M/s. Neemrana Hotels Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 98/DEL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9077 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 06-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Difference of opinion; TDS
• Section: 40(a)(ia)

Judgement Text

1 ITA NO. 98/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 98/DEL/2017 (A.Y 2012-13) M/S. NEEMRANA HOTELS PVT. LTD. A-58, NIZAMUDDIN EAST, NEW DELHI-110013 NEW DELHI AAACN0674J (APPELLANT) VS D CIT CIRCLE-18(1) C.R.BUILDING, ITO, NEW DELHI-2 NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 04/11/2016 PASSED BY CIT(A)-6, DELHI FOR ASSESSMENT YEAR 2012 -13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT THE CIT (APPEALS) IN VIEW OF THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW, ERRED IN UPHOLDING DISALLOWANCE OF RS 1 9,20,000/- U/S 40(A)(IA) ON ACCOUNT OF LICENSE FEES PAID TO SRK TRAVELS & TO URS PVT. LTD. 2. THAT THE CIT (APPEALS) HAS IN VIEW OF THE FACTS AN D CIRCUMSTANCES OF THE CASE, HAS ERRED IN LAW AND ON FACTS IN UPHOLDING TH AT THERE IS A SHORT DEDUCTION OF TAX BY THE ASSESSEE/APPELLANT ON THE A MOUNT OF RS 19,20,000/- AND ERRED IN UPHOLDING THE DISALLOWANCE OF THE SAME . 3. THAT THE CIT(A) HAS FAILED TO APPRECIATE THAT IN F ACT NO TDS WAS REQUIRED APPELLANT BY SH. SALIL KAPOOR, ADV., MS. SOUMYA SINGH, ADV. RESPONDENT BY MS. RINKU SINGH, SR. DR DATE OF HEARING 04.07.2019 DATE OF PRONOUNCEMENT 10.07.2019 2 ITA NO. 98/DEL/2017 TO BE DEDUCTED ON THE AMOUNT PAID TO SRK TOURS & TR AVELS PVT. LTD. AND AS SUCH THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT AP PLICABLE 4. THAT BOTH THE LOWER AUTHORITIES HAS FAILED TO APPR ECIATE THAT THIS IS A CASE WHERE THE DISALLOWANCE IS FOR ALLEGED SHORT DEDUCTI ON OF TDS AND THIS IS NOT A CASE OF NON-DEDUCTION OF TDS AS PER THE PROVISIONS OF SECTION 40(A)(IA) DISALLOWANCE OF EXPENDITURE CANNOT BE MADE IF THERE IS A SHORT DEDUCTION OF TDS. 5. THAT THE CIT (APPEALS) FAILED TO CONSIDER THAT TA X DEDUCTED AT SOURCE IS A VICARIOUS - LIABILITY. THEREFORE, EXPENDITURE CAN NOT BE DISALLOWED AND APPELLANT CANNOT BE TREATED AS ASSESSEE IN DEFAULT SINCE THE TAX LIABILITY HAS BEEN DISCHARGED BY THE PAYEE. 6. THAT THAT THE DISALLOWANCE U/S 40(A)(IA) IS ILLEGA L AND BAD IN LAW AND HAS BEEN WRONGLY UPHELD BY THE C1T (A). IN ANY CASE, IN VIEW OF THE PROVISO ADDED BY THE FINANCE ACT 2012, THE ASSESSEE COULD NOT BE TREATED AS ASSESSEE IN DEFAULT AND THE DISALLOWANCE IS NOT SUSTAINABLE AN D IS LIABLE TO BE DELETED 7. WITHOUT PREJUDICE TO ABOVE, THE CIT (APPEALS) IN V IEW OF THE FACTS FAILED TO CONSIDER THAT THE PROVISIONS OF SECTION 40(A)(IA) A RE APPLICABLE ONLY TO AMOUNTS REMAINING PAYABLE AS ON THE LAST DAY OF PREVIOUS YEAR. 8. THAT THE DISALLOWANCES MADE AND THE OBSERVATIONS M ADE ARE UNJUST, UNLAWFUL AND BASED ON MERE SURMISES AND CONJECTURES . THE ADDITIONS/DISALLOWANCES MADE CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD AND IN ANY CASE THEY ARE EXCESSIVE. 9. THAT THE EXPLANATION GIVEN AND THE EVIDENCE PRODUC ED, MATERIAL PLACED AND AVAILABLE ON RECORD HAS NOT BEEN PROPERLY CONSI DERED AND JUDICIALLY INTERPRETED AND THE ADDITIONS MADE CANNOT BE JUSTIF IED IN VIEW OF THE SAID MATERIAL AND EXPLANATION. 10. THAT THE AO ERRED IN LAW AND ON FACTS IN CHARGING INTEREST U/S 234B, 234C, 234D, & 244A(3) OF THE ACT. THE AO HAS FAILED TO APPRECIATE THAT THE ASSESSEE COULD HAVE NEVER FORESEEN THESE ADDITI ONS BEING MADE AGAINST THE ASSESSEE. THE ABOVE OBJECTIONS ARE WITHOUT PREJUDICE TO EACH OTHER. THE ASSESSEE CRAVES LEAVE TO ALTER, AMEND OR WITHDRAW ALL OR ANY OBJECT IONS HEREIN OR ADD ANY FURTHER GROUNDS AS MAY BE CONSIDERED NECESSARY EITH ER BEFORE OR DURING THE HEARING. 3. THE ASSESSEE IS CARRYING ON THE BUSINESS OF HOTE LS AT VARIOUS PROPERTIES OWNED BY DIFFERENT OWNERS. THE ASSESSEE FILED RETUR N OF INCOME FOR ASSESSMENT YEAR 2012-13 DECLARING A TOTAL INCOME OF RS. 4,82,9 8,700/- AGAINST THE TOTAL 3 ITA NO. 98/DEL/2017 TAX DUE OF RS. 1,57,76,017/- INCLUDING ADVANCE TAX, TDS AND SELF ASSESSMENT TAX. THE ASSESSING OFFICER OBSERVED THAT THE ASSESS EE COMPANY PAID LICENSE FEES AMOUNTING TO RS. 3,56,56,068/- TO VARIOUS PA RTIES AFTER DEDUCTING TAX AT SOURCE AT THE RATE OF 10%. HOWEVER, IN CASE OF SRK TRAVEL AND TOUR, THE TAX AT SOURCE WAS DEDUCTED AS 2% INSTEAD OF 10% AMOUNTING TO RS. 24,00,000/-. THE COPIES OF AGREEMENTS ENTERED INTO BY THE ASSESSEE W ITH VARIOUS PERSONS WERE ALSO FILED. THE ASSESSEE DEDUCTED TDS U/S 194-I IN RESPECT OF LICENSE FEE PAID TO SOME PARTIES WHEREAS IN CASE OF SRK TRAVELS AND TOU R IT CLAIMS THAT PAYMENTS ARE NOT COVERED U/S 194-I. THUS THE ASSESSING OFFIC ER MADE DISALLOWANCE U/S 40(A)(IA) AMOUNTING TO RS. 19,20,000/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER THE ASSE SSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT THE CIT(A) RELIED UPON THE DECISION OF ASSESSEE FOR EARLIER YEAR I.E. A.Y. 2008-09 WHERE IN THE TRI BUNAL UPHELD THE DISALLOWANCE U/S 40(A)(IA) BUT THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE FILED M.A. AND THE SAID ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSE E BY THE TRIBUNAL VIDE ORDER DATED 27.11.2008 (ITA NO. 2893/DEL/2013). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE MATERIAL AVAILABLE ON RECORD. THE CIT(A) RELIED UPON THE NON-MODIFIED DEC ISION OF THE TRIBUNAL WHICH WAS SUBSEQUENTLY DECIDED IN FAVOUR OF THE ASSESSEE. THE TRIBUNAL HELD AS UNDER: 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN THIS CASE ARE UND ISPUTED AND WE FIND THAT THE ASSESSEES CASE IS SQUARELY COVERED BY THE JUDG MENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.K. TEK RIWAL (SUPRA) WHEREIN THE HONBLE CALCUTTA HIGH COURT HAD HELD THAT IN CASE O F ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILITY OF ANY I TEM OR NATURE OF PAYMENTS FALLING UNDER THE VARIOUS TDS PROVISIONS, THE ASSES SEE CAN BE DECLARED TO BE 4 ITA NO. 98/DEL/2017 THE ASSESSEE IN DEFAULT U/S 201 OF THE ACT BUT NO D ISALLOWANCE CAN BE MADE BY INVOKING PROVISIONS OF SECTION 40A(IA). THE HON BLE HIGH COURT OF CALCUTTA OBSERVED THAT THE PROVISIONS OF SECTION 40A(IA) HAV E TWO LIMBS; ONE IS WHERE, INTER ALIA, THE ASSESSEE HAS TO DEDUCT TAX AND SECO ND WHERE AFTER DEDUCTING TAX, INTER ALIA, THE ASSESSEE HAS TO PAY THE SAME I NTO GOVERNMENT ACCOUNT. THE HONBLE HIGH COURT OF CALCUTTA WENT TO OBSERVE THAT THERE WAS NOTHING IN THE SAID SECTION TO TREAT, INTER ALIA, THE ASSESSEE AS DEFAULTER WHERE THERE IS A SHORTFALL IN DEDUCTION AND FURTHER, SECTION 40A(IA) REFERS ONLY TO THE DUTY TO DEDUCT TAX AND PAY TO GOVERNMENT ACCOUNT. UNDISPUTE DLY, IN THE PRESENT APPEAL ALSO, THERE IS NO ALLEGATION THAT THE TAX DE DUCTED WAS NOT PAID INTO THE GOVERNMENT ACCOUNT AND THE ONLY FAULT OF THE ASSESS EE IS THE FAILURE ON ITS PART TO DEDUCT TAX AT THE PRESCRIBED RATE. THIS, AS PER THE JUDGMENT OF THE HONBLE HIGH COURT OF CALCUTTA, DOES NOT ATTRACT DI SALLOWANCE U/S 40A(IA) OF THE ACT. WE ALSO NOTE THAT A SIMILAR VIEW HAS BEEN TAKEN BY THE ITAT MUMBAI BENCH IN THE CASE OF DCIT VS. CHANDABHOY REPORTED I N (2012) 17 TAXMANN. COM 158(MUM.) AND HONBLE HIGH COURT OF KARNATAKA I N CIT-LTU VS. HEWLETT- PACKARD INDIA SALES (P.) LTD. REPORTED IN 382 ITR 4 96 (KAR). ACCORDINGY, RESPECTFULLY FOLLOWING THE RATIO OF THE JUDGMENTS A S AFORESAID, WE ALLOW GROUND NO. 4 OF THE ASSESSEES APPEAL. THE ISSUES ARE IDENTICAL IN THE PRESENT CASE. THERE FORE THE MATTER IS SQUARELY COVERED AND HENCE APPEAL OF THE ASSESSEE IS ALLOWED . 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 2019 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 10/07/2019 *BINITA* COPY FORWARDED TO: 5 ITA NO. 98/DEL/2017 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 0 4 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 0 5 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK