Income Tax Appellate Tribunal - Delhi
Acit, New Delhi vs Shri Amritpal Singh, New Delhi on 14 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'A' NEW DLEHI
BEFORE SHRI G.D. AGRAWAL, PRESIDENT
AND
SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER
I.T.A. No.6787/Del/2015
Assessment Year: 2009-10
Amrit Pal Singh, Vs Asstt. Commissioner of Income-tax
C-2, Dewan Shree Apartments, Circle-52(1), New Delhi.
30, Ferozeshah Road, New Delhi.
(PAN: AARPS5236M)
I.T.A. No. 6797/Del/2015
Assessment Year: 2008-09
Asstt. Commissioner of Income-tax vs Amrit Pal Singh,
Circle-52(1), New Delhi. C-2, Dewan Shree Apartments
30, Ferozeshah Road, New Delhi.
(PAN: AARPS5236M)
(Appellant) (Respondent
Assessee by: Shri R.K. Kapoor, CA
Department by: Shri Ravikant Gupta, Sr. DR
Date of hearing: 02.05.2018
Date of Pronouncement: 14 .05.2018
ORDER
PER K. NARASIMHA CHARY, JM
These two appeals are preferred by the assessee and the revenue respectively challenging the order dated 29.10.2015 of the ld. Commissioner of 2 Income-tax (Appeals)-18, New Delhi {hereinafter referred to as the "ld. CIT(A)} in Appeal No.404/14-15.
2. Brief facts of the case are that the assessee is engaged in the business of advertising. The assessee buys rights for display sites from other parties engaged in the business of advertising. During the year under consideration, the assessee has bought such rights for display sites from Adwel Advertising, which is a proprietorship concern of his wife. During the year under consideration, the assessee had paid a sum of Rs.2,75,28,200/- to M/s. Adwel Advertising for acquiring rights to put up display boards on DTC Bus Queue Shelters. The payments made for such rights are accounted for in the Profit & Loss A/c as 'display charges'. After acquiring these rights for display of boards on DTC bus queue shelters, the assessee offers these rights mainly to advertising agencies. The receipts from sale of such rights for display of boards on DTC bus queue shelters from advertising agencies are treated as display receipts in the Profit & Loss A/c. The advertising agencies contact the parties (advertisers) who are interested in advertising their products on the display boards of DTC bus queue shelters.
3. The assessee in his books of account/Profit & Loss A/c, which are maintained on cash basis, had shown under the year under consideration, a sum of Rs.2,45,00,000/- under the head 'display charges' and claimed it as an expense. The assessee had also paid a sum of Rs.30,28,200/- as service tax on the above display charges to Adwel Advertising. Against the receipts from advertising agencies, the assessee collects service tax as well which is shown in gross receipts. Against the service tax collected, service tax paid (Cenvat Credit) is claimed as a 3 deduction and the balance, if any, is paid to the Govt. The payment to the Government is deducted from the receipts. The net receipt is shown in the Profit & Loss A/c. This is the factual position, which has been verified by the AO in the course of assessment proceedings.
4. The original assessment in this case was made u/s. 143(3) vide order dated 29.12.2011, wherein the AO computed the total income at Rs.2,94,23,963/- against the returned income ofRs.12,32,593/- by making the following disallowances:
(i) Disallowance u/s 2(22)(e) - Deemed dividend Rs.5,63,000/-
(ii) Disallowance u/s 40(a)(ia) - non deduction of TDS on
Display charges including service-tax Rs.2,75,28,200/-
(iii) Disallowance u/s 36(1)(va) Rs.1,00,170/-
Rs.2,81,91,370/-
The assessee had filed appeal in respect of disallowance u/s.2(22)(e),
disallowance u/s.4o(a)(ia) and disallowance u/s.36(i)(va). The CIT(A) confirmed the disallowances at serial no. II and III. The matter ultimately went before the ITAT Delhi Bench A', where the assessee raised several legal issues. The Hon'ble ITAT Delhi A' Bench vide order dated 22.11.2013 in ITA No.6009/Del/2012, set aside the orders of the AO and the CIT(A) and remitted both the issues to the AO for verification and re-adjudication on all the propositions raised by the learned counsel of the assessee and thereafter record reasons in support of his conclusion. Accordingly, the assessee was given fresh opportunity from time to time to represent his case before the AO. The AO vide order dated 15.1.2015 4 sustained the addition of Rs.2,80,91,200/- thereby rejecting all the propositions raised by the assessee.
5. Assessee challenged this order dated 15.1.2015 before the learned CIT(A). Learned CIT(A), after considering the entire gamut of facts and the law applicable thereto found that the decision of the Hon'ble jurisdictional High Court in CIT vs. Ansal Landmark Township P. Ltd. (ITA No.160 of 2015 and also CIT vs Rajender Kumar (2013) TIOL 547 and also on the order dated 22.11.2013 of the Income-tax Appellate Tribunal in ITA No.6009/Del/2012 and found that the proviso to Section 40a(1a) is retrospective in nature and inasmuch the payee M/s Adwel Advertising had filed its return offering income and paying the tax thereon, no disallowance u/s 40a(ia) can be made. He, therefore, deleted the addition of Rs.2,75,28,200/-.
6. However, in so far as the addition of Rs.5,63,000/- made by invoking the provisions u/s 2(22)(e) of the Act is concerned, learned CIT(A) recorded that the ITAQT has directed the learned AO to examine the issue in the light of the contentions taken before the ITAT and in such a case it is not open to the assessee to extend the scope of assessment with fresh arguments. On this premise, both the learned AO and learned CIT(A) refused to consider the argument of the assessee that the authorities below are duty bound to examine whether the payment of Rs.5,63,000/- being alleged as a loan or advance by the 5 company to the assessee was in fact a net overdrawn as per the books of the company and not the assessee on the date of each payment during the year.
7. It is the argument of the learned AR that while disposing of ITA No.6009/Del/2012, it was observed by the Tribunal that the contention of the assessee that Profit and Loss account of deductee and the total receipt of the ledger of the deductee were available at pages 45 & 46 of paper book submitted in this case show that the deductee had already included these receipts in the profit and loss account and paid the ultimate tax, as such, in view of the decision of the Hon'ble jurisdictional High Court in the case of Rajender Kumar (supra), if applied, no disallowance would result because second proviso inserted u/s 40a(ia) by Finance Act, 2012 applicable w.e.f. 1.4.2013 is a missionary provision and it will be applicable with retrospective effect. Learned AR further invited our attention to the order vide paragraph No.7 wherein the Tribunal observed that the moment payee had filed its return including receipt in profit and loss account and paid the taxes thereon, no disallowance in the hands of the assessee could be made. Basing on this, he submits that in view of the clear finding of the ITAT, it is not open for the learned AO to say that the display charges of Rs.2,75,25,200/- claimed by the assessee are disallowable u/s 40a(1a) of the Act.
8. The learned DR vehemently relied on the orders of the learned AO. 6
9. We have perused the record in the lights of the submissions made on either side. In so far as the facts are concerned, absolutely there is no dispute. The assessee is not a contractor within the meaning of Section 194C of the Act and at the same time M/s Adwal Advertisings to whom the payment was made was also not a sub contractor carrying out the work on behalf of the assessee for display of advertisement. It is also not in dispute that the assessee is not carrying out any work as a contractor for the person in Section 194C. Lastly, it stood admitted that M/s Adwel Advertisings, the deductee had filed their return on 31.3.2010 declaring a receipt of Rs.2,75,28,200/- in the profit and loss account and had paid the taxes thereon. Learned CIT(A) recorded that evidence to this effect was produced by the assessee before the learned AO and was duly examined by him. In these circumstances, learned CIT(A) recorded that in view of the decision of the jurisdictional High Court in the case of Ansal Landmark Township P. Ltd. (supra), the second proviso to Section 40(a)(ia) can be made. There is no illegality or irregularity in the finding recorded by the CIT(A) and the revenue has not demonstrated before us as to how the deduction claimed by the assessee u/s 40(a)(ia) could be disallowed on the face of the pronouncement in Ansal Landmark Township case (supra) and Rajender Kumar (supra). 7
10. We, therefore, find that disallowing the addition of Rs.2,75,28,200/- u/s 40(a)(ia) of the Act is contrary to the findings of the Tribunal in ITA No.6009/Del/2012 and also to the decisions of the Hon'ble jurisdictional High Court in the case of Rajender Kumar (supra) and Ansal Landmark Township (supra). We according uphold the finding of the learned CIT(A) and dismiss the grounds of appeal in ITA No.6797/Del/2015.
11. Now coming to the assessee's appeal in ITA No.6787/Del/2015, the bone of contention is in respect of the addition of Rs.5,63,000/- u/s 2(22)(e) of the Act treating it as deemed dividend of the assessee. Record reveals that it has been the plea of the assessee before the authorities below that the addition of Rs..... From Pg 22 of CIT(A)- to be edited The last contention of the assessee is that provisions of section 40a(ia) would not apply where the assessee has paid the amount during the year, relying on the judgment of ITAT in the case of Marilyn Shipping & Transport vs.CIT 136 ITD 23(SB) and judgment of Allahabad High Court in the case of Vector Shipping Services 2013 - TIOL-599-HC . The A.O. was of the view that the non-jurisdictional High Court Order is not binding on the A.O. as has been held in the case of Thane Electricity 206 ITR 727(Mum) _& in the case of Mahindra & Mahindra 313 ITR 263 (AT.)(SB)308. The 8 A.O. further held that the SLP filed by the department in the case Vector Shipping have been dismissed by the SC in limine without going into the merit of the case and thus such an order of the Apex court does not constitute res judicata. The AO relied on the judgment of SC in the case of Kuhayammed and Ors vs State of Kerala and Anr 2000(6) SCC 359 where the SC held that dismissal of SLP in-limine does not constitute a binding precedent. Further the AO has cited several other High Court decisions like Sikander Khan N Tanvar ITA-905 /2012 dated 02-05-2013 of Gujarat HC and Md. J.H.Mondal in ITA No. 31 by 2013 of Kolkata HC and M/s. Cresent Export Syndicate of Kolkata HC in ITA 20/2013 which have stated that the decisions of special bench in the case of Marilyn Shipping & Transport does not lay down correct law.
The A.O. also rejected the alternative plea of the assessee that the amount of Rs.2,75,28,200/ also includes service tax of Rs.30,28,000 on which TDS is not deductible, for reasons stated in the order.
I have gone through the submissions of the AR and the findings of the AO. Section 4oa(ia) of the Income-Tax Act reads as under:
Section 4o(a)(ia) [any interest, commission or brokerage, [rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts 9 payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work)], on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, [has not been paid on or before the due date specified in subsection (1) of section 139 : ] [Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, [thirty per cent of] such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid :] [Provided further that where an assessee fails to deduct the whole or any part ofther tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, 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 by the resident payee referred to in the said proviso.] The second proviso to section 40a(ia) was inserted w.e.f 01-04-2013. There is a mandatory requirement u/s 201 to deduct at source and the assessee would be a defaulter when this is not complied but the intention of the legislature is riot to 10 treat the asseseee as a person in default subject to fulfillment of the conditions stipulated in proviso to section 201 (1). These conditions are that the payee resident has furnished return u/s. 139, that he has taken into account such sum for computing income in such return, and paid the tax due on the income declared by him, in such return of income and further a person furnishes a certificate to this effect from an accountant in such form as may be prescribed.
The second proviso of the section 4o(a)(ia) has been the matter of interpretation before the Hon'ble Delhi HC. The hon'ble Delhi High Court in the case of CIT vs Ansal Landmark Township Pvt. Ltd , agreeing with the decision of ITAT Agra bench in the case of Rajeev Kumar Aggarwal Vs. ACIT(ITA 337/Agra /2013) held that the insertion of second proviso to section 40a(ia) is declaratory and curative in nature and has retrospective effect from 1-4-2005 .
It may be noted that there are difference of opinion on the issue between different HCs. While decisions similar to that of Hon'ble Delhi HC have been rendered by the Karnataka HC in CIT vs Santosh Kumar Shetty 227 Taxman 170( Kar) and CIT vs Omprakash R. Chaudhary [ 2015 ] 57 taxmann.com 38 (Gujarat), the Kerala HC in Prudential Logistics And Transports vs. ITO 364 ITR 689(Ker) has held that second proviso to section 4o(a)(ia) giving concession to assessee in case receipient of amount had already paid tax on such amount is applicable with effect from 1-4-2013 11 only and, therefore, benefit of said proviso was not available to assessee in earlier years.
This was again followed by the same HC in Thomas George Muthoot vs. CIT ITA.No. 278 of 2014 ( Kerala) which held that the contention that the second proviso to Section 4o(a)(ia) of the Act, introduced by the Finance Act 2012, is retrospective in operation, based on the verdicts in Allied Motor (P) Ltd. v. Commissioner of Income Tax [(1997) 224 ITR 677 (SC)] and Commissioner of Income Tax v. Alom Extrusions Ltd . [(2009) 319 ITR 306] and that disallowance could not have been ordered invoking Section 40 (a)(ia) of the Act is not acceptable.
The HC held that the proviso was inserted by Finance Act 2012 and came into force with effect from 01.04.2013. The fact the second proviso was introduced with effect from 01.04.2013 is expressly made clear by the provisions of the Finance Act 2012 itself. This legal position was clarified by this Court in Prudential Logistics And Transports v. ITO [(2014) 364 ITR 689 (Ker)]. A statutory provision, unless otherwise expressly stated to be retrospective or by intendment shown to be retrospective, is always prospective in operation. Finance Act 2012 shows that the second proviso to Section 40 (a)(ia) has been introduced with effect from 01.04.2013. Reading of the second proviso does not show that it was meant or intended to be curative or remedial in nature, and even the appellants did not have such a case. Instead, by 12 this proviso, an additional benefit was conferred on the assessees. Such a provision can only be prospective as was held by Kerala HC in Prudential Logistics and Transports (supra).
The other main contention of the assessee is that no disallowance under section 4o(a)(ia) is called for as the provisions of sec. 40(a)(ia) can be invoked where the amount claimed is "payable" as on the close of the financial year. This interpretation in Marilyn Shipping & Transport vs. ACIT, 136 ITD 23 (Vishakhapatnam) has been endorsed in the judgment of Allahabad High Court in the case of Vector Shipping Services 2013-TIOL-599-ALL-HC and also in the judgments of Delhi ITAT in the case of ITO vs. Mrs. Kanak Singh and ITO vs. Shri Anoop Khandelwal. Moreover SLP against the said judgment has been dismissed in limine by the Apex Court. But it is also seen that there are several contradictory decisions from other High Courts on this aspect e.g. Crescent Exports Syndicate and another [ITAT 20 of 2013] and the Gujarat High Court in the case of Commissioner of Income Tax v. Sikandadarkhan N Tunvar [ITA Nos.905 of 2012. In Thomas George Muthoot vs. CIT ITA.No. 278 of 2014 ( Kerala), the HC held:
The contention, relying on the judgment of the Allahabad High Court in Commissioiier of Income Tax v. Vector Shipping Services (P) [(2013) 357 ITR 642 (All)] 13 that the appellants had already paid the amount and therefore, the provisions of Section 4o(a)(ia), applicable only in respect of the amount which remains to be payable on the last day of the financial year, is not attracted is not acceptable. Primarily, this contention should be answered with reference to the language used in the statutory provision. Section 4o(a)(ia) makes it clear that the consequence of disallowance is attracted when an individual, who is liable to deduct tax on any interest payable to a resident on which tax is deductible at source, commits default. The language of the Section does not warrant an interpretation that it is attracted only if the interest remains payable on the last day of the financial year. If this contention is to be accepted, this Court will have to alter the language of Section 40(a) (ia) and such an interpretation is not permissible. This view that we have taken is supported by judgments of the Calcutta High Court in Crescent Exports Syndicate and another [ITAT 20 of 2013] and the Gujarat High Court in the case of Commissioner of Income Tax v. Sikandadarkhan N Tunvar [ITA Nos.905 of 2012 & connected cases], which have been relied on by the Tribunal. Similar view in favour of Revenue has been taken by P & H HC in PMS Diesels vs CIT ITA 716 of 2009 ( P & H) holding that the dismissal of the SLP, therefore, does not confirm the view of the Allahabad High Court. As held by the Supreme Court inV.M. 14 Salgaocar & Bros. (P) Ltd., etc. Vs. Commissioner of Income Tax, etc. (2000) 243 ITR 383 (SC) and in Supreme Court Employees Welfare Association vs. Union of India (1989) 4 SCC 187, when an SLP is summarily dismissed under Article 136 of the Constitution, the Court does not lay down any law and that the dismissal of an SLP in limine by a non speaking order does not justify any inference that the contentions raised on the merits of the case have been rejected.However following the binding decision of Hon'ble jurisdictional Delhi HC itbe case of Ansal Landmark (supra) that the second proviso is retrospective in nature , the assessee's contention that since the payee M/s. Adwel Advertising has filed its return offering the income and paid tax thereon, no disallowance u/s.40fa)fia) can be made on this ground alone, has to be accepted. The disallowance is therefore directed to be deleted, after necessary verification of this claim.
GROUNDS 4 to 5 taken together: Addition u/s. 2(22) (e):
4. That the learned AO has erred in law and on facts in making an addition of Rs.5,63,000/- on account of payments to Adwel Advertising Service by Adwel Advertising (P) Ltd. as income of the assessee u/s.2(22)(e) of the Income-tax Act by arbitrarily rejecting the contention of the assessee that the provisions of section 2(22)(e) have no application in view of the undisputed facts that the assessee had a credit balance of Rs.23,26,569/- in the name of Amrit Pal Singh in the books of 15 Adwel Advertising Pvt. Ltd. under the head 'unsecured loans' as per audited Balance 4.1 The Assessing Officer has failed to appreciate that Adwel Advertising Service and Amrit Pal Singh are the same person and he had two accounts, one in the name of Amrit Pal Singh and other in the name of Adwel Advertising Service in the books of Adwel Advertising Pvt. Ltd. and since the overall balance in the books of Adwel Advertising Pvt. Ltd. was a credit balance throughout the year relevant to the assessment year under consideration, the provisions of section 2(22)(e) are not attracted in respect of alleged withdrawal of Rs.5,63,000/-. The addition, therefore, may be deleted.
In the original assessment, the AO noticed that the assessee has received a loan of Rs.5,63,000/- from M/s. Adwel Advertising Pvt. Ltd. in which he holds 50% share. When asked to explain, the assessee has stated that he is having business transaction with the company and has taken funds from the company for providing services. Since the nature of advance was for business, no addition is called for, as per the assessee. However the A.O. held that the provisions are applicable and therefore he made an addition of Rs.5,63^000/- under section 2(22)(e) of the I.T.Act,i96i.
168.2 Before the CIT (Appeals), the assessee reiterated his stand. However the CIT(A) held that the assessee has not made any business transactions with the company and therefore, he confirmed the addition.
8.3 During the hearing in further appeal before the ITAT, the revenue submitted +v,it the propositions raised by the assessee in his written submissions were ver taken up for consideration before the assessing officer and therefore However, learned AO refused to entertain this plea on the ground that the assessee cannot bring any entirely new facts into the case and in view of the ITAT's remanding the matter to the file of the AO, assessee cannot unsettle the concluded findings of the CIT(A) and the ITAT. Learned CIT(A) also recorded that on going through the order of the ITAT, he found that the Tribunal had directed the AO to examine the issues in the light of the contentions taken before the ITAT, as such, it is not open for the assessee to extend the scope with fresh arguments.
The entire exercise of the assessment proceedings all through the different forums is for the determination of just and proper tax liability of the assessee. In so far as the facts borne out of the record, if they lend any support to the contention of the assessee, in the interest of justice, such facts have to be 17 considered for determination of the correct tax liability of the assessee. In this matter, the contention of the assessee was that payment of Rs.5,63,000/- by the company is not a loan or advance to the assessee but it was a net overdrawn as is evidenced by the books of the company. Assessee claims to have produced that copy of his account as appearing in the books of M/s Adwel Advertising P. Ltd. showing unsecured loan of Rs.23,26,569.96 as on 1.4.2008 and 31.3.2009 i.e. for Asstt. Year 2009-10. Learned AO has not verified the correctness or otherwise of these entries. So also the learned AO has not verified whether the company which is said to have advanced the alleged loan, had in fact any accumulated profits or not. The verification of the accounts of the assessee appearing in the books of M/s Adwel Advertising P. Ltd. and also whether M/s Adwel Advertising has any accumulated profits as on the date of such advancing of alleged loan is vital for the addition of this amount of Rs.5,63,000/-. In these circumstances, we are of the considered opinion that it is just and necessary to direct such verification at the end of the AO. If the learned AO finds that M/s Adwel Advertising does not fit the required profits and reserves to advance the loan or that the assessee 18 Order pronounced in the open court on this day the 14th May, 2018.
Sd/- sd/-
(G.D. AGRAWAL) (K. NARASIMHA CHARY)
PRESIDENT JUDICIAL MEMBER
Dated: 14th May, 2018
'VJ'
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
By order
Asstt. Registrar