GPT Marecom (P) Ltd., Kolkata V. PCIT-2 , Kolkata

ITA 449/KOL/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7650 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 20-07-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Retrospective amendment; Assessment record; TDS; Set aside
• Section: 263; 143(3); 40(a)(ia)

Judgement Text

1 ITA No.449/Kol/2020 M/s. GPT Marecom Pvt. Ltd. AY 2015-16 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA [Before Shri A. T. Varkey, JM & Shri Manish Borad, AM ] I.T.A. No. 449/Kol/2020 Assessment Year: 2015-16 M/s. GPT Marecom Pvt. Ltd. (PAN: AAKCS4738E) Vs. Pr. Commissioner of Income-tax-2, Kolkata Appellant Respondent Date of Hearing 24.02.2022 Date of Pronouncement 28.02.2022 For the Appellant Shri A. K. Tibrewal, FCA & Shri Amit Agrawal, Advocate For the Respondent Smt. Sucheta Chattapadhyay Ray, CIT, DR ORDER Per Shri A. T. Varkey, JM: This is an appeal preferred by the assessee against the order of Ld. Pr. CIT-2, Kolkata dated 13.01.2020 for AY 2015-16 passed u/s. 263 of the Income-tax Act (hereinafter referred to as the “Act”). 2. This appeal of assessee is time barred by 66 days. After hearing both the parties we condone the delay and admit the appeal for hearing. 3. The main grievance of the assessee is against the action of the Ld. Pr. CIT to have invoked the revisional jurisdiction u/s. 263 of the Act without fulfilling the essential condition precedent as prescribed u/s. 263 of the Act. 4. In the impugned order the Ld. Pr. CIT has found fault with the AO passing the assessment order u/s. 143(3) of the Act dated 29.12.2017 which according to him is erroneous in so far as prejudicial to the interest of the revenue for certain fault he noticed in the assessment order. The fault on which the Ld. Pr. CIT has exercised his revisional 2 ITA No.449/Kol/2020 M/s. GPT Marecom Pvt. Ltd. AY 2015-16 jurisdiction is that even though the assessee had debited interest expenses of Rs.2,03,98,186/- (paid to M/s. GPT Infraproject Ltd.) which is reflected in the P&L Account, however, assessee failed to deduct any TDS on it, it should have been deducted as per law. Therefore, according to the Ld. Pr. CIT as per provision of section 40(a)(ia) of the Act the said amount of Rs.2,03,98,186/- (interest expenses claimed by the assessee as deduction) ought to have been disallowed by the AO and should have been added back to its total income. According to the Ld. Pr. CIT, since the AO has completed the assessment without making any disallowance of the interest expenditure the order of the AO is erroneous insofar as prejudicial to the interest of revenue and so he set aside the AO’s order and directed him to verify the aforesaid fact and re-assess the income of the assessee. Aggrieved by the impugned action of Ld. Pr. CIT, the assessee is before us, raising the legal issue of jurisdiction of Ld. Pr. CIT. 5. At the outset, the Ld. AR of the assessee Shri A. K. Tibrewal submitted that the payee i.e. M/s. GPT Infraproject Ltd. to whom the assessee had made the payment of interest has already shown the same in its income and for proving that he drew our attention to page 7 of paper book wherein the details of interest income on loan as on 31.03.2015 of M/s. GPT Infraproject Ltd. is found placed. From a perusal of the same, it is seen as item no. 6 that the assessee company (M/s. GPT Marecom Pvt. Ltd.) has made payment of interest to the tune of Rs.2,03,98,186/- to M/s. GPT Infraprojects Ltd. (recipient of interest income/payee). It is also noted from perusal of page 7 of paper book that there are six other persons also who has paid interest which details are reflected in the said chart. It is noted that M/s. GPT Infraproject Ltd. (payee) has received a total amount of Rs.3,71,62,185/- as interest receipt/income which includes the interest payment made by the assessee to the tune of Rs.2,03,98,186/-. According to the Ld. AR, a perusal of the note to financial statement of payee for the year ending on 31.03.2015 (Schedule 19.2) would show that the interest income as Rs.372.20 lacs which means that the amount of interest paid by the assessee has been shown by the payee/recipient in its total income of interest. According to the Ld. AR, since the payee/recipient has already shown in its total income the interest receipt from the 3 ITA No.449/Kol/2020 M/s. GPT Marecom Pvt. Ltd. AY 2015-16 assessee to the tune of Rs.2,03,98,186/- then no disallowance should be resorted to by applying section 40(a)(ia) of the Act and for that proposition he brought to our notice the amendment brought in with retrospective effect by insertion of second proviso to section 40(a)(ia) of the Act. According to Ld. AR, as a result of the amendment as long as the recipient of amount shows that it is its income which includes the amount given by assessee/payor (without deducting TDS) and has duly offered the same to tax in its Return of Income, then disallowance u/s. 40(a)(ia) of the Act should not be resorted to and for that proposition he relied on the decision of this Coordinate bench of this Tribunal (Santosh Jain Vs. CIT, Raipur) in ITA No. 87/RPR/2014 wherein a similar order of the Ld. Pr. CIT u/s. 263 of the Act was challenged before the Tribunal on similar ground; and the Tribunal was pleased to give relief to the assessee by quashing the order of Ld. Pr. CIT and for easy reference the order of the Tribunal is reproduced as under: “1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 18th March, 2014, passed by the learned CIT under section 263 read with section 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter), for the assessment year 2009-10, on the following grounds :- “1. That the notice u/s 263 is illegal, invalid and without jurisdiction. 