DCIT, CHENNAI V. R.S.Enterprises, CHENNAI

ITA 87/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8191 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 09-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-01-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH JCITD R

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , !' . ' # $ % $& BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NOS.87 & 88 /MDS./2015 ( % ' '(' / ASSESSMENT YEARS :2010-11 & 2011-12) DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE 22, NO.7,RAMAKRISHNA STREET, WEST TAMBARAM,CHENNAI 600 045. VS. M/ S.R.S.ENTERPRISES , 20,ALAGESAN STREET, WEST TAMBARAM, CHENNAI-45. PAN AAHFR 8636 G ( / APPELLANT ) ( / RESPONDENT ) )* + , / APPELLANT BY : MR.A.V.SREEKANTH,JCIT,D.R -.)* + , / RESPONDENT BY : MR.K.BALASUBRAMANIAN,ADVOCATE # ' + / / DATE OF HEARING : 08.12.2015 01( + / /DATE OF PRONOUNCEMENT : 20.01.2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGAI NST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS)-II, ITA NOS.87 & 88/MDS/2015 2 SALEM, DATED 25.09.2014 PERTAINING TO ASSESSMENT YE ARS 2010-11 & 2011-12. SINCE CERTAIN ISSUES IN THESE APPEALS ARE COMMON NATURE, THESE APPEALS ARE CLUBBED TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY GROUND RAISED BY THE REVENUE IN THESE TWO APPEALS IS WITH REGARD TO DELETION OF DISALLOWANCE OF ` 3,75,25,075/-(A.Y 2010- 11) & ` 4,43,04,063/- (A.Y 2011-12) ON THE INTEREST EXPENSE S U/S.40(A)(IA) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME ON 24.02.2011 AND 04.10.2011 DECLARING AN IN COMES OF ` 29,04,328/- ` 1,13,69,615/- FOR ASSESSMENT YEARS 2010-11 & 2011- 12 RESPECTIVELY. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE LD. ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD DEBIT ED THE INTEREST EXPENSES OF ` 3,75,25,075/- AND ` 4,43,04,063/- IN THE PROFIT AND LOSS ACCOUNTS OF FINANCIAL YEARS 2009-10 AND 2010-11. FU RTHER ON VERIFICATION, IT WAS FOUND THAT THE ASSESSEE HAD NO T DEDUCTED/REMITTED ANY TDS ON THESE EXPENSES. THEREFORE, THE LD. ASSE SSING OFFICER ITA NOS.87 & 88/MDS/2015 3 INVOKED THE PROVISIONS OF THE SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE INTEREST EXPENSES OF ` 3,75,25,075/- AND ` 4,43,04,063/- FOR THE RELEVANT ASSESSMENT YEARS. AGGRIEVED, THE ASSESSEE PREFERRED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS). 4. ON APPEAL, THE LD. COMMISSIONER OF INCOME TAX(A PPEALS) PLACED RELIANCE ON THE DECISION OF THE SPECIAL BENC H OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT (2012) 136 ITD 23 (VISAKHAPATNAM) AND OBSERVED THAT THE WORDS PAID AND PAYABLE, FOR THE PURPOSE OF SECTION 40(A)(IA) HAVE BEEN DELIBER ATED BY VARIOUS TRIBUNALS AND HIGH COURTS. THE SPECIAL BENCH OF IT AT (VIZAG BENCH), IN THE CASE OF MERILYN SHIPPING AND TRANSPO RTERS VS. ADDL.CIT (136 ITD 23)(VIZAG SB), HAS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO THE EXPENS ES THAT ARE PAYABLE AND OUTSTANDING AS ON 31ST MARCH OF THE R ELEVANT FINANCIAL YEAR IN WHICH THE EXPENSES ARE CLAIMED. THIS VIEW H AS ALSO BEEN ENDORSED BY THE HIGH COURT OF ALLAHABAD IN THE CASE OF VECTOR SHIPPING SERVICES P. LTD. (357 ITR 642)(ALL.), WHER E IT HAS CLEARLY BEEN HELD THAT FOR DISALLOWING EXPENSES FROM BUSINE SS AND PROFESSION ITA NOS.87 & 88/MDS/2015 4 ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE A MOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END O F THE YEAR. THE HEAD NOTE OF THE DECISION IS AS UNDER: SECTION 40(A)(IA), READ WITH SECTION 192, OF THE I NCOME-TAX ACT, 1961 - BUSINESS DISALLOWANCE - INTEREST, ETC., PAID TO R ESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE - ASSESSMENT YEAR 2009-1 0 - WHETHER FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION O N GROUND THAT TDS HAS NOT BEEN DEDUCTED, AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY END OF YEAR - HELD, YES - AS SESSEE, A SHIPPING COMPANY, CLAIMED DEDUCTION OF SALARY PAID TO EMPLOYEES OF COMPANY M WHICH PERFORMED SHIP, MANAGEMENT WORK O N ITS BEHALF - ASSESSING OFFICER DISALLOWED EXPENSES UNDER SECTION 40(A) (IA) ON GROUND THAT TDS WAS NOT DEDUCTED ON SUCH EXPENSES - COMMISSIONER (APPEALS) AND TRIBUNAL DELETED DISALLO WANCE BY RECORDING FINDING THAT M HAD DEDUCTED TDS ON SALA RIES PAID BY IT ON BEHALF OF ASSESSEE AND NO AMOUNT REMAINED PAYABLE A T YEAR END - WHETHER TRIBUNAL WAS JUSTIFIED IN DELETING DISALLO WANCE - HELD, YES [PARA 10] ITA NOS.87 & 88/MDS/2015 5 THE COMMISSIONER OF INCOME TAX(APPEALS) FURTHER OBS ERVED THAT ON THE CONTRARY, THE HIGH COURTS OF KOLKATA AND GUJARA T, IN THE CASES OF CIT VS.CRESCENT EXPORTS SYNDICATE (216 TAXMAN 258)( KOL.) AND CIT VS. SIKANDAR KHAN N. TANVAR (357 ITR 312)(GUJ.) RES PECTIVELY, HAVE HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) CAN B E INVOKED EVEN IF THE EXPENSES ARE ALREADY PAID AND NOT OUTSTANDING AS ON 31ST MARCH OF THE RELEVANT FINANCIAL YEAR. THE COMMISSIONER OF IN COME TAX(APPEALS) AFTER ANALYZING THE ABOVE DECISIONS, J URISDICTIONAL CHENNAI BENCH OF ITAT, RECENTLY, IN THE CASE OF ITO VS. M/S. THEEKATHIR PRESS MADURAI (ITA NO.2076(MDS)/2012 DATED 18.9.2013), HAS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLIC ABLE ONLY WHEN THE EXPENSES ARE PAYABLE AND OUTSTANDING AS ON 31ST M ARCH OF THE RELEVANT FINANCIAL YEAR AND ALSO HELD THAT:- 5. WE FIND THAT THE JUDGMENT OF THE HONBIE ALLAHAB AD HIGH COURT IS IN FAVOUR OF THE ASSESSEE. AT THE SAME TIME, WE FIND T HAT THE ORDERS OF THE CALCUTTA HIGH COURT AND THE GUJARAT HIGH COURT ARE AGAINST THE ASSESSEE. IN SUCH CIRCUMSTANCES THE RULE OF JUDICIAL PRECEDEN CE DEMANDS THAT THE VIEW FAVOURABLE TO THE ASSESSEE MUST BE ADOPTED, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PROD UCTS LTD., 88 ITR ITA NOS.87 & 88/MDS/2015 6 192. FOLLOWING THE ABOVE FUNDAMENTAL RULE DECLARED BY THE HONBLE SUPREME COURT, WE HAVE TO FOLLOW THE JUDGMENT OF TH E HONBLE ALLAHABAD HIGH COURT, WHICH IS IN FAVOUR OF THE ASS ESSEE. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE UNDER SECTION 40(A)(I A) APPLIES ONLY TO THOSE AMOUNTS PAYABLE AND NOT TO THOSE AMOUNTS P AID FURTHER THE COMMISSIONER OF INCOME TAX(APPEALS) OBS ERVED THAT THE HONBLE SUPREME COURT OF INDIA, VIDE CC NO.8068/20 14 DATED 02.07.20 14, HAS UPHELD THE DECISION OF THE ALLAHAB AD HIGH COURT (IN THE CASE OF VECTOR SHIPPING SERVICES P. LTD) BY DIS MISSING THE SLP FILED BY THE REVENUE. ACCORDINGLY, THE COMMISSIONER OF INCOME TAX(APPEALS) CONSIDERING