHRI C. SUBRAHMANYAM, AR ) - / DATE OF HEARING : 27.10.2015 ) - / DATE OF PRONOUNCEMENT : 04.12.2015 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A), VIJAYAWADA DATED 2.5.2012 FOR THE ASSESSMENT YEAR 2 008-09. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS DISALL OWANCE U/S 40A(IA) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS TH E ACT). THE A.O. HAS DISALLOWED AN AMOUNT OF RS.1,26,63,211/- ON THE GRO UND THAT THE ITA NO.385/VIZAG/2012 M.B.M.R. REAL ESTATE PVT. LTD., PENAMALURU 2 ASSESSEE HAS FAILED TO DEDUCT TDS ON COMMISSION, AD VERTISEMENT & WORKS CONTRACT. ON APPEAL, THE LD. CIT(A) BY FOLLO WING THE DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS, VIS AKHAPATNAM VS. ACIT IN ITA NO.477/VIZAG/2008 DELETED THE ADDITION MADE BY THE A.O. ON ACCOUNT OF THE AMOUNTS ALREADY PAID BY THE END OF T HE FINANCIAL YEAR. 3. ON BEING AGGRIEVED, REVENUE HAS CARRIED THE MATT ER IN APPEAL BEFORE THE TRIBUNAL. THE LD. D.R. HAS STRONGLY SUP PORTED THE ORDER OF THE A.O. 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE SPECIAL BENCH OF THE TRIBUNAL AND ALSO THE COORDINA TE BENCH OF THE TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIN D THAT THE ISSUE INVOLVING IN THIS APPEAL IS RELATING TO DISALLOWANC E U/S 40A(IA) OF THE ACT. THE VERY SIMILAR ISSUE HAS BEEN CONSIDERED BY THE C OORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA). RECENTLY, THE HONBLE TRIBUNAL HAS CONSID ERED THE ISSUE IN THE CASE OF M/S. SRINIVASA SRI KALESWARI TRANSPORT (P) LTD. VS. ITO ITA NO.385/VIZAG/2012 M.B.M.R. REAL ESTATE PVT. LTD., PENAMALURU 3 WARD-4(2) IN ITA NOS.313 & 354/VIZAG/2012 DATED 30.1 1.2015. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED HEREUNDE R: 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE CASE LAWS RE LIED UPON BY THE PARTIES. DURING THE COURSE OF HEARING, THE A.R. OF THE ASSES SEE ARGUED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL, IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT (SUPRA). WE HAVE GONE THROUGH THE SPECIAL BENCH DECISION OF THIS TRIBUNAL MENTIONED ABOVE IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND COME TO THE CONCLUSION THAT THE SPECIAL BENCH OF VISAKHAPATNAM IN THE ABOV E CASE, HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION IS RE PRODUCED AS UNDER: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2005-06. A REFERENCE U/S 255(3) OF THE INCOME-TAX ACT HAS BEEN MADE TO THE HONBLE PRESIDENT TO CONSTITUTE A SPECIAL BENCH TO ADJUDICATE AN ISSUE W HETHER SECTION 40A(IA) OF THE INCOME TAX ACT CAN BE INVOKED ONLY TO DISALL OW EXPENDITURE OF THE NATURE REFERRED TO THEREIN WHICH IS SHOWN AS PAYABL E AS ON THE DATE OF BALANCE SHEET OR IT CAN BE INVOKED ALSO TO DISALLOW SUCH EXPENDITURE WHICH BECOMES PAYABLE AT ANY TIME DURING THE RELEVANT PRE VIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR? CONSEQUENTL Y, SPECIAL BENCH WAS CONSTITUTED AND THE AFORESAID QUESTION WAS ANSWERED IN FAVOUR OF THE ASSESSEE. ACCORDING TO THE MAJORITY VIEW, IT WAS HE LD THAT SECTION 40A(IA) OF THE ACT IS APPLICABLE ONLY TO EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED TO DISALL OW THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE YEAR WITHOUT DEDU CTING TAX AT SOURCE. 2. ISSUE INVOLVED IN THIS APPEAL IS WITH REGARD TO THE DISALLOWANCE OF PAYMENTS OF RS. 38,75,000/- TOWARDS BROKERAGE AND RS.2,43,253/- TOWARDS COMMISSION ON NON-DEDUCTION OF TDS BY INVOK ING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE ASSESSEES CASE WAS THAT THE ENTIRE BROKERAGE IN COMMISSION PAYMENTS WERE ACTUALLY PAID DURING THE FINANCIAL YEAR EXCEPTING AN AMOUNT OF RS. 1,78,025/- WHICH REMAINED PAYABLE AS ON 31.3.2005. THE CLAIM OF THE ASSESSEE WAS REJECTED B Y THE REVENUE RESULTING IN AN APPEAL BEFORE US BY THE ASSESSEE. F OLLOWING THE MAJORITY VIEW OF THE SPECIAL BENCH, THE PROVISIONS OF SECTIO N 40A(IA) CANNOT BE INVOKED WITH RESPECT TO THE AFORESAID PAYMENTS WHIC H WERE ACTUALLY PAID DURING THE FINANCIAL YEAR BUT IT CAN BE INVOKED WIT H RESPECT TO RS.1,78,025/- WHICH REMAINED PAYABLE AS ON 31.3.200 5. THEREFORE, THE DISALLOWANCE IS REDUCED TO RS.1,78,025/- ONLY. ACCO RDINGLY, THE ORDER OF THE CIT(A) IS MODIFIED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.385/VIZAG/2012 M.B.M.R. REAL ESTATE PVT. LTD., PENAMALURU 4 6. THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF DCI T VS. VEERA ASSOCIATES (2015) 55 TAXMAN.COM, WHILE DEALING WITH THE SIMILA R ISSUE HELD AS UNDER: IN VIEW OF THE AFORESAID, CONTENTION OF THE DEPARTM ENT THAT THE RATIO LAID DOWN BY THE ITAT VISAKHAPATNAM SPECIAL B ENCH IN CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) IS NOT APPLIC ABLE, CANNOT BE ACCEPTED. SINCE THE DEPARTMENT HAS NOT CONTROVERTE D THE FACT THAT THE ENTIRE AMOUNT OF ` 5,98,13,357 WAS PAID BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR AND NOTHING REMAINED PAYABLE ON THE LAST DAY OF THE PREVIOUS YEAR, IN OUR VIEW, AS PER THE RATIO LAID D OWN IN CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), NO DISALLOWANCE UNDE R SECTION 40(A)(IA) CAN BE MADE. ACCORDINGLY, THE CIT(A)S ORDER ON THIS I SSUE DESERVES TO BE UPHELD. 7. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE AND ALSO APPLYING THE RATIO LAID DOWN BY THE COORDINATE BENCH OF THIS TRI BUNAL IN MERILYN SHIPPING AND TRANSPORTS (SUPRA), WE ARE OF THE OPINION THAT NO D ISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT, FOR THE AMOUNTS ALREADY P AID DURING THE FINANCIAL YEAR. ACCORDINGLY, WE UPHELD THE CIT(A) ORDER AND DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN VIEW OF THE ABOVE, THIS APPEAL FILED BY THE R EVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 4 TH DEC15. SD/- SD/- ( . . . . ) ( . ) ( G. MANJUNATHA) ( (( ( V. DURGA RAO ) )) ) / // / ACCOUNTANT MEMBER / // / JUDICIAL MEMBER /VISAKHAPATNAM: 3 / DATED : VG/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT THE ACIT, CIRCLE-1(1), VIJAYAWADA 2. '(& / THE RESPONDENT M/S. M.B.M.R. REAL ESTATE PRIVATE LTD., BESIDE PRIY A FOODS, PORANKI, PENAMALURU MANDAL. 3. 5 / THE CIT, VIJAYAWADA 4. 5 () / THE CIT(A), VIJAYAWADA ITA NO.385/VIZAG/2012 M.B.M.R. REAL ESTATE PVT. LTD., PENAMALURU 5 5. ' , , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM