Iris Associates Pvt. Ltd., New Delhi V. Addl.CIT, Special Range- 4, New Delhi

ITA 7548/DEL/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2728 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 15-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Business expenditure; Maximum Marginal Rate; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI R.K.PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A NO.7548/DEL/2017 (ASSESSMENT YEAR-2014-15) IRIS ASSOCIATES PVT. LTD. 4-LSC POCKET, C, 6 & 7 VASANT KUNJ, NEW DELHI-110 070 PANAAACI 7437G VS. ADD . CIT, SPECIAL RANGE-4, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. P.C. YADAV, ADV. RESPONDENT BY MS. NIDHI SRIVASTAVA, CIT-DR DATE OF HEARING 25.03.2021 DATE OF PRONOUNCEMENT 21.06.2021 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST OR DER DATED 12.09.2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-35, NEW DELHI {CIT(A)} FOR ASSESSMENT YEAR: 2014-15. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS CARRYING ON THE BUSINESS 2 ITA NO.7548/DEL/2017 IRIS ASSOCIATES PRIVATE LIMITED VS . ACIT OF INTERIOR CONTRACTORS. THE CASE WAS SELECTED FOR S CRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDING, IT WAS N OTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.1,78,707/- ON ACCOUNT OF INTEREST ON DELAYED DEPOSITS ON TAX DEDUCTED AT SOU RCE (TDS). THE ASSESSEE WAS ASKED TO SUBSTANTIATE ITS CLAIM OF ALLO WABILITY OF THIS AMOUNT. IT WAS THE ASSESSEE SUBMISSION BEFORE THE AS SESSING OFFICER THAT THE INTEREST HAD BEEN PAID IN-COMPLIAN CE WITH THE PROVISIONS OF INCOME TAX ACT, 1961 (HEREINAFTER CAL LED THE ACT) AND THAT SUCH INTEREST WAS COMPENSATORY IN NATURE AND WAS NOT PENAL IN NATURE AND WAS, THEREFORE, AN ALLOWABLE DEDUCTION. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND ADDED THE AMOUNT OF RS.1,78,707/- TO THE INCOME OF THE ASSESSEE, THEREBY COMPLETING THE ASSESSMENT AT AN INCOME OF RS.1,99,72,840/-. 2.1 THE ASSESSEE APPROACHED THE LD. FIRST APPE LLANT AUTHORITY AGAINST THE ADDITION. THE LD. CIT(A) UPHELD THE ACT ION OF THE ASSESSING OFFICER AND NOW THE ASSESSEE HAS APPROACHE D THIS 3 ITA NO.7548/DEL/2017 IRIS ASSOCIATES PRIVATE LIMITED VS . ACIT TRIBUNAL CHALLENGING THE ADDITION BY RAISING THE FO LLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E-TAX (APPEALS) IS AGAINST FACTS AND LAW. 2. THAT THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE RS.1,7 8,707/- BEING INTEREST PAID ON DELAYED DEPOSIT OF TDS. 3. THAT THE APPELLANT MAY ADD, ALTER OR WITHDRAW ANY OF THE GROUNDS AT THE TIME OF THE HEARING. 3.0 THE LD. AUTHORIZED REPRESENTATIVE (A R) SUBMITTED THAT THE ISSUE WAS COVERED BY ORDER OF ITAT IN THE CASE OF DCIT VS. NARAYANI ISPAT PVT. LTD. REPORTED IN [2018] ITR (T RIBUNAL) 371 (KOLKATA) . THE LD. AUTHORIZED REPRESENTATIVE DREW OUR ATTENTI ON TO THE RELEVANT PARAGRAPHS OF THE ORDER OF THE ITAT AN D SUBMITTED THAT, IN VIEW OF THE ORDER OF THE CO-ORDINATE BENCH AS CITED ABOVE, THERE WAS NO DOUBT THAT THE INTEREST EXPENDITURE ON DELAYED PAYMENT OF INCOME TAX WAS ALSO AN ALLOWABLE DEDUCTION . IT WAS SUBMITTED THAT SINCE THE TAX WAS DEDUCTED AT SOURCE ON EXPENDITURE 4 ITA NO.7548/DEL/2017 IRIS ASSOCIATES PRIVATE LIMITED VS . ACIT INCURRED ON REVENUE ACCOUNT, THE ASSESSEES APPEAL SHOULD BE ALLOWED. 4.0 PER CONTRA, THE LD. CIT-DR SUBMITTED THA T THE INTEREST WAS LEVIED ON UNPAID TDS LIABILITY AND, THEREFORE, THE SAME WAS NOT ALLOWABLE FOR DEDUCTION FROM THE INCOME OF THE ASSES SEE. THE LD. CIT-DR ALSO PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHENNAI PROPERTIE S LTD. REPORTED IN 239 ITR 435 (MADRAS) AND THE CASE OF FERRO ALLOYS CORPORATION VS. CIT REPORTED IN [1992] 196 ITR 406 (BOMBAY) . THE LD. CIT-DR EMPHASIZED THAT THE DEFAULT IN PAYMENT OF STATUTORY LIABILITIES ALWAYS HAS PENAL CONSEQUENCES AND NOT COMPENSATORY CONSEQUENCES AND, THEREFORE, THE APPEAL OF THE ASSE SSEE DESERVED TO BE DISMISSED. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT ITAT KOLKATA BENCH IN THE CASE OF DCIT VS. NARAYANI ISPAT PVT. LTD. (S UPRA) HAS HELD THAT INTEREST PAID ON LATE DEPOSIT OF TDS IS COMPEN SATORY IN NATURE AND IS, THEREFORE, ALLOWABLE AS DEDUCTION. FURTHER, THE KOLKATA 5 ITA NO.7548/DEL/2017 IRIS ASSOCIATES PRIVATE LIMITED VS . ACIT BENCH CAME TO THE SAME CONCLUSION IN THE CASE OF M/ S. SAI FOOD PRODUCTS PVT. LTD. VS. DCIT IN ITA NO.1887/KOL/2016 VIDE ORDER DATED 06.04.2018 BY FOLLOWING ITS EARLIER DECISION I N DCIT VS. NARAYANI ISPAT PVT. LTD. (SUPRA). SIMILAR DECISIONS WERE GIVEN BY THE KOLKATA BENCH IN THE CASES OF DCIT VS. RUNGTA MINES LTD. IN ITA NO.1531/KOL/2017 VIDE ORDER DATED 05.10.2018, DCIT VS. BONAI INDUSTRIAL COMPANY LTD. IN ITA NO.1533/KOL/2017 VID E ORDER DATED 10.10.2018, DCIT VS. V2 RETAIL LTD. IN ITA NO.1794/ KOL/2018 VIDE ORDER DATE 28.06.2019 AND DCIT VS. MA ANNAPURNA TRA NSPORT IN ITA NO.822/KOL/2018 VIDE ORDER DATED 15.01.2020. IN ALL THESE CASES THE KOLKATA BENCH ALLOWED THE INTEREST PAID O N LATE PAYMENT OF TDS AS A DEDUCTION. SIMILAR ORDERS WERE PASSED B Y ITAT MUMBAI BENCH IN THE CASE OF STUP CONSULTANTS PVT. LTD. VS. ADD. C.I.T IN ITA NO. 5827/MUM/2012 VIDE ORDER DATED 11.12.2018 A ND ITAT BANGLORE BENCH IN THE CASE OF M/S IDS NEXT BUSINESS SOLUTIONS VS. ACIT IN ITA NO.510/BANG/2018 VIDE ORDER DATED 15.06 .2018. 5.1 HOWEVER, THE ITAT BANGLORE BENCH IN THE C ASE OF VELANKANI INFORMATION SYSTEM LTD. VS. DCIT IN ITA NO.218/BANG /2017 6 ITA NO.7548/DEL/2017 IRIS ASSOCIATES PRIVATE LIMITED VS . ACIT REPORTED IN [2018] 172 ITR 356 (BANGLORE TRIBUNAL) VIDE ORDER DATED 12.09.2018 DISALLOWED THE INTEREST PAID U/S 201(1A) OF THE ACT FOR DELAY IN DEPOSITING TAX DEDUCTED AT SOURCE AND DECI DED THE ISSUE AGAINST THE ASSESSEE. THE BANGLORE BENCH OF THE TR IBUNAL, FOLLOWING THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF CHENNAI PROPERTIES INVESTMENTS LTD. (SUPRA) HELD TH AT INTEREST PAID FOR DELAY IN DEPOSITING TAX DEDUCTED AT SOURCE IS I N THE NATURE OF TAX AND THE SAME CANNOT BE ALLOWED AS DEDUCTION. WHILE FOLLOWING THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF CHENNAI PROPERTIES INVESTMENTS (SUPRA), THE BANGALORE BENCH OF ITAT ALSO DISTINGUISHED THE ORDER OF THE KOLKATA BENCH IN THE CASE OF DCIT VS. NARAYANI ISPAT PVT. LTD. IN THE FOLLOWING WORDS: THOUGH THE DECISION OF THE TRIBUNAL IS LATER IN PO INT OF TIME, JUDICIAL DISCIPLINE DEMANDS THAT THE DECISION OF TH E HONBLE MADRAS HIGH COURT IS TO BE FOLLOWED. IT IS ALSO WOR THWHILE TO MENTION THAT THE KOLKATA BENCH OF TRIBUNAL IN THE C ASE OF NARAYANI ISPAT PVT. LTD. (SUPRA), WHICH WAS CITED B Y THE LD. COUNSEL FOR THE ASSESSEE, DID NOT CONSIDER OR DID N OT HAVE AN OCCASION TO CONSIDER THE DECISION OF THE HONBLE MA DRAS HIGH 7 ITA NO.7548/DEL/2017 IRIS ASSOCIATES PRIVATE LIMITED VS . ACIT COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTM ENTS LTD. (SUPRA). UNDER THESE CIRCUMSTANCES, WE FOLLOW THE D ECISION OF THE HONBLE MADRAS HIGH COURT AND UPHOLD THE ORDER OF THE LD. CIT(A) IN SO FAR AS ON IT RELATES TO DISALLOWANCE O F INTEREST ON DELAYED REMITTANCE OF TAX DEDUCTED AT SOURCE U/S 20 1(1A) OF THE ACT. 5.2 SIMILARLY, THE AHMEDABAD BENCH OF THE IT AT IN THE CASE OF MMR INFRA VS. DCIT IN ITA NO.1609/AHD/2018 VIDE ORD ER DATED 01.06.2020 DID NOT AGREE WITH THE ORDER OF THE ITAT KOLKATA BENCH IN THE CASE OF DCIT VS. NARAYANI ISPAT PVT. LTD. (S UPRA) AND HELD THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY T HE HONBLE MADRAS HIGH COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. (SUPRA). THE CASE OF THE NARAYANI ISPAT PVT. LTD. WAS ALSO DISTINGUISHED BY ITAT DELHI BENCH IN THE CA SE OF DLF LTD. VS. ADDL. CIT IN ITA NO.2126/DEL/2013 AND 2749/DEL/ 2013 VIDE ORDER DATED 27.05.2019 AND THE JUDGMENT OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF CHENNAI PROPERTIES AND IN VESTMENTS LTD. (SUPRA) WAS FOLLOWED. THE DELHI BENCH OF THE ITAT IN THIS CASE OBSERVED THAT EVEN THOUGH, IT IS PERSUADED BY THE R EASONING TO THE 8 ITA NO.7548/DEL/2017 IRIS ASSOCIATES PRIVATE LIMITED VS . ACIT ITAT KOLKATA BENCH, HOWEVER, AS A MATTER OF JUDICIA L DISCIPLINE, IT IS RELYING ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. (SU PRA) AS THIS WAS THE ONLY JUDGMENT OF THE HONBLE HIGH COURT ON THE ISSUE. 5.3 THUS, FROM THE ABOVE MATRIX ON THE DEVELOPMEN T OF LAW ON THE ISSUE, IT EMERGES THAT INTEREST IS PAYABLE A S CONSEQUENCE OF FAILURE TO PAY TAX AND THE EXPENDITURE INCURRED FOR THE PURPOSE OF PAYMENT OF INTEREST DOES NOT RELATE TO THE BUSINESS OF THE ASSESSEE. THEREFORE, IT IS APPARENT THAT THE PAYMENT OF INTER EST HAS NOTHING TO DO WITH THE BUSINESS OF THE ASSESSEE AND, ACCORDINGL Y, PAYMENT OF INTEREST CANNOT BE ALLOWED AS DEDUCTION UNDER THE P ROVISIONS OF THE ACT. WHILE COMING TO THIS CONCLUSION, WE ARE GUIDE D BY THE RATIO LAID BY THE HONBLE MADRAS HIGH COURT IN THE CASE O F CIT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD. (SUPRA) WHER EIN THE HONBLE HIGH COURT OF MADRAS HAS CLARIFIED THAT INC OME TAX IS NOT ALLOWABLE AS BUSINESS EXPENDITURE AND THE AMOUNT DED UCTED AS TAX IS NOT AN ITEM OF EXPENDITURE. IN THE ABOVE SAID JU DGMENT, THE HONBLE MADRAS HIGH COURT ALSO REFERRED TO THE JUDG MENT OF THE HONBLE APEX COURT IN THE CASE OF BHARAT COMMERCE I NDUSTRIES LTD. 9 ITA NO.7548/DEL/2017 IRIS ASSOCIATES PRIVATE LIMITED VS . ACIT VS. CIT REPORTED IN [1998] 230 ITR 733 WHEREIN THE H ONBLE APEX COURT HAS REJECTED THE ARGUMENTS ADVANCED BY THE AS SESSEE THAT RETENTION OF MONEY PAYABLE TO THE STATE AS TAX OR I NCOME TAX WOULD AUGMENT THE CAPITAL OF THE ASSESSEE AND THE EXPENDI TURE INCURRED TOWARDS THE NORMAL INTEREST PAID FOR THE PERIOD OF S UCH RETENTION WOULD ASSUME CHARACTER OF BUSINESS EXPENDITURE. THE HONBLE APEX COURT WENT ON TO HOLD THAT AN ASSESSEE COULD NOT PO SSIBLY CLAIM THAT IT WAS BORROWING FROM THE STATE, THE AMOUNTS PAY ABLE TO IT AS INCOME TAX, AND UTILIZING THE SAME AS CAPITAL IN IT S BUSINESS, TO CONTEND THAT THE INTEREST PAID FOR THE PERIOD OF DE LAY IN PAYMENT OF TAX AMOUNTED TO A BUSINESS EXPENDITURE. THE HONBLE MADRAS HIGH COURT WENT ON TO DECIDE THE QUESTION IN FAVOUR OF TH E REVENUE AND AGAINST THE ASSESSEE. 5.4 THEREFORE, IN VIEW OF THE ABOVE CITED JUDICIAL PRECEDENTS, WE ARE NOT INCLINED TO AGREE WITH THE CONTENTIONS OF THE LD. AUTHORIZED REPRESENTATIVE ON THE ISSUE AND WE UPHOL D THE ORDER PASSED BY THE LD. CIT(A) IN WHICH SHE HAS CONFIRMED THE ADDITION MADE ON ACCOUNT OF INTEREST PAID ON LATE DEPOSIT OF TDS. 10 ITA NO.7548/DEL/2017 IRIS ASSOCIATES PRIVATE LIMITED VS . ACIT 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON 21 ST JUNE, 2021. SD/- SD/- (R.K.PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21/06/2021 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI