ITO, New Delhi V. M/s. Shivaai Industries Pvt. Ltd., New Delhi

ITA 6578/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3832 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 04-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST IMPUGNED DATED PASSED
• Keywords: Additional evidence; Reasonable cause; Reassessment proceedings
• Section: 143(3); 201(1); 147; 148

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.:- 6578/DEL /2014 ASSESSMENT YEAR: 2007-08 ITO, WARD-23(2), NEW DELHI. VS. M/S. SHIVAAI INDUSTRIES PVT. LTD. E-3/38, SECTOR-7, ROHINI NEW DELHI 110 085 (APPELLANT) (RESPONDENT) O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 3.9.2014, PASSED BY LD. CIT(AP PEALS)- XI NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 147/143 (3) FOR THE ASSESSMENT YEAR 2007-08. IN THE GROUNDS OF APPEAL RE VENUE HAS RAISED FOLLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN AD MITTING ADDITIONAL EVIDENCE IN THE FORM OF AGREEMENT BETWEE N THE ASSESSEE COMPANY AND DTC IN CONTRAVENTION OF RULE 4 6A OF I.T. RULES 1962 AS IT WAS NEVER PRODUCED BEFORE A.O. DEPARTMENT BY: SHRI S.S. RANA, CIT(DR) DEPARTMENT BY : SHRI PRADEEP DINODIA, CA SHRI R.K. KAPOOR, CA DATE OF HEARING 25/10/2017 DATE OF PRONOUNCEMENT 25/10/2017 ITA NO. 6578/DEL/2014 ITO VS. M/S. SHIVAAI INDUSTRIES PVT. LTD. 2 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE U/S 40(A)(IA) MADE BY THE A.O. IN RESP ECT OF PAYMENT MADE TO DTC ON ACCOUNT OF NON DEDUCTION OF TDS. 3. THE APPELLANT CRAVES LEAVE TO AMEND, MODIFY, ALTER OR FORGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING TH E HEARING OF THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSE COMPANY IS ENGAGED IN THE BUSINESS OF DISPLAY OF ADVERTISEMENT AND WAS AWARD ED CONTRACT FOR DISPLAY OF SUCH ADVERTISEMENT ON DTC BUS QUEUE SHELTE RS AND TIME KEEPER BOOTHS FOR DIFFERENT ZONES FOR A PERIOD OF THR EE YEARS INCLUDING THE YEAR UNDER CONSIDERATION, BY DTC NEW DELHI. IT HAS FILED ITS ORIGINAL RETURN OF INCOME ON 31.10.2007, DECLARING TO TAL INCOME OF RS. 1,52,062/- AND AS AGAINST THIS THE ORIGINAL ASSESSME NT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 22.12.2009 AT AN INCOME OF RS. 2,25,251/-. LATER ON, THE ASSESSEES CASE WAS REOPENE D U/S 147 BY ISSUANCE OF NOTICE U/S 148 DATED 28.3.2012, PRIMARILY ON THE REASON THAT, WHILE COMPLETING THE ASSESSMENT THE DISALLOWANCE O F RS. 15,15,66,324/- BEING PAYMENT OF RENT TO DTC COULD NOT B E MADE BY THE AO AS THE ASSESSEE HAS FAILED TO COMPLY WITH THE PR OVISIONS OF SECTION 40(A)(IA) WHICH HAS RESULTED INTO UNDER ASSES SMENT BY THIS AMOUNT. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO GIVE ITS JUSTIFICATION FOR NON DEDUCTION OF TDS ON THE PAYMENT OF SITE RENT AMOUNTING TO RS. 15,15,66,324/- P AID TO DTC IN VIEW OF THE PROVISION OF SECTION40(A)(IA). IN RESPONS E, THE ASSESSEE SUBMITTED COPY OF CERTIFICATE U/S 197 FOR DEDUCTION OF TA X AT LOWER/ NIL RATE. HOWEVER THE LD. AO AFTER DETAILED DISCUSSION HEL D THAT THE PAYMENT MADE BY THE ASSESSEE TO DTC WAS AKIN TO LICENC E FEE PAID TO DTC FOR DISPLAY OF ADVERTISEMENT ON VARIOUS SITES IN TE RMS OF SECTION ITA NO. 6578/DEL/2014 ITO VS. M/S. SHIVAAI INDUSTRIES PVT. LTD. 3 194I AND THEREFORE, FAILURE TO DEDUCT TDS ATTRACTS DISAL LOWANCE U/S 40(A)(IA). ACCORDINGLY, THE ENTIRE PAYMENT WAS DISALLO WED BY THE AO. 3. IN THE FIRST APPEAL BESIDES VARIOUS SUBMISSI ONS MADE BEFORE THE LD. CIT (A), ONE OF THE CRUCIAL SUBMISSIONS MADE WAS THAT NO TAX WAS DEDUCTABLE U/S 194I IN RESPECT OF 50% OF PAYMENT OF LI CENCE FEE, BECAUSE THE SAME WAS PAID TO MUNICIPAL CORPORATION OF DELHI (MCD) AND MCDS INCOME IS EXEMPT U/S 10(20), THEREFORE, THE RE WAS NO LIABILITY TO DEDUCT TDS ON PAYMENT MADE TO MCD. IT WAS BROUGHT ON RECORD FROM THE TERMS OF TENDER FOR AWARD OF CONTRACT FOR DISPLAY OF ADVERTISEMENT ON DTC BUS QUEUE SHELTER/ TIME KEEPING B OOTHS, THAT 50% OF THE LEASE FEE IS PAYABLE TO MCD AND A SEPARATE CHEQUE IN FAVOUR OF MCD HAS BEEN PRESENTED TO DTC AND BALANCE 50% IS A LEASE FEE CHEQUE ISSUED IN FAVOUR OF DTC. HENCE BOTH THE AU THORITIES SHARE THE REVENUE IN RATIO OF 50:50. IN SUPPORT COPIES OF MO NTHLY BILLS RAISED BY DTC AS WELL AS THE FORWARDING LETTERS OF PAYMENT OF LICENCE FEE WERE ENCLOSED. APART FROM THAT, IT WAS FURTHER SUBMITTED THAT TH E PAYMENT MADE TO DTC IS ALREADY PART OF THE RECEIPTS AND IF IN T HE CASE OF THE PAYEE (I.E. DTC) WHICH IS AN UNDERTAKING OF GOVT. OF DELHI, ASSESSMENT U/S 143(3) FOR THE RELEVANT ASSESSMENT YEAR HAS BEEN C OMPLETED MUCH PRIOR TO THE DATE OF NOTICE, THEN NO DISALLOWANCE CAN BE MADE U/ 40(A)(IA). IN SUPPORT RELIANCE WAS PLACED ON SECOND PROVISO TO SECTION 40(A)(IA) READ WITH PROVISO TO SECTION 201(1) BROUGHT BY THE FINANCE ACT, W.E.F 1.4.2013. IT WAS SUBMITTED THAT THIS AMENDMENT S HOULD BE TREATED AS RETROSPECTIVE AND IN SUPPORT; RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJINDER KUMAR REPORTED AS 2013 TIOL 547 . 4. LD. CIT (A) SO FAR AS THE ASSESSEES CONTENTI ON AND THE ADDITIONAL EVIDENCE PLACED BY THE ASSESSEE VIDE ITS A PPLICATION UNDER ITA NO. 6578/DEL/2014 ITO VS. M/S. SHIVAAI INDUSTRIES PVT. LTD. 4 RULE 46 A, HAD CALLED FOR REMAND REPORT FROM THE AO V IDE LETTER DATED 15.4.2004 AND IN RESPONSE THE AO HAS SUBMITTED HIS REM AND REPORT VIDE LETTER DATED 9.7.2014, WHEREIN HE HAS REQUESTED NOT TO ACCEPT THE ADDITIONAL EVIDENCES. AFTER CALLING FOR THE REJOINDER FROM THE ASSESSEE AND CONSIDERING THE ENTIRE GAMUT OF FACTS, THE LD. CIT(A ) ON THIS ISSUE OBSERVED AND HELD AS UNDER :- IN GROUND NO. 9, IT HAS BEEN ARGUED THAT AS PER TH E AGREEMENT ITSELF, 50% OF PAYMENT OF LICENSE FEE WAS PAID TO MCD. THE MCD BEING A GOVT. ORGANIZATION, ITS RELEVANT IN COME IS EXEMPT U/S 10(20) OF THE ACT. ALTHOUGH THE APPELLANT HAS M ADE APPLICATION UNDER RULE 46A OF THE INCOME TAX RULES, 1962 IN RESPECT OF THIS ISSUE, HOWEVER, THE CONTENTS OF AGR EEMENT BETWEEN THE APPELLANT AND DTC SHOWS THAT 50% OF LICENSE FEE WAS TO BE PAID TO MCD. FURTHER, THE, PAYMENTS TO 'MCD HAVE, B EEN, DIRECTLY MADE THROUGH APPELLANT'S BANK ACCOUNT WITHOUT ROUTI NG THE SAME FROM THE ACCOUNT OF DTC. IT SEEMS THE AO COULD NOT EXAMINE THIS ISSUE AT THE TIME OF ASSESSMENT. THE FACT BEING SO, IT IS NOT A CASE OF ADDITIONAL EVIDENCE BUT JUST A CASE OF HIGHLIGHT ING THE ALREADY EXISTING FACTS. ON EXAMINING THE AGREEMENT SIGNED B Y THE APPELLANT WITH DTC, IT IS EVIDENT THAT THE APPELLAN T WAS BOUND TO MAKE PAYMENT OF 50% OF LICENSE FEE TO MCD. THE APPE LLANT HAS PRODUCED ALL THE EVIDENCES IN RESPECT OF DIRECT PAY MENTS MADE TO MCD. FURTHER, THE INCOME OF MCD IS EXEMPT U/S 10(20 ) OF THE ACT AS IT COMES UNDER THE DEFINITION OF LOCAL AUTHORITI ES. THE FACTS BEING SO, THE AO'S ACTION IN NOT EXCLUDING SUCH PAY MENTS FROM THE APPLICABILITY OF TDS PROVISIONS AND THUS APPLYING T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN RESPECT OF PAYMENT MADE DIRECTLY TO MCD WHICH COVERS 50% OF THE TOTAL AMOUNT INVOLVED, IS NOT JUSTIFIED. 5. ON THE CONTENTION RAISED BY THE ASSESSEE THAT, SINC E REGULAR ASSESSMENT IN THE RESPECT OF PAYEE, I.E. DTC, HAS BEEN COMPLETED U/S 143(3) MUCH PRIOR TO THE DATE OF ISSUANCE OF NOTICE U /S 148, THEREFORE, IN VIEW OF THE SECOND PROVISO OF SECTION 40(A)(IA) NO DISALLOWANCE CAN BE MADE, HIS RELEVANT OBSERVATION AND FINDING READS A S UNDER :- ITA NO. 6578/DEL/2014 ITO VS. M/S. SHIVAAI INDUSTRIES PVT. LTD. 5 12.3. I HAVE CAREFULLY CONSIDERED ALL THE ARGUMEN TS PUT FORWARD BY THE APPELLANT REGARDING THE APPLICA BILITY OF PROVISIONS U/S 40(A)(IA) OF THE ACT IN RESPECT OF O UTSTANDING AMOUNTS (PAYABLE), THERE ARE CONTRADICTORY VIEWS FR OM DIFFERENT HIGH COURTS AND THE CBDT HAS ALSO ISSUED A CIRCULAR IN THIS REGARD. THE APPELLANT'S CASE FINDS SUPPORT FROM THE DECISIONS OF HON'BLE COURTS RELIED UPON BY IT. WITHOUT PREJUDICE TO APPELLANT'S THIS ARGUMENT, THE ARGUMENT THAT THE PAYEE'S (DTC) ASSESSMENT HAS ALREADY BEEN COMPLETED U/S 143(3) OF THE ACT, WHEREIN IT HAS SHO WN ALL THE RECEIPTS IN RESPECT OF LICENSE FEES PAID BY THE APPELLANT. IT IS OBSERVED THAT THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) IS CU RATIVE AND REMEDIAL IN NATURE AND FOR MAKING THE PROVISION WOR KABLE GIVING IT A REASONABLE INTERPRETATION, THEREFORE, S UCH AMENDMENT MUST BE CONSTRUED RETROSPECTIVELY IN OPER ATION. AS HELD BY THE HON'BLE COURT ON THE BASIS OF RULE O F REASONABLE CONSIDERATION IN HOLDING THE RETROSPECTI VE EFFECT OF THIS PROVISO, THE AO IS NOT JUSTIFIED IN INVOKIN G SECTION 40(A)(IA) OF THE ACT IN MAKING DISALLOWANCE. NE FRU ITFUL PURPOSE IS SERVED IF THE APPELLANT IS MADE LIABLE T O MAKE TDS ON SUCH PAYMENTS WHICH HAVE ALREADY BEEN SHOWN AS INCOME IN PAYEE'S ACCOUNT. IN A RECENT JUDGMENT, TH E HON'BLE ITAT, DELHI, BENCH-D, NEW DELHI IN ITA NO. 3893/DE1 /2010 AND 5696/DE1/2011 IN THE CASE OF ITO, 37(2), NEW DE LHI VS. DR. JAIDEEP KUMAR SHARMA, HAVE HELD THE SIMILAR VI EW BASED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RAJINDER KUMAR (SUPRA).THE FACTS BE ING SO, THE A.O.S ACTION IN MAKING THE DISALLOWANCE U/S 40 (A)(IA) OF THE ACT IS NOT JUSTIFIED AND THE GROUND NO. 6,7,9 & 11 OF THE APPEAL ARE ALLOWED. 6. BEFORE US THE LD. CIT (DR), SUBMITTED THAT DESPITE SEVERAL OPPORTUNITIES GIVEN BY THE AO TO THE ASSESSEE, NOWHERE IT WAS POINTED OUT OR BROUGHT TO THE NOTICE OF THE AO THAT, FIRSTLY, 50% OF THE ADVERTISEMENT FEE HAS BEEN PAID TO MCD AND NOT TO DTC A S THE ASSESSEES CONTENTION BEFORE THE AO WAS ALL TOGETHER DI FFERENT AND NO ITA NO. 6578/DEL/2014 ITO VS. M/S. SHIVAAI INDUSTRIES PVT. LTD. 6 REASONABLE CAUSE WERE GIVEN BY THE ASSESSEE BEFORE THE LD. CIT (A) AS TO WHY SUCH ADDITIONAL EVIDENCE COULD NOT BE FILED BE FORE THE AO. THUS HE SUBMITTED THAT MATTER SHOULD BE REMANDED BACK TO THE FI LE OF AO FOR EXAMINING THIS ISSUE. SECONDLY, ON THE ISSUE THAT IN THE CASE OF THE PAYEE, ASSESSMENT HAS BEEN COMPLETED U/S 143(3), HE SUBMITTED THAT IT CANNOT BE ASCERTAINED AS TO WHETHER THE PAYMENTS RECEI VED BY THE DTC HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT OR IT IS PART OF ITS RECEIPTS. THUS, FOR VERIFICATION OF THIS ASPECT ALSO, MATTER SHOULD BE RESTORED BACK TO THE FILE OF AO. 7. ON THE OTHER HAND, LD. COUNSEL SUBMITTED THAT, ASSE SSEE AFTER GIVING THE ENTIRE EXPLANATION BEFORE THE LD. CIT(A) AL ONG WITH THE TENDER DOCUMENT THROUGH WHICH THIS PAYMENT HAS BEEN MA DE, IT IS QUITE CLEAR THAT 50% OF THE PAYMENT HAS BEEN MADE TO MCD AND THEREFORE, TO THE EXTENT OF 50% NO TDS WAS DEDUCTIBLE. LD. CIT (A) HAS GIVEN DUE OPPORTUNITY TO THE AO TO VERIFY THIS ASPECT WH O HAS SIMPLY FAILED TO EXAMINE AND HAS OBJECTED TO ADMISSIBILITY WI THOUT GOING INTO THE FACT IT GOES TO THE VERY ROOT OF THE MATTER OF DISALLOW ANCE U/S 40(A)(IA). REGARDING SECOND CONTENTION RAISED BY THE L D. CIT (DR), HE SUBMITTED THAT SUCH A HUGE PAYMENT MADE TO DTC TOWARDS ADVERTISEMENT FEE IS PART OF THE RECEIPT OF DTC AND ONCE THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) IN THE CASE OF DTC AT A HUGE LOSS, THEN THERE WAS NO REQUIREMENT FOR THE ASSES SEE TO DEDUCT TDS ON SUCH PAYMENT. THEREFORE, LD. CIT (A) HAS RIGH TLY ACCEPTED THE ASSESSEES CONTENTION ON THIS SCORE. IN ANY CASE, NOW IT IS A SETTLED LAW THAT SECOND PROVISO TO SECTION 40(A)(IA) HAS BEEN HELD TO BE RETROSPECTIVE FROM 1.4.2005 IN VIEW OF THE JUDGEMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P.) LTD. (2015) 377 ITR 635 (DELHI). ITA NO. 6578/DEL/2014 ITO VS. M/S. SHIVAAI INDUSTRIES PVT. LTD. 7 8. WE HAVE HEARD RIVAL CONTENTIONS AND ALSO PERUSE D THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER QUA THE ISSUE RAISED BEFORE US. SO FAR AS THE ADMISSIBILITY OF ADDITIONAL EVIDENCE BY THE LD. CIT(A) IS CONCERNED, WE FIND THAT THE VERY BASIS FOR MAKING THE PAYMENT IS ORIGINATING FROM THE CONTRACT ENTERED BY THE ASSESSEE W ITH THE DTC FOR DISPLAY OF ADVERTISEMENT ON DTC ON THEIR BUS QUEUE SH ELTERS AND TIME KEEPER BOOTHS. IN THE SAID CONTRACT ITSELF, IT HAS BEEN AGREED THAT 50% OF THE LEASE FEE IS PAYABLE TO THE MCD AND AS PER THE A GREEMENT A SEPARATE CHEQUE IN FAVOUR OF MCD IS GIVEN. ONCE THIS FACT WAS PLACED BEFORE THE LD. CIT (A), HE IMMEDIATELY CONFRONTED TO TH E AO TO SUBMIT HIS REMAND REPORT AFTER VERIFICATION. AO AFTER TAKING NOTE OF ALL THESE DOCUMENTS HAS SIMPLY OBJECTED TO ADMISSION OF ADDITIO NAL EVIDENCE, WHICH IN OUR OPINION WAS NOT CORRECT ON THE PART OF THE AO. WHEN THE MANDATE WAS GIVEN BY THE LD. CIT(A) TO VERIFY THE PAYM ENT MADE TO MCD WHICH IS FLOWING FROM THE BANK STATEMENT OF THE ASSE SSEE PLACED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THEN IT WAS THE DUTY OF THE AO TO VERIFY THE SAME. IN ANY CAS E THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT PAYMENT TO MCD HAS BEEN MADE THROUGH ASSESSEES BANK ACCOUNT THROUGH CHEQUE DULY RE FLECTED IN THE BANK ACCOUNT OF DTC WHICH IS ALREADY PART OF THE ORIGI NAL RECORD, WHICH AO HAS NOT EVEN BOTHER TO EXAMINE THIS ISSUE AT TH E TIME OF ASSESSMENT. THUS, THERE WAS A COMPLETE FAILURE ON PA RT OF THE AO HIMSELF WHILE MAKING SUCH A DISALLOWANCE U/S 40(A)( IA). THE FINDING AND OBSERVATION OF LD. CIT (A) IN THIS REGARD AS INCO RPORATED ABOVE IS THEREFORE, CONFIRMED AS IT IS BASED ON APPRAISAL OF FACTS AND PROVISIONS OF LAW. 9. SO FAR AS THE SECOND ISSUE IS CONCERNED THAT , SINCE REGULAR ASSESSMENT OF DTC, I.E., PAYEE HAS BEEN COMPLETED U/ S 143(3) AT A HUGE LOSS, WHEREIN ALL THE RECEIPTS OF LICENCE FEE PA ID BY THE ASSESSEE ITA NO. 6578/DEL/2014 ITO VS. M/S. SHIVAAI INDUSTRIES PVT. LTD. 8 HAS BEEN REFLECTED IN ITS INCOME, THEREFORE, NO DISAL LOWANCE IS CALLED FOR, WE FIND THAT THIS FACT THAT THE PAYMENT MADE BY THE ASSESSEE IS PART OF DTCS RECEIPTS, HAS BEEN DULY NOTED BY THE LD. CIT (A) IN PARA 12.2. ONCE IN THE HANDS OF THE PAYEE, RECEIPTS HAVE BE EN SHOWN AND INCOME THEREON HAS BEEN ASSESSED U/S 143(3), THEN NO DISALLOWANCE U/S 40(A)(IA) CAN BE MADE IN VIEW OF THE SECOND PROVISO TO SECTION 40(A)(IA) BROUGHT BY THE FINANCE ACT 2012 W.E.F. 1.4. 2013 WHICH HAS HELD TO BE DECLARATORY AND CURATIVE IN NATURE BY THE HON BLE JURISDICTIONAL HIGH COURT IN VARIOUS CASES INCLUDING THAT OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD. (SUPRA). THUS THE FINDING AND OBSERVATION OF LD. CIT (A) WHILE DELETING THE SAID DI SALLOWANCE IN PARA 12.3 WHICH HAS BEEN REPRODUCED ABOVE IS AFFIRMED AN D ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER, 2017. SD/- SD/- (PRASHANT MAHARISHI) (A MIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 /10/2017 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI ITA NO. 6578/DEL/2014 ITO VS. M/S. SHIVAAI INDUSTRIES PVT. LTD. 9