DCIT, Circle-17(2), Hyd, Hyderabad V. VMC Systems Ltd., Hyd, Hyderabad

ITA 534/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6360 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 15-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V GOPINATH
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.534/HYD/2016 ASSESSMENT YEAR 2011-2012 THE DCIT, CIRCLE 17(2) HYDERABAD. VS. M/S. VMC SYSTEMS LTD., HYDERABAD. PAN AABCV4225A (APPELLANT) (RESPONDENT) FOR REVENUE : MR. B.V. GOPINATH FOR ASSESSEE : -NONE- DATE OF HEARING : 01.08.2016 DATE OF PRONOUNCEMENT : 01.08.2016 ORDER PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-5, HYDERABAD AND IT PERTAINS TO THE A.Y. 2011-2012. FOLLOWING GROUNDS WERE URGED BEFORE US. 2. THE LD. CIT(A) ERRED LAW AND IS ERRED IN HOLDING T HAT THE PROVISIONS OF SEC 40(A)(IA) OF THE I.T. ACT WOULD A PPLY ONLY TO THE AMOUNTS PAYABLE AS ON 31 ST OF MARCH OF THE PREVIOUS YEAR BUT WOULD NOT APPLY TO THE AMOUNTS WH ICH ARE PAID DURING THE PREVIOUS YEAR ? 3. THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO ALLOW THE ENTIRE PAYMENT AS NOTHING REMAINED PAYABL E AS ON THE LAST DAY OF THE PREVIOUS YEAR IGNORING THE DEPARTMENT VIEW IN THE BOARDS CIRCULAR NO.10/DV/20 13 (F.NO.279/MISC/M-61/2012-ITJ (VOLUME-II), DATED 16.12.2013 ? 2. FACTS NECESSARY FOR THE DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. THE ASSESSEE-COMPANY IS ENGAGED IN TH E BUSINESS 2 ITA.NO.534/HYD/2016 M/S. VMC SYSTEMS LTD., HYDERABAD. OF MANUFACTURE OF TRANSMISSION EQUIPMENT AND POWER ACCESSORIES. FOR THE YEAR UNDER CONSIDERATION, THE ASS ESSEE DECLARED INCOME OF RS.18,36,20,167 UNDER THE NORMAL PROVISIONS AND RS.3,58,73,905 UNDER MAT PROVISIONS. THOUGH THE SAME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ORIGINALLY, IT WAS LATER ON TAKEN-UP FOR SCRUTINY BY ISSUING A NOTICE UNDER SEC TION 143(2) OF THE ACT AND DURING THE SAID PROCEEDINGS, THE ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE INCURRED EXPENDITURE TOWARDS CONTRIBUTION TO PF, ESI AND LEAVE ENCASHMENT ETC., AND O N COMPARISON OF THE DETAILS OF PROVISIONS MADE TOWARDS TH ESE EXPENSES WITH THE DETAILS OF ACTUAL PAYMENT, THERE WAS A DIFFERENCE OF RS.28,69,792 WHICH IS HIT BY THE PROVI SIONS OF SECTION 43B OF THE ACT. HE ACCORDINGLY MADE THE ADDITIO N OF RS.28,69,792. 2.1. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THAT PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY IN RESPECT OF PAYABLE AMOUNT SHOWN IN BALANCE SHEET AS OUTSTANDIN G EXPENSES WHEREAS IN THE INSTANT CASE, THE AMOUNT WAS ALR EADY PAID BEFORE THE END OF THE ACCOUNTING YEAR AND HENCE, NO DISALLOWANCE CAN BE MADE UNDER SECTION 40(A)(IA) OF THE ACT. IN THIS REGARD, THE ASSESSEE RELIED UPON THE DECISION OF THE ITAT, HYDERABAD BENCH IN THE CASE OF TEJA CONSTRUCTIONS 39 S OT 13 AS WELL AS THE DECISION IN THE CASE OF BARTRONICS INDIA L TD., VS. ACIT (2012) 22 TAXMANN.COM 5 (HYD.). LD. CIT(A), WAS OF TH E VIEW THAT THE DECISION OF THE ITAT HYDERABAD SPECIAL BENCH IN T HE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT (2012) 136 ITD 23 (SB) SQUARELY APPLIES TO THE INSTANT CASE AND IN THIS REGARD HE OBSERVED AS UNDER : 3 ITA.NO.534/HYD/2016 M/S. VMC SYSTEMS LTD., HYDERABAD. D. I FURTHER FIND THAT WHILE DECIDING THE APPEAL I N THE CASE OF JANAPRIYA ENGINEERS SYNDICATE (I.T.T.A. NO.352 O F 2014 DATED 24.06.2014) THE HONBLE ANDHRA PRADESH HIGH COURT HAS CLARIFIED THE ISSUE OF INTERIM STAY GRANTED BY IT IN THE CASE OF MERILYN SHIPPING & TRANSPORTS ((SUPRA)). I WILL LIKE TO REPRODUCE THE RELEVANT PART OF THE SAID ORDER AND SAME READS AS UNDER : ' 4. WE ARE OF THE VIEW THAT UNTIL AND UNLESS THE DECISION OF THE SPECIAL BENCH IS UPSET BY THIS COURT, IT BINDS SMALLER BENCH AND COORDINATE BENCH OF THE TRIBUNAL. UNDER THE CIRCUMSTANCES, IT IS NOT OPEN TO THE TRIBUNAL, AS RIGHTLY CONTENDED BY MR. NARASIMHA SARMA, LEARNED COUNSEL, TO REMAND ON THE GROUND OF PENDENCY ON THE SAME ISSUE BEFORE THIS COURT, OVERLOOKING AND OVERRULING, BY NECESSARY IMPLICATION, THE DECISION OF THE SPECIAL BENCH. WE SIMPLY SAY THAT IT IS NOT PERMISSIBLE UNDER QUASI JUDICIAL DISCIPLINE'. FROM THE CLARIFICATION ISSUED BY THE HON'BLE HIGH C OURT, IT IS CLEAR THAT UNTIL AND UNLESS THE DECISION OF M ARILYN SHIPPING & TRANSPORT (SUPRA) IS REVERSED, IT IS TO BE FOLLOWED. HON'BLE COURT HAS HELD THAT JUDICIAL DISC IPLINE MANDATES THAT THE DECISION OF THE SPECIAL BENCH HAS TO BE FOLLOWED BY OTHER BENCHES. IN TEJA CONSTRUCTION V. ACIT [2010J 39 SOT 13(HYD)(URO) ITAT HYDERABAD BENCH 'A' AND BARTRONICS INDIA LTD. V. ACIT [2012J 22 TAXMANN.COM 5 (HYD.) IT WAS HELD THAT SECTION 40(A) (IA) ARE APPLICABLE ONLY IN RESPECT OF PAYABLE AMOUNT SHOWN IN BALANCE SHEET AS OUTSTANDING EXPENSES ON WHICH TDS HAS NOT BEEN MADE. THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE HO N'BLE ITAT, I HOLD THAT : (I) THE LIABILITY TO DEDUCT TDS OUT OF PAYMENTS TO PISL DOES ARISE ; (II) BUT ONLY THE OUTSTANDING AMOUNTS AS ON 31 ST MARCH 2011 ARE TO BE ADDED ; 4 ITA.NO.534/HYD/2016 M/S. VMC SYSTEMS LTD., HYDERABAD. (III) IN THE VERY SCHEME OF THINGS OF THE PRESENT CASE, THERE WILL BE NO OUTSTANDING AS IN THIS CASE AFTER DEDUCTING 1% TOWARDS DISCOUNT TOWARDS MARGIN OF PISL, THE BALANCE SALE PROCEEDS ARE TRANSFERRED TO THE ASSESSEE. HENCE, THERE WILL BE NO ADDITION U/S. 40(A)(IA) IN PRESENT CASE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. 3. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. THOU GH THE LD. D.R. SUBMITTED THAT THE WORD PAYABLE WAS NOT PROPE RLY INTERPRETED BY THE ITAT, HYDERABAD BENCH, HE DID NOT P LACE ANY DECISION OF THE JURISDICTIONAL HIGH COURT OR THE DECIS ION OF ITAT, HYDERABAD BENCH WHEREIN A CONTRARY VIEW IS TAKEN ON TH IS ASPECT. SINCE THE LD. CIT(A) FOLLOWED THE OBSERVATIONS OF THE HONBLE JURISDICTIONAL HIGH COURT WHICH INTURN, WAS R EFERRED TO BY THE ITAT HYDERABAD BENCH IN NUMBER OF CASES, WE D O NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) A ND ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT(A) AN D DISMISS THE APPEAL FILED BY THE REVENUE. 4. AS PRONOUNCED IN THE OPEN COURT, APPEAL FILED BY THE REVENUE IS DISMISSED. SD/- SD/- (B. RAMAKOTAIAH) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT HYDERABAD DATED 01 ST AUGUST, 2016 VBP/- COPY TO 1. THE DCIT, CIRCLE-17(2), 6 TH FLOOR, B BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD. 2. M/S. VMC SYSTEMS LTD., 6-3-879/B, II FLOOR, GREENL ANDS, BEGUMPET, HYDERABAD. 3. CIT(A)-5, 6A, I.T. TOWERS, A.C. GUARDS, HYDERABAD. 4. PR. CIT-3, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD. 6. GUARD FILE