2. The notice issued u/s 263 of the I.T. Act, 1961 is without proper examination/consideration/perusal of the assessee’s assessment record by the ld. CIT and therefore, there was no application of mind as well as exercise of quasi judicial discretion and judgment by CIT and consequently the order u/s 263(1) dated 18.3.2014 is bad in law and void ab initio.. 3. That the ld. CIT erred in setting aside the assessment order passed u/s 143(3) by ACIT-2(1), Raipur dated 12.12.2011 by resorting to section 263 as the order passed by the AO was neither erroneous nor prejudicial to the interest of the revenue.”. 2. To adjudicate on this appeal only a few material facts need to be taken note of. The short reason for which the learned Commissioner has subjected the assessment order to revision proceedings is that the Assessing Officer did not examine disallowance under section 40(a)(ia) of Rs.70,68,580/- on account of finance charges paid to various banks and NBFCs. During the course of proceedings before the learned Commissioner, it was inter alia contended by the assessee that the interest/finance charges so paid, in respect of which disallowance under section 40(a)(ia) is sought to be invoked, have already been offered to taxation by the recipients. It was also submitted, as evident from the extract of submission reproduced at page no.15 of the paper book, that insertion of second proviso to section 40(a)(ia) should be given retrospective effect and that as a result, as long as the recipient of income embedded in payment has offered the same to tax, disallowance under section 40(a)(ia) cannot be invoked. Learned Commissioner nevertheless disregarded these submissions and proceeded to exercise his powers under section 263 of the Act by directing the Assessing Officer to “make assessment regarding disallowance of finance charges under 4 ITA No.449/Kol/2020 M/s. GPT Marecom Pvt. Ltd. AY 2015-16 section 40(a)(ia) of the IT Act, 1961 after giving proper opportunity of being heard to the assessee”. The assessee is aggrieved and is in appeal before me. 3. I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position. I find that the plea of the ld. counsel with regard to retrospectivity of second proviso to section 40(a)(ia) of the Act was indeed well taken. Hon'ble Delhi High Court in the case of CI`T vs. Ansal Land Mark Township (P) Limited (2015) 377 ITR 635 has approved a decision of the co-ordinate bench of this Tribunal in the case of Rajeev Kumar Agarwal vs. ACIT, 149 ITD 363 holding so. Their Lordships have held that “reasoning of the Agra Bench of ITAT (in the above case) as regards the rationale behind the insertion of the second proviso to section 40(a)ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merit acceptance”. In this view of the matter and having regard to the uncontroverted contention of the assessee that the receipts of these interest and finance charges in the hands of the recipients have been duly offered to tax, I am of the considered view that the learned Commissioner was clearly in error in exercising his powers under section 263 of the Act on the facts of this case. I therefore, quash the impugned revision order under section 263. Assessee gets the relief accordingly.” 6. In the light of the aforesaid order of the Tribunal in similar case and the facts noted supra, since the recipient of amount (i.e. interest income of Rs.2,03,98,186/-) has been shown as income by M/s. GPT Infraproject Ltd. [ payee] in its ROI, no disallowance of interest expenses in the hands of assessee invoking section 40(a)(ia) of the Act was warranted. So, the action of AO not to disallow the interest expenses claimed by the assessee cannot be faulted. Therefore, we are inclined to quash the impugned order of the Ld. Pr. CIT since the recipient has shown in its return the receipt from assessee as income and offered for tax the interest payment given by assessee as noted supra. Therefore, the appeal of assessee is allowed. 7 . In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 28th February, 2022. Sd/- Sd/ (Manish Borad) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 28th February, 2022 JD(Sr.P.S.) Copy of the order forwarded to: 5 ITA No.449/Kol/2020 M/s. GPT Marecom Pvt. Ltd. AY 2015-16 1. Appellant –M/s. GPT Marecom Pvt. Ltd., Security House, 23-B, N. S. road, 4 th floor, Kolkata-700 001. 2 Respondent – Pr. CIT-2, Kolkata 3. 4. 5. ACIT, Circle-4(1), Kolkata. DR, ITAT, Kolkata. (sent through e-mal) /True Copy, By order, Assistant Registrar