M/s. M.Sambandam & Sons, CHENNAI V. ACIT, CHENNAI

ITA 612/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5052 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 29-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR; CHANDRASEKARAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A BEFORE SHRI U.B.S.BEDI, JUDICIAL MEMBER AND SHRI N. S.SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 04.05.11 DRAFTED ON:05.05.11 ITA NO.612/MDS/2009 ASSESSMENT YEAR : 2005-06 M/S.M.SAMBANDAM & SONS, 6/25,COVELONG MUTHUGRAMANI STREET, PERIAMET, CHENNAI 600 003. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-X, CHENNAI 600 034. PAN/GIR NO. : AAFFM 6229 A (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI G.BASKAR & SHRI M.S.CHANDRASEKARAN RESPONDENT BY: SHRI SHAJI P. JACOB O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV ,CHENNAI, D ATED 19.12.2008. 2. THE FIRST GROUND OF APPEAL OF THE ASSESSE IS DIRECT ED AGAINST THE ORDER OF THE CIT(A) CONFIRMING THE ACTION OF THE ASSESSING OFFIC ER DISALLOWING EXPENDITURE INCURRED ON AIRFREIGHT CHARGES OF RS.5,98,454/- PAID TO M/S.CAP RICON LOGISTICS PVT. LTD., RS.36,645/- PAID TO M/S.VAN GUARD AND RS.32,840/- PAID TO M/S.C OASTAL FRIGHT AND LOGISTICS PVT. LTD., 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSE HAS MADE PAYMENT OF AIRFREIGHT CHARGES TO THE FOLLO WING PARTIES:- A. CAPRICON LOGISTICS P. LTD. RS.5,98,454/- B. VAN GUARD RS. 36,645/- C. COASTAL FREIGHT AND LOGISTICS P LTD RS. 54,135 /- HE FOUND THAT THE ASSESSE WAS LIABLE TO DEDUCT TAX AT SOURCE WHILE MAKING THESE PAYMENTS TO THE PARTIES, WHICH THE ASSESSE FAILED T O DO AND THEREFORE BY INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE INCOME TAX ACT, 1961 HE DISALLOWED THE DEDUCTION OF THE SAID AMOUNT CLAIMED BY THE ASSESSE IN COMPUTING THE TOTAL INCOME. ON APPEAL, THE CIT(A) OBSERVED THAT THE PAYMENT MADE TO M/S.COASTA L FREIGHT AND LOGISTICS PVT LTD. OF RS.18,980/- AND RS.2,315/- ARE LESS THAN RS.20,000/ -, THEREFORE DISALLOWANCE COULD NOT HAVE BEEN MADE U/S.40(A)(IA) OF THE ACT AND ACCORDI NGLY, HE ALLOWED DEDUCTION OF - 2 - RS.21,295/- OUT OF RS.54,435/- PAID TO M/S.COASTAL FREIGHT AND LOGISTICS PVT LTD. AND CONFIRMED THE BALANCE DISALLOWANCE OF RS.32,840/-. THE CIT(A) ALSO CONFIRMED THE DISALLOWANCE OF AIRFREIGHT CHARGES PAID TO M/S. CAP RICON LOGISTICS P. LTD. RS.5,98,454/- AND RS.36,645/- PAID TO M/S.VAN GUARD. 4. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS E SHRI G. BASKAR SUBMITTED THAT NO DISALLOWANCE COULD BE MADE FOR AIRFREIGHT C HARGES EXPENDITURE INCURRED BY THE ASSESSE WITHOUT DEDUCTING TAX AT SOURCE AS THE PAYE ES OF THE SUM HAD PAID THE TAX DUE ON THE INCOME RECEIVED BY THEM BY FILING THE INCOME TAX RETURN. FOR HIS THIS CONTENTION, HE PLACED RELIANCE ON THE DECISION OF HONBLE GUJAR AT HIGH COURT IN THE CASE OF CIT VS. RISHIKESH APARTMENTS CO-OPERATIVE SOCIETY LTD., 253 ITR 310 (GUJ.|). HE ALSO RELIED ON THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE P. LTD., VS. CIT 293 ITR 226 (SC ). 5. THE DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND S UPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER DISALLOWED DEDUCTION FOR AIRFREIGHT CHARGES OF RS.6,89,534/-BY INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT AS THE ASSES SE FAILED TO DEDUCT TAX AT SOURCE WHILE MAKING THE PAYMENTS TO THE PARTIES. IN APPEAL, THE CIT(A) ALLOWED RELIEF OF RS.21,295/- OUT OF THE PAYMENT OF RS.54,435/- MADE TO M/S.COAST AL FREIGHT AND LOGISTICS PVT LTD. ON THE GROUND THAT PAYMENTS OF RS.18,980/- AND RS.2,31 5/- WAS LESS THAN RS.20,000/- AND THEREFORE, NO DISALLOWANCE FOR EXPENDITURE OF RS.21 ,295/- COULD BE MADE U/S.40(A)(IA) AND CONFIRMED THE BALANCE DISALLOWANCE OF RS.36,840 /- OUT OF PAYMENTS MADE TO M/S.COASTAL FREIGHT AND LOGISTICS PVT LTD. AND ALSO CONFIRMED THE DISALLOWANCE OF RS.5,98,454/- PAID TO CAPRICON LOGISTICS P. LTD. AN D RS.32,840/- PAID TO M/S. COASTAL FREIGHT AND LOGISTICS P LTD. THE CONTENTION OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSE IS THAT AS THE PAYEES HAD PAID TAX ON THE A MOUNTS RECEIVED FROM THE ASSESSE, THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER OF THE PAYMENTS MADE TO THESE PARTIES WAS NOT JUSTIFIED. WE FIND THAT THE DISALLOWANCE HAS BEEN MADE U/S.40(A)(IA) OF THE ACT, WHICH PROVIDES THAT WHERE AN ASSESSE WHILE MAKING PAYMENT OF ANY INTEREST, COMMISSION OR BROKERAGE, RENT OR ROY ALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT O R AMOUNTS PAYABLE TO A CONTRACTOR OR A SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT AN Y WORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XIVB AND SUCH TAXES HAS NOT B EEN DEDUCTED OR AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED UNDER SUB-SECTION(1) OF SECTION 139, - 3 - THEN THE AMOUNTS OF SUCH EXPENDITURE SHALL NOT BE D EDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BU SINESS OR PROFESSION . THE PROVISO TO SECTION 40(A)(IA) FURTHER PROVIDES THAT IN CASE WHE RE PAYMENT OF TDS IS MADE SUBSEQUENTLY AFTER DEDUCTION THEN THE CORRESPONDING EXPENDITURE WILL BE ALLOWED AS DEDUCTION TO THE ASSESSE IN THE PREVIOUS YEAR IN WH ICH SUCH PAYMENT OF TDS MADE BY THE ASSESSE. THUS, IT IS OBSERVED THAT AS PER THE PROV ISIONS OF THIS SECTION SPECIFIED EXPENDITURES INCLUDING PAYMENTS FOR CONTRACT ON WH ICH TDS IS DEDUCTIBLE IS ALLOWED AS DEDUCTION TO THE ASSESSE ONLY WHEN THE ASSESSE DEDU CTS TAX AND DEPOSITS THE SAME TO THE CREDIT OF THE CENTRAL GOVERNMENT. IN THE INSTANT C ASE, IT IS NOT IN DISPUTE THAT THE EXPENDITURE TO THE EXTENT DISALLOWED BY THE CIT(A) WAS THE EXPENDITURE ON WHICH THE ASSESSE WAS REQUIRED TO DEDUCT TDS AS PER THE PROVI SIONS OF SEC.194C OF THE ACT. THE ONLY CONTENTION OF THE ASSESSE IS THAT AS THE RECEI VER OF THE INCOME HAS PAID TAX DIRECTLY TO THE GOVERNMENT AND THEREFORE, THE ASSESEE IS NOT LIABLE TO DEDUCT TAX AND THEREFORE, THE DISALLOWANCE BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) IS NOT WARRANTED. FOR THIS CONTENTION THE ASSESSE PLACED RELIANCE ON THE DECIS ION OF HONBLE GURJART HIGH COURT IN THE CASE OF RISHIKESH APARTMENTS CO-OPERATIVE SOCIE TY LTD.(SUPRA) AND THE DECISION OF THE HONBLE SUPRME COURT IN THE CASE OF HINDUSTAN C OCA COLA BEWERAGE P. LTD. (SUPRA). WE HAVE PERUSED THE ABOVE CITED DECISIONS. WE FIND THAT IN THE ABOVE DECISIONS IT HAS BEEN HELD THAT WHERE THE TAX WAS DEDUCTIBLE ON PAYM ENT MADE BY THE ASSESEE AND THE ASSESSE HAS FAILED TO DEDUCT TAX BUT THE RECEIVER O F THE PAYMENT HAS PAID FULL TAX DUE ON HIS INCOME TO THE GOVERNMENT THEN IN SUCH A CASE, T HE ASSESSE CANNOT BE AGAIN ASKED TO DEPOSIT THE TAX. IN OTHER WORDS, THESE DECISIONS A RE AN AUTHORITY FOR THE PROPOSITION THAT THE TAX WHICH IS COLLECTABLE BY WAY OF TDS IS THE T AX WHICH IS CHARGEABLE U/S.4 OF THE ACT AND MACHINE BE OF TDS IS NOT FOR COLLECTION OF DOUB LE TAX FOR AND ON BEHALF OF CENTRAL GOVERNMENT. HOWEVER, IN THE INSTANT CASE, THE ISSUE DOES NOT RELATE TO COLLECTION OR DEMAND OF ITDS. THE ISSUE RELATES TO ALLOWABILITY AN EXPENDITURE ON WHICH TAX WAS DEDUCTIBLE UNDER CHAPTER XIVB OF THE ACT. AS PER THE PROVISIONS OF SEC.40(A)(IA) THE CONDITIONS PRECEDENT FOR ALLOWABILITY OF CERTAIN SP ECIFIED EXPENDITURE INCLUDING FREIGHT IS THAT THE TAX SHOULD BE DEDUCTED THEREFROM AND SUCH DEDUCTED TAX SHOULD BE PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT. THEREFORE, IN OUR VIEW THE ABOVE DECISIONS DO NOT SUPPORT THE CASE OF THE ASSESSE IN SO FAR AS THOSE DECISIONS ARE NOT CONCERNED WITH ALLOWABILITY OF ANY EXPENDITURE. IN THE ABOVE CIRC UMSTANCES WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CTI(A). HENCE, THIS GROUND OF APPE AL OF THE ASSESSE IS DISMISSED. 7. THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS DI RECTED AGAINST THE ORDER OF THE CIT(A) DELETING THE LEVY OF INTEREST U/S.234B OF TH E INCOME TAX ACT. - 4 - 8. AT THE TIME OF HEARING, NO SUBMISSIONS WERE MADE BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSE ON THIS GROUND OF APP EAL. HENCE, THE SAME IS DISMISSED FOR WANT OF PROSECUTION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON THIS 13 TH DAY OF MAY , 2011. SD/- SD/- (U.B.S.BEDI) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: CHENNAI, DAY OF 13 TH MAY, 2011. COMPILED AND COMPARED BY: K S SUNDARAM COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, CHENNAI DATE INITIALS 1. DRAFT DICTATED ON --------------- --------- ---------- 2. DRAFT PLACED BEFORE AUTHORITY --------------- ------------------- 3. DRAFT PROPOSED & PLACED --------------- ------ ------------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED --------------- ----- -------------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- --- ----------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------