Sh. Mohit Burman, New Delhi V. ACIT, New Delhi

ITA 392/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6420 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 22-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 201(1); 139

Judgement Text

1 ITA NO. 392/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AN D SMT SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A .NO. 392/DEL/2014 (ASSESSMENT YEAR-2009-10) APPELLANY BY SH. M.P. RASTOGI, ADV RESPONDENT BY SH. RAJESH KUMAR, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 20/11/2013 PASSED BY CIT(A)-XXVI, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS: 1. THAT THE DISALLOWANCE OF RS.10,80,000/- BEING T HE RENT U/S 40(A) (IA) OF THE INCOME-TAX ACT, 1961 (THE ACT) ON ACCOUNT OF NON-DEDUCTION OF TDS IN TERMS OF SECTION 194-1 OF THE ACT BY THE A.O AND SUSTAINED BY CIT(A) IS BAD IN LAW. 2. THAT UNDER THE EXPLANATION TO SECTION 191 OF THE ACT, THE ASSESSEE IS NOT AN ASSESSEE IN DEFAULT WITHIN THE MEANING OF SU B-SECTION (1) OF SECTION 201 OF THE ACT, AS THE PAYEE HAS ALREADY PA ID THE TAX AND MOHIT BURMAN 4 TH FLOOR, PUNJABI BHAWAN, 10, ROUSE AVENUE NEW DELHI AAAPB3071C (APPELLANT) VS ACIT CIRCLE-32(1) NEW DELHI (RESPONDENT) DATE OF HEARING 16.03.2017 DATE OF PRONOUNCEMENT 20. 03.2017 2 ITA NO. 392/DEL/2014 CONSEQUENTLY THE DISALLOWANCE OF RS.10,80,000/- MAD E BY THE A.O U/S 40(A) (IA) OF THE ACT AND SUSTAINED BY THE CIT( A) IS BAD IN LAW. 3. THAT THE SECOND PROVISO TO SECTION 40(IA) READ W ITH THE FIRST PROVISO TO SECTI9ON 201(1) OF THE ACT, BROUGHT BY THE FINAN CE ACT, 2012 EXPLAINING THAT IF THE PAYEE H AS PAID TAX, THEN TH E PAYER SHALL NOT BE DEEMED AS THE ASSESSEE IN DEFAULT, ARE CLARIFICA TORY, RETROACTIVE AND CONSEQUENTLY THE DISALLOWANCE OF RS.10,80,000/- AS MADE BY THE A.O AND SUSTAINED BY THE CIT(A) ARE ARBITRARY A ND BAD IN LAW. 4. THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 3. THE ASSESSEE, A CONSULTANT, HAD PROFESSIONAL REC EIPTS OF RS.72,00,000/. HE FILED HIS RETURN OF INCOME SHOWING INCOME OF RS. 1, 14,27,829/-. THE ASSESSEE FAILED TO DEDUCT AT SOURCE ON RENT PAYMENT OF RS.10,80,000/- IN ACCORDANCE TO SECTION 196I. THEREFORE, THE ASSESSI NG OFFICER INVOKE SECTION 40(A)(IA) AND DISALLOWED THE RENT PAYMENT OF RS.10, 80,000/- ON WHICH TDS WAS NOT CALCULATED. ACCORDINGLY, BY THE SAME, THE ASSE SSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) HELD THAT:- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE RECORD. THE LD. COUNSELS CONTENTION THAT SINC E THE RECIPIENT OF THE RENT HAS PAID TAX ON THE RENT PAID BY THE APPELLANT; THE REFORE, THE TAX ON THE SAME INCOME CANNOT BE LEVIED IN THE HANDS OF THE PA YER/APPELLANT BY MAKING DISALLOWANCE OF RENT, HAS NO MERIT AS FAR AS THE DISALLOWANCE U/S 40(A)(IA) IS CONCERNED THOUGH IT HAS IN RESPECT OF SECTION 201 AND 201A. THIS ISSUE HAS BEEN DEALT IN THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA 293 ITR 226. THE R ATIO LAID DOWN IN THE CASE OF HINDUSTAN COCA COLA (SUPRA) IS NOT RELEVANT HERE AT ALL AS THE FACTS OF THIS CASE ARE HELD DISTINGUISHABLE. THE PRESENT CASE IS IN RESPECT OF THE DISALLOWANCE U/S 40(A)(IA) WHEREAS THE CASE OF HIND USTAN COCA COLA IS IN RESPECT OF SECTION 201 AND 201A. THE PROVISO BROU GHT IN, VIDE FINANCE BILL 2012, WITH EFFECT FROM (WEF) 1/4/2013 PROVIDES RELI EF TO THOSE ASSESSEES WHO ARE NOT DEEMED ASSESSEE IN DEFAULT U/S 201(1) W .E.F 1/4/2013. HERE, THE APPELLANT IS UNDOUBTEDLY ASSESSEE IN DEFA ULT U/S 201(1), THEREFORE, THIS AMENDMENT IS ALSO OF NO HELP TO HIM . FURTHER, THIS AMENDMENT IS NOT RELEVANT FOR THE YEAR UNDER CONSID ERATION. 3 ITA NO. 392/DEL/2014 4. THE CIT (A) DISMISS THE APPEAL OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THE PARTY WHOM THE TDS SHOULD HAVE BEEN CALCUL ATED AND RECOVERED HAS ALREADY PAID THE TAX. THE LD. AR FURTHER SUBMITTED THE AMENDMENT TO SECTION 40(A)(IA) PROVISO 2 IS RETROSPECTIVE IN NATURE. HE ALSO RELIED ON THE JURISDICTIONAL HIGH COURT JUDGMENT IN CASE OF CIT V S. ANSAL LAND MARK TOWNSHIP PVT. LTD. WHEREIN THE IDENTICAL FACTS ARE PUT BEFORE US. 5. THE LD. DR SUBMITTED THAT THE CIT(A) WAS RIGHT I N DISMISSING THE APPEAL OF THE ASSESSEE AS THE PROVISO BROUGHT IN FINANCE B ILL 2012 W.E.F 1/4/2013 AND PROVIDES RELIEF TO THOSE ASSESSEE WERE NOT DEEMED A SSESSEE IN DEFAULT U/S 201(1). THE SAID AMENDMENT IS PROSPECTIVE IN NATUR E AND DOES NOT HELD TO THE ASSESSEE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RECORDS. THE JUDGMENT CITED BY THE LD. AR THAT OF ANSAL LAND MAR K TOWNSHIP PVT. LTD. SQUARELY COVERS THE ASSESSEES CASE AS THE AMENDMEN T IS RETROSPECTIVE AS IT IS A BENEFICIAL LEGISLATION WHEN THE PAYMENT OF TAX IS A LREADY DONE OF THE PARTIES FROM WHO TDS HAS TO BE RECOVERED THERE IS NOTHING R EMAINS ON RECORD FOR THE REVENUE TO RECOVER THE SAME. THE FIRST PROVISO TO S ECTION 201(1) OF THE ACT CLEARLY PROVIDES THAT WHERE A PERSON FAILS TO DEDUC T TAX AT SOURCE ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE AC COUNT OF A RESIDENT SUCH PERSON SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEF AULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT HAS FURNISHED HIS RETURN OF INCOME U/S 139 OF THE ACT. THE INTENTION OF THE LEGISLATURE IS NOT TO TREAT THE AS SESSEE AS A PERSON IN DEFAULT SUBJECT TO THE FULFILLMENT OF THE CONDITIONS PROVID ED IN THE FIRST PROVISO TO SECTION 201(1). THE INSERTION OF THE SECOND PROVIS O TO SECTION 40(A)(IA) IS BENEFICIAL LEGISLATION FOR ASSESSEE. AS PER BOTH TH E PROVISOS TO SECTION 40(A)(IA) AND SECTION 201(1) OF THE ACT AS LONG AS THE PAYEE/ RESIDENT (WHICH IN THIS CASE IS ALIP) HAS FILED ITS RETURN OF INCOME DISCLOSING THE PAYMENT RECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HAS A LSO PAID TAX ON SUCH 4 ITA NO. 392/DEL/2014 INCOME, THE ASSESSEE WOULD NOT BE TREATED AS A PERS ON IN DEFAULT. AS FAR AS THE PRESENT CASE IS CONCERNED, IT IS NOT DISPUTED BY TH E REVENUE THAT THE PAYEE HAS FILED RETURNS AND OFFERED THE SUM RECEIVED TO TAX. 7. IN RESULT, APPEAL IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 20TH OF MARCH, 2017. SD/- SD/- (J.SUDHAKAR REDDY) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 20/03/2017 *R.NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 5 ITA NO. 392/DEL/2014 DATE 1. DRAFT DICTATED ON 16/03/2017 SR. PS 2. DRAFT PLACED BEFORE AUTHOR 17/03/2017 SR. PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 20.03 .2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 20.03 .2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.