Income Tax Appellate Tribunal - Mumbai
Underwater Services Company ( ... vs Assessee on 3 September, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "F",
MUMBAI
BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER &
SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER
ITA NO. 6601/MUM/2011(A.Y. 2008-09)
Underwater Services Company The Addl. CIT, Range 12(3),
(Dissolved), 1st Floor, Aaykar Bhavan,
23-24, Mb.P.T.Building, Malet Bunder Vs. MK Road, Mumbai - 20.
Road, Mazgaon,
Mumbai - 400 009
PAN:AABFU 9626P
(Appellant) (Respondent)
Appellant by : Shri D.P>Bapat
Respondent by : Shri Amardeep
Date of hearing : 03/09/2012
Date of pronouncement : 07/09/2012
ORDER
PER I.P.BANSAL, J.M
This is an appeal filed by the assessee. It is directed against the order dated 06/07/2011 of Ld. CIT(A)-23, Mumbai for the assessment year 2008-
09. The grounds of appeal read as under:
"Being aggrieved by the order passed by the Commissioner of Income- tax (Appeals)23, Mumbai, your Appellant submits the following ground of appeal for sympathetic consideration:
The learned Commissioner of Income-tax (Appeals)-erred in upholding disallowance of charter hire charges of Rs.1,16,60,000/- under section 40)a)(ia) of the Income Tax Act.
Without prejudice, the learned Commissioner of Income Tax (Appeals) erred in not restricting the disallowance to Rs. 98,21,825/-.
Your appellant reserves the right to add to, alter or amend the above ground of appeal, if necessary."2 ITA NO. 6601/MUM/2011(A.Y. 2008-09)
2. The AO discussed this issue in para-4 of the assessment order. It was noticed that assessee has deducted at @1.75% on following amounts paid for hiring the vessels.
Pearl / Opal - On 4th May,2007, for daily charter rate of Rs. 1,45,000/- MMII - On 4th May, 2007, for daily charter rate of Rs. 17,000/- Topaz - On 6th June, 2007, for daily charter rate of Rs. 95,000/-
2.1 The aforementioned amounts aggregated to a sum of Rs. 1,16,60,000/-. As the tax was not deducted in accordance with the provisions of section 194I the AO disallowed the sum of Rs. 1,16,60,000/- under section 40(a)(ia) of the Income Tax Act, 1961 (the Act).
3. Before CIT(A) it was submitted that tax was deducted @ 1.75% on the basis of certificate issued by ITO(TDS) and there was neither non-deduction of tax nor any shortage in deducting the tax. To be more precise the said amount which has been calculated at Rs. 1,16,60,000/- is calculated as under as per details given at page 19 of the Paper Book.
"Charter Hire charges for Pearl/Opal/MMII for the period 01/04/07 to 31/03/2008 credited on or after 04/05/2007 53,46,000 Charter Hire Charges for Topaz for the period 01/04/07 to 05/06/2007 credited on or after 06/06/2007 62,70,000 1.16.16,000 3.1 It may further be mentioned here that the total payments made by the assessee for charter hire charges is an aggregate sum of Rs. 12,74,55,000/- and the aforementioned amount of Rs. 1,16,60,000/- represents the amount paid by the assessee in respect of Pearl/Opal, Topaz and MMII vessels and it relates to period aforementioned and rest of the payment is with respect to other items and the other part of the year. The details is being summarized in the following chart given at page 11 of the paper book.
3 ITA NO. 6601/MUM/2011(A.Y. 2008-09)
Ship Name Day Date of No. of Charter Remaining Charter Total
rate lower days Hire days of Hire Charter
TDS till Charges the year Charges Hire
certificate date of till date of for Expenses
Lower Lower Remaining
TDS TDS period
Cert.
Rupees Rupees Rupees Rupees
Impugned
Charter Hire
Charges
a)Pearl/Opal 1,45,000 4/5/2007 33 47,85,000 333 48285000 53070000
b)Topaz 95,000 6/6/2007 66 62,70,000 300 28500000 34770000
c)MMII 17,000 4/5/2007 33 5,61,000 242 4114000 4675000
Sub Total 11616000 80899000 92515000
Other Ships
a) Tourmaline 18900000
b) 7029000
Aquamarine
c) Peridot 1680000
d)Shishu 1155000
e)MMII 476000
f) Opal 5700000
Sub Total 34940000
Final Total 127455000
3.2 Before Ld. CIT(A) it was pleaded that the charter hire charges for the period prior to the date of issue of the certificates under section 197 were paid after issue of the certificate and this fact is evident from the copy of the account of the payee in the books of the assessee which is also on the record of the AO. When the payments were actually made by the assessee the tax exemption certificate allowing deduction of tax at reduced rates were available with the assessee and the tax was deducted at source as per the rates specified by the AO. Ld. CIT(A) has rejected this submission of the assessee on the ground that assessee was required to deduct tax under section 194 of the Act. The certificate was issued by the ITO (TDS) in the month of May and June 2007. Ld. CIT(A) has rejected the contention of the 4 ITA NO. 6601/MUM/2011(A.Y. 2008-09) assessee that no payments were made prior to the date of the order of ITO (TDS) as the proper method of accounting would be the combination of the date of providing of certificate and billing. The mere fact that assesse accounted for the entries to circumvent the provisions of IT Act, the assessee cannot divest itself of the responsibility to deduct tax. Ld. CIT(A) has also rejected the alternative contention of the assessee that since tax @ 1.75% was deducted the net disallowance should be restricted to Rs.98,21,825/-. On the aforementioned finding of the Ld. CIT(A) the assessee has raised the above grounds of appeal.
4. After narrating the facts it was submitted by Ld. A.R that even according to the certificate issued by ITO(TDS) the assessee was authorized to deduct tax at lower rate i.e. 1.75% ( inclusive of surcharges and educational cess) for financial year 2007-08. He referred to Page No.9 & 10 of the paper book, where copies of the certificates issued under section 197(1) of the Act dated 4/5/2007 and 6/6/2007 are placed. In the aforementioned certificates the AO has authorized the assessee to deduct tax @1.75% ( inclusive of surcharge and educational cess) on the payments mentioned in the Schedule -VI in both the certificates and the validity of certificate is described for the year ending 31/3/2008. Schedule mentioned in the aforementioned certificate are described below for the sake of convenience.
SCHEDULE - VI of Certificate dated 4/5/2007 Sr# Name & address of the Estimated amount of rent to be received.
person responsible for paying rent.
1. M/S. Underwater Services 1. Continous Charter Hire Rs.1,45,000/-
Company, per day from 01.04.07 to 31.03.08 for 7, Mbpt Building, Malet PEARL/OPAL Monthly Rs.44,95,000/-
Bunder, Approx.
Mumbai 400009 2. Continous Charter Hire Rs. 17,000/-
per day from 01.04.07 to 31.03.08 for MMII.
Monthly Rs. 5,27,000/- Approx.
5 ITA NO. 6601/MUM/2011(A.Y. 2008-09)SCHEDULE VI Certificate dated 6/6/2007 Sr# Name & address of the Estimated amount of rent to be received.
person responsible for paying rent.
1. M/S. Underwater Services 1. Continuous Charter Hire Rs.95,000/-
Company, per day from 01.04.07 to 31.03.08 for 7, Mbpt Building, Malet Topaz. Monthly Rs.29,45,000/-
Bunder, Approx.
Mumbai 400009
Ld. A.R submitted that assessee did not make any payment before the issue of the certificate hence, no part of the impugned amount could be disallowed.
5. On the other hand, Ld. D.R relied on the order passed by AO and Ld. CIT(A).
6. We have carefully considered the rival submissions in the light of material placed before us. The only ground on which Ld. CIT(A) has sustained the disallowance is that assessee should have deducted and paid the amount of TDS before the issue of TDS certificate on the amounts payable for the hiring of vessels. As against that it is the case of the assessee that it has been authorized to deduct tax at lower rate and that authorization is in force from 1/4/2007 till 31/3/2008. We have carefully gone through the certificates, the relevant portion of which have already been described in the above part of this order. According to the provisions of section 40(a)(ia) certain amounts are not deductible in computing the income chargeable under the head " profits and gains of business or profession" which inter alia includes any amount payable to a resident or amount payable to a contractor or sub-broker being resident for carrying out any work on which tax is deductible at source and where such tax either has not been deducted or after deduction it has not been paid on or before the due date specified in sub-section (1) of section 139. In the present case it 6 ITA NO. 6601/MUM/2011(A.Y. 2008-09) is not even the case of revenue that assessee did not deduct and pay TDS @ 1.75% for whole of the year as per the described dates. The only objection of the department is that upto the date of the certificate there was obligation of the assessee to deduct tax at the full rate. We do not support such conclusion drawn by the revenue authorities. It is neither a case of short deduction nor a case of non-deduction. Tax having been deducted at the rate allowed by the ITO(TDS) and is also paid before due date of filing of return. Therefore, we see no justification in the disallowance upheld by the Ld. CIT(A). The certificates for deduction of tax at source at lower rate was in operation for whole of the year, therefore, there was no default of the assessee for deduction of tax. The disallowance has wrongly been sustained by Ld. CIT(A) and the same is deleted and the appeal by the assessee is allowed.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on the 7th day of Sept. 2012 Sd/- Sd/-
(B.RAMAKOTAIAH ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 7th Sept. 2012
Copy to: 1. The Appellant 2. The Respondent 3. The CIT City -concerned
4. The CIT(A)- concerned 5. The D.R "F" Bench.
(True copy) By Order
Asst. Registrar, ITAT, Mumbai Benches
MUMBAI.
Vm.