KAYA LTD, MUMBAI V. DCIT (TDS) RG 2(1), MUMBAI

ITA 4271/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0747 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 12-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 21-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI CHANDRAN LD
• Assessee Lawyers: MILIN BAKHAI LD
• Section: 201(1)

Judgement Text

ITA NO.4271/M/2016 KAYA LIMITED ASSESSMENT YEAR 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 4271/MUM/2016 ( / ASSESSMENT YEAR: 2012-13) KAYA LIMITED 23/C MAHAL INDUSTRIAL ESTATE, OPP. ANDHERI BANK MAHAKALI CAVES ROAD NEAR PAPER BOX ANDHERI MUMBAI 400 093 / VS. DEPUTY COMMISSIONER OF INCOME TAX (TDS) RANGE 2(1) 7TH FLOOR K.G. MITTAL HOSPITAL BUILDING CHARNI ROAD MUMBAI 400 059 ./ ./PAN/GIR NO. AACCK-1045-L ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) ' / APPELLANT BY : SHRI MILIN BAKHAI, LD. AR #$ ' / RESPONDENT BY : SHRI RAVI CHANDRAN, LD. DR / DATE OF HEARING : 12/05/2017 / DATE OF PRONOUNCEMENT : 17/05/2017 ITA NO.4271/M/2016 KAYA LIMITED ASSESSMENT YEAR 2012-13 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY THE ASSESSEE FOR ASSESSM ENT YEAR [AY] 2012-13 ASSAILS THE ORDER OF THE LD. COMMISSIONER O F INCOME-TAX (APPEALS)- 59 [CIT(A)], MUMBAI DATED 23/03/2016 QUA TREATING ASSESSEE AS ASSESSEE-IN-DEFAULT TO THE EXTENT OF RS.3,12,776/- WITHIN THE MEANING OF SECTION 201(1) OF THE INCOME TAX ACT FOR NON-DED UCTION OF TDS ON CERTAIN PAYMENTS AND CONSEQUENTIAL LEVY OF INTEREST U/S 201(1A) FOR RS.1,12,598/-. 2 . BRIEFLY STATED, THE ASSESSEE, BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN PROVIDING SKINCARE SERVICES AND HOLDING TAN-MUMK-13061- G, WAS SUBJECTED TO AN ORDER U/S 201(1) READ WITH SECTION 201(1A) OF THE INCOME TAX ACT, 1961 VIDE ASSESSING OFFICER [AO] OR DER DATED 26/03/2014. THE LD. AO, UPON PERUSAL OF TAX AUDIT R EPORT FOR IMPUGNED AY, NOTICED THAT THE ASSESSEE MADE PROVISION OF REN T & PROFESSIONAL FEES AMOUNTING TO RS.14,41,875/- & RS.16,85,877/- R ESPECTIVELY BUT FAILED TO DEDUCT TDS OF RS.1,44,188/- AND RS.1,68,5 88/- FROM THE SAID PAYMENT WHICH RESULTED INTO RAISING OF IMPUGNED DEM AND OF RS.3,12,776/- AGAINST THE ASSESSEE U/S 201(1) AND C ONSEQUENTIAL INTEREST DEMAND @1% FOR 36 MONTHS U/S 201(1A) AMOUN TING TO RS.1,12,598/-. BOTH THE DEMANDS WERE CONTESTED BEF ORE LD. CIT(A) WHERE THE ASSESSE CONTENDED THAT THESE WERE MERE ADHOC PROVISIONS ONLY ON ESTIMATED BASIS WITHOUT THERE BEING ANY SPE CIFIC ENTRIES IN THE RESPECTIVE LEDGER ACCOUNTS OF THE PAYEE. FURTHER, T HE ASSESSEE REVERSED ITA NO.4271/M/2016 KAYA LIMITED ASSESSMENT YEAR 2012-13 3 THE SAID PROVISIONS IN THE SUCCEEDING YEARS AND DED UCTED DUE TDS WHENEVER ACTUAL PAYMENTS OF RENT / PROFESSIONAL FEE S WERE CREDITED / PAID BY HIM TO RESPECTIVE PAYEES. MOREOVER, THE RES PECTIVE PAYEES WERE NOT IDENTIFIABLE / NOT AVAILABLE WITH THE ASSESSEE AT THE TIME OF MAKING PROVISIONS AND THEREFORE, THERE WAS NO LIABILITY OF TDS AGAINST THE SAME. FURTHER, THE ASSESSEE HIMSELF TREATING THESE AMOUNT S AS PROVISIONS DISALLOWED THE SAME IN THE COMPUTATION OF INCOME. R ELIANCE WAS PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS FOR VARIOUS CONT ENTIONS. HOWEVER, NOT CONVINCED, LD. CIT(A) REJECTED THE ASSESSEES S TAND BY NOTING THAT THE LIABILITY TO DEDUCTED TDS WAS FASTENED ON THE A SSESSEE THE MOMENT THE PROVISIONS OF EXPENSES WERE CREATED IN THE BOOK S OF ACCOUNTS. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR ASSESSEE [AR], RAISING SIMIL AR PLEAS AND WHILE DRAWING OUR ATTENTION TO THE COMPUTATION OF INCOME PLACED IN THE PAPER- BOOK , CONTENDED THAT THESE WERE A MERE PROVISIONS WHICH WERE SUBSEQUENTLY REVERSED BY THE ASSESSEE. THE ASSESSEE DISALLOWED THE SAME IN THE COMPUTATION OF INCOME U/S 40(A)(IA) AS THE LIABILITY IN RESPECT THEREOF HAD NOT CRYSTALLIZED AND THEREFORE, THE QUE STION OF TDS DID NOT ARISE AT ALL AND THE LOWER AUTHORITIES HAVE ERRED I N TREATING THE ASSESSEE AS ASSESSEE-IN-DEFAULT . RELIANCE HAS BEEN PLACED ON FOLLOWING JUDICIAL PRONOUNCEMENT FOR VARIOUS CONTENTIONS:- (I) DIT VS ERICSSON COMMUNICATIONS LTD [DELHI HIGH COURT ITA 106/2002 ORDER DATED 04/09/2015] (II) KARNATAKA POWER TRANSMISSION CORPORATION LTD. VS. DCIT [KARNATAKA HIGH COURT 67 TAXMANN.COM 259 02/02/2016] (III) ALLIANCE MEDIA & ENTERTAINMENT LTD. [ITAT MUM BAI 79 TAXMANN.COM 114 08/02/2017] (IV) IDBI VS ITO [ITAT MUMBAI 107 ITD 0045 31/07/20 06] ITA NO.4271/M/2016 KAYA LIMITED ASSESSMENT YEAR 2012-13 4 (IV) IBM INDIA PRIVATE LIMITED VS ITO TDS [ITAT BAN GALORE ITA NO. 749 TO 753/BANG/2012 ORDER DATED 14/05/2015] 4. PER CONTRA LD. DR PLACED RELIANCE ON THE FINDINGS OF LD.CIT(A) AND ASSERTED THAT THE IMPUGNED EXPENSES WERE NOT MERE P ROVISIONS RATHER THE ASSESSEE FAILED TO DEDUCT TDS AGAINST THE SAME AND RIGHTLY BEEN TREATED AS ASSESSEE-IN-DEFAULT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD INCLUDING THE CITED CASE LAWS. F IRST OF ALL, WE FIND THAT ASSESSEE IN HIS COMPUTATION OF INCOME HAS SUO-MOTO MADE THE DISALLOWANCE OF SAID EXPENDITURE U/S 40(A)(IA). FUR THER, THE NATURE OF EXPENSES IS RENT & PROFESSIONAL EXPENSES . THEREFORE, SO FAR AS THE ARGUMENT THAT THESE WERE MERE PROVISIONS IS DIFFICU LT TO ACCEPT SINCE THE ASSESSEE IS MAKING SUO-MOTO DISALLOWANCE AGAINST THE SAME U/S 40(A)(IA) WHICH IS RELATED WITH ADDITION / DISALLOW ANCE CONSEQUENT TO FAILURE OF DEDUCTION OF TAX AT SOURCE BY THE ASSESS EE. FURTHER, THESE EXPENSES ARE RELATING TO RENT WHICH IS PAYABLE AGAINST SPECIFIC PROPERTY TO A SPECIFIC PAYEE. SIMILARLY PROFESSIONAL EXPENSES ARE PAYABLE FOR PARTICULAR SERVICES TO A PARTICULAR PAYEE. SO, THE ARGUMENT THAT THE PAYEES WERE NOT IDENTIFIABLE IS ALSO DIFFICULT TO A CCEPT. PER QUERY FROM THE BENCH DURING CLARIFICATION, LD. AR COULD NOT GIVE S ATISFACTORY REPLY TO THE SAME AND MERELY STATED THAT THE SAME WERE PROVISION S FOR WHICH DISALLOWANCE U/S 40(A)(IA) HAS BEEN MADE BY THE PAY EE AND THE PAYEES WERE NOT IDENTIFIABLE. 6. HOWEVER, THE LD. AR, DURING PROCEEDINGS BEFORE U S, STATED THAT THE ASSESSEE REVERSED THE PROVISIONS IN SUBSEQUENT YEAR S AND DEDUCTED TDS FROM ACTUAL PAYMENT AS PER LAW AND DEPOSITED TH E SAME. IF THIS IS ITA NO.4271/M/2016 KAYA LIMITED ASSESSMENT YEAR 2012-13 5 SO, THE ASSESSEE COULD NOT BE REQUIRED TO DEPOSIT T HE SAME AGAIN BY RAISING THIS DEMAND. THEREFORE, WE DIRECT LD. AO TO VERIFY THE FACT THAT WHETHER THE ASSESSEE, IN SUBSEQUENT YEARS, HAS REVE RSED THE SAID AMOUNTS AND DEDUCTED THE DUE TDS AT THE TIME OF ACT UAL PAYMENT AND DEPOSITED THE SAME TO THE CREDIT OF CENTRAL GOVERNM ENT. IF SO, THE SAID DEMAND OF RS.3,12,776/- RAISED U/S 201(1) SHALL STA ND DELETED. 7. HOWEVER, SO FAR INTEREST U/S 201(IA) IS CONCERNE D, WE FIND THAT THE ASSESSEE IS LIABLE TO PAY THE SAME SINCE WE HAVE AL READY NOTED THAT THE EXPENSES AGAINST WHICH TDS WAS DEDUCTIBLE WAS NOT M ERE PROVISIONS AND THE PAYEES WERE IDENTIFIABLE AND THE ASSESSEE H IMSELF DISALLOWED THE SAME U/S 40(A)(IA). THEREFORE, THE INTEREST DEM AND RAISED U/S 201(IA) STAND CONFIRMED AGAINST WHICH THE INTEREST, IF ANY, ALREADY PAID BY THE ASSESSEE SHALL BE ADJUSTED. OUR VIEW ALSO STANDS FO RTIFIED BY THE ABOVE CITED CASE LAWS. 8. THE LD. AO IS DIRECTED TO VERIFY THE ABOVE FACTS IN TERMS OF OUR ABOVE DIRECTIONS AND RE-COMPUTE THE TAX DEMAND U/S 201(1)/201(IA). 9. THE ASSESSEES APPEAL STANDS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2017. SD/- SD/- (D.T. GARASIA) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 17.05.2017 SR.PS:- THIRUMALESH ITA NO.4271/M/2016 KAYA LIMITED ASSESSMENT YEAR 2012-13 6 / 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 FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI