ARIDMAN SINGH, Jaipur V. ITO, Jaipur

ITA 391/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99342 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DR DHK
• Keywords: Retrospective amendment; Non-deduction of tax

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 391/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SHRI ARIDAMAN SINGH A-10, AMBABARI JAIPUR CUKE VS. THE ITO WARD- 4 (1) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AGBPS 0987 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI RAJ MEHRA, JCIT -DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09 /10/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 04-03-2014 FOR THE ASSESSME NT YEAR 2009-10 WHEREIN THE SOLITARY GROUND OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 3,56,79 0/- MADE BY THE AO U/S 40(A)(IA) ON ACCOUNT OF NON-DEDUCTION OF TAX A T SOURCE ON INTEREST PAID TO RELIANCE CAPITAL (P) LTD. ITA NO. 391/JP/2014 SHRI ARIDAMAN SINGH VS. ITO, WARD- 4 (1), JAIPUR . 2 2.1 THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET CONTENDS THAT THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSES SEE BY THE JUDGMENT OF THIS BENCH IN THE CASE OF ACIT, CIRCLE- 4, JAIPUR V S. SHRI GIRDHARI LAL BARGOTI (ITA NO. 757/JP/2012 DATED 10-04-2015), HOL DING AS UNDER:- 10. AT THE OUTSET, THE LD AR FOR THE ASSESSEE HAS SUBMITTED AS UNDER:- 1. THE LEGISLATIVE INTENT FOR INTRODUCING SECTION 40 (A)(IA) IS EXPLAINED IN CBDT CIRCULAR NO.5/2005 DT. 15.07.2005 REPORTED AT 269 ITR 101 (STATUTE). IN THE PRESENT C ASE THERE IS NO DISPUTE AS TO THE FACT THAT INTEREST HA S ACTUALLY BEEN PAID TO ABOVE FINANCE COMPANIES AND AS ON 31.03.2009 NO AMOUNT OF INTEREST WAS PAYABLE. THE SPECIAL BENCH OF ITAT IN CASE OF MERILYN SHIPPING & TRANSPORT VS. ACIT 16 ITR (TRIB) 1 (PB 62-63) HAS HELD THAT SECTION 40(A)(IA) CANNOT BE INVOKED IN RESPECT OF AMOUNTS ACTUALLY PAID WITHIN THE PREVIOUS YEARS WITHO UT DEDUCTION OF TAX AT SOURCE. AFTER THIS DECISION THE GUJARAT HIGH COURT IN CASE OF CIT VS. SIKANDAR KHAN N. TUNVAR 357 ITR 312 AND CALCUTTA HIGH COURT IN CASE OF CIT VS. CRESCENT EXPORT SYNDICATE 94 DTR 81 HELD THAT SECTIO N 40(A)(IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31 ST MARCH OF THE PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. HOWEVE R, THE ALLAHABAD HIGH COURT IN CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD. 94 DTR 101/357 ITR 642 HE LD THAT IT IS ONLY THE AMOUNT WHICH IS PAYABLE AND NOT THAT WHICH HAS BEEN ALREADY PAID BY THE END OF THE YEAR T HAT CAN BE DISALLOWED U/S 40(A)(IA). AGAINST THE SAID DE CISION OF ALLAHABAD HIGH COURT, THE DEPARTMENT FILED A SPE CIAL LEAVE PETITION (SLP) IN THE SUPREME COURT WHICH WAS DISMISSED BY THE SUPREME COURT VIDE ITS ORDER DT.02.07.2014. THUS, THERE ARE TWO VIEWS ON THIS ISSUE , ONE IN FAVOUR OF THE ASSESSEE AND OTHER AGAINST THE ASSESSEE. CONSIDERING THESE VIEWS, THE VARIOUS BENCH ES OF HONBLE ITAT, AFTER CONSIDERING THE VARIOUS AMENDMEN T ITA NO. 391/JP/2014 SHRI ARIDAMAN SINGH VS. ITO, WARD- 4 (1), JAIPUR . 3 MADE TO SECTION 40(A)(IA) FROM TIME TO TIME TO REMO VE THE UNDUE HARDSHIP AND CONSIDERING THE DECISION OF SUPR EME COURT IN CASE OF CIT VS. VEGETABLE PRODUCTS LTD. 88 ITR 192 WHERE IT IS HELD THAT WHEN TWO VIEWS ARE POSSIBL E ON AN ISSUE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFERRED DELETED THE DISALLOWANCE. HE ALSO RELIED O N THE FOLLOWING CASE LAWS: (I) DCIT VS. ANANDA MARAKALA (2014) 150 ITD 323 (BANG.) (TRIB.) (II) ITO VS. M/S THEEKATHIR PRESS (CHENNAI)(TRIB.) ITA NO. 2076(MDS)2012 DT. 18.09.2013 THE ISSUE OF APPLICABILITY OF TDS ON AMOUNT PAYABLE AS ON 31ST MARCH ONLY IS ALSO COVERED BY THE DECISION OF THE HONBLE ITAT JAIPUR BENCH IN CASE OF JVVNL V. DCIT 12 3 TTJ 888 WHEREIN IT WAS HELD THAT SECTION 40(A)(IA) AP PLIES ONLY WHEN THE AMOUNT IS PAYABLE AND NOT WHERE THE EXPENDITURE IS PAID. THEREFORE WHERE THE ASSESSEE HA S MADE ACTUAL PAYMENT, THE PROVISIONS OF SECTION 40(A )(IA) IS NOT APPLICABLE. 2. IT MAY ALSO BE POINTED OUT THAT SECOND PROVISO T O SECTION 40(A)(IA) INSERTED BY FA, 2012 W.E.F. 01.04.2013 HAS PROVIDED THAT WHERE AN ASSESSEE FAILS TO DEDUCT TAX ON THE SUM PAID TO THE RESIDENT BUT SUCH RESIDENT PAYEE HA S FURNISHED THE RETURN, TAKEN INTO ACCOUNT SUCH SUM F OR COMPUTING INCOME AND HAS PAID THE TAX DUE ON THE IN COME DECLARED BY HIM THEN IT WILL BE DEEMED THAT ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE O F FURNISHING OF RETURN BY THE RESIDENT PAYEE. ALL THE FINANCE COMPANIES TO WHICH ASSESSEE HAVE PAID INTEREST ARE LARGE COMPANIES AND ASSESSED TO TAX. THEREFORE, THE PRESUMPTION IS THAT THESE COMPANIES HAVE INCLUDED T HE INTEREST PAID BY THE ASSESSEE TO THEM IN THEIR INCO ME AND PAID TAX THEREON. THE DELHI HIGH COURT IN CASE OF CI T VS. TRANS BHARAT AVIATION PVT. LTD. 320 ITR 671 HAS HELD THAT SINCE DEDUCTEE IS A GOVERNMENT UNDERTAKING, THE TAX ES MAY BE PRESUMED TO HAVE BEEN PAID LASTLY BY THE DUE DATE OF FILING OF THE RETURN OF INCOME AND, THEREFORE, T HE LIABILITY ITA NO. 391/JP/2014 SHRI ARIDAMAN SINGH VS. ITO, WARD- 4 (1), JAIPUR . 4 OF THE ASSESSEE TO PAY INTEREST ON THE AMOUNT WHICH WAS TO BE DEDUCTED AS TDS ENDS WITH THE DUE DATE OF FILING O F THE RETURN BY THE DEDUCTEE. THEREFORE, CONSIDERING THE A BOVE AMENDMENT WHICH IS INTRODUCED TO REMOVE UNINTENDED HARDSHIP, THE DEPARTMENT MAY BE DIRECTED TO VERIFY THIS FACT AND WHERE FINANCE COMPANIES HAS PAID TAX ON SUCH INTEREST, NO DISALLOWANCE U/S 40(A)(IA) BE MADE IN T HE HANDS OF THE ASSESSEE. IT IS A SETTLED LAW THAT SECO ND PROVISO TO SECTION 40(A)(IA) INSERTED W.E.F. 01.04.2 013 HAS RETROSPECTIVE EFFECT AS HELD IN BANGALORE BENCH IN CASE OF SH. G. SHANKAR VS. ACIT IN ITA NO.1832/BANG/2013 DT. 10.10.2014, AGRA BENCH IN CASE OF RAJEEV KUMAR AGAR WAL VS. ACIT (2014) 34 ITR(TRIB.)479, DELHI BENCH IN CASE OF ITO VS. DR. JAIDEEP KUMAR SHARMA (2014) 34 ITR(TRIB.)565, BANGALORE BENCH IN CASE OF DCIT VS. AN ANDA MARAKALA (2014) 150 ITD 323 AS THE AMENDMENT WAS MADE TO REMOVE THE UNDUE HARDSHIP. 3. IT MAY ALSO BE POINTED OUT THAT AN AMENDMENT H AS BEEN MADE BY FA, 2014 W.E.F. 01.04.2015 IN SECTION 40(A)( IA) WHEREBY IT IS PROVIDED THAT 30% OF ANY SUM PAYABLE T O A RESIDENT SHALL BE DISALLOWED IF TAX IS NOT DEDUCTED AT SOURCE UNDER CH. XVIIB AS AGAINST THE 100% PRESENTLY MADE. THE PURPOSE OF THIS AMENDMENT WAS EXPLAINED IN THE MEMORANDUM AS UNDER:- T HE DISALLOWANCE OF WHOLE OF THE AMOUNT OF EXPENDITU RE RESULTS INTO UNDUE HARDSHIP AND THEREFORE IN ORDER TO REDUCE THE HARDSHIP, IT IS PROPOSED THAT IN CASE OF NON-DEDUCTION OR NON-PAYME NT OF TDS ON PAYMENTS MADE TO RESIDENTS AS SPECIFIED IN SECTION 40(A)(IA) OF THE ACT, THE DISALLOWANCE SHALL BE RESTRICTED TO 30% OF THE AMOUNT OF EXPENDITURE CLAIMED. THE FINANCE MINISTER WHILE INTRODUCING THE AMENDMENT IN PARA 207 OF THE BUDGET SPEECH HAS STATED AS UNDER:- 207. CURRENTLY, WHERE AN ASSESSEE FAILS TO DEDUCT AND PAY TAX ON SPECIFIED PAYMENTS TO RESIDENTS, 100 PERCENT OF SUC H PAYMENTS ARE NOT ALLOWED AS DEDUCTION WHILE COMPUTING HIS INCOME . THIS HAS CAUSED UNDUE HARDSHIP TO TAXPAYERS, PARTICULARLY WHERE THE RATE OF TAX IS ONLY 1 TO 10%. HENCE , I PROPOSE TO PROVIDE THAT INSTEAD OF 100 PERCENT, ONLY 30% OF SUCH PAYMENTS WILL BE DISALLOWED. ITA NO. 391/JP/2014 SHRI ARIDAMAN SINGH VS. ITO, WARD- 4 (1), JAIPUR . 5 FROM THE ABOVE IT CAN BE NOTED THAT THE AMENDMENT MADE BY FA (NO.2) ACT, 2014 W.E.F. 01.04.2015 IS TO REMOV E UNINTENDED AND UNDUE HARDSHIP AND THEREFORE THIS AMENDMENT SHOULD BE GIVE RETROSPECTIVE EFFECT AS PE R THE VARIOUS DECISIONS STATED ABOVE. IT IS ALSO SUBMITTE D THAT THE SUPREME COURT IN CASE OF CIT VS. VATIKA TOWNSHIP PVT. LTD. 109 DTR 33 HAS HELD THAT LEGISLATIONS WHICH MODIFY AC CRUED RIGHTS OR WHICH IMPOSE OBLIGATIONS OR IMPOSE NEW DUTI ES OR ATTACH A NEW DISABILITY HAVE TO BE TREATED AS PROSPE CTIVE UNLESS THE LEGISLATIVE INTENT IS CLEARLY TO GIVE TH E ENACTMENT A RETROSPECTIVE EFFECT. HOWEVER, IF LEGISLATION CONF ERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GENERALLY AND WHERE TO CONFER SUCH BENEFIT AP PEARS TO HAVE BEEN THE LEGISLATORS OBJECT, THEN THE PRESU MPTION WOULD BE THAT SUCH LEGISLATION, GIVING IT A PURPOSIV E CONSTRUCTION, WOULD WARRANT IT TO BE GIVEN A RETROSPE CTIVE EFFECT . THEREFORE EVEN IN A CASE IT IS HELD THAT THE DISALLOWANCE U/S 40(A)(IA) IS WARRANTED, SAME SHOULD BE RESTRICTED TO ONLY 30% OF THE AMOUNT OF INTEREST PA ID. IN VIEW OF ABOVE, THE ORDER OF THE CIT(A) BE UPHELD BY DISMISSING THE GROUND OF THE DEPARTMENT. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. ON IS SUE OF AMOUNT ALREADY PAID DURING THE YEAR OR AMOUNT SHOWN PAYABLE AS ON 31 ST MARCH OF EVERY YEAR, THE VARIOUS COURTS HAVE DIFFE RENT VIEWS I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODU CTS LTD. (SUPRA) HAS HELD THAT WHEN THERE ARE TO VIEWS ON AN I SSUE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFERRED. THEREFORE, WE CONFIRM THE ORDER OF THE LD. CIT(A). FURTHER THE RE CIPIENT ARE NBFC, THEREFORE, NOT POSSIBLE TO NOT BE ASSESSED TO TAX, THESE PAYMENTS WERE RELATED FOR A.Y. 2009-10 AND RETURN FO R A.Y. 2009- 10 ALREADY MIGHT HAVE BEEN FILED BY THESE NBFC BY I NCLUDING THESE INTERESTS RECEIPTS AS THEIR INCOME. THEREFORE , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT( A). ITA NO. 391/JP/2014 SHRI ARIDAMAN SINGH VS. ITO, WARD- 4 (1), JAIPUR . 6 2.2 THE LD. DR IS HEARD. 2.3 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. RESPECTFULLY FOLLOWING THE JUD GEMENT OF THIS BENCH IN THE CASE OF ACIT, CIRCLE- 4, JAIPUR VS. SHRI GIR DHARI LAL BARGOTI (SUPRA), THE DISALLOWANCE MADE BY THE AO U/S 40(A)( IA) OF THE ACT AS RAISED IN THE GROUNDS OF APPEAL IS DELETED. THUS TH E SOLITARY GROUND OF THE ASSESSEE IS ALLOWED. 3.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D ORDER PRONOUNCED IN THE OPEN COURT ON 09 /10/ 2015. SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09 /10/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI ARIDAMAN SINGH, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 4 (2), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 391/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR