Income Tax Appellate Tribunal - Hyderabad
Asst. Commissioner Of Income Tax, ... vs Warangal Urban Co-Operative Bank ... on 9 April, 2021
ITA No 674 of 2019 Warangal Urban Coop. Bank Ltd Hyderabad
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' A ' Bench, Hyderabad
(Through Video Conferencing)
Before Shri S.S. Godara, Judicial Member
AND
Shri Laxmi Prasad Sahu, Accountant Member
ITA No.674/Hyd/2019
Assessment Year: 2013-14
Asstt. CIT, Circle 1 Vs. M/s. Warangal Urban
Warangal Coop. Bank Ltd
Warangal
PAN:AAAAW0651J
(Appellant) (Respondent)
Revenue by: Sri Sunil Kumar Pandey, DR
Assessee by: Sri P. Murali Mohan Rao
Date of hearing: 24/02/2021
Date of pronouncement: 09/04/2021
ORDER
Per S.S. Godara, J.M.
This Revenue's appeal for A.Y 2013-14 arises from the CIT(A)-3, Hyderabad's order dated 15.02.2019 passed in appeal No. 0105/AC-Cir-1/WGL/CIT(A)-3/2016-17, in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, 'the Act'].
Heard both the parties. Case file perused.
2. The Revenue has pleaded the following substantive ground in this appeal:
"1. The learned CIT(A) erred on both law and facts of the case.
2. The Learned CIT(A) erred in allowing the appeal without appreciating the fact situation of the case in hand.Page 1 of 7
ITA No 674 of 2019 Warangal Urban Coop. Bank Ltd Hyderabad
3. The Learned CIT(A) erred in allowing the appeal without following the due procedure as laid down under Rule 46A of the Income Tax Rules, 1962.
4. The Learned CIT(A) erred in allowing the appeal without hearin9 the AO.
5. Any other ground(s) that may be urged at the time of hearing".
3. The Revenue's case as per its pleadings in nut shell is that the CIT (A) has erred in law and on facts in reversing the Assessing Officer's action inter alia invoking section 40(a)(ia) disallowance of Rs.3,72,35,416/- on interest payments made by assessee to its members. The CIT (A)'s order to this effect reads as under:
"X) The appellant filed the appeal belatedly on the ground that the appeal papers were misplaced by the office staff and could be traced out subsequently and hence the appeal could be filed with the delay of one day only. The reason for the delay in the filing of appeal has been duly considered and the delay is condoned.
XI) Ground Nos.1 and 9 in appeal are general in nature and does not call for adjudication.
XII) Ground round Nos.2, 3 and 4 in appeal relates to disallowance u/s 40(a)(ia) and TDS in respect of interest payments to the members of the society. Facts of the case, grounds of appeal, assessment order and submissions of the appellant were perused. It is also seen that the appellant had preferred additional grounds with reference to additions made u/s.40(a)(ia) which are referred to as additional grounds No.10, 11 and 12. It is seen that the additional grounds do not involve new facts and are not any findings which attract the provisions of Rule 46A. The additional grounds relate to judicial decisions which are said to be applicable to the facts of the case.
It is seen that a disallowance of Rs.3,72,35,416/- was made in assessment by invoking Section 40(a)(ia) of the Income Tax Act. The appellant submitted during the course of appeal proceedings that the appellant was not to be held in default u/s.201(1)/201(1A) of the Act and that the payee had already offered the said receipt to tax. The appellant submitted that when the appellant is not in default ujs.201(1)/201(1A), the provisions of Section 40(a)(ia) cannot be invoked. The relevant provision made in the Act w.e.f 01.04.2013. However, the appellant also placed Page 2 of 7 ITA No 674 of 2019 Warangal Urban Coop. Bank Ltd Hyderabad reliance on the judgement of the Hon'ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township (P.) Ltd, [2015J 61 taxmann.com 45 (Delhi)/377 ITR 635 (Delhi), wherein it was held in para 11 as under:
"The first proviso to Section 201(1) of the Act has been inserted to benefit the Assessee. It also states that where a person fails to deduct tax at source on the sum paid to a resident or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a)(ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. "
From the above, the appellant submitted that it was clear that when there is no default u/s 201 of the Act could not be sustained. The appellant further submitted that the CBDT in Circular no. 5 of 2005 dated 15th July, 2005 has also clarified that the provisions of section 40 (a)(ia) of the Act is to augment compliance of TDS provisions in case of residents and curb bogus payments to them but not in respect of the expenses genuinely incurred by the assessee for the business operations and hence the appellant submitted that the disallowance u/s 40(a)(ia) of the Act may please be deleted.
Further, the appellant also placed reliance on the judgment of the jurisdictional Tribunal in the case of DCIT vs M/s Visu International Limited [ITA No. 488&621/Hyd/20131 wherein it was held that:
"The learned counsel for the assessee has contended that the assessee company has not been treated as the assessee in default under Section 201(1) of the Act for its failure to deduct tax at source from the payment made on account of audit fee and therefore, no disallowance can be made on account of audit fee, as per the second proviso to S.40(a)(ia). Although the learned Departmental Representative has contended that the said second proviso has been inserted in the statute by the Finance Act, 2012 with effect from 1.4.2013, it is noted, the same has been treated as retrospectively applicable from 1.4.2005 by the coordinate Bench (Bangalore) of this Tribunal in the case of G. Shankar Vs. ACIT (ITA No. 1832/Bang/2013 for Page 3 of 7 ITA No 674 of 2019 Warangal Urban Coop. Bank Ltd Hyderabad assessment year 2005-06). We, therefore, restore this issue to the file of the Assessing Officer for the limited purpose of verifying as to whether the assessee company is treated as an assessee in default under S.201(1) of the Act for its failure to deduct tax at source from the payment made on account of audit fee. If it is found on such verification that no order under Section 201 (1) is passed to this effect, the Assessing Officer is directed to delete the disallowance made under S. 40(a)(ia)"
From the above, it is apparent that when there is no default under section 201, the additions made u/ s 40(a)(ia) of the Act cannot be sustained. The appellant also placed reliance on the decision of the jurisdictional ITAT in the case of Country Club Hospitalities & Holidays Limited Vs. ACIT in ITA.No.1S04/Hyd/2012. Further, the appellant also submitted that the facts of the appellant's case is different from the facts of the case of M/ s. Palam Gas Limited (81 Taxman.com 43)(SC) where the issue is 'paid/ payable' whereas in the appellant's case there is no proceedings u/s.201(1)/201(1A) to invoke Section 40(a)(ia). Considering the facts, issues and circumstances of the instant case, Ground No.2, 3 and 4 in appeal are allowed.
XIII) Ground No.5 in appeal relates to payment of Rs.40, 159 j - being employees contribution to EPF u/s 2(24) (x) R.W.S. 36(1) (v). The submissions of the appellant are extracted below;
"In the course assessment the Ld. AD has made an addition towards belated payment of employees contribution to provident fund in terms of section 2(24) (x) of the Act read with section 36(1) (v) of the Act. At this point it may be submitted that, though the EPF was paid belatedly, it was paid well before the due date for filing of the return u/ s 13 9(1) of the Act. As per provisions of section 43 B of the Act, the EPF paid before the due date for filing of the Return of Income is allowable as incurred an paid during the year. The Challan for the amount paid is filed along with the submissions. Thus, no addition is called for u/ s 2 (24) (x) of the Act.
In this regard, reliance is placed on the following case laws:
c. Karnataka High Court in the case of CIT V/s. Sabari Enterprises (298 IUTR 141)-Kar.
d. Decision of ITAY, Hyderabad in the case of Ybrant Digital Ltd Vs DCIT dated 05.03.2014 in ITA No. 1769/Hyd/2012.
Since, in the present case the amount of EPF is duly paid before the due date of filing of return u/ s.139(1) of the Act, no disallowance is warranted. It is, therefore, prayed to allow the expenditure.Page 4 of 7
ITA No 674 of 2019 Warangal Urban Coop. Bank Ltd Hyderabad Considering the payment of EPF has been made before the due date for filing of return and respectfully following the ratio of the decisions referred to above, Ground No.5 in appeal is allowed.
XIV) Ground No.6 in appeal relates to disallowance of the reduction in the value of government securities of an amount ofRs.6,91,000/-. The submissions of the appellant are extracted below:
"The AO had disallowed the depreciation clamed in the premium paid on government securities at Rs. 6,91,000/-, treating it as capital in nature. A decisive point here is that as per the profit and loss account, the assessee has not claimed any depreciation on Premium paid on the Government securities for the above said amount of Rs. 6,91,000/-. As observed, the depreciating claimed on the Government securities is found to be ZERO. As could also be noticed from the computation statement even, no adjustment (deduction for this amount) was made to the net profit, to suggest that the assessee claimed depreciation either as per Straight Line Method or as per Reduced Balanced Method under Section 32 of IT Act .
It is a fact that the assessee has taken certain Government Securities during the year under reference and paid premium for a sum of Rs. 6,91,500/-. This was debited to P&L a/ c and credited to Government Securities Account, as the same is an allowable expenditure. It is not the question of the Premium on Government Securities being allowable or not. To evidence or the above fact, we are submitting herewith the copies of P&L A/ c. for the period 1/4/2012 to 31/03/2013. Also we are enclosing here with the computation statement for kind perusal and decision on the issue.
Thus, it is a big misnomer/misconception to presume that the assessee claimed depreciation on the Government security and to disallow an unclaimed expenditure. It is therefore, prayed to delete the addition.
Considering the submission made by the appellant and explanations given, it is held that the disallowance made is not warranted and hence, Ground No:6 in appeal is allowed.
XV) Ground No.7 in appeal relates to disallowance ujs.14A of Rs.10,714/-. The submissions of the appellant are extracted below:
"During the course of assessment the AO made a disallowance u/ s 14A r.w.s Rule BD of IT Rules 1962; for a sum of Rs. 10,714/- towards deemed expenditure relating Page 5 of 7 ITA No 674 of 2019 Warangal Urban Coop. Bank Ltd Hyderabad to investment, the income therefore which is exempt. This is worked out basing on a presumption that the interest expenditure booked is for earning of exempt income.
In this regard, we would like to submit that, where the Assessing Officer contemplates disallowance u/ s 14A, he is required to record satisfaction which has to be done with regard to accounts of the assessee. The assessing officer has made the disallowance treating it as interest on funds which have been deployed as investments, the income arising there from which is not includable in taxable income. In this case, AO has calculated disallowance based on the interest without considering the fact that there is no fresh investment.
(viii) In this regard, we would also like to submit the following facts which may please be considered in favor of the assessee.
(f) The Assessing Officer has not prima facie found any expenditure relating to the borrowed capital which was invested in the asset, the income arising there from which is exempt.
(g) The Assessing Officer has not prima facie satisfied himself that, there is a claim of expenditure towards interest on the borrowed capital which was invested in an asset the income there from which is exempt.
(h) The Assessing Officer has not established any nexus between expenditure booked and the investment made the income there from which is exempt.
(i)The Assessing Officer has wrongly applied the Rule 8D, when the assessee has maintained books of account and got them statutorily audited.
(j) The Assessing Officer has erred in calculating the disallowance u/s 14A in terms of Rule 8D by wrong application of the Rule.
Considering the submission made by the appellant and explanations given, it is held that the disallowance ujs.14A made is not warranted and hence, Ground No.7 in appeal is allowed".
4. Learned DR fails to dispute the clinching fact that the CIT (A) has nowhere admitted any of the assessee's additional evidence during the course of first appeal proceedings. Coupled with this, we make it clear that the Revenue has not raised any Page 6 of 7 ITA No 674 of 2019 Warangal Urban Coop. Bank Ltd Hyderabad other grounds specifically seeking to reverse the CIT (A)'s impugned action on any other aspect on merits. We thus quote hon'ble apex court's decision in CIT vs. Pilliah And Sons on 13 October, 1966 Equivalent citations: 1967 63 ITR 411 (SC) that this tribunal need not record its own finding on facts if its expresses complete agreement with the CIT()A's conclusion under challenge. We adopt the same reasoning here as well and affirm CIT (A)'s action deleting the impugned disallowance/addition made by the Assessing Officer.
5. This Revenue's appeal is dismissed.
Order pronounced in the Open Court on 9th April, 2021.
Sd/- Sd/-
(LAXMI PRASAD SAHU) (S.S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated 9th April, 2021.
Vinodan/sps
Copy to:
1 ACIT, Circle 1 No.1-8-610, 3rd Floor, Mayuri Complex, Nakkalagutta, Hanamkonda, Warangal 506001 2 M/s Warangal Urban Coop. Bank Ltd, H.No.8-11-45, 1st Floor, Opp: Intezargunj, Police Station, RNT Road, Warangal 506001 3 CIT (A)-3 Hyderabad 4 Pr. CIT - 3 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 7 of 7