DEORA TRADING CO., V. ITO 20(2)1,

MA 729/MUM/2012

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 0626 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 04-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T D SINGH
• Assessee Lawyers: UTTAM CHAND BOTHRA
• Keywords: Business expenditure; Retrospective amendment
• Section: 194C

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . .. . . .. . , ,, , !' !' !' !' , # # # # $ %& $ %& $ %& $ %& , ,, , ' !' ' !' ' !' ' !' ( ( ( ( BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER )#)# #!* . / M.A NO. 729/MUM./2012 ( . / ITA NO. 3487/MUM./2009 ) ( '* + #,+ / ASSESSMENT YEAR : 200506 ) DEORA TRADING CO. A69, MIDC CHAKALA MAROL INDL ESTATE ANDHERI (E), MUMBAI 400 093 .. #! / APPLICANT * V/S INCOME TAX OFFICER WARD20(2)1 PIRAMAL CHAMBERS MUMBAI 400 012 .... -./0 / RESPONDENT '/ . / PERMANENT ACCOUNT NUMBER AABFD4909V '* +2 3 4 / ASSESSEE BY : MR. UTTAM CHAND BOTHRA '# 3 4 / REVENUE BY : MR. T.D. SINGH *# 3 / DATE OF HEARING 14.06.2013 !% 56, 3 / DATE OF ORDER 05.07.2013 !% !% !% !% / ORDER $ %& $ %& $ %& $ %& , ,, , ' !' ' !' ' !' ' !' 7 7 7 7 / PER AMIT SHUKLA, J.M. BY WAY OF THIS MISCELLANEOUS APPLICATION, THE ASSES SEE SEEKS RECTIFICATION OF THE IMPUGNED ORDER DATED 8 TH JUNE 2012, PASSED BY THE TRIBUNAL, MUMBAI BENCH, IN ITA NO.3487/MUM./2009, F OR ASSESSMENT YEAR 200506. DEORA TRADING CO. 2 2. IN THE PRESENT APPLICATION, THE ASSESSEE HAS RAISED MAINLY TWO ISSUES ON WHICH IT HAS BEEN POINTED OUT THAT THERE HAS BEE N A MISTAKE APPARENT FROM RECORD. THE FIRST ISSUE RELATES TO DISALLOWANC E OF WEAVING CHARGES AGGREGATING TO ` 60,14,842, PAID TO SANTOGEN SILK MILLS LTD. UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961, FOR NONDEDU CTION OF TDS UNDER SECTION 194C. THE CONTENTIONS RAISED IN THE APPLICA TION ARE AS UNDER: THAT THE HONBLE TRIBUNAL, WHILE SUSTAINING SUCH DI SALLOWANCE, HAS OVERLOOKED THE FACT THAT THE CONCERNED PAYEE M/S. S ANTOGEN SILK MILLS LTD., WAS A SICK INDUSTRIAL COMPANY REFERRED TO BIFR. IT WAS INCURRING HEAVY LOSSES AND ITS NET WORTH WAS ERODED. ITS INCOME TAX ASSESS MENT FOR THE RELEVANT ASSESSMENT YEAR 200506 WAS ALSO COMPLETED ON A LOS S OF ` 62,74,230 AND ADMITTEDLY THERE WAS NO TAX PAYABLE OR DUE FROM THE PAYEE (COPY OF INTIMATION UNDER SECTION 143(1)(A) ISSUED TO THE SA ID PAYEE IS ENCLOSED HEREWITH FOR READY REFERENCE. 1. THAT THE VERY PURPOSE OF TDS PROVISIONS IS TO EN SURE SPEEDY AND EARLIER COLLECTION OF TAX WHERE IT IS DUE AND PAYAB LE . WHEN IT IS ESTABLISHED ON FACTS THAT NO TAX WAS DUE OR PAYABLE BY THE PAYEE, 1 DS IN SUCH CASE (AND THEN SUBSEQUENT REFUND) WOULD BE AN IDLE FORMALITY BREACH OF WHICH WILL NOT DESERVE A SEVERE PUNISHMENT LIKE A PERMANENT DISALL OWANCE TO THE PAYER OF GENUINE BUSINESS EXPENDITURE. KIND ATTENTION IS INV ITED TO THE FOLLOWING OBSERVATION IN SAMPATH LYENGARS LAW OF INCOME TAX VOL 6 10TH EDITION PAGE 9687: IT MAY ALSO BE POINTED OUT, THAT THE SUPREME COURT ITSELF IN CENTRAL PROVISION MANGANESE ORE CO. LTD. V CIT 160 JR 961 POINTED OUT THAT SUCH INTEREST IS COMPENSATORY IN NATURE FOR MONEYS WRONGLY WITHHELD FROM THE GOVT. WHERE THERE ARE NO DUES TO BE COLLECTED BY THE GOVT., EITHER BECAUSE OF DIRECT PAYMENT BY THE ASSESSEE OR FOR ANY OTHER REASON SUCH INTEREST SHOULD NOT BE LEVIABLE BY UNDERSTANDING LEVY OF INTEREST AS JUSTI FIED ONLY, WHERE THERE IS A SHORTFALL IN TAX PAYABLE TO AN GOVT. BUT NOT PAID. (EMPHASIS SUPPLIED) THE SE OBSERVATIONS APPLY WITH EQUAL FORCE TO TDS OBLIGATI ONS ALSO. 2. THAT THE PROVISIONS OF S. 40(A)(IA) COVERING TDS U/S. 194C WERE INTRODUCED BY THE FINANCE (NO.2) ACT, 2004 W.E.F. 01-04-2005 A ND, HENCE, T WAS THE FIRST YEAR OF OPERATION. THE APPELLANT, NOT BEING FULLY C ONVERSANT WITH THE SAID PROVISION, BONA FIDE BELIEVED THAT TAX WAS NOT DEDU CTIBLE AT SOURCE ON THE AMOUNTS PAYABLE TO M/S. SANTOGEN SILK MILLS LTD., A S THE PAYEE HELD NO TAX LIABILITY AT ALL. IT IS AN ADMITTED POSITION THAT P AYEE WAS A SISTER CONCERN AND APPELLANT WAS FULLY AWARE OF ITS SICK FINANCIAL CON DITION. 3. THAT IT IS SUBMITTED WITH RESPECT THAT NON DEDUC TION OT TAX AT SOURCE IN A CASE WHERE IT IS CLEAR BEYOND DOUBT THAT TDS, F MAD E WILL ONLY BE CLAIMED AS A REFUND BY THE PAYEE HAS RESULTED IN ONLY A TECHNICA L OR VENIAL BREACH OF LAW, IF ANY. IT CAN NOT BE THE INTENTION OF THE LEGISLATURE TO DISALLOW FOREVER, AS IS BEING DONE IN THE APPELLANTS CASE, A GENUINE EXPEN DITURE ACTUALLY INCURRED BY THE ASSESSEE FOR A MERE TECHNICAL OR VENIAL BREACH OF LAW, AS AFORESAID. 4. THAT, IN VIEW OF THE AMENDMENTS MADE TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2012, WHICH IS CURATIVE IN NATURE, THE AFORESA ID DISALLOWANCE OF WEAVING CHARGES PAID TO SANTOGEN SILK MILS LTD. SHOULD NOT HAVE BEEN CONFIRMED BY THE HONBLE ITAT AS THE SAID PAYEE CAR NOT BE DEEME D TO BE AN ASSESSEE IN DEFAULT U/S 201(1). IN THIS CONNECTION, WE WOULD LI KE TO BRING TO YOUR KIND DEORA TRADING CO. 3 NOTICE THAT THE CURATIVE AMENDMENTS, WHICH ARE MADE FOR THE PURPOSES OF REMOVING UNINTENDED HARDSHIP, HAVE BEEN HELD TO HAV E RETROSPECTIVE EFFECT IN A NUMBER OF JUDICIAL DECISIONS. 5. THAT THE SPECIAL BENCH DECISION IN THE CASE OF MERHYN SHIPPING & TRANSPORTS VS. ACIT (VISHAKHAPATNAM ITATT (VIZAG SP L BUNCH) DELIVERED ON 29.03.2012 [ASSTT. YEAR 2005-06], WHICH HAD AN IMPA CT ON THE CASE OF THE APPELLANT, HAS NOT BEEN CONSIDERED BY THE HONBLE T AT. 6. IT IS RESPECTFULLY POINTED OUT THAT WHILE SUSTA INING THE DISALLOWANCE OF WEAVING CHARGES, THE HONBLE TRIBUNAL HAS REMITTED THE MATTER BACK TO THE ASSESSING OFFICER IN RESPECT OF PROCESSING CHARGES AND SERVICE CHARGES DISALLOWED U/S 40(A)(IA). IT IS, THEREFORE, EARNESTLY PRAYED THAT IN THE LIGH T OF THE ABOVE SUBMISSIONS, THE MATTER RELATING TO WEAVING CHARGES MAY ALSO BE REMITTED TO HE ASSESSING OFFICER FOR NECESSARY VERIFICATION OF ABOVE FACTS A ND ALSO WHETHER ANY AMOUNT WAS ACTUALLY PAYABLE AT THE END OF THE PREVIOUS YEA R TO WHICH ALONE, THE PROVISIONS OF SECTION 40(A)(IA) CAN APPLY AS HAS BE EN HELD BY HONBLE SPECIAL BENCH IN THE ABOVE REFERRED CASE OF M/S. MERILYN SH IPPING AND TRANSPORTS VS. ACIT. 3. THE SECOND ISSUE RELATES TO DISALLOWANCE OF CAR HIR E CHARGES AMOUNTING TO ` 1,20,000, PAID TO GEETA DEVI DEORA UNDER SECTION 4 0(A)(IA) FOR NON DEDUCTION OF TDS UNDER SECTION 194C. IN THIS REGARD , FOLLOWING CONTENTIONS HAVE BEEN RAISED: 1. THAT THE CAR HIRE CHARGES AMOUNTING TO RS. 12000 0/- PAID TO SRNT. GEETA DEVI DEORA IS IN THE NATURE OF RENT REFERRED TO IN SECTION 1941 OF THE INCOME TAX ACT, 1961. IT IS, THEREFORE, SUBMITTED WITH RES PECT THAT THE PROVISIONS OF SECTION 194C DID NOT APPLY TO THE SAID CAR HIRE CHA RGES WHICH IS COVERED BY SECTION 194I. 2. THAT THE PROVISIONS OF SECTION 40(A)(IA) WERE NO T APPLICABLE TO RENT DURING THE ASSESSMENT YEAR 2005-06 AS RENT HAS BEEN BROUGHT UNDER THE SCOPE OF THIS SECTION W.E.F. 01-4-2006 ONLY BY THE TAXATION LAWS (AMENDMENT) ACT, 2006. 3. THAT, ACCORDINGLY, THE DISALLOWANCE OF CAR HIRE CHARGES AMOUNTING TO RS. 120000/- PAID TO SMT. GEETA DEVI DEORA U/S 40(A) (I A) IS OUTSIDE THE SCOPE OF THAT SECTION. 4. THE LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASS ESSEE, SUBMITTED THAT THE TRIBUNAL HAS FAILED TO CONSIDER THE FACT T HAT SANTOGEN SILK MILLS LTD., WAS RUNNING INTO HEAVY LOSSES, THEREFORE, THERE WAS NO REQUIREMENT OF DEDUCTION OF TDS AS THE TDS DEDUCTED WOULD ULTIMATE LY WOULD HAVE BEEN REFUNDED TO THE PAYEE. SECONDLY, THAT THERE HAS BEE N AMENDMENT IN SECTION 40(A)(IA) BY THE FINANCE ACT, 2012, WHEREIN SECOND PROVISO HAS BEEN DEORA TRADING CO. 4 INSERTED W.E.F. 1 ST APRIL 2013 THAT WHERE AN ASSESSEE FAILS TO DEDUCT TAX ON ANY SUM BUT IS DEEMED TO BE ASSESSEE IN DEFAULT UND ER THE FIRST PROVISO TO SECTION 201(1), THEN FOR THE PURPOSE OF SECTION 40( A)(IA), IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME. THIS AMENDMENT THOU GH BROUGHT IN STATUTE W.E.F. 1 ST APRIL 2013, SHOULD BE HELD AS CURATIVE IN NATURE A ND, HENCE, RELIEF SHOULD HAVE BEEN GIVEN UNDER THIS PROVISO. REGARDIN G DISALLOWANCE OF CAR HIRE CHARGES, HE SUBMITTED THAT THE CAR HIRE CHARGE S FALLS WITHIN THE NATURE OF RENT UNDER SECTION 194I AND NOT UNDER SECTION 194C OF THE ACT. THEREFORE, THERE IS A MISTAKE APPARENT ON RECORD. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THE ENTIRE CONTENTIONS RAISED IN THE APPLICATION ARE BASED ON ALL TOGETHER NEW GROUNDS WHICH WAS NEITHER RAISED B EFORE THE TRIBUNAL NOR BEFORE THE LEARNED COMMISSIONER (APPEALS) AND / OR BEFORE THE ASSESSING OFFICER. THUS, NEW PLEA CANNOT BE ENTERTAINED AT TH E STAGE OF THE PROCEEDINGS UNDER SECTION 254(2). FURTHER, THE TRIB UNAL HAS GIVEN A VERY DETAIL FINDING AS TO WHY THE PROVISIONS OF SECTION 194C ARE APPLICABLE AND HAS ALSO DEALT WITH THE REASONS FOR CONFIRMING THE DISA LLOWANCE. THERE IS NO MISTAKE APPARENT FROM RECORD WHICH HAS BEEN POINTED OUT IN THE APPLICATION OR BY THE LEARNED COUNSEL, THEREFORE, THE SAME SHOU LD BE REJECTED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RE LEVANT FINDINGS OF THE TRIBUNAL VISAVIS THE CONTENTIONS RAISED IN TH E PRESENT MISC. APPLICATION. WITH REGARD TO THE FIRST ISSUE OF DISALLOWANCE UNDE R SECTION 40(A)(IA), THE ASSESSEES CONTENTION HAS BEEN THAT THE PAYEE COMPA NY, SANTOGEN SILK MILLS LTD. WAS UNDER THE BIFR AND, HENCE, TDS PROVISIONS UNDER THE INCOME TAX ACT CANNOT BE APPLIED. THE TRIBUNAL, IN PARAS6 AND 7 HAS DEALT THIS ISSUE IN DETAIL AND HAS GIVEN A CATEGORICAL FINDING AS TO WH Y THE PAYMENT ON ACCOUNT OF WEAVING CHARGES AMOUNTS TO WORK DONE IN PURSUANC E OF WORK CONTRACT WITHIN THE MEANING OF SECTION 194C AND ALSO THE REA SONS AS TO WHY THE TDS WAS LIABLE TO BE DEDUCTED. THE CONTENTION NOW WHICH HAS BEEN RAISED IN THE APPLICATION IS ALTOGETHER A NEW PLEA AND NO MISTAKE HAS BEEN POINTED OUT IN THE FINDINGS OF THE TRIBUNAL. AS REGARDS THE AMENDM ENT BROUGHT IN STATUTE BY DEORA TRADING CO. 5 THE FINANCE ACT, 2012, BY WAY OF INSERTION OF SECON D PROVISO TO SECTION 40(A)(IA), IT IS CLEAR THAT THE SAME HAS BEEN BROUG HT IN STATUTE W.E.F. 1 ST APRIL 2013. WHETHER IT IS A CURATIVE IN NATURE SO AS TO H AVE RETROSPECTIVE EFFECT, CANNOT BE DEALT IN THE PROCEEDINGS UNDER SECTION 25 2(2), WHICH IS STRICTLY CIRCUMSCRIBED ON THE SCOPE OF MISTAKE APPARENT FROM RECORD. EVEN THE OTHER CONTENTIONS WHICH HAVE BEEN RAISED HAVE NOT BEEN RA ISED BEFORE THE TRIBUNAL EITHER AT THE TIME OF HEARING OR BEFORE THE LEARNED COMMISSIONER (APPEALS). THUS, THE SAME CANNOT BE ENTERTAINED NOW. INSOFAR T HE RELIANCE PLACED ON THE SPECIAL BENCH DECISION IN MERLIN SHIPPING AND T RANSPORT V/S JCIT, THE SAME IS DISTINGUISHABLE AND IS NOT APPLICABLE AT AL L TO THE FACTS OF THE PRESENT CASE AS IT WAS NOT A CASE WHERE THE ISSUE INVOLVED WAS WITH REGARD TO THE PAID OR PAYABLE AMOUNT. MOREOVER, THE SAID SPECIAL BENCH DECISION HAS NOW BEEN OVERRULED BY THE HONBLE CALCUTTA AND GUJA RAT HIGH COURTS. THUS, INSOFAR AS THE FIRST ISSUE RAISED IN THE PRESENT AP PLICATION IS CONCERNED, WE DO NOT FIND ANY MISTAKE APPARENT ON RECORD WHICH CAN B E RECTIFIED AND, HENCE, THE CONTENTIONS RAISED BY THE ASSESSEE ARE DISMISSE D. 7. REGARDING THE SECOND ISSUE OF DISALLOWANCE OF ` 1,20,000 WHEREIN THE ASSESSEE HAS SUBMITTED THAT THE CAR HIRING FALLS WI THIN THE NATURE OF RENT UNDER SECTION 194I IS ALSO A NEW PLEA WHICH WAS NOT BEEN RAISED BEFORE THE LEARNED COMMISSIONER (APPEALS) OR BEFORE THE TRIBUN AL. OTHERWISE ALSO THE DEFINITION OF RENT AS GIVEN IN SECTION 194I WHICH I S NOW BEING RELIED UPON A NEW PLEA WHICH WAS NOT RAISED AT ANY STAGE. OTHERWI SE ALSO, THE DEFINITION OF RENT AS GIVEN IN SECTION 194I, DOES NOT SPEAK ABOUT CARE HIRE CHARGES. ON THE OTHER HAND, THE TRIBUNAL HAS HELD THAT HIRING O F CAR WAS WITHIN THE TERMS OF A CONTRACT WHICH COMES WITHIN THE PURVIEW OF WOR K IN PURSUANCE OF A CONTRACT AS DEFINED UNDER SECTION 194C. AT THIS STA GE, TO ENTER INTO CONTROVERSY WHETHER THE CARE HIRE CHARGES FALLS WIT HIN THE AMBIT OF SECTION 194C OR 194I IS A DEBATABLE ISSUE AND, HENCE, BEYON D THE SCOPE PROCEEDINGS UNDER SECTION 254(2). THUS, THIS CONTENTION OF THE ASSESSEE IS DEVOID OF MERITS AND, HENCE, THE SAME IS NOT SUSTAINABLE. ACC ORDINGLY, THE MISCELLANEOUS APPLICATION PREFERRED BY THE ASSESSEE IS DISMISSED. DEORA TRADING CO. 6 8. 2 8 '* +2 3 )#)# #!* 2 * 9: ; 8. IN THE RESULT, ASSESSEES M.A. IS TREATED AS DIS MISSED. !% 3 6, < =!*8 5 TH JULY 2013 6 3 ; ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JULY 2013 SD/- . .. . . .. . !' !' !' !' P.M. JAGTAP ACCOUNTANT MEMBER SD/- $ $ $ $ %& %& %& %& ' !' ' !' ' !' ' !' AMIT SHUKLA JUDICIAL MEMBER MUMBAI, =!* =!* =!* =!* DATED: 5 TH JULY 2013 !% 3 -'$) >), / COPY OF THE ORDER FORWARDED TO : (1) '* +2 / THE ASSESSEE; (2) '# / THE REVENUE; (3) ? () / THE CIT(A); (4) ? / THE CIT, MUMBAI CITY CONCERNED; (5) )#B -''* , , / THE DR, ITAT, MUMBAI; (6) + C / GUARD FILE. .) -' / TRUE COPY !%* / BY ORDER -! . DE / PRADEEP J. CHOWDHURY #2F '* D# / SR. PRIVATE SECRETARY G / 9 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI