RAMESH BHAGWANDAS MAKHIJA, MUMBAI V. ITO 19(2)(2), MUMBAI

ITA 4299/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71994 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 21-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAJ M SHROFF
• Section: 43B; 201(1); 148; 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND SANJAY ARORA (AM) . . , , _ ./I.T.A. NO.4299/MUM/2012 ( / ASSESSMENT YEAR : 2007-08) RAMESH BHAGWANDAS MAKHIJA, 3, GEETANJALI, 73, V.P.ROAD, SANTACRUZ (W), MUMBAI-400056 / VS. INCOME TAX OFFICER 19(2)(2), MITTAL COURT, MUMBAI ( ( / APPELLANT) .. ( ) ( / RESPONDENT) _ ./ ./PAN/GIR NO. : AAGPM7588P ( /: APPELLANT BY SHRI RAJ M SHROFF ) ( , / RESPONDENT BY SHRI SANJEEV JAIN , / / DATE OF HEARING : 13.11.2013 , / /DATE OF PRONOUNCEMENT : 27.12.2013 / O R D E R PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2007-08 AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (A) DATED 26.3.2012. 2. ONLY EFFECTIVE GROUND OF APPEAL TAKEN IN THIS AP PEAL IS AS TO WHETHER LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING O FFICER TO DISALLOW THE CLAIM OF INTEREST EXPENDITURE OF RS.2,48,500/- ON THE GROUND THAT AS SESSEE FAILED TO DEDUCT TDS BUT THE RECIPIENTS HAS SHOWN ITS INCOME IN INDIVIDUAL RETU RNS THE RECEIPT OF INTEREST AND PAID TAXES THEREON. 3. RELEVANT FACTS ARE THAT THE ASSESSEE IS A PROPRI ETOR OF M/S KARISHMA SALES CORPORATION ENGAGED IN THE BUSINESS OF DEALING IN COATED FABRICS. THE ASSESSEE CLAIMED A SUM OF RS.2,48,500/- AS INTEREST EXPENDI TURE. DURING THE COURSE OF I.T.A. NO.4299/MUM/2012 2 ASSESSMENT PROCEEDINGS INITIATED U/S 148 OF THE A CT, AO ASKED THE ASSESSEE AS TO WHY THE INTEREST CLAIM OF RS.2,48,500/- SHOULD NOT BE DISALLOWED, SINCE ASSESSEE DID NOT DEDUCT TDS AND THEREFORE AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE MADE APPLICABLE TO IT. AO HAS STATED THAT THE ASS ESSEE SUBMITTED THAT HE HAS NO OBJECTION TO THE SAME. SINCE ASSESSEE AGREED TO THE SAID ADDITION, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO DISALLOWED THE SUM O F RS.2,48,500/- OF THE INTEREST EXPENDITURE CLAIMED BY ASSESSEE AS PER THE PROVISIO NS OF SECTION 40(A)(IA) OF THE ACT. 4. HOWEVER, THE ASSESSEE DISPUTED THE SAID ADDITION BEFORE LD. CIT(A) AND CONTENDED THAT THE RECIPIENTS HAVE SHOWN THE SAME I NTEREST INCOME IN THEIR INDIVIDUAL RETURN OF INCOME AND PAID TAXES THEREON BY FILING RETURNS ON 31.7.2007. THEREFORE, THE SAID AMOUNT IS DOUBLE TAXED. THE ASSESSEE CONTEN DED THAT TDS IS APPLICABLE IN ONLY ONE CASE AND IN OTHER TWO CASES OF FAMILY MEMBERS ARE NOT TAXABLE. THE ASSESSEE ALSO ENCLOSED COPY OF RETURN AS WELL AS COPY OF ACKNOWLE DGEMENT THERETO BEFORE THE LD. CIT(A). HOWEVER, THE LD. CIT(A) AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE WHICH ARE STATED IN PARA 2 OF THE IMPUGNED ORDER HA S CONFIRMED THE ACTION OF AO VIDE PARA 3 OF HIS ORDER WHICH READS AS UNDER : 3. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER, THE SUBMISSION OF THE APPELLANT AND THE FACTS OF THE CASE. THE AO HA S MADE THE ADDITION ON THE GROUND THAT THE APPELLANT HAD NOT DEDUCTED TAX AT S OURCE ON THE INTEREST PAYMENT OF RS.2,48,500/-. THE AO HAS ALSO MENTION ED IN THE ASSESSMENT ORDER THAT THE LD. AR OF THE APPELLANT HAD AGREED FOR THI S ADDITION DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, STILL THE APPELLAN T HAS FILED THE APPEAL AND HAS PLEADED BEFORE ME THAT SINCE, THE RECIPIENTS OF THE INTEREST AMOUNT HAVE PAID TAXES ON THE INTEREST INCOME, THERE IS NO NEED FOR MAKING ANY TDS AS THIS WILL TANTAMOUNT TO DOUBLE TAXATION. IN MY VIEW, TH IS INTERPRETATION OF LAW IS NOT CORRECT AND THE APPELLANT SHOULD HAVE DEDUCTED TAX AT SOURCE FOR THE ALLOWANCE OF INTEREST PAYMENT AS STIPULATED IN SECTION 40(A)( IA) OF THE IT ACT. IF THE CONTENTION OF THE APPELLANT IS ACCEPTED THEN THE SE CTION 40(A)(IA) WILL BECOME REDUNDANT. THEREFORE, IN MY VIEW THE ADDITION MADE BY AO OF RS.2,48,500/- IS IN ORDER AND THE SAME IS ACCORDINGLY, CONFIRMED. T HE GROUND OF APPEAL IS DISMISSED. HENCE, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING, LD AR REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE LD. CIT(A). HE FURTHER SUBMITTED THAT BY FINANCE ACT, 2012 THE PROVISO TO SECTION 40(A)(IA) OF THE ACT HAS BEEN INSERTED WITH EFFECT FROM 1.4.2013 WHICH PROVIDES THAT IF AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM B UT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB-SECTION ( 1) OF SECTION 201, THEN, FOR THE PURPOSE OF SECTION 40(A)(IA), IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX I.T.A. NO.4299/MUM/2012 3 ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO' I.E .FIRST PROVIS O TO SUB-SECTION (1) OF SECTION 201 OF THE ACT. WE CONSIDER IT TO STATE THE FIRST PROVISO O F SECTION 201(1) OF THE ACT WHICH HAS BEEN INSERTED BY FINANCE ACT, 2012 WITH EFFECT FRO M 1.7.2012 WHICH READS AS UNDER : 201. [(1) . ( A ) .. ( B ) . [PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCOR DANCE WITH THE PROVISIONS OF THIS CHAPTER ON THE SUM PAID TO A RESIDENT OR ON TH E SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT ( I ) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 ; ( II ) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING IN COME IN SUCH RETURN OF INCOME; AND ( III ) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HI M IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO T HIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED] 6. LD. AR SUBMITTED THAT SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY FINANCE ACT, 2012 WITH EFFECT FROM 1.4.2013 IS REME DIAL IN NATURE AND THE SAME SHOULD BE CONSIDERED RETROSPECTIVELY. HE SUBMITTED THAT T HE RECIPIENTS OF THE INTEREST HAD PAID TAXES ON THE AMOUNT OF INTEREST RECEIVED FROM THE A SSESSEE IN THE RETURN FILED, IT SHOULD BE DEEMED THAT THE ASSESSEE WAS NOT IN DEFAU LT IN DEDUCTING TDS AS PER THE PROVISIONS OF CHAPTER XVII-B OF THE ACT AND NO DISA LLOWANCE SHOULD BE MADE. AR ALSO FILED AN EXTRACT FROM TAXMANNS MASTERGUIDE-2012 , PAGE 1.216. IN THIS REGARD, WE MAY STATE THAT THE SAID TAXMANNS MASTERGUIDE-2012 IS ONLY IN THE FORM OF ARTICLE SUGGESTING THAT SECOND PROVISO TO SECTION 40(A)(IA ) OF THE ACT INSERTED BY FINANCE ACT, 2012 SHOULD BE READ RETROSPECTIVELY, THOUGH IT IS P ROVIDED BY FINANCE ACT, 2012 THAT IT IS INSERTED WITH EFFECT FROM 1.4.2013. IN THE SAID EX TRACT SOME OF THE EARLIER DECISIONS HAVE BEEN REFERRED TO IN THE CONTEXT OF AMENDMENT MADE IN SECTION 43B OF THE ACT AND STATED THAT THE SAID AMENDMENT MADE BY FINANCE ACT IS BENEFICIAL IN NATURE AND HENCE SHOULD BE CONSIDERED LIBERALLY AND RETROSPECTIVELY. THUS, LD. AR SUBMITTED THAT DISALLOWANCE MADE BY AO SHOULD BE DELETED. 7. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER OF LD. CIT(A) AND ALSO RELIED ON THE DECISION OF ITAT, MUMBAI IN THE CASE OF ADDL. CIT V/S DICGC LTD. (2012) 14 ITR(TRIB) 194 (MUMBAI), WHEREIN IT HAS BEEN HELD TH AT ONCE TAX HAS NOT BEEN I.T.A. NO.4299/MUM/2012 4 DEDUCTED AT SOURCE, EVEN IF SUCH TAX HAS BEEN PAI D BY THE DEDUCTEE, DISALLOWANCE U/S 40(A)(IA) CAN STILL BE MADE. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTH ORITIES BELOW, SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES AS ALSO AMENDMENT MA DE BY FINANCE ACT, 2012 TO SECTION 201(1) AS WELL AS SECTION 40(A)(IA) OF THE ACT. 8.1 ON PERUSAL OF THE AMENDMENT MADE BY FINANCE ACT, 2012 BY INSERTING THE PROVISO TO SECTION 40(A)(IA) OF THE ACT W.E.F.1.7 .2013, IT IS STATED THAT IF THE PAYER FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B OF THE ACT ON SUM PAID TO A RESIDEN T OR ON THE SUM CREDITED TO THE ACCOUNT OF RESIDENT, PAYER SHALL NOT BE DEEMED T O BE AN ASSESSEE IN DEFAULT IF IN RESPECT OF ON SUCH AMOUNT TAX HAS BEEN PAID BY THE PAYEE RESIDENT IN THE RETURN FILED BY HIM. SINCE 40(A)(IA) OF THE ACT PROVIDES FOR DISALLOWANCE INTERALIA FOR NON- DEDUCTION OF TDS ON THE INTEREST SO PAID TO A RESID ENT, EVEN IF IN A CASE WHEN THE PAYEE HAS PAID TAXES ON THE SUM SO RECEIVED OR CREDITED T O HIS ACCOUNT BY THE PAYER WITHOUT DEDUCTING TDS, A SECOND PROVISO HAS BEEN INSERTED TO SECTION 40(A)(IA) OF THE ACT W.E.F. 1.4.2013 BY FINANCE ACT, 2012 TO BRING THE PROVIS ION OF SECTION 40(A)(IA) AT PAR WITH SECTION 201 (1) OF THE ACT BECAUSE PAYER WILL NOT BE TREATED AN ASSESSEE IN DEFAULT BUT STILL PRIOR TO INSERTION OF SECOND PROVISO TO SECTI ON 40(A)(IA) OF THE ACT, THE DISALLOWANCE IN HIS HANDS WILL BE MADE IF TDS IS NOT DEDUCTED ON THE AMOUNT PAID INTERALIA INTEREST AND IF DEDUCTED BUT HAS NOT PAID THE SAME BEFORE TH E DUE DATE OF FILING OF THE RETURN. THEREFORE, TO THIS EXTENT, WE AGREE WITH LD. AR TH AT DEFECT OR ANOMALY HAS BEEN REMOVED BY FINANCE ACT, 2012 BY INSERTING SECOND P ROVISO TO SECTION 40(A)(IA) OF THE ACT TO BRING IT AT PAR WITH THE AMENDMENT MADE BY THE FINANCE ACT, 2012 TO SECTION 201(1) OF THE ACT WHICH IS APPLICABLE FROM 1.7.2012 . HOWEVER, WE ARE OF THE VIEW THAT THE SAID PROVISO TO SECTION 40(A)(IA) EVEN IF IT IS CONSIDERED TO BE BENEFICIAL PROVISO AND IS CONSIDERED TO CURE A DEFECT OR REMOVE ANOMALY, IT COULD BE READ WITH EFFECT FROM 1.7.2012 ONLY I.E APPLICABLE FROM ASSESSMENT YEAR 2012-13 AND ACCORDINGLY THE BENEFIT OF THE SAME COULD NOT BE GIVEN TO THE ASSES SEE AS THE ASSESSMENT YEAR INVOLVED IS ASSESSMENT YEAR 2007-08. THERE IS NO DISPUTE TO THE FACT THE ASSESSEE FAILED TO DEDUCT TDS IN RESPECT OF INTEREST PAID AND ALSO ADMITTED BEFORE THE AO FOR MAKING THE DISALLOWANCE AS PER THE PROVISIONS OF SECT ION 40(A)(IA) OF THE ACT AT THE TIME OF ASSESSMENT PROCEEDINGS. WE ARE OF THE CONSIDE RED VIEW THAT THE SAID AMENDMENT MADE BY FINANCE ACT, 2012 TO SECTION 40(A)(IA) OF THE ACT CANNOT BENEFIT THE ASSESSEE. HENCE, THE LD. CIT(A) HAS RIGHTLY, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, MADE DISALLOWANCE OF THE INTEREST PAID BY ASSESSEE OF I.T.A. NO.4299/MUM/2012 5 RS.2,48,500/- U/S 40(A)(IA) OF THE ACT. ACCORDINGL Y, WE CONFIRM THE ORDER OF LD. CIT(A) BY REJECTING THE GROUNDS OF APPEAL TAKEN BY ASSESSE E. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON T HE 27TH DECEMBER, 2013 , 2 3 27TH DECEMBER, 2013 , SD SD ( / SANJAY ARORA) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: /12/2013 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ( / THE APPELLANT 2. ) ( / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- CONCERNED 4. ; / CIT CONCERNED 5. < )> , / > , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER TRUE COPY (ASSTT. REGISTRAR) / > , /ITAT, MUMBAI