Income Tax Appellate Tribunal - Chandigarh
Ito, Ludhiana vs Sh. Raghubir Moudgill, Ludhiana on 28 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI. SANJAY GARG, JUDICIAL MEMBER AND
DR. B.R.R. Kumar, ACCOUNTANT MEMBER
ITA No. 1022/Chd/2016
Assessment Years: 2010-11
The I TO Vs. Sh. Raghubir Moudgill
Ward -7(3), Ludhiana 35-A, Raghunath Enclave
Backside Aggar Nagar,
Ludhiana
PAN No. ADUPM6717H
(Appellant) (Respondent)
Assessee By : Shri. Pankaj Bhalla
Vinay Kohli
Department By : Shri. S.K. Mittal
Date of hearing : 28/06/2017
Date of Pronouncement : 28/08/2017
ORDER
PER DR. B.R.R. KUMAR, AM
The present appeal has been filed by the Revenue against the order of the Ld. CIT(A)-3 Ludhiana, dt. 11/09/2015.
2. The Revenue has raised the following grounds of appeal:
1. Whether on the facts and circumstances of the case and also on merits, the learned Commissioner of Income Tax (Appeals) was justified in invoking jurisdiction and passing the order under section 154 of the Income-tax Act, 1961 without pointing out specific mistakes in the earlier order passed under section 250(6) which led to change of opinion and deletion of disallowance which was sustained earlier.
2. Whether the facts of the case of Punjab State Cooperative Federation of Housing Building Societies Ltd. Vs. DCIT, Circle-4(1), Chandigarh in ITA 834/Chd/2011 dt. 31/05/2012 relying upon which the learned Commissioner of Income Tax (Appeals) has allowed relief to the assessee are similar to the case of the assessee and applicable to the case of the assessee.
3. Brief facts of the case are that the assessee filed its return of income on 15/10/2010 declaring total income of Rs. 28,23,120/- for the AY 2010-11. The assessee is deriving income from the labour contracts. During the course of assessment the AO observed that the assessee had made payments for job works charges amounting to Rs. 196,90,000/-. From the copy of the account 2 submitted, it has been found by the AO that the assessee has made paymen of these charges without deducting TDS on the payments made, whereas the same was shown as TDS payable on the month end.
4. The AO opined that the Section 194C provides that the TDS has to be deducted at the time of making such payments. The AO invoked section 194C(1) which reads as under:
194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out for work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to-
(i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;
(ii) two per cent where the payments is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein."
5. The AO observed that Section 194C makes it clear that at the time of payment to be made to a contractor, TDS has to be deducted from such payment and only remaining amount has to be credited to the account of the contractor either in cash or by cheque or by any other mode whichever is earlier. Since the assessee has first made payment to various parties for the job work done by them through cheques on various dates during the month and the TDS was shown as payable at the month end. The AO held that the assessee has made payment to the parties through cheques but has not deducted TDS at the time of payment. The AO relied on ITO Vs. Bhoomi Construction in ITA No. 601 (RJT.) of 2012, dated 08th Feb, 2013 and held that TDS has to be deducted at the time of crediting these parties with the payments.
6. The CIT(A) in her order dt. 11/09/2015 upheld the addition made by the AO.
3
7. During the submission before the Ld. CIT(A) the assessee submitted that the fact of Bhoomi Constructions case are distinguishable from the assessee's case. In the said case the total deduction of the tax was made on 31st March by debiting the account of the payee, whereas in the present assessee's case, the deduction of tax was made regularly out of the bill amount at the time of credit in the payees account since the payment to the payee were made prior to the credit of the total amount in the respective account of the payees but in the same month itself then deduction of tax made at the time of credit and not at the time of making payment does not amount to non compliance of any provision of law relating to deduction of tax at source because the tax in any case was to be deposited in the Government account by seven days of next month or otherwise before the due date of filing the return of income.
8. During the remand report proceeding the AO reiterated that the assessee made payment to the parties without deducting the TDS on payments made whereas the same is shown as TDS payable on the month end.
9. The Ld. CIT(A) has confirmed the addition on the ground that the TDS liability accrued at the end of every month being coterminous with the accrual of the liability of the principal sum. Later the Ld. CIT(A) vide order dt. 02/08/2016 has modified her order and given relief to the assessee based on the judgment of Punjab State Federation of Housing Building Societies Ltd. Vs. DCIT, Circle 4(1) Chandigarh.
10. Before us the Revenue took up two grounds (a) whether Section 154 done by the Ld. CIT(A) is correct and (b) whether the fact of Punjab State Cooperative Federation of Housing Building Societies Ltd. Vs. DCIT is applicable to the assessee.
11. We have heard Ld. Representatives of both the parties and perused the material placed before us.
4
12. In so far as the issue in the ground no 1. is concerned it has been held that non consideration of the decision of the jurisdictional court would constitute mistake apparent from record. Since the decision of the jurisdictional ITAT was not considered while passing the impugned order under section 250(6) of the Act it constitutes a mistake apparent from record for which the appropriate remedy would be passing of order under section 154 of the Act. Thus there is no merit on the ground taken by the Revenue.
13. Regarding the ground no. 2 Whether the facts of the case of Punjab State Cooperative Federation of Housing Building Societies Ltd. Vs. DCIT, Circle-4(1), Chandigarh in ITA 834/Chd/2011 dt. 31/05/2012 relying upon which the learned Commissioner of Income Tax (Appeals) has allowed relief to the assessee are similar to the case of the assessee and applicable to the case of the assessee is concerned, we find that the case is squarely applicable and in favour of the assessee. The relevant portion of the judgment in the above said case is reproduced hereunder
17. Th e S p eci al B en c h of Mum b ai Tri b un al i n DCIT V s.B h a rt i Sh i p ya rd Li mi t ed ( 2 01 1 ) 13 2 I TD 5 3 ( M um b ai ) h ad h el d t h at t h e am en dm en t b r o ugh t b y t h e Fi n an ce Act , 201 0 t o p r o vi so t o s ect i on 40( a ) ( i a ) of t h e Ac t , b y wa y of s u b st i t ut ed p r ovi s o wa s t o b e ap p l i ed w. e .f . 1.4 . 20 10 an d wa s n ot ret r o sp e ct i ve i n n at ur e. Ho we ve r, t h e H on ' b l e Cal c ut t a Hi gh C o u rt i n CI T Vs . Vi rgi n Cr eat i on s ( s up r a ) h a ve h el d t h at t h e sai d am en dm en t t o p r o vi so t o sect i on 4 0( a )( i a ) of t h e Act wa s ret r o sp e ct i ve i n nat ur e. 18 In t h e f act s of t h e p re sen t ca se an d a s b r o ugh t o ut b y t h e a s se s see b ef o re u s, t h e a s s es s ee h a d de d uct e d t a x at s o ur ce o ut of p aym e n t s m ad e t o con t r act o r t ot al i n g R s. 1, 2 1, 75, 82 8 /- wh i ch wa s dep o si t ed b ef or e 8 . 7.2 00 8. Th e d u e d at e f o r.f i l i n g ret ur n of i n com e of t h e a s se s se e wa s 30. 09 .2 00 8. F ol l o wi n g t h e rat i o l ai d do wn b y t h e Hon 'b l e Cal c ut t a Hi gh C o urt i n CI T Vs . Vi rgi n Cr eat i on s ( s up ra ) an d va ri o u s B en ch e s of t h e T ri b un al we h ol d t h at on c e t h e t a x h a s b een ded u ct ed a n d d ep o si t ed b y t h e a ss es s e e b ef ore t h e d u e d at e of f i li n g ret urn of i n c om e, t h er e i s n o m eri t i n di sall o wi n g t h e exp en di t ur e rel at ab l e t o s u ch t a x de d uct ed at s o ur ce. Th e a s se s se e s ucc ee ds on b ot h t h e co un t s. Acc or di n gl y, we di rect the A ss e ssi n g Of f i cer t o al l o w t h e cl ai m of exp en di t ure of R s . 1, 0 1, 33, 95 3 /- . Th e g r o u n ds of ap p eal rai se d b y t h e a s se s se e a re t h us al l o we d.
19. In t h e re s ul t , t h e ap p eal f i l ed b y t h e a s se ss ee i s al l o we d . 5
14. As a result, we do not find any cogent reason to interfere with the order of the Ld. CIT(A) as the order of the rectification passed is based on the ratio of the decision of the Hon'ble Jurisdictional Punjab & Haryana High Court in case of M/s Punjab State Cooperative Federation of Housing Building Societies.
15. In the result, appeal of the Revenue is dismissed.
The order is pronounced on 28/08/2017 in the open Court.
Sd/- Sd/- (SANJAY GARG) (Dr. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER AG Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The Departmental Representative