P.Rajasekaran, Madurai V. ACIT, Madurai

ITA 863/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64206 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 19-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAJAGOPAL
• Assessee Lawyers: C V RAJAN
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 863/MDS/2012 ASSESSMENT YEAR : 2006-07 SHRI P. RAJASEKARAN, 10/1, DEPUTY COLLECTOR COLONY, 1 ST STREET, K.K. NAGAR, MADURAI 625 020. PAN : ABZPR3772L (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, MADURAI. (RESPONDENT) APPELLANT BY : SHRI C.V. RAJAN, ADVOCATE RESPONDENT BY : SHRI K. RAJAGOPAL, JCIT DATE OF HEARING : 21.08.2012 DATE OF PRONOUNCEMENT : 21.08.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVANC E IS THAT THE CIT(APPEALS) UPHELD THE DISALLOWANCE MADE BY THE AS SESSING OFFICER UNDER SECTION 40(A)(IA) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). AN ADDITIONAL GROUND HAS ALSO BEEN FILED BY THE ASSESS EE IN WHICH HE ASSAILS SUCH DISALLOWANCE FOR A REASON THAT ALL THE AMOUNTS STOOD PAID 2 I.T.A. NO. 863/MDS/12 AS AT THE END OF THE PREVIOUS YEAR RELEVANT TO IMPU GNED ASSESSMENT YEAR. 2. FACTS APROPOS ARE THAT ASSESSEE, PROPRIETOR OF A CONCERN ENGAGED IN QUARRYING ACTIVITIES AS WELL AS MANUFACTURE OF B RICKS, HAD FILED HIS RETURN OF INCOME FOR IMPUGNED ASSESSMENT YEAR, DECL ARING AN INCOME OF ` 91,80,550/-. DURING THE COURSE OF SCRUTINY PROCEE DINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT ASSESSEE HAD PAID FIN ANCIAL CHARGES OF VARYING AMOUNTS TOTALLING TO ` 21,60,498/- TO ELEVEN PERSONS. IT WAS ALSO NOTICED THAT ASSESSEE HAD CLAIMED PAYMENT OF ` 1,62,000/- UNDER THE HEAD ADVERTISEMENT EXPENSES. THESE CLAIMS WERE D ISALLOWED BY THE A.O. FOR A REASON THAT TAX WAS NOT DEDUCTED AT SOUR CE AND THEREFORE, SECTION 40(A)(IA) WAS ATTRACTED. 3. IN HIS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT THERE WAS NO REQUIREMENT TO DEDUCT TAX ON THE FINANCIAL CHARGES SINCE THE DISALLOWANCE WAS MADE WITHOUT VERIFYING T HE RELEVANT DOCUMENTS. AS PER THE ASSESSEE, DISALLOWANCE OF PU BLICITY EXPENSES WAS ALSO NOT CALLED FOR SINCE SECTION 194C WAS NOT ATTRACTED. HOWEVER, CIT(APPEALS) WAS NOT FULLY IMPRESSED. HE SUSTAINED THE ADDITION MADE BUT SCALED DOWN THE ADDITION AGAINST THE FINANCIAL CHARGES TO ` 15,61,793/-. 3 I.T.A. NO. 863/MDS/12 4. NOW BEFORE US, LEARNED A.R. HAS STRONGLY ASSAILE D THE ORDERS OF AUTHORITIES BELOW AND RELYING ON THE DECISION OF SP ECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSP ORT V. ACIT (2012) 16 ITR (TRIB.) 1 (SB), SUBMITTED THAT ALL THE EXPENSES STOOD PAID IN THE RELEVANT PREVIOUS YEAR AND THEREFORE, APPLICATION O F SECTION 40(A)(IA) WAS NOT WARRANTED. 5. LEARNED D.R., ON THE OTHER HAND, SUBMITTED THAT IT WAS NOT CLEAR FROM THE ASSESSMENT ORDER WHETHER THE AMOUNTS WERE PAID OR ONLY CHARGED TO THE ACCOUNTS OF THE CONCERNED PARTIES. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. INSOFAR AS FINANCIAL CHARGES ARE CONCERNED, IT IS C LEARLY MENTIONED BY THE ASSESSING OFFICER IN PARA 2 OF ASSESSMENT ORDER THA T SUCH AMOUNTS WERE PAID BY THE ASSESSEE. SIMILARLY, FOR ADVERTISEMENT EXPENSES ALSO, IT HAS BEEN STATED BY THE ASSESSING OFFICER THAT IT WAS PA ID TO ONE M/S HARI ADVERTISING. SINCE THE AMOUNTS STOOD PAID DURING T HE RELEVANT PREVIOUS YEAR, IN VIEW OF THE DECISION OF SPECIAL BENCH OF T HIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT (SUPRA), RIGOURS OF SECTION 40(A)(IA) WERE NOT ATTRACTED. AS PER THE DECISION OF SPECIAL BENCH (SUPRA), DISALLOWANCE UNDER SECTION 40(A)(IA) COULD BE MADE ONLY WHERE THE AMOUNTS STOOD PAYABLE AS AT THE END OF THE RELEVANT PREVIOUS YEAR. THIS 4 I.T.A. NO. 863/MDS/12 WAS NOT THE CASE HERE. WE ARE, THEREFORE, OF THE O PINION THAT THE DISALLOWANCE WAS NOT WARRANTED. SUCH DISALLOWANCE STANDS DELETED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THE ORDER WAS PRONOUNCED IN THE COURT ON TUESDAY, T HE 21 ST OF AUGUST, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 21 ST AUGUST, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, MADURAI (4) CIT-I, MADURAI (5) D.R. (6) GUARD FILE