Giraben Atulbhai Shah, Ahmedabad V. DCIT, Central Circle-1(2), Ahmedabad

ITA 585/AHD/2022

AI Insights

The case revolves around an appeal by Giraben Atulbhai Shah against the order of the Commissioner of Income Tax (Appeals) -11, Ahmedabad, which confirmed the addition of Rs. 22,95,051 to the assessee's income for non-deduction of TDS under section 194A read with section 40(a)(ia) of the Income Tax Act, 1961, during the assessment year 2018-2019. The addition was related to delayed payment charges and interest payable on the purchase of shares from JM Financial Services Ltd. The primary legal contention was whether these charges constituted 'interest' under the Act, which would necessitate TDS deduction. The Tribunal found that the charges were integral to the share purchase transactions facilitated by a broker and thus should not be treated as interest for TDS purposes.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135841 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-07-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 28-12-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’D’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRISIDDHARTHANAUTIYAL,JUDICIALMEMBER आयकरअपीलसं./ITANo.585/AHD/2022 धििाधरणवरध / Asstt.Year:2018-2019 GirabenAtulbhaiShah, 8,AmrashrishBunglow, Nr.PrahladnagarGarden, Satellite, Ahmedabad-380015. PAN:ALHPS1801P Vs. D.C.I.T, CentralCircle-1(2), Ahmedabad. (Applicant)(Respondent) Assesseeby:WrittenSubmission Revenueby:ShriAtulPandey,Sr.D.R सुिवाईकीतारीख/DateofHearing:05/07/2023 घोरणाकीतारीख/DateofPronouncement:27/09/2023 आदेश/ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheAssesseeagainst theorderoftheLearnedCommissionerofIncomeTax(Appeals)-11,Ahmedabad, arisinginthematterofassessmentorderpassedunders.143(3)oftheIncome TaxAct,1961(here-in-afterreferredtoas"theAct")relevanttotheAssessment Year2018-2019. ITAno.585/AHD/2022 A.Y.2018-19 2 2.Attheoutset,itwasnoticedthattherewasadelayinfilingtheappealby theassesseefor145days.Itwassubmittedbytheassesseeintheaffidavitthat theorderpassedbytheLd.CIT(A),dated07/06/2022wasdeliveredinspam folderofe-mail.Therefore,theassesseecouldnotcometoknowabouttheorder oftheld.CIT(A).Assuch,itwasrealizedbytheassesseethatwhentherecovery proceedingsagainsttheoutstandingdemandwereinitiatedbytherevenue. Thereafter,theassesseeimmediatelyapproachedthetaxconsultanttofilethe appealbeforetheTribunalwhichwasfinallydonedated29/12/2022.However,in thisprocessadelayof145dayshasoccurredinadvertently.Thus,itwasprayed bytheassesseeforcondonationofdelay. 3.Onthecontrary,theLd.DRdidnotraiseanyseriousobjectionafter consideringthereasonforfilingtheappealwiththedelayof145daysandleftthe issueatthediscretionoftheBench.Consideringtheabovestatedfactsandthe lengthofthedelay,wedeemitfittocondone.Hence,wecondonethedelayand proceedtoadjudicatetheissueonmerit. 4.Theassesseehasraisedthefollowinggroundsofappeal. 1.TheorderpassedbytheAOandconfirmedbyCIT(A)isbadinlawandrequiredtobe quashed. 2.Ld.CIT(A)erredinlawandonfactsinmakingadditionofRs.2295051/-byinvokingsection 40(a)(ia)oftheActignoringfactthatdelayedpaymentchargeswouldnotpartkecharacterof interestu/s.194Aandaccordinglysection40(a)(ia). 3.Ld.CIT(A)oughttohaveconsideredthatpayeeJMFinancialServicesLtd.Hasincluded paymentbyassesseeintheirincomeandaccordinglyaspersecondprovisotosection 50(a)(ia),nodisallowancehasbeencalledfor. 4.Ld.CIT(A)failedtograntopportunityofpersonalhearingandthusviolatedprincipleof naturaljusticeandaccordinglyorderpassedbyhimrequiredtobesetaside. 5.Initiationofpenaltyproceedingsu/s.270Aisjustified. 6.TheonlyissueraisedbytheassesseeisthattheLd.CIT(A),erredin confirmingthedisallowancemadebytheAOforRs.22,95,051onaccountof non-deductionofTDSu/s194Ar.w.s.40(a)(ia)oftheAct. ITAno.585/AHD/2022 A.Y.2018-19 3 7.TheAOduringtheassessmentproceedingsfoundthattheassesseehas claimedexpenseforRs.66,39,497/-andRs.10,10,675/-representingthe delayedpaymentchargesandinterestpayable.AspertheAO,theassessee failedtodeducttheTDSundertheprovisionsofsection194AoftheActand thereforetheAOdisallowedthesumofRs.22,95,051/-being30%ofdelayed paymentchargesandinterestchargesundertheprovisionofsection40(a)(ia) oftheActandaddedtothetotalincomeoftheassessee. 6.AggrievedassesseepreferredanappealtotheLd.CIT(A).Theassessee beforetheLd.CIT(A)submittedthattheimpugneddelaypaymentchargesand interestpayablechargeswereincurredonaccountofoverduepaymentofthe purchaseofsharesmadefromthebrokernamelyJMFinancialservicesLtd.As suchtheimpugnedexpensesdonotrepresentonthemoneyborrowedfromthe parties.Accordingly,theassesseecontendedthattheimpugnedcharges,being partofthepurchases,cannotbemadesubjecttotheprovisionofTDS. 7.Itwasalsopointedoutbytheassesseethatthedelaypaymentcharges andinterestpayableasdiscussedabovedoesnotfitwithinthemeaningof interestasprovidedundersection2(28A)oftheAct.Theassesseeinsupportof hiscontentionhasreliedonvariouscaselawswhicharereproducedintheorder oftheLd.CIT(A). 8.However,theLd.CIT(A),disagreedwiththecontentionoftheassesseeon thereasoningthattheshareswerepurchasedbytheassesseefromthethird partywhichwasunknowntoher.Buttheshareswerepurchasedthroughthe involvementofthebroker,namelyJMFinancialServicesLimited,whichisnotthe seller.Nevertheless,thedelayedpaymentchargesandinterestchargeshavebeen paidtoJMFinancialServicesLimited.Therefore,thetransactiononwhich assesseehasincurreddelaypaymentcharges/interestchargescannotbedefined inthecategoryofinterestonthepurchases.Accordingly,theLd.CIT(A), ITAno.585/AHD/2022 A.Y.2018-19 4 confirmedtheorderoftheAObymakingtherelianceonvariousjudgmentswhich arereproducedinhisorder. 9.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus.Theassesseebeforeushasfiledthereturnsubmissionrunningfrom pages1to47andreiteratedthecontentionmadebeforetheLd.CIT(A). 10.Ontheotherhand,theLd.DRvehementlysupportedtheorderofthe authoritiesbelow. 11.WehaveheardtheLd.DRandconsideredthewrittensubmissionsfiledby theassessee.Thecontroversyinthepresentcaseariseswhetherthedelayed paymentchargesandinterestexpensesincurredbytheassesseearepartof purchasesoritisaninterestsubjecttotheprovisionofTDSundersection194Aof theAct.TheprovisionsofSection2(28A)oftheActdefinestheterm'interest'to meaninterestpayableinanymannerinrespectofanymoneysborrowedordebt incurred(includingadeposit,claimorothersimilarrightorobligation)and includesanyservicefeeorotherchargeinrespectofthemoneysborrowedor debtincurredorinrespectofanycreditfacilitywhichhasnotbeenutilized. Admittedlythereisnomoneyborrowedonwhichtheassesseehasincurredthe interestexpensesandthisfacthasnotbeendisputedbytheauthoritiesbelow.In thepresentcase,thedelaypaymentchargeandinterestexpensehavebeenpaid inrelationtothepurchasesfromthebroker,namelyJMFinancialServicesLimited. Undeniably,theassesseehaspurchasedsharesfromtheplatformofthestock exchangewherethebuyersandsellersarenotknowntoeachotherandthe transactionsbetweenthemaresettledthroughthebroker.So,insubstance,we findthatthebrokerisactingasamiddlemanauthorizedbythestockexchangein settlingthetransactionofpurchaseandsalesbetweentherespectivepartiesand outofsuchtransaction,thebrokerearnscommission.Itisalsoundisputedthat theassesseecannotcarryouttransactionsontheplatformofthestockexchange ITAno.585/AHD/2022 A.Y.2018-19 5 withouttheinvolvementofthebroker.Thus,weareoftheviewthatthedelay paymentchargeandinterestexpensesincurredbytheassesseeonthepayment tothebrokershouldbetreatedasapartandparcelofpurchasesofshares.Itis becausethebrokerisoneoftheintegralpartiesinexecutingthetransaction betweenbuyerandthesellerattheplatformofstockexchange.Besides,wealso notethattheassesseehasnotborrowedanymoneyfromanypartywherethe interestcosthasbeenincurred.Therefore,weareoftheviewthattheinterest anddelaypaymentchargesindisputecannotbemadesubjecttotheprovisionof TDSundertheprovisionofsection194AoftheAct.Accordingly,thequestionof makingdisallowanceoftheexpensesonaccountofnon-deductionofTDSunder theprovisionofsection40(a)(ia)oftheActdoesnotarise. 11.4Beforeparting,itisalsoimportanttonotethattheassesseebeforetheAO hascontendedthathehasalreadymadedisallowanceoftheexpensesincurred withoutdeductingtheTDSinthecomputationofincome.Thereisnodisputeto thefactthatthecontentionoftheassesseewasnotcorrect.However,itdoesnot meanthattheassesseeonsubmittingwrongdetailsshouldbemadetosufferon accountofthedisallowancewhicharenotwarrantedundertheprovisionoflaw. Accordingly,wesetasidethefindingsoftheLd.CIT(A)anddirecttheAOto deletetheadditionmadebyhim.Hence,thegroundofappealoftheassesseeis herebyallowed. 12.Intheresult,theappealfiledbytheassesseeisallowed. OrderpronouncedintheCourton27/09/2023atAhmedabad. Sd/-Sd/- (SIDDHARTHANAUTIYAL)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated27/09/2023 Manish ITAno.585/AHD/2022 A.Y.2018-19 6