PVS Memorial Hospital Ltd, Cochin V. DCIT, Ernakulam

ITA 572/COCH/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4594 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 14-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: RADHESH BHATT
• Keywords: Bonafide belief; Question of law; Difference of opinion
• Section: 194C

Judgement Text

ITA NO. 572/ COCH/ 2011 1 IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 572/ COCH/ 2011 (ASST YEAR 2006 - 07 ) PVS MEMORIAL HOSPITAL LTD ., KALOOR COCHIN 17 VS THE DY COMMR OF INCOME TAX CIRCLE 2(1), ERNAKULUM ( APPELLANT) (RESPONDENT) PAN NO. AABCP3914G ASSESSEE BY SHRI RADHESH BHATT REVENUE BY SMT S VI JA YA PRABHA, JR DR DATE OF HEARING 24 TH JUNE 2013 DATE OF PRONOUNCEMENT 16 TH , AUG 2013 OR D ER PER B.R. BASKARAN, AM: THE APPEAL FILED BY THE ASSES SEE IS DIRECTED AGAINST THE ORDER DATED 25TH JULY 2011 PASSED BY THE LD CIT(A) - II KOCHI AND IT RELATES TO THE ASST YEAR 2006 - 07. THE APPEAL IS BARRED BY LIMITATION B Y SIX DAYS. THE ASSESSEE HAS FILED THE PETITION WITH A REQUEST TO CONDONE THE DELAY. 2 WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. HAVING REGARD TO THE SUBMISSIONS MADE IN THE PETITION, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 3 THE SOLITARY ISSUE RAISED IN THIS APPEAL IS WHETHER THE LD CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE U/S 40 ( A ) (IA) OF THE I . T ACT. ITA NO. 572/ COCH/ 2011 2 3.1 THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF: THE ASSESSEE IS RUNNING AN ALLOPATHIC HOSPITAL. IT HAD ENTERED INTO AN AGREEMENT WITH ANOTHER HOSPITAL NAME D M/S LAKESHORE HOSPITAL & RESEARCH CENTRE LTD. ( HEREINAFTER M/S LAKESHORE ) IN ORDER TO RUN SOME OF ITS DEPARTMENTS. A C CORDING TO AGREEMENT, M/S LAKESHORE WILL RUN GASTROENTEROLOGY, GASTROINTESTINAL SURGERY, UROLOGY, NEPHROLOGY AND ANESTHESIOLOGY DEPARTMENTS OF THE ASSESSEE UPON RECEIPT OF PAYME NTS AS PER THE AGREEMENT . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PAID A SUM OF RS. 69,06,644/ - TO M/S LAKESHORE. THE ASSESSEE ALSO DEDUCT ED TAX AT SOURCE U/S 194C OF THE ACT @ 2% . THE AO TOOK THE VIEW THAT THE SERVICES RENDERED BY M/S LAKESHO RE FALL UNDER THE CATEGORY OF PROFESSIONAL SERVICE S , AND HENCE THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE U/S 194J OF THE A CT @ 5%. THE AO ALSO NOTICED THAT THE ASSESSEE, IN THE IMMEDIATE PRECEDING YEAR ALSO , HAD DEDUCT ED TAX AT SOURCE U/S 194C OF THE ACT AND THE AO HAD DISALLOWED PROPORTIONATE AMOUNT RELATABLE TO THE SHORT DEDUCTION AND THE SAME WAS CONFIRMED BY THE APPELLATE AUTHORITIES. ACCORDINGLY, THE AO DISALLOWED PROPORTIONATE AMOUNT RELATABLE TO SHORT DEDUCTION OF TAX AT SOURCE, WHICH WAS WORKED OUT TO RS. 41,43,986/ - BY INVOKING PROVISIONS OF SEC. 40 ( A ) (IA) OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE DISALLOWANCE BY FOLLOWING THE ORDER OF THE TRIBUNAL PASSED IN THE HANDS OF THE ASSESSEE FOR ASSESSMENT YEAR 2005 - 06. AGGRIEVED BY THE ORD ER OF LD CIT(A) , THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RECORD. ADMITTEDLY, THE COORDINATE BENCH OF THIS TRIBUNAL CONFIRMED AN IDENTICAL DISALLOWANCE MADE BY THE AO IN THE IMM EDIATE PRECEDING YEAR BY UPHOLDING THE VIEW OF THE AO THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE ON THE PAYMENT MADE TO M/S LAKESHORE U/S 194J OF THE ACT . T HE LD AR OF THE ASSESSEE SUBMITTED THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE T O DEDUCT TAX AT ITA NO. 572/ COCH/ 2011 3 SOURCE. IN FACT, THE ASSESSEE HAS DEDUCTED TAX AT SOURCE U/S 194C OF THE ACT UNDER THE BONAFIDE BELIEF THAT THE SAID PROVISION ONLY SHALL APPLY TO THE PAYMENTS MADE TO M/S LAKESHORE, SINCE THE PAYMENT WAS MADE IN PURSUANCE OF CONTRACT ENTE RED BETWEEN THEM. THE AO IS, HOWEVER, HAVE TAKEN THE VIEW THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE U/S 194J OF THE ACT. THE VIEW ENTERTAINED BY THE ASSESSING OFFICER WAS UPHELD BY THE TRIBUNAL ONLY SUBSEQUENT TO THE CLOSURE OF THE YEAR UNDER CONSIDERATION AND HENCE THE ASSESSEE DID NOT HAVE THE BENEFIT OF THE VIEW EXPRESSED BY THE TRIBUNAL. 4.1 THE LD A.R FURTHER SUBMITTED THAT THE RE IS ACTUALLY SHORT DEDUCTION OF TAX AT SOURCE IN THE INSTANT YEAR. HE SUBMITTED THAT THE PROVISIONS OF SEC. 40 ( A ) (IA) CANNOT BE INVOKED IN CASE OF SHORT DEDUCTION OF TAX AT SOURCE , AS THE PROVISIONS OF SEC. 40 ( A ) (IA) DOES NOT PROVIDE FOR SUCH A CONTINGENCY UNLIKE THE PROVISIONS OF SEC. 201 OF THE ACT, WHEREIN THE SHORT DEDUCTION OF TAX AT SOURCE WOULD ALSO GET ATTRACTED. IN SUPPORT OF HIS CONTENTION S , THE LD AR RELIED UPON THE FOLLOWING DECISIONS : I) DY CIT VS S K TEKRIWAL (CALCUTTA HC DATED 03 - 12 - 2012)(ITAT NO. 183 OF 2012) II) CHA N DABHOY & JASSOBHY - 49 SOT 448 (ITAT MUMBAI) 5 ON THE OTHER HAND, THE LD DR SUBMITTED THAT THE COORDINATE BENCH OF THIS TRIBUNAL HAS ALREADY DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE REVENUE IN THE ASSESSEE S OWN CASE IN THE IMMEDIATE PRECEDING YEAR. THE LD DR FURTHER CONTENDED THAT THE P ROVISIONS OF SEC. 40 ( A ) (IA) CAN BE INVOKED EVEN FOR SHORT DEDUCTION OF TAX AT SOURCE . 6 WE HAVE CONSIDERED THE RIVAL CONTENTION S AND CAREFULLY PERUSED THE RECORD. WE NOTICE THAT THE COORDINATE BENCH OF THIS TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN ASSESSEE S OWN CASE IN ITA NO. 874/ COCH/2008 AND THE TRIBUNAL , VIDE ITS ORDER DATED 21 ST NOV 2008 , HA S GIVEN ITA NO. 572/ COCH/ 2011 4 A FINDING THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE U/S 194J OF THE ACT AND ACCORDINGLY HELD THAT THERE IS NO INFIRMITY IN THE ORDER OF LD CIT(A) IN CONFIRMING THE DISALLO WANCE MADE U/S 40 ( A ) (IA) OF THE A CT . 6 .1 HOWEVER, THE HONBLE CALCUTTA HIGH COURT, IN THE SUBSEQUENT DECISION IN THE CASE OF DY CIT VS S K TEKRIWAL (SUPRA) HAS APPROVED THE VIEW TAKEN BY THE CO - ORDINATE BENCH OF THE TRIBUNAL THAT THE PROVISIONS OF SEC. 4 0(A)(IA) SHALL NOT APPLY FOR SHORT DEDUCTION OF TAX AT SOURCE. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE BY HONBLE CALCUTTA HIGH COURT: - THE COURT: WE ARE SATISFIED THAT THE ORDER UNDER CHALLENGE IS A JUST ORDE R. THE REASONING APPEARING AT PARAGRAPH 6 OF THE JUDGMENT AND/OR ORDER UNDER CHALLENGE READS AS UNDER: - IN THE PRESENT CASE BEFORE US THE ASSESSEE HAS DEDUCTED TAX U/S. 194C(2) OF THE ACT BEING PAYMENTS MADE TO SUB - CONTRACTORS AND IT IS NOT A CASE OF NON - DEDUCTION OF TAX OR NO DEDUCTION OF TAX AS IS THE IMPORT OF SECTION 40A(IA) OF THE ACT. BUT THE REVENUES CONTENTION IS THAT THE PAYMENTS ARE IN THE NATURE OF MACHINERY HIRE CHARGES FALLING UNDER THE HEAD RENT AND THE PREVIOUS PROVISIONS OF SECTI ON 194I OF THE ACT ARE APPLICABLE. ACCORDING TO REVENUE, THE ASSESSEE HAS DEDUCTED TAX @ 1% U/S. 194C(2) OF THE ACT AS AGAINST THE ACTUAL DEDUCTION TO BE MADE AT 10% U/S. 194I OF THE ACT, THEREBY LESSER DEDUCTION OF TAX. THE REVENUE HAS MADE OUT A CASE OF LESSER DEDUCTION OF TAX AND THAT ALSO UNDER DIFFERENT HEAD AND ACCORDINGLY DISALLOWED THE PAYMENTS PROPORTIONATELY BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE LD. CIT, DR ALSO ARGUED THAT THERE IS NO WORD LIKE FAILURE USED IN SECTI ON 40(A)(IA) OF THE ACT AND IT REFERRED TO ONLY NON - DEDUCTION OF TAX AND DISALLOWANCE OF SUCH PAYMENTS. ACCORDING TO HIM, IT DOES NOT REFER TO GENUINENESS OF THE PAYMENT OR OTHERWISE BUT ADDITION U/S. 40(A)(IA) CAN BE MADE EVEN THOUGH PAYMENTS ARE GENU INE BUT TAX IS NOT DEDUCTED AS REQUIRED U/S.40(A )(IA) OF THE ACT. WE ARE OF THE VIEW THAT THE CONDITIONS LAID DOWN U/S.40(A)(IA) OF THE ACT FOR MAKING ADDITION IS THAT TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED. IF BOTH THE CONDITI ONS ARE SATISFIED THEN SUCH PAYMENT CAN BE DISALLOW ED U/S. 40(A)(IA) OF THE ACT BUT WHERE TAX IS DEDUCTED BY THE ASSESSEE, EVEN UNDER BONAFIDE WRONG IMPRESSION, UNDER WRONG PROVISIONS OF TDS, THE PROVISIONS OF SECT ION 40(A)(IA) OF THE ACT CANNOT BE INVO KED. HERE IN THE PRESENT CASE BEFORE US, THE ASSESSEE HAS DEDUCTED TAX U/S. 194C(2) OF THE ACT AND NOT U/S. 194I OF THE ACT AND THERE IS NO ALLEGATION THAT THIS TDS IS NOT DEPOSITED WITH THE GOVERNMENT ACCOUNT. WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT HAS TWO LIMBS ONE IS WHERE, INTER ALIA, ASSESSEE HAS TO DEDUCT TAX AND THE SECOND WHERE AFTER DEDUCTING TAX, INTER ALIA, THE ASSESSEE HAS TO PAY INTO GOVERNMENT ACCOUNT. ITA NO. 572/ COCH/ 2011 5 THERE IS NOTHING IN THE SAID SECTION TO TREAT, INTER ALIA, THE ASSESSEE AS DEFAULTER WHERE THERE IS A SHORTFALL IN DEDUCTION. WITH REGARD TO THE SHORTFALL, IT CANNOT BE ASSUMED THAT THERE IS A DEFAULT AS THE DEDUCTION IS NOT AS REQUIRED BY OR UNDER THE ACT, BUT THE FACTS IS THAT THIS EXPRESSION, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB - SECTION (1) OF SECTION 139. THIS SECTION 40(A)(IA) OF THE ACT REFERS ONLY TO THE DUTY TO DEDUCT TAX AND PAY TO GOVERNMENT ACCOUNT. IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILITY OF ANY ITEM OR THE NATURE OF PAYMENTS FALLING UNDER VARIOUS TDS PROVISIONS, THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT U/S. 201 OF THE ACT AND NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT (A) ALLOWING THE CLAIM OF ASSESSEE AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. WE FIND NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS CASE AND THEREFORE, WE REFUSE TO ADMIT THE APPEAL. ACCORDINGLY, THE APPEAL IS DISMISSED. 6 . 2 ADMITTEDLY, THE CO - ORDINATE BENCH OF THE TRIBUNAL, WHICH DECIDED AN IDENTICAL ISSUE IN THE ASSESSEES CASE D ID NOT HAVE THE BENEFIT OF THE DECISION OF HONBLE CALCUTTA HIGH COURT ( REFERRED SUPRA ) , AS IT WAS RENDERED BY THE HIGH COURT SUBSEQUENTLY. WE FURTHER NOTICE THAT THIS BENCH OF TRIBUNAL HAS FOLLOWED THE DECISION OF THE HONBLE CALCUTTA HIGH COURT ( REFER RED SUPRA ) , IN THE CASE OF M/S APOLLO TYRES IN ITA NO.31 & 74/COCH/2010 IN ITS ORDER DATED 29 TH MAY 2013. 7 IN THE INSTANT CASE, ADMITTEDLY, THE ASSESSEE HAD DEDUCTED TAX AT SOURCE U/S 194C OF THE ACT AND INSTEAD OF SEC. 194J OF THE ACT. CONSISTENT WITH THE VIEW TAKEN BY THIS BENCH OF TRIBUNAL IN THE CASE OF M/S APOLLO TYRES LTD (REFERRED SUPRA), WE HOLD THAT THE TAX AUTHORITIES ARE NOT CORRECT IN INVOK ING THE PROVISIONS OF SEC. 40 ( A ) (IA) FOR MAKING THE IMPUGNED DISALLOWANCE. ACCORDINGLY, WE SET ASIDE TH E ORDER OF THE LD CIT(A) AND DIRECT THE AO TO DELETE THE DISALLOWANCE MADE U/S 40 ( A ) (IA) OF THE ACT FOR THE YEAR UNDER CONSIDERATION. ITA NO. 572/ COCH/ 2011 6 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF AUG 2013. SD/ - SD/ - (N.R.S. GANESAN) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 16 TH , AUG 2013 RAJ* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN