THE ACIT, Hyderabad V. Sri K.Srinivasulu Naidu, Hyderabad

ITA 871/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66391 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 871/HYD/2010 ASSESSMENT YEAR: 2006-07 THE ASST. COMMISSIONER OF INCOME-TAX, ... APPELLAN T CIRCLE 6(1), HYDERABAD. VS. K. SRINIVAS NAIDU , RESPONDENT HYDERABAD. (PAN ADOPK 5782 E) APPELLANT BY : SMT. VIDISHA KALRA RESPONDENT BY : NONE DATE OF HEARING : 17/10/2012 DATE OF PRONOUNCEMENT : 19/10/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), GUNTUR DATED 26/03/2010 FOR THE A SSESSMENT YEAR 2006-07. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PROPRIETOR OF VNS TRANSPORT, AND FILED HIS RETURN O F INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 31/10/2006 D ECLARING AN INCOME OF RS. 13,26,247/- FROM BUSINESS, WHICH WAS PROCESSED U/S 143(1) OF THE ACT ON 16/05/2007. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND AFTER ISSUING STATUTO RY NOTICES, ASSESSMENT WAS COMPLETED U/S 143(3). THE AO HELD TH AT HIRE CHARGE PAYMENTS OF RS. 58,30,921/-, WHICH WERE MADE IN AGGREGATE OF RS. 50,000/-, ON WHICH THE ASSESSEE FA ILED TO DEDUCT 2 ITA NO. 871/HYD/2010 K. SRINIVAS NAIDU TDS AS PER THE PROVISIONS OF SECTION 40(A)(IA) ARE TO BE DISALLOWED AND, THEREFORE, THE SAID AMOUNT OF RS. 5 8,30,921/- WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 3. ON APPEAL, THE CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S TEJA CONSTRUCTIONS IN ITA NO. 30 8/HYD/2009 FOR AY 2005-06, ORDER DATED 23/10/2009, DELETED THE DIS ALLOWANCE OF RS. 58,30,921/- MADE BY THE AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL:- 1. THE CIT(A)ERRED IN ALLOWING RELIEF TO THE ASSESS EE RELYING UPON THE DECISION OF THE ITAT. 2. THE DECISION RELIED UPON BY THE CIT(A) IN THE CA SE OF M/S TEJA CONSTRUCTION IN ITA NO. 308/HYD/2009 FOR THE A Y 2005- 06 IS TOTALLY MISPLACED BECAUSE IN THAT CASE THE IS SUE WAS WHETHER THE PROVISIONS OF SECTION 40(A)(IA) CAN BE INVOKED ONCE THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED AND T HE INCOME IS ESTIMATED. IN THAT CONTEXT, THE ADDITION MADE SEPARATELY U/S 40(A)(IA) WAS DELETED. 3. THE TERM PAYABLE IN SECTION 40(A)(IA) IS TO BE READ HARMONIOUSLY WITH REFERENCE TO THE PROVISIONS OF TD S IN CHATER XVIIB WHEREIN THE LIABILITY TO DEDUCT TDS AR ISES AT THE TIME OF CREDIT OR THE PAYMENT WHICHEVER IS EARL IER. THEREFORE, LINKING THESE EXPRESSION PAYABLE TO TH E BALANCE SHEET WHICH REFLECTS THE STATE OF AFFAIRS AT A PART ICULAR POINT OF TIME, IS TOTALLY ABSURD AND AGAINST THE SPIRIT I N THE LIGHT OF THE ACCEPTED PRINCIPLES OF ACCOUNTANCY. 4. THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO.2) BILL, 2004 (WHICH IS ALSO COMMUNICATED THROU GH CBDT CIRCULAR NO. 5 OF 2005 DATED 15/07/2007) CLEARLY ST ATE THAT THE EXISTING PROVISIONS OF SUB-CLAUSE (I) OR CLAUSE (A) OF SECTION 40 REGARDING PAYMENT MADE OUTSIDE INDIA OR TO NON- RESIDENTS ARE BEING EXTENDED TO RESIDENTS ALSO WITH A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISIONS. IN VIEW OF TH IS, THE INTERPRETATION OF ITAT IS TOTALLY PERVERSE TO THE S PIRIT OF LAW. 5. RECENTLY, THE ALLAHABAD HIGH COURT IN THE CASE O F DEYS MEDICAL (UP) (P) LTD. VS. UNION OF INDIA AND OTHERS REPORTED IN 316 ITR 445 (2008) DATED 15/02/2008 AND IN ANOTH ER 3 ITA NO. 871/HYD/2010 K. SRINIVAS NAIDU DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF SHR EE CHOUDHARY TRANSPORT COMPANY VS. INCOME TAX OFFICER 225 CTR (RAJ.) 125, THE PROVISIONS OF SECTION 40(A)(IA) HAS BEEN HELD TO BE APPLICABLE ALSO TO THE PAYMENTS MADE DUR ING THE FY. 5. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE AT THE TIME OF HEARING BEFORE US. HOWEVER, WE PROCEED TO D ECIDE THIS APPEAL AFTER HEARING THE LEARNED DR AND ON MERITS O F THE CASE. 6. AFTER HEARING THE LEARNED DR AND PERUSING THE RE CORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THA T THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECI SION OF THE SPECIAL BENCH OF THE VIZAG TRIBUNAL IN THE CASE OF M/S MERLYN SHIPPING TRANSPORT & OTHERS, 136 ITD 23(SB)(VIZAG) WHEREIN THE TRIBUNAL HELD AS UNDER:- WHEN S. 40(A)(IA) WAS PROPOSED TO BE INSERTED BY T HE FINANCE BILL 2004, IT APPLIED TO ANY AMOUNT CREDI TED OR PAID. HOWEVER, WHEN ENACTED BY THE FINANCE ACT 20 04, IT APPLIED ONLY TOAMOUNT PAYABLE. THE WORDS CREDITE D/ PAID AND PAYABLE HAVE DIFFERENT CONNOTATIONS AND THE L ATTER REFERS TO AN AMOUNT WHICH IS UNPAID. THE CHANGE IN LANGUAGE BETWEEN THE BILL AND THE ACT IS CONSCIOUS AND WITH A PURPOSE. THE LEGISLATIVE INTENT IS CLEAR THAT ONLY THE OUTSTANDING AMOUNT OR THE PROVISION FOR EXPENSE (AN D NOT THE AMOUNT ALREADY PAID) IS LIABLE FOR DISALLOWANC E IF TDS IS NOT DEDUCTED. ALSO, S. 40(A)(IA) CREATES A LEGAL FI CTION BY VIRTUE OF WHICH EVEN GENUINE AND ADMISSIBLE EXPENSE S CAN BE DISALLOWED FOR WANT OF TDS. A LEGAL FICTION HAS TO BE LIMITED TO THE AREA FOR WHICH IT IS CREATED. CONSEQ UENTLY, S. 40(A)(IA) CAN APPLY ONLY TO EXPENDITURE WHICH IS P AYABLE AS OF 31ST MARCH AND DOES NOT APPLY TO EXPENDITURE WHICH HAS BEEN ALREADY PAID DURING THE YEAR. 7. AS THE ISSUE UNDER CONSIDERATION IS IDENTICAL TO THE SAID CASE DECIDED BY THE COORDINATE BENCH, RESPECTFULLY FOLLO WING THE SAME, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE TH E ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME IN THE LIGHT OF 4 ITA NO. 871/HYD/2010 K. SRINIVAS NAIDU THE SPECIAL BENCH DECISION OF THE VIZAG BENCH IN TH E CASE OF MERLYN SHIPPING TRANSPORT & OTHERS (SUPRA). 8. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 19/10/2012. SD/- SD/- ( CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 19 TH OCTOBER, 2012. KV COPY TO:- 1) ACIT, CIRCLE 6(1), HYDERABAD. 2) SRI K. SRINIVAS NAIDU, DR.NO. 8-2-268/1/D/2, ARORA COLONY, ROAD NO. 3, BANJARA HILLS, HYDERABAD. 3) THE CIT(A), GUNTUR. 4) THE CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D.