S.K. M FABRICS ( AMANA ) L;TD, MUMBAI V. JT CIT (OSD) RG 4(3), MUMBAI

ITA 7581/MUM/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0807 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 24-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Section: 194C

Judgement Text

, E , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANJUNATHA G, AM ITA NO.7581/MUM/2012 : ASST.YEAR 2009-2010 M/S.S.K.M.FABRICS (AMANA) LTD. 99, NIRANJAN, MARINE DRIVE MUMBAI 400 002. PAN : AAFCS2660E. VS. THE JT.COMMISSIONER OF INCOME-TAX (OSD) RANGE 4(3) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : --- NONE --- /RESPONDENT BY : SHRI V.JUSTIN, DR / DATE OF HEARING : 22.01.2018 / DATE OF PRONOUNCEMENT : .01.2018. / O R D E R PER SAKTIJIT DEY (JM) : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 16.10.2012 OF THE LEARNED CIT(A)-8, MUMBAI FOR THE ASSESSMENT YEAR 2009-2010. 2. THE ONLY ISSUE ARISING FOR CONSIDERATION IN THE PRESENT APPEAL IS DISALLOWANCE OF RS.65,52,843 U/S 40(A)(IA) OF THE I NCOME-TAX ACT, 1961. 3. BRIEFLY THE FACTS ARE THE ASSESSEE, A COMPANY, I S ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING AND SELLING MANM ADE FABRICS. FOR THE ASSESSMENT UNDER DISPUTE, THE ASSESSEE FILED ITS RE TURN OF INCOME ON 30.09.2009 DECLARING TOTAL INCOME OF RS.75,64,518. DURING THE ITA NO.7581/MUM/2012 M/S.SKM FABRICS (AMANA) LIMITED. 2 ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT ASSESSEE HAS PAID AN AMOUNT OF RS.80,89,920 TO M/S.AWADH REA LTY TOWARDS FACILITY FEES AND DEDUCTED TAX AT THE RATE OF 2.26% U/S 194C OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PAYM ENT MADE BY THE ASSESSEE TO M/S.AWADH REALTY IS IN THE FORM OF RENT , THEREFORE, THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT THE RATE OF 20 % U/S 194J OF THE ACT. FROM THE MEMORANDUM OF UNDERSTANDING WITH M/S. AWADH REALTY, THE ASSESSING OFFICER FOUND THAT THE FACILITIES PRO VIDED BY M/S.AWADH REALTY INCLUDED ELECTRICITY, WATER CONNECTION AND S ECURITY. APPORTIONING 10% OUT OF THE TOTAL AMOUNT PAID TOWARDS SUCH FACIL ITY, THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 194C. AS FAR AS THE BALANCE PAYMENT IS CONCERNED, THE ASSESSING OFFICER HELD TH AT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S 194J OF THE ACT AND ACCORDINGLY DISALLOWED AN AMOUNT OF RS.65,52,843 U/S 40(A)(IA) OF THE ACT. THE ASSESSEE CHALLENGED THE DISALLOWANCE MADE, BEFORE T HE FIRST APPELLATE AUTHORITY. HOWEVER, THE LEARNED FIRST APPELLATE AUT HORITY UPHELD THE DISALLOWANCE. 4. WHEN THE APPEAL WAS CALLED FOR HEARING, NO-ONE A PPEARED ON BEHALF OF THE ASSESSEE, THEREFORE, WE PROCEED TO DI SPOSE OFF THE APPEAL EX PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. 5. THE LEARNED DR SUPPORTING THE ORDER OF THE DEPAR TMENTAL AUTHORITIES, RELIED UPON THE DECISION OF THE HONBL E KERALA HIGH COURT IN ITA NO.7581/MUM/2012 M/S.SKM FABRICS (AMANA) LIMITED. 3 THE CASE OF CIT V. PVS MEMORIAL HOSPITAL LTD. IN ITA NO.16 OF 2014, JUDGMENT DATED 20 TH JULY, 2015. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D DR AND PERUSED THE MATERIALS ON RECORD. AS COULD BE SEEN, THIS IS NOT A CASE WHERE THE ASSESSEE HAS COMPLETELY FAILED TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO M/S.AWADH REALTY. THE ASSESSEE IN F ACT HAS DEDUCTED TAX ON THE PAYMENT MADE TO THE CONCERNED P ARTY, THOUGH AT A LOWER RATE BY APPLYING THE PROVISIONS OF SECTION 19 4C. THE ASSESSING OFFICER BEING OF THE VIEW THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE U/S 194J AT THE RATE OF 20%, HAS DISALLOWED THE PAYMENT MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, ALLEGING SHORT DEDUCTION OF TAX BY THE ASSESSEE. THEREFORE, THE IS SUE ARISING FOR CONSIDERATION BEFORE US IS WHETHER DISALLOWANCE U/S 40(A)(IA) CAN BE MADE IN A CASE WHERE THE ASSESSEE HAS DEDUCTED TAX AT A LOWER RATE. AFTER DUE CONSIDERATION OF THE ISSUE, WE FIND THAT THOUGH THERE IS NO DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT O N THE ISSUE, HOWEVER, DIVERGENT VIEWS HAVE BEEN EXPRESSED BY DIFFERENT HI GH COURTS. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. S.K.TEKRIWAL [(2012) 361 ITR 432 (CAL.)] HAS HELD THAT NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT CAN BE MADE FOR SHORT DEDUCTION OF TAX AT SOURC E. THE SAME VIEW HAS ALSO BEEN EXPRESSED BY THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF CIT V. KISHOR RAO HUF [(2016) 387 ITR 196 (KAR.)] . HOWEVER, IT NEEDS TO BE MENTIONED THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT V. PVS MEMORIAL HOSPITAL LIMITED (SUPRA) HAS TAKEN A CONTRARY VIEW BY ITA NO.7581/MUM/2012 M/S.SKM FABRICS (AMANA) LIMITED. 4 HOLDING THAT EVEN FOR SHORT DEDUCTION OF TAX, DISAL LOWANCE U/S 40(A)(IA) CAN BE MADE. BE THAT AS IT MAY, DIFFERENT BENCHES O F THE TRIBUNAL INCLUDING THE MUMBAI BENCHES, FOLLOWING THE DECISIO N OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. S.K.TEKRIWAL (SUPRA) HAVE ALSO HELD THAT DISALLOWANCE U/S 40(A)(IA) OF THE ACT CAN NOT BE MADE FOR SHORT DEDUCTION OF TAX AT SOURCE. ADHERING TO THE SETTLED LEGAL PRINCIPLE THAT IN CASE OF DIVERGENT VIEW EXPRESSED BY NON JURISDICTIO NAL HIGH COURTS, THE VIEW FAVOURABLE TO THE ASSESSEE IS TO BE TAKEN, W E RESPECTFULLY FOLLOW THE DECISION OF THE HONBLE CALCUTTA HIGH COURT AND HONBLE KARNATAKA HIGH COURT (SUPRA) AND HOLD THAT NO DISALLOWANCE U/ S 40(A)(IA) CAN BE MADE. THE GROUND RAISED IS ALLOWED. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 24 TH DAY OF JANUARY, 2018. !'#$ SD/- SD/- (MANJUNATHA G) (SAKTIJIT DEY) / ACCOUNTANT MEMBER ! / JUDICIAL MEMBER ! MUMBAI; ! DATED : 24 TH JANUARY, 2018. DEVDAS* '!#$%&%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' ( ) / THE CIT, MUMBAI. 4. ' / CIT(A)-8 , MUMBAI 5. *+#,,-. , -. , ! / DR, ITAT, MUMBAI 6. #012 / GUARD FILE. ITA NO.7581/MUM/2012 M/S.SKM FABRICS (AMANA) LIMITED. 5 / BY ORDER, *, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ! / ITAT, MUMBAI ITA NO.7581/MUM/2012 M/S.SKM FABRICS (AMANA) LIMITED. 6 DATE INITIAL 1. DRAFT DICTATED ON 22.01.2018 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 23.01.2018 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DRAFT DICTATION SHEETS ARE ATTACHED SR.PS