Punjab-Haryana High Court
Commissioner Of Income-Tax-I vs M/S Raja Forgings & Gears Ltd on 28 March, 2011
Author: Ajay Kumar Mittal
Bench: Adarsh Kumar Goel, Ajay Kumar Mittal
Income-tax Appeal No.5 of 2011 -1-
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IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
Income-tax Appeal No. 5 of 2011
Date of decision: 28.3.2011
Commissioner of Income-Tax-I, Chandigarh
...Appellant
Versus
M/s Raja Forgings & Gears Ltd. ...Respondent
CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL
HON'BLE MR.JUSTICE AJAY KUMAR MITTAL
Present: Ms. Urvashi Dhugga, Senior Standing Counsel for the appellant.
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AJAY KUMAR MITTAL, J.
1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") against order dated 22.4.2010 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A', Chandigarh in ITA No.272/CHD/2010, relating to the assessment year 2006-07, claiming the following substantial questions of law:-
"i) Whether on the facts and circumstances of the case, Hon'ble ITAT, Chandigarh has erred in setting aside the decision of CIT(A), Chandigarh which upheld the addition made by the AO on account of interest paid to Mrs. Gargi Goel being expenditure pertaining to period prior to the Asstt. Year under consideration i.e. AY 2006-
07 under the provisions of section 40(a)(ia) when the provisions of section 40(a)(ia) clearly provide that what is Income-tax Appeal No.5 of 2011 -2- *** to be allowed in subsequent year is only what is disallowed in the relevant year?
ii) Whether on the facts and circumstances of the case, the Hon'ble ITAT has erred in allowing the late payments of employees contribution of ESI & PF beyond the grace period to the respective funds, in violation of provisions of Section 36(1)(va) of the Income Tax Act, 1961?"
3. The facts as narrated in the appeal necessary for adjudication of the present appeal may be noticed. The assessee had filed return on 27.11.2006 declaring total income at nil. The return was processed under Section 143(1) of the Act on 3.10.2007. However, the case of the assessee was selected for scrutiny and the assessment was framed under Section 143(3) of the Act on 10.12.2008. The Assessing Officer made the disallowances amounting to Rs.1,14,140/- on account of interest paid to Mrs. Gargi Goel as the same pertained to the period prior to 31.3.2005 and Rs.16,18,632/- on account of late payment of ESI/EPF. The assessee filed appeal before the Commissioner of Income-Tax (Appeals) (for short "the CIT(A)") which was partly allowed on 9.12.2009 granting relief of Rs.4,33,117/- out of the total disallowance of Rs.16,18,632/-. Further appeal filed by the assessee was, however, accepted by the Tribunal vide order dated 22.4.2010 and the addition made by the assessing officer was deleted in toto.
4. We have heard learned counsel for the revenue who has Income-tax Appeal No.5 of 2011 -3- *** challenged the findings recorded by the Tribunal deleting the addition made by the assessing officer with regard to the interest paid to Smt. Gargi Goel for the period upto 31.3.2005 during the financial year relating to the assessment year 2006-2007.
5. The Tribunal while deciding question No.1 in favour of the assessee observed that in terms of proviso to Section 40(a)(ia) of the Act, where the assessee in any subsequent years deducts tax at source and pays before the due dates then such expenditure is admissible as a deduction in the year in which such tax has been paid. It was further noticed that the assessee had deducted and paid tax at source on the interest expenditure relating to the period 1.4.2004 to 31.3.2005 during the period ending 31.3.2006 and within the specified due dates and was thus entitled to deduction in terms of Section 40(a)(ia) of the Act. The finding recorded by the Tribunal reads as under:-
"7. Section 40 of the Act starts with a non obstante clause. Under the provisions of section 40(a)(ia) of the Act, it is provided that where any interest, commission or brokerage, rent, royalty, fees for professional or technical services, amounts payable to a contractor or sub contractor for carrying out any work (including supply of labour for carrying out any work), is payable to a resident and on which tax is deductible at source under chapter XVII B and where such tax has either not been Income-tax Appeal No.5 of 2011 -4- *** deducted or after deduction not been paid before the due dates as specified in the said sub section, then no deduction shall be allowed in computing the income chargeable under the heads profits & gains of business or profession. The provisio to section 40(a)(ia) of the Act, however, provides that where tax has been deducted in any subsequent years and paid, then such expenditure is to be allowed as a deduction in the year in which such tax has been paid. The incidence of tax payments are recognized in the proviso itself.
8. In the light of the above said provisions, now we shall address the issue raised before us. The assessee had claimed interest expenditure relating to the period 1.4.2004 to 31.3.2006 during the period ending 31.3.2006, in view of the provisions of section 40(a)(ia) of the Act, the interest payable by the assessee to Smt.Gargi Goyal was eligible to tax deduction at source. Admittedly, no tax was deducted on deposits on account of the interest relatable to the period ending 31.3.2005 within the due dates provided in section 40(a)(ia) of the Act at the closing of the year ending 31.3.2005. However, such tax was deducted and paid during the period ending 31.3.2006. In view of the provisions of the Income-tax Appeal No.5 of 2011 -5- *** Act, which mandated that where payment of specified items of expenditure are exigible to deduction to tax at source and where such tax has not been deducted, then the assessee is not entitled to the claim of deduction in respect of such expenditure on which TDS has not been deducted and paid within the previous year. The proviso to the said sub section further mandates that in case of payments of TDS in subsequent year's then the claim of the assessee is to be allowed in the year when the tax deducted has been paid in the account of the treasury. In the facts of the present case before us, the assessee had deducted and paid the tax at source on the interest relatable to the period 1.4.2004 to 31.3.2005 in the year ending 31.3.2006 and within specified due dates, the assessee is entitled to the claim of expenditure in the year under consideration in view of the provisions of section 40
(a)(ia) of the Act, which expenditure is otherwise relatable to the preceding year."
6. No fault could be pointed out in the finding recorded by the Tribunal regarding allowability of expenditure on account of interest paid to Smt. Gargi Goel for the period upto 31.3.2005. Question No.1, thus, as claimed, does not arise for consideration in this appeal.
Income-tax Appeal No.5 of 2011 -6-
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7. Adverting to question no.2, we find that the same is covered by the judgment of Hon'ble Supreme Court in Commissioner of Income-Tax Vs.Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) against the revenue.
8. In view of the above, no substantial question of law arises. Consequently, the appeal is dismissed.
( Ajay Kumar Mittal)
Judge
March 28, 2011 (Adarsh Kumar Goel)
Pka Judge