Vinedale Distilleries Limited, Hyderabad, Hyderabad V. DCIT, Circle-17(2), Hyderabad, Hyderabad

ITA 545/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2658 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 24-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Retrospective amendment; Question of law
• Section: 143(3); 201(1); 139

Judgement Text

ITA NO 545 OF 201 7 VINEDALE DISTILLERIES LTD HYDERABAD PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A (SMC) BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.545/HYD/2017 (ASSESSMENT YEAR: 2012-13) M/S. VINEDALE DISTILLERIES LIMITED, HYDERABAD PAN: AACCV 8494 N VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 17(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO FOR REVENUE : SHRI V. SREEKAR, DR O R D E R THIS IS ASSESSEES APPEAL FOR THE A.Y 2012-13. IN T HIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE CIT (A)-5, HYDERABAD, DATED 31.10.2016 CONFIRMING THE DISALLOW ANCES MADE BY THE AO U/S 40(A)(IA) OF THE ACT. THE ASSESSEE HA S RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.27,51,000/- U/S 40(A)(IA). 3. THE LD CIT (A) OUGHT TO HAVE APPRECIATED THAT THE PROVISIONS OF SECTION 40(A)(IA) WOULD APPLY TO THE EXPENDITURE WHICH IS PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND NOT TO THE AMOUNTS WHICH IS ALREADY PAID DURING THE PREVIOUS YEAR. DATE OF HEARING : 24.08. 2017 DATE OF PRONOUNCEMENT : 31.08.2017 ITA NO 545 OF 201 7 VINEDALE DISTILLERIES LTD HYDERABAD PAGE 2 OF 8 4. THE LD CIT (A) OUGHT TO HAVE APPRECIATED THAT THE SECOND PROVISO TO 40(A)(IA) OF THE LT. ACT, 1961 IS HAVING RETROSPECTIVE EFFECT. 5. THE LD CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAS NOT BEEN REGARDED AS ASSESSEE IN DEFAULT AS PER SECTION 201 OF THE INCOME TAX ACT, 1961 AND HENCE NO DISALLOWANCE U/ S 40(A)(IA) CAN BE MADE. 6. THE APPELLANT MAY ADD, ALTER OR MODIFY ANY OTHER POINTS TO THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE CASE. 2. FURTHER, VIDE LETTER DATED 28.07.2017, THE ASSESS EE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL: 7. AS PER THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF NATIONAL THERMAL POWER CO. LTD VS. CIT (1998) 229 ITR 383 (SC) THE ITAT HAS JURISDICTION TO EXAMINE THE QUESTION OF LAW THOUGH NOT ARISEN BEFORE THE CIT (A) BUT HAS ARISEN BEFORE THE IT AT FOR THE FIRST TIME. 8. THE LD AO ERRED IN PROVOKING THE PROVISIONS OF SECTION 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT PAYMENTS MADE ARE NOT COVERED BY PROVISIONS OF CHAPTER XVII-B OF THE ACT. 9. THE AO OUGHT TO HAVE APPRECIATED THE FACT THAT THE RECEIVER OF THE LEGAL CHARGES I.E. PAYEE, WHO IS RESIDENT HAS OFFERED THE SAME AS INCOME IN ITS RETURN OF INCOME FOR THE RESPECTIVE FINANCIAL YEAR AND THEREFORE, THE ASSESSEE CANNOT BE TREATED AS ASSESSEE IN DEFAULT. 10. THE AO OUGHT TO HAVE APPRECIATED THE FACT THAT SECOND PROVISO TO SECTION 40(A)(IA) IS ITA NO 545 OF 201 7 VINEDALE DISTILLERIES LTD HYDERABAD PAGE 3 OF 8 CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM 01.04.2005 FROM THE DATE IN WHICH SUB- CLAUSE I.E., 40(A) WAS INSERTED BY FINANCE ACT. 11. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LD. CIT (A) OUGHT. TO HAVE APPRECIATED THE FACT THAT THE LD. ASSESSING OFFICER WHILE DETERMINING THE TAX LIABILITY OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION HAS NOT ALLOWED THE CARRIED FORWARD LOSS OF RS. 9,32,77,000/ - FROM EARLIER YEARS . 12. THE APPELLANT MAY ADD OR ALTER OR AMEND OR MODIFY OR SUBSTITUTE OR DELETE OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL . 3. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ADDITIONAL GROUNDS O F APPEAL, ONLY GROUNDS OF APPEAL NOS.10 & 11 THE ASSESSEE WISH TO PURSUE AND DOES NOT WISH TO PRESS THE OTHER GROUNDS OF APPEAL. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G, FILED ITS RETURN OF INCOME FOR THE A.Y 2012-13 ON 29.09.2012 D ECLARING A LOSS OF (-) RS.22,68,323. DURING THE ASSESSMENT PRO CEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSE E DEBITED VARIOUS EXPENSES TO THE EXTENT OF RS.27,61,000 TO T HE A/C OF SHRI HEMANTH CHOWDHARY AND AGGARWAL LAW ASSOCIATES WITHO UT MAKING TDS. THE AO THEREFORE, MADE THE DISALLOWANCE OF RS.27,61,000 U/S 40(A)(IA) OF THE ACT. ON FURTHER A PPEAL, THE CIT (A) CONFIRMED THE DISALLOWANCE AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. ITA NO 545 OF 201 7 VINEDALE DISTILLERIES LTD HYDERABAD PAGE 4 OF 8 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAS NOT BEEN TREATED AS AN ASSESSEE I N DEFAULT U/S 201(1) OF THE ACT WITH REGARD TO THE SAID PAYMENT A ND THEREFORE, THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS NOT SU STAINABLE. HE PLACED RELIANCE UPON THE FOLLOWING DECISIONS IN SUP PORT OF HIS CONTENTIONS: I) ITAT VISAKHAPATNAM BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORT VS.ACIT (16 ITR (AT) 1) II) HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. M/S.JANAPRIYA ENGINEERS SYNDICATE IN ITTA NO.352 OF 2014 DATED 24.6.2014. 6. FURTHER, HE ALSO SUBMITTED THAT THE SECOND PROVIS O TO SECTION 40(A)(IA) OF THE ACT IS APPLICABLE RETROSPE CTIVELY AS HELD BY THE TRIBUNAL AT HYDERABAD IN THE ABOVE SAID CASES. 7. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMIT TED THAT THE ASSESSEE HAD CLAIMED CARRY FORWARD OF LOSS IN ITS RETURN OF INCOME, BUT THE AO HAS NOT ALLOWED THE SAME AND INS PITE OF RAISING THE ISSUE BEFORE THE CIT (A), THE CIT (A) H AS FAILED TO ADJUDICATE THE SAME. HE THEREFORE, PRAYED THAT THE ISSUE MAY BE REMANDED TO THE FILE OF THE AO FOR VERIFICATION OF THE ASSESSEES CLAIM OF CARRY FORWARD OF LOSS AND ALLOW THE SAME I F IT IS FOUND TO BE IN ORDER. ITA NO 545 OF 201 7 VINEDALE DISTILLERIES LTD HYDERABAD PAGE 5 OF 8 8. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, I FIND THAT THE ISSUE OF APPLICABILITY O F SECTION 40(A)(IA) WHEN THE ASSESSEE HAS NOT BEEN TREATED AS AS ASSES SEE IN DEFAULT U/S 201 OF THE I.T. ACT IS COVERED IN FAVO UR OF THE ASSESSEE BY THE FOLLOWING DECISIONS: A) VISU INTERNATIONAL LTD VS. DY.CIT IN ITA NO.488 & 621/HYD/2013, DATED 12.11.2014 B) DCIT VS. ADITYA CONSTRUCTION CO. IN ITA NO. 1319/HYD/2014, DATED 28.11.2014 C) AGA PUBLICATIONS VS. DCIT IN ITA NO.249/HYD/2013 , DATED 26.08.2016 10. IN THE CASE OF M/S. AGA PUBLICATIONS LTD, I AM ONE OF THE SIGNATORY TO THE SAID ORDER AND AT PARA 4 OF IT S ORDER THE TRIBUNAL HAS HELD AS UNDER: 4. FURTHER, THE SECOND PROVISO TO SECTION 40(A)(IA) PROVIDES THAT DISALLOWANCE U/S 40(A)(IA) CANNOT BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SECTION 201(1) OF THE ACT. THE FIR ST PROVISO TO SUB-SECTION (I) OF SECTION 201 PROVIDES THAT A PERSON WHO IS LIABLE TO MAKE TDS BUT FAILS TO DO SO, SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT, IF THE RECIPIENT HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 AND HAS OFFERED THE INCOME AND HAS PAID TAXES THEREON AND HAS FURNISHED A CERTIFICATE TO THIS EFFECT. THOUGH THESE PROVISIONS ARE STATED TO BE APPLICABLE WITH EFFECT FROM 1.4.2013, THE ITA NO 545 OF 201 7 VINEDALE DISTILLERIES LTD HYDERABAD PAGE 6 OF 8 COORDINATE BENCH OF THIS TRIBUNAL AT BANGALORE IN THE CASE OF DCIT VS. ANANDA MARKALA REPORTED IN (2014) 150 ITD 323 (BANG.) HAS HELD THAT THIS PROVISO IS APPLICABLE WITH RETROSPECTIVE EFFECT. IN VIEW OF THE DOCUMENTS FILED BY THE ASSESSEE BEFORE US TO DEMONSTRATE THAT THE PAYEES HAVE OFFERED THE SAID INCOME TO TAX IN THEIR HANDS, WE DEEM IT FIT AND PROPER TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMAND THE ISSUE TO THE FILE OF THE AO FOR RECONSIDERATION AND VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE. 11. FURTHER, IN THE CASE OF M/S ADITYA CONSTRUCTION COMP[ANY INDIA PVT. LTD, THE TRIBUNAL HAS ALSO CONS IDERED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F HINDUSTAN COCA COLA BEVERAGES PVT. LTD, 293 ITR 226 (S.C) WHE REIN IT WAS HELD THAT IF THE PAYEES HAVE ADMITTED THE RECEIPT O F INCOME, THERE IS NO NEED FOR THE PAYEE TO DEDUCT THE TDS AND IN S UCH CIRCUMSTANCES, THE ASSESSEE CANNOT BE TREATED AS A S ASSESSEE IN DEFAULT AND CONSEQUENTLY THE SECOND PROVISO TO SEC TION 40(A)(IA) ALSO COMES INTO OPERATION EVEN THOUGH THE SAID PROV ISO WAS INTRODUCED FROM 1.4.2013. 12. IN THE CASE OF M/S. VISU INTERNATIONAL LTD (CIT ED SUPRA), THIS TRIBUNAL HAS CONSIDERED THE DECISION O F THE COORDINATE BENCH AT BANGALORE IN THE CASE OF G.SHAN KAR VS. ACIT IN ITA NO.1832/BANG/2013 FOR THE A.Y 2005-06 TO HOLD THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS RETROSPECTIV ELY APPLICABLE FROM 1.4.2005. IN VIEW OF THE SAME, I DEEM IT FIT A ND PROPER TO ADMIT THE ADDITIONAL GROUND OF APPEAL AND REMAND TH E ISSUE TO ITA NO 545 OF 201 7 VINEDALE DISTILLERIES LTD HYDERABAD PAGE 7 OF 8 THE FILE OF THE AO FOR VERIFICATION AS TO WHETHER T HE RECIPIENT OF THE LEGAL FEE HAS OFFERED THE INCOME IN ITS RETURN OF I NCOME FOR THE RESPECTIVE FINANCIAL YEAR. THUS, GROUNDS OF APPEAL 5, 9 AND 10 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 13. GROUND NO.3 IS REJECTED IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF PALAM GAS SERV ICES VS. CIT DATED 3.5.2017 WHEREIN, THE HON'BLE COURT HAS HELD THAT SECTION 40(A)(IA) COVERS NOT ONLY THOSE CASES WHERE THE AMO UNT IS PAYABLE BUT ALSO WHEN IT IS PAID. 14. AS REGARDS GROUND NO.11, WE DEEM IT FIT AND PRO PER TO REMIT THIS ISSUE TO THE FILE OF THE AO WITH A DIREC TION TO EXAMINE THE ASSESSEES CLAIM OF THE CARRY FORWARD OF LOSS F ROM EARLIER YEARS AND IF IT IS FOUND TO BE IN ORDER, THEN THE AO MAY ALLOW THE SAME IN ACCORDANCE WITH THE LAW. 15. THE OTHER GROUNDS OF APPEAL ARE NOT NECESSARY T O BE ADJUDICATED. ASSESSEES APPEAL IS THEREFORE, TREATE D AS PARTLY ALLOWED. 16 IN THE RESULT, ASSESSEES APPEAL IS TREATED AS P ARTLY ALLOWED. ITA NO 545 OF 201 7 VINEDALE DISTILLERIES LTD HYDERABAD PAGE 8 OF 8 ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2017. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 31 ST AUGUST, 2017. VINODAN/SPS COPY TO: 1 P. MURALI & CO. CAS, 6-3-655/2/3 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500082 2 DY. COMMISSIONER OF INCOME TAX, CIRCLE 17(2), HYD ERABAD 3 CIT (A)-5 HYDERABAD 4 PR. CIT 5 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER