Deputy Commissioner of Income Tax, Circle- 1 (1), Panaji., Panaji V. M/s Rani Infrastructure Development Ltd., Panaji

ITA 61/PAN/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93613 (ITAT-PANAJI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S NATARAJ
• Assessee Lawyers: PRAKASH SHETTY MANAGER FINANCE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 61 /PNJ/201 5 (ASST. YEAR : 200 7 - 0 8 ) DCIT, CIRCLE - 1(1), PANAJI. VS. M/S. RANI INFRASTRUCTURE DEVELOPMENT LTD., 407, SHIV TOWER, PATTO PLAZA, PANAJI. PAN NO. AAACR 9056 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRAKASH SHETTY . (MANAGER FINANCE) DEPARTMENT BY : SHRI S. NATARAJ - D R DATE OF HEARING : 27 / 0 7 /2015 . DATE OF PRONOUNCEMENT : 27 / 0 7 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS), PANAJI, DATED 2 4 / 11 /201 4 . 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS. 46,82,700/ - CLAIMED AS FINANCE COST BY THE ASSESSEE, WHICH WAS PAID WITHOUT DEDUCTING TDS AS PER THE PROVISIONS OF SEC.194 A OF THE ACT. 3 . T HE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PAID INTEREST TO THE FOLLOWING PARTIES: - 2 ITA NO. 61/PNJ/2015 SR.NO. NAME OF THE PARTY INTEREST PAID 1 INDIAN OIL CORPORATION LTD. RS. 5,30,320/ - 2 L & T FINANCE RS. 35,32,622/ - 3 FINANCE ON HP (L & T FINANCE) RS. 23,37,717/ - RS. 64,00,659/ - ACCORDING TO THE ASSESSING OFFICER, AS PER THE PROVISIONS OF SEC. 194A, THE ASSESSEE SHOULD HAVE DEDUCTED TDS ON THE INTEREST PAID TO THE SAID PARTIES ON LOANS BORROWED FROM THEM. SINCE THE ASSESSEE FAILED TO DEDUCT TDS, HE BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT DISALLOWED THE DEDUCTION OF RS. 64,00,659/ - . 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE OF RS. 46,82,700/ - BY OBSERVING AS UNDER: - 5.4 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE A.O. HAS DIA1LOWED CLAIM OF INTEREST EXPENSES, BECAUSE THE ASSESSEE DID N O T DEDUCT TAX AT SOURCE. INTEREST AMOUNTING TO RS.58,7 0 ,339/ - WAS PAID TO M/S.L&T FINANCE, WHEREAS RS.5,30,320/ - WAS PAID TO M/S. INDIAN OIL CORPORATION LTD. THE APPELLANT STATED THAT TDS ON INTERES T W AS INTRODUCED FROM THAT YEAR ITSELF. THE APPELLANT HAD AVAILED OF LOAN FROM M/S. L&T FINANCE AND HAD GIVEN THEM POST DATED CHEQUES INCLUS IVE OF INTEREST COMPONENTS, PRIOR TO THE CHANGES MADE IN THE TDS PROVISIONS. THEY WERE ALSO NOT CLEAR ABOUT THE APPLICABILITY OF TDS PROVISIONS ON NON BANKING FINANCIAL COMPANIES (NBFCS) AS M/S. LARSEN AND TOUBRO FINANCE IS AN NBFC. SINCE THE ASSES SEE HAD ALREADY PAID POST DATED CHEQUES, INCLUSIVE OF INTEREST COMPONENT, THERE WAS NO SCOPE FOR THE APPELLANT TO BE ABLE TO DEDUCT TAX AT SOUR CE FROM THE SAME. OUT OF THE TOTAL INTEREST EXPENSE CLAIMED IN THE CASE OF M/S. L & T FINAN CE, OF RS.58,70,339/ - AN AMOU NT OF RS.46,82,700/ - HAS BEEN RECOGNIZED AS INCOME BY M/S. L&T FINANCE FOR THE SAME YEAR. IN ITS SUPPORT THE APPELLANT HAS PLACED RELIANCE ON THE DECISION OF HONBLE SUPRE M E COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE P. LTD VS. CIT, REPORTED IN (200 7) 293 ITR 226 (SC). IN THIS CASE, THE APPELLANT HAD DEDUCTED TAX AT LOWER RATE. BUT THE HONBLE TRIBUNAL SAID THAT SINCE THE DEDUCTED HAS PAID TAXES ON THE INCOME, THERE IS NO NEED TO DEDUCT THE TAX ALL OVER AGAIN. INSTANT CASE IS QUITE SIMILAR TO THE CAS E DECIDED BY THE HONBLE SUPREME COURT. IN THE INSTANT CASE, THE RECIPIENT HAS SHOWN INTEREST INCOME AMOUNTING TO RS.46,82,700/ - IN ITS RETURN AND HAS PAID 3 ITA NO. 61/PNJ/2015 TAXES ON THE SAME. THEREFORE, IN THE CASE OF L&T FINANCE, DISALLOWANCE BE RESTRICTED TO THE BALANCE AMOUNT OF RS.11,87,639/ - ON WHICH TAX WAS NOT PAID BY THE DEDUCTEE. INTEREST OF RS 5,30,320/ - WAS PAID TO M/S INDIAN OIL CORPORATION LTD. WITHOUT DEDUCTING ANY TAX AT SOURCE. THE APPELLANT HAS CONTENDED THAT SINCE INDIAN OIL CORPORATION LIMITED IS A GOVT. BODY, THEREFORE TDS PROVISIONS SHALL NOT BE APPLICABLE IN THIS CASE. I DO NOT AGREE WITH THE CONTENTION OF THE APPELLANT. M/S. INDIAN OIL CORPORATION LIMITED IS A PUBLIC SECTOR UNDERTAKING, BUT NOT A GOVT. BODY, WHICH IS EXEMPT FROM TDS PROVISIONS. I N VIEW OF THIS, DISALLOWANCE OF RS.5,30,320/ - IS HEREBY CONFIRMED. IN THE RESULT, DISALLOWANCE TO THE EXTENT OF RS. 17,17,959/ - IS CONFIRMED AND RS.46,82,7 00 IS DELETED. THIS GROUND OF APPEAL OF THE APPELLANT IS PA RT L Y AL LOWED. 5. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6 . THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 7 . WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION OF RS. 46,82,700/ - ON THE GROUND THAT M/S. L & T FINANCE HAS SHOWN THE SAID AMOUNT AS INCOME IN THE RETURN OF INCOME FILED AND HAS PAID THE TAX DUE THEREON. IN OUR CONSIDERED OPINION, THE PURPOSE OF DEDUCTING TAX AT SOURCE IS THAT THERE IS NO LOSS TO THE GOVERNMENT FOR TAX DUE ON INCOME EMBEDDED IN THE AMOUNT PAID BY THE ASSESSEE TO THE RECIPIENT OF THE AMOUNT. WHEN THE RECIPIENT OF THE AMOUNT INCLUDES THE SAID RECEIPT IN ITS INCOME AND PA YS TAX THEREON, THEN THERE IS NO LOSS OF R EVENUE TO THE GOVERNMENT AND, THEREFORE, IN OUR CONSIDERED VIEW, THE COMMISSIONER OF INCOME TAX (APPEALS) WAS FULLY JUSTIFIED IN DELETING THE ADDITION. FURTHER, OUR VIEW IS SUPPORTED BY THE INSERTION OF THE SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT BY T HE FINANCE ACT 2012 W.E.F. 01/04/2013 WHICH READS AS UNDER: - 4 ITA NO. 61/PNJ/2015 PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII - B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB - SECTION (1) OF SECTION 201 , THEN, FOR THE PURPOSE OF THIS SUB - CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. 8 . THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND O F APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 27 TH DAY OF JULY , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH JU LY , 201 5 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 5 ITA NO. 61/PNJ/2015 DATE INITIAL ORIGINAL DICTATION PAD IS ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 27 .0 7 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 28 .07 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 28 /07 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 28 /0 7 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28 /07 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 27 /0 7 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 28 /07 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER