Jt. Commissioner of Income Tax(OSD), Range-1, Hyderabad V. AGA Publications Limited, Hyderabad

ITA 879/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1320 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 12-03-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 07-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P V SUBBA RAJU
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: TDS
• Section: 143(3); 115JB; 40(a)(ia); 201(1); 143(1); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE V. DURGA RAO , JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER ITA NO. 879/HYD/2018 ASSESSMENT YEAR: 2014 - 15 JCIT (OSD), RANGE - 1, HYDERABAD. VS. AGA PUBLICATIONS LIMITED, HYDERABAD. PAN: AABCA 8511 G (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI P. MURALI MOHANA RAO REVENUE BY: SRI P.V. SUBBA RAJU, DR DATE OF HEARING: 12/03/2019 DATE OF PRONOUNCEMENT: 15 /03/2019 ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 1, HYDERABAD DATED 26/02/2018 FOR THE ASSESSMENT YEAR 2014 - 15. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - I) THE ORDER OF THE LD. CIT(A) IS ERRONEOUS O N FACTS AS WELL AS IN LAW. II) LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXPENSES OF RS. 1,48,00,206/ - MADE U/S 40(A)(IA) OF THE ACT. III) THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXPENDITURE OF RS. 1,13,09,448/ - MADE U/S 40(A)(IA) OF TH E ACT. IV) THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO VERIFY WHETHER IN RESPECT OF REIMBURSEMENT OF EXPENSES THAT PAYEES HAVE TAKEN INTO ACCOUNT SUCH SUM PAID BY THE ASSESSEE FOR COMPUTING THEIR INCOME FOR THE SUBJECT YEAR AND PAID TAX THER EON AS PER THE 2 PROVISO TO SECTION 201(1)AND THEN ALLOW THE EXPENDITURE UPON VERIFICATION. V) THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE CLAIM OF THE ASSESSEE UNDER THE SECOND PROVISO TO SECTION 40(A)(IA) READ WITH FIRST PROVISO TO SECTION 201(1) CAN BE ALLOWED ONLY WHEN THE ASSESSEE FURNISHES A CERTIFICATE IN FORM NO.26A THAT CONDITIONS THEREIN ARE FULFILLED AND IN THE PRESENT CASE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE TO THAT EFFECT EITHER BEFORE THE A.O. OR THE CIT(A). VI) THE APPELLANT CRAVES LEA VE TO ADD, DELETE, SUBSTANTIATE AND AMEND ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. GROUNDS NO.1 AND 6 ARE GENERAL IN NATURE AND THEREFORE, THE SAME ARE DISMISSED. 3. GROUNDS NO.2 AND 3 RELATES TO DISALLOWANCE OF EXPENDITURE U/S 40(A)(IA ) OF THE ACT. FACTS ARE IN BRIEF THAT THE ASSESSEE, M/S. AGA PUBLICATIONS LIMITED, FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 45,90,570/ - UNDER THE NORMAL PROVISIONS OF AND BOOK PROFITS OF ( - ) RS. 1,71,28,440/ - U/S 115JB OF THE ACT. THE RETURN OF INCOME WAS PROCESS U/S 143(1) OF THE ACT. THE ASSESSEES CASE WAS SELECTED FOR LIMITED SCRUTINY UNDER AFTER FOLLOWING THE DUE PROCESS, ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT . 4. IN THE ASSESSMENT ORDER, A.O. HAS NOTED THAT THE ASSESSEE IS A PUBLI SHER OF NATIONAL TELUGU NEWSPAPER VAARTHA. THE ASSESSEE - COMPANY REIMBURSED THE EXPENDITURE TOWARDS SALARIES AND OTHER MISCELLANEOUS EXPENSES AMOUNTING TO RS. 1,48,00,026/ - AND M/S. SUPERIOR PRINTERS PRIVATE LIMITED TOWARDS SALARIES AMOUNTING TO RS. 1,13 ,09,448/ - RESPECTIVELY WITHOUT DEDUCTING TDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE TO FILE 3 OBJECTIONS, IF ANY, FOR DISALLOWANCE OF SUCH EXPENDITURE U/S 40(A)(IA) OF THE ACT. THE ASSESSEE HAS SUBMITTED BEFORE THE A.O. T HAT THE ASSESSEE ONLY REIMBURSED THE EXPENSES SPENT TOWARDS SALARIES, MISCELLANEOUS EXPENSE AND THEREFORE, NO TDS WAS DEDUCTED. HOWEVER, THE A.O. HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND DISALLOWED THE ENTIRE EXPENDITURE BY INVOKING THE PROVIS IONS OF SECTION 40(A)(IA) OF THE ACT. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) , WHO OBSERVED THAT, BY FOLLOWING THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10 IN ITA NO.249/HYD/2013 DATED 26/08/2016, IF PAYEES HAVE OFFERED THEIR INCOME TO TAX, THE EXPENDITURE INCURRED BY THE ASSESSEE HAS TO BE ALLOWED AND DIRECTED THE A.O. TO VERIFY WHETHER THE INCOME HAS BEEN OFFERED TO TAX BY THE RECIPIENTS AND ALLOWED THE GROUND RAISED BY THE ASSESSEE. ON BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS OF APPEAL. 6. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE GROUNDS RAISED BY THE REVENUE AND SUBMITTED THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS AND SINCE THE SAME WAS NOT DONE, THE A.O. INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE EXPENDITURE. HE, THEREFORE, STRONGLY RELIED UPON THE ORDER OF THE A.O. 7. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS REIMBURSEMENT OF EXPENSES ONLY AND THEREFORE, NO TDS HAS TO BE DEDUCTED. FOR THIS 4 PROPOSITION HE RELIED ON THE DECISION OF THE ITAT, AHMEDAB AD BENCH IN THE CASE OF DCIT VS. ADANI GAS LTD (ITA NOS.775/AHD/2014 AND OTHERS, DATED 17/10/2018). 8. WE HAVE HEARD BOTH THE PARTIES, CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE ORDERS OF T HE AUTHORITIES BELOW. WE FIND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE PERTAINS TO REIMBURSEMENT OF SALARIES, MISCELLANEOUS EXPENSES. THESE FACTS ARE NOT DISPUTED BY THE DEPARTMENT. THE COORDINATE BENCH OF THE TRIBUNAL AT AHMEDABAD HAS CONSIDERED TH E VERY SAME ISSUE BY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT NARMADA VALLEY FERTILIZERS CO LTD [2013] 35 TAXMANN.COM 638 (GUJ.) AND THE DECISION THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ITD CEM IN DIA JV [2018] 405 ITR 533 (BOM) AND HELD THAT IN THE CASE REIMBURSEMENT OF EXPENSES, NO TDS IS REQUIRED TO BE DEDUCTED . FOR THE SAKE OF READY REFERENCE AND CONVENIENCE, RELEVANT PARA 9 FROM THE SAID TRIBUNALS ORDER IS EXTRACTED AS UNDER: - 9. THE GROUND NO.2 CONCERNS ADDITION OF RS. 2.57 LAKHS UNDER SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF NON DEDUCTION OF TDS. AS POINTED OUT ON BEHALF OF THE ASSESSEE, THE AFORESAID PAYMENT MADE TO ADANI POWER LTD WAS ON ACCOUNT OF RE - IMBURSEMENT OF ACTUAL EXPENSES, TH E DETAILS OF WHICH ARE PROVIDED AT PAGE NO.226 OF THE PAPER BOOK. IN THE ABSENCE OF ANY INCOME ELEMENT IN THE PAYMENT MADE, THE OBLIGATION TO DEDUCT TAX AT SOURCE ON SUCH PAYMENT DO NOT ARISE AND CONSEQUENTLY, PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DO NOT COME INTO PLAY IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT NARMADA VALLEY FERTILIZERS CO LTD [2013] 35 TAXMANN.COM 638 (GUJ.). THE LAW THAT A MERE REIMBURSEMENT DOES NOT REQUIRE TO DEDUCTION WAS ALSO FOLLO WED IN CIT VS. ITD CEM INDIA JV (2018) 405 ITR 533 (BOM.) IN RESPECT OF REIMBURSEMENT OF ADMINISTRATIVE EXPENSES TO A JOINT VENTURE PARTNER. THEREFORE, WE DO NOT 5 FIND ANY ERROR IN THE ORDER OF THE CIT(A) AND CONSEQUENTLY DECLINE TO INTERFERE. 9. WE, R ESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AT AHMEDABAD (SUPRA), ARE OF THE OPINION THAT THE A.O. IS NOT CORRECT IN INVOKING THE PROVISIONS OF SECTION 40(A)(IA) IN THIS CASE AND THEREFORE, THE GROUNDS NO.2 AND 3 RAISED BY TH E REVENUE ARE DISMISSED. 10. GROUND NO.4 RELATES CIT(A)S DIRECTION TO A.O. TO VERIFY WHETHER THE PAYEES HAVE OFFERED THE AMOUNT TO TAX OR NOT. IN THIS REGARD, S O FAR AS THE ASSESSEES ALTERNATIVE ARGUMENT IS THAT THE PAYEE HAS ALREADY FILED THE RETURN OF INCOME WHEREIN HE HAS OFFERED THE INCOME TAX AND THEREFORE NO DISALLOWANCE CAN BE MADE. THE LD. CIT(A) BY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO BY FOLLOWING THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE IN ITA NO.249/HYD/2013 (SUPRA) DIRECTED THE A.O. TO VERIFY WHETHER THE PAYEE HAS OFFERED THE VERY AMOUNT TO TAX OR NOT AND ALLOW THE GROUND RAISED BY THE ASSESSEE. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND T HE GROUND NO.4 RAISED BY THE REVENUE IS DISMISSED. 11. GROUND NO.5 RELATES TO NON - FURNISHING OF CERTIFICATE IN FORM NO.26A. SO FAR AS THIS GROUND IS CONCERNED, WE FIND THAT THE ISSUE INVOLVED IN THIS APPEAL IS ALREADY COVERED BY THE COORDINATE BENCH OF THE TRIBUNAL AT AHMEDABAD (SUPRA) IE., THE EXPENSES PAID BY THE ASSESSEE ARE ONLY REIMBURSEMENT OF EXPENDITURE AND THEREFORE, NO TDS 6 IS REQUIRED TO BE DEDUCTED. IN SO FAR AS THE ASSESSEES CONTENTION IS CONCERNED, THE PAYEE HAS ALREADY OFFERED THE VERY SAME AMOUNT FOR TAXATION AND THEREFORE, NO DISALLOWANCE IS REQUIRED TO BE MADE. CIT(A) HAS ALSO DIRECTED THE A.O. TO VERIFY WHETHER THE PAYEE HAS OFFERED THE INCOME TO TAX OR NOT AND THE INCOME TAX DETAILS OF THE PAYEE AND IF THE A.O. FINDS THAT THE PAYEE HAS OFFERED THE INCOME TO TAX, THEN NO DISALLOWANCE CAN BE MADE IN THE HANDS OF THE ASSESSEE. IN VIEW OF THE ABOVE FINDING GIVEN BY THE CIT(A), IN OUR OPINION, THE DECISION OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. GROUND NO.5 RAISED BY THE ASSESSEE IS DISMISSED. 12. IN THE RESULT, APPEAL FILED BY THE RE VENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT O N 15 TH MARCH, 2019. SD/ - SD/ - (D.S. SUNDER SINGH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 15 TH MARCH , 2019 OKK COPY TO: - 1) M/S. AGA PUBLICATIONS LIMITED, NO.396, VAARTHA BUILDING, LOWER TANK BUND ROAD, HYDERABAD - 500080. 2) JCIT (OSD), RANGE - 1, 8 TH FLOOR, C BLOCK, R.NO.836, IT TOWERS, HYDERABAD. 3) THE CIT(A) - 1, HYDERABAD 4) T HE PR. CIT - 1, HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE