The ACIT, Visakhapatnam V. Shri Sanapala Satyanarayana , Visakhapatnam

ITA 95/VIZ/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6736 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RAVI SHANKAR NARAYAN
• Keywords: Question of law
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ( ITA NO. 95 / VIZ /201 7) (ASST. YEAR : 2012 - 13 ) A CIT, CIRCLE - 1(1), VISAKHAPATNAM. V . SANAPALA SATYANARAYANA, D.NO. 11 - 8 - 25/1, PLOT NO. 23, DASPALLA HILLS, VISAKHAPATNAM. P AN NO. AOWPS 4101 A (APPELLANT) (RESPONDENT) C.O.NO. 43/VIZ/2017 ITA NO. 95 / VIZ /201 7 (ASST. YEAR : 20 12 - 1 3 ) SANAPALA SATYANARAYANA, D.NO. 11 - 8 - 25/1, PLOT NO. 23, DASPALLA HILLS, VISAKHAPATNAM. V . A CIT, CIRCLE - 1(1), VISAKHAPATNAM. PAN NO. AOWPS 4101 A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI S. RAVI SHANKAR NARAYAN - SR. DR DATE OF HEARING : 2 9 / 0 8 /201 7 . DATE OF PRONOUNCEMENT : 31 / 0 8 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH IS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , VIJAYAWADA , DATED 20 / 1 0/201 6 FOR THE ASSESSMENT YEAR 20 12 - 13 . 2 ITA NO. 95/VIZ/2017 & C.O.NO. 43/VIZ/2017 ( SANAPALA SATYANARAYANA ) ITA NO.95/VIZ/2017 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME BY ADMITTING TOTAL INCOME OF 87,27,220/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SECURITY AND ASSESSMENT IS COMPLETED UNDER SECTION 143(3) BY DISALLOWING AN AMOUNT OF 43, 16,582/ - UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT') . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS CLAIMED FINANCE CHARGES I.E. INTEREST ON LOANS TO NBFCS OF 43,16,582/ - IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR END ING 31/03/2012. ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, IT WAS OBSERVED THAT ASSESSEE HAS NOT DEDUCTED TDS ON THE ABOVE FINANCE CHARGES UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS ASKED THE ASSESSEE AS TO WHY THE ABOVE SUM OF 43,16,582/ - SHOULD NOT BE DISALLOWED FOR NON - DEDUCTION OF TDS. IN RESPONSE THERE TO, THE ASSESSEE HAS SUBMITTED THAT FINANCIA L INSTITUTIONS , TO WHOM THE ASSESSEE MADE PAYMENTS , INFORMED THAT THEY ARE EXEMPT FROM TDS DEDUCTIONS AND, THEREFORE, UNDER THE GENUINE IMPRESSION, NO TDS WAS DEDUCTED. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE CAME TO A CONCLUSION THAT ASSESSEE FAILED TO DEDUCT TDS UNDER SECTION 40(A)(IA) OF THE ACT OF 43,16,582/ - AND BY DISALLOW ING, THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3 ITA NO. 95/VIZ/2017 & C.O.NO. 43/VIZ/2017 ( SANAPALA SATYANARAYANA ) 3 . ON APPEAL, LD. CIT(A) BY FOLLOWING THE DECISION OF THE SPECIAL BENCH, VISAKHAPATNAM IN THE CASE OF MER I L Y N SHIPPING & TRANSPORTS VS. ACIT [(2012) 136 ITD 23] AND ALSO THE DECISION OF ITAT, VISAKHAPATNAM IN THE CASE OF MUKUNDARA ENGINEERS & CONTRACTORS VS. ACIT (ITA NO. 657/VIZ/2014) HAS HELD TH A T THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE MADE APPLICABLE IN RESPECT OF THE AMOUNTS ALREADY PAID BEFORE 31 ST MARCH AND DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION. 4 . ON BEING AGGRIEVED, THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT IN CIVIL APPEAL NO. 5512/2017, THE HON'BLE SUPREME COURT IN THE CASE OF M/S.PALAM GAS SERVICE VS. CIT HAS CONSIDERED THE ISSUE AND UPHELD THE VIEW TAKEN BY THE HON'BLE MADRAS HIGH COURT, CALCUTTA HIGH COURT, GUJARAT HIGH COURT AND PUNJAB & HARYANA HIGH COURT AND OVERRULED THE VIEW TAKEN BY THE ALLAHA B AD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING PVT. LTD. [(2013) 357 ITR 642] AND SUBMITTED THAT DECISION OF THE HON'BLE SUPREME COURT MAY BE FOLLOWED AND THE APPEAL FILED BY THE REVENUE SHOULD BE ALLOWED. 6 . ON THE OTHER HAND, L EARNED COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER PASSED BY THE LD. CIT(A). 7 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 4 ITA NO. 95/VIZ/2017 & C.O.NO. 43/VIZ/2017 ( SANAPALA SATYANARAYANA ) 8 . THE ONLY ISSUE FOR CONSIDERATION IS WHETHER SECTION 40(A)(IA) COVERS ONLY THE AMOUNT IS PAYABLE BUT ALSO WHEN IT IS PAID. THE HON'BLE SUPREME COURT HAS CONSIDERED THE VIEWS TAKEN BY THE HON'BLE CALCUTTA HIGH COURT, THE HON'BLE MADRAS HIGH COURT AND THE HON'BLE PUNJAB & HARYANA HIGH COURT , WHICH ARE REPRODUCED AS UNDER . T HE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (2013) 216 TAXMAN 258 (CALCUTTA) HAS HELD AS UNDER: - 13. .......... ..... THE TERM SHALL USED IN ALL THESE SECTIONS MAKE IT CLEAR THAT THESE ARE MANDATORY PROVISIONS AND APPLICABLE TO THE ENTIRE SUM CONTEMPLATED UNDER THE RESPECTIVE SECTIONS. THESE SECTIONS DO NOT GIVE ANY LEVERAGE TO THE ASSESSEE TO MAKE THE PAYMENT WITHOUT MAKING TDS. ON THE CONTRARY, THE INTENTION OF THE LEGISLATURE IS EVIDENT FROM THE FACT THAT TIMING OF DEDUCTION OF TAX IS EARLIEST POSSIBLE OPPORTUNITY TO RECOVER TAX, EITHER AT THE TIME OF CREDIT IN THE ACCOUNT OF PAYEE OR AT THE TIME OF PAYMENT TO PAYEE, WHICHEVER IS EARLIER. 9. T HE HON'BLE MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS OF INDIA VS. ACIT [(2010) 325 ITR 610 (MAD.)] HAS CONSIDERED THE ISSUE AND HELD AS UNDER: - THE DIVISION BENCH REFERRED TO THE STATISTICS PLACED BEFORE IT BY THE DEPARTMENT WHICH DISCLOSED THAT TDS COLLECTION HAD AUGMENTED THE REVENUE. THE GROSS COLLECTION OF ADVANCE TAX, SURCHARGE, ETC. WAS RS. 2,75,857.70 CRORES IN THE FINANCIAL YEAR 2008 - 09 O F WHICH THE TDS COMPONENT ALONE CONSTITUTED RS. 1,30,470.80 CRORES. THE DIVISION BENCH OBSERVED THAT INTRODUCTION OF SECTION 40(A)(IA) HAD ACHIEVED THE OBJECTIVE OF AUGMENTING THE TDS TO A SUBSTANTIAL EXTENT. THE DIVISION BENCH ALSO OBSERVED THAT WHEN THE P ROVISIONS AND PROCEDURES RELATING TO TDS ARE SCRUPULOUSLY APPLIED, IT ALSO ENSURED THE IDENTIFICATION OF THE PAYEES THEREBY CONFIRMING THE NETWORK OF ASSESSEES AND THAT ONCE THE ASSESSEES ARE IDENTIFIED IT WOULD ENABLE THE TAX COLLECTION MACHINERY TO BRING WITHIN ITS FOLD ALL SUCH PERSONS WHO ARE LIABLE TO COME WITHIN THE NETWORK OF TAX PAYERS. THESE 5 ITA NO. 95/VIZ/2017 & C.O.NO. 43/VIZ/2017 ( SANAPALA SATYANARAYANA ) OBJECTS ALSO INDICATE THE LEGISLATIVE INTENT THAT THE REQUIREMENT OF DEDUCTING TAX AT SOURCE IS MANDATORY. 16. THE LIABILITY TO DEDUCT TAX A T SOURCE IS MANDATORY. 10 . THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF P.M.S. DIESELS & ORS. VS. CIT [(2015) 374 ITR 562] HELD AS UNDER: - 13. THE LIABILITY TO DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF CHAPTER XVII IS MANDATORY. A PERSON RESPONSIBLE FOR PAYING ANY SUM IS ALSO LIABLE TO DEPOSIT THE AMOUNT IN THE GOVERNMENT ACCOUNT. ALL THE SECTIONS IN CHAPTER XVII - B REQUIRE A PERSON TO DEDUCT THE TAX AT SOURCE AT THE RATES SPECIFIED THEREIN. THE REQUIREMENT IN EACH OF THE SECTIONS IS PRECED ED BY THE WORD 'SHALL'. THE PROVISIONS ARE, THEREFORE, MANDATORY. THERE IS NOTHING IN ANY OF THE SECTIONS THAT WOULD WARRANT OUR READING THE WORD 'SHALL' AS 'MAY'. THE POINT OF TIME AT WHICH THE DEDUCTION IS TO BE MADE ALSO ESTABLISHES THAT THE PROVISIONS ARE MANDATORY. FOR INSTANCE, UNDER SECTION 194C, A PERSON RESPONSIBLE FOR PAYING THE SUM IS REQUIRED TO DEDUCT THE TAX 'AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF THE PAYMENT THEREOF. 11 THE HON'BLE SUPREME COURT IN THE CASE OF M/S. PALAM GAS SERVICE (SUPRA) HAS APPROVED THE VIEW TAKEN BY THE PUNJAB & HARYANA HIGH COURT AND HELD THAT SECTION 40(A)(IA) COVERS NOT ONLY THOSE CASES WHERE THE AMOUNT IS PAYABLE BUT ALSO WHEN IT IS PAID . THE HON'BLE SUPREME COURT HAS OBSERVED THAT THE VIEW TAKEN BY THE HON'BLE HIGH COURTS OF PUNJAB & HARYANA, MADRAS AND CALCUTTA IS THE CORRECT VIEW AND THAT OF ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING PVT. LTD., (SUPRA) DID NOT DECIDE THE QUESTION OF LAW CORRECTLY. THUS, INSOFAR AS THE JUDGMENT OF ALLAHABAD HIGH COURT IS CONCERNED, THE HON'BLE SUPREME COURT HAS OV ERRULE D THE SAME . 6 ITA NO. 95/VIZ/2017 & C.O.NO. 43/VIZ/2017 ( SANAPALA SATYANARAYANA ) 12 R ESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S. PALAM GAS SERVICE (SUPRA) , WE FIND THAT THE VIEW TAKEN BY THE LD. CIT(A) THAT SECTION 40(A)(IA) COVERS ONLY THE AMOUNT PAYABLE AND NOT PAID IS NOT A CORRECT VIEW. THUS, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND HOLD THAT SECTION 40(A)(IA) COVERS NOT ONLY THOSE CASES WHERE THE AMOUNT IS PAYABLE BUT ALSO WHEN IT IS PAID . IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE REVENUE IS ALLOWED. C.O.NO. 43/VIZ/2017 13 . THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE LD. CIT(A). IN VIEW OF OUR DECISION ABOVE, THE C.O. FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND ACCORDINGLY DISMISSED. 14 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS ALLOWED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 3 1 S T DAY OF AUGUST , 201 7 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3 1 S T AUGUST , 201 7 . VR/ - COPY TO: 1. THE ASSESSEE - SANAPALA SATYANARAYANA, D.NO. 11 - 8 - 25/1, PLOT NO. 23, DASPALLA HILLS, VISAKHAPATNAM. 2. THE REVENUE ACIT, CIRCLE - 1(1), VISAKHAPATNAM. 3. THE CIT - 1, VISAKHAPATNAM. 4. THE CIT(A) , VIJAYAWADA. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER 7 ITA NO. 95/VIZ/2017 & C.O.NO. 43/VIZ/2017 ( SANAPALA SATYANARAYANA )