M/s Gita Refractories Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 702/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8602 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-02-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 13-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: RAMESH KAMALAPURKAR
• Keywords: Retrospective amendment
• Section: 143(3)

Judgement Text

ITA NO.702/B/09 1 IN THE INCOME TAX APPELLATE T RIBUNAL, BANGALORE BENCH A BEFORE GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.702./BA NG/2009 (ASSESSMENT YEAR 2005-06) M/S GITA REFRACTORIES PVT. LTD., NO.209, SWISS COMPLEX, 33, RACE COURSE ROAD, BANGALORE-560 001. . APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-11(3), BANGALORE. . RESPONDENT APPELLANT BY : SHRI RAMESH KAMALAPURKAR RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI O R D E R PER GEORGE GEORGE K, JUDICIAL MEMBER : THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) - I, BANGALORE DATED 12.05.2009. THE ASSESSMENT YEAR CO NCERNED IS 2005-06. 2. THE EFFECTIVE GROUNDS RAISED ARE FOLLOWS : I) THE CIT(A) GROSSLY ERRED IN CONFIRMING THE ADDI TION OF DISALLOWANCE OF RS.34,44,337/- U/S 40(A)(IA) OF THE ACT IN SPITE OF THE AMENDMENT BROUGHT IN BY FINANCE ACT 20 08 TO THE SAID SECTION WITH RETROSPECTIVE EFFECT FROM INCEPTION OF THE SAID SECTION I.E FROM 1 ST APR, 2005. ITA NO.702/B/09 2 II) THE CIT(A) I BANGALORE GROSSLY ERRED IN IGNORING THE RELEVANT CLARIFICATIONS OF THE CBDT, W HICH WAS ALREADY ISSUED WHEN THE SAID APPELLATE ORDER WA S PASSED WITH REFERENCE TO THE AMENDED SEC. AND SIMPL Y CONFIRMED THE SAID ADDITION WITHOUT APPRECIATING OR CONSIDERING THE YEAR OF APPLICABILITY AND THE SPIRI T OF THE AMENDMENT. THE FACTS OF THE CASE IN BRIEF ARE AS FOLLOWS: 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY DOING THE BUSINESS OF MANUFACTURE AND TRADE OF REFRACTORY BRI CKS, MORTARS AND CASTABLES. THE ASSESSEE COMPANY FILED THE RETUR N OF INCOME ON 31.10.2005 BY DECLARING AN LOSS OF RS.21,19,532/ -. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS CO MPLETED U/S 143(3) OF THE ACT, ON A TOTAL INCOME OF RS.16,74,20 5/-, AND A DEMAND OF RS.7,28,745/- WAS RAISED ON THE COMPANY. 4. DURING THE COURSE OF SCRUTINY PROCEEDINGS THE AS SESSEE WAS ASKED TO PRODUCE COPIES OF TDS CHALLANS FOR TDS MAD E ON VARIOUS COUNTS MADE FROM TIME TO TIME. THE ASSESSEE COMPAN Y HAD CORRECTLY DEDUCTED TDS ON ALL SUCH PAYMENTS WHICH A TTRACT TDS PAYMENTS AND TDS RETURNS WERE ALSO FILED FROM TIME TO TIME. THE LEARNED OFFICER HAS STATED THAT, THE ASSESSEE PRODU CED ALL CHALLANS EXCEPT CHALLAN FOR PAYMENT OF RS.5,32,941/- ON INTE REST PAYMENTS. THE LEARNED OFFICER THEN ISSUED A SUMMONS TO THE AS ST. GENERAL ITA NO.702/B/09 3 MANAGER, STATE BANK OF HYDERABAD, J.C ROAD BRANCH, BANGALORE DATED 5.10.2004 FOR FURNISHING CORRECT DATE OF REM ITTANCE TO THE CENTRAL GOVERNMENT ACCOUNT. THE ASST. GENERAL MANA GER, STATE BANK OF HYDERABAD, J.C ROAD BRANCH BANGALORE VIDE H IS LETTER DATED 17.10.2007 STATED AS FOLLOWS WE VERIFIED THE ACCOUNT AND FOUND THAT CHEQUE NO.552623 DATED 30.5.2005 FOR RS. 5,32,941/- HAS BEEN CREDITED ON 28.06.2005. THE LEARNED OFFIC ER ALSO HELD THAT, THERE WAS A DELAY IN TDS PAYMENT OF RS.2,091 ON PROFESSIONAL CHARGES WHICH WAS ALSO PAID ON 28.6.20 05. THE RELEVANT DETAILS WITH REGARD TO THE AMOUNTS PAID, T DS THEREON, DUE DATE OF PAYMENT AND ACTUAL DATE OF PAYMENTS ARE AS FOLLOWS. NATURE OF PAYMENT AMOUNT IN RS. TDS THEREON IN RS. DUE DATE OF PAY-MENT ACTUAL DATE OF PAYMENT INTEREST 34,23,427 5,32,941 31.05.2005 28.06.2005 PROFESSIONAL CHARGES 20,910 2,091 31.05.2005 28.06.2005 THE ASSESSING OFFICER DISALLOWED RS.34,44,337/- U/ S 40(A)(IA) FOR DELAY IN REMITTING OF TDS INTO GOVERN MENT ACCOUNT. 5. ON APPEAL BEFORE THE CIT(A), IT WAS REQUESTED TH AT HE MAY TAKE A LENIENT VIEW OF THE ABOVE DEFAULT AS THE SAI D SECTION PERTAINING TO DISALLOWANCE HAD BECOME OPERATIONAL W ITH EFFECT FROM ASSESSMENT YEAR 2005-06 AND IT WAS THE FIRST YEAR O F SUCH OPERATION OF LAW. ITA NO.702/B/09 4 6. IN THE MEAN TIME AFTER THE APPEAL WAS FILED AND BEFORE THE HEARING OF THE CASE, FINANCE ACT 2008 BROUGHT AN AM ENDMENT TO THE SAID SECTION WITH RETROSPECTIVE EFFECT FROM 01. 04.2005 WHEREBY IT PROVIDED THAT, IF THE TAX DEDUCTED IN THE MONTH OF MARCH IS REMITTED INTO THE GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, NO DISALLOWANCE U/S 40A(IA) OF THE ACT CAN BE CALLED FOR. THE ASSESSEE ALSO PLACED RELIANCE ON THE AMENDED PROVISION OF SECTION 40A(IA) AND REQUESTED TO DELET E THE ADDITION OF RS.34,44,337/-. 7. THE CIT(A)-I, BANGALORE WHILE DISPOSING THE APPE AL, CONCLUDED THAT, THE AMENDED SECTION IS OPERATIONAL FROM ASST. YEAR 2006-07 AND ACCORDINGLY CONFIRMED THE DISALLOWANCE OF RS.34,47,337/-. THE CIT(A)-I WHILE CONFIRMING THE SAID ADDITION ON PAGE 8 OF THE ORDER OBSERVED AS UNDER : THE APPELLANT ARGUED THAT SINCE IT HAD DEDUCTED TDS IN THE MONTHS OF MAR, 2005 AND REMITTED THE SAM E TO THE GOVT. ACCOUNT ON 28.6.2005 WHICH WAS MUCH BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME FOR ASST. YEAR 2005-06, I.E., 31.10.2005, THE APPELLANT HAD F ULFILLED THE REQUIREMENTS AS PER THE AMENDED PROVISIONS OF S EC. 40(A)(IA) AND THAT, AS SUCH, NO DISALLOWANCE WAS CA LLED FOR IN VIEW OF THE AMENDMENT TO SEC.40(A)(IA) BROUG HT ABOUT BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE E FFECT FROM 01.04.2005 RELEVANT FOR ASST. YEAR 2006-07. ITA NO.702/B/09 5 HOWEVER, IT IS QUITE APPARENT THAT THIS RETROSPECTI VE AMENDMENT CAME INTO EFFECT ONLY IN THE SUBSEQUENT A SST. YEAR, I.E 2006-07 AND NOT DURING THE FINANCIAL YEAR RELEVANT FOR THE ASST. YEAR IN QUESTION, I.E 2005-0 6. HENCE, THE APPELLANTS RELIANCE ON THE RETROSPECTIV E AMENDMENT EVEN THOUGH IT IS NOT RELEVANT FOR THE AS ST. YEAR UNDER CONSIDERATION IS COMPLETELY MISPLACED, UNTENABLE AND IS THEREFORE UNACCEPTABLE. AGGRIEVED BY THE ORDER OF THE CIT(A), ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED AR SUBMITTED THAT THE CONCLUSION DRA WN BY THE CIT(A) IS ERRONEOUS AND HENCE NEED TO BE REVERSED P ARTICULARLY IN LIGHT OF THE LANGUAGE USED IN THE MEMORANDUM OF CLA USES CONTAINED IN FINANCE ACT 2008. HE ALSO RELIED ON T HE CBDT CIRCULAR NO.1 DATED 27.03.2009 WHICH EXPLAINED THE PROVISIONS RELATING TO THE AMENDMENT, BROUGHT IN BY THE FINANC E ACT 2008. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDE R OF THE AUTHORITIES BELOW : 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE RELEVANT AMENDED PROVISIO NS OF SEC. 40A(IA) (WITH RETROSPECTIVE EFFECT FROM 1.4.05) RE ADS AS UNDER : ITA NO.702/B/09 6 (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT, ROYALTY] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNT S PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK )(INCLUDING SUP PLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-BAND SUCH T AX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION [HAS NOT BEEN PAID : (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SEC. (1) OF SEC. 139; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR 10. AS PER THE AMENDED CLAUSE (A), NO DISALLOWANCE IS CALLED FOR IF THE TAX WHICH WAS SO DEDUCTED IN THE LAST MONTH OF THE PREVIOUS YEAR, IS PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB- SEC. (1) OF SEC. 139. IN THE PRESENT CASE, THE ASSESSEE HAVING DEDUCTED THE TAX IN THE MONTH OF MARCH 2005, HAS REMITTED THE DEDUCTED TAX TO THE GOVERNMENT ACCOUNT ON 28.6.2005 AS AGAINST THE DUE DATE OF FILING RETURN OF INCOME WHICH WAS 31.10.2005, RELEVANT FOR ASST. YEAR 2005- 06. HENCE THE ASSESSEE HAS FULFILLED THE REQUIREME NT OF REMITTANCE OF TAX BEFORE THE DUE DATE OF RETURN OF INCOME, AS PER THE AMENDED PROVISIONS OF THE SAID SECTION AND AS SUCH NO DISAL LOWANCE WAS CALLED FOR IN THE MATTER, AFTER THE RETROSPECTIVE AMENDMEN T TO THE SAID SECTION, BROUGHT BY THE FINANCE ACT 2008. ITA NO.702/B/09 7 11. THE AMENDMENT TO SEC. 40A(IA) BROUGHT IN FINANC E ACT 2008 HAS BEEN FURTHER EXPLAINED BY CBDT CIRCULAR NO.1 DA TED 27.3.09 AND FOR READY REFERENCE SAME IS REPRODUCED BELOW : AMENDMENT TO THE PROVISIONS OF SUB-CLAUSE(IA) OF CLAUSE(A) OF SECTION 40 OF THE INCOME-TAX ACT : 12.1 AS PER THE PROVISIONS OF SUB-CLAUSE (IA) OF CL AUSE (A) OF SEC. 40, ANY INTEREST, COMMISSION, BROKERAGE , FEES FOR PROFESSIONAL SERVICES, FEES FOR TECHNICAL SERVI CE PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK, RENT AND ROYALTY ON WHICH TAX IS DEDUCTIBLE A T SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YE AR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIM E PRESCRIBED UNDER SUB-SEC. (1) OF SEC. 200 SHALL NOT BE ALLOWED AS DEDUCTION. HOWEVER, THE SUM IS ALLOWED AS A DEDUCTION IN THE YEAR OF ACTUAL PAYMENT OF TDS. 12.2 TO MITIGATE ANY HARDSHIP CAUSED BY THE ABOVE PROVISIONS OF SEC. 40 WHILE MAINTAINING TDS DISCIPL INE, THE ACT HAS AMENDED PROVISIONS OF SUB-CLAUSE (IA) OF CL AUSE (A) OF SEC. 40. THE AMENDMENT ALLOWS ADDITIONAL TI ME (TILL DUE DATE OF FILING OF RETURN OF INCOME) FOR DEPOSIT OF TDS PERTAINING TO DEDUCTIONS MADE FOR THE MONTH OF MARC H SO THAT DISALLOWANCE UNDER SUB-CLAUSE (IA) OF CLAUSE ( A) OF SECTION 40 IS NOT ATTRACTED IN SUCH CASES. THUS WH ERE THE LAST DATE FOR FILING THE RETURN OF INCOME IN CASE O F A TAXPAYER (DEDUCTOR) IS 30 TH SEPTEMBER, HE WILL GET ADDITIONAL TIME OF ITA NO.702/B/09 8 SIX MONTHS (APRIL TO SEPTEMBER) FOR DEPOSITING THE TAX DEDUCTED AT SOURCE ON AN EXPENDITURE INCURRED OR PA YMENT MADE IN THE MONTH OF MARCH SO AS TO ESCAPE DISALLOW ANCE UNDER SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40. 12.3 APPLICABILITY THIS AMENDMENT HAS BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT FROM 1 ST APR, 2005 AND SHALL ACCORDINGLY APPLY FOR ASSESSMENT YEAR 2005-06 AND SUBSEQUENT ASSESSMENT YEARS. 12. IT IS CLEAR FROM THE ABOVE CBDT CIRCULAR ITSELF AMENDMENT BROUGHT IN BY FINANCE ACT 2008 TO THE SEC. 40(A)(IA ) IS WITH RETROSPECTIVE EFFECT FROM A.Y 2005-06 AND HENCE TH E BENEFIT OF THE SAID AMENDMENT NEEDS TO BE ACCORDED TO THE ASSESSEE COMPANY. 13. FOR THE AFORESAID REASONS, WE REVERSE THE DECIS ION OF THE AUTHORITIES BELOW AND HOLD CLAUSE (A) OF THE AMEND ED PROVISION IS APPLICABLE, SINCE THE ASSESSEE HAD PAID TO THE GOVT . ACCOUNT TAX DEDUCTED AT SOURCE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. THEREFORE, IT CANNOT BE SAID THAT THERE IS A VIOLATION OF PROVISION OF 40A(IA) AND HENCE NO DISALLOWANCE OF E XPENDITURE IS CALLED FOR. HOWEVER, WE MAKE IT CLEAR, IF PROPORTI ONATE AMOUNT OF EXPENDITURE IS ALLOWED AS DEDUCTION IN THE SUBSEQUE NT YEAR, THE SAME SHALL BE DISALLOWED BY THE AO BY TAKING RECOUR SE TO THE VARIOUS PROVISIONS UNDER THE ACT. ITA NO.702/B/09 9 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 5TH FEB, 2010. SD/- SD/- (A. MOHAN ALANKAMONY) (GEORG E GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED : 05/02/10 VMS. COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. BY ORDER ASST. REGISTRAR, ITAT, BANGAL ORE.