THE DECISIONS OF THE ALLAHABAD HIGH COU RT IN THE CASE OF VECTOR SHIPPING SERVICES P. LTD. (35 7 ITR 642) (ALL.), WHICH HAS ALSO BEEN UPHELD BY THE APEX COURT, AND A LSO THE JURISDICTIONAL ITAT IN THE CASE OF ITO VS. M/S. THE EKATHIR PRESS MADURAI (ITA NO.2076(MDS)/2012 DATED 18.09.2013), H OLD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY IF THE AMOUNTS ARE PAYABLE AND OUTSTANDING AS ON 31ST MARCH OF THE R ELEVANT FINANCIAL YEARS. THE COMMISSIONER OF INCOME TAX (APPEALS) OBS ERVED THAT ITA NOS.87 & 88/MDS/2015 7 SINCE THE ASSESSEE HAS ALREADY PAID THE INTEREST EX PENSES OF ` 3,75,25,075/- AND ` 4,43,04,063/- AS ON 31.03.2010 AND 31.03.2011 RESPECTIVELY, THE SAME CANNOT BE DISALLOWED U/S.40( A)(IA) OF THE ACT. HENCE THE COMMISSIONER OF INCOME TAX(APPEALS) DIREC TED THE ASSESSING OFFICER TO ALLOW THESE INTEREST EXPENSES OF ` 3,75,25,075/- AND ` 4,43,04,063/- AS DEDUCTIONS IN THE A.YS.2010-11 AND 2011-12. AGGRIEVED OF THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THESE CASES, THE CIT(A) PLACED RELIANCE ON THE DECISION OF THE SPECIAL BENCH OF ITAT (VIZAG BENCH), IN THE CAS E OF MERILYN SHIPPING AND TRANSPORTERS CITED ABOVE AND ALSO ON T HE JUDGEMENT OF THE GUJARAT HIGH COURT IN THE CASE OF VECTOR SHIPP ING SERVICES P. LTD., CITED SUPRA WHEREIN IT WAS HELD THAT PROVISIO NS OF THE SECTION 40(A)(IA) IS NOT APPLICABLE WHEN THERE IS NO OUTSTA NDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESS MENT YEAR IN RESPECT OF THESE PAYMENTS. THIS APPEAL IS FILED BY THE REVENUE AND THE REVENUE IS NOT ABLE TO PRODUCE ANY EVIDENCE TO SHOW THAT ANY AMOUNT OUTSTANDING TOWARDS OUTSTANDING EXPENSES EIT HER IN THE NAME ITA NOS.87 & 88/MDS/2015 8 OF SUNDRY CREDITORS OR AS OUTSTANDING EXPENSES AS I T IS OUTSTANDING AT THE END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. HENCE, IN THE ABSENCE OF ANY MATERIAL TO SUG GEST THAT THE AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, THEN IMPUGNED AMOU NT CANNOT BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENCH OF CHENNAI TRIBUNAL IN THE CA SE OF SHRI N.PALANIVELU VS. ITO, SALEM REPORTED IN [2015] 40 I TR(TRIB.) 325(CHENNAI). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DISALLOW THE ONLY AMOUNT WHICH IS OUTSTANDING AT TH E END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R. HENCE, FOR LIMITED PURPOSE TO VERIFY THE OUTSTANDING AMOUNT OU T OF THIS IMPUGNED AMOUNT AT THE END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, WE REMIT THE ISSUE BACK O THE FILE OF THE LD. ASSESSING OFFICER. FURTHER, WE ALSO MAKE IT CLEAR T HAT IF THE ASSESSEE PAID THE TDS BEFORE THE RETURNS FILED U/S.139(1) OF THE ACT, THAT EXPENSES CANNOT BE DISALLOWED. THE LD. ASSESSING OF FICER HAS TO DECIDE THE ISSUE AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE FOR ITA NOS.87 & 88/MDS/2015 9 PRODUCING NECESSARY EVIDENCE. THIS GROUND IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 20 TH OF JANUARY,2016 AT CHENNAI. SD/- SD/- ( . ' # $ ) (G.PAVAN KUMAR) ( ( ) ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 20 TH JANUARY,2016 . K S SUNDARAM. 4 + -%/56 76(/ /COPY TO: 1. )* /APPELLANT 2. -.)* /RESPONDENT 3. # 8/ () /CIT(A) 4. # 8/ /CIT 5. 6'9: -%/% /DR 6. :;' < /GF