M/s Kantipudi Steels Pvt. Ltd., Rajahmundry V. THE Addl. CIT., RAJAHMUNDRY RANGE, Rajahmundry

ITA 482/VIZ/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0124 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 17-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P SRINIVASA MURTHY
• Section: 194C

Judgement Text

ITA NOS.411 & 482/2012 KANTIPUDI STEELS PVT. LTD., RAJAHMUNDRY 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.411/VIZAG/2012 ( / ASSESSMENT YEAR : 2008-09 ) ACIT CIRCLE - 1 RAJAHMUNDRY VS. KANTIPUDI STEELS (P) LTD. RAJAHMUNDRY [ PAN: AACCK 5550G] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) ./ I.T.A.NO.482/VIZAG/2012 ( / ASSESSMENT YEAR : 2008-09 ) KANTIPUDI STEELS (P) LTD. RAJAHMUNDRY VS. ACIT CIRCLE - 1 RAJAHMUNDRY ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI P. SRINIVASA MURTHY, DR '(& ) / RESPONDENT BY : SHRI G.V.N. HARI, AR ) - / DATE OF HEARING : 26.11.2015 ) - / DATE OF PRONOUNCEMENT : 18.12.2015 ITA NOS.411 & 482/2012 KANTIPUDI STEELS PVT. LTD., RAJAHMUNDRY 2 / O R D E R PER BENCH: THESE CROSS APPEALS FILED BY THE REVENUE AS WELL A S ASSESSE, ARE DIRECTED AGAINST THE ORDER OF CIT (A), VISAKHAPATNA M DATED 27.8.2012 FOR THE ASSESSMENT YEAR 2008-09. SINCE, THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE. ITA NO.411/VIZAG/2012 : 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESS EE IS A COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF WHOLESALE AND R ETAIL TRADE IN STEEL, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 30.3.2009 DECLARING A TOTAL INCOME OF RS.96,26,150/-. THE RE TURN OF INCOME WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT (HEREINA FTER CALLED AS THE ACT) ON 19.11.2009. SUBSEQUENTLY, THE CASE WAS SE LECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY, NOTICE U/S 143(2) & 142 (1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICE, THE ASSESSEES AUTH ORIZED REPRESENTATIVE APPEARED FROM TIME TO TIME AND FURNISHED THE BOOKS OF ACCOUNTS AND OTHER DETAILS CALLED FOR BY THE ASSESSING OFFICER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEE HAS PAID CARRIAGE INWARD AND FREIGHT CHARGES OF RS.13,10,521 /- WITHOUT DEDUCTING ITA NOS.411 & 482/2012 KANTIPUDI STEELS PVT. LTD., RAJAHMUNDRY 3 TAX AT SOURCE U/S 194C OF THE ACT. THEREFORE, MADE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE AS SESSEE SUBMITTED THAT THE EXPENDITURE INCURRED UNDER THE HEAD CARRIA GE INWARD AND FREIGHT CHARGES HAS BEEN PAID DURING THE FINANCIAL YEAR AND NOTHING HAS BEEN PAYABLE AT THE END OF THE FINANCIAL YEAR. THE REFORE, DISALLOWANCE U/S 40(A)(IA) OF THE ACT, CANNOT BE APPLICABLE TO T HE AMOUNTS ALREADY PAID WITHIN THE FINANCIAL YEAR. THE ASSESSE FURTHE R SUBMITTED THAT THE ITAT, VISAKHAPATNAM SPECIAL BENCH IN THE CASE OF M/ S. MERILYN SHIPPING & TRANSPORTS VS. ACIT 136 ITD 23, HELD THAT DISALLO WANCE UNDER SEC. 40A(IA) IS NOT APPLICABLE FOR THE AMOUNT ALREADY PA ID WITHIN THE FINANCIAL YEAR AND WHICH IS APPLICABLE FOR THE AMOUNTS PAYABL E AT THE END OF THE FINANCIAL YEAR. THEREFORE, CONSIDERING THE RATIO LA ID DOWN BY THE HONBLE ITAT, REQUESTED TO DELETE THE ADDITIONS MADE BY THE AO. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS FURNISHED BY THE ASSESSEE HELD THAT THE ASSESSEES CASE IS SQUARELY COVERED BY THE SPEC IAL BENCH DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA). HOWEVER, THE CIT(A) HELD THAT THE AO HAS NOT EXAMIN ED, WHETHER THE AMOUNTS ARE PAID OR PAYABLE, THEREFORE, REMITTED BA CK THE MATTER TO THE ITA NOS.411 & 482/2012 KANTIPUDI STEELS PVT. LTD., RAJAHMUNDRY 4 FILE OF THE AO FOR THE LIMITED PURPOSE OF VERIFYING THE AMOUNT PAID AND PAYABLE AND DIRECTED THE AO TO RESTRICT THE ADDITIO N ONLY TO THE AMOUNTS, WHICH REMAINED PAYABLE AT THE END OF THE FINANCIAL YEAR. AGGRIEVED BY THE CIT(A)S ORDER, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DR SUBMITTED THAT THE CIT(A), WAS NOT RI GHT IN DELETING THE ADDITIONS MADE BY THE AO U/S 40(A)(IA) OF THE A CT, AS THE DEPARTMENT DID NOT ACCEPT THE SPECIAL BENCH DECISIO N OF ITAT, IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA). THE LD. D.R. FURTHER SUBMITTED THAT THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE HONBLE A.P. HIGH COURT AND HONBLE A.P. HIGH COURT STAYED THE OPERATION OF THE SPECIAL BENCH DECISION. THEREFORE , IN VIEW OF THE FACT THAT THE ISSUE HAS NOT ATTAINED FINALITY, THE ORDER OF THE AO SHOULD BE UPHELD. THE LD. D.R. FURTHER SUBMITTED THAT THE HO NBLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF M/S. RANA POLYCO T LTD. VS. CIT IN ITA NO.171 OF 2014 HAS HELD THAT SECTION 40(A)(IA) OF T HE ACT IS APPLICABLE EVEN THE AMOUNT HAS BEEN ALREADY PAID DURING THE FI NANCIAL YEAR. THEREFORE, REQUESTED TO UPHOLD THE ASSESSMENT ORDER . ON THE OTHER HAND, THE LD. A.R. OF THE ASSESSEE STRONGLY SUPPORT ED THE ORDER OF THE CIT(A). ITA NOS.411 & 482/2012 KANTIPUDI STEELS PVT. LTD., RAJAHMUNDRY 5 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. DURING THE COURSE OF HEARING, THE AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH, IN THE CA SE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA). WE HAVE GONE THROUG H THE SPECIAL BENCH DECISION IN THE LIGHT OF THE FACTS OF THE PRE SENT CASE AND COME TO THE CONCLUSION THAT THE SPECIAL BENCH OF ITAT, VISA KHAPATNAM IN THE ABOVE CASE HELD THE ISSUE IN FAVOUR OF THE ASSESSEE . THE RELEVANT PORTION IS REPRODUCED AS UNDER: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2005-06. A REFERENCE U/S 255(3) OF THE INCOME-TAX ACT HAS BEEN MADE TO THE HONBLE PRESIDENT TO CONSTITUTE A SPECIAL BENCH TO ADJUDICATE AN ISSUE W HETHER SECTION 40A(IA) OF THE INCOME TAX ACT CAN BE INVOKED ONLY TO DISALL OW EXPENDITURE OF THE NATURE REFERRED TO THEREIN WHICH IS SHOWN AS PAYABL E AS ON THE DATE OF BALANCE SHEET OR IT CAN BE INVOKED ALSO TO DISALLOW SUCH EXPENDITURE WHICH BECOMES PAYABLE AT ANY TIME DURING THE RELEVANT PRE VIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR? CONSEQUENTL Y, SPECIAL BENCH WAS CONSTITUTED AND THE AFORESAID QUESTION WAS ANSWERED IN FAVOUR OF THE ASSESSEE. ACCORDING TO THE MAJORITY VIEW, IT WAS HE LD THAT SECTION 40A(IA) OF THE ACT IS APPLICABLE ONLY TO EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED TO DISALL OW THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE YEAR WITHOUT DEDU CTING TAX AT SOURCE. 2. ISSUE INVOLVED IN THIS APPEAL IS WITH REGARD TO THE DISALLOWANCE OF PAYMENTS OF RS. 38,75,000/- TOWARDS BROKERAGE AND RS.2,43,253/- TOWARDS COMMISSION ON NON-DEDUCTION OF TDS BY INVOK ING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE ASSESSEES CASE WAS THAT THE ENTIRE BROKERAGE IN COMMISSION PAYMENTS WERE ACTUALLY PAID DURING THE FINANCIAL YEAR EXCEPTING AN AMOUNT OF RS. 1,78,025/- WHICH REMAINED PAYABLE AS ON 31.3.2005. THE CLAIM OF THE ASSESSEE WAS REJECTED B Y THE REVENUE RESULTING IN AN APPEAL BEFORE US BY THE ASSESSEE. F OLLOWING THE MAJORITY VIEW OF THE SPECIAL BENCH, THE PROVISIONS OF SECTIO N 40A(IA) CANNOT BE INVOKED WITH RESPECT TO THE AFORESAID PAYMENTS WHIC H WERE ACTUALLY PAID DURING THE FINANCIAL YEAR BUT IT CAN BE INVOKED WIT H RESPECT TO ITA NOS.411 & 482/2012 KANTIPUDI STEELS PVT. LTD., RAJAHMUNDRY 6 RS.1,78,025/- WHICH REMAINED PAYABLE AS ON 31.3.200 5. THEREFORE, THE DISALLOWANCE IS REDUCED TO RS.1,78,025/- ONLY. ACCO RDINGLY, THE ORDER OF THE CIT(A) IS MODIFIED. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 5. THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF DCI T VS. VEERA ASSOCIATES (2015) 55 TAXMAN.COM UNDER SIMILAR CIRCU MSTANCES HELD THE ISSUE IN FAVOUR OF THE ASSESSEE AS UNDER: IN VIEW OF THE AFORESAID, CONTENTION OF THE DEPARTM ENT THAT THE RATIO LAID DOWN BY THE ITAT VISAKHAPATNAM SPECIAL BENCH IN CAS E OF MERILYN SHIPPING & TRANSPORTS (SUPRA) IS NOT APPLICABLE, CA NNOT BE ACCEPTED. SINCE THE DEPARTMENT HAS NOT CONTROVERTED THE FACT THAT THE ENTIRE AMOUNT OF RS.5,98,13,357 WAS PAID BY THE ASSESSEE D URING THE RELEVANT PREVIOUS YEAR AND NOTHING REMAINED PAYABLE ON THE L AST DAY OF THE PREVIOUS YEAR, IN OUR VIEW, AS PER THE RATIO LAID D OWN IN CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), NO DISALLOWANCE UNDE R SECTION 40(A)(IA) CAN BE MADE. ACCORDINGLY, THE CIT(A)S ORDER ON TH IS ISSUE DESERVES TO BE UPHELD. 6. THE LD. D.R. RELIED UPON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF M/S. RANA POLYCOT LTD. V S. CIT ITA NO.171 OF 2014 AND ARGUED THAT HONBLE PUNJAB & HARYANA HIGH COURT HAS HELD THE ISSUE IN FAVOUR OF THE REVENUE AFTER CONSIDERIN G ITAT SPECIAL BENCH DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRA NSPORTS (SUPRA) AND ALSO THE ALLAHABAD HIGH COURT JUDGEMENT IN THE CASE OF CIT VS. M/S. VECTOR SHIPPING SERVICES PVT. LTD. (2013) 262 CTR 5 45. THEREFORE, REQUESTED TO UPHOLD THE ADDITION MADE BY THE AO. WE HAVE GONE THROUGH THE HONBLE P&H HIGH COURT JUDGEMENT RELIED UPON BY THE LD. D.R. IN THE LIGHT OF THE FACTS OF THE PRESENT CASE. THE HONBLE PUNJAB & ITA NOS.411 & 482/2012 KANTIPUDI STEELS PVT. LTD., RAJAHMUNDRY 7 HARYANA HIGH COURT AFTER CONSIDERING THE SPECIAL BE NCH DECISION OF ITAT AND ALSO HONBLE ALLAHABAD HIGH COURT JUDGEMENT IN THE CASE OF M/S. VECTOR SHIPPING (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE DEPARTMENT. WITH DUE RESPECT TO THE HONBLE PUNJAB & HARYANA HIG H COURT, WE PREFER TO FOLLOW THE SPECIAL BENCH DECISION OF INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT, FOR THE REASON THAT THE HONBLE SUPREME COURT HAS DISMISSED THE SL P FILED BY THE DEPARTMENT IN THE CASE OF CIT VS. VECTOR SHIPPING S ERVICES PVT. LTD. (SUPRA). IN VIEW OF THE DISMISSAL OF THE SLP FILED BY THE DEPARTMENT, THE ORDER PASSED BY THE HONBLE ALLAHABAD HIGH COURT HA S BECOME FINAL. THEREFORE, BY FOLLOWING THE JUDGEMENT OF HONBLE HI GH COURT OF ALLAHABAD AND ALSO RESPECTFULLY FOLLOWING THE SPECI AL BENCH DECISION OF ITAT VISAKHAPATNAM, WE ARE OF THE OPINION THAT NO D ISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT FOR THE AMOUNTS ALREA DY PAID DURING THE FINANCIAL YEAR. ACCORDINGLY, WE INCLINED TO UPHELD THE CIT(A) ORDER AND DISMISS THE APPEAL FILED BY THE REVENUE. ITA NO.482 OF 2012: 7. DURING THE COURSE OF HEARING, THE A.R. OF THE AS SESSEE SUBMITTED THAT THE ISSUES RAISED IN THIS APPEAL, HAS BEEN CON SIDERED BY THE AO, WHILE GIVING EFFECT TO THE CIT(A) ORDER AND FURNISH ED A COPY OF THE ORDER ITA NOS.411 & 482/2012 KANTIPUDI STEELS PVT. LTD., RAJAHMUNDRY 8 GIVING EFFECT PASSED BY THE AO DATED 5.4.2013, THE A.R. FURTHER SUBMITTED THAT SINCE, ASSESSE GOT RELIEF ON ALL THE ISSUES, WHICH ARISES IN THIS APPEAL, THE GROUNDS OF APPEAL ARE NOT PRESSED. THEREFORE, WE DISMISS ALL THE GROUNDS RAISED BY THE ASSESSEE AS N OT PRESSED. 9. IN THE RESULT, APPEALS FILED BY THE REVENUE IS D ISMISSED AND APPEAL FILED BY THE ASSESSEE IS ALSO DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 TH DEC15. SD/- SD/- ( . ) ( . . . . ) ( (( ( V. DURGA RAO ) )) ) ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 3 / DATED : 18.12.2015 VG/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT THE ACIT, CIRCLE-1, RAJAHMUNDRY 2. '(& / THE RESPONDENT M/S. KANTIPUDI STEELS (P) LTD., SHOP NO.25, MUNICIP AL COMPLEX, KAMBALA TANK, RAJAHMUNDRY 3. 5 / THE CIT, RAJAHMUNDRY 4. 5 / THE CIT, VISAKHAPATNAM 5. 5 () / THE CIT (A), VISAKHAPATNAM 6. ' , , / // / DR, ITAT, VISAKHAPATNAM 7 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM