Sri.M.Radhakrishnan Nair, Cochin V. The ITO, Cochin

ITA 587/COCH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96788 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 19-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 24-12-2014
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: PREETHA S NAIR
• Keywords: Rule of consistency; Retrospective amendment
• Section: 201(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO.587 /COCH/2014 ASSESSMENT YEAR : 2009-10 M. RADHAKRISHNAN NAIR, FLAT NO.1, A-2, FOUR SQUARE MANOR, HOLY FAITH BUILDING, THRIKKAKARA, KOCHI-682 021. [PAN: ACJPN 1259N] VS. THE INCOME TAX OFFICER, WARD- 2(3), KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SMT. PREETHA S. NAIR, ADV. REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 19/11/2015 DATE OF PRONOUNCEMENT 23/11/2015 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE ARISES FRO M THE ORDER OF THE LD. CIT(A)-II, KOCHI DATED 09-09-2014 FOR THE ASSESSMENT YEAR 2009 -10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL:- 1 . THE ORDER OF THE COMMISSIONER OF INCOME TAX(A), COC HIN-II DATED 09-09-2014 IN I.T.A. 95/R-2/E/CIT(A)-II/2011-12 IS OPPOSED TO LAW FACTS AND WEIGHT OF EVIDENCE. 2. THE CIT (A) WAS WRONG IN CONFIRMING THE DISALL OWANCE BY THE ASSESSING OFFICER OF RS.10,29,877/- PAID AS INTERE ST TO NBFCS SUCH AS RELIANCE CAPITAL LTD., L&T FINANCE LTD., SUNDARAM F INANCE LTD., INDIA I.T.A. NO.587/COCH/2014 2 BULL CAPITAL SERVICES PVT. LTD. AND OTHER INTEREST PAYMENTS ON THE GROUND THAT THE SAME IS WITHOUT DEDUCTING TAXES. 3. THE CIT(A) WAS WRONG IN CONFIRMING THE DISALLOW ANCE BY THE ASSESSING OFFICER OF RS.70,486/- PAID AS INTEREST T O FEDERAL BANK LTD. WITHOUT DEDUCTING TAXES THOUGH THIS SHOULD ALSO BE TREATED AT PAR WITH INTEREST PAYMENT TO HDFC BANK ETC. 4. THE CIT(A) OUGHT TO HAVE ALLOWED THE CLAIM IN VIEW OF THE DECISION OF THE SUPREME COURT IN HINDUSTAN COCA COLA BEVERAG ES 293 ITR 226 (SC) AND THE AMENDMENT MADE TO SECTION 201 AND SECT ION 191 OF THE INCOME ACT WITH RETROSPECTIVE EFFECT FROM 01-06-200 2 (FINANCE ACT, 2008). CIT(A) SHOULD HAVE FOLLOWED HER DECISION FO R A.Y. 2008-09 ON THE SAME POINT DECIDE IN I.T.A. 110/R/E/CIT(A)-II/2 010-11 DATED 15-1- 2014. 5. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE PAYMENT ON ACCOUNT OF ADVERTISEMENT TO M/S. GUIDE ADVERTISI NG RS.98000/- AND RS.51,936/- TO VARIOUS OTHER PARTIES WERE INCURRED FOR THE PURPOSE OF BUSINESS. HENCE THE DISALLOWANCE IN THIS RESPECT WA S NOT JUSTIFIED. 6. THE CIT(A) WENT WRONG IN REJECTING AND IGNORI NG THE EXPLANATION PLACED BEFORE HER THAT THE APPELLANT HAD PRODUCED A LL BOOKS AND RECORDS BEFORE THE ASSESSING OFFICER AT THE TIME OF APPEAL HEARING. 3. THE BRIEF FACTS OF THE CASE AS EMANATING FR OM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: IN THE FINANCIAL STATEMENT THE ASSESSEE HAD DEBITE D RS.36,79,537/ UNDER INTEREST AND BANK CHARGES. ON VERIFICATION I T IS SEEN THAT THE ASSESSEE HAS TAKEN BOTH SECURED AS WELL AS UNSECURE D LOANS AND INTEREST ON ACCOUNT OF SECURED AS WELL AS UNSECURED LOAN CLAIMED AS EXPENDITURE. THE DETAILS OF INTEREST CLAIMED ARE AS FOLLOWS: BANK CHARGES 3,64,671/- FINANCE CHARGE FOR RELIANCE LOAN 3,0 1,769/- FINANCING CHARGE 12,06,787/- INTEREST ON LTF 57,132/- FINANCE CHARGES(INDICA) 65,862/- FINANCE CHARGE (LANCER) 1,96,046/- I.T.A. NO.587/COCH/2014 3 INTEREST ON TRADE ADVANCE SFL 3,6 2,677/- INTEREST PAID 85,349/- TOTAL 36,79,537/- THE ASSESSEE HAS PAID SO MUCH OF INTEREST TO SO MAN Y INSTITUTIONS AND SOME OF THESE INSTITUTIONS ARE NON-BANKING FINA NCIAL COMPANIES TAX IS LIABLE TO BE DEDUCTED FROM THE INTEREST PAID TO THESE NON- BANKING FINANCIAL INSTITUTIONS. THEN ONLY THE INTE REST IS ALLOWABLE AS EXPENDITURE. HOWEVER TAX HAS NOT BEEN DEDUCTED FRO M THESE INTEREST PAID TO THESE NON-BANKING FINANCIAL INSTIT UTIONS. THE TOTAL INTEREST PAID TO NBFC IS AS FOLLOWS: 1. FINANCE CHARGE FOR RELIANCE LOAN 3,01,769/- 2. FINANCING CHARGE 12,06,787/- INTEREST ON LTF 57,132/- INTEREST TO TRADE ADVANCE TO SFL 3,62,677/- TOTAL 19,28,365/- HENCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION OF RS.19,28,365/- BEING THE INTEREST PAID. THIS IS AD DED TO THE TOTAL INCOME. 4. HOWEVER THE CIT(A) DELETED THE ADDITION TO THE EXTENT OF RS.7,78,002/- SINCE THE ASSESSEE HAD TAKEN PERSONAL LOANS FROM HD FC AND STANDARD CHARTERED BANK WHICH BEING SCHEDULED BANKS. THE AS SESSING OFFICER WAS NOT CORRECT IN LAW IN DISALLOWING THE WHOLE AMOUNT AND ACCORDINGLY, THE SAID ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED BY THE LD. CIT(A) . THE LD. CIT(A) FURTHER OBSERVED THAT OLD LOANS HAVE BEE N TAKEN FROM VARIOUS NBFCS EXCEPT THE SAID TWO LOANS MENTIONED HEREINABO VE, AND THEREFORE, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.11,50,363/ -. 5. THE ASSESSING OFFICER WENT ON TO DISALLOW PA YMENT OF RS.98,000/- TO GUIDE ADVERTISING AND RS.51,936 TO CLASS VEHICLES T OTALLING TO RS.1,49,936/- I.T.A. NO.587/COCH/2014 4 THE ASSESSING OFFICER OBSERVED THAT AS PER THE PROV ISIONS OF SECTION 40(A)(IA), THE ASSESSEE IS ELIGIBLE FOR DEDUCTION ON ACCOUNT O F ADVERTISEMENT ONLY IF HE HAS DEDUCTED TAX AT SOURCE ON SUCH PAYMENTS. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND HE ACCORDINGLY, OBSERVED THAT THE ADVERTISEMENTS MADE BY THE ASSESS EE ARE IN FACT A CONTRACT AND TDS SHOULD HAVE BEEN DEDUCTED WHICH, HAS NOT BE EN DEDUCTED BY THE ASSESSEE AND ACCORDINGLY, THE ASSESSING OFFICER MAD E THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 6. THE CIT(A) CONFIRMED THE DISALLOWANCE OF RS.1, 49,936/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ADVERTISEMENT. 7. THE LD. COUNSEL FOR THE ASSESSEE WITH REGARD TO GROUND NO. 3 FOR PAYMENT OF LOANS TO FEDERAL BANK FOR BUYING THE CLA SS CARS AND ARGUED THAT THESE PAYMENTS WERE MADE TO THE SCHEDULED BANKS AND NO TDS IS REQUIRED TO BE DEDUCTED. 8. THE LD. DR ON THE OTHER HAND STATED THAT NO T DS IS REQUIRED TO BE DEDUCTED FOR THE PAYMENT TO THE SCHEDULED BANKS AS PER THE ACT. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. WE ARE CONVINCED BY THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE WHICH I.T.A. NO.587/COCH/2014 5 IS CONCEDED BY THE LD. DR THAT NO TDS IS REQUIRED T O BE DEDUCTED ON PAYMENT OF INTEREST TO SCHEDULED BANKS AS PER THE A CT AND THEREFORE, THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DEL ETE THE ADDITION AMOUNTING TO RS.70,486/- AND TO THAT EXTENT, THE ORDER OF THE LD. CIT(A) IS DIRECTED TO BE REVERSED. ACCORDINGLY, GROUND NO. 3 OF THE ASSE SSEE IS ALLOWED. 10. AS REGARDS GROUND NOS. 2 & 4, WHICH IS WITH R EGARD TO PAYMENT OF INTEREST TO NBFCS, SUCH AS RELIANCE CAPITAL LTD., L &T FINANCE LTD., SUNDARAM FINANCE LTD., ETC., THERE IS NO DISPUTE TO THE FAC T THAT THESE ARE NON BANKING FINANCIAL CORPORATIONS AND TAX IS REQUIRED TO BE DE DUCTED AT SOURCE ON PAYMENT OF INTEREST TO SUCH NBFCS WHICH HAS IN FACT NOT BEEN DEDUCTED BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE ARGU ED THAT FOR THE ASSESSMENT YEAR 2008-09, THE APPELLATE AUTHORITY HA D ALLOWED INTEREST PAYMENTS TO NBFCS AND AFTER THE DECISION OF THE APP ELLATE AUTHORITY, I.E., THE LD. CIT(A), THE REVENUE HAS NOT GONE INTO APPEAL AN D THEREFORE, THE ORDER OF THE LD. CIT(A) ATTAINED FINALITY AND ACCORDINGLY, T HE PRINCIPLE OF CONSISTENCY SHOULD HAVE BEEN FOLLOWED. 11. IN THIS REGARD, A WRONG OR ERRONEOUS VIEW TA KEN EARLIER CANNOT BE ALLOWED TO BE PERPETUATED ON THE GROUND OF CONSISTE NCY IS A WELL-SETTLED PROPOSITION OF LAW. I.T.A. NO.587/COCH/2014 6 12. HOWEVER, IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES REPORTED IN 2 93 ITR 226 AND IN VIEW OF THE AMENDMENT MADE TO SECTION 201(1) AND SECTION 40(A)(IA) OF THE ACT, IF THE PAYEE HAS FURNISHED THE RETURN OF INCOME U/S. 139, AND HAS TAKEN INTO ACCOUNT SUCH INCOME IN SUCH RETURN OF INCOME AND HA S PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME , AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCO UNTANT IN SUCH FORM AS MAY BE PRESCRIBED, THE ASSESSEE SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX OFFERED. IN THE CIRCUMSTANCE S AND FACTS OF THE CASE, AS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE, THE SAI D INCOME HAS BEEN DECLARED BY THE SAID NBFCS IN THEIR RETURN OF INCOM E FURNISHED U/S. 139 OF THE ACT. THIS ISSUE REQUIRES VERIFICATION AND ACCORDIN GLY, IN THE INTEREST OF JUSTICE, THE MATTER IS REMITTED BACK TO THE FILE OF THE ASSE SSING OFFICER WHO WILL EXAMINE WHETHER THE SAID NBFCS HAVE INCLUDED THE SA ID INCOME WHILE COMPUTING THE INCOME IN THE SAID RETURN OF INCOME F ILED U/S. 139 OF THE ACT AND HAVE PAID THE TAX DUE ON THE SAID INCOME DECLAR ED BY THEM IN THE SAID RETURN OF INCOME AND THE ASSESSEE IS REQUIRED TO FU RNISH A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN THE FORM AS PRESCRIBED . IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ISSUE AS DIRECTED HEREINABOV E AND DECIDE THE ISSUE DE NOVO. THUS, GROUND NOS. 2 AND 4 ARE ALLOWED FOR ST ATISTICAL PURPOSES. I.T.A. NO.587/COCH/2014 7 13. AS REGARDS GROUND NO. 5, THE PAYMENT HAS B EEN MADE FOR MAKING ADVERTISEMENTS TO M/S. GUIDE ADVERTISING AND VARIOU S OTHER PARTIES. 14. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THA T THESE ADVERTISEMENT CHARGES HAVE BEEN PAID ON REQUIREMENT BASIS. THERE WAS NO CONTRACT WITH ANY OF PARTIES. TO THIS EFFECT, THE LD. COUNSEL FO R THE ASSESSEE HAS NOT PLACED ON RECORD ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE HER CLAIM OF MAKING ADVERTISEMENTS TO DIFFERENT AGENCIES EITHER BEFORE ANY OF THE AUTHORITIES BELOW OR EVEN BEFORE US. THERE IS ALWAYS A CONTRACT , BE IT BE AN ORAL CONTRACT OR A WRITTEN CONTRACT, THOUGH THE SAME HAS NOT BEEN BROUGHT ON RECORD BY THE ASSESSEE AT ANY FORUM. IN THE CIRCUMSTANCES AN D FACTS OF THE CASE, WE TREAT THE ADVERTISEMENT DONE BY THE ASSESSEE AS A C ONTRACT FOR WHICH HE WAS REQUIRED TO DEDUCT TAX AT SOURCE WHICH HAS NOT BEEN DEDUCTED BY THE ASSESSEE AND THEREFORE, THE PROVISIONS OF SECTION 4 0(A)(IA) OF THE ACT ARE CLEARLY APPLICABLE AND ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THUS GROUND NO. 5 OF THE ASSESSEE IS DISMISSED. 15. GROUND NO. 1AND 6 ARE GENERAL IN NATURE AND D O NOT REQUIRE ADJUDICATION. I.T.A. NO.587/COCH/2014 8 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 587/COCH/2014 IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 23- 11-2015. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 23RD NOVEMBER. 2015 GJ COPY TO: 1. M.RDHAKRISHNAN NAIR, FLAT NO.1, A-2, FOUR SQUARE MANOR, HOLY FAITH BUILDING, THRIKKAKARA, KOCHI-682 021. 2. THE INCOME TAX OFFICER, WARD-2(3), KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II,KOCH I. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOCHI. 4. THE COMMISSIONER OF INCOME-TAX, 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN