DESTIMONEY ENTERPRISES LTD, MUMBAI V. ITO (TDS) (OSD) 1(3), MUMBAI

ITA 4125/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0123 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINAY DESHMANE
• Section: 133A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ITA NO. 4124 & 4125 / MUM/ 20 1 5 ( / ASSESSMENT YEAR: 2 0 08 - 09 AND 2009 - 10 ) DESTIMONE Y ENTERPRISES LIMITED (FORMERLY KNOWN AS DESTIMONEY ENTERPRISES PVT LTD.)SHOP NO.5, SAHJEEVAN CHS N M JOSHI MARG, NEXT TO YAMAHA SHOWROOM, ELPHINSTONE ROAD, (W), MUMBAI - 400013 / VS. INCOME TAX OFFICER - TDS(OSD) 1(3), 8 TH FLOOR, ROOM NO. 811 , K.G.MITTA L HOSPITAL BUILDING, CHARNI ROAD, MUMBAI - 400002 ( / APPELLANT) : ( / RESPONDENT ) ./ PAN : AAACD5100F/MUMD13951A ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI VINAY DESHMANE AND SHRI PAWAN SHARMA / REVENUE BY : SHRI PURUSHOTTAM KUMAR / DATE OF HEARING : 1 6.8 .2017 / DATE OF PRONOUNCEMENT : 28. 8 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: THE CAPTIONED ARE APPEAL S BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR S 2008 - 09 AND 20 10 - 11 . THE APPEALS ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) - 59 , MUMBAI , DATED 2 3.4. 201 5 WHICH IN TURN HAS ARISE N FROM AN 2 ITA NO. 4124 AND 4125/ MUM/2015 ORDER PASSED BY THE ASSESSING OFFICER DATED 31. 3.201 1 UNDER SECTION 201(1)/201(1A) OF THE INCOM E TAX ACT, 1961(IN SHORT THE ACT). SINCE ISSUE INVOLVED IN BOTH THESE APPEALS PERTAINS TO THE ADDITION ON ACCOUNT OF SECTION 201 AND 201(1A), THESE APPEALS WERE CLUBBED TOGETHER, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE . ITA NO. 4124/MUM/2015 2. GROUND NO.1 IS AGAINST THE UPHOLDING THAT THE PROVISION S FOR RENT OF RS.2,83,91,800/ - WAS SUBJECT TO DEDUCTION OF TAX AT SOURCE UNDER THE PROVI SI ONS OF SECTION 194 - I OF THE INCOME TAX ACT, 1961. 3. A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT ON 23.12.2008 AT THE BUSINESS PREMISES OF THE ASSESSEE AT MARATHON INNOVA, B WIND, 1 ST FLOOR, MARATHEM NEXT GEN COMPLEX, GANPATRAO MARG, LOWER PAREL, MUMBAI - 400013 DURING WHICH CERTAIN DISCREPANC IES WERE FOUND IN T HE DEDUCTION OF TAX AT SOURCE. THE AO FOUND THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON RS.2,83,91,800/ - ON ACCOUNT OF PROVISIONS FOR RENT WHICH WERE CHARGED TO PROFIT AND LOSS ACCOUNT . THE AO ALSO OBSERVED THAT IN THE TAX AUDIT REPORT BEARING FORM NO.3C D PART B SERIAL NO.17(F) , IT IS STATED THAT THE ASSESSEE DECLARED INADMISSIBLE EXPENSES U/S 40(A)(IA) OF THE ACT ON ACCOUNT OF RENT OF RS.2,83,91,800/ - . SINCE TDS PAYABLE UNDER SECTION 194 - I OF 3 ITA NO. 4124 AND 4125/ MUM/2015 RS.64,33,582/ - HAS NOT BEEN DEDUCTED AND PAID AND ACCORDING LY, THE AO ASKED THE REASONS FOR THE SAME, WHICH WAS REPLIED BY THE ASSESSEE BY SUBMITTING TH A T THIS WAS NOT ACTUAL RENT PAID BUT ONLY PROVISION S CREATED TOWARDS RENT WHICH WAS NEVER PAID DUE TO PENDING LITIGATION WITH THE LANDLORD AND THE ASSESSEE SU O MOTU DISALLOWED THE SAME WHILE FILING THE RETURN OF INCOME U/S 40(A)(IA) OF THE ACT. 4. FACTS OF THE CASE ARE THAT THE ASSESSEE IDENTIFIED THE SAID PROPERTY (PROPERTY) FOR IT S OPERATIONS IN GURGAON AND STARTED NEGOTIATIONS WITH THE BUILDER FOR THE PU RCHASE OF THE PROPERTY. HOWEVER, DURING THE COURSE OF DUE DILIGENCE T HE ASSESSEE UNDERSTOOD THAT LAND ON WHICH THIS PROPERTY WA S LOCATED WA S UNDER ACQUISITION PROCEEDINGS BY THE HARYANA STATE . THE BUILDER UPON REALIZATION THAT CONSIDERABLE TIME WOULD B E CONSUMED IN THE LITIGATION AGREED TO LEASE OUT THE SAID PROPERTY TO THE ASSESSEE AND ALSO AGREED TO SALE THE PROPERTY AT A AGREED PRICE AFTER GETTING NECESSARY CLEARANCE S . THE LEASE AGREEMENT WAS EXECUTED ON 20.10.2006 AND UNDER THE SAID AGREEMENT T HE ASSESSEE WAS GIVEN A RIGHT TO PURCHASE THE SAID PROPERTY. THE ASSESSEE VIDE LETTER TO BUILDER DATED 25.10.2006 ACCEPTED RIGHT TO PURCHASE FROM THE BUILDER SUBJECT TO THE CONDITIONS THAT THE BUILDER SHOULD OBTAIN NOC AND GET THE PROPERTY RELEASED FROM THE PROCEEDINGS OF THE LOCAL AUTHORITY. VIDE LETTER DATED 28.5.2007 THE 4 ITA NO. 4124 AND 4125/ MUM/2015 ASSESSEE EXERCISED ITS RIGHT TO PURCHASE THE PROPER T Y AND IN THE MEAN TIME LEASE WAS TERMINATED. THE BUILDER HOWEVER FAILED TO HONOUR THE COMMITMENTS AND ASSESSEE HAS TO FILE A SUIT FOR SPECIFIC PERFORMANCE ON 3.7.2008. HOWEVER, DURING THE PENDENCY OF THE SUIT THE STATUTORY A U DI T OR S ADVISED THAT THE PROVISION SHOULD BE CREATED FOR LEASE OF RENT TO THE TUNE OF RS.28 ,22,889/ - AND WAS ACCORDINGLY PROVIDED IN THE YEAR ENDE D 31.3.2008 BUT THE SAME WAS DISALLOWED WHILE FILING THE RETURN OF INCOME U/S 40(A)(IA) OF THE ACT . THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE WAS LIABLE FOR U/S 194I OF THE ACT BY TREATING THE ASSESSEE IN DEFAULT UND ER THE PROVISIONS OF SECTION 201 AND 201(1A) OF THE ACT AND RAISED DEMAND OF TDS PLUS INTEREST ACCORDINLY . 5 . IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALSO DECIDED THE ISSUE AGAINST THE ASSESSEE BY OBSERVING THAT THE RENT DEBITED TO THE PROFIT AND LOSS ACCOUNT WAS LIABLE FOR TDS U/S 194 - I AND NOW AGGRIEVED BY THE ORDER OF THE FAA, THE ASSESSEE IS IN APPEAL BEFORE US. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS OF AUT HORITIES BELOW. IN THE PRESENT CASE, THE ASSESSEE MADE SUO MOTU DISALLOWANCE OF PROVISION FOR LEASE RENT OF RS.2,83,91,800/ - UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT AND DID NOT CLAIM ANY DEDUCTION THEREO F FROM ITS 5 ITA NO. 4124 AND 4125/ MUM/2015 INCOME . IN OUR CONSIDERE D VIEW THE PROVISION OF TDS ARE NOT APPLICABLE WHERE THERE IS NO CLAIM OF EXPENDITURE MADE BY THE ASSESSEE AND ASSESSEE HAS MADE SUO MOTU DISALLOWANCE U/S 40(A)(IA) OF THE ACT. WE FIND MERIT IN THE CONTENTIONS OF THE AS S ES S EE THAT THE ASSES SEE HAS ALREADY MADE SUO MOTTO DISALLOWANCE U/S 40(A)(IA) OF THE ACT AT THE TIME OF FILING THE RETURN OF INCOME AND PAID INCOME TAX ACCORDINGLY WITHOUT CLAIMING ANY EXPENDITURE O F LEASE RENTAL ON THE GROUND THAT THE PROVISIONS WERE OF CONTINGENT NATURE AND WERE NEVER E VER PAID. WE THEREFORE ARE INCLINED TO SET ASIDE THE ORDER OF THE FAA AND HOLD THAT THE PROVISIONS OF SECTION 194 - I OF THE ACT ARE NOT APPLICABLE WHERE THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION OF THE EXPENSES BY SUO MOTU MA KING THE DIS ALLOWANCE U/S 40 (A)(IA) OF THE ACT. THE AO IS DIRECTED ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7 . GROUNDS OF APPEAL NO.2 IS AGAINST THE UPHOLDING THE ORDER OF AO THAT TDS WAS ATTRACTED ON INTERNET CHARGES AND LEASELINE CHARGES. 8 . DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS PAID LEASE LINE CHARGES AND INTERNET CHARGES TO M /S A D VANCE TECHNOLOGIES LTD ON WHICH ACCORDING TO AO TDS U/S 194 - I OF THE ACT HAS NOT BEEN DEDUCTED. ACCORDINGLY, THE AO(TDS) ISSUED NOTIC E TO THE ASSESSEE WHICH WAS REPLIED BY THE ASSESSEE BY SUBMITTING THAT THE PAYMENT TO THE ABOVE SAID COMPANY WAS FOR THE INTERNET CONNECTION AND 6 ITA NO. 4124 AND 4125/ MUM/2015 NOT FOR USE OF ANY PLANT OR EQUIPMENTS AND THEREFORE THE PROVISIONS QUA TDS W ERE NOT APPLICABLE EITHER U /S 194 - C OR 194 - I OR 194 - J OF THE ACT IN SUPPORT HIS CONTENTION, THE LD.AR RELIED ON THE FOLLOWING DECISIONS : I) SKTCEKK COMMUNICATION LTD V/S DCIT (2001) 251 ITR 53) MADRAS HIGH COURT; II) WIPRO LTD V/S ITO (2004) 80 TTJ 191) (BANGALORE TRIBUNAL); I II) CIT V/S BHARTI CELLUR LTE CIT V/S ESCOTEL MOBILE COMMUNICATION LIMITED, CIT V/S HUTCHINSON ESSAR TEL LTD (2008) UNREPORTED) DELHI HIGH COURT); 9 . THE AO , NOT FINDING THE REPLY OF THE ASSESSEE CONVINCING , TREATED THE ASSESSEE IN DEFAULT AND RAISED DEMAND OF TAX AND INTEREST THEREON BY TREATING THE ASSESSEE IN DEFAULT . IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE PROVISIONS OF TDS U/S 194I OF THE ACT WERE APPLICABLE ON THE LEASELINE /INTERNET CHARGES. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING T HE ORDERS OF AUTHORITIES BELOW . WE FIND THAT THE AS S ES S EE HAS AVAILED INTERNET SERVICES AND PAID INTERNET /LEASE CHARGES FOR THE SAME. A CCORDING TO THE AO, THE SAID PAYMENT OF LEASE RENT /INTERNET CHARGES W ERE LIABLE TO TAX U/S 194 - I OF THE ACT. WE FIND THAT IN THIS CA S E THE ASSESSEE WAS ONLY AVAILED THE INTERNET CONNECTION AND WAS NOT USING ANY ASSET , PLANT OR MACHINERY WHICH INVOLVE D PA YMENT 7 ITA NO. 4124 AND 4125/ MUM/2015 OF RENT. IN OUR CONSIDERED VIEW THE LEASELINE CHARGES/INTERNET CHARGES ARE ONLY THE PAYMENT FOR USE OF INTERNET CONNECTION AND THESE ARE NOT FALLING WITHIN THE PROVISIONS OF SECTION 194 - I , 194 - C AND 194 - J OF THE ACT . MOREOVER THE CASE OF THE ASSESS EE IS SQUARELY COVERED BY THE VARIOUS DECISIONS REFERRED TO BY THE LD AR. ACCORDINGLY W E SET AS IDE THE ORDER OF LD. CIT(A) ON THIS ISSUE BY ALLOWING THE GROUND RAISED BY THE ASSESSEE. THE AO(TDS) IS DIRECTED ACCORDINGLY. ITA NO. 4125 /MUM/201 5 11 . THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE UPHOLDING THE ORDER OF AO BY THE LD.CIT(A) QUA THE INTERNET CHARGES AND LEASE LINE CHARGES BEING SUBJECT TO TDS U/S 194 - I OF THE ACT . 12 . WE HAVE ALREADY DECIDED THE ISSUE IN ITA NO.4124/MUM/2015 FOR THE ASS ESSMENT YEAR 2008 - 09. THE FACTS BEING THE SAME, THE FINDINGS OF ITA NO. 4124 /MUM/201 5 WOULD , MUTATIS MUTANDIS , APPLY TO THIS APPEAL AS WELL. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 13 . IN THE RESULT, THE APPEAL S OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH AUG , 2017. SD SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 8 ITA NO. 4124 AND 4125/ MUM/2015 MUMBAI ; DATED : 28. 8 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI