Income Tax Appellate Tribunal - Pune
B.C. Biyani Projects Pvt. Ltd., ... vs Assessee on 10 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member,
and Shri R.K.Panda, Accountant Member.
ITA.No.1422/PN/2011
(Asstt. Year : 2005-06)
B.C.Biyani Projects Pvt. Ltd.
Biyani Chambers, Professor Colony,
Jamner Road,
Bhusawal. .. Appellant
Vs.
ACIT, Circle-2,
Jalgaon. .. Respondent
Appellant by : Shri M.K.Kulkarni
Respondent by : Shri Mukesh Verma
Date of Hearing : 10.07.2012
Date of Pronouncement : 26.07.2012
ORDER
PER SHAILENDRA KUMAR YADAV, JM:
This appeal has been filed by the assessee against the order of CIT(A) on following grounds:
1. On the facts and circumstances of the case and in law the Ld. C.I.T.(A) erred in confirming the addition of Rs.9,54,01,780/-
as made by the A.O. u/s.40(a)(ia) by way of disallowance of payment to sub-contractors as per effect given by an order under section 154 dt. 14-10-2008.
2
2. On the facts and circumstances of the case and in law the Ld. C.I.T.(A) erred in rejecting the grounds challenging the levy of interest u/s.234-B and 234-D of the Income-tax Act, 1961.
2. The assessee is a private limited company filed return of income on 31.05.2005. The return was taken up for scrutiny. During the assessment proceedings, the Assessing Officer invoked provisions of section 40(a)(ia) of Income Tax Act, 1961, for default of TDS remittance and made addition of Rs.10,93,95,645/-. Aggrieved by this addition, assessee filed an appeal before the first appellate authority, who upheld the order of the Assessing Officer. Same has been opposed before us. In fact, the Assessing Officer on perusal of the Audit Report in form No.3CD filed alongwith return of income noticed that tax deducted at source from payment made to sub- contractor was credited to the Government late, i.e., beyond the time prescribed under Income Tax provisions. The details of the same are as under:
Sr Name of the Place Total T.D.S. (Rs.)
No. party amount (Rs.)
1 Metcon India Mumbai 2,54,94,950 2,83,091
2 Sail Chandrapur 4,49,02,598 5,02,909
Construction
3 N.Janga Reddy Kurnool 16,83,217 18,515
4 A.V.R. 1,30,27,336 1,43,300
Construction
5 P.Shankar 3,43,711 3,781
Reddy
6 T.Bhanuprakash 3,22,07,090 3,54,277
Reddy
7 Aadin Project P. 69,57,784 76,536
Ltd.
8 K.R.Vijay 2,98,599 3,285
Bhaskar Reddy
9 K.T.R. and Co. 56,21,143 61,832
10 Sigma 10,38,779 11,427
Construction
11 Pradeep 23,13,140 25,443
3
Earthmover
12 Komaldas 10,02,248 11,025
Sankdi
TOTAL 13,48,90,595 14,95,418
Less: Amount 2,54,94,950 2,83,091
paid to Metcon
India Ltd.,
Mumbai T.D.S.
31.03.2005
10,93,95,645 12,12,327
3. Before us, the only short point raised by the assessee is to the effect that the disallowance is not merited, because provisions of section 40(a)(ia) of the Act does not cover situations where the expenditure has been actually paid during the year itself and that section 40(a)(ia) is applicable only to the amount of expenditure which is payable as on 31st March of every year. In support of such proposition, reliance has been placed on the decision of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports v. Addl. CIT 70 DTR (Visakha) (SB)(Trib) 81. In the present case, it is sought to be pointed out that the entire expenditure in question has been actually paid out and therefore, even if there was a default in deduction of tax at source under section 194C, disallowance under section 40(a)(ia) cannot be made having regard to the ratio of the judgment of the Special Bench in the case of Merilyn Shipping & Transports (supra).
4. On the contrary, the learned Departmental Representative has not disputed the factual matrix that the proposition sought to be canvassed by the assessee is supported by the decision of the Special Bench of the Tribunal in the case of Merilyn Shipping & 4 Transports, so, however, he has relied upon the orders of the authorities below in support of the case of the Revenue.
5. We have carefully considered the rival submissions. We find that the proposition canvassed by the assessee was a subject- matter of consideration by the Special Bench in the case of Merilyn Shipping & Transports (supra) and relevant portion of the 'Head Notes' as reported in 70 DTR(Visakha)(SB) (Trib) 81 reads as under:
"The legislature by consciously replacing the words from "credited" or "paid" to "payable", the intent has been made clear that only the outstanding amount or the provision for expenses which are liable for TDS are to be disallowed in the event there is default in not following the TDS provisions under Chapter XVII-B. No doubt the object of s. 40(a)(ia) is to ensure that the TDS provision as provided in Chapter XVII-B is implemented without any default. The sub-section speaks of the amount 'payable' on which the tax is not deducted and therefore it should apply only if any amount is 'payable', but if the amount is already paid the provisions of this section should not apply. The crucial word is 'payable'. If one looks into the TDS provisions from ss. 194A to 194K, it will be apparent that as per the language of those sections, tax is to be deducted at the time the amount is paid or at the time when the mount is credited, i.e. when the liability is admitted and it becomes payable. Therefore, wherever the payment is covered by aforesaid sections whether paid or credited, tax has to be deducted. Sections 194L and 194LA may also be looked into which say that tax has to be deducted only at the time of payment. The language in these sections therefore shows that the legislature has used different language in different sections. It is trite law that each and every word of the section has its own meaning and while drafting s. 40(a)(ia) the legislature was conscious of the fact that there may be a case where the amount is paid and there may be a case where the amount is payable and has used appropriate words so that the language maybe clear and clear meaning may be given. One may look into the language contained in Finance Bill, 2004 wherein this provision was introduced. In the Finance Bill both the words paid and payable were used. However the word paid was subsequently dropped which shows that s. 40(a)(ia) 5 was meant to be applicable only if the amount covered therein was "payable" at the end of the year. Reference may be made for the scope and effect of s. 40(a)(ia) as clarified by CBDT in Circular No 5 of 2005, dt 15th July, 2005 to show that the intention to introduce this provision was brought to curb bogus payments by creating bogus liability. - CIT v. Upnishad Investment (P)Ltd & Ors (2002) 177 CTR (Guj) 176: (2003) 260 ITR 532 (Guj) applied."
The aforesaid decision of the Tribunal supports the proposition canvassed by the assessee to the effect that where an amount is already paid during the year itself, the provisions of section 40(a)(ia) of the Act do not apply and that the same is applicable only in respect of the amounts outstanding or remaining payable at the end of every year, i.e. 31st of March. In this view of the matter, we therefore hold that the Commissioner of Income-tax (Appeals) erred in not accepting the proposition of the assessee that section 40(a)(ia) of the Act can be invoked to make a disallowance only in cases where the amounts are outstanding or remaining payable at the end of the year, i.e. 31st March. In this view of the matter, we therefore have to examine the applicability of such proposition to the facts of the present case. Since the same involves a factual appreciation, we, therefore, deem it fit and proper to restore the matter back to the file of the Assessing Officer who shall examine the matter in the light of the decision of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports (supra). The assessee shall satisfy the Assessing Officer that the amounts in question have already been paid during the year itself and are not remaining outstanding as on 31st March so as to escape from the rigors of section 40(a)(ia) of the Act. On being satisfied, the 6 Assessing Officer shall delete the addition and if the Assessing Officer arrives to a contrary finding, he shall be at liberty to pass an appropriate order in accordance with law. Needless to mention, in carrying out the aforesaid exercise, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard and thereafter pass an order afresh as per law.
6. The other Ground relating to levy of interest under section 234B and 234D being consequential in nature, no adjudication is called for.
7. In the result, the appeal of the assessee is allowed for statistical purposes.
Decision pronounced in the open Court on 26th Day of July, 2012.
Sd/- Sd/-
( R.K.PANDA ) ( SHAILENDRA KUMAR YADAV )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 26th July, 2012
gsps
Copy of the order is forwarded to:
1. The Assessee
2. The ACIT, Circle-2, Jalgaon.
3. The CIT(A)-II, Nashik.
4. The CIT concerned.
5. The DR "A" Bench, Pune.
6. Guard File.
By Order
Sr.Private Secretary,
Income Tax Appellate Tribunal,
Pune.