Haryana State Roads and Bridges Development Corporation Limited, Panchkula V. DCIT, Panchkula

ITA 404/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95613 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: HARRY RIKHY
• Keywords: Business expenditure; Diversion of income; Additional evidence; Question of law; Revenue expenditure; Capital expenditure
• Section: 37; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.RANO JAIN, ACCOUNTANT MEMBER ITA NO. 404/CHD/2014 ASSESSMENT YEAR: 2010-11 M/S HARYANA STATE ROADS & VS THE DCIT, BRIDGES DEVELOPMENT CORP.LTD. PANCHKULA CIRCLE, BAY NO. 13-14, PANCHKULA. SECTOR 2, PANCHKULA. PAN: AAACH9435M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARRY RIKHY RESPONDENT BY : SHRI S.K.MITTAL DATE OF HEARING : 14.10.2015 DATE OF PRONOUNCEMENT : 16.10.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS) PANCHKULA, DATED 03.02.2014 FOR ASSESSMENT YEAR 2010-11. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 3. THE GROUND NO. 1 IS GENERAL AND NEED NO ADJUDICATION. 4. ON GROUND NO.2, ASSESSEE CHALLENGED THE ORDER OF THE LD. CIT(APPEALS) IN UPHOLDING THE ADDITION OF RS. 96,91,000/- BY TREATING THE GUARANTEE FEE PAID AS C APITAL EXPENDITURE. 2 5. THE BRIEF FACTS ARE THAT ASSESSING OFFICER NOTED THAT ASSESSEE HAS CLAIMED GUARANTEE FEES AT RS. 96,91,00 0/-. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF THI S EXPENDITURE. THE ASSESSEE REPLIED THAT THIS AMOUNT WAS PAID TO THE STATE OF HARYANA FOR GIVING GUARANTEE A GAINST LOAN TAKEN FROM HUDCO BY THE ASSESSEE CORPORATION. THE TOTAL GUARANTEE AGAINST FEES WAS RS. 1121.56 LACS W HICH WAS TO BE AMORTIZED IN THE PERIOD OF LOAN TAKEN IN VARIOUS SCHEMES. THE ASSESSING OFFICER CONCLUDED THAT ASSE SSEE HAD RAISED LOAN FROM HUDCO FOR ITS PROJECTS ON WHIC H GUARANTEE FEE OF RS. 96,91,000/- WAS CLAIMED. SINC E THE AMOUNT OF LOAN WAS CAPITALIZED BECAUSE SAME WAS USE D FOR THE PROJECTS, GUARANTEE FEES PAID WAS ALSO IN NATUR E OF CAPITAL EXPENDITURE WHEREAS THE SAME WAS CLAIMED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER, ACCORD INGLY, TREATED THE SAME AS CAPITAL EXPENDITURE AND MADE TH E ADDITION. 6. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) T HAT ASSESSEE IS ENGAGED IN THE MAINTENANCE AND IMPROVEM ENT OF STATE HIGHWAYS AND OTHER DISTRICT ROADS IN THE S TATE OF HARYANA. FOR THE SAME PROJECTS, ASSESSEE BORROWED LOAN FROM HUDCO. THE HARYANA GOVERNMENT GIVES GUARANTEE AGAINST LOAN TAKEN FROM HUDCO BY THE ASSESSEE. THE GUARANTEE FEES PAID TO THE STATE GOVERNMENT WAS CLA IMED AS REVENUE EXPENDITURE. THE GUARANTEE FEES PAID IS EXPENDITURE AND IS NOT REFUNDABLE, THEREFORE, IT WA S REVENUE EXPENDITURE. THE ASSESSEE RELIED UPON CERT AIN DECISIONS IN SUPPORT OF THE CONTENTIONS. THE LD. 3 CIT(APPEALS), HOWEVER, CONSIDERING THE FACTS OF THE CASE, CONFIRMED THE ADDITION AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. FINDINGS OF LD. CIT(APPEALS) IN P ARA 4.2 TO 4.8 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 4.2 I HAVE GONE THROUGH THE FACTS OF THE CASE A ND WRITTEN SUBMISSIONS FILED BY THE APPELLANT. THE AO MADE THE ADDITION OF RS.96,91,000/-- ON FINDING THAT THE CLAIMED EXPENDI TURE AS GUARANTEE FEE WAS PAID TO THE HARYANA STATE GOVERNMENT ON THE LOAN RAISED BY APPELLANT FROM HUDCO. THE AO TREATED THE AMOUNT OF GUARANTEE FEE AS CAPITAL EXPENDITURE AS IT WAS RELATED TO LOA NS TAKEN BY APPELLANT USED FOR VARIOUS PROJECT THE EXPENDITURE ON WHICH WERE CAPITAL IN NATURE. WHEREAS, APPELLANT HAVE ARGUED T HAT GUARANTEE FEE PAID FOR RECEIVED OF SUCH LOAN FROM HUDCO IS ONE TI ME EXPENSE AND WAS PAID TO HARYANA GOVERNMENT ON WHOSE GUARANT EE THE LOAN WAS RELEASED TO THE APPELLANT. THE GUARANTEE FEE PA ID BY ITS INHERENT NATURE IN ONE TIME EXPENSES WHICH IS NOT REFUNDABLE AND HENCE REVENUE EXPENSES. IN THIS REGARD, THE APPELLANT H AS RELIED IN THE CASE OF CIT VS SIWAKANII MILLS LTD. (SUPRA) WHERE THE HON' BLE SUPREME COURT HELD THAT INTEREST OF DEFERRED PAYMENT AND GUARANTE E COMMISSION PAID TO THE BANK FOR PURCHASE OF MACHINERY IS REVENUE EX PENDITURE. THE APPELLANT HAS FURTHER RELIED ON FEW OTHER JUDGMENTS . HOWEVER, THE FACTS OF THE CASES RELIED BY APPELLANT ARE DISTINGU ISHABLE WITH THE FACTS OF THE INSTANT CASE. EVEN THEN, THE ARGUMENTS TAKEN BY PLACING RELIANCE ON TIN CASE OF CIT VS. SIWAKAMI MILLS LTD. (SUPRA) IS COUNTERED BY THE DECISION OF HON'BLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT (CENTRAL), LUDHIANA VS SOBHAG TEXTILE PVT. LTD.(2006) 153 TAXMAN 597 WHERE THE HON'BLE HIGH COURT ADJUDICATED ON THE FOLLOWING QUESTION OF LAW. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THE GUARANTEE COMMISSION PAID TO CANARA BANK AGAINST PURCHASE OF MACHINERY T HROUGH IDBI AS NOT OF CAPITAL NATURE ?' THE HON'BLE PUNJAB & HARYANA HIGH COURT ANSWERED TH E QUESTION IN THE NEGATIVE, I.E. IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE. 4 4.3 WITHOUT PREJUDICE TO THE ABOVE ARGUMENT AND JUD ICIAL PRONOUNCEMENTS, IT IS IMPORTANT TO UNDERSTAND THE FACTS OF THE CASE AN D ALLOWABILITY OF GUARANTEE FEE AS REVENUE EXPENDITURE FOR THE BUSINE SS OF THE APPELLANT. THE APPELLANT IS A CORPORATION IN THE STATE OF HARY ANA ENTRUSTED WITH MAINTENANCE AND IMPROVEMENT OF STATE HIGHWAYS. MAIN DISTRICT ROADS AND OTHER DISTRICT ROADS IN THE ENTIRE STATE OF HARYANA . THE HARYANA STATE GOVERNMENT HAS GIVEN GUARANTEE FOR STATE CORPORATIO N TO HUDCO (A CENTRAL GOVERNMENT ORGANIZATION) AGAINST GRANT OF L OAN. FOR THIS ACTIVITY OF GIVING GUARANTEE, THE HARYANA STATE GOVERNMENT H AS TAKEN THE GUARANTEE FEE. DURING THE APPELLATE PROCEEDINGS, TH E COUNSEL OF APPELLANT WAS ASKED TO JUSTIFY AND FURNISH THE DOCUMENTARY EV IDENCES SHOWING THE PROVISION FOR MAKING SUCH PAYMENT AND ITS JUSTIFICA TION AS BUSINESS EXPENDITURE. THE APPELLANT SUBMITTED A COPY OF MEMO RANDUM DATED 16.09.2002 ISSUED BY COMMISSIONER AND SECRETARY TO THE GOVERNMENT OF HARYANA, PUBLIC WORKS DEPARTMENT WHERE UNDER ITEM N O. 8, THE PAYMENT OF GOVERNMENT GUARANTEE FEE TO THE HARYANA GOVERNMENT IS REFLECTED AGAINST RECOVERY OF FISRDC FUNDS. THE APPELLANT ALSO FURNIS HED A COPY OF LETTER DATED 17.01.2012 ISSUED BY EXECUTIVE DIRECTOR TO FI NANCE COMMISSIONER AND PRINCIPAL SECRETARY, GOVERNMENT OF HARYANA WHER E IT IS MENTIONED THAT AN ACCOUNT OF RS.560.78 CRORES WAS TAKEN AS LO AN FROM HUDCO. FOR IMPROVEMENT OF STATE HIGHWAYS AND MDR AND ODR IN TH E STATE OF HARYANA AGAINST WHICH BANK GUARANTEE AT 2% I.E. RS.L 1,21,5 6,000/- WAS PAYABLE TO STATE GOVERNMENT. THE SAME HAS BEEN' PAID IN FULL. HOWEVER, (LIE APPELLANT FAILED TO PRODUCE ANY EVIDENCE REGARDING ANY PROVIS ION OF STATUTE UNDER WHICH THE STATE GOVERNMENT MAY DIVERT PART OF LOAN OR MAKE SUCH TRANSACTION AS SOURCE OF REVENUE FOR ITSELF. THE AP PELLANT IN ITS BOOKS OF ACCOUNT HAS AMORTISED THE TOTAL GUARANTEE FEE OF RS .L 121.56 LACS IN THE PERIOD OF LOAN TAKEN FOR VARIOUS SCHEMES I.E. FOR A BOUT 13 TO 14 YEARS. AS A PART OF TOTAL GUARANTEE FEE PAID TO THE STATE GOVT. THE APPELLANT HAS CLAIMED RS.96,91,000/- EXPENDITURE DURING THE YEAR. 4.4 AFTER CONSIDERATION OF THE FACTS AND BACKGROUND OF THE CASE, IT IS WORTHWHILE TO QUOTE THE PROVISIONS OF SECTION 37(1) OF THE INCOME TAX ACT. 'SECTION 37(1)- ANY EXPENDITURE (NOT BEING EXPENDIT URE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OR PROFESSION SHALL BE 5 ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER TH E HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. EXPLANATION.-FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO H AVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. THE SECTION 37(1) MAKES IT VERY CLEAR THAT ANY EXPE NDITURE ALLOWED OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PRO FITS AND GAINS OF THE BUSINESS OR PROFESSION'. THIS EXPLANATION IS IN ADD ITION TO VARIOUS EXPLANATIONS WHICH ARE PROVIDED UNDER SECTION 30 TO 36 OF THE ACT. IT IS NOT IN DISPUTE THAT THE EXPENDITURE INCURRED BY WAY OF FEE TO THE STATE GOVERNMENT FOR HAVING GIVEN AS GUARANTEE FOR THE LOANS BORROWE D BY THE APPELLANT IS NOT ONE OF THE EXPENDITURE WHICH FALLS WITHIN SECTI ONS 30 TO 36 OF THE ACT. THEREFORE, IT HAS TO BE EXAMINED WITHIN SECTION 37 OF THE ACT. 4.5 IN THE PRESENT CASE, THE APPELLANT IS A CREATIO N OF STATE GOVERNMENT. THE APPELLANT HAS PAID GUARANTEE FEE OF RS.1121.56 LACS TO STATE GOVERNMENT FOR RAISING A LOAN OF RS.560.78 CRORES F ROM ANOTHER CENTRAL GOVERNMENT ORGANIZATION (HUDCO). NO OTHER BASIS OR JUSTIFICATION HAS BEEN SUBMITTED FOR GIVING THE GUARANTEE FEE TO THE STATE GOVERNMENT BY ITS OWN CORPORATION. IT IS A CLEAR CASE OF DIVERSION OF INCOME BY THE APPELLANT TO THE STATE GOVERNMENT. IN FACT, BY SUCH ARRANGEMENT, A PORTION OF THE LOAN RAISED HAVE BEEN DIVERTED TO THE STATE GOVERNMENT W ITHOUT ANY APPARENT REASON. THE EXPENDITURE HAS BEEN GIVEN A NAME OF GU ARANTEE FEE WHICH IS IN FACT DIVERSION OF FUNDS TO THE STATE GOVERNMENT. AS PER PROVISIONS OF SECTION 37(1) OF THE ACT, THE CLAIMED EXPENDITURE AS GUARAN TEE FEE HAS NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF EARNING PROFITS FROM THE BUSINESS ACTIVITY BY THE CORPORATION. MERELY BECAUS E THE STATE GOVERNMENT BECAME GUARANTOR AND CHARGED SUCH GUARAN TEE FEE, THE GUARANTEE FEE PAID BY THE CORPORATION WOULD NOT CON STITUTED A LAWFUL EXPENDITURE SO AS TO CLAIM' DEDUCTION U/S 37(1) OF THE ACT. 4.6 IN THIS CONTEXT, RELIANCE IS PLACED ON THE DECISION OF HON'BLE HIGH COURT OF KNRNATAKA IN THE CASE OF CIT VS. UNITED B REWERIES LTD. (2012) 17 TAXMANN.COM 6 WHERE IT WAS HELD THAT IN THE CIRCUMS TANCES OF THE CASE, 6 MERELY BECAUSE MANAGING DIRECTOR AGREED TO STAND AS A GUARANTOR ON PAYMENT OF CERTAIN COMMISSION, IT WOULD NOT CONSTIT UTE A LAWFUL EXPENDITURE SO AS TO BE CLAIMED DEDUCTION U/S 37(1) OF THE ACT. IN THAT CASE, THE HON'BLE COURT CITED THE REFERENCE OF CIRCULAR OF RB I DATED 29.07.1990 WHICH MANDATES THAT THE BANKS WERE REQUIRED TO ENSU RE THAT THE PRACTICE OF GIVING GUARANTEES WAS NOT USED BY THE DIRECTORS AS A SOURCES OF REMUNERATION , FROM THE BORROWING COMPANY AND THE BANKS WERE ALSO ADVISED TO OBTAINED SUCH AN UNDERTAKING FROM THE BO RROWING COMPANY. 4.7 REGARDING THE APPELLANT'S SUBMISSION ON RULE OF CON SISTENCY TO BE ADOPTED BY DEPARTMENT, IT IS MENTIONED THAT RES JUD ICATA IS NOT APPLICABLE IN INCOME TAX PROCEEDINGS AS EACH ASSESSMENT YEAR I S A SEPARATE PROCEEDINGS. IN THIS REGARD, I PLACE RELIANCE ON TH E DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BHARAT SANCHAR NIGAM L TD. & ANR. VS. UNION OF INDIA & ORS. 282 ITR 273. MOREOVER, THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SESHASAYEE INDUSTRIES LTD.242 ITR 6 91 HELD THAT THE FACT THAT ITS CLAIM WAS NOT QUESTIONED IN EARLIER YEARS DOES NOT ENTITLE THE ASSESSEE TO CONTEND THAT THE LAW SHOULD NOT BE APPLIED DURING T HE CURRENT YEAR. THEREFORE, THE APPELLANT'S STAND ON RULE OF CONSIST ENCY IN THIS CASE DOES NOT HOLD GOOD. 4.8 IN VIEW OF AFORESAID DISCUSSION, IT IS FOUND THAT T HE CLAIM OF GUARANTEE FEE OF RS.96,91,000/- DURING THE YEAR IS MERELY A D IVERSION OF PART OF LOAN RECEIVED FROM THE BORROWING COMPANY TO THE STATE GO VERNMENT WITHOUT ANY BASIS OR THE BUSINESS ACTIVITY OF THE APPELLANT COR PORATION. THE SAID EXPENDITURE INCURRED IS NOT FOUND TO BE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSES OF BUSINESS AND THEREFORE, NOT ALLOWABLE I N COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION'. THEREFORE, THE DISALLOWANCE OF RS.96,91,000/- ON TH IS ACCOUNT BY THE AO IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 7. AFTER HEARING RIVAL CONTENTIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT ASSESSEE HAS TAKEN LOANS FROM HUDCO FO R MAINTAINING AND IMPROVEMENT OF STATE HIGHWAYS AND O THER DISTRICT ROADS IN STATE OF HARYANA AND SAME LOAN WA S 7 CAPITALIZED. THE HARYANA GOVERNMENT HAS GIVEN GUAR ANTEE FOR STATE CORPORATION OF HUDCO AGAINST GRANT OF LOA N. FOR THIS ACTIVITY OF GIVING GUARANTEE, THE HARYANA STAT E GOVERNMENT HAS TAKEN THE GUARANTEE FEES. THE COUNS EL FOR ASSESSEE WAS DIRECTED TO EXPLAIN AND JUSTIFY TH AT IT WAS REVENUE EXPENDITURE. IT IS ALSO ADMITTED FACT THAT ASSESSEE IN ITS BOOKS OF ACCOUNT HAS AMORTIZED THE TOTAL GUA RANTEE FEES OF RS. 1121.56 LACS IN THE PERIOD OF LOAN TAKE N FOR VARIOUS SCHEMES I.E. FOR 13 TO 14 YEARS. THEREFORE, GUARANTEE FEES WAS AMORTIZED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. THE LD. CIT(APPEALS), IN THE BACKGROUN D OF THESE FACTS NOTED THAT ASSESSEE IS A CREATION OF ST ATE GOVERNMENT AND NO OTHER BASIS OR JUSTIFICATION HAS BEEN SUBMITTED FOR GIVING GUARANTEE FEES TO THE STATE GOVERNMENT BY ITS OWN CORPORATION. 7(I) THE LD. CIT(APPEALS) ALSO NOTED THAT IT IS A C ASE OF DIVERSION OF INCOME BY ASSESSEE TO THE STATE GOVERN MENT. IT WAS ALSO RECORDED IN THE FINDING OF FACT THAT IN -FACT, BY SUCH ARRANGEMENT, A PORTION OF THE LOAN RAISED HAVE BEEN DIVERTED TO THE STATE GOVERNMENT WITHOUT ANY APPARE NT REASONS. AS PER LETTER ON RECORD, THE STATE GOVERN MENT DECIDED TO LEVY GUARANTEE FEE AT SPECIFIED RATE ON ALL THE CURRENT BORROWINGS. THE FINDING OF FACT RECORDED B Y LD. CIT(APPEALS) HAVE NOT BEEN REBUTTED THROUGH ANY EVI DENCE OR MATERIAL ON RECORD. IT IS, THEREFORE, CLEAR CAS E THAT WHEN THE ASSESSEE HAS CAPITALIZED THE LOAN TAKEN FR OM HUDCO IN THE BOOKS OF ACCOUNT AND ALLEGED EXPENDITU RE OF GUARANTEE FEES, HAVE BEEN AMORTIZED IN THE BOOKS OF 8 ACCOUNT IN DIFFERENT YEARS, WOULD CLEARLY SHOW THAT THE EXPENDITURE CLAIMED AS REVENUE WAS IN-FACT, CAPITAL EXPENDITURE BECAUSE IT WAS RELATED TO THE RECEIPT O F THE LOAN WHICH WAS CAPITALIZED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS ALSO NOT BEEN ABLE TO R EBUT THE FINDING OF FACT RECORDED BY LD. CIT(APPEALS) THAT P ORTION OF THE LOAN RAISED HAVE BEEN DIVERTED TO THE STATE GOV ERNMENT WITHOUT ANY APPARENT REASONS. THEREFORE, WHEN ASSE SSEE WAS ASKED TO JUSTIFY AS TO FOR WHAT PURPOSES, THE G UARANTEE FEE WAS PAID TO THE STATE GOVERNMENT, ASSESSEE WAS NOT ABLE TO EXPLAIN ANYTHING IN THIS REGARD. IT IS WEL L SETTLED LAW THAT WHEN ASSESSEE CLAIMED DEDUCTION ON ACCOUNT OF BUSINESS EXPENDITURE, BURDEN WOULD BE UPON ASSESSEE TO PROVE THAT THE SAID EXPENDITURE WAS NOT IN THE NATU RE OF CAPITAL EXPENDITURE AND HAS BEEN LAID OUT OR EXPEND ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE, HOWEVER, FAILED TO PRODUCE ANY EVIDENCE O R MATERIAL BEFORE AUTHORITIES BELOW TO PROVE THAT THE GUARANTEE FEES PAID TO STATE GOVERNMENT, WAS WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS PURPOSES. 7(II) THE LD. DR SUBMITTED THAT HON'BLE PUNJAB & HA RYANA HIGH COURT DECIDED THIS ISSUE IN FAVOUR OF THE REVE NUE IN THE CASE OF SOBHAG TEXTILES PVT. LTD. 153 TAXMAN 59 7 WHICH IS REPRODUCED IN THE ORDER OF LD. CIT(APPEALS ). THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, RELIED UPON DECISION OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF AKKAMAMBA TEXTILES LTD. 117 ITR 294 AND SUBMITTED T HAT THE SAID ORDER HAS BEEN CONFIRMED BY THE HON'BLE SU PREME 9 COURT IN THE DECISION REPORTED IN 227 ITR 464. ON GOING THROUGH THE JUDGEMENT OF THE HON'BLE SUPREME COURT, WE FIND THAT HON'BLE SUPREME COURT PASSED THE FOLLOWIN G ORDER, HEARD COUNSEL FOR PARTIES. DISMISSED. NO COSTS. SINCE IN THIS CASE, HON'BLE SUPREME COURT DISMISSED THE PETITION BY NON-SPEAKING ORDER, THEREFORE, THE SAME WOULD NOT ATTRACT THE DOCTRINE OF MERGER. WE RELY UPON D ECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KUNHAYA MMED & OTHERS V STATE OF KERALA & ANOTHER 245 ITR 360. THEREFORE, AS AGAINST DECISION OF ANDHRA PRADESH HI GH COURT, DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SUBHAG TEXTILES PVT. LTD. (SUPRA) WAS RIGHTLY RE LIED UPON BY LD. DR. HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF SOBHAG TEXTILE (P) LTD. (SUPRA) REFERRED TO DECISIO N RELIED ON BY LD. COUNSEL FOR THE ASSESSEE. 8. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AND THE FINDINGS OF FACT RECORDED BY LD. CIT(APPEALS), WHICH HAVE NOT BEEN ASSAILED TO THROU GH ANY EVIDENCE OR MATERIAL ON RECORD, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD . CIT(APPEALS). WE CONFIRM HIS FINDINGS AND DISMISS THIS GROUND OF APPEAL OF ASSESSEE. 9. ON GROUND NO. 3, ASSESSEE CHALLENGED THE ORDER O F LD. CIT(APPEALS) IN UPHOLDING THE ADDITION OF RS. 4,03, 129/- UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT. THE ASSESSING OFFICER NOTED THAT TDS WAS NOT DEDUCTED O N THE PAYMENTS OF RS. 4,03,129/- MADE FOR CONSULTANCY CHA RGES 10 TO M/S CONSULTING ENGG. ASSOCIATES. THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE SAME UNDER SECTION 40(A)( IA) OF THE ACT. 9(I) THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT PROVISIONS OF SECTION 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF TDS DEFAULTS IF THE PAYMENT IS PAYABLE. IN THIS CASE, AMOUNT IS ACTUALLY PAID, THEREFORE, SAME PROVISIONS WOULD NOT APPLY. 9(II) THE LD. CIT(APPEALS) AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE, NOTED THAT IN THIS CAS E, ASSESSEE HAS PAID CONSULTANCY CHARGES ON 15.09.2009 TO M/S CONSULTING ENGINEER ASSOCIATES WITHOUT DEDUCTIN G TDS. HE HAS RELIED UPON DECISION OF THE HON'BLE CA LCUTTA HIGH COURT IN THE CASE OF CRESENT EXPOTS SYNDICATE 216 TAXMAN 258 AND DECISION OF THE GUJRAT HIGH COURT IN THE CASE OF SIKANDAR KHAN N. TANWAR 87 DTR 137 IN WHICH ISSUE OF PAID AND PAYABLE HAVE BEEN DECIDED IN FAVO UR OF THE REVENUE. THE LD. CIT(APPEALS), FOLLOWING THE S AME DECISIONS, CONFIRMED THE ADDITION AND DISMISSED THI S GROUND OF APPEAL OF THE ASSESSEE. 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS, IN-FACT DEDUCTED TDS AND FILED THE PR OOF OF THE SAME AT PAGES 11 TO 15 OF THE PAPER BOOK AND AD MITTED THAT THESE PAPERS WERE NOT FILED BEFORE THE AUTHORI TIES BELOW. HOWEVER, LD. COUNSEL FOR THE ASSESSEE WAS N OT ABLE TO EXPLAIN UNDER WHICH PROVISIONS, THESE ADDITIONAL EVIDENCES COULD BE CONSIDERED. THE LD. COUNSEL FOR THE 11 ASSESSEE DID NOT MOVE ANY APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCES AND EVEN DURING THE COURSE OF ARGUMENTS, DID NOT SEEK ADJOURNMENT TO MAKE REQUEST FOR ADMISSION OF THE ADDITIONAL EVIDENCES OR TO EXPLAIN ANY REASON FOR NOT FILING THESE DOCUMENTS BEFORE AUTHOR ITIES BELOW. THE LD. DR, THEREFORE, SUBMITTED THAT THESE EVIDENCES COULD NOT BE CONSIDERED AT THE SECOND APP ELLATE STAGE. THE LD. DR ALSO POINTED OUT THAT THE ASSESS EE PLEADED BEFORE AUTHORITIES BELOW THAT NO TAX HAVE B EEN DEDUCTED ON THE AFORESAID PAYMENT AND ASSESSEE CLAI MED THAT SINCE AMOUNT IS PAID, THEREFORE, PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. THEREFORE, ALL THESE DOCUMENTS ARE AFTER THOUGHT. THE LD. DR SUBMITTED THAT THE I SSUE IS COVERED AGAINST THE ASSESSEE BY JUDGEMENT OF HON'BL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF PMS DIES ELS 374 ITR 562 IN WHICH HON'BLE HIGH COURT HELD THAT, THE REQUIREMENT TO DEDUCT TAX AT SOURCE IS MANDATORY AN D THAT THE PROVISIONS OF SECTION 40(A)(IA) APPLY TO ASSESS EE WHO FOLLOW THE CASH SYSTEM AS WELL AS MERCANTILE SYSTEM OF ACCOUNTING. 11. CONSIDERING THE ABOVE SUBMISSIONS, WE DO NOT FI ND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. THE ASSESSEE SPECIFICALLY PLEADED BEFORE AUTHORITIES BE LOW THAT SINCE AMOUNT IS ACTUALLY PAID, THEREFORE, ASSESSEE IS NOT REQUIRED TO DEDUCT TDS ON THE SAME AMOUNT. NO OTHE R SUBMISSIONS WERE RAISED BEFORE AUTHORITIES BELOW. T HE ISSUE OF PAID AND PAYABLE HAS ALREADY BEEN DECI DED AGAINST THE ASSESSEE BY HON'BLE PUNJAB & HARYANA HI GH 12 COURT IN THE CASE OF PMS DIESELS (SUPRA). NOW, THE LD. COUNSEL FOR THE ASSESSEE HAS COME UP WITH NEW PLEA THAT SINCE TAX HAS BEEN DEDUCTED, THEREFORE, MATTER MAY BE REMANDED TO THE ASSESSING OFFICER. FIRST OF ALL, TH E PLEA OF THE ASSESSEE HAS NO MERIT BECAUSE ONCE ASSESSEE PLE ADED BEFORE AUTHORITIES BELOW THAT AMOUNT OF RS. 4,03,12 9/- HAS BEEN PAID ON 15.09.2009, WHERE IS THE QUESTION OF DEDUCTION OF TDS ON THE SAME AMOUNT. FURTHER, ASSE SSEE HAS NOT FILED ANY APPLICATION FOR ADMISSION OF THE ADDITIONAL EVIDENCES AND HAS NOT EXPLAINED ANY REAS ON WHY ASSESSEE HAS NOT FILED THESE DOCUMENTS BEFORE THE AUTHORITIES BELOW WHICH HAVE BEEN NOW FILED AT PAGE S 11 TO 15 OF THE PAPER BOOK, GENUINENESS OF SAME ARE IN DO UBT. THEREFORE, NO COGNIZANCE OF THE SAME COULD BE TAKEN AT THIS STAGE. SINCE THESE DOCUMENTS (PB-11 TO 15) WERE NO T FILED BEFORE AUTHORITIES BELOW AND THIS ISSUE IS NOT ARIS ING OUT OF THE ORDERS OF AUTHORITIES BELOW, THEREFORE, WE DO N OT FIND ANY JUSTIFICATION TO GIVE FINDINGS ON THE SAME. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF THE ASSESSEE ON THIS GROUND HAS NO MERIT. THE SAME IS DISMISSED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVN ESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16 TH OCT., 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD