DCIT CEN CIR 7(3), MUMBAI V. VARDHAVINAYAK TOWNSHIP DEVELOPMENT P.LTD, MUMBAI

ITA 7011/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9954 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 27-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 01-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.7011/MUM/2016 : ASST.YEAR 2012-2013 DY.COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 7(3) MUMBAI. / VS. M/S.VARDHAVINAYAK TOWNSHIP DEVELOPMENT PRIVATE LIMITED ROOM NO.1, CHAWL NO.4 KANJUR (EAST), MUMBAI 400 042. PAN : AABFL3409M. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI V.JANARDHANAN /RESPONDENT BY : SHRI JITENDRA JAIN / DATE OF HEARING : 27.06.2017 / DATE OF PRONOUNCEMENT : 01.09.2017 / O R D E R THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 06.09.2016 PERTAINING TO ASSESSMENT YEAR 2012-2013. 2. THE GROUNDS OF APPEAL READ AS UNDER:- '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN FAILING TO APPRECIATE THAT THE DISALLOWANCE U/S 40(A)(IA) WILL BE ATTRACTED AS THE ASSESSES HAS NOT DEDUCTED TAX AT SOURCE ON THE INTEREST PAYMENT OF RS. 1,68,44,164/- EVEN THOUGH THE PARTY TO WHOM THE INTEREST WAS PAID HAD INCLUDED THE INTEREST INCOME IN COMPUTING ITS RETURNED TAXABLE INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C1T(A) ERRED IN FAILING TO APPRECIATE THAT THE 2' PROVISO TO SECTION 40(A)(IA) WAS INSERTED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 01.04.2013 AND THE SAME COULD NOT BE ITA NO.7011/MUM/2016. M/S.VARDHAVINAYAK TOWNSHIP DEVELOPMENT PVT.LTD. 2 HELD TO BE APPLICABLE RETROSPECTIVELY TO THE ASSESSMENT YEAR 2012-2013. ' THE APPELLANT PRAYS THAT THE ORDER OF CIT(A)-49, MUMBAI ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND AND/OR ADD NEW GROUNDS WHICH MAY BE NECESSARY. 3. THE FACTS OF THE CASE ARE AS UNDER:- 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT ASSESSEE HAD PAID INTEREST OF RS.1,68,44,164/- ON WHICH TDS WAS NOT DEDUCTED. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID INTEREST PAYMENT SHOULD NOT BE DISALLOWED U/S.40(A)(IA). IN RESPONSE, THE ASSESSEE STATED THAT AS THE RECIPIENT PARTY OF INTEREST HAS DULY FILED THEIR RETURN OF INCOME INCORPORATING INTEREST INCOME RECEIVED FROM THE ASSESSEE, NO DISALLOWANCE U/S.40(A)(IA) SHOULD BE MADE IN VIEW OF THE SECOND PROVISO OF SECTION 40(A)(IA) INSERTED VIDE FINANCE ACT, 2012. 3.2 THE CONTENTION OF THE ASSESSEE WAS CONSIDERED BY THE AO, BUT NOT FOUND TO BE TENABLE AS SECOND PROVISO OF SECTION 40(A)(IA) INSERTED VIDE FINANCE ACT, 2012 WAS APPLICABLE W.E.F. 01.04.2013, I.E. A.Y. 2013-14. THE ASSESSEE HAD INCURRED INTEREST EXPENSES OF RS.1,68,44,164/-, OUT OF WHICH RS.48,42,100/- WAS CAPITALIZED TO INVENTORY AND THE REMAINING AMOUNT OF RS.1,20,02,064/- WAS DEBITED TO PROFIT AND LOSS ACCOUNT, HENCE, THE AO WAS OF THE VIEW THAT INTEREST EXPENSES WAS NOT ALLOWED TO BE CLAIMED AS BUSINESS DEDUCTION U/S.40(A)(IA) AND HENCE PROCEEDED TO ADD RS.1,20,02,064/- TO THE ITA NO.7011/MUM/2016. M/S.VARDHAVINAYAK TOWNSHIP DEVELOPMENT PVT.LTD. 3 INCOME OF THE ASSESSEE. FURTHER, THE AO REDUCED THE INVENTORY BY AN AMOUNT OF RS.48,42,100/- 4. UPON ASSESSEES APPEAL, LEARNED CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE IMPUGNED AMENDMENT WAS RETROSPECTIVE IN EFFECT. FOR THIS PROPOSITION, LEARNED CIT(A) INTER ALIA RELIED UPON HONBLE DELHI HIGH COURT DECISION. I MAY GAINFULLY REFER TO THE ORDER OF LEARNED CIT(A) AS UNDER:- 7. I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE, THE STAND TAKEN BY THE A.O IN THE ASSESSMENT ORDER, THE GROUNDS OF APPEAL AND THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT DURING THE HEARING PROCEEDINGS. 7.1 THE ONLY ISSUE TO BE CONSIDERED IS WHETHER THE 2ND PROVISO TO SECTION 40(A)(IA), INSERTED BY FINANCE ACT, 2012 W.E.F. 01.04.2013 IS RETROSPECTIVE IN EFFECT OR NOT. IN THIS REGARD, IT IS NOTED THAT IN THE CASE OF TRUSTED SHARES & INVESTMENT LTD. VS. ITO - 4(2)(2), MUMBAI, THE ITAT, SMC BENCH HAS FOLLOWED THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LANDMARK TOWNSHIP PVT. LTD. (ITA NO.160 & 161 OF 2015 DATED 26.08.2015) WHEREIN IT WAS HELD THAT THE AMENDMENT TO SECTION 40(A)(IA) W.E.F. 01.04,2013, BRINGING IN THE 2ND PROVISO WAS CLARIFICATORY AND, HENCE RETROSPECTIVE. THIS VIEW HAS BEEN ADOPTED BY ITAT, MUMBAI IN IDBI CAPITAL MARKETS VSDLLMNITA NO.888/MUM/2014 DATED 13.10.2015 AND IN THE CASE OF MAHINDRA NAVISTAR AUTOMOTIVES LTD. VS. DCIT - 2(2), MUMBAI IN ITA NO.3324&4645/MUM/2013 DATED 13.05.2016. 7.2 I FIND THAT THE APPELLANT HAD FILED A CERTIFICATE FROM CHARTERED ACCOUNTANT CERTIFYING THAT THE APPELLANT COMPANY HAS PAID/CREDITED AN AMOUNT OF RS. 1,68,44,164/- ON 31,03.2012, BY WAY OF INTEREST ON LOAN TO THE ACCOUNT OF SURYODAY BUILDWELL AND FARMS PVT. LTD. AND THE PAYEE HAS FURNISHED ITS RETURN OF INCOME FOR THE A.Y. 2012-13 ON 29.09.2012 IN WHICH THE SAID INTEREST ITA NO.7011/MUM/2016. M/S.VARDHAVINAYAK TOWNSHIP DEVELOPMENT PVT.LTD. 4 INCOME HAS BEEN TAKEN INTO ACCOUNT FOR COMPUTING THE TAXABLE INCOME. IN VIEW OF THE ABOVE, THE APPELLANT COMPANY CANNOT BE SAID TO BE AN ASSESSEE IN DEFAULT UNDER 1ST PROVISO TO SECTION 201(1). FURTHER, THE APPELLANT WOULD BE COVERED BY 2ND PROVISO TO SECTION 40(A)(IA) WHICH IS HELD TO BE RETROSPECTIVE AND APPLICABLE FOR A.Y. 2012-13, FOLLOWING THE DECISIONS CITED BY THE APPELLANT AND ALSO NOTED ABOVE IN PARA 7,1. ACCORDINGLY, IT IS HELD THAT THE DISALLOWANCE OF INTEREST U/S.40(A)(IA) OF RS.1,20,02,064/- AS WELL AS REDUCTION OF INTEREST OF RS.48,42,100/- FROM THE INVENTORY, ON THE GROUND THAT TAX WAS NOT DEDUCTED AT SOURCE ON SUCH INTEREST PAYMENT, IS NOT CORRECT AND THE AO IS DIRECTED TO ALLOW THE DEDUCTION OF RS.1,20,02,064/- AND THE CAPITALIZATION OF INTEREST AMOUNT OF RS.48,42,100/- TO THE INVENTORY. 5. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. I FIND THAT THE IMPUGNED AMENDMENT AS CONTESTED BY THE REVENUE IN THE GROUNDS OF APPEAL ABOVE HAS ALREADY BEEN HELD BY HONBLE DELHI HIGH COURT TO BE RETROSPECTIVE IN NATURE. IN THE PRESENT CASE, THE ASSESSEE HAS FILED CERTIFICATE FROM THE CHARTERED ACCOUNTANT, AND ASSESSEE COMPANY HAS PAID AND THE PAYEE HAS FURNISHED ITS RETURN OF INCOME IN WHICH THE SAID INCOME HAS BEEN TAKEN INTO ACCOUNT FOR COMPUTATION OF TAXABLE INCOME. IN SUCH SITUATION LEARNED CIT(A) HAS HELD THAT DISALLOWANCE U/S 40(A)(IA) IS NOT REQUIRED. 7. UPON CAREFUL CONSIDERATION, I FIND THAT THE ISSUE HAS BEEN DECIDED BY THE LEARNED CIT(A) FOLLOWING HONBLE DELHI HIGH COURT DECISION. THERE IS NO CONTRARY DECISION OF HONBLE JURISDICTIONAL HIGH COURT. IN SUCH SITUATION, RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, I UPHOLD THE SAME. ITA NO.7011/MUM/2016. M/S.VARDHAVINAYAK TOWNSHIP DEVELOPMENT PVT.LTD. 5 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON THIS 01 ST DAY OF SEPTEMBER, 2017. SD/- ( SHAMIM YAHYA ) ACCOUNTANT MEMBER MUMBAI; DATED : 01 ST SEPTEMBER, 2017. DEVDAS* / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.