Income Tax Appellate Tribunal - Delhi
Nuchem Machine Tools Ltd., New Delhi vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
and
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.2452/Del./2011
(ASSESSMENT YEAR : 2007-08)
ITO, Ward 13 (3), vs. M/s. Nuchem Machine Tools Ltd.,
New Delhi. Barar House Estate, Bara Tooti Chowk,
Sadar Bazar, Rui Mandi, School Lane,
Delhi - 110 006.
(PAN : AAACN3196R)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Sanjay Kalra, FCA
REVENUE by : Shri R.S. Negi, Senior DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER :
This appeal filed by the revenue emanates from the order of CIT (Appeals)-XVI, New Delhi dated 24.01.2011 for the assessment year 2007-
08. The grounds of appeal read as under :-
"1. On the facts and circumstance of case as well as in law, the Ld. CIT(A) erred in deleting the addition of Rs.14,23,253/- made by the AO u/s 40(a)(ia)of the I.T. Act for non deduction of tax ignoring the ledger account of the assessee wherein the assessee itself has taken the said amount as accrued interest.
2. On the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in deleting the addition of Rs.1,52,511/- payable to M/s. Chanchal Trading Co. treating it to be a genuine creditor without verifying the identity and 2 ITA No.2452/Del./2011 genuineness of the creditor and also in absence of any confirmation from the creditor.
3. The appellant craves to be allowed to add any fresh grounds of appeal and / or delete or amend any of the grounds of appeal."
2. The assessee company is engaged in manufacturing and sale of Hydraulic Presses, its components and job work. In the ground no.1, the revenue has contested the deletion of addition of Rs.12,03,555/-. The Assessing Officer made a disallowance of Rs.14,23,253/- for non-deduction of tax at source u/s 40(a)(ia) of the Income-tax Act. The CIT (A) has granted part relief to the assessee by holding as under :-
"3.2 I have considered the submissions made by the authorized representative of the appellant company. Other than the payments made to M/s Newar Steel Ltd. and M/s Kali Ram Reti Ram, the other interest payments made by the appellant and disallowed by the A.O. u/s 40(a)(ia) are payments made on account of interest under the EPF Act, interest on self assessment of advance tax, interest on late deposit of excise duty, interest on late deposit of sales tax, etc. or interest payments below Rs.5,000/-. These payments do not require deduction of tax at source and therefore cannot be disallowed u/s 40(a)(ia) of the Act. Regarding the payment of Rs.8.5 lacs to M/s Newar Steel Ltd., it has been submitted that Rs.8 lacs represented the payment of principal amount by the appellant to the party under orders of the Court and only Rs.50,000/-represented interest, on which TDS has been deducted by the appellant. Therefore, no disallowance u/s 40(a)(ia) is called for of this payment. As regards the payment to M/s Kali Ram Reti Ram, it is seen that the appellant paid Rs.11,02,252/- to the party, of which Rs.8,73,555/- was the principal amount and balance Rs.2,28,698/- was the interest on account of delayed payment to the party. The appellant's contention is that since the amount was paid under orders of the Court, no TDS was deductible in view of judgement of Hon'ble 3 ITA No.2452/Del./2011 Bombay High Court in the case of Madhusudan Shrikrishan vs. Emkay Exports and others (188 Taxman 195). However, the provisions of the Act provide for deduction of tax at source from interest payments (section 94A) irrespective of whether such payments were made in compliance to a decree of the Court or otherwise. Accordingly, in my view the payment of interest of Rs.2,28,698/- made by the appellant to M/s Kali Ram Reti Ram deserves to be disallowed as the appellant has not deducted tax at source from the same. In view of the above discussion, the disallowance made by the A.O. is confirmed to the extent of Rs.2,28,698/- and the appellant gets relief of Rs.12,03,555/,.- This ground of appeal is partly allowed."
3. We have head both the sides on the issue. We find that the CIT (A) has granted the relief after factually verifying the facts of the case and in our considered view, there is no fault in the order of the CIT (A). Accordingly, we sustain the same. Ground No.1 is dismissed.
4. In the ground no.2, the issue involved is deleting the addition of Rs.1,52,511/- payable to M/s. Chanchal Trading Co. The Assessing Officer disallowed the amount as non-genuine activity. CIT (A) has granted the relief by holding as under :-
"4.2 I have considered the submissions made by the authorized representative of the appellant company. The addition of Rs.1,52,511/- to income of the appellant has been made by the A.O. u/s 68 of the IT Act, holding that since no confirmation of a creditor M/s Chanchal Trading Company could be filed by the appellant, the same was unexplained cash credit. However, when the A.O. has accepted the purchases and sales recorded in the books of the appellant, it cannot treat a creditor from whom material was purchased as unexplained. Further, as long as the appellant is acknowledging this party as a creditor & reflecting the amount due to it on the liabilities side of its balance sheet, the liability does not cease to exist and cannot be added to the income of the appellant u/s 41 (1) 4 ITA No.2452/Del./2011 of the IT Act. The addition made to the income of the appellant company by the A.O. on account of unexplained creditor is, therefore, deleted. This ground of appeal is allowed."
5. We have heard both the sides on the issue. We find that there is no force in the ground of the revenue since the Assessing Officer has accepted the purchase and sales which are recorded in the books of account. The Assessing Officer cannot treat the credit from whom material was purchased as unexplained. Keeping these facts in view, we find no merit in the revenue's ground no.2.
6. Ground No.3 is general in nature and does not require any adjudication.
7. In the result, the appeal of the revenue stands dismissed.
Order pronounced in open court on this 13th day of April, 2012.
Sd/- sd/-
(RAJPAL YADAV) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 13th day of April, 2012
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-XVI, New Delhi.
5.CIT(ITAT), New Delhi AR, ITAT
NEW DELHI.