DCIT 10(3), MUMBAI V. NOVACARE DRUG AND SPECIALITIES P.LTD, MUMBAI

ITA 7511/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93089 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-12-2013
• Court: TRIBUNAL
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , MUMBAI BENCH B MUMBAI . BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO 7511 /MUM/201 3 ASSESSMENT YEAR: - 2008 - 09 THE DY. COMMISSIONER OF INCOME TAX, ROOM NO. 451, 4 TH FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS.` M/S NOVACARE DRUG AND SPECIALTIES PVT. LTD. B - 119, VARDHAMAN COMPLEX, LBS MARG, VIKHROLI (W), MUMBAI 400 083. PAN/GIR NO. AAACN3331N APPELLANT RESPONDENT ORDER PER G.S. PANNU, AM THE CAPTIONED APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) [ HEREINAFTER REFERRED TO AS THE CIT(A) ] DATED 28.10.2013 , WHICH IN - TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961( REVENUE BY DR. YOGESH KAMAT ASSESSEE BY SHRI DHARMESH SHAH DATE OF HEARING 11.06.2015 DATE OF PRONOUNCEMENT 30 .05.2015 2 7511/MUM/2013 ASSESSMENT YEAR: - 2008 - 09 PAGE 2 OF 5 HEREINAFTER R EFERRED TO AS THE ACT) DATED 22.12.2010 PERTAINING TO ASSESSMENT YEAR 2008 - 09 . IN THIS APPEAL, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION MADE BY AO ON ACCOUNT OF SHORT DEDUCTION OF TAX U/S 40(A)(IA) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S 40(A)(IA) ON ACCOUNT OF SHOT DEDUCTION OF TDS BY NO APPRECIATIN G THE FACT THAT THE AMENDED PROVISIONS IN RESPECT OF THE SAME BY THE FINANCE ACT, 2012 IS APPLICABLE W.E.F 01/01/2013 ONLY. 2. BRIEFLY , PUT THE RELEVANT FACTS ARE THAT THE RESPONDENT ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956, AND IS INTER - ALIA , ENGAGED IN THE BUSINESS OF MANUFACTURE OF DRUG FORMULATIONS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, IT FILED A RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 4,89,66,010/ - , WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT WHEREBY THE TOTAL INCOME WAS ASSESSED AT RS. 5,59,15,090/ - , AFTER MAKING CERTAIN DISALLOWANCES/ADDITIONS. ONE OF THE AMOUNTS DISALLOWED BY THE ASSESSING OFFICER WAS A SUM OF RS. 63,45,794/ - OUT OF THE TOTAL MARKETING SERVICE CHARGES OF RS. 1,26,91,589/ - PAID TO M/S NOVAMARK SPECIALITIES PVT. LTD. A PORTION OF THE EXPENDITURE WAS DISALLOWED ON THE GROUND THAT ASSESSEE FAILED TO ESTABLISH THE GENUI NENESS AND THE REASONABLENESS OF THE PAYMENT. ANOTHER REASON FOR THE DISALLOWANCE WAS THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE ON SUCH PAYMENT AT THE RATE OF 2% IN TERMS OF SECTION 194C OF THE ACT, 3 7511/MUM/2013 ASSESSMENT YEAR: - 2008 - 09 PAGE 3 OF 5 WHEREAS, ACCORDING TO THE ASSESSING OFFICER SUCH PAYME NTS WERE LIABLE FOR DEDUCTION OF TAX AT SOURCE AT THE RATE OF 10% IN TERMS OF SECTION 194J OF THE AC T . THE ASSESSING OFFICER, THEREFORE, OBSERVED THAT WITHOUT PREJUDICE TO HIS ACTION OF DISALLOWING 50% OF EXPENDITURE IN THE ABSENCE OF REQUISITE EVIDENCE, T HE PROPORTIONATE EXPENDITURE RELATABLE TO THE SHORT DEDUCTION OF TAX AT SOURCE WAS ALSO DISALLOWABLE IN TERMS OF SECTION 40(A)(IA) OF THE ACT. 3. IN APPEAL BEFORE THE CIT(A), ASSESSEE ASSAILED THE ADDITION ON VARIED GROUNDS. THE CIT(A) CALLED FOR A REMA ND REPORT FROM THE ASSESSING OFFICER . IN THE REMAND REPORT FURNISHED BY THE ASSESSING OFFICER, THE BASIS OF ABSENCE OF EVIDENCE WAS NOT PURSUED. THEREFORE, THE ONLY BASIS OF DISALLOWANCE WHICH SURVIVED FOR CONSIDERATION OF CIT(A) WAS THE APPLICATION OF SEC TION 40(A)(IA) OF THE ACT, BY THE ASSESSING OFFICER. THE CIT(A) HAS NOTED THAT IN A CASE WHERE TAX DEDUCTION IS NOT MADE IN PROPER SECTION THEN THE SAME DOES NOT CALL FOR DISALLOWANCE U/S 40(A)(IA) OF THE ACT, AND ACCORDINGLY, HE HAS DELETED THE ADDITION. AGAINST SUCH A DECISION OF CIT(A), REVENUE IS IN APPEAL BEFORE US. 4. AS THE AFORE - STATED GROUNDS OF APPEAL SHOW, THE ONLY POINT AGITATED BY THE REVENUE BEFORE US IS THE ACTION OF THE CIT(A) IN DELETING THE ADDITION BY HOLDING THAT THE PROVISIONS OF SECT ION 40(A)(IA ) OF THE ACT, ARE NOT ATTRACTED IN THE PRESENT CASE. 5. AT THE TIME OF HEARING, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE CIT(A) HAS DELETED THE ADDITION BY FOLLOWING THE JUDGMENT OF 4 7511/MUM/2013 ASSESSMENT YEAR: - 2008 - 09 PAGE 4 OF 5 HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.K. TEKRIWAL [361 ITR 432] . THE LD. DR APPEARING FOR THE REVENUE HAS NOT DISPUTED THAT THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.K. TEKRIWAL (SUPRA) CLEARLY COVERS THE CONTROVERSY BEFORE US. 6. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.K. TEKRIWAL (SUPRA) CONSIDERED A DISALLOWANCE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, WITH RESPECT TO THE PAYMENTS MADE TOWARDS MACHINERY HIRE CHARGES. IN THAT CASE, A SSESSEE WAS FOUND TO HAVE DEDUCTED TAX AT SOURCE ON SUCH PAYMENT AT THE RATE OF 1% U/S 194C(2) OF THE ACT, WHEREAS THE CLAIM OF THE ASSESSING OFFICER WAS THAT ACTUAL TAX DEDUCTION AT SOURCE OUGHT TO HAVE BEEN MADE AT THE RATE OF 10% U/S 194I OF THE ACT. THE DISAL LOWANCE WAS MADE U/S 40(A)(IA) OF THE ACT, OF THE EXPENDITURE PROPORTIONATE TO THE SHORT DEDUCTION OF TAX. THE HONBLE CALCUTTA HIGH COURT NEGATED THE DISALLOWANCE AND AFFIRMED THE STAND OF THE ASSESSEE THAT WHERE TAX WAS DEDUCTED AT SOURCE BY THE ASSESSED , THOUGH UNDER A WRONG PROVISION, THE MISCHIEF OF SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED. 7. IN THE PRESENT CASE ALSO, THE POINT MADE OUT BY THE ASSESSING OFFICER IS THAT ASSESSEE HAS DEDUCTED THE TAX AT SOURCE AT THE RATE OF 2% U/S 194C OF THE A CT, WHEREAS, THE TAX WAS DEDUCTIBLE AT THE RATE OF 10% IN TERMS OF SECTION 194J OF THE ACT, IN RELATION TO THE IMPUGNED PAYMENTS OF MARKETING SERVICE CHARGES. QUITE CLEARLY, FOLLOWING THE RATIO OF THE JUDGMENT OF HONBLE CALCUTTA 5 7511/MUM/2013 ASSESSMENT YEAR: - 2008 - 09 PAGE 5 OF 5 HIGH COURT IN THE CASE OF CIT VS. S.K. TEKRIWAL (SUPRA) , THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT, IS NOT SUSTAINABLE IN THE PRESENT CASE. 8. AS A CONSEQUENCE OF THE ABOVE DISCUSSION, WE HEREBY AFFIRM THE ORDER OF CIT(A) SETTING ASIDE THE ACTION OF ASSESSING OFFICER OF INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, IN THE PRESENT CASE. 9 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JUNE 2015. SD/ - SD/ - ( SANJAY GARG ) (G.S. PANNU) (JUDICIAL MEMBER/ U;KF;D LNL; ) (ACCOUNTANT MEMBER/ YS[KK LNL; ) MUMBAI DATED 30 - 0 6 - 2015 SKS SR. P.S, COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI