HCC PATI JOINT VENTURE, MUMBAI V. ACIT 23(1), MUMBAI

ITA 5743/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7779 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 23-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 28-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S SHRIVASTA VA
• Assessee Lawyers: H P MAHAJANI
• Section: 194C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, H, MUMBAI BEFORE SHRI S V MEHROTRA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 5743/MUM/2009 (ASSESSMENT YEAR 2005-06) HCC PATI JOINT VENTURE HINCON HOUSE, LBS MARG, VIKHROLI (W), MUMBAI-400083 PAN:AAACH8971N . APPELLANT VS ACIT 23(1) 1 ST FL. C-10 PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI-400051 RESPONDENT APPELLANT BY : SHRI H P MAHAJANI RESPONDENT BY : SHRI R S SHRIVASTA VA O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 28.08.2009 OF THE CIT(A)- FOR THE ASSES SMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THI S APPEAL: : I. ON FACTS AND CIRCUMSTANCES O THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE DECISION OF THE AO OF DISALLOWING RS.32,87,534/- ITA NO. 5743/MUM/2009 (ASSESSMENT YEAR 2005-06) 2 UNDER SECTION 40(A)(IA) OF THE IT ACT ON THE GROUN D THAT TDS DEDUCTED THEREFROM HAD NOT BEEN DEPOSITED, IGNORING THE FACT THAT THE TDS WAS ADJUSTED AGAINS T THE EXCESS DEPOSITS OF TAX MADE IN EARLIER YEAR; II) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN STATING THAT THE AO HAS NOTED THAT THE APPELLANT HAD NOT DEDUCTED TDS ON SUBCONTRACTING EXPENSES WHEN IN FACTS THE AO HAS STATED THAT THE ASSESSEE HAS DEDUCTED TAX O N THE PAYMENTS MADE TO THE FOLLOWING PARTIES BUT NOT DEPOSITED WITHIN FINANCIAL YEAR 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E ADMITTED CERTAIN PAYMENTS MADE ON VARIOUS DATES ON ACCOUNTS OF SUB-CONTRACTING EXPENSES. THE AO HAS NOTED FRO M THE TAX AUDIT REPORT THAT THE CERTAIN EXPENSES HAVE BEEN IN ADMISSIBLE U/S 40(A)(IA) AMOUNTING TO RS.2,12,736/-. THE DETA ILS OF THE EXPENSES ARE GIVEN BY THE AO AT PAGE THREE OF ASSES SMENT ORDER. THE AO FURTHER NOTED THAT THE ASSESSEE HAS DEDUCTED THE TAX ON THE PAYMENT MADE TO THE VARIOUS PARTIES ON ACCOUNT OF CERTAIN SUBCONTRACTING EXPENSES BUT NOT DEPOSIT ED WITHIN THE FINANCIAL YEAR OR BEFORE THE DUE DATE. THE TOT AL OF SUCH PAYMENTS IS RS.73,95,380/-. THE AO ISSUED SHOW CAU SE NOTICE TO THE ASSESSEE TO SHOW CAUSE AS TO WHY THE SE EXPENSES SHOULD NOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT. 4. THE ASSESSEE SUBMITTED BEFORE THE AO THAT DURIN G THE FINANCIAL YEAR 2003-04 THERE WAS A EXCESS DEPOSIT S OF TAX OF ITA NO. 5743/MUM/2009 (ASSESSMENT YEAR 2005-06) 3 RS.1,26,417/-. ACCORDINGLY, THE PORTION OF SUCH EX CESS SUM WAS ADJUSTED AGAINST THE CURRENT YEAR LIABILITY. 5. THE AO AFTER CONSIDERING THE SUBMISSIONS AND FAC TS OF THE CASE HELD THAT RS.73,95,380/- HAS BEEN PROVIDED . HOWEVER, ACTUAL AMOUNT OF RS.32,87,534/- HAS BEEN CHARGED TO PROFIT AND LOSS ACCOUNT. SINCE THE PROVISIONS O F LAW TO ALLOW AND DISALLOW CERTAIN EXPENSES CLAIMED BY THE ASSES SEE, THE SAME IS RESTRICTED TO RS.32,87,534/- BEING AMOUNT D EBITED TO THE PROFIT AND LOSS ACCOUNT. ACCORDINGLY, THE AO MADE THE ADDITION ON THIS ACCOUNT O F RS.2,12,736/- AND RS32 ,87,534/-, TOTAL AMOUNTING TO RS.35,00,207/- THE ASSESSEE CH ALLENGED THE DISALLOWANCE OF RS.32,87,534/- U/S 40(A)(IA) OF THE ACT. 6. ON APPEAL, THE CIT(A) UPHELD THE DISALLOWANCE M ADE BY THE AO ON THIS ACCOUNT. 7. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMIT TED THAT DURING THE FINANCIAL YEAR 2003-04, THERE WAS A EXCESS DEPOSITS OF TAX WHICH WAS INTIMATED TO THE ITO, TD S, VIDE LETTER DATED 29.7.2004. THE ASSESSEE DEDUCTED THE TAX ON THE PAYMENT MADE IN THE CURRENT YEAR AND INSTEAD OF BEI NG DEPOSITED HAD BEEN ADJUSTED AGAINST THE SAID EXCESS PAYMENT OF TDS MADE IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR. ITA NO. 5743/MUM/2009 (ASSESSMENT YEAR 2005-06) 4 THE LD. AR HAS SUBMITTED THAT AS PER THE CBDT CIRCU LAR NO.285, DATED 20.10.1980 THE EXCESS PAYMENT MADE BY THE ASESEEE WHICH IS MORE THAN THE TAX DEDUCTED AT SOUR CE SHOULD BE ADJUSTED AGAINST THE EXISTING TAX LIABILITY AN D EVEN AFTER MADE SUCH LIABILITY, THE BALANCE AMOUNT IF ANY SHOU LD BE REFUNDED TO THE ASSESSEE. THE LD. AR HAS FURTHER S UBMITTED THAT THE DEPARTMENT HAS NOT DISPUTED THAT THE EXCE SS DEPOSITS OF TAX BY THE ASSESSEE IN THE PREVIOUS YEAR AND THE REFORE THE ASSESSEE IS ENTITLED FOR ADJUSTMENT OF THE SAID EX CESS PAYMENT AGAINST THE CURRENT YEAR TAX LIABILITY. HE HAS ALSO RELIED UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF BASF (INDIA) LTD AND ANOTHER V/S W HASAN C IT REPORTED IN 280 ITR 136 (BOM) AND SUBMITTED THAT TH E HON. HIGH COURT HAS CONSIDER THE CIRCULAR NO. 790 DATED 20.4.2000 AND HELD THAT THE SAID CIRCULAR GIVES THE RIGHT TO THE REFUND OF TDS TO THE DEDUCTER. THUS, THE CIRCULAR CREATE VES TED RIGHT TO CLAIM OF REFUND OF TDS. THE LD. AR HAS SUBMITTED THAT WHEN THE ASSESSEE IS ENTITLED FOR REFUND OF EXCESS DEPOS IT OF TAX THEN THE SAME HAS TO BE ADJUSTED AGAINST THE TAX LI ABILITY OF THE ASSESSEE AND THEREFORE THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) IS UNJUSTIFIED AND ILLEGAL. 8. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THERE IS NO PROVISION IN THE ACT FOR ADJUSTMENT OF THE EXC ESS TDS ITA NO. 5743/MUM/2009 (ASSESSMENT YEAR 2005-06) 5 DEPOSITED BY THE DEDUCTOR AGAINST THE LIABILITY OF THE ASSESSEE. THE LD. DR HAS FURTHER SUBMITTED THAT TH E CIRCULAR RELIED UPON BY THE ASSESSEE IS ONLY NECESSARY ADMIN ISTRATIVE MEASURE AND THE CLAIM OF THE REFUND OR ADJUSTMENT HAS TO BE DECIDED BY THE AO AND THE ASSESSEE HAS NO RIGHT TO ADJUST THE SAME ON ITS OWN. THE CBDT CIRCULAR IS AN ADMIN ISTRATIVE MEASURE FOR REFUND OF THE EXCESS TDS DEPOSITED BY T HE DEDUCTOR. HE HAS FURTHER CONTENDED THAT THE SAID CI RCULAR DOES NOT GIVE RIGHT TO THE ASSESSEE NOT TO DEPOSIT THE T DS DEDUCTED FOR THE SUBSEQUENT YEAR. HE HAS RELIED UPON THE OR DERS OF THE LOWER AUTHORITIES. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. AS FAR AS THE BOARD CIRCULAR NO.285 DATED 21.10.1980 IS CONCERNED, THERE IS NO DOUBT THAT THE BOARD HAS CLARIFIED AND ISSUED THE INSTRUCTIONS THAT THE EXCESS PAYMENT SHOULD BE ADJUSTED AGAINST THE EXISTING TAX LIABILITY AFTER S UCH LIABILITY IF ANY BALANCE AMOUNT REMAINED, THE SAME MAY BE REFUND ED TO THE ASSESSEE. THE HON. JURISDICTIONAL HIGH COURT IN THE CASE OF BASF (INDIA) LTD AND ANOTHER V/S W HASAN CIT R EPORTED IN 280 ITR 136 (BOM) HELD THAT THE SAID CIRCULAR CREA TE WASTED RIGHT IN FAVOUR OF THE DEDUCTOR FOR REFUND OF THE TDS. THERE IS NO QUARREL ON THE POINT THAT THE ASSESSEE HAS RI GHT TO CLAIM THE REFUND OF THE EXCESS PAYMENT OF TDS. FURTHER THE ITA NO. 5743/MUM/2009 (ASSESSMENT YEAR 2005-06) 6 QUESTION ARISES THAT WHETHER THE ASSESSEE IS ENTITL ED NOT TO DEPOSIT THE TDS DEDUCTED IN RESPECT OF THE PAYME NT MADE AND CLAIM ADJUSTMENT OF THE EXCESS PAYMENT MADE IN THE EARLIER YEARS. THE ISSUE BEFORE US IS NOT REFUND OF THE EXCESS PAYMENT OF TDS OR ADJUSTMENT OF THE EXCESS PAYMENT AGAINST THE CURRENT TAX LIABILITY. BUT THE ISSUE BEFORE US IS DISALLOWANCE OF THE CLAIM OF EXPENDITURE ON THE B ASIS THAT THE ASSESSEE DEDUCTED THE TAX BUT NOT DEPOSITED WITH TH E GOVERNMENT WITHIN THE PERIOD AS PRESCRIBED UNDER TH E STATUTE AND SECTION 40(A)(IA). THE UNDISPUTED FACT IS THAT THE ASSESSEE MADE THE PAYMENT TO SUB-CONTRACTOR AND DE DUCTED THE TAXES BUT THE SAME WAS NOT DEPOSITED WITH THE G OVERNMENT ON THE PRETEXT THAT THE ASSESSEE HAS ADJUSTED THE S AME AGAINST THE EXCESS PAYMENT IN THE EARLIER YEARS. I N CASE OF FAILURE OF DEDUCTION OF TAX OR FAILURE TO DEPOSIT O F THE SAME U/S 194C OR THE OTHER PROVISIONS OF IT ACT AS THE CASE MAY BE THE ASSESSEE HAS TO FACE THE CONSEQUENCES PROVIDED UND ER CHAPTER XVII OF THE ACT INVITING THE PENALTY OR INT EREST. THE PROVISIONS OF SECTION 40(A)(IA) ARE IN THE NATURE O F ADDITIONAL MEASURE TO ENSURE THE DEDUCTION AND DEPOSIT OF THE TAX (TDS) WITHIN TIME. THE ASSESSEE MADE MORE PAYMENT THAN REQUIREMENT AND THE CBDT HAS GIVEN RIGHT TO THE DE DUCTOR TO CLAIM REFUND OR ADJUST THE EXCESS PAYMENT, THE REFU ND AND CLAIM OF EXCESS PAYMENT HAS TO BE DECIDED BY THE RE VENUE ITA NO. 5743/MUM/2009 (ASSESSMENT YEAR 2005-06) 7 AUTHORITIES. BUT IN THE GARB OF THE SAID CLAIM O F EXCESS DEPOSIT OF THE TDS DEDUCTED BY THE ASSESSEE ON THE PAYMENT DURING SUBSEQUENT YEAR CANNOT BE WITHHELD BY THE A SSESSEE. THE ASSESSEE HAS TO DEPOSIT THE TDS IN COMPLIANCE W ITH THE PROVISIONS OF THE ACT. SINCE, THE TDS DEDUCTED BY T HE ASESEEE IS NOT THE ASSESSEES OWN TAX LIABILITY BUT THE AS SESSEE IS UNDER OBLIGATION AND DUTY TO DEPOSIT THE SAME WITH THE GOVERNMENT AND THEREFORE, NON-DEPOSIT OF THE TDS DE DUCTED BY THE ASSESSEE IS CLEAR CONTRADICTION OF THE PROV ISIONS OF THE ACT. MOREOVER, WHEN THE TDS IS DEDUCTED ON THE PAYM ENT, THE SAID PAYMENT ARE ALLOWED AS EXPENDITURE ONLY WHEN T HE ASSESSEE FULFILS THE CONDITIONS AS PRESCRIBED U/S 4 0(A)(IA). THEREFORE, IRRESPECTIVE OF THE FACTS THAT THE ASSE SSEE IS ENTITLED TO CLAIM THE REFUND OR GET IT ADJUSTED AGA INST THE TAX LIABILITY UNDER THE PROVISIONS OF THE ACT, THE ASSE SSEE CANNOT WITHHOLD THE TDS DEDUCTED AND IF THE ASSESSEE DOES SO THEN THE RELEVANT PROVISIONS OF THE ACT ARE ATTRACTED. THEREFORE, IN OUR VIEW WHEN THE ASSESSEE UNDISPUTEDLY THE DEDUCT ED THE TAX BUT TO THE EXTENT THE SAME WAS NOT DEPOSITED WI TH THE GOVERNMENT THE PROVISIONS OF SECTION 40(A)(IA() ARE ATTRACTED AND THE CLAIM OF THE DEDUCTION OF SUCH EXPENDITURE WOULD BE DISALLOWED. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LOWER AUTHORITIES QUA THIS ISSUE. WE MAY CLARIFY THAT THIS VIEW WILL HAV E NO BEARING ITA NO. 5743/MUM/2009 (ASSESSMENT YEAR 2005-06) 8 ON THE RIGHT OF THE ASSESSEE TO CLAIM THE REFUND OR ADJUSTMENT AGAINST THE CURRENT LIABILITY OF TAX. 10. THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAR, 2011 SD SD (S V MEHROTRA ) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI, DATED 31ST MAR 2011 SRL:29311 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI