ACIT, Chandigarh V. M/s Thukral Regal Shoes, Chandigarh

ITA 91/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80892 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHAVAIR SINGH
• Assessee Lawyers: GURJIT SINGH
• Keywords: Proportionate interest
• Section: 147; 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACOCUNTANT MEMBER ITA NO. 91/CHD/2013 ASSESSMENT YEAR 2008-0-9 A.C.I.T. CIRCLE 2(1) V THUKRAL REGAL SHOES ROOM NO. 414, 4 TH FLOOR SCO 88, SECTOR 17-D AYAKAR BHAWAN, CHANDIGARH SECTOR 17-E, AAAFT 5204 F CHANDIGARH CROSS OBJECTIONS NO. 8/CHD/2013 ARISING OUT OF ITA NO. 91/CHD/2013 ASSESSMENT YEAR 2008-0-9 THUKRAL REGAL SHOES V A.C.I.T. CIRCLE 2(1) SCO 88, SECTOR 17-D CHANDIGARH CHANDIGARH AAAFT 5204 F ITA NO. 166/CHD/2013 ASSESSMENT YEAR 2008-0-9 THUKRAL REGAL SHOES V A.C.I.T. CIRCLE 2(1) SCO 88, SECTOR 17-D CHANDIGARH CHANDIGARH AAAFT 5204 F (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI MAHAVAIR SINGH RESPONDENT BY SHRI GURJIT SINGH DATE OF HEARING 17.9.2014 DATE OF PRONOUNCEMENT 23.9.2014 ORDER PER BHAVNESH SAINI, JM THIS ORDER SHALL DISPOSE OFF CROSS APPEALS / MATTE RS FILED BY BOTH THE PARTIES AGAINST THE ORDER OF LD. CIT(A), CHANDIGARH DATED 1.11.2012 FOR ASSESSMENT YEAR 2008-09. 2 WE HAVE CONSIDERED THE SUBMISSIONS OF LD. D.R FOR THE REVENUE, REPRESENTATIVE OF ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ALL THESE MATTERS HAVE BEEN DECIDED AS UNDER: 2 ITA NO. 91/CHD/2013 APPEAL OF REVENUE 3 IN THIS DEPARTMENTAL APPEAL THE REVENUE HAS CHALL ENGED THE DELETION OF ADDITION OF DISALLOWANCE OF INTEREST ON FUNDS ADVAN CED / DIVERTED TO ITS PARTNERS FOR PURCHASE OF PROPERTIES IN THEIR OWN NAMES U/S 3 6(1)((III) OF IT ACT. 4 THE ASSESSEE CHALLENGED THE ADDITION OF RS. 36,17 ,803/- U/S 36(1)(III) OF IT ACT BEFORE THE LD. CIT(A). THE ASSESSING OFFICE R DISALLOWED PROPORTIONATE INTEREST ON INTEREST FREE ADVANCES MADE BY THE ASSE SSEE TO ITS PARTNERS. IN THE APPELLATE PROCEEDINGS, THE PARTNERS OF ASSESSEE FIR M HAS POINTED OUT THAT SIMILAR ISSUE HAS BEEN ADJUDICATED BY ITAT, CHANDIG ARH BENCH IN ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 27.4.2012 IN ITA NO. 650/CHD/2011 IN FAVOUR OF THE ASSESSEE. THE LD. CIT(A) ON GOING THROUGH THE O RDER OF THE TRIBUNAL FIND THAT IDENTICAL ADDITION HAS BEEN DELETED BY THE TRI BUNAL. FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2007-08, THE LD. CIT(A) DELETED THE ADDITION. COPY OF THE ORDER DATED 27.4.2012 OF THE TRIBUNAL I N THE CASE OF THE ASSESSEE (SUPRA) IS PLACED ON RECORD. AFTER CONSIDERING THE SUBMISSIONS WE FIND THSAT THE ISSUE HAS BEEN DECIDED BY THE LD. CIT(A) BY FOL LOWING THE ORDER OF THE TRIBUNAL, THEREFORE WE FIND NOTHING WRONG IN THE OR DER OF CIT(A) AND CONFIRM THE SAME. ACCORDINGLY WE DO NOT FIND ANY MERIT IN THE GROUND OF APPEAL OF THE REVENUE. SAME IS ACCORDINGLY DISMISSED. 5 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . CROSS OBJECTIONS NO. 8/CHD/2013 6 THE ASSESSEE ON GROUND NO. 1 OF CROSS OBJECTION H AS CHALLENGED THE REOPENING OF THE ASSESSMENT U/S 147 OF IT ACT. NO SUBMISSIONS WERE MADE IN THIS GROUND BEFORE THE LD. CIT(A). THE LD. CIT(A) FIND THAT THE ASSESSMENT IN THIS CASE WAS INITIALLY COMPLETED U/S 143(1) OF IT ACT, THEREFORE CASE IS CLEARLY COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON 'BLE SUPREME COURT IN CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS PVT LT D. 291 ITR 500 (S.C). THIS GROUND WAS ACCORDINGLY DISMISSED. THE REPRESENTAT IVE OF THE ASSESSEE IN VIEW OF THE ABOVE FINDING OF THE LD. CIT(A) AND THAT NO SUBMISSIONS HAVE BEEN MADE BEFORE THE LD. CIT(A) CHALLENGING THE GROUND OF APP EAL BEFORE HIM, SUBMITTED THAT HE WOULD NOT BE PRESSING THIS GROUND OF CROSS OBJECTIONS AND SEEK 3 PERMISSION TO WITHDRAW THE SAME. CONCISE GROUND NO. 1 OF CROSS OBJECTIONS IS ACCORDINGLY DISMISSED AS WITHDRAWN. 7 THE ASSESSEE ON GROUND NO. 2 OF CONCISE GROUNDS OF CROSS OBJECTIONS SUBMITTED THAT IT WAS NECESSARY FOR LD. CIT(A) TO D ETERMINE WHETHER THE ADVANCES TO THE PARTNERS FOR ACQUIRING ASSETS FOR F IRMS OWN BUSINESS, IS LOAN FOR THE PURPOSE OF SECTION 36(1)(III) OF IT ACT. T HIS ISSUE WAS NEVER RAISED BEFORE THE AUTHORITIES BELOW AND THERE IS NO FINDIN G OF FACT RECORDED BY THE LD. CIT(A) IN THE IMPUGNED ORDER EVEN AS PER CONCISE GR OUNDS OF CROSS OBJECTIONS BY THE ASSESSEE. IN THE ABSENCE OF ANY ADEQUATE MA TERIAL ON RECORD THE ASSESSEE IS TRYING TO GIVE NEW TWIST TO THE MATTER IN ISSUE. IT WOULD NOT BE APPROPRIATE TO GIVE FURTHER FINDINGS ON THIS ISSUE. THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF INTEREST BEFORE THE LD. CIT(A) WHICH HAS ALREADY BEEN DELETED BY THE LD. CIT(A) AND CONFIRMED BY US ABOVE WHILE DISMISSING THE DEPARTMENTAL APPEAL, THEREFORE THIS GROUND OF CROSS OBJECTIONS HAS NO MERIT AND IS ACCORDINGLY DISMISSED. 8 ON GROUND NO. 3 OF THE CROSS OBJECTIONS, THE REPR ESENTATIVE OF THE ASSESSEE SUBMITTED THAT SAME IS FILED IN SUPPORT OF ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION OF DISALLOWANCE OF INTEREST A ND SEEKS PERMISSION TO WITHDRAW THE SAME. THIS GROUND IS, THEREFORE DISMI SSED AS WITHDRAWN BECAUSE NO CROSS OBJECTIONS LIES ON THIS ISSUE FOR MERELY S UPPORTING THE ORDER OF THE LD. CIT(A). THIS GROUNDS OF CROSS OBJECTIONS IS DISMIS SED. 9 IN THE RESULT, CROSS OBJECTIONS OF THE ASSESSEE I S DISMISSED. ITA NO. 166/CHD/2013 ASSESSEES APPEAL 10 IN THIS APPEAL OF THE ASSESSEE, THE ASSESSEE IN CONCISE GROUNDS OF APPEAL HAS CHALLENGED THE ADDITION OF RS. 10,28,186 /- U/S 40(A)(IA) OF IT ACT ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE FROM EMI S WITHDRAWN BY THE NON BANKING FINANCIAL INSTITUTIONS (IN SHORT NBFC). 11 THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HA D NOT DEDUCTED TAX ON INTEREST OF RS. 10,28,186/- U/S 40(A)(IA) OF IT ACT . THE ADDITION WAS NOT SEPARATELY MADE BY THE ASSESSING OFFICER BECAUSE TH E ENTIRE INTEREST CLAIMED BY THE ASSESSEE FIRM HAS BEEN DISALLOWED U/S 36(1)( III) OF IT ACT. 4 12 THE ASSESSEE CHALLENGED THIS ADDITION BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT THE ASSESSEE HAD PAID INTEREST TO TH E NBFCS AND HAD NOT DEDUCTED TAX AT SOURCE. THE PARTNER OF THE ASSESSE E FIRM HAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE CAUSE OF ACTION TO DEDUCT T HE TAX NEVER AROSE AND SO THE TAX WAS NOT DEDUCTED. HE HAS RELIED ON THE DECISIO N OF SPECIAL BENCH OF THE TRIBUNAL, VISHAKHAPATNAM IN THE CASE OF MERILYN SHI PPING AND TRANSPORT V. ADDL CIT, ITA NO. 477/VIZ/2008. 13 THE LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE. HE HAS NOTED THAT THE CONTENTION OF THE ASSESSEE THAT THE CAUSE OF ACTION TO DEDUCT TAX NEVER AROSE, DOES NOT HOLD WATER BE CAUSE THE ASSES SEE SHOULD HAVE DEDUCTED THE TAX WHILE MAKING PAYMENT OF INTEREST TO THE NBF CS. 14 THE LD. CIT(A) DISCUSSED THE HISTORY OF THE CASE OF MERILYN SHIPPING AND TRANSPORT V. ADDL CIT (SUPRA) RELIED UPON BY THE AS SESSEE IN DETAIL IN THE APPELLATE ORDER. THE LD. CIT(A) ALSO OBSERVED THAT THE ISSUE IN THAT CASE MAY HAVE NOT DIRECT BEARING ON THE MATTER IN ISSUE. TH E LD. CIT(A) DID NOT FOLLOW THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL, VISH AKHAPATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORT V. ADDL CIT (SUPRA) AND WAS OF THE VIEW THAT THE DISALLOWANCE U/S 40(A)(IA) IS TO BE MADE EVEN I F THE AMOUNT (ON WHICH TAX WAS DEDUCTIBLE) HAVE BEEN PAID DURING THE YEAR AND DISALLOWANCE IS NOT TO BE RESTRICTED TO THE AMOUNT OUTSTANDING AS ON THE DATE OF BALANCE SHEET. THE LD. CIT(A) ACCORDINGLY CONFIRMED THE ADDITION AND ALSO DIRECTED THAT SINCE DISALLOWANCE OF INTEREST U/S 36(1)(III) BE DELETED , THEREFORE THIS ADDITION OF RS. 10,28,136/- IS TO BE MADE. THIS GROUND WAS ACCORDI NGLY DISMISSED. 15 AFTER HEARING BOTH THE PARTIES, WE DO NOT FIND A NY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. THE REPRESENTATIVE OF THE ASSESSEE RELIED UPON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL, VISHAKHA PATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORT V. ADDL CIT (SUPRA) AND ALSO STATED THAT BEFORE SANCTION / RELEASE OF THE LOAN TO THE ASSESSEE, THE ASSESSEE HAD TO AUTHORIZE NBFCS TO WITHDRAW THE COMPLETE EMIS, THEREFORE PAYM ENT ALREADY MADE COULD NOT BE SUBJECTED TO TDS. THE SUBMISSIONS OF THE AS SESSEE WOULD CLEARLY SHOW THAT THE ASSESSEE HAD NOT DEDUCTED ANY TAX ON THE I NTEREST AMOUNT PAID. IT IS ADMITTED FACT THAT THE ASSESSEE PAID INTEREST TO NB FCS AND NO TAX WAS DEDUCTED AT SOURCE. IT IS, THEREFORE CLEAR THAT TH E ASSESSEE HAS ALSO NOT PAID 5 TDS AS PER LAW. THEREFORE PROVISIONS OF SECTION 4 0(A)(IA) WOULD BE ATTRACTED IN THE CASE OF THE ASSESSEE. THE SOLE CONTENTION O F THE ASSESSEE FIRM WAS THAT THE CASE IS COVERED BY THE ORDER OF SPECIAL BENCH O F THE TRIBUNAL, VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING AND TRANSPORT V. ADDL CIT (SUPRA). THIS ORDER OF SPECIAL BENCH HAS BEEN CONS IDERED BY HON'BLE GUJRAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N TUNVAR , 357 ITR 312 AND ORDER OF SPECIAL BENCH OF THE TRIBUNAL, VISHAKHAPATNAM IN TH E CASE OF MERILYN SHIPPING AND TRANSPORT V. ADDL CIT (SUPRA) HAS BEEN OVERRULE D. HON'BLE HIGH COURT HELD AS UNDER: IN ADDITION TO PROVISIONS ALREADY EXISTING, THE LE GISLATURE INTRODUCED YET ANOTHER PROVISION FOR ENSURING COMPLIANCE WITH THE REQUIREMENT OF DEDUCTI NG TAX AT SOURCE AND DEPOSITING IT WITH THE CENTRAL GOVERNMENT. IN PLAIN TERMS SECTION 40(A)(IA ) OF THE INCOME-TAX ACT, 1961, PROVIDES THAT IN CASE OF ANY INTEREST, COMMISSION OR BROKERAGE, RENT , ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES OF TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMO UNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK ON WHICH TAX IS DEDUCTIBL E AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID BEFOR E THE DUE DATE, SUCH AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER T HE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IRRESPECTIVE OF THE PROVISIONS CONTAINE D IN SECTIONS 30 TO 38 OF THE ACT. THE PROVISO TO SECTION 40(A)(IA) , HOWEVER, ENABLES THE ASSESSEE T O TAKE SUCH DEDUCTION IN A SUBSEQUENT YEAR, IF TAX IS DEDUCTED IN SUCH YEAR OR THOUGH DEDUCTED DUR ING THE PREVIOUS YEAR, IT IS PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1) IF SECTION 139. T HE PROVISIONS MUST BE CONSTRUED STRICTLY. UNDER THE PROVISION, DISALLOWANCE IS MADE OF AN EXPENDITU RE WHICH HAS OTHERWISE BEEN INCURRED AND IS ELIGIBLE FOR DEDUCTION, ON THE GROUND THAT THOUGH T AX WAS REQUIRED TO BE DEDUCTED AT SOURCE IT WAS NOT DEDUCTED OR IF DEDUCTED, HAD NOT BEEN DEPOSITED BEFORE THE DUE DATE. BY ANY INTENDMENT OR LIBERAL CONSTRUCTION OF SUCH PROVISION, THE LIABILI TY CANNOT BE FASTENED IF THE PLAIN MEANING OF THE SECTION DOES NOT SO PERMIT. FOR THE PURPOSE OF THE SECTION, THE TERMS PAYABLE AND PAID ARE NOT SYNONYMOUS. THE WORD PAID HAS BEEN DEFINED IN SEC TION 43(2) OF THE ACT TO MEAN ACTUALLY PAID OR INCURRED ACCORDING TO THE METHOD OF ACCOUNTING, UPON THE BASIS OF WHICH PROFITS AND GAINS ARE COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION. SUCH DEFINITION IS APPLICABLE FOR THE PURPOSE OF SECTIONS 28 TO 41 UNL ESS THE CONTEXT OTHERWISE REQUIRES. IN CONTRAST, THE TERM PAYABLE HAS NOT BEEN DEFINED. IN THE CON TEXT OF SECTION 40(A)(IA), THE WORD PAYABLE WOULD NOT INCLUDE PAID. IN OTHER WORDS, THEREFORE , AN AMOUNT WHICH IS ALREADY PAID OVER CEASES TO BE PAYABLE AND CONVERSELY WHAT IS PAYABLE CANNOT BE ONE THAT IS ALREADY PAID. HOWEVER, MERELY BECAUSE THE ACCOUNTS ARE CLOSED ON MARCH 31 AND THE COMPUTATION OF PROFIT AND LOSS IS TO BE JUDGED WITH REFERENCE TO SUCH DATE, THAT DOES NO T MEAN THAT WHETHER AN AMOUNT IS PAYABLE OR NOT MUST BE ASCERTAINED ON THE STRENGTH OF THE POSI TION EMERGING ON MARCH 31. WHAT SECTION 40(A)(IA) REQUIRES IS THAT THERE SHOULD BE AN AMOUN T PAYABLE WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCTED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS PROVISION NOWHERE RE QUIRES THAT THE AMOUNT WHICH IS PAYABLE MUST REMAIN SO PAYABLE THROUGHOUT THE YEAR. HENCE, SECTI ON 40(A)(IA) WOULD COVERS NOT ONLY AMOUNTS WHICH ARE PAYABLE AS ON MARCH 31 OF A PARTICULAR YE AR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR, OF COURSE AS LONG AS THE OTHER REQ UIREMENTS OF THE PROVISION EXIST. SINCE IN THIS CASE BOTH THE ISSUES ARE DIRECTLY INV OLVED AND THE APPEAL HAS BEEN DECIDED IN NEGATIVE I.E. IN FAVOUR OF REVENUE AND A GAINST THE ASSESSEE, THEREFORE FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N TUNVAR (SUPRA), WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. THE APPEAL OF THE ASSESSEE ON THIS GROUND IS, THEREFORE DISMISSED. 16 IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 166/CHD/2013 IS DISMISSED. 6 17 NO OTHER POINT IS ARGUED OR PRESSED BEFORE US. 18 IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 91/CHD/2013, CROSS OBJECTIONS OF THE ASSESSEE IN ITA NO. 8/CHD/2013 AN D THE APPEAL OF ASSESSEE IN ITA NO. 166/CHD/2013 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.9.2014 SD/- SD/- (T.R. SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23.9.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR