Govind Enclave, Trichur V. The ITO, Trichur

ITA 733/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73842 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 13-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: C A VARGHESE
• Keywords: Opportunity of being heard

Judgement Text

ITA NO. 733/ COCH/ 2013 1 IN THE INCOME TAX APPELA TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 733/ COCH/ 2013 (ASST YEAR 2006 - 07 ) GOVIND ENCLAVE NORTH NADA GURUVAYOOR THRISSUR 680 101 VS THE INCOME TAX OFFICER WARD 1 GURUVAYOOR THR ISSUR 680 101 ( APPELLANT) (RESPONDENT) PAN NO. AAGFG4430J ASSESSEE BY SHRI C A VARGHESE REVENUE BY SMT LATHA V KUMAR, JR DR DATE OF HEARING 13 TH JAN 2014 DATE OF PRONOUNCEMENT 17 TH , JAN 2014 OR D ER PER N.R.S G A N ESAN,JM : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - V, KOCHI DATED 1 8 .9.2013 AND PERTAINS TO THE AY 2006 - 07. THE ONLY ISSUE ARISES FOR OUR CONSIDERATION IS DISALLOWANCE OF EXPENDITURE U/S 40(A)(IA) OF THE ACT. 2 SRI C A VARGHESE, THE LD REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS ALREADY PAID THE ENTIRE EXPENDITURE BEFORE 31 ST MARCH AND NOTHING REMAINS TO BE PAYABLE. THEREFORE, ACCORDING TO THE LD REPRESENTATIVE, THE PROVISIONS OF SEC. 40(A)(IA) IS NOT APPLICABLE IN RESPECT OF THE AMOUNT ALREADY PAID. THE LD REPRESENTATIVE PLACED HIS RELIANCE ON THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL AT VIZHAKAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS ACIT (70 DTR 81 ) . THE LD REPRESENTATIVE FURTHER SUBMITTED THAT THE ALLAH ABAD HIGH COURT IN THE CASE OF CIT VS VECTOR SHIPPING SERVICES (P) LTD IN 357 ITR 642 CONFIRMED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA). THE ITA NO. 733/ COCH/ 2013 2 LD REPRESENTATIVE FURTHER SUBMITTED THAT HOWEVER, IN CALCUTTA HIGH COURT IN THE CASE OF CIT VS MD JAKIR HOSSAIN MONDAL FOUND THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IS NOT CORRECT. THE GUJARAT HIGH COURT ALSO FOUND THAT THE DECISION OF THE SPECIAL BENCH IS NOT AT ALL A GOOD LAW. THE CHENNAI BENCH O F THIS TRIBUNAL IN ITO VS M/S THEEKATHIR PRESS IN ITA NO. 2076/MDS/2012 DATED 18 TH SEPT 2013 FOUND THAT IN VIEW OF THE CONFLICTING JUDICIAL OPINION BETWEEN THE HIGH COURTS OF CALCUTTA, GUJARAT ARE ONE SI D E AND THE ALLAHABAD HIGH COURT IS IN ANOTHER SIDE , T HE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS VEGETABLE PRODUCTS LTD (88 ITR 192) IS APPLICABLE. THEREFORE, ACCORDING TO THE LD REPRESENTATIVE, THERE IS NO JUSTIFICATION ON THE PART OF THE LOWER AUTHORITIES TO DISALLOW ANY EXPENDITURE U/S 40(A)(IA) O F THE ACT. 2.1 ON THE CONTRARY, SMT LATHA V KUMAR, THE LD DR SUBMITTED THAT CALCUTTA HIGH COURT AND GUJARAT HIGH COURTS HAVE ELABORATELY DISCUSSED THE MATTER A N D FOUND THAT THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MERILYN SH IPPING & TRANSPORTS (SUPRA) IS NOT A GOOD LAW . IT WAS FOUND THAT SECTION 40(A)(IA) COVERS NOT ONLY THE AMOUNT S WHICH ARE PAYABLE AS ON 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO COVERS THE AMOUNT S WHICH ARE PAID AT ANY TIME DURING THE YEAR. THEREFORE, ACCORD ING TO THE LD DR, THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE AO. 3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEE HAS NOT DEDUCTED ANY TAX AT S OURCE ; THEREFORE , THE AO DISALLOWED THE CLAIM OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. THE ASSESSEE , NOW CONTEN D S THAT SECTION 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOUNT REMAINS PAYABLE AND NOT THE AMOUNT ALREADY PAID . PLACING RELIANCE ON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORT (SUPRA) AND THE JUDGMENT OF THE ITA NO. 733/ COCH/ 2013 3 ALLAHABAD HIGH COURT , THE LD AR SUBMITTED THAT EVEN THOUGH THE CALCUTTA HIGH COURT AND GUJARAT HIGH COURTS HAVE TAKEN A DIFFERENT VIE W IN FAVOUR OF THE REVENUE, THE JUDGMENT OF THE ALLAHABAD HIGH COURT HAS TO BE FOLLOWED IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF VEGETABLE PRODUCTS (SUPRA). 3.1 WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES P LTD (SUPRA). I N THE CASE BEFORE THE ALLAHABAD HIGH COURT, THE ASSESSEE REIMBURSED THE SALAR IES PAID TO ITS EMPL OYEES BY M/S MERCATOR LINES LTD . M/S MERCATOR LINES LTD DEDUCTED TAX ON THE SALAR IES PAID TO THE EMPLOYEES. THEREFORE, IT WAS CONTENDED THAT SINCE THE TAX WAS ALREADY DEDUCTED BY M/S MERCATOR LINES LTD, THERE IS NO REQUIREMENT FOR DEDUCTING TAX ON REIMBURSEMENT. THE CONTENTION OF THE ASSESSEE WAS UPHELD BY THE ALLAHABAD HIGH COURT . FOR THE PURPOSE OF CONVENIE NCE, WE REPRODUCE THE OBSERVATION MADE BY THE HIGH COURT: IN THE PRESENT CASE , TAX WAS DEDUCTED AS TDS FROM THE SALARIES OF THE EMPLOYEES PAID BY M/S MERCATOR LINES LTD., AND THE CIRCUMSTANCES IN WHICH SUCH SALARIES WERE PAID BY M/S MERCATOR LINES LTD ., FOR M/S VECTOR SHIPPING SERVICES, THE ASSESSEE WERE SUFFICIENTLY EXPLAINED. IN THOSE FACTS AND CIRCUMSTANCES, THE ALLAHABAD HIGH COURT FOUND THAT THE TRIBUNAL HAS NOT COMMITTED AN Y ERROR IN RECORDING THE FINDING ON THE FACTS. THERE IS NO DISCUSSION AB OUT THE CORRECTNESS OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA). 3.2 WE ALSO CAREFULLY GONE THROUGH THE DECISION OF THE CALCUTTA AND GUJARAT HIGH COURTS. THERE WAS ELABORATE DISCUSSION IN RESPE CT OF CORRECTNESS OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) AND CALCUTTA HIGH COURT AND GUJARAT HIGH ITA NO. 733/ COCH/ 2013 4 COURTS FOUND THAT THE DECISION OF THE SPECIAL BENCH IN MERILYN SHIPPING & TRANSPORTS (SUPRA) IS NOT GOOD LA W. NO DOUBT, THE CHENNAI BENCH OF THE TRIBUNAL, AFTER CONSIDERING THE JUDGMENT OF THE APEX COURT IN THE CASE OF VEGETABLE PRODUCTS (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. A BARE READING OF THE JUDGMENT OF THE ALLAHABAD HIGH COURT SHOWS THAT THE CORRECTNESS OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IS NOT THE SUBJECT MATTER AND THE ALLAHABAD HIGH COURT FOUND THAT THE TAX WAS DEDUCTED BY THE COMPANY WHICH PAID THE SALARY ; T HEREFORE, THE CONTENTION OF THE ASSESSEE THAT TAX NEED NOT BE DEDUCTED , WAS ACCEPTED BY THE HIGH COURT AND THE TRIBUNAL. 4 ON IDENTICAL CIRCUMSTANCES , THIS BENCH OF THIS TRIBUNAL REMANDED THE MATTER BACK TO THE FILE OF THE AO FOR RECONSIDERATION AFTER CONSIDERING THE JUDGMENT OF THE CALCUTTA HIGH COURT AND GUJARAT HIGH COURTS AND THAT OF THE ALLAHABAD HIGH COURT. FOR THE SAKE OF CONSISTENCY, WE REMAND THIS MATTER BACK TO THE FILE OF THE AO FOR RECONSIDERATION. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF DISALLOWANCE U/S 40(A)(IA ) IS REMANDED TO THE FILE OF THE AO FOR RECONSIDERATION IN THE LIGHT OF THE JUDGMENT S OF THE GUJARAT HIGH COURT AND CALCUTTA AND ALLAHABAD HIGH COURTS. THE AO SHALL EXAMINE THE MATTER AFRESH AND THEN DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING R EASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH , DAY OF JAN 2014 . SD/ - SD/ - ( B.R. BASKARAN) ( N .R.S GANESAN) ACCOUNTANT MEM BER JUDICIAL MEMBER COCHIN: DATED 17 TH , JAN 201 4 ITA NO. 733/ COCH/ 2013 5 RAJ* COPY TO: 1. APPELLANT GOVIND ENCLAVE, NORTH NA DA , GURUVAYOOR THRISSUR 680 101 2. RESPONDENT - THE INCOME TAX OFFICER WARD 1 GURUVAYOOR, THRISSUR 680 - 101 3. CIT(A) 4. CIT 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTR AR ITAT, COCHIN