ACIT, CHENNAI V. M/s. Associated Garment Exports, CHENNAI

ITA 486/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64365 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 11-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BASHYAM JT
• Assessee Lawyers: D ANAND
• Keywords: Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NO.486/MDS/2011 ASSESSMENT YEAR : 2007-08 THE ACIT CIRCLE XV CHENNAI VS M/S ASSOCIATED GARMENT EXPORTS NO.13, G.N.CHETTI ROAD CHENNAI 6 [PAN AAJFA7198N] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURU BASHYAM, JT. CIT RESPONDENT BY : SHRI D. ANAND DATE OF HEARING : 27-09-2012 DATE OF PRONOUNCEMENT : 28-09-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AG AINST THE ORDER OF THE CIT(A)-XII, CHENNAI, DATED 16.12.2010. 2. THE DR, AT THE TIME OF HEARING, ARGUED AND SUBMITT ED THAT THE ISSUE INVOLVED IN THE APPEAL IS THAT THE ASSES SING OFFICER HAD MADE DISALLOWANCE OUT OF CONTRACT CHARGES OF ` 60,76,383/- FOR NON- DEDUCTION OF TDS AND TDS DEDUCTED BUT NOT PAID TO T HE CREDIT OF THE CENTRAL GOVERNMENT, DISALLOWANCE OF PROFESSIONAL CH ARGES OF I.T.A.NO.486/2011 :- 2 -: ` 8,12,756/- FOR NON-DEDUCTION OF TDS AND TDS DEDUCT ED BUT NOT PAID AND DISALLOWANCE OF COMMISSION PAYMENTS OF ` 8,95,603/- ON ACCOUNT OF NON-DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER MADE THE DISALLO WANCE ON THE BASIS OF THE DETAILS GIVEN IN THE TAX AUDIT REPORT OF THE ASSESSEE FILED ALONGWITH THE RETURN OF INCOME. HE SUBMITTED THAT THE CIT(A), ON AN APPEAL FILED BY THE ASSESSEE, AGAINST THE DISALLOW ANCES MADE BY THE ASSESSING OFFICER, RESTRICTED THE DISALLOWANCE TO ` 38,83,732/- ON ACCOUNT OF CONTRACT CHARGES, ` 6,40,871/- ON ACCOUNT OF PROFESSIONAL CHARGES AND ` 2,54,732/- ON ACCOUNT OF COMMISSION PAYMENTS. WHI LE DOING SO, THE CIT(A) OBSERVED THAT THE EXPENSES DEB ITED IN THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE WERE TO THE ABOVE E XTENT. HE SUBMITTED THAT THE CIT(A) HAS NOT ALLOWED ANY OPPOR TUNITY TO THE ASSESSING OFFICER BEFORE PARTLY DELETING THE DISALL OWANCES AND HENCE, VIOLATED THE PROVISIONS OF RULE 46A OF THE INCOME-T AX RULES. 3. ON THE OTHER HAND, THE A.R OF THE ASSESSEE SUBMIT TED THAT NO DISALLOWANCE U/S 40(A)(IA) OF EXPENSES CLAIMED BY THE ASSESSEE ON WHICH NO TDS WAS DEDUCTED CAN BE MADE BY INVOKIN G THE PROVISIONS OF SECTION 40(A)(IA). HE SUBMITTED THA T THE EXPENSES AS CLAIMED BY THE ASSESSEE IN THE AUDITED PROFIT & LO SS ACCOUNT WERE ` 38,83,732/- ON ACCOUNT OF CONTRACT CHARGES, ` 6,40,871/- ON ACCOUNT OF I.T.A.NO.486/2011 :- 3 -: PROFESSIONAL CHARGES AND ` 2,54,732/- ON ACCOUNT OF COMMISSION PAYMENTS, THEREFORE, THE CIT(A) WAS FULLY JUSTIFIED IN DELETING THE DISALLOWANCE MADE IN EXCESS BY THE ASSESSING OFFICE R THAN WHAT WAS CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME. 4. IN THE ALTERNATIVE, IT WAS THE SUBMISSION OF THE A .R OF THE ASSESSEE THAT IT WILL BE SEEN FROM PAGE 11 OF THE P APER BOOK FILED BY THE ASSESSEE WHICH CONTAINS SCHEDULE 7 CURRENT L IABILITIES, THAT NONE OF THE EXPENSES CLAIMED BY THE ASSESSEE IN TH E PROFIT & LOSS ACCOUNT ON WHICH DISALLOWANCE WAS MADE BY THE ASSES SING OFFICER U/S 40(A)(IA) WERE OUTSTANDING FOR PAYMENT AT THE YEAR ENDING ON 31.3.2007. HENCE, HE SUBMITTED THAT IN VIEW OF THE DECISION OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS ACIT, [2012] 16 ITR (TRIB )1(SB), NO DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSESSEE WHICH HAS BEEN PAID DURING THE FINANCIAL YEAR CAN BE MADE. THUS, HE SUBMITTED THAT ON THIS GROUND ALSO, THE ORDER OF THE CIT(A) SHOULD BE SUSTAINED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE CIT(A) HAS DECIDED THE ISSUE BY OBSERVING AS UN DER: I.T.A.NO.486/2011 :- 4 -: DECISION :- AFTER CAREFUL CONSIDERATION OF THE MATERIAL BROUGHT ON RECORD BY THE COUNSEL OF THE APPELLANT, IMPUGNED ORDER, ASSESSMENT RECORDS AND FACTS OF THE CASE, APPEAL OF THE APPELLANT IS DISCUSSED AND DECIDED ON THE FOLLOWING LINES, I . E. (1) DISALLOWANCE U/S 40(A)(IA) MADE EXPENDITURE H EAD-WISE AND (2) ADDITION MADE IN THE COMPUTATION OF TOTAL TAXABLE INCOME IN THE IMPUGNED ORDER ON ACCOUNT OF DISALLOWANCE OF INTEREST . DISALLOWANCE U/S 40(A)(IA) - CONTRACT : - A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE ASSESSING OFFICER HAD DISALLOWED AMOUNTS OF RS.37,06,631/- AND RS.23,69,7 52/- ON ACCOUNT OF NON- DEDUCTION OF TDS AND TDS DEDUCTE D BUT NOT REMITTED RESPECTIVELY. IT IS ALSO SEEN FRO M THE ASSESSMENT RECORDS MADE AVAILABLE IN THIS OFFICE BY THE ASSESSING OFFICER, AN AMOUNT OF ` 38,83,732/- ONLY IS SHOWN AS CONTRACT EXPENSES IN THE PROFIT AND LOSS ACCOUNT. THOUGH THE APPELLANT CLAIMS THAT TDS WAS MADE ON AN AMOUNT OF RS.23,69,752/-, IT IS SEEN THAT THE APPEL LANT HAD NOT REMITTED THE SAME IN TO THE GOVERNMENT OF INDIA ACCOUNT WITHIN THE TIME PRESCRIBED IN THE PROVISION S OF THE INCOME-TAX ACT, 1961. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO RESTRICT THE DISALLOWANCE U/S 40(A)(IA) OF THE INCO ME-TAX ACT, 1961 IN RESPECT OF THIS ITEM OF EXPENDITURE I . E. 'CONTRACT CHARGES' TO RS.38,83,732/- AS AGAINST RS.60,76,383/- MADE IN THE IMPUGNED ' ORDER. THE ASSESSING OFFICER IS FURTHER DIRECTED TO ALLOW EXPE NSES ON ACCOUNT CONTRACT CHARGES TO THE EXTENT TDS WAS DEDU CTED IN THE YEAR IN WHICH THE SAID TDS WAS REMITTED INTO THE GOVERNMENT OF INDIA ACCOUNT. THUS, THE APPELLANT PARTLY SUCCEEDS IN THIS GROUND OF ITS APPEAL . DISALLOWANCE U/S 40(A)(IA) - PROFESSIONAL CHARGES :- THE ASSESSING OFFICER HAD DISALLOWED AMOUNTS OF RS.4,05,412/- AND RS 4,07,344/- ON ACCOUNT OF NON- DEDUCTION OF TDS AND TDS DEDUCTED BUT NOT REMITTED RESPECTIVELY IN THE IMPUGNED ORDER. A PERUSAL OF TH E ASSESSMENT RECORDS MADE AVAILABLE IN THIS OFFICE BY THE ASSESSING OFFICER SHOWS THAT AN AMOUNT OF RS.6,40,8 71/- ONLY IS SHOWN AS EXPENSES ON ACCOUNT OF PROFESSIONA L I.T.A.NO.486/2011 :- 5 -: CHARGES IN THE PROFIT AND LOSS ACCOUNT. THOUGH THE APPELLANT CLAIMS THAT TDS WAS MADE ON AN AMOUNT OF RS 4,07 ,344/-, IT IS SEEN THAT THE APPELLANT HAD NOT REMITTED THE SAME INTO THE GOVERNMENT OF INDIA ACCOUNT WITHI N THE TIME PRESCRIBED IN THE PROVISIONS OF THE INCOME-TAX ACT, 1961. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO RESTRICT THE DISALLOWANCE U/S 40(A)(IA) OF THE INCO ME-TAX ACT, 1961 IN RESPECT OF EXPENSES ON ACCOUNT OF 'PROFESSIONAL CHARGES' AT RS.6,40,871/- AS AGAINST RS.8,12,756/- MADE IN THE IMPUGNED ORDER. FURTHER, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THIS ITEM OF EXPENDITURE TO THE EXTENT TDS WAS DEDUCTED IN THE Y EAR IN WHICH THE SAID TDS WAS REMITTED INTO THE GOVERNMENT OF INDIA ACCOUNT. THUS, THE APPELLANT PARTLY SUCCEEDS IN THIS GROUND OF ITS APPEAL. DISALLOWANCE U/S 40(A)(IA) - COMMISSION :- A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE ASSESS I NG OFFICER HAD DISALLOWED AN AMOUNT OF RS.8,95,603/- ON ACCOUN T OF NON-DEDUCTION OF TDS UNDER THIS HEAD. THE ASSESSME NT RECORDS MADE AVAILABLE TO THIS OFFICE BY THE ASSESSING OFFICER GOES TO SHOW THAT THE ACTUAL AMOU NT DEBITED IN THE PROFIT AND LOSS ACCOUNT IN RESPECT O F THIS ITEM OF EXPENDITURE I S RS.2,54,732/- ONLY. THE COUNSEL OF THE APPELLANT HAD CONCEDED THAT NO TDS WAS DEDUCTED ON THIS ITEM OF EXPENDITURE AND AGREED FOR THE DISALLOWANCE OF THE SAME. AND HENCE, THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISALLOWANCE U/S 40(A)(IA) OF THE INCO ME-TAX ACT, 1961 ON ACCOUNT OF 'COMMISSION' TO RS.2,54,732 /- AS AGAINST RS.8,95,603/- MADE IN THE IMPUGNED ORDER. ACCORDI N GLY, APPELLANT FAILS TO SUCCEED IN THIS . GROUND OF ITS APPEAL . 6. THE D.R COULD NOT POINT OUT THAT ANY AMOUNT MORE TH AN THE AMOUNT DIRECTED BY THE CIT(A) WAS ALLOWED TO THE AS SESSEE IN COMPUTING ITS TOTAL INCOME. SECTION 40(A)(IA) PROV IDES FOR DISALLOWANCE OF CERTAIN EXPENSES. THE DISALLOWANCE OF EXPENSES PRE-SUPPOSES CLAIM I.T.A.NO.486/2011 :- 6 -: OF DEDUCTION FOR COMPUTING THE INCOME. WHEN AN AMO UNT IS NOT CLAIMED AS DEDUCTION IN COMPUTING THE INCOME, QUEST ION OF DISALLOWANCE OF SUCH AN AMOUNT BY INVOKING THE PROV ISIONS OF SECTION 40(A)(IA) DOES NOT ARISE. AS IN THE INSTANT CASE, NO MATERIAL COULD BE BROUGHT ON RECORD BEFORE US TO SHOW THAT THE AMOUNT IN DISPUTE WAS ALLOWED AS DEDUCTION IN COMPUTING ITS INCOME, IN OU R CONSIDERED OPINION, QUESTION OF DISALLOWING THE SAME BY INVOKI NG THE PROVISIONS OF SECTION 40(A)(IA) DOES NOT ARISE. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS DISMI SSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 28 TH OF SEPTEMBER, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 28 TH SEPTEMBER, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR