M/s Aman Creations, Kurukshetra V. ITO, Kurukshetra

ITA 718/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9820 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: GAGAN DEEP SINGH
• Keywords: Retrospective amendment
• Section: 194C; 201(1); 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 718/CHD/2016 ASSESSMENT YEAR: 2011-12 M/S AMAN CREATIONS, VS. THE ITO, WARD-2, KURUKSHETRA KURUKSHETRA PAN NO. AAQFM0497D (APPELLANT) (RESPONDENT) APPELLANT BY : SH. GAGANDEEP SINGH RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 13.07.2016 DATE OF PRONOUNCEMENT : 19. 07.2016 ORDER THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAI NST THE ORDER OF LD. CIT(A)-1, GURGAON DATED 7.3.2016 FOR ASSESSMENT YEA R 2011-12 ON THE FOLLOWING GROUNDS:- 1. THE LEARNED COMMISSIONER (APPEALS) AND AO HAVE FAILED TO APPRECIATE IN LAW AND ON FACTS THAT THE R ECIPIENT (M/S AMAN DHABA) HAVE ALREADY INCLUDED THE GENERATO R EXPENSES AMOUNTING , RS 1,75,691/-, ON WHICH THE APPELLANT FAILED TO DEDUCT THE TAX U/S 194C IN ITS INCOME TAX RETURN FILED UNDER SECTION 139, THEREFORE, BY V IRTUE OF SECOND PROVISO TO SECTION 40(A)(IA) BY THE FINANCE ACT 2012, DISALLOWANCE UNDER SECTION 40(A}(IA} COULD NO T BE INVOKED. 2. THE LEARNED COMMISSIONER (APPEALS) ALSO ERRED IN LAW BY IGNORING THE FACT IN VIEW OF WELL SETTLED LEGAL 2 POSITION THAT THE INSERTION OF SECOND PR OVISO TO SECTION 4O(A)(IA) WAS DECLARATORY AND CURATIVE IN N ATURE AND IT HAD RETROSPECTIVE EFFECT FROM 1-4-2005, BEIN G THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WA S INSERTED BY THE FINANCE (NO. 2) ACT, 2004. 3. ON A 'FAIR, JUST AND EQUITABLE' INTERPRETATION OF LAW TAX WITHHOLDING LAPSES BY THE ASSESEE DID NOT RESUL T IN ANY LOSS TO THE EXCHEQUER, AS THE PAYEE(M/S AM AN DHABA) HAD INCLUDED THE SUM RECEIVED IN ITS TAXABLE INCOME BY FILING THE RETURN AND THIS FACT HAS ALSO NOT BEEN DISPUTED BY THE LEARNED AO. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED ITS RETURN OF INCOME AT RS. 2,33,040/-. THE ASSESSEE IS A PARTNERSHIP FI RM RUNNING REEBOK OUTLET UNDER THE NAME AND STYLE OF M/S AMAN CREA TIONS AT G.T. ROAD, SHAHBAD (M), KURUKSHETRA. DURING THE YEAR UNDER CON SIDERATION, THE ASSESSEE HAD PAID RS. 1,75,691/- TO M/S AMAN DHABA BEING THE SHARE OF GENERATOR EXPENSES ON ACTUAL BASIS BUT THE SAME IS DISALLOWED BY THE ASSESSING OFFICER IN TERMS OF PROVISIONS CONTAINED U/S 40(A)(IA) R.W.S. 194C OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). THE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT GENERATOR EXPENSES HAVE BEEN PAID TO THE NEIGHBOUR ON ACTUAL BASIS. MOREOVER, THESE ARE SHOWN AS INCOM E OF THE RECIPIENT AND DECLARED IN ITS RETURN OF INCOME FOR THE SAID ASSES SMENT YEAR. MOREOVER, BY INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) BY FINANCE ACT, 2012 AND IN VIEW OF THE FACT THAT RECIPIENT HAVE ALREADY INC LUDED THE INCOME EMBEDDED IN THESE PAYMENTS IN THEIR TAX RETURNS FIL ED UNDER SECTION 139, DISALLOWANCE WOULD NOT BE JUSTIFIED. EVEN THOUGH, T HE PROVISO IS STATED TO BE EFFECTIVE FROM 1.4.2013, SINCE THE AMENDMENT IS DECLARATORY AND 3 CURATIVE IN NATURE AND, THEREFORE, IT SHOULD BE GIV EN RETROSPECTIVE EFFECT FROM 1.4.2005, BEING THE DATE FROM WHICH SUB CLAUS E (IA) OF SECTION 40 (A) WAS INSERTED BY THE FINANCE (NO.2) ACT, 2014.. THE ITAT AGRA BENCH IN THE CASE OF RAJEEV KUMAR AGGARWAL VS. ADDL. COMMISS IONER OF INCOME, MATURA HAS HELD THAT THE AMENDED PROVISIONS OF SECT ION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETRO SPECTIVE EFFECT FORM 1.4.2005. 3. THE LD. CIT(A) FOUND THAT SECOND PROVISION TO S ECTION 40(A)(IA) OF THE ACT HAS BEEN INTRODUCED BY FINANCE ACT, 2012 W .E.F. 1.4.2013, THEREFORE, IT IS NOT APPLICABLE TO THE ASSESSMENT Y EAR UNDER APPEAL. HE HAS ALSO RELIED ON THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF PRUDENTIAL LOGISTICS & TRANSPORTS VS. ITO DATED 13 .1.2014 IN WHICH IT WAS HELD THAT INSERTION OF SECOND PROVISIO TO SECTI ON 40(A)(IA) IS W.E.F. 1.4.2013. THEREFORE, SAID BENEFIT IS NOT AVAILABLE TO THE ASSESSEE. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT ADDITION IS WHOLLY UNJUSTIFIED. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER OF THE ITAT, AGRA BENCH IN THE CASE OF RAJEEV KUMAR AGGARWAL (SUPRA) HAS BEEN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP P. LTD [2015] 377 ITR 635 (DELHI), IN WHICH IT WAS HELD AS UNDER:- SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOW ED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATIO N IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY T HE 4 ASSESSEE. IT IS NOT A PENALTY FOR TAX WITHHOLDING L APSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA ) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM APRIL 1, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WAS INS ERTED BY THE FINANCE (NO. 2) ACT, 2004. THE FIRST PROVISO TO SECTION 201(1) OF THE ACT HAS BEEN INSERTED TO BENE FIT THE ASSESSEE. IT ALSO STATES THAT WHERE A PERSON FAILS TO DEDUCT TAX AT SOURCE ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT, SUCH PERSON SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 . WHAT IS COMMON TO BOTH PROVISOS TO SECTIONS 40(A)(IA) AND 201(1) OF T HE ACT IS THAT AS LONG AS THE PAYEE OR RESIDENT HAS FILED ITS RETURN OF INCOME DISCLOSING THE PAYMENT RECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HA S ALSO PAID TAX ON SUCH INCOME, THE ASSESSEE WOULD NO T BE TREATED AS A PERSON IN DEFAULT. HELD, DISMISSING THE APPEAL, THAT THE PAYEES HAD FI LED RETURNS AND OFFERED THE SUMS RECEIVED TO TAX. NO DISALLOWANCE COULD BE MADE UNDER SECTION 40(A)(IA). . HE HAS, THEREFORE, SUBMITTED THAT THE ISSUE IS COVE RED IN FAVOUR OF THE ASSESSEE. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE J UDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP P. LTD (SUPRA), WHICH IS OF LATER DATED 26..8.2015. I T IS WELL SETTLED LAW THAT 5 WHEN TWO VIEWS ARE POSSIBLE, THE DECISION IN FAVOUR OF THE ASSESSEE MAY BE FOLLOWED. OTHER CONDITIONS ARE NOT DISPUTED. IN VI EW OF THE ABOVE, I SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 19 TH JULY, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR