SHRI MAHESH KHANWANI, JAIPUR V. INCOME TAX OFFICER , JAIPUR

ITA 879/JPR/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1203 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 27-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT DHK
• Keywords: Question of law; Difference of opinion
• Section: 40(a)(ia); 194C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 879/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14. SHRI MAHESH KHANWANI, F-53, SHIVAM GURUNANAK MARG, GHIYA MARG, BANI PARK, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 3(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. A DRPK 7451 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26.11.2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 27/11/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 7 TH SEPTEMBER, 2017 OF LD. CIT (A)-1, JAIPUR FOR THE ASSESSMENT YEAR 2013-14. THE ONLY ISSUE ARISES IN THIS APPEAL OF THE ASSESSEE FO R OUR CONSIDERATION AND ADJUDICATION IS DISALLOWANCE MADE BY THE AO UNDER SECTION 40(A)( IA) OF THE IT ACT IN RESPECT OF THE INTEREST PAID TO THE NBFC. 2. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE ASSESSEE HAS PAID THE INTEREST OF RS. 5,72,923/- TO M/S. BLUE STAR HOME F INANCE LTD. WHICH WAS SUBSEQUENTLY KNOWN AS DEEWAN HOUSING FINANCE CORPOR ATION LTD. (DHFCL). SINCE THE RECIPIENT OF INTEREST HAS INCLUDED THE SAID AMO UNT IN THE TOTAL INCOME AND FILED THE RETURN OF INCOME, THEREFORE, IN VIEW OF THE SEC OND PROVISO TO SECTION 40(A)(IA) OF 2 ITA NO. 879/JP/2017 SHRI MAHESH KHANWANI, JAIPUR. THE IT ACT NO DISALLOWANCE IS CALLED FOR. IN SUPPO RT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISIONS OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. GIRDHARI LAL BARGOTI IN ITA NO. 757/JP/2012 DATED 1 0.4.2014 AND IN THE CASE OF ACIT VS. M/S. VASTUVEDIK COLONIZERS & DEVELOPERS IN ITA NO. 320/JP/2015 DATED 24.10.2018. THE LD. A/R HAS ALSO FILED A COPY OF T HE CERTIFICATE/CONFIRMATION ISSUED BY THE DHFCL REGARDING THE INTEREST INCOME WAS OFFE RED FOR TAXATION. 3. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THIS ISSUE WAS NOT RAISED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW, THERE FORE, IT REQUIRES A PROPER VERIFICATION. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CO NSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. M/S. VASTU VEDIK COLONIZERS & DEVELOPERS (SUPRA) IN PARA 4 AND 4.1 AS UNDER :- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS IN TH E BUSINESS OF BUILDER AND DEVELOPER AND ENGAGED IN CONSTRUCTION OF HOUSIN G PROJECTS. THE ASSESSEE HAS MADE THE PAYMENT OF RS. 2,50,000/- TO MAHAK MEHTA AFTER DEDUCTION OF TDS @ 1% UNDER SECTION 194C OF T HE ACT. THE AO WAS OF THE VIEW THAT THE PAYMENT MADE BY THE ASSESS EE WAS IN THE NATURE OF FEES FOR TECHNICAL SERVICES OR PROFESSION AL FEE AND, THEREFORE, THE PROVISIONS OF SECTION 194J IS APPLICABLE. WE F IND THAT THE AO HAS NOT EXAMINED THE ISSUE OF NATURE OF PAYMENT AS PER THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT WHICH DEFINES THE TERM FEES FOR TECHNICAL SERVICES OR THE PAYMENT WAS MADE AS A PROFESSIONAL FEE. ONCE THE ASSESSEE HAS DEDUCTED THE TDS WHICH IS A BONAFIDE D ECISION OF THE 3 ITA NO. 879/JP/2017 SHRI MAHESH KHANWANI, JAIPUR. ASSESSEE THAT THE PROVISIONS OF SECTION 194C IS APP LICABLE IN RESPECT OF THE SAID PAYMENT MADE UNDER SUB-CONTRACT, THEN EVEN IF THE AO DID NOT ACCEPT THIS DECISION OF THE ASSESSEE, THE PROVI SIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED DUE TO THE REASON OF D IFFERENCE OF OPINION. THE HONBLE CALCUTTA HIGH COURT IN THE CA SE OF CIT VS. S.K. TEKRIWAL (SUPRA) HAS CONSIDERED THIS ISSUE AS UNDER :- 1. WE ARE SATISFIED THAT THE ORDER UNDER CHALLENGE IS A JUST ORDER. 2. THE REASONING APPEARING AT PARAGRAPH 6 OF THE JUDGM ENT AND/OR ORDER UNDER CHALLENGE READS AS FOLLOWS : 'IN THE PRESENT CASE BEFORE US THE ASSESSEE HAS DED UCTED TAX U/S. 194C(2) OF THE ACT BEING PAYMENTS MADE TO SUB-CONTRACTORS AND IT IS NOT A CASE OF NON- DEDUCTION OF TAX OR NO DEDUCTION OF TAX AS IS THE I MPORT OF SECTION 40A(IA) OF THE ACT. BUT THE REVENUE'S CONTENTION IS THAT THE P AYMENTS ARE IN THE NATURE OF MACHINERY HIRE CHARGES FALLING UNDER THE HEAD 'RENT ' AND THE PREVIOUS PROVISIONS OF SECTION 194I OF THE ACT ARE APPLICABL E. ACCORDING TO REVENUE, THE ASSESSEE HAS DEDUCTED TAX @ 1% 2 U/S. 194C(2) OF TH E ACT AS AGAINST THE ACTUAL DEDUCTION TO BE MADE AT 10% U/S. 194I OF THE ACT, THEREBY LESSER DEDUCTION OF TAX. THE REVENUE HAS MADE OUT A CASE O F LESSER DEDUCTION OF TAX AND THAT ALSO UNDER DIFFERENT HEAD AND ACCORDINGLY DISALLOWED THE PAYMENTS PROPORTIONATELY BY INVOKING THE PROVISIONS OF SECTI ON 40(A)(IA) OF THE ACT. THE LD. CIT, DR ALSO ARGUED THAT THERE IS NO WORD LIKE FAILURE USED IN SECTION 40(A)(IA) OF THE ACT AND IT REFERRED TO ONLY NON-DE DUCTION OF TAX AND DISALLOWANCE OF SUCH PAYMENTS. ACCORDING TO HIM, IT DOES NOT REFER TO GENUINENESS OF THE PAYMENT OR OTHERWISE BUT ADDITIO N U/S. 40(A)(IA) CAN BE MADE EVEN THOUGH PAYMENTS ARE GENUINE BUT TAX IS NO T DEDUCTED AS REQUIRED U/S.40(A)(IA) OF THE ACT. WE ARE OF THE VIEW THAT T HE CONDITIONS LAID DOWN U/S.40(A)(IA) OF THE ACT FOR MAKING ADDITION IS THA T TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED. IF BOTH THE CON DITIONS ARE SATISFIED THEN SUCH PAYMENT CAN BE DISALLOWED U/S. 40(A)(IA) OF TH E ACT BUT WHERE TAX IS DEDUCTED BY THE ASSESSEE, EVEN UNDER BONAFIDE WRONG IMPRESSION, UNDER WRONG PROVISIONS OF TDS, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED. HERE IN THE PRESENT CASE BEFORE US, THE ASSESSEE HA S DEDUCTED TAX U/S. 194C(2) OF THE ACT AND NOT U/S. 194I OF THE ACT AND THERE I S NO ALLEGATION THAT THIS TDS IS NOT DEPOSITED WITH THE GOVERNMENT ACCOUNT. WE AR E OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT HAS TWO LIMBS ONE IS WHERE, INTER ALIA, ASSESSEE HAS TO DEDUCT TAX AND THE SECOND WHE RE AFTER DEDUCTING TAX, INTER ALIA, THE ASSESSEE HAS TO PAY INTO GOVERNMENT ACCOUNT. THERE IS NOTHING IN THE SAID SECTION TO TREAT, INTER ALIA, THE ASSES SEE AS DEFAULTER WHERE THERE IS A SHORTFALL IN DEDUCTION. WITH REGARD TO THE SHORTF ALL, IT CANNOT BE ASSUMED THAT THERE IS A DEFAULT AS THE DEDUCTION IS NOT AS REQUI RED BY OR UNDER THE ACT, BUT 4 ITA NO. 879/JP/2017 SHRI MAHESH KHANWANI, JAIPUR. THE FACTS IS THAT THIS EXPRESSION, 'ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED O R, AFTER DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED I N SUB-SECTION 3 (1) OF SECTION 139'. THIS SECTION 40(A)(IA) OF THE ACT REF ERS ONLY TO THE DUTY TO DEDUCT TAX AND PAY TO GOVERNMENT ACCOUNT. IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILITY OF ANY I TEM OR THE NATURE OF PAYMENTS FALLING UNDER VARIOUS TDS PROVISIONS, THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT U/S. 201 OF THE ACT AND NO DISA LLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT (A) ALLOWI NG THE CLAIM OF ASSESSEE AND THIS ISSUE OF REVENUE'S APPEAL IS DISMISSED.' 3. WE FIND NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS CASE AND THEREFORE, WE REFUSE TO ADMIT THE APPEAL. ACCORDINGLY, THE APP EAL IS DISMISSED. 4. IN VIEW OF DISMISSAL OF THE APPEAL ITSELF, THE CONN ECTED APPLICATION HAS BECOME INFRUCTUOUS AND THE SAME IS ALSO DISMISSED. THUS AN IDENTICAL ISSUE HAS COME UP FOR CONSIDERATI ON OF THE HONBLE HIGH COURT REGARDING DEDUCTION OF TDS BY THE ASSESSEE UN DER SECTION 194C WHEREAS THE AO HELD THAT THE PROVISIONS OF SECTION 194-I ARE APPLICABLE. THE HONBLE HIGH COURT HAS UPHELD THE ORDER OF THE TRIB UNAL WHEREIN IT WAS HELD THAT ONCE THE ASSESSEE HAS DEDUCTED THE TAX AT SOUR CE AS PER PROVISIONS OF CHAPTER XVII-B, THEN EVEN IF A PARTICULAR PROVISION UNDER THE SAID CHAPTER WAS NOT CONSIDERED BUT TAX WAS DEDUCTED UNDER SOME OTHE R PROVISIONS, THE ASSESSEE CANNOT BE HELD AS ASSESSEE IN DEFAULT SO A S THE PROVISIONS OF SECTION 40(A)(IA) IS CONCERNED. WE FURTHER NOTE THAT THE C OORDINATE BENCH OF THIS TRIBUNAL IN CASE OF ACIT VS. M/S. M.C. SHARMA ASSOC IATES & CONSULTANTS PVT. LTD. (SUPRA) HAS ALSO CONSIDERED THIS ISSUE IN PARA 2.7 AS UNDER :- 2.7. WE FIND THAT THIS FINDING ON FACT BY THE LD. CIT (A) IS NOT CONTROVERTED BY THE REVENUE. EVEN IF IT IS ASSUMED THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX U/S 194J OF THE ACT BUT NOT U/S 194C OF THE ACT IN THAT EVENTUALITY ALSO. IT IS THE CASE OF SHO RT DEDUCTION OF TAX. THE RELIANCE HAS BEEN PLACED BY THE LD. COUNSEL FOR THE ASSESSEE ON THE JUDGEMENT OF HONBLE CALCUTTA HIGH COURT RENDER ED IN THE CASE OF CIT VS. S.K. TEKRIWAL (2013) 90 DTR 26 (CAL.) WHERE IN HONBLE CALCUTTA HIGH COURT HAS HELD THAT WE ARE OF THE VIEW THAT THE CONDITIONS LAID DOWN U/S 40(A)(IA) OF THE ACT FOR MAKING ADDITION I S THAT TAX IS 5 ITA NO. 879/JP/2017 SHRI MAHESH KHANWANI, JAIPUR. DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDU CTED. IF BOTH THE CONDITIONS ARE SATISFIED THEN SUCH PAYMENT CAN BE D ISALLOWED U/S 40(A)((IA) OF THE ACT BUT WHERE TAX IS DEDUCTED BY THE ASSESSEE, EVEN UNDER BONA FIDE WRONG IMPRESSION, UNDER WRONG PROVI SIONS OF TDS, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT B E INVOKED. HENCE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE H ONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.K. TEKRIWAL (SUPRA), WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT (A) WHICH IS UPHELD. TH US THE SOLITARY GROUND RAISED BY THE REVENUE IS REJECTED. ACCORDINGLY, IN VIEW OF THE ABOVE DECISIONS, WE HOL D THAT PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED WHEN THE ASSESSEE HAS D EDUCTED THE TAX AT SOURCE AS PER PROVISIONS OF SECTION 194C, AS PER T HE BOANFIDE DECISION OF THE ASSESSEE EVEN IF THE AO HAS HELD THAT THE PROVISION S OF SECTION 194J ARE APPLICABLE IN RESPECT OF THE SAID PAYMENT. HENCE, T HE DISALLOWANCE MADE BY THE AO IS DELETED. 4.1. THE SECOND DISALLOWANCE WAS MADE BY THE AO IN RESPECT OF INTEREST PAYMENT TO M/S. TATA MOTOR FINANCE. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE RECIPIENT HAS CONSIDERED THE SAI D AMOUNT IN ITS TOTAL INCOME AND PAID THE TAX, HOWEVER THIS ISSUE REQUIRE S VERIFICATION OF FACT AS THE ASSESSEE DID NOT FILE THE REQUISITE CERTIFICATE TO THE EXTENT THAT THE RECIPIENT HAS CONSIDERED THIS AMOUNT IN THE TOTAL INCOME AND PAID TAX ON THE SAME. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO FOR VERIFICATION OF THE FACT AND THEN DECIDING THIS ISSUE IN THE LIGHT OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD., 234 TAXMAN 825 (DELHI) WHEREIN IT WAS HELD THAT THE AMENDMENT BROUGHT IN SECTION 40(A)(IA) OF THE ACT IS CURATIVE IN NATURE AND, THEREFORE, IT IS APPLICABLE RETROSPECTIVELY. THUS IT IS NOW SETTLED PROPOSITION OF LAW AS PER TH E VARIOUS DECISIONS OF HONBLE HIGH COURTS THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS CURATIVE IN NATURE AND IS APPLICABLE RETROSPECTIVELY. HAVING HELD THAT THE B ENEFIT OF SECOND PROVISO IS 6 ITA NO. 879/JP/2017 SHRI MAHESH KHANWANI, JAIPUR. AVAILABLE TO THE ASSESSEE IF THE RECIPIENT OF INTER EST HAS ALREADY TAKEN THIS AMOUNT IN ITS TOTAL INCOME AND FILED THE RETURN OF INCOME, WE DIRECT THE AO TO VERIFY THIS FACT AND DECIDE THE ISSUE IN THE LIGHT OF THE ABOVE OBSE RVATIONS AND DECISIONS. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27/11/201 8. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 27/11/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI MAHESH KHANWANI, JAIPUR. 2. THE RESPONDENT THE ITO WARD 3(2), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 879/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 7 ITA NO. 879/JP/2017 SHRI MAHESH KHANWANI, JAIPUR.