ITO, Ward-8(2), Hyd, Hyderabad V. Amardeep Textiles, Hyd, Hyderabad

ITA 851/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6268 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Section: 143(3)

Judgement Text

1 ITA.NO.851/HYD/2016 M/S. AMARDEEP TEXTILES, HYDERABAD. IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC) : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA.NO.851/HYD/2016 ASSESSMENT YEAR 2008-2009 THE INCOME TAX OFFICER, WARD-8(2), HYDERABAD PIN 500 084. VS. M/S. AMARDEEP TEXTILES, HYDERABAD. PAN AAMFS8988D (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI K.J.RAO FOR ASSESSEE : -NONE- DATE OF HEARING : 09.01.2017 DATE OF PRONOUNCEMENT : 09.01.2017 ORDER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A)-2, HYDERABAD AND IT PERTAINS TO THE A. Y. 2008-2009. THOUGH THE CASE WAS POSTED FROM TIME TO TIME, NONE APPEA RED FOR THE ASSESSEE AND I, THEREFORE PROCEED TO DISPOSE OF THE AP PEAL EX-PARTE, QUA THE ASSESSEE. THE REVENUE HAS RAISED THE FOLLOWING GR OUNDS : 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHILE DEC IDING THE ISSUES RAISED IN APPEAL. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT IN IGNORING THE MATERIAL FACTS TH AT THOUGH SECTION 40(A)(IA) HAD BEEN INCORPORATED RECENTLY, THE PROVI SIONS OF THE SECTION 40(A)(IA) ARE IN STATUTE SINCE LONG AND NO HIGH COURT HAD HELD THAT THE PROVISIONS OF THESE SECTIONS ARE APPL ICABLE TO ONLY TO PAYABLE AMOUNTS. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) IS CORRECT IN IGNORING THE MATERIAL FACTS TH AT INTEREST PAID OF RS.1,85,947 WITHOUT DEDUCTING TDS TO RELIANCE CA PITAL LIMITED WHICH IS A NON-BANKING COMPANY AND NOT FALL S UNDER ANY CLAUSES OF THE SECTION 194A(3). 2 ITA.NO.851/HYD/2016 M/S. AMARDEEP TEXTILES, HYDERABAD. 4. ANY OTHER GROUND ARISES DURING THE COURSE OF APPEAL PROCEEDINGS. 2. THE AUTHORISATION ISSUED BY THE COMMISSIONER UNDE R SECTION 253(2) OF THE ACT DO NOT INDICATE AS TO WHAT ARE TH E GROUNDS WHICH WERE PROPOSED AND AUTHORISED. 3. AS COULD BE NOTICED FROM THE ASSESSMENT ORDER THE ASSESSEE IS INVOLVED IN THE BUSINESS OF TEXTILE TRADING. IT ADMI TTED TOTAL INCOME OF RS.9,84,940. THE ASSESSMENT WAS ORIGINALLY COMPLETED UNDER SECTION 143(3) OF THE ACT BY DETERMINING THE INCOME AT RS.10,3 1,800. LATER ON IT WAS REOPENED ON THE GROUND THAT THE INCOME CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT. AFTER HEARING THE ASSESSEE THE ASSE SSMENT WAS COMPLETED ON A TOTAL INCOME OF RS.13,93,750 BY MAKIN G THE FOLLOWING THREE ADDITIONS. (I) DISALLOWANCE OF RENT U/S.40(A)(IA) RS.1,26,000 (II) DISALLOWANCE OF INTEREST U/S.40(A)(IA) RS.1,85,947 (III) INCOME ACCEPTED RS. 50,000 4. THE FIRST ADDITION REFERS TO THE RENT PAID WITHOUT D EDUCTING THE TAX. THE ASSESSEE PAID RENT TO TWO PERSONS VIZ., SM T. GEETA RANI RS.1,26,000 AND SRI ROANK RAJ AGARWAL RS.90,000. TH E A.O. FURTHER NOTICED THAT THE PROVISIONS OF SECTION 194I ARE NOT APPL ICABLE IN THE CASE OF SRI ROANK RAJ AGARWAL WHEREAS THE PAYMENT TO SMT. GE ETA RANI IS WITHIN THE PRESCRIBED LIMITS AND THEREFORE, TAX OUGHT TO HAVE BEEN DEDUCTED AT SOURCE. THE ASSESSEES CONTENTION, ON THE O THER HAND, WAS THAT SMT. GEETA RANI FILED RETURN OF INCOME DULY ADMITTIN G THE RENT RECEIVED BY HER AND THEREFORE, THE PROVISIONS OF SECTI ON 40(A)(IA) ARE NOT ATTRACTED. IT WAS ALSO SUBMITTED THAT THE SAID PROVISIONS AR E APPLICABLE ONLY IN RESPECT OF AMOUNT PAYABLE. 3 ITA.NO.851/HYD/2016 M/S. AMARDEEP TEXTILES, HYDERABAD. 5. THE LD. CIT(A) OBSERVED THAT AMENDMENT IN SE CTION 40(A)(IA) IS INCORPORATED W.E.F. 01.07.2012 AND THEREFORE, EVEN IF THE RECIPIENT HAD FILED THE RETURN OF INCOME THE PROVISIONS OF SECTION 40 (A)(IA) CAN BE INVOKED IN THE CASE OF THE ASSESSEE WHO HAS PAID THE R ENT WITHOUT DEDUCTION OF TAX. ACCORDINGLY, HE ADDED A SUM OF RS.1 ,26,000. 6. THE ASSESSEE ALSO PAID INTEREST OF RS.1,85,9 47 TO RELIANCE CAPITAL LIMITED WITHOUT DEDUCTING TAX. THE CASE OF THE ASS ESSEE WAS THAT INTEREST HAS BEEN PAID TO A BANKING COMPANY AND HEN CE IT IS NOT ATTRACTED BY THE PROVISIONS OF SECTION 194A OF THE ACT. IT WAS ALSO CONTENDED THAT THE PAYMENT HAVING ALREADY BEEN MADE, SEC TION 40(A)(IA) IS NOT APPLICABLE. 7. THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT SUBSTANT IATED THAT THE RECIPIENT OF THE INTEREST IS A BANKING COMPANY FA LLING UNDER SECTION 194A OF THE ACT. HE ALSO OBSERVED THAT ON ANY PA YMENT MADE, THE ASSESSEE HAS TO DEDUCT TAX AS OTHERWISE, PROVISIONS OF SECTION 40(A)(IA) ARE ATTRACTED. IT MAY BE NOTICED THAT THE A.O. H AS ALSO MADE AN ADDITION OF RS.50,000. SINCE THE ASSESSEE VOLUNTARILY OFFERED THE SAID SUM AT THE TIME OF ORIGINAL ASSESSMENT, THE ASSESSEE HA S NOT RAISED ANY OBJECTION IN THE APPEAL. 8. AGGRIEVED BY THE ORDER OF THE A.O, IT WAS CONTENDED BEFORE THE CIT(A) THAT PROVISIONS OF SECTION 40(A)(IA) ARE NO T APPLICABLE IN RESPECT OF PAYMENTS ALREADY MADE, IN THE LIGHT OF DECIS ION OF ITAT, SPECIAL BENCH, VISAKHAPATNAM IN THE CASE OF M/S. MER LYIN SHIPPING & TRANSPORTS VS. ADDL. CIT, RANGE-1, VISAKHAPATNAM 136 ITD 23 (VISAKHAPATNAM) (SB). THE LD. CIT(A) DELETED THE ADDI TION OF RS.1,26,000 AND RS.1,85,947 BY APPLYING THE RATIO LAI D DOWN BY THE ITAT, SPECIAL BENCH, VISAKHAPATNAM (SUPRA) BY OBSERV ING THAT SECTION 40(A)(IA) IS APPLICABLE ONLY TO THE EXPENDITURE WHICH IS INCURRED AND 4 ITA.NO.851/HYD/2016 M/S. AMARDEEP TEXTILES, HYDERABAD. PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED WHEN IT HAS ALREADY BEEN PAID DURING THE PREVIOUS YEAR WITHOU T DEDUCTING TAX AT SOURCE. 9. AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBU NAL. THOUGH GROUNDS ARE NOT SPECIFIC WITH REGARD TO THE SUM OF RS.1 ,26,000, LD. D.R. SUBMITTED THAT IT HAS TO BE ASSUMED THAT THE COMMISSIONER HA S AUTHORISED THE A.O. EVEN WITH REGARD TO RENT PAID TO SMT. GEETA RANI. IT DESERVES TO BE NOTICED THAT IN UMPTEEN NUMBER OF CASES THE BENCH HAVING NOTICED THAT THERE IS A VARIATION BETWEEN THE DI RECTION GIVEN AND THE GROUNDS RAISED BEFORE THE BENCH, I HAVE BEEN REQU ESTING THE LD. D.RS. TO PLACE THE GROUNDS WHICH WERE APPROVED BY THE COMMISSIONER BUT THIS IS ALSO ONE OF SUCH CASES WHERE THE REVENUE H AS NOT PLACED BEFORE ME THE GROUNDS WHICH WERE APPROVED BY THE COMM ISSIONER. AT ANY RATE, THE MAIN ISSUE IS THAT WHETHER AMOUNT PAID CAN BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF INVOKING THE PROVISIO NS OF SECTION 40(A)(IA) OF THE ACT. I AM OF THE OPINION THAT THE DECISI ON OF THE HON'BLE SPECIAL BENCH OF THE ITAT IN THE CASE OF MERILYIN SHI PPING & TRANSPORT VS. ADDL. CIT, RANGE-1, VISAKHAPATNAM (SUPRA) IS B INDING ON THE CO- ORDINATE BENCHES OF ITAT. SINCE THERE IS NO AMOUNT OUTS TANDING AT THE END OF THE ACCOUNT YEAR, NO AMOUNT CAN BE DISALLOWED U NDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. BE THAT AS IT MAY, THIS ISSUE WAS CONSIDERED BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD., [38 TAXMANN.CO M (ALL)], WHICH AFFIRMED THE SAID DECISION OF THE SPECIAL BENCH IN ME RILYIN SHIPPING & TRANSPORT VS. ADDL. CIT, RANGE-1, VISAKHAPATNAM (SUP RA) THAT FOR DISALLOWANCE U/S. 40(A)(IA) OF THE ACT, THE AMOUNT SHO ULD BE PAYABLE AND NOT WHICH HAS BEEN PAID DURING THE YEAR. THIS FA CT WAS ALSO ACCEPTED BY THE CBDT IN CIRCULAR NO. 10/DV/2013 DT. 16-12-2013. HON'BLE SUPREME COURT OF INDIA HAS AFFIRMED THE DECIS ION OF THE HON'BLE 5 ITA.NO.851/HYD/2016 M/S. AMARDEEP TEXTILES, HYDERABAD. HIGH COURT OF ALLAHABAD AS REGARDS THE APPLICABILITY OF SECTION 40(A)(IA) OF THE ACT. IN VIEW OF THIS, I AM OF THE OPINION THAT THE CO- ORDINATE BENCH HAS TO FOLLOW THE DECISION OF THE SPECIA L BENCH, MORE SO, THE OPINION EXPRESSED BY THE SPECIAL BENCH IS ULTIMATEL Y APPROVED BY THE HON'BLE SUPREME COURT. FOR THESE REASONS, I AM OF THE OPINION THAT THE FACTS OF THE CASE, THERE CAN BE NO DISALLOWANCE U/S .40(A)(IA). 10. IN THE CASE OF ACIT VS. M/S. JANAPRIYA PROPERTIE S P. LTD., IN ITA.NOS.1614 & 1622 TO 1624/HYD/2012 DATED 19.01.2015 , THE COORDINATE BENCH HAS CONSIDERED SIMILAR ISSUE AND HE LD AS UNDER : '7. UPON HEARING THE RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THAT THE DECISION OF THE ITAT SPECIAL BENCH IS BINDING ON TH E TRIBUNAL, PARTICULARLY IN VIEW OF THE CLARIFICATORY ORDER PAS SED BY THE HON'BLE HIGH COURT OF JUDICATURE AT HYDERABAD IN THE INSTAN T CASE, AND THUS, WE RESPECTFULLY FOLLOW THE DECISION OF SPECIA L BENCH IN THE CASE OF MERILYIN SHIPPING & TRANSPORT (SUPRA), AND HOLD THAT THE PROVISIONS OF S. 40(A)(IA) CANNOT BE INVOKED WHERE THE PAYMENTS WERE ALREADY MADE BY THE ASSESSEE. WE DIRECT THE AS SESSING OFFICER ACCORDINGLY. IN THE RESULT, APPEALS OF THE REVENUE INSOFAR AS THE ABOVE ISSUE IS CONCERNED, ARE HEREBY DISMISSED' . 11. AFTER PERUSING THE ORDERS OF CIT(A) AND THE PRIN CIPLES OF LAW INVOLVED THEREIN, I DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). GROUNDS ARE REJECTED 12. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.01.2017. SD/- (D.MANMOHAN) VICE PRESIDENT HYDERABAD, DATED 09 TH JANUARY, 2017. VBP/- 6 ITA.NO.851/HYD/2016 M/S. AMARDEEP TEXTILES, HYDERABAD. COPY TO 1. THE INCOME TAX OFFICER, WARD-8(2), 6 TH FLOOR, SIGNATURE TOWERS, KOTHAGUDA, KONDAPUR, OPP. BOTINICAL GARDEN, SERILINGA MPALLY MANDAL, HYDERABAD 500 084. 2. M/S. AMARDEEP TEXTILES, D.NO.21-1-642/C1, GOD GIF T MARKET, RIKAB GUNJ, HYDERABAD 500 002. 3. CIT(A)-2, HYDERABAD. 4. PR. CIT-2, HYDERABAD. 5. D.R. ITAT B (SMC) BENCH 6. GUARD FILE.