Income Tax Appellate Tribunal - Chandigarh
North Himalayan Environment ... vs Ito, Panchkula on 6 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.883/Chd/2015
(Assessment Year : 2011-12)
M/s North Himalayan Environment Vs. The Income Tax Officer,
Protection & Education Society, Ward-1,
SCF-14, 2nd Floor, Sector-15, Panchkula.
Panchkula.
PAN: AAATN9704G
(Appellant) (Respondent)
Appellant by : Shri Amitoz Singh Kamboj
Respondent by : Shri Manjit Singh, DR
Date of hearing : 10.01.2017
Date of Pronouncement : 06.04.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
Thi s appeal has been fi l ed by the assessee agai nst the order of CI T( A) , Panchkul a d ated 30/09/2015 rel ati ng to A.Y 2011-12.
2. The assessee ha s rai sed the fol l o wi ng grounds o f appeal :
"1. T hat the Ld. C IT (A) h as erred on f ac ts and in l a w in al l eg ing th at the add i tions are requ ired to be made on ac coun t of non deduc tion of tax at source u/s 40( a)( i a) of the Inco me T ax Ac t, 1961( "T he Act" ).
2. T hat the Ld. C IT (A) h as erred on f ac ts and in l a w in no t cons id er ing th at the p ay men ts h av e been made to a s tatu tor y bod y M/ S H. P. Bus S tands M an ag e men t and Devel o p men t 2 Au thor i ty, Sh i ml a wh ich is a govern men t de p ar tme n t. T hus, there is no ques tion of a bogus p ay me n t, the moo t po in t to curb bogus p ay men ts wh en the l a w was en ac ted.
3. T hat the Ld. A. O h as erred on f ac ts and l a w in al l eg ing as abov e wi th ou t appre c iating th at the s aid gov t. o rg an iz ation h as dul y sho wn the s aid p ay me n ts in i ts Re turn of Inco me. T he Ld. C IT ( A) was o f the v ie w th at the assessee is requ ired to deduc t T DS u/s 194( C) on the p ay men ts mad e to M/s H. P. Bus S tan ds M an age men t an d Devel o p men t Au thor i ty, Sh i ml a. Where as the con te n ti on of th e assessee was th at T DS was no t r equ ired to be deduc ted on p ayme n ts made to M/s H. P. Bus S tands M an ag e men t and Devel o p men t Au thor i ty, Sh i ml a. wh ich is a govern men t de p ar tme n t.
4. In v ie w of al l th ese and such o ther grounds, wh ic h may be tak en at the ti me of he ar ing, th e appe al may pl e ase be al l o we d and jus tice rendered.
T otal p ay me n t made is Rs. 36, 50, 133/- wh ich is d is al l o we d. "
4. The onl y i ssue i n the present appeal i s agai nst the acti on of the Ld . CI T( A) i n uph ol di ng the addi ti on of Rs. 36,50,133/- made u/s 40( a) ( i a) of the Act.
5. Bri ef facts rel evant to the i ssue are that the assessee had cl ai med "di spl a y ri ghts pa yment" of Rs. 36,50,133/- whi ch as per the a ssessee were pa i d to M/s H.P.Bus Stands Management and Devel opment Authori t y, Shi ml a for obtai ni ng di spl a y ri ghts whi ch was al l otted through tender. The A.O di sal l o w ed the same u/s 40(a) ( i a) of the Act si nce no ta x had been de ducted on the sa me by the assessee. Ld. CI T( A) , i n appel l at e proceedi ngs before hi m, uphel d the di sal l o wance made .
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6. Aggri eved by the same, the assess ee has no w come up i n appeal before us.
7. Duri ng the course of heari ng before us, Ld. counsel for the assessee took th e pl ea that no di sal l o wance coul d be made u/s 40( a) ( i a) si nce the pa yee i .e M/s H.P.Bus Stands Management and Devel opment Authori t y, Shi ml a had i ncl uded the sai d pa yments i n i ts i ncome and had pai d ta xes on the same. Ld . Counsel for th e assessee subm i tted that thi s pl eadi ng had been taken before the Ld. CI T( A) al so but i n the absence o f evi dence provi ng that the pa ye e had pai d ta xes on the same, Ld. CI T( A) had not accepted the assessee's contenti on. Ld. Counsel for the assessee thereafter stated that it had evi dence to prove and substanti ate i ts cl ai m whi ch i t wi shed to no w produce before us by wa y of addi ti onal evi dence. Ld.counsel for the assessee fi l ed an appl i cati on i n thi s regard dated 06/09/2016. Ld. Counsel for the assessee further pl eaded that si nce these documents were to be procured / obtai ned from the payee, the y coul d not be submi tted du ri ng appel l ate p roceedi ngs and therefore, requested that the same ma y no w be admi tted si nce the y went to the root of the matter to deci de the i ssue. Ld. DR on the other hand rel i ed on the order of the AO and CI T( A) .
8. We have heard both the parti es. The sol e i ssue before us i s rel a ti ng to di sal l o wa nce made u/s 4 0( a) ( i a) on 4 account of non d educti on of ta x at source vi s-à-v i s e xpense i ncurred on acco unt of "di spl a y r i ghts pa yment" a mounti ng to Rs. 36,50,133/- made to M/s H.P.Bus Stands Management and Devel opment Authori t y, Shi ml a. The sol e contenti on rai sed by the LD. Counsel of the assessee is that no di sal l o wance i s permi ssi bl e u/s 40( a) ( i a) si nce th e pa yee i .e M/s H.P.Bus Stands Management and Devel opment Authori t y, Shi ml a has i ncl uded the sai d pa ym ent i n i ts i ncome and pai d ta xes on the s ame. The Ld. C ounsel has further adduced the fol l o wi ng evi dences before us to substanti ate i ts aforesai d cl ai m.
• Certi fi cate from M/S H.P. Bus Stands Management and Devel opment Authori t y, Shi ml a regardi ng recei pts from the assessee on account of adverti sement ri ghts duri ng the year and further certi f yi ng that the sai d amount was dul y accounted for i n i ts books.
• Copy of I ncome Ta x return of M /s H.P. Bus Stands Management and Devel opment Authori t y, Shiml a fi l ed duri ng the year.
9. We are i n agreement wi th the contenti on of the Ld. Counsel of the assessee vi s-à-vi s the proposi ti on of l a w that where the pa yee has i ncl uded the i mpugned pa yment in i ts i ncome and pai d ta xes on the sa me and di scl osed i t i n i ts Return of I ncome, no di sal l o wance on account of the sai d pa yment/ e xpens es i s to be made i n the hands of the pa yer. 5 The Hon'bl e Del h i Hi gh Court i n the case of CI T -1 vs Ansal Land Mark To wnshi p ( P) Ltd i n I TA No.160/2015 & 161/2015 dt.26-08-2015, has l ai d do wn the sai d proposi ti on hol di ng as under:
"12. Relevant to the case in hand, what is common to both the provisos to Section 40 (a) (ia) and Section 210 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax.
13. Turning to the decision of the Agra Bench of ITAT in Rajiv Kumar Agarwal v. ACIT (supra ) , the Court finds that it has undertaken a thorough analysis of the second proviso to Section 40 (a)(ia) of the Act and also sought to explain the rationale behind its insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under:
"On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a "fair, just and equitable" interpretation of law- as is the guidance from Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an "intended consequence" to disallow the expenditure, due to non deduction of tax at source, even in a situation in which corresponding income is brought to tax in the hands of the recipient. The scheme of Section 40(a)(ia), as we see it, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. It is not, in our considered view, a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax withholding lapse. The penalty for tax withholding lapse per se is separately provided for in Section 271 C, and, section 40(a)(ia) does not add to the same. The provisions of Section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the assessee's tax withholding lapses did 6 not result in any loss to the exchequer. Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an "intended consequence" to punish the assessees for non deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No.
2) Act, 2004."
14. The Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a) (ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance.
15. In that view of the matter, the Court is unable to find any legal infirmity in the impugned order of the ITAT in adopting the ratio of the decision of the Agra Bench, ITAT in (Rajiv Kumar Agarwal v. ACIT).
16. No substantial question of law arises in the facts and circumstances of the present case. The appeal is dismissed."
10. Further, we fi nd that the assessee has adduced evi dences before us by wa y of ad di ti onal evi dences to prove that the pa yee had i ncl uded the aforesai d pa yment in i ts i ncome and pai d ta xes on the sam e al so. Si nce we agree wi th the Ld. Counsel of the assessee that these evi dences go to the root of the m atter and are nec essar y for the ad judi cati on of the i ssue i n the present appeal , we therefore admi t the same and further restore the i ss ue to the fi l e of the A.O to e xami ne the i ssue afresh i n the l i ght of the pro posi ti on as l ai d do wn by th e Hon'bl e Del hi Hi gh Court i n A nsal Land Mark To wnshi p ( P) ( Ltd) ( supra) a nd i n the l i ght of evi dences produced by the assessee i n thi s regard. We ma y add that 7 the assessee be gi ven due opport uni t y of heari ng and i s free to adduce al l e vi dences whi ch i t wi shes to rel y upon to substanti ate i ts cl ai m. The A.O . i s di rected to deci de the matter thereafter i n accordance wi th l a w.
11. I n effect, the appeal of the assessee i s al l o wed for stati sti cal purposes.
Order pronounced in the open court.
Sd/- Sd/-
(BHAVNESH SAINI) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 6 t h April, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh
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