M/s Sai Builders, Bhind V. I.T,O., Ward-2(1), Gwalior

ITA 72/AGR/2014

• Counselvise Citation: 7220314 RSA 2014
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SHARMA
• Assessee Lawyers: RAJENDRA SHARMA
• Keywords: Depreciation; Non-deduction of tax
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO.72/AGRA/ 2014 ASSESSMENT YEAR: 2008-09 M/S SAI BUILDERS, VS. INCOME TAX OFFICER, C/O. JAI PRAKASH SHARMA, WARD 2(1), GWALIOR. DASRATH NAGAR, BHAROLI ROAD, BHIND (M.P.). (PAN ABHFS 1834 Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJENDR A SHARMA, ADVOCATE RESPONDENT BY : SHRI S.D. SHARMA , JR. D.R. DATE OF HEARING : 18.06.2014 DATE OF PRONOUNCEMENT : 27.06.2014 O R D E R PER PRAMOD KUMAR, ACCOUNTANT MEMBER: BY WAY OF THIS APPEAL THE ASSESSEE HAS CHALLENGED T HE CORRECTNESS OF ORDER DATED 07.01.2014 PASSED BY THE LD. CIT(A) IN THE MA TTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2008-09. ITA NO.72/AGRA/2014 A.Y. 2008-09 2 2. GROUND NO.1 IS NOT PRESSED BY THE ASSESSEE AND A S SUCH DISMISSED FOR WANT OF PROSECUTION. 3. IN GROUND NO.2, THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW I N CONFIRMING THE DISALLOWANCE OF RS.545000/- BEING PAYMENT ACTUALLY MADE TO THE SUB- CONTRACTORS U/S.40(A)(IA) OF THE I.T. ACT WITHOUT D ISCUSSING & IGNORING THE SUBMISSIONS URGED. THE DISALLOWANCE MAY KINDLY BE DELETED. 4. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONC ERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S THE A.O. NOTED THAT THE ASSESSEE HAS MADE PAYMENTS AGGREGATING TO RS.5,45,0 00/- TO SUB-CONTRACTORS IN RESPECT OF WHICH NO TAX DEDUCTIONS HAVE BEEN MADE. IT WAS ON THIS UNDISPUTED FACT THE DISALLOWANCE OF RS.5,45,000/- WAS MADE UNDER SE CTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. AGGRIEVED BY THE DISALLOWANCE SO M ADE, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) OBSERVED THAT THE FACT OF TAX NOT HAVING BEEN DEDUCTED IS UNDISPUTED AND, THEREFO RE, THE DISALLOWANCE MADE BY THE A.O. CAN ONLY BE CONFIRMED. THE ASSESSEE IS NO T SATISFIED AND IS IN FURTHER APPEAL BEFORE US. ITA NO.72/AGRA/2014 A.Y. 2008-09 3 5. LEARNED COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO HONBLE ALLAHABAD HIGH COURTS JUDGEMENT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES PVT. LTD. (JUDGMENT DATED 09.07.2013 IN ITA NO.122 OF 2013) AND HAS CONTENDED THAT THE RATIO OF SPECIAL BENCH DECISION IN THE CAS E OF MERILYN SHIPPING & TRANSPORT VS. ACIT (136 ITD SB 23) STANDS APPROVED BY THE HONBLE ALLAHABAD HIGH COURT. THEREFORE, ACCORDING TO LEARNED COUNSE L, THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN ONLY BE MADE IN RE SPECT OF SUMS REMAINING OUTSTANDING AT THE END OF THE YEAR. HE FURTHER POI NTS OUT THAT THERE WERE NO MONEYS OUTSTANDING AT THE END OF THE YEAR AS IS EVIDENT FR OM THE FACT THAT ALL THE PAYMENTS, AS CLEARLY NOTED BY THE A.O. HIMSELF, HAVE BEEN MAD E DURING THE RELEVANT YEAR ITSELF. IT IS CONTENDED THAT IN THE CASE OF DCIT VS. GUPTA OVERSEAS (2014) 42 TAXMANN.COM 42 (AGRA TRIBUNAL), THIS BENCH OF THE T RIBUNAL HAS HELD THAT SO FAR AS DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT IS CONCERNED, THE SAME WILL NOT HOLD GOOD, IN RESPECT OF THE SUMS ACTUALLY PAID DUR ING THE YEAR, IN LAW IN VIEW OF HONBLE ALLAHABAD HIGH COURTS DECISION IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES PVT. LTD. (SUPRA) AND IN THE LIGHT OF CBDT CIRCULAR NO.10/DV/2013 DATED 16.12.2013. WE ARE THUS URGED TO DELETE THE IMPUGNE D DISALLOWANCE AND HOLD THAT SECTION 40(A)(IA) HAS NO APPLICATION ON THE FACTS O F THIS CASE. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE STAND OF THE AUTHORITIE S BELOW AND SUBMITS THAT THE ISSUE REGARDING INAPPLICABILITY OF SECTION 40(A)(IA) IN R ESPECT OF AMOUNTS PAID DURING THE YEAR STANDS CONCLUDED AGAINST THE ASSESSEE BY HONB LE GUJARAT HIGH COURTS ITA NO.72/AGRA/2014 A.Y. 2008-09 4 JUDGEMENT IN THE CASE OF CIT VS. SIKANDAR KHAN N. T UNVAR, 357 ITR 312 AND CIT VS. CRESCENT EXPORT SYNDICATE, 216 TAXMAN 258. WE A RE THUS URGED TO CONFIRM THE DISALLOWANCE AND THUS DECLINE TO INTERFERE IN THE M ATTER. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO T HE APPLICABLE LEGAL POSITIONS. 8. WHILE IT IS TRUE THAT IN THE CASE OF DCIT VS. GUPTA OVERSEAS , THIS TRIBUNAL HAS HELD THAT AN ANALYSIS OF THE STAND SO TAKEN BY THE CBDT, WHI CH IS BINDING ON ALL THE FIELD OFFICERS UNDER SECTION 119 OF THE ACT, LEADS US TO THE CONCLUSION THAT SO FAR AS ALLAHABAD HIGH COURT DECISION IS CON CERNED, IT IS TO BE TREATED AS APPROVAL OF MERILYN SHIPPING DECISION (SUPRA), A ND, ACCORDINGLY, THERE IS NO REQUIREMENT FOR TAX WITHHOLDING WITH RESPECT TO PAYMENTS ACTUALLY MADE TO THE RESIDENTS DURING THE RELEVANT PREVIOUS YEAR ITS ELF AND THERE CANNOT THUS BE A DISALLOWANCE UNDER SECTION 40(A)(IA) FOR TAX WITHH OLDING WITH RESPECT TO PAYMENT ACTUALLY MADE DURING THE RELEVANT PREVIOUS YEAR ITS ELF, ONE HAS TO BEAR IN MIND THE FACT THAT THE ASSESSEE BEFORE US NOW IS A RESIDENT OF GWALIOR AND AS SUCH THE JURISDICTIONAL HIGH COURT FOR THE ASSESSEE WILL BE HONBLE MADHYA PRADESH HIGH COURT. IN THE CASE OF GUPTA OVERSEAS (SUPRA) THE I SSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE NOT ON THE BASIS OF WHAT VECTOR SHIPPING S ERVICES PVT. LTD. HAS HELD BUT ON THE BASIS OF WHAT CBDT CIRCULAR NO. NO.10/DV/201 3 DATED 16.12.2013 (SUPRA) ITA NO.72/AGRA/2014 A.Y. 2008-09 5 INTERPRETS VECTOR SHIPPING SERVICES PVT. LTD DECISI ON TO BE HOLDING. IN OTHER WORDS, THE DECISION WAS TAKEN ON THE BASIS OF CIRCU LAR WHICH BINDS ALL FIELD OFFICERS UNDER SECTION 119 OF THE I.T. ACT, 1961 RATHER THAN ON THE BASIS OF PRINCIPLES OF LAW LAID DOWN BY THE HONBLE ALLAHABAD HIGH COURT. QUI TE TO THE CONTRARY, ARTICULATING THE VIEWS OF THE BENCH ONE OF US (I.E. ACCOUNTANT MEMBER) AT PARAGRAPH NOS.37 & 38 HAS STATED THUS: IT COULD THUS BE, BY THIS SCHOOL OF THOUGHT, WHOLLY INAPPROPRIATE TO PROCEED ON THE BAS IS OF THE RATIO OF MERILYN SHIPPING & TRANSPORT STANDS APPROVED BY THE HONBLE JURISDICTIONAL HIGH COURT PARTICULARLY WHEN THAT ASPECT OF THE MATTER W AS NOT EVEN IN CHALLENGE BEFORE THEIR LORDSHIPS. HOWEVER, ONE OF THE DEMERI TS, IF WE CAN TERM IT AS A DEMERIT, OF THIS SCHOOL OF THOUGHT IS THAT THERE IS AN INHERENT RISK OF BEING LESS THAN RIGHT IN SUCH A SUBJECTIVE DECISION, AS IN ANY CEREBRAL PURSUIT . BUT, THEN, THESE OBSERVATIONS WERE IMMEDIATELY FOLLOWED BY THE OBSERVATION THAT WE ARE, HOWEVER, SAVED OF TAKING THIS CALL AS, AT THIS STAG E, IT IS USEFUL TO TAKE NOTE OF THE CBDT CIRCULAR NO. 10/DV/2013 DATED 16.12.2013 .. IN VIEW OF THIS POSITION IT WOULD PERHAPS BE STRETCHING THE THINGS TOO FAR TO SUGGEST THAT GUPTA OVERSEERS DECISION IS AN AUTHORITY FOR THE PROPOSI TION THAT THE HONBLE ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES PVT. LTDS (SUPRA) CASE AS APPROVED PROPOSITION LAID DOWN OF MERILYN SHIPPING & TRANSPO RT (SUPRA). IN OUR CONSIDERED VIEW, THE SPECIFIC ISSUE DECIDED BY SPECIAL BENCH I N MERILYNS CASE DID NOT EVEN COME UP FOR CONSIDERATION BEFORE HONBLE ALLAHABAD HIGH COURT. ITA NO.72/AGRA/2014 A.Y. 2008-09 6 9. IN ANY CASE THE VIEW TAKEN BY THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORT (SUPRA) STANDS REJECTED BY THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDAR KHAN N. TUNVAR, 357 ITR 312 AND THE JUDGEMENT OF HONBLE CALCUTTA HIGH COURT IN THE CIT VS. CRESCENT EXPORT SYNDICATE, 216 TAXMAN 258. IN THIS VIEW OF THE MAT TER AND BEARING IN MIND THE FACT THAT NEITHER THERE IS ANY DECISION OF ANY OF H ONBLE HIGH COURT IN FAVOUR OF THE ASSESSEE, ON THIS ISSUE, NOR WE DO NOT HAVE THE BEN EFIT OF ANY GUIDANCE OF HONBLE JURISDICTIONAL HIGH COURT ON THIS ISSUE, WE ARE BOU ND BY THE SPECIFIC VIEWS EXPRESSED BY HONBLE GUJARAT HIGH COURT AND BY THE HONBLE CALCUTTA HIGH COURT RATHER THAN A LONG DRAWN INFERENCE FROM THE JUDGEME NT OF HONBLE ALLAHABAD HIGH COURT. IN ALL FAIRNESS TO THE ASSESSEE, THERE IS I NDEED A JUDICIAL PRECEDENT, IN THE CASE OF INFRA DEVELOPERS VS ACIT AND VICE VERSA DATED 19TH OCTOBER 2012, BY AGRA BENCH BUT THAT WAS THE POINT OF TIME WHEN BENE FIT OF ESTEEMED VIEWS OF HONBLE GUJARAT HIGH COURT AND HONBLE CALCUTTA HIG H COURT WAS NOT AVAILABLE. NOW THAT HONBLE HIGH COURTS HAVE OPINED IN FAVOUR OF THE REVENUE, THE ASSESSEE CAN NOT DERIVE ANY ADVANTAGE FROM THE SAID DECISION FROM A LOWER TIER OF THE JUDICIAL HIERARCHY. FOR THESE REASONS, WE ARE UNABL E TO SEE ANY MERITS IN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE AND A CCORDINGLY WE REJECT THE SAME. THE DISALLOWANCE OF RS.5,45,000/- STANDS CONFIRMED. GROUND NO.2, THUS, DISMISSED. ITA NO.72/AGRA/2014 A.Y. 2008-09 7 10. IN GROUND NO.3, THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW A ND ON FACTS AND WAS NOT JUSTIFIED IN CONFIRMING THE ADHOC DISALLOWA NCES OUT OF CERTAIN EXPENSES IN A CAPRICIOUS MANNER. WITHOUT DISCUSSIN G AND IGNORING THE SUBMISSIONS MADE BEFORE HIM THE DISALLOWANCES C ONFIRMED BY THE CIT(A) MAY KINDLY BE DELETED OR SUITABLY INTERFERED WITH. 11. SO FAR AS THESE GRIEVANCES OF THE ASSESSEE ARE CONCERNED, THE RELEVANT FACTS ARE THIS. THE ASSESSEE HAS CLAIMED REPAIRS AND MAI NTENANCE EXPENSES OF RS.88,099/- BUT THE A.O. DISALLOWED RS.8,000/- OUT OF THIS ON THE GROUND THAT THE VOUCHERS ARE SELF-MADE. AS PER THE DIESEL AND PETR OL EXPENSES, THE DISALLOWANCE OF RS.6,000/- WAS MADE ON THE GROUND OF PRIVATE USE OF THESE VEHICLES IN THE ABSENCE OF LAW BOOK AND CANNOT BE RULED OUT. AS FOR EXPENS ES ON MACHINERY AND VEHICLES THE AMOUNT WAS DISALLOWED ON THE GROUND THAT A PART OF THE EXPENDITURE WAS RELATING TO THE PERIOD FALLING IN THE SUBSEQUENT PR EVIOUS YEAR. THE DISALLOWANCE SO MADE WAS RS.15,400/-. WITH RESPECT TO OFFICE AND M ISCELLANEOUS EXPENSES THE A.O. NOTED THAT THERE ARE CERTAIN EXPENSES LIKE TEA , SNACKS AND OTHER SUCH EXPENSE WHICH SEEMS TO BE PRIMA FACIE PERSONAL IN NATURE AN D THE LD. A.R. ALSO, IN THE COURSE OF ASSESSMENT PROCEEDINGS ACCEPTED THE FACTS AS SUCH. ACCORDINGLY THE DISALLOWANCE OF RS.40,700/- WAS IN THIS RESPECT. O UT OF PRINTING AND STATIONERY RS.10,377/- THE A.O. DISALLOWED RS.2,000/- ON THE G ROUND THAT BILLS AND VOUCHERS INCLUDED SELF-MADE VOUCHERS AND WERE NOT PROPERLY M ADE OUT. ITA NO.72/AGRA/2014 A.Y. 2008-09 8 12. AGGRIEVED BY THE DISALLOWANCES SO MADE, THE ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCES S. THE ASSESSEE IS AGGRIEVED AND IS THUS IN FURTHER APPEAL BEFORE US. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. BARRING DISALLOWANCE OF RS.6,000/- OUT OF DIESEL AN D PETROL AND DEPRECIATION OF RS.40,700/- MADE OUT OF OFFICE EXPENSES, WHICH ARE MADE ON THE GROUND THAT THESE EXPENSES REPRESENTS PERSONAL EXPENSES OF PARTNERS O F THE FIRM, ALL OTHER DISALLOWANCES ARE MADE PURELY ON SURMISE AND CONJEC TURES. THE FACT THAT THE VOUCHERS ARE SELF-MADE DOES NOT INDICATE THAT THE E XPENSES ARE GENUINE. IN SMALL BUSINESS AND IN REAL LIFE SALUTATION USE OF SELF-MA DE VOUCHERS ARE SOME TIME INEVITABLE AND THEREFORE NO DISALLOWANCE CAN BE MAD E ON THE BASIS THAT THAT VOUCHERS BEING SELF-MADE, BY ITSELF. AS FAR AS THE PRE-PAID EXPENSES UNDOUBTEDLY A PORTION OF THE POLICY COVERED BY INSURANCE POLICY M AY PERTAIN TO SUBSEQUENT PREVIOUS YEAR BUT WHAT IS RELEVANT FOR DETERMINING THE ADMISSIBILITY OF AN EXPENDITURE UNDER THE MERCANTILE METHOD OF ACCOUNTI NG, AS FOLLOWED BY THE ASSESSEE, IS THE POINT OF TIME WHEN LIABILITY TO PAY SUM ACCRUED OR ARISES. AS LONG AS SUCH A LIABILITY ARISES DURING THE RELEVANT PREV IOUS YEAR, THE SAME IS TO BE ALLOWED AS A DEDUCTION. STRICTLY SPEAKING A PORTION OF SUCH INSURANCE POLICY PAYMENT MAY PERTAIN TO THE SUBSEQUENT PERIOD, BUT THEN THE TOTAL PAYMENT MADE ITA NO.72/AGRA/2014 A.Y. 2008-09 9 DURING THE RELEVANT YEAR DOES NOT EXCEED FOR ONE PR EVIOUS YEAR IN AS MUCH AS CORRESPONDING ADJUSTMENT FOR THE YEAR PAID EXPENSES IN THE IMMEDIATELY PRECEDING YEAR HAS NOT BEEN MADE EITHER. THE HYPER TECHNICAL APPROACH ADOPTED BY THE A.O. IS THUS DOES NOT APPEAL TO US. IN VIEW OF THESE DI SCUSSIONS, AS ALSO BEARING IN MIND THE ENTIRETY OF THE FACTS OF THE CASE, WE DELETE TH E DISALLOWANCE OF RS.25,400/- IN RESPECT OF REPAIRS AND MAINTENANCE EXPENSES, IN RES PECT OF PREPAID INSURANCE OF VEHICLE AND MACHINERY, IN RESPECT OF PRINTING AND S TATIONERY EXPENSES. AS FOR THE DISALLOWANCE OF RS.46,700/- WHICH IS MADE ON ACCOUN T OF EXPENSES BEING PERSONAL IN NATURE, WE SEE NO REASONS TO INTERFERE IN THE SA ME. ACCORDINGLY, TO THAT EXTENT DISALLOWANCES ARE CONFIRMED. THUS, GROUND NO.3 IS PARTLY ALLOWED. 14. IN THE RESULT, APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. (ORDER PRONOUNCED IN THE OPEN COURT ON 27.06.2014) SD/- SD/- (BHAVNESH SAINI) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER DATE: 27 TH JUNE, 2014 PBN/* COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT ITA NO.72/AGRA/2014 A.Y. 2008-09 10 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY