THE DCIT, (CENTRAL), Indore V. M/S. SILVER REALITIES & INFRASTRUCTURE P. LTD., Indore

ITA 609/IND/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4377 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 11-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: C P RAWKA
• Keywords: Business expenditure; Opportunity of being heard; Retrospective amendment; Difference of opinion; Revenue expenditure
• Section: 194C; 154

Judgement Text

DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JM & SHRI O.P. MEENA, AM ITA NO. 609/IND/2013 A.Y.2008-09 DY.COMMISSIONER OF INCOME TAX (CENTRAL), INDORE ::: APPELLANT VS M/S SILVER REALITIES INFRASTRUCTURE PRIVATE LIMITED, INDORE PAN AAJCS 3841D ::: RESPONDENT APPELLANT BY SHRI MOHD. JAVED RESPONDENT BY SHRI C.P. RAWKA DATE OF HEARING 26.7.2016 DATE OF PRONOUNCEMENT 3 . 8 .2016 O R D E R PER SHRI D.T. GARASIA, AM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-I, INDORE, DATED 10.7.20 13. 2. THE SUM AND SUBSTANCE OF THE GROUNDS OF APPEAL OF TH E REVENUE IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 2 DELETING THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF TH E ACT AS MADE BY THE ASSESSING OFFICER. 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DEVELOPING TOWNSHIP AT INDORE UNDER THE NAME OF SILV ER SPRING. THE RETURN OF INCOME WAS FILED AT NIL INCOME . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING DISALLOWANCE OF RS. 154 LACS FOR SHORT DEDUCTION OF TD S HOLDING THAT ADVERTISEMENT EXPENSES PAID TO DAINIK BHASKAR WAS A PROFESSIONAL PAYMENT. THE ASSESSEE MADE PAYMENT OF RS. 172 LACS AND TDS WAS MADE AT 1% AS PER SECTION 194C OF THE ACT. THE ASSESSING OFFICER OBSE RVED THAT THE ENTIRE EXPENSES CLAIMED ON ACCOUNT OF ADVERTISEMENT ARE NOT ALLOWABLE THIS YEAR AS ASSESSEE COMPANY ACCOUNTED FOR SALES AT RS.15.28 CRORES ONLY. TH E ASSESSING OFFICER WAS THUS OF THE VIEW THAT THE ASSESS EE HAS DEFAULTED IN DEDUCTING AND PAYING PROPER TDS AS PER DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 3 LAW. THE ASSESSING OFFICER, THEREFORE, DISALLOWED TH E ASSESSEES CLAIM FOR REVENUE EXPENDITURE AMOUNTING TO RS.154.80 LACS ON ACCOUNT OF DEFAULT IN DEDUCTING TDS . ON APPEAL, THE LEARNED CIT(A) FOLLOWING THE DECISION OF T HE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF S.K. TEK RIWAL (GA NO. 2069 OF 2012) AND VARIOUS OTHER ORDER OF COORDINATE BENCHES OF ITAT, DELETED THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE ACT. NO W THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED DR SUBMITTED THAT THE LEARNED ASSESSI NG OFFICER WAS FULLY JUSTIFIED IN DISALLOWING THE CLAIM O F THE ASSESSEE U/S 40(A)(IA) OF THE ACT AND THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE WITHOUT DISCUSSING THE ISSUE AT LENGTH AND WITHOUT SHOWING ANY REASON THEREFOR. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS O F DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 4 DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CAS E OF M/S. S.K. TEKRIWAL (SUPRA) AS ALSO THE DECISIONS OF IT AT AND AS SUCH THERE IS NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE CATEGORI CALLY SUBMITTED THAT THE HON'BLE DELHI HIGH COURT IN THE C ASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PRIVATE LIMITED; 377 ITR 635 (DEL) HAS HELD THAT SECOND PROVISO TO SECTI ON 40A(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM IST APRIL, 2005. HOWEVER , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THE FOLLOW ING WRITTEN SUBMISSIONS :- DURING THE COURSE OF ASSESSMENT UNDER SECTION 143(3 ) THE LD ASSESSING OFFICER HAS DISALLOWED ADVERTISEME NT EXPENSES ON TWO NORMS. FIRST, ON THE GROUND THAT TD S WAS DEDUCTED ON PAYMENT TO DAINIK BHASKAR @1% APPLICABL E FOR ADVERTISEMENT EXPENSES WHEREAS IT WAS REQUIRED TO B E DEDUCTED AT HIGHER RATE, BEING PROFESSIONAL FEES. S ECOND GROUND FOR DISALLOWANCE WAS THAT THE ADVERTISEMENT EXPENSES WHERE MORE THAN THE INCOME RECOGNISED DURI NG THE YEAR. IN THE FIRST APPEAL THE LD CIT APPEALS DE LETED THE ADDITION RIGHTLY HOLDING THAT THE EXPENSES WHERE ADVERTISEMENT IN NATURE. HOWEVER, THE LD CIT (APPEA LS) DID DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 5 NOT DECIDE THE ALTERNATE GROUND RAISED BY THE LD AS SESSING OFFICER. SINCE THE MATTER WAS ALIVE, THE ASSESSEE F ILED AN APPEAL BEFORE THIS BENCH AND SIMULTANEOUSLY FILED A N APPLICATION UNDER SECTION 154 BEFORE THE LD CIT (AP PEALS) WITH THE REQUEST TO ADJUDICATE THE SAID ALTERNATE G ROUNDS VIDE ORDER DATE 10.04.2014 LD CIT (APPEALS) HAS PAS S IT AN ORDER UNDER SECTION 154 ALLOWING THE ASSESSEE TO AP PEAL ON THE QUESTION OF THE SAID ALTERNATE GROUND ALSO. ACC ORDINGLY, APPEAL NO 610 HAS BEEN WITHDRAWN BY THE ASSESSEE. O N THE OTHER HAND THE DEPARTMENT HAS FILED APPEAL NO 609 O N THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN HOLDING THE NATURE OF EXPENSE AS ADVERTISEMENT WHERE IT WAS A PAYMENT OF PROFESSIONA L FEES AS PER AGREEMENT ON RECORD. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE UNDER SECTION 40 (A)(IA) MADE BY THE AO. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN NOT ADJUSTING THE ALTERNATIVE DISALLOWANCE ON THE ISSUE OF EXCESS CLAIM OF ADVERTISEMENT EXPENSES. IN THE ABOVE CONTEXT REFERENCE IS INVITED TO THE AS SESSEES SUBMISSION BEFORE THE LD CIT (A) AND THE APPELLATE ORDER PASSED BY THE LD COMMISSIONER OF INCOME TAX (APPEAL S). A COPY OF ASSESSEES SUBMISSION BEFORE THE LD COMMISS IONER OF INCOME TAX (APPEALS) IS ANNEXED HERE WITH.(1) IT MAY KINDLY BE APPRECIATED THAT LD AO HAS MISCONS TRUE THE AGREEMENT REACHED BETWEEN THE ASSESSEE AND THE ADVERTISER DANIK BHASKAR. THE ADVERTISER HAD PUBLIS HED ADVERTISEMENT IN THE NEWSPAPERS ON DIFFERENT RATES WHICH RESULTED INTO SUBSTANTIAL RESPONSE IN THE SHAPE OF BOOKING DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 6 IN THE ASSSESSSS PROJECT. THEREFORE, IT WAS CLEARL Y A CASE OF ADVERTISEMENT WHEREIN THERE WAS NO AOTA OF PROFESSI ONAL SERVICES. AS REGARDS SECOND ISSUE THAT THE ADVERTI SEMENT EXPENSES ARE MORE THAN THE RECEIPT SHOWN IN THE P& L: IT IS TO SUBMIT THAT INCOME HAS BEEN RECOGNISED IN ACCORD ANCE WITH AS9 OF INSTITUTE OF CHARTERED ACCOUNTANT. HOWE VER THE BUSINESS GAINED IS SOFARAS MUCH MORE THAN THE INCOM E RECOGNISED, WHICH IS IN THE SHAPE OF BOOKINGS WHICH YIELDED INCOME IN THE SUBSEQUENT YEARS. HENCE, LD AO WAS NO T JUSTIFIED IN MAKING DISALLOWANCE. LD COMMISSIONER O F INCOME TAX (APPEALS) HAS ELABORATED HIS FINDINGS IN THE APPELLATE ORDER WHILE ARRIVING AT THE CONCLUSION TH AT NO DISALLOWANCE WAS CALLED FOR. THE ASSESSEES CASE FINDS SUPPORT FROM THE FOLLOWIN G PRONOUNCEMENT: 1. DISALLOWANCE U/S 40(A)(IA) SHALL NOT BE MADE MEREL Y BECAUSE TDS HAS BEEN DEDUCTED U/S 194C INSTEAD OF SECTION 194J ADIT, INTERNATIONAL TAXATION VS. DRILL ING SYSTEMS LLC (ITAT DELHI), ITA NO.751/DEL/2013, DATE - 09 TH JANUARY,2015- DISALLOWANCE U/S 40(A)(IA) SHALL NOT BE MADE MERELY BECAUSE TDS HAS BEEN DEDUCTED U/S 194C INSTEAD OF SECTION 194J ADIT, INTERNATIONAL TAXATION VS. EXPRE SS DRILLING SYSTEMS LLC (ITAT DELHI), ITA NO.751/DEL/2 013, DATE-09 TH JANUARY, 2015. 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 DEDUCT ING TAX, INTER ALIA, THE ASSESSEE HAS TO PAY INTO THE GOVERN MENT ACCOUNT . THERE IS NOTHING IN THE SAID SECTION TO T REAT, INTER ALIA, THE ASSESSEE AS DEFAULTER WHERE THERE IS A SH ORT FALL IN DEDUCTION. WITH REGARD TO THE SHORT FALL, IT CANNOT BE ASSUMED THAT THERE IS A DEFAULT AS THE DEDUCTION IS NOT AS DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 7 REQUIRED BY OR UNDER THE ACT , BUT THE FACTS IS THA T THIS EXPRESSION, ON WHICH TAX IS DEDUCTIBLE AT SOURCE U NDER CHAPTER XVII- B AND SUCH TAX HAS NOT BEEN PAID ON O R BEFORE THE DUE DATE SPECIFIED IN SUB SECTION (1) OF SECTIO N 139. THIS SECTION 40(A)(IA) OF THE ACT REFERS ONLY TO THE DUT Y TO DEDUCT TAX AND PAY TO GOVERNMENT ACCOUNT. IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILI TY OF THE ITEM OR THE NATURE OF THE PAYMENTS FALLING UNDER VA RIOUS TDS PROVISIONS THE ASSESSEE IN DEFAULT U/S 201 OF T HE ACT AND NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 2. CIT VS S.K. TEKRIWAL, 361 ITR 432(CALCUTTA HIGH COURT) BUSINESS EXPENDITURE- DISALLOWANCE- PAYMENTS SUBJEC T TO DEDUCION OF TAX AT SOURCE- PAYMENTS TO SUB-CONTRACT OR- ASSESSEE DEDUCTING TAX AT SOURCE UNDER WRONG PROVIS ION RESULTING IN SHORT DEDUCTION OF TAX- NO DISALLOWANC E- CAN BE MADE APPLYING SECTION 40(A)(IA)- INCOME TAX ACT, 1961 3. ACIT VS PANKAJ BHARGAVA,( 34 CCH 0035, DELHI TRIBUNAL) BUSINESS EXPENDITURE ALLOWABILITY AO HELD THAT ASSESSEE HAS DEDUCTED TAX AT SOURCE UNDER S 194C AT 1 PERCENT WHEREAS IT OUGHT TO HAVE BEEN DEDUCTED UNDE R S 194J AT 10 PERCENT AND DISALLOWED EXPENSES CLAIMED BY ASSESSEEHELD, THIS APPEAL WAS SIMILAR TO ISSUE INV OLVED FOR AY 20082009 AND IN THAT CASE AGAINST ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DELETING IMPUG NED ADDITION UNDER S 40A(IA), DEPARTMENT HAD COME UP WI TH APPEAL WHICH WAS DISMISSEDFOLLOWING PRECEDENT, ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS) WAS UPHELD AS ISSUE WAS SQUARELY COVERED IN FAVOUR OF ASSESSEEREVENUE S APPEAL DISMISSED. DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 8 4. TATA AIG GENERAL INSURANCE CO. LTD. VS INCOME TAX OFFICER(OSD)3(2),(43 SOT 0215, MUMBAI BENCH) TDSUNDER S. 194DCOMMISSION PAID ON REINSURANCE INSURANCE COMPANIES HAVE NOT PROVIDED ANY SERVICE OF SOLICITING OR PROCURING INSURANCE BUSINESS FOR THE ASSESSEE COMPANYON THE OTHER HAND, THE ASSESSEE COMPANY HAS PROVIDED REINSURANCE TO THE INSURANCE COMPANY AND IF THE REINSURANCE COMPANIES HAVE REDUCED THE PREMIUM DIRE CTLY FROM THE PREMIUM PAYABLE BY THE INSURED, SUCH A DED UCTION WILL NOT ATTRACT PROVISIONS OF S. 194D GENERAL INSURANCE CORPORATION OF INDIA VS. ASSTT. CIT (2009) 125 TTJ (MUMBAI) 779: (2009) 29 DTR (MUMBAI)(TRIB) 505 : (2009) 28 S OT 453 (MUMBAI) FOLLOWED 5. DCIT-11(2) VS. CHANDABHOY & JASSOBHOY(17 TAXMANN.COM 158, MUMBAI BENCH) BUSINESS EXPENDITUREDISALLOWANCE UNDER S. 40(A)(IA ) PAYMENT MADE TO CONSULTANTS ENGAGED BY CHARTERED ACCOUNTANTS' FIRMAO HELD PAYMENT MADE TO CONSULTAN TS ENGAGED BY CHARTERED ACCOUNTANTS' FIRM ARE IN NATUR E OF FEES FOR PROFESSIONAL SERVICES AND ACCORDINGLY PROV ISIONS OF S. 194J WOULD ATTRACT AND SINCE ASSESSEE HAS NOT DE DUCTED THE TAX, DISALLOWED AMOUNTS CLAIMED OF RS.26,75,535 / U/S. 40(A)(IA) COMMISSIONER OF INCOME TAX (APPEALS ) DELETED ADDITION MADE BY AOHELD, ASSESSEE HAS EMPL OYED ABOUT 18 CONSULTANTS WITH WHOM IT ENTERED INTO AGRE EMENTS FOR A PERIOD OF TWO YEARSTHEY WERE PAID FIXED AMOU NTS WITHOUT ANY SHARE IN THE PROFITTHESE CONSULTANTS A RE PROHIBITED FROM TAKING ANY PRIVATE ASSIGNMENTS AND WORKED FULL TIME WITH THE ASSESSEE FIRMTHERE WAS DEDUCTIO N OF TAX U/S 192 AND IN THEIR INDIVIDUAL ASSESSMENTS THESE PAYMENTS WERE ACCEPTED AS SALARY PAYMENTSENTIRE AMOUNT PAID FOR 18 CONSULTANTS IS ONLY AN AMOUNT OF RS.26,75,535/, WHICH INDICATES THAT THEY ARE IN EMPLOYMENT AND NOT PROFESSIONAL CONSULTANTSASSESSE E HAS DEDUCTED TAX U/S 192HENCE, S. 40(A)(IA) ALSO DO NO T APPLY AS THE SAID PROVISION CAN BE INVOKED ONLY IN EVENT OF NON DEDUCTION OF TAX BUT NOT FOR LESSER DEDUCTION OF TA X. DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 9 6. CIT-1 VS. ANSAL LAND MARK TOWNSHIP PRIVATE LIMITED (DELHI HIGH COURT) THE HIGH COURT HELD THAT SECOND PROVISO TO SECTION 40A(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPE CTIVE EFFECT FROM 1ST APRIL 2005. FURTHER REFERENCE IS INVITED TO SECOND PROVISO TO S ECTION 40A(IA) WHICH READS AS UNDER PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS O F CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO T O SUB-SECTION (1) OF SECTION 201, THEN, FOR THE PURPO SE OF THIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE ASSESS EE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESID ENT PAYEE. IN SUPPORT OF THE ABOVE, IT IS SUBMITTED THAT THE R ECEIPT ON ACCOUNT OF ADVERTISEMENT HAS BEEN DULY RECOGNISED B Y THE PAYEE DAINIK BHASKAR IN ITS BOOKS OF ACCOUNTS. TO CERTIFICATE TO THE ABOVE EFFECT ISSUED BY THE DAINI K BHASKAR ACKNOWLEDGING PAYMENT OF TAX ON PARTICULAR RECEIPT IS ENCLOSED HEREWITH FOR READY REFERENCE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTEN TIONS OF THE PARTIES IN VIEW OF THE JUDGMENTS CITED BEFORE US. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PRIVATE LIMITED (SUPRA) HAS CATEGORICALLY HELD THAT SECOND PROVISO TO SECTION 40A(IA) IS DECLARATORY AND CURATIVE IN NATURE AND HAS RETROSPECTIVE EFFECT FROM IST DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 10 APRIL, 2005. WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSI NG OFFICER FOR THE PURPOSE OF LIMITED VERIFICATION ON THE ASPECT AS T O WHETHER DAINIK BHASKAR HAS INCLUDED THE RECEIPT IN ITS PROFIT AND LOSS ACCOUNT IN COMPUTING THE BUSINESS INC OME OFFERED TO TAX AND IF IT IS FOUND TO BE SO, THE ASSE SSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE. NEEDL ESS TO SAY THAT THE ASSESSING OFFICER SHALL PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPEN COURT ON 3 AUGUST, 2016 SD/- SD/- (O.P. MEENA) (D.T. G ARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER 3RD AUGUST, 2016 DN/- DCIT VS. SILVER REALITIES ITA NO. 609/IND/2013 11