The Asstt. Director Income Tax, Circle-5, RAJKOT-GUJARAT V. M/s D.M. L. Exim Pvt. Ltd., RAJKOT-GUJARAT

ITA 573/RJT/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2359 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V K CHAKRAVARTY M J RANPURA
• Keywords: Difference of opinion
• Section: 143(3); 194C; 12

Judgement Text

ITA NO . 573 / RJT/201 4 ASSESSMENT YEAR: 20 10 - 11 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E - COURT AT AHMEDABAD) [CORAM: PRAMOD KUMAR AM AND KUL BHARAT JM ] ITA NO. 573 /RJT/201 4 ASSESSMENT YEAR: 20 10 - 11 ASSTT. COMMISSIONER OF INCOME TAX . .......... ...... ... . . . ..... APP ELLANT CIRCLE - 5, RAJKOT . VS. DML EXIM PVT. LTD. . .......... .... ...... ..................RESPONDENT 405, EMBASY T OWER, JAWAHAR ROAD, OPP. PUBLIC GARDEN RAJKOT . [PAN: A A B CD 8911 B ] APPEARANCES BY: V .K. CHAKRAVARTY F OR THE APPELLANT M.J. RANPURA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : DECEMBER 31 ST , 201 5 DATE OF PRONOUNCING THE ORDER : JANUARY 19 TH , 2016 O R D E R PER PRAMOD KUMAR AM: 1. BY W A Y OF THIS A PPEAL, THE ASSES S ING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 23.07.2014 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR A SSESSMENT YEAR 2010 - 11, ON THE FOLLOWING GROUNDS: 1. ON FAC T S AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING T HE DISALLOWANCE OF RS.67,84,807/ - U/S 40(A)(I A ) OF THE IT ACT. ITA NO . 573 / RJT/201 4 ASSESSMENT YEAR: 20 10 - 11 PAGE 2 OF 4 2. ANY OTHER GROUND TH A T THE REVENUE MAY RAISE BEFORE OR DURING THE PROCEEDING BEFORE THE HON BLE ITAT. 3. ON THE FACTS OF T HE CASE A ND IN LAW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) MAY B E SET A SIDE AND TH A T OF THE AO BE RESTORED TO THE ABOVE EXTENT. 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATER IAL AND UNDISPUTED FACTS NEED TO BE TAKEN NOTE OF. DURING THE ASSESSMENT PR OCEEDINGS , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEDUCTED TAX UNDER SE C TION 194C FROM THE PAYMENT AGGREGATING TO RS.67,84,807/ - TO T HE C US T OM S H OUSE A GENT S WHEREAS ACCO RDING TO THE ASSESSING O F FICER, TAX W A S DEDUCTIBLE UND E R SECT I ON 194 J . THE ASSESSING OFFICER WAS THUS OF THE VIEW THAT THERE WAS A SHORT DEDUCTION OF TAX AT SOURCE FROM THESE PAYMENTS. IT WAS IN THIS BACKDROP HE CAME TO THE CONCLUSION THAT THERE WAS FAIL URE TO DEDUCT TAX AT SOURCE FROM PAYMENTS TO THE CUSTOM S HOUSE AGENT S AND ACCORDINGLY THE SAME IS TO BE DISALLOWED UNDER SE CTION 40( A )(IA) OF THE ACT. AGGRIEVED BY THE DISALLOWANCE SO MADE, T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . CIT(A). IT WAS, INTER ALIA, CONTENDED BY THE ASSESSEE THAT THE DISALLOWANCE UNDER SECTION 40( A )(I A ) CANNOT BE RESORTED TO IN THE CASE OF SHO RT DEDUCTION OF TAX AT SOURCE , EVEN IF ANY AND , THEREFORE , THE IMPUGNED DISALLOWANCE IS UNSUSTAINABLE IN LAW. RELIANCE WAS PLACED ON HON BLE HIGH COURT OF CALCUTTA IN THE C A SE OF CIT VS. S . K . TEKRIWAL , 260 CTR 73 . A CCEPTING TH ESE ARGUMENTS , L EARNED CI T(A) DELETED THE IMPUGNED DISALLOW ANCE AND JUSTIFIED HIS STAND AS FOLLOWS : - 7. WHILE HOLDING THAT THE PAYMENTS MADE TO CHAS ARE LIABLE FOR TAX DEDUCTION AT SOURCE U/S. 194J OF THE IT ACT, 1961, THE ISSUE AT HAND IS WHETHER THE ASSESSING OFFICER IS JUSTIFIED TO DISALLOW THE ENTIRE PAYMENT MADE TO CHAS AT RS.67,84,807/ - U/S. 40(A)(IA) OF THE IT ACT, 1961 ON THE GROUND THAT THE AP PELLANT HAS DEDUCTED THE TAX ON T HE IMPUGNED PAYMENTS U/S. 194C @ 2% AS AGAINST STIP U LATED DEDUCTION OF TAX @ 10% U/S. 194J OF TH E IT ACT, 1961. THE ASSESSING O FFICER HAS NOT MADE AN Y NOTABLE DISCUSSION ON THIS ISSUE. HOWEVER, ON THE OTHER HAND , THE AUTH ORISED ITA NO . 573 / RJT/201 4 ASSESSMENT YEAR: 20 10 - 11 PAGE 3 OF 4 REPRESENTATIVE HAS CITED THE JUDGEMENT OF HON BLE HIGH COURT OF CALCUTTA IN THE C A SE OF CIT VS. S.K. TEKRIWAL 260 CTR 0073, WHEREIN IT HAS BEEN HELD THAT EXPENSES ARE NOT LIABLE TO BE DISALLOWED U/S 40(A)(IA) ON ACCOUNT OF SHORT DEDUCTION OF TAX AT SOURCE . THE RELEVANT PARAGRAPH OF THE JUDGEMENT IS REPRODUCED HEREUNDER FOR THE S A K E OF BREVITY: WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A)(I A ) OF THE ACT HAS TWO LIMBS ONE IS WHERE, INTER ALIA, ASSESSEE HAS TO DEDUCT TAX AND THE SECOND WHERE AFTER DEDUCTING TAX, IN T ER ALIA, T HE ASSESSEE HAS TO PAY INTO GOVERNMENT ACCOUNT . 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 FAC T S IS THAT THIS EXPRESSION, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XIVV - 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 T HERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXAB ILITY OF ANY ITEM OR THE NATURE OF PAYMENT FALLING UNDER VARIOUS T DS PROVISIONS, THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT U/S. 201 OF THE ACT A ND NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 8. APART FROM THE ABOVE CITATION, T HE AUTHORISED REPRESENTATIVE HAS CITED THE FOLLOWING JUDGEMENTS TO BUTTRESS HIS ARGUMENTS THAT THE DISALLOWANCE U/S. 40(A)(IA) IS NOT WARRANTED WHEN THE TAX DEDUCTION AT SOURCES WAS INCORRECTLY ME UNDER A DIFFERENT SECTION W HICH RESULTED IN THE SHORTFALL. HON BLE ITAT DELHI E BENCH IN THE CA S E OF GLAXO SMITHKLINE CONSUMER HEAL T HCARE LTD. V S. ITO 12 SOT 221 (DELHI) HON BLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS. JIVANLAL LALLOOBHAI & CO. 206 ITR 548 (BOM) HON BLE ITAT, MUM BAI B BENCH IN THE C A S E OF ACIT VS. MERCHANT SHIPPING SERVICES (P) LTD. 129 ITD 109 (MUMBAI) HON BLE IT A T MUMABI IN THE CASE OF DCIT VS. CH A NDABHOY & JASSOBHOY 49 SOT 448 (MUMBAI) 9. RESPECTFULLY FOLLOWING THE ABOVE JUDGEMENT, I AM ALSO OF THE VIEW THAT IN A CASE LIKE THIS, WHERE THE APPELLANT HAS DEDUCTED TAX AT SOURCE IN RESPECT OF THE PAYMENTS MADE TO CH A S @ 2% UNDER SECTION 194C, WHEN IT IS REQUIRED TO BE MADE @10% U/S. 194J OF THE IT ACT, 1961, THE PROVISIONS OF SECTION 40(A)(IA) OF THE IT ACT, 1961 CANNOT BE MADE APPLICABLE. AS HELD BY THE HON BLE HIGH COURT OF CALCUTTA IN THE ABOVE REFERRED CASE THAT IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILITY OF ANY ITEM OR THE NATURE OF PAYMENT FALLING UNDER VARIOUS TDS PROVIS IONS, THE ASSESSEE CAN BE DECLARED TO BE AN ASSESS EE IN DEFAULT U/S. 201 OF THE ACT AND NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)( I A) OF THE ACT. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. THE ADDITION MADE AT RS.67,84,807/ - ON ACCOUNT OF ITA NO . 573 / RJT/201 4 ASSESSMENT YEAR: 20 10 - 11 PAGE 4 OF 4 DISALLOWANCE OF PAYMENTS MAD E TO CHAS U/S. 40(A) ( IA) OF THE IT A CT, 1961 STANDS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 3. AGGRIEVED BY T HE RELIEF SO GRANTED BY THE LD . CIT(A), T HE ASSESSING OFFICER IS IN APPEAL BEFORE US . 4 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. WE ARE NO T INCLINED TO DISTURB THE VERY WELL REASONED CONCLUSIONS ARRIVE D AT BY THE LD . CIT (A) AS HE HAS EXPLAINED AT LENGTH A BINDING JUDICIAL PRECEDENT FOR THE PROPOSITION THAT A SHOR T DEDUCTI O N O F TAX AT SOURCE, EVEN IF ANY, C A NNOT BE VISITED WITH THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. T HEREFORE , THE DISALLOWAN CE WAS UNSUSTAINABLE IN LAW AND THE LD . CIT (A) WAS QUITE JUSTIFIED IN D ELETING TH E IMPUGNED DISALLOWANCE . W E APPROVE AND UPHOLD THE ERUDITE AND WELL REASONED STAND TAKEN BY THE LD . CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 5. IN THE RESULT, THE APPE AL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 19 TH DAY OF JANUARY , 201 6 . SD/ - SD/ - KUL BHARAT PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 19 TH DAY OF JANUARY , 201 6 COPIES TO: (1) TH E APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT