Income Tax Appellate Tribunal - Ahmedabad
Mmr Infra, Sabarkantha vs Dcit, Sabarkantha Circle,, Himatnagar on 1 June, 2020
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'A' अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 1609/Ahd/2018 ( नधा रण वष / Assessment Year : 2015-16) MMR Infra बनाम/ Dy. Comm. of Income D-49, New Durga Bazar, Vs. Tax Himatnagar, Dist. Sabarkantha Circle, Sabarkantha 383001 Himatnagar थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAWFM8280A (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri S. N. Divatia, A.R. यथ क ओर से / Shri Dileep Kumar, Sr. D.R. Respondent by :
सन ु वाई क तार ख / Date of Hearing 05/03/2020 घोषणा क तार ख /Date of Pronouncement 01/06/2020 आदे श/O R D E R PER WASEEM AHMED - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-2, Ahmedabad (CIT(A) in short) dated 25/05/2018 relevant to Assessment Year (AY) 2015-16.
I T A N o . 1 6 0 9 / Ah d / 1 8 [ M M R I n f r a v s . D C I T ] A. Y . 2 0 1 5 - 1 6 - 2 -
2. The only issue raised by the assessee is that the learned CIT (A) erred in confirming the disallowance of Rs. 2,34,079/- on account of interest on late payment of TDS under section 201(1A).
3. Briefly stated fact is that the Assessee is a partnership firm and engaged in the business of construction. The assessee during the year under consideration paid interest on late deposit of TDS for Rs. 2,34,079/- only. The assessee claimed the same as business expenses. The contention of the assessee is that the provision of section 40(a)(ii) of the Act prohibits the deduction of payment of taxes levied on profit or gain of the business. However TDS is not paid on profit or gains of the business, therefore interest paid under section 201(1A) is allowable as business expenses as the same does not constitute the part of the taxes which is levied on profit or gains of business
4. However the AO disallowed the claim of the assessee by holding that the interest paid on TDS is not as allowable expenses in light of the decision of Hon'ble Madras High Court in case of CIT vs. Chennai Properties & Investment Ltd reported in 105 Taxman 346.
5. Aggrieved assessee preferred an appeal before learned CIT (A) who confirmed the order of the AO by holding as under:
"3.3. I have carefully considered the facts of the case, assessment order and submission of the appellant. The AO has disallowed interest on TDS amounting to Rs.2,34,079/- not paid in time on the around that same is not business expenditure u/s.
37(1) of the Act. The AO has relied upon decision of Honourable Madras High Court in the case of CIT Vs. Chennai Properties & Investment Ltd.
3.4. Appellant on the other hand has submitted not interest on late payment of TDS is allowable u/s. 37 of the I. T. Act, 1961 and relied upon decision of Honourable ITAT, Kolkata in the case of M/s. Narayani Ispat Pvt. Ltd. It is seen from the decision of Honourable Madras High Court in the case of CIT VB. Chennai Properties & investment Ltd. that the Honourable High Court has clearly held that interest paid u/s. 201 (1A) would not assume the character of business expenditure and cannot be regarded as compensatory payment. The decision of Honourable Kolkata Tribunal in the case of M/s. Narayani Ispat Pvt. Ltd. has not considered the decision of Honourable Madras High Court. AS held by a full court decision of Hon'ble AP High Court, in the case of CIT vs B R Constructions [(1993) 202 ITR 222 (AP)], a judicial precedent ceases to be a binding precedent when it is passed per irrcurium. In view of the above, the AO has correctly' followed the decision of Honourable Madras High Court (supra) and I T A N o . 1 6 0 9 / Ah d / 1 8 [ M M R I n f r a v s . D C I T ] A. Y . 2 0 1 5 - 1 6 - 3 -
disallowed the interest on TDS u/s. 37 of the I. T. Act, 1961. The ground of appeal is accordingly dismissed."
6. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
7. The learned AR for the assessee before us filed a paper book running from pages 1 to 47 and submitted that the Kolkata Tribunal in the case of DCIT Vs. Narayani Ispat Limited in ITA N0. 2127/Kol/2014 vide order dated 30-08- 2017 has decided the issue in favour of the assessee.
8. On the contrary the learned DR vehemently supported the order of the authorities below.
9. We have heard the rival contention of both the parties and perused the material available on record before us. At the outset we note that the interest on delayed deposit of TDS is not allowable deduction in view of the judgment of Hon'ble Madras High Court in case of CIT vs. Chennai Properties & Investment Ltd (supra) wherein it was held as under:
"The liability for deduction of tax arises by reason of the provisions of the Act. Under section 201, the consequence of failure to comply with the same renders that person liable to be deemed as an assessee in default with all the consequences attached thereto. The liability to pay interest on the amount not deducted or deducted, but not paid is directly related to the failure to deduct or remit the amount. The amount required to be deducted is the amount payable as income-tax. The interest paid for the period of delay takes colour from the nature of the principal amount required to be paid but not paid within time. The principal amount here would be the income-tax and the interest payable for delayed payment is the consequence of failure to pay the tax and in the circumstances, is in the nature of a penalty though not described as such in section 201(1A). The fact that the income-tax required to be remitted is not income-tax payable by the assessee but is ultimately for the benefit of and to the credit of the recipient of the income on which that tax is payable, does not in any manner alter the character of the payment, namely, its character as income-tax. The interest paid under section 201(1A), therefore, would not assume the character of business expenditure and could not be regarded as a compensatory payment."
Before parting, it is important to note that we have decided the identical issue in favour of the assessee in the case of M/s Narayani Ispat Pvt. Ltd. (supra). However, we are changing our decision in the present case for the simple reason that the judgment of Hon'ble Madras High Court in case of CIT vs. I T A N o . 1 6 0 9 / Ah d / 1 8 [ M M R I n f r a v s . D C I T ] A. Y . 2 0 1 5 - 1 6 - 4 -
Chennai Properties & Investment Ltd reported in 105 taxmann 346 was not brought to our notice while hearing the case of M/s Narayani Ispat Pvt. Ltd. There is no ambiguity that the issue is covered against assessee by the Hon'ble Madras High Court in case of Chennai Properties & Investment Ltd. (supra). Accordingly we do not find any infirmity in the order of the learned CIT-A. Hence we decline to interfere. Thus the ground of appeal of the assessee is dismissed.
10. In the result, appeal of the assessee is dismissed.
This Order pronounced in Open Court 01/06/2020 Sd/- Sd/-
(MADHUMITA ROY) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahm e da ba d : Da t e d 0 1 /0 6/ 2 0 20
True Copy
S. K. SINHA
आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं*धत आयकर आय,
ु त / Concerned CIT
4. आयकर आयु,त- अपील / CIT (A)
5. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ*धकरण, अहमदाबाद ।