V-TEX WVG & MFG MILLS LTD, MUMBAI V. DCIT 4(3)(2), MUMBAI

ITA 6703/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9732 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 15-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: M V SANGHVI
• Keywords: Opportunity of being heard; Earning of tax free income; Retrospective amendment
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH F , MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND PAWAN SINGH, JUDICIAL MEMBER ITA NO. 6703 /MUM/2016 (ASS ESSMENT YEAR- 2012-13) M/S V-TEX WVG & MFG MILLS LTD., OFFICE NO. 313, AHURA CENTRE, 82, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI-400093 PAN:AABCV7931K VS. DCIT-4(3)(2) AAYAKAR BHAVAN, NEW MARINE LINES, MUMBAI-20. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.V. SANGHVI (AR) REVENUE BY : SHRI RAM TIWARI (DR) DATE OF HEARING : 22.03.2018 DATE OF PRONOUNCEMENT : 22.03.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER O F INCOME-TAX (APPEALS)-9, MUMBAI, [FOR SHORT THE LD. CIT(A)] DAT ED 29.08.2016 FOR ASSESSMENT YEAR 2012-2013. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1 THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST PAID ON CAR LOANS OF RS. 48,13,356/ -TO NON-BANKING FINANCIAL INSTITUTIONS (NBFC) UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF NON-DEDUCTIO N OF TDS; 1.2 THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE APPELLANT IS NOT DEEMED TO BE A N ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX ON INTEREST PAID TO NON-BANKING F INANCIAL INSTITUTIONS AS THE PAYEE HAS CONSIDERED THE SAID INTEREST IN THEIR RETURN OF INCOME; ITA NO. 6703/MUM/16- M/S V-TEX WVG & MFG MILLS LTD. 2 1.3 THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE APPELLANT HAS DULY SUBMITTED TH E PROOF THAT THE SAID INTEREST PAID TO NON BANKING FINANCIAL INSTITUTIONS IS DULY CONSIDERED AS INCOME AND TAXES DUE ON THE SAME ARE DULY PAID BY T HE SAID INSTITUTIONS; 2.1 THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ADDITION OF RS.471,290/ - ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE INCOME TAX ACT,1961 MADE BY APPLYING RUL E 8D OF THE INCOME TAX RULES; 2.2 THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE APPELLANT HAS NOT EARNED ANY IN COME WHICH DOES NOT FORM PART OF TOTAL INCOME. 2.3 THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE APPELLANT HAS NOT INCURRED ANY EXPENDITURE TO EARN INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 30.09.2012 DECLARING TO TAL INCOME AT RS. 1,38,44,163/-. THE ASSESSMENT WAS COMPLETED UNDER S ECTION 143(3) OF THE ACT ON 10.03.2015. THE ASSESSING OFFICER WHILE PASS ING THE ASSESSMENT ORDER BESIDES THE OTHER ADDITION AND DISALLOWANCES, DISALLOWED RS. 48,13,536/- UNDER SECTION 40(A)(IA) ON ACCOUNT OF N ON-DEDUCTION OF TDS ON PAYMENT OF INTEREST ON CAR LOANS AND RS. 4,71,29 0/- UNDER SECTION 14A R.W. RULE 8D. ON APPEAL BEFORE THE LD. CIT(A), BOTH THE ADDITIONS/DISALLOWANCES WAS CONFIRMED. FURTHER, AGG RIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT A PPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (A R) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE RE VENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE SUBMITS THAT ITA NO. 6703/MUM/16- M/S V-TEX WVG & MFG MILLS LTD. 3 THE SECOND PROVISO IN SECTION 40(A)(IA) IS BROUGHT BY FINANCE ACT 2012 AND IS APPLICABLE W.E.F. 01.04.2013. THE SAID PROVI SO IS HELD TO BE RETROSPECTIVE IN NATURE BY VARIOUS DECISION OF TRIB UNAL AND BY HONBLE DELHI HIGH COURT IN CIT VS ANSAL LANDMARK TOWNSHIPS (P.) LTD. [2015] (377 ITR 635). THE LD. AR OF THE ASSESSEE FURTHER S UBMITS THAT NO DISALLOWANCES WARRANTED AT THE HAND OF ASSESSEE AND THE MATTER MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR LIMIT ED PURPOSE FOR VERIFICATION OF PAYMENT ON TAX ON SUCH INTEREST PAY MENT BY THE FINANCER OF THE CAR/ VEHICLES. THE RECIPIENT HAS GIVEN CERTIFIC ATE THAT THEY HAVE PAID THE TAX ON SUCH INCOME. IN SUPPORT OF HIS SUBMISSIO N, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF TRIBUNAL IN IT S OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 6572/MUM/2013. O N THE OTHER HAND, THE LD. DR FOR THE REVENUE FAIRLY CONCEDED TH AT HE HAS NO OBJECTION, IF THE MATTER IS RESTORED TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION, IF THE RECIPIENT OF THE INTEREST HAS INCLUDED THE INTEREST INCOME IN THEIR RETURN OF INCOME. 4. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D FIND THAT SIMILAR DISALLOWANCE WAS MADE AGAINST THE ASSESSEE FOR ASSE SSMENT YEAR 2010- 11. HOWEVER, ON APPEAL BEFORE TRIBUNAL IN ITA NO. 6 572/MUM/2013 THE TRIBUNAL VIDE ORDER DATED 01.12.2015 PASSED THE FOL LOWING ORDER: 4. GROUND NO: 2 RELATES TO THE DISALLOWANCE OF INTE REST PAID TO NON- BANKING FINANCIAL INSTITUTIONS U/S. 40(A) (IA) OF T HE ACT. ITA NO. 6703/MUM/16- M/S V-TEX WVG & MFG MILLS LTD. 4 4.1 WHILE SCRUTINIZING THE RETURN OF INCOME, THE A SSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED EXPENSES UNDE R THE HEAD INTEREST PAID ON CAR LOANS. HOWEVER, THE AO FOUND THAT THE ASSESS EE HAS NOT DEDUCTED TAX AT SOURCE. THE AO ACCORDINGLY DISALLOWED RS. 93,205 /- U/S. 40(A)(IA) OF THE ACT. 4.2. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHE MENTLY SUBMITTED THAT PROVISO TO SEC. 40(A)(IA) HAS BEEN HELD TO BE DECLA RATORY AND CURATIVE IN NATURE AND THEREFORE HAVE RETROSPECTIVE EFFECT BY T HE TRIBUNAL DELHI BENCH IN THE CASE OF ITA VS DR. JAIDEEP KUMAR SHARMA 34 I TR 0565 WHEREIN THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE HON'BLE H IGH COURT OF DELHI IN THE CASE OF CIT VS ANSAL LAND MARK TOWNSHIP (P) LTD IN ITA NO. 160 & 161 OF 2015. THE LD. COUNSEL SUBMITTED THAT THUS IF THE PAYEES HAVE OFFERED THE INCOME IN THE RESPECTIVE RETURN AND HAVE PAID THE T AXES, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE PAYER LE. THE AS SESSEE. 6. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNS EL. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE DECISION OF THE TRI BUNAL AND THE HON'BLE HIGH COURT OF DELHI (SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE RESTORE THIS ISSUE TO THE FILE OF THE AO. THE ASSESSEE IS D IRECTED TO FURNISH NECESSARY DETAILS IN SUPPORT OF ITS CLAIM THAT THE INTEREST H AS BEEN SHOWN BY THE PAYEES IN THE RESPECTIVE' RETURNS AND HAVE PAID TAXES THER EON, THE AO IS DIRECTED TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE SECOND PROVISO TO SEC. 40(A)(IA)OF THE ACT AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 5. CONSIDERING THE DECISION OF TRIBUNAL ON IDENTICAL G ROUND OF APPEAL, THIS GROUND OF APPEAL IS ALLOWED IN PRINCIPLE. HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE FACT, IF THE RECIPIENT OF THE INTEREST HAS SHOWN IT IN ITA NO. 6703/MUM/16- M/S V-TEX WVG & MFG MILLS LTD. 5 THEIR RETURN OF INCOME AND GRANT THE RELIEF TO THE ASSESSEE. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED. 6. GROUND NO.2 RELATES TO DISALLOWANCE UNDER SECTION 1 4A. THE LD. AR OF THE ASSESSEE SUBMITS THAT NO TAX FREE INCOME IS REC EIVED BY THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR. THUS, NO DISALL OWANCE UNDER SECTION 14A IS WARRANTED AGAINST THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN CASE OF CIT VS. I L & F S REPORTED IN 399 ITR 483. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHO RITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT TH E ASSESSEE HAS NOT SHOWN ANY DIVIDEND INCOME ON THE INVESTMENT MADE BY THE ASSESSEE. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF RULE 8D AND MADE THE DISALLOWANCE OF RS. 4,71,290/-. THE LD. CIT(A) UPHE LD THE ACTION OF ASSESSING OFFICER. THE HON'BLE DELHI HIGH COURT IN CASE OF CIT VS. I L & FS (SUPRA) HELD WHEN NO EXEMPT INCOME WAS EARNED IN RELEVANT ASSESSMENT YEAR, THERE COULD BE NO DISALLOWANCE IN TERMS OF SECTION 14A, READ WITH RULE 8D. THUS, IN VIEW OF THE DECISION OF HON'BLE DELHI HIG H COURT IN CIT VS IL & FS (SUPRA) WE DIRECT THE ASSES SING OFFICER TO VERIFY THE FACT IF NO EXEMPT INCOME IS RECEIVED BY THE ASS ESSEE DURING THE YEAR AND GRANT THE RELIEF TO THE ASSESSEE. ITA NO. 6703/MUM/16- M/S V-TEX WVG & MFG MILLS LTD. 6 8. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF MARCH 2018. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 22/03/2018 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE C