ACIT, Bangalore V. M/s Shankaranarayan Construction company, Bangalore

ITA 954/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8479 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-02-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 05-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LAKSHMI HUNDE PURI
• Section: 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBE R AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.954/BANG/2009 ASSESSMENT YEAR : 2004-05 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 8(1), BANGALORE. : APPELLANT VS. M/S. SHANKARNARAYANA CONSTRUCTION COMPANY, NO.9, RAJARAM MOHAN ROY ROAD, BANGALORE 560 025. : RESPONDENT APPELLANT BY : SMT. LAKSHMI HUNDE PURI RESPONDENT BY : SHRI NARENDRA SHARMA O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-II, BANGALORE IN ITA NO.176/DC 8(1)/CIT(A)-I I/06-,07 DATED: 22.7.2009 FOR THE ASSESSMENT YEAR 2004-05 IN THE CA SE OF SHANKARANARAYANA CONSTRUCTION COMPANY. 2. THE REVENUE HAS RAISED THREE GROUNDS, OUT OF WH ICH, GROUND NO:3 BEING GENERAL AND NO SPECIFIC ISSUE INVOLVED, IT WAS CONSIDERED AS ITA NO.954/BANG/09 PAGE 2 OF 8 NON-CONSEQUENTIAL. IN THE REMAINING GROUNDS, THE IS SUES RAISED ARE TWO- FOLD, NAMELY: THE CIT(A) HAS ERRED: (I) IN ALLOWING RELIEF OF RS.7.49 LAKHS U/S 80G BY MISI NTERPRETING S.80G(4) OF THE ACT; & (II) IN ALLOWING TDS CREDIT IN FULL. BRIEF: 3. THE ASSESSEE FIRM (THE ASSESSEE IN SHORT) UN DERTAKES CIVIL CONTRACT WORKS. DURING THE ASSESSMENT PROCEEDINGS , THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80G OF THE A CT AT RS.23.25 LAKHS IN RESPECT OF DONATION OF RS.46.50 LAKHS MADE BY TH E ASSESSEE; THAT THE SAID CLAIM WAS MADE WITH REFERENCE TO THE GROSS TOT AL INCOME OF RS.33685294/- AS PER THE ASSESSEES STATEMENT OF AC COUNT AND THAT THE ASSESSEE HAD NOT SET OFF OF RS.2172724/- BEING LOSS BROUGHT FORWARD FROM THE AY 2002-03. THE OBSERVATION OF THE AO WAS THAT IF THE SAID BROUGHT- FORWARD LOSS WERE TO BE SET OFF AGAINST THE GROSS T OTAL INCOME, THE CORRECT GROSS TOTAL INCOME WOULD BE RS.31512570/- AND THAT THE ASSESSEE WAS ENTITLED TO CALCULATE THE RELIEF U/S 80G WITH REFER ENCE TO THE CORRECT GROSS TOTAL INCOME OF RS.3.15 CRORES. IN OTHER WORDS, TH E ASSESSEE CAN CLAIM RELIEF U/S 80G OF THE ACT AT RS.749372/- BEING 50% OF 10 PER CENT OF THE CORRECT GROSS TOTAL INCOME AS WORKED OUT AS UNDER: GROSS TOTAL INCOME AS PER STATEMENT OF INCOME RS. 33685294 LESS: BROUGHT FORWARD LOSS 2172724 CORRECT GROSS TOTAL INCOME 31512570 10% THEREOF 3151257 80G RELIEF AT 50% ON RS.3151257 1575628 ITA NO.954/BANG/09 PAGE 3 OF 8 ACCORDINGLY, HE DISALLOWED RS.749372/- BEING EXCESS RELIEF CLAIMED U/S 80G OF THE ACT. 4. AGGRIEVED, THE ASSESSEE HAD APPROACHED THE LD. CIT (A) WHO, AFTER CONSIDERING THE ASSESSEES CONTENTIONS A S WELL AS THE PERUSAL OF THE RELEVANT RECORDS, HAS OBSERVED THUS 3.4. FROM A PERUSAL OF THE COMPUTATION OF INCOME, IT IS SEEN THAT THE APPELLANT HAD MADE A DONATION OF RS.4990000/- OUT O F WHICH AN AMOUNT OF RS.2325000/- BEING 50% OF THE DONATION SO MADE WAS CLAIMED DEDUCTION FROM THE GROSS TOTAL INCOME. IN PARA 3 OF PAGE 3 OF THE ASSESSMENT ORDER, THE AO HAD WORKED OUT GROSS T OTAL INCOME. IN THIS CONNECTION, S.80G(4) OF THE ACT READS AS UN DER: ... 3.5. IT MAY BE SEEN THAT 10% OF THE GROSS TOTAL INC OME WORKED OUT BY THE AO I.E., RS.3115257/- IS THE HIGHER THAN 50% OF THE DEDUCTION ALLOWABLE U/S 80G OF THE ACT. HENCE, THERE IS MERI T IN THE SUBMISSION OF THE APPELLANT THAT THE AO IS NOT CORRECT IN REST RICTING AGAIN THE DEDUCTION U/S 80G TO 10% OF THE GROSS TOTAL INCOME AS WORKED OUT BY THE AO. IN TERMS OF SUB-SECTION (4) OF S.80G EXTRA CTED ABOVE, THE DEDUCTION WOULD BE RESTRICTED TO 10% OF THE GROSS T OTAL INCOME AND, IF THE DEDUCTION U/S 80G EXCEEDS 10% OF THE GROSS TOTA L INCOME, THEN THE EXCESS SHOULD BE IGNORED. IN THIS CASE, HOWEVER, D EDUCTION U/S 80G AS CLAIMED BY THE APPELLANT DOES NOT EXCEED 10% OF THE GROSS TOTAL INCOME. THEREFORE, THE CLAIM OF THE APPELLANT IS I N ORDER 5. DISILLUSIONED, THE REVENUE HAS COME UP BEFORE U S WITH A PLEA THAT THE CIT(A) HAD ERRED IN MISINTERPRETING S.80G( 4) OF THE ACT BY ALLOWING RELIEF OF RS.7.49 LAKHS. 5.1. ON THE OTHER HAND, THE LD. AR REITERATED WHAT HAS BEEN CONTENDED BEFORE THE FIRST APPELLATE AUTHORITY AND, FURTHER, PLEADED THAT THE LD. CIT(A) HAS CONCEDED TO THE ASSESSEES REQUEST I N A JUDICIOUS MANNER WHICH REQUIRES TO BE SUSTAINED. ITA NO.954/BANG/09 PAGE 4 OF 8 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND ALSO CRITICALLY PERUSED THE RELEVANT PROVISIONS OF THE A CT. 6.1. THE RELEVANT PORTION OF S. 80G(4) OF THE ACT , FOR THE SAKE OF READY REFERENCE, IS REPRODUCED AS BELOW: (4) WHERE THE AGGREGATE OF THE SUMS REFERRED TO IN SUB-CLAUSES (IV), (V), (VI), (VIA) AND (VII) OF CLAUSE (A) AND IN CLAUSES (B) AND (C) OF SUB- SECTION (2) EXCEEDS TEN PERCENT OF THE GROSS TOTAL INCOME ( AS REDUCED BY ANY PORTION THEREOF ON WHICH INCOME-TAX IS NOT P AYABLE UNDER ANY PROVISION OF THIS ACT AND BY ANY AMOUNT IN RESPECT OF WHICH THE ASSESSEE IS ENTITLED TO A DEDUCTION UNDER ANOTHER P ROVISION OF THIS CHAPTER ), THEN THE AMOUNT IN EXCESS OF TEN PER CENT OF THE GROSS TOTAL INCOME SHALL BE IGNORED FOR THE PURPOSE OF COMPUTIN G THE AGGREGATE OF THE SUMS IN RESPECT OF WHICH DEDUCTION IS TO BE ALL OWED UNDER SUB- SECTION (1) 6.2. AS RIGHTLY HIGHLIGHTED BY THE LD. CIT(A), IN TERMS OF SUB- SECTION (4) OF S.80G , THE DEDUCTION WOULD BE RESTR ICTED TO 10% OF THE GROSS TOTAL INCOME AND, IF THE DEDUCTION U/S 80G EXCEEDS 10% OF THE GROSS TOTAL INCOME, THEN THE EXCESS SHOULD BE IGNORED. ON A PE RUSAL OF THE IMPUGNED ORDER UNDER DISPUTE, WE FIND THAT THE FINDING OF TH E CIT (A) IS IN CONFORMITY OF THE PROVISIONS OF S.80G(4) OF THE ACT AND IT DO ESNT SUFFER FROM ANY INFIRMITY WHATSOEVER, WE DECLINE TO ACCEDE TO THE R EVENUES REQUEST. 7. THE OTHER GRIEVANCE OF THE REVENUE IS WITH REGA RD TO THE CIT(A)S DECISION IN ALLOWING TDS CREDIT IN FULL. 7.1. THE ISSUE, IN BRIEF, IS THAT THE ASSESSEE WAS IN RECEIPT OF RS.562374306/- FROM THE KPCL IN RESPECT OF CIVIL CO NTRACT WORKS EXECUTED DURING THE YEAR-ENDED 31.3.04, BUT, IT HAD SHOWN TH E RECEIPTS ONLY AT RS.554505206/- IN ITS P & L ACCOUNT, THE DIFFERENCE BEING RS.7869100/-. ITA NO.954/BANG/09 PAGE 5 OF 8 ACCORDINGLY, THE AO HAD RESTRICTED THE TDS CLAIM WI TH REFERENCE TO THE CONTRACT RECEIPTS SHOWN IN THE P & L ACCOUNT AND, T HUS, DISALLOWED THE TDS CLAIM OF RS.165251/-. WHILE DOING SO, THE AO HAD O BSERVED THAT IT WAS DIFFICULT TO RECONCILE THE TURNOVER OF THE ASSESSEE WITH REFERENCE TO THE TDS CLAIMS AS THE SYSTEM OF ACCOUNT FOLLOWED BY THE ASS ESSEE VIS--VIS THE KPCL WAS DIFFERENT. 7.2. THE ASSESSEE TOOK UP THE ISSUE BEFORE THE CIT (A) FOR REDRESSAL. AFTER ANALYZING THE ISSUE IN DEPTH, THE LD. CIT (A) HAS OBSERVED THUS 4A.4.THE APPELLANT IS FOLLOWING MERCANTILE SY STEM OF ACCOUNTING. THEREFORE, WHENEVER INCOME IS RECOGNIZ ED BY RAISING THE WORK COMPLETED BILLS AND IT IS CREDITED IN THE BOOK S OF ACCOUNT IRRESPECTIVE OF ITS ACTUAL RECEIPT. AT THE TIME OF APPEAL HEARING, THE APPELLANT HAS SUBMITTED THE RECONCILIATION STATEMEN T OF WORK RECEIPTS AS PER KPCL TDS CERTIFICATES, WHICH IS REPRODUCED B ELOW: 1. WORK RECEIPTS AS PER P & L A/C FOR AY 2003-04 RS.373077650 LESS: 31.3.03 WORK BILL NOT ACCOUNTED FOR BY KPCL FOR AY 03-04 336846 61 WORK RECEIPTS AS PER KPCL TDS CERTIFICATE FOR AY 03-04 339392989 2.WORK RECEIPTS AS PER P & L A/C FOR A.Y 2004-05 554505206 ADD: 31/3/03 WORK BILL ACCOUNTED FOR BY KPCL FOR AY 04-05 3368466 TOTAL: 588189867 LESS: 30/3/04 WORK BILL NOT ACCOUNTED FOR BY KPCL FOR AY 04-05 25815535 WORK RECEIPTS AS PER KPCL TDS CERTIFICATE FOR AY 2004-05 562374332 ITA NO.954/BANG/09 PAGE 6 OF 8 4A.5.FROM THE DETAILS GIVEN ABOVE, IT IS CLEAR THAT THE APPELLANT HAS PROPERLY TAKEN INTO ITS BOOKS OF ACCOUNT THE INCOME RECOGNIZED WITH REFERENCE TO THE RUNNING BILLS. IT CAN THUS BE SEE N FROM THE STATEMENT THAT THE WORK RECEIPTS AS PER P & L ACCOUNT FOR AY 2003- 04 WAS RS.373077650/- OUT OF WHICH KPCL HAD NOT ACCOUNTED FOR A SUM OF RS.33684661/- AND FROM THIS KPCL HAD WITHHELD 10% I .E., RS.3368466/-. THIS AMOUNT WAS ACCOUNTED FOR BY THE KPCL IN THE SU BSEQUENT AY I.E., 2004-05. IT IS SIGNIFICANT TO NOTE THAT KPCL IS DE DUCTING TAX AT SOURCE WHILE MAKING PAYMENTS TO THE APPELLANT, AND, ACCORD INGLY, ISSUING TDS CERTIFICATES. HENCE, THE APPELLANTS WORK RECEIPTS STAND RECONCILED ACCORDINGLY. THIS METHOD OF ACCOUNTING IS CONSISTEN TLY FOLLOWED BY THE APPELLANT FROM YEAR TO YEAR. THEREFORE, THE ADVERSE CONCLUSION DRAWN BY THE AO IS NOT JUSTIFIED. HE IS, THEREFORE, DIRECTE D TO ALLOW CREDIT FOR TDS IN FULL AFTER VERIFICATION AND GIVING AN OPPORTUNIT Y OF BEING HEARD TO THE APPELLANT. 8. OFFENDED, THE REVENUE HAS COME UP BEFORE US IN THE PRESENT APPEAL WITH A PLEA THAT THE ASSESSEE HAD NOT TAKEN INTO ITS BOOKS OF ACCOUNT THE TOTAL INCOME RECOGNIZED WITH REFERENCE TO RUNNING BILLS AND, THUS, THE CIT(A) ERRED IN ALLOWING TDS CREDIT IN FU LL. 8.1. THE LD. AR PRESENT WAS ALSO HEARD. DURING TH E COURSE OF HEARING, THE LD. A R FURNISHED COPIES (I) THE HONB LE TRIBUNALS FINDING IN THE CASE OF ELSAMEX TWS SNC IV V. ACIT IN ITA NO:14 20/BANG/2005 DT:26/6/07 AND (II) IN THE CASE OF SMT.PUSHPA VIJOY V. ACIT REPORTED IN (2005) 4 SOT 589 (COCH). 8.2. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE CASE LAWS ON WHICH THE ASSESSEE HAS PLA CED ITS FAITH. AT THE OUT SET, WE WOULD LIKE TO POINT OUT THAT WH ILE DISALLOWING THE TDS CLAIM OF THE ASSESSEE, THE AO, ACCORDING TO THE CIT (A), HAD OBSERVED THAT IT WAS DIFFICULT TO RECONCILE THE TURNOVER OF THE A SSESSEE WITH REFERENCE TO THE TDS CERTIFICATES AS THE SYSTEM OF ACCOUNT FOLL OWED BY THE ASSESSEE ITA NO.954/BANG/09 PAGE 7 OF 8 AND THE KPCL DIFFERENT WHICH, PERHAPS, CULMINATED I N RESTRICTING THE TDS CLAIM. AS RIGHTLY POINTED OUT BY THE CIT(A), THE A SSESSEE HAD FURNISHED A RECONCILIATION STATEMENT OF WORK RECEIPTS AS PER KP CL TDS CERTIFICATE BEFORE HIM WHO, AFTER DUE CONSIDERATION OF THE ISSU E, HAD OBSERVED THAT KPCL IS DEDUCTING TAX AT SOURCE WHILE MAKING PAYME NTS TO THE APPELLANT AND, ACCORDINGLY, ISSUING TDS CERTIFICATES. HENCE, THE APPELLANTS WORK RECEIPTS STAND RECONCILED ACCORDINGLY. FURTHER THE CASE LAW REFERRED BY LD. AR IN 4 SOT 589 (COCH) SUPRA GOES IN FAVOUR OF THE ASSESSEE WHEREIN IT WAS HELD THE TDS MADE IN A PARTICULAR ASSESSMENT YEAR SHOU LD BE GIVEN CREDIT IN THE ASSESSMENT OF THE RESPECTIVE ASSESSME NT YEAR ITSELF. THERE IS NO PROVISION IN THE ACT TO DIVIDE THE TDS INTO DIFFERE NT PROPORTIONATE PIECES AND TO GIVE CREDIT ON THE BASIS, WHETHER, THE ENTIRE IN COME HAS BEEN OFFERED FOR ASSESSMENT OR NOT. THERE IS ALSO NO PROVISION IN TH E ACT TO POSTPONE THE TDS CREDIT TO FUTURE ASSESSMENT YEARS OTHER THAN THE AS SESSMENT YEAR FOR WHICH THE TDS WAS MADE. IN SUBSTANCE, THE TAX DEDUCTED AT SOURCE MUST BE AT TRIBUTED TO THE CONCERNED ASSESSMENT YEAR AND NOT TO A PARTICULAR ITEM OR SOU RCE OF INCOME. THE PROVISIONS OF LAW CONTAINED IN SECTION 199 DID NOT PROVIDE FOR ANY SUCH EVENTUALITY. THEREFORE, THE ASSESSING OFFICER SHOULD IMPLEMENT T HE COMMISSIONER (APPEALS) ORDER AND ALSO GIVE CREDIT TO THE ASSESSE E FOR THE ENTIRE AMOUNT OF TDS MADE BY THE BANK. ITA NO.954/BANG/09 PAGE 8 OF 8 IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE REVENUES GRIEVANCE GETS CLARIFIED. ACCORDINGLY, WE CONFIRM THE FINDING OF THE CIT(A) ON THIS COUNT. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF MARCH, 2010. SD/- SD/- ( SHAILENDRA KUMAR YADAV ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE, DATED, THE 19 TH MARCH, 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.