M/s. D.N. Gheewala & A.N.Gheewala, Bharuch V. The Income tax Officer,Ward-3, Bharuch

ITA 882/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5942 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 23-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: JAYANT T MANUBARWALAAR
• Keywords: TDS
• Section: 40(a)(ia); 201(1); 143(1); 201; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' (BEFORE S/SHRI MUKUL SHRAWAT,JM & A N PAHUJA, AM) ITA NO.882/AHD/2010 (ASSESSMENT YEAR:-2006-07) M/S D N GHEEWALA & A N GHEEWALA,2&3, GANGA JAMUNA SOCIETY, BEHIND JINWALA HIGH SCHOOL, ANKLESHWAR [PAN: AABFD 7181 J] V/S INCOME-TAX OFFICER, WARD- 3, BHARUCH [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI JAYANT T MANUBARWALA,AR REVENUE BY:- SHRI M C PANDIT, DR O R D E R A N PAHUJA: THIS IS AN APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 08-01-2010 OF THE LD. CIT(APPEALS)-VI, BARODA , RAISING TWO ARGUMENTATIVE GROUNDS-ONE RELATING TO DISALLOWANCE OF 20% OF THE TELEPHONE EXPENSES AND THE SECOND RELATING TO DISAL LOWANCE OF DEDUCTION OF RS.81180/- U/S 40A(IA) OF THE ACT. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS. 81,440/- FILED ON 26.10.2006 BY THE A SSESSEE, TRADING IN RAVA AND MAIDA, AFTER BEING PROCESSED ON 19.4.20 07 U/S 143(1) OF THE INCOME-TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT],WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 23.4.2007. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER[AO IN SHORT] FOUND THAT THE ASSE SSEE DEBITED TELEPHONE EXPENSES AMOUNTING TO RS.1,07,414/- TO TH E PROFIT & LOSS ACCOUNT. SINCE THE ASSESSEE FAILED TO PRODUCE ANY L OG BOOK/ CALL REGISTER FOR THE PERSONAL USE OF TELEPHONES, THE A O DISALLOWED 20% OF RS.1,07,414/- I.E. AN AMOUNT OF RS.21,483/- ON THE GROUND THAT PERSONAL ELEMENT IN THESE EXPENSES CANNOT BE RULED OUT. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWANCE. ITA NO.882/AHD/2010 FOR AY2006-07 M/S D N GHEEWALA & A N GHEEWALA 2 3 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST T HE FINDINGS OF THE LD. CIT(A).THE LEARNED AR ON BEHALF OF THE A SSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LD. CIT(A) AND SUBMITTED THAT SINCE NOBODY WAS PRESENT NEAR THE TELEPHONE DU RING THE WORKING HOURS, NO PERSONAL USE COULD BE ATTRIBUTED. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THOUGH THE LD. AR DENIED PERSONAL USE OF PHONE , RE LEVANT DETAILS OF EXPENSES HAVE NOT BEEN PLACED BEFORE US NOR IT WAS CLAIMED THAT THE PARTNERS OF THE ASSESSEE FIRM OR THEIR FAMILY HAD THEIR INDEPENDEN T PHONES FOR PERSONAL USE. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE ASSESSEE DID NOT PLACE BEFORE US EITHER DETAILS OF TELEPHONE EXPENSES NOR ANY OTHER MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE OF THE OPINION THAT DISALLOWANCE MADE BY THE AO IS REASONABLE AND ACCORDINGLY, FINDINGS O F THE LEARNED CIT(A) ARE UPHELD. THEREFORE, GROUND NO. 1 IS DISMISSED . 5. GROUND NO.2 RELATES TO THE DISALLOWANCE OF RS.81 ,180/- U/S.40(A)(IA) OF THE ACT. ON VERIFICATION OF INTER EST EXPENSES, IT WAS NOTICED BY THE AO THAT THE ASSESSEE PAID INTEREST OF RS.1,64,880/- ON UNSECURED LOANS, WITHOUT DEDUCTING TDS IN ACCORD ANCE WITH THE PROVISIONS OF SECTION 194A OF THE ACT. THEREFORE, T HE AO DISALLOWED THE CLAIM FOR DEDUCTION OF INTEREST,HAVING RECOURSE TO PROVISIONS OF SEC. 40A(IA) OF THE ACT. 6. ON APPEAL, THE LEARNED CIT(A) PARTLY ALLOWED TH E CLAIM WITH THE FOLLOWING OBSERVATIONS:- 4.2 IN APPEAL, THE ID. AR SUBMITTED THAT BOTH THE RECIPIENTS OF INTEREST HAVE SUBMITTED FORM NO.15H IN DUPLICATE TO ITS FIRM AND THE SAME WERE SEND TO CIT, VODODARA. IN VIEW THIS, IT IS REQUESTE D THAT THE ADDITION MAY BE DELETED. ITA NO.882/AHD/2010 FOR AY2006-07 M/S D N GHEEWALA & A N GHEEWALA 3 4.3 I HAVE CONSIDERED THE SUBMISSION OF THE ID. AR AND FACTS OF THE CASE. IT IS SEEN THAT THE ASSESSING OFFICER HAS APP LIED PROVISIONS OF SECTION 40A(I)(IA) IN RESPECT OF INTEREST PAID TO TWO PERSO NS AMOUNTING TO RS.83,700/-TO SHRI KRUNAL GHEEWALA AND RS.81,180/- TO SHRI VISHAL GHEEWALA ON THE GROUND THAT THE ASSESSEE HAD MADE P AYMENT OF INTEREST WITHOUT DEDUCTING TAX AT SOURCE. IT IS ALSO OBSERVE D BY THE ASSESSING OFFICER THAT THERE WAS NO PROOF OF FORM 15H FILED. HOWEVER, THE AR HAS PROVED THAT THE RECIPIENTS OF INTEREST HAVE FILED T HE RETURNS BY FILING THE XEROX COPIES OF SUCH RETURNS ALONG WITH THE STATEME NTS OF INCOME INCLUDING THE INTEREST RECEIVED FROM THE APPELLANT. A PERUSAL OF THESE STATEMENTS REVEALED THAT IN THE CASE OF SHRI KRUNAL GHEEWALA N O TAX WAS PAYABLE BY HIM AND AS SUCH THE ASSESSING OFFICER WAS NOT JUSTI FIED IN ADDING BACK INTEREST OF RS.83,700/- PAID TO HIM. BUT HOWEVER IN THE OTHER CASE THE RECIPIENT WAS HAVING TAXABLE INCOME AND HENCE ACTIO N OF THE ASSESSING OFFICER IN ADDING BACK RS.81,180/- PAID TO SHRI VIS HAL GHEEWALA IS SUSTAINED. THIS GROUND IS THUS ALLOWED IN PART. 7. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED AR ON BEHAL F OF THE ASSESSEE REITERATED THEIR ARGUMENTS BEFORE THE CIT(A)WHILE R ELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. DEWAN CHAND, (2009) 178 TAXMAN 173. THE LEARNED DR, ON TH E OTHER HAND, SUPPORTED THE FINDINGS OF THE LD. CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISION RELIED UPON ON BEHAL F OF THE ASSESSEE. THE RELEVANT PROVISIONS OF SEC. 40A(IA) OF THE AC T READ AS UNDER:- ' 40. AMOUNTS NOT DEDUCTIBLE. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION S 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCO ME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', - (A) IN THE CASE OF ANY ASSESSEE- (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, ITA NO.882/AHD/2010 FOR AY2006-07 M/S D N GHEEWALA & A N GHEEWALA 4 BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTI BLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDU CTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID,- (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED- (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTI NG THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID..' 8.1 AS IS APPARENT FROM THE AFORESAID PROVISIONS , CERTAIN AMOUNTS, INCLUDING INTEREST ARE NOT DEDUCTIBLE IN COMPUTING THE INCOME CHARGEABLE UNDER THE ACT UNLESS TAX IS DEDUCTED AT SOURCE AND PAID TO THE CR EDIT OF THE GOVERNMENT. A SUM PAID AS INTEREST IS LIABLE TO BE DEDUCTED FROM COMP UTATION OF THE TOTAL INCOME STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF THE A CT AND NOT OTHERWISE. IT IS NOT DISPUTED THAT ON THE PAYMENT MADE BY THE ASSESSEE, WHICH IS IN DISPUTE IN THE PRESENT CASE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE BY VIRTUE OF S. 194A OF THE ACT FAILING WHICH S. 40(A)(IA) PROVIDES THAT SUCH PAYMENT SHALL NOT BE ALLOWED TO BE DEDUCTED FROM COMPUTATION OF TOTAL IN COME OF THE ASSESSEE. ONCE A DEDUCTION OF A PARTICULAR AMOUNT IS NOT ALLOWABLE U NDER THE ACT, IT IS LIABLE TO BE TAXED AND MERELY BECAUSE SOME OTHER PERSON IS LIABL E TO TAX AFTER RECEIVING THE SAID AMOUNT , IT CANNOT BE SAID THAT FORMER ASSESSE E IS ENTITLED FOR EXEMPTION AND ITA NO.882/AHD/2010 FOR AY2006-07 M/S D N GHEEWALA & A N GHEEWALA 5 CANNOT BE TAXED. WE ARE NOT SHOWN OF ANY AUTHORITY PROVIDING THAT SUCH TAXATION IS NOT PERMISSIBLE IN LAW AND IS BAD EVEN OTHERWISE . THUS, PLEA ON BEHALF OF THE ASSESSEE THAT RECIPIENT OF INTEREST HAS ALREADY BE EN TAXED ON INTEREST INCOME AND THEREFORE, DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE,IS DEVOID OF ANY MERIT AND IS, THEREFORE, REJECTED. THE VIEW WHICH W E HAVE TAKEN IS SUPPORTED BY THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF DEYS MEDICAL(UP)(P) LTD. VS. UNION OF INDIA AND OTHER,31 6 ITR 445. 8.2 AS REGARDS DECISION IN THE CASE OF DEW AN CHAND(SUPRA) RELIED UPON BY THE LD. AR , IN THIS CASE THE HONBLE HIGH COURT UP HELD THE CONCLUSION OF THE ITAT THAT ONCE THE PAYEES HAD PAID THE TAX ON THE AMOUNT RECEIVED BY THEM, THE ASSESSEE/DEDUCTOR CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) AND THE TAX REQUIRED TO BE DEDUCTED CANNOT B E RECOVERED FROM SUCH ASSESSEE. APPARENTLY, THIS DECISION WAS RENDERED IN THE CONTEXT OF PROVISIONS OF SEC.201 OF THE ACT. THE LD. AR DID NOT EXPLAIN AS T O HOW THIS DECISION IS RELEVANT IN THE CONTEXT OF PROVISIONS OF SEC. 40A(IA) OF THE ACT. IN THIS CONTEXT, OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD., 198 ITR 257 ARE RE LEVANT WHEREIN IT WAS LAID DOWN THAT IT IS NEITHER DESIRABLE NOR P ERMISSIBLE TO PICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF THE COURT, DIVOR CED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE ' LAW ' DECLARED BY THE COURT. HONBLE SUPREME COURT ALSO CAUTIONED IN THEIR DECISION DATED 6.3.2009 IN THE CASE OF STATE OF AP VS. M.RADHA KRI SHNA MURTHY,[CRIMINAL APPEAL NO. 386 OF 2002] THAT COURTS SHOULD NOT PLACE RELIA NCE ON DECISIONS WITHOUT DISCUSSING AS TO HOW THE FACTUAL SITUATION FITS IN WITH THE FACT SITUATION OF THE DECISION ON WHICH RELIANCE IS PLACED. OBSERVATIONS OF COURTS ARE NEITHER TO BE READ AS EUCLID'S THEOREMS NOR AS PROVISIONS OF THE STATUTE AND THAT TOO TAKEN OUT OF THEIR CONTEXT. THESE OBSERVATIONS MUST BE READ I N THE CONTEXT IN WHICH THEY APPEAR TO HAVE BEEN STATED. SINCE THE DECISION REL IED ON BY THE LD. AR WAS RENDERED IN THE CONTEXT OF PROVISIONS OF SEC. 201 O F THE ACT, WE ARE OF THE OPINION ITA NO.882/AHD/2010 FOR AY2006-07 M/S D N GHEEWALA & A N GHEEWALA 6 THAT RELIANCE ON THIS DECISION IS TOTALLY MISPLACE D IN THE CONTEXT OF PROVISIONS OF SEC. 40A(IA) OF THE ACT. 8.3 IN VIEW OF THE FOREGOING, ESPECIALLY WHEN ADMITTEDLY TAX HAS NOT BEEN DEDUCTED AT SOURCE FROM PAYMENT OF INTERES T TO SHRI VISHAL GHEEWALA , WE HAVE NO HESITATION IN AFFIRMING THE F INDINGS OF THE LD. CIT(A) IN UPHOLDING THE DISALLOWANCE MADE U/S 40A(IA) OF THE ACT . 9. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 18 -06-2010 SD/- SD/- (MUKUKL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 18-06-2010 COPY OF THE ORDER FORWARDED TO : 1. M/S D N GHEEWALA & A N GHEEWALA,2/3, GANGA JAMUN A SOCIETY, BEHIND JINWALA HIGH SCHOOL, ANKLESHWAR 2. ITO, WARD-3, BHARUCH 3. CIT CONCERNED 4. CIT(A)-VI, BARODA 5. DR,C BENCH, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD