Income Tax Appellate Tribunal - Mumbai
Deora Trading Co. , vs Assessee on 8 June, 2012
आयकर अपील य अ धकरण,
धकरण, मंुबई यायपीठ 'डी
डी'
डी मंुबई
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, MUMBAI
ी पी.
पी.एम.
एम. जगताप,
जगताप, लेखा सद य,
य एवं ी अ मत शु ला, या यक सद य के सम
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
व वध आवेदन सं. / M.A no. 729/Mum./2012
(आयकर अपील सं. / ITA no. 3487/Mum./2009)
( नधारण वष / Assessment Year : 2005-06)
Deora Trading Co. ....................... आवेदक /
A-69, MIDC
Applicant
Chakala Marol Indl Estate
Andheri (E), Mumbai 400 093
बनाम v/s
Income Tax Officer ................... यथ /
Ward-20(2)-1 Respondent
Piramal Chambers
Mumbai 400 012
थायी लेखा सं./ Permanent Account Number - AABFD4909V
नधा रती क ओर से / Assessee by : Mr. Uttam Chand Bothra
राज व क ओर से / Revenue by : Mr. T.D. Singh
सनवाई
ु क तार ख / आदे श घोषणा क तार ख /
Date of Hearing - 14.06.2013 Date of Order - 05.07.2013
आदे श / ORDER
अ मत शु ला, या यक सद य के ारा /
PER AMIT SHUKLA, J.M.
By way of this miscellaneous application, the assessee seeks rectification of the impugned order dated 8th June 2012, passed by the Tribunal, Mumbai Bench, in ITA no.3487/Mum./2009, for assessment year 2005-06.
Deora Trading Co.
22. In the present application, the assessee has raised mainly two issues on which it has been pointed out that there has been a mistake apparent from record. The first issue relates to disallowance of weaving charges aggregating to ` 60,14,842, paid to Santogen Silk Mills Ltd. under section 40(a)(ia) of the Income Tax Act, 1961, for non-deduction of TDS under section 194C. The contentions raised in the application are as under:-
"That the Hon'ble Tribunal, while sustaining such disallowance, has overlooked the fact that the concerned payee M/s. Santogen Silk Mills Ltd., was a Sick Industrial Company referred to BIFR. It was incurring heavy losses and its net worth was eroded. Its income tax assessment for the relevant assessment year 2005-06 was also completed on a loss of ` 62,74,230 and admittedly there was no tax payable or due from the payee (copy of intimation under section 143(1)(a) issued to the said payee is enclosed herewith for ready reference.
1. That the very purpose of TDS provisions is to ensure speedy and earlier collection of tax where it is due and payable. When it is established on facts that no tax was due or payable by the payee, 1 DS in such case (and then subsequent refund) would be an idle formality breach of which will not deserve a severe punishment like a permanent disallowance to the payer of genuine business expenditure. Kind attention is invited to the following observation in Sampath lyengar's Law of Income Tax VOl 6 10th Edition page 9687:
"It may also be pointed out, that the Supreme Court itself in Central Provision Manganese Ore Co. Ltd. v CIT 160 JR 961 pointed out that such interest is compensatory in nature for moneys wrongly withheld from the Govt. Where there are no dues to be collected by the Govt., either because of direct payment by the assessee or for any other reason such interest should not be leviable by understanding levy of interest as justified only, where there is a shortfall in tax payable to an Govt. but not paid." (Emphasis supplied) These observations apply with equal force to TDS obligations also.
2. That the Provisions of s. 40(a)(ia) covering TDS u/s. 194C were introduced by the Finance (No.2) Act, 2004 w.e.f. 01-04-2005 and, hence, t was the first year of operation. The appellant, not being fully conversant with the said provision, bona fide believed that tax was not deductible at source on the amounts payable to M/s. Santogen Silk Mills Ltd., as the payee held no tax liability at all. It is an admitted position that payee was a sister concern and appellant was fully aware of its sick financial condition.
3. That it is submitted with respect that non deduction ot tax at source in a case where it is clear beyond doubt that TDS, f made will only be claimed as a refund by the payee has resulted in only a technical or venial breach of law, if any. It can not be the intention of the Legislature to disallow forever, as is being done in the appellant's case, a genuine expenditure actually incurred by the assessee for a mere technical or venial breach of law, as aforesaid.
4. That, in view of the amendments made to section 40(a)(ia) by the Finance Act, 2012, which is curative in nature, the aforesaid disallowance of weaving charges paid to Santogen Silk Mils Ltd. should not have been confirmed by the Hon'ble ITAT as the said payee car not be deemed to be an assessee in default u/s 201(1). In this connection, we would like to bring to your kind Deora Trading Co.3
notice that the curative amendments, which are made for the purposes of removing unintended hardship, have been held to have retrospective effect in a number of judicial decisions.
5. That the Special Bench decision in the case of MerHyn Shipping & Transports vs. ACIT (Vishakhapatnam ITATt (Vizag Spl Bunch) delivered on 29.03.2012 [Asstt. year 2005-06], which had an impact on the case of the appellant, has not been considered by the Hon'ble TAT.
6. It is respectfully pointed out that while sustaining the disallowance of Weaving Charges, the Hon'ble Tribunal has remitted the matter back to the Assessing officer in respect of Processing Charges and Service Charges disallowed u/s 40(a)(ia).
It is, therefore, earnestly prayed that in the light of the above submissions, the matter relating to Weaving Charges may also be remitted to he Assessing Officer for necessary verification of above facts and also whether any amount was actually payable at the end of the previous year to which alone, the provisions of Section 40(a)(ia) can apply as has been held by Hon'ble Special Bench in the above referred case of M/s. Merilyn Shipping and Transports vs. ACIT."
3. The second issue relates to disallowance of car hire charges amounting to ` 1,20,000, paid to Geeta Devi Deora under section 40(a)(ia) for non- deduction of TDS under section 194C. In this regard, following contentions have been raised:-
1. That the Car Hire Charges amounting to Rs. 120000/- paid to Srnt. Geeta Devi Deora is in the nature of rent referred to in Section 1941 of the Income tax Act, 1961. It is, therefore, submitted with respect that the provisions of Section 194C did not apply to the said car hire charges which is covered by Section 194I.
2. That the provisions of Section 40(a)(ia) were not applicable to rent during the assessment year 2005-06 as rent has been brought under the scope of this section w.e.f. 01-4-2006 only by the Taxation Laws (Amendment) Act, 2006.
3. That, accordingly, the disallowance of Car Hire Charges amounting to Rs.
120000/- paid to Smt. Geeta Devi Deora u/s 40(a) (ia) is outside the scope of that Section.
4. The learned Counsel, appearing on behalf of the assessee, submitted that the Tribunal has failed to consider the fact that Santogen Silk Mills Ltd., was running into heavy losses, therefore, there was no requirement of deduction of TDS as the TDS deducted would ultimately would have been refunded to the payee. Secondly, that there has been amendment in section 40(a)(ia) by the Finance Act, 2012, wherein second proviso has been Deora Trading Co.
4inserted w.e.f. 1st April 2013 that where an assessee fails to deduct tax on any sum but is deemed to be assessee in default under the first proviso to section 201(1), then for the purpose of section 40(a)(ia), it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income. This amendment though brought in statute w.e.f. 1st April 2013, should be held as curative in nature and, hence, relief should have been given under this proviso. Regarding disallowance of car hire charges, he submitted that the car hire charges falls within the nature of rent under section 194I and not under section 194C of the Act. Therefore, there is a mistake apparent on record.
5. On the other hand, the learned Departmental Representative submitted that the entire contentions raised in the application are based on all together new grounds which was neither raised before the Tribunal nor before the learned Commissioner (Appeals) and / or before the Assessing Officer. Thus, new plea cannot be entertained at the stage of the proceedings under section 254(2). Further, the Tribunal has given a very detail finding as to why the provisions of section 194C are applicable and has also dealt with the reasons for confirming the disallowance. There is no mistake apparent from record which has been pointed out in the application or by the learned Counsel, therefore, the same should be rejected.
6. We have heard the rival contentions, perused the relevant findings of the Tribunal vis-a-vis the contentions raised in the present misc. application. With regard to the first issue of disallowance under section 40(a)(ia), the assessee's contention has been that the payee company, Santogen Silk Mills Ltd. was under the BIFR and, hence, TDS provisions under the Income Tax Act cannot be applied. The Tribunal, in Paras-6 and 7 has dealt this issue in detail and has given a categorical finding as to why the payment on account of weaving charges amounts to work done in pursuance of work contract within the meaning of section 194C and also the reasons as to why the TDS was liable to be deducted. The contention now which has been raised in the application is altogether a new plea and no mistake has been pointed out in the findings of the Tribunal. As regards the amendment brought in statute by Deora Trading Co.
5the Finance Act, 2012, by way of insertion of second proviso to section 40(a)(ia), it is clear that the same has been brought in statute w.e.f. 1st April 2013. Whether it is a curative in nature so as to have retrospective effect, cannot be dealt in the proceedings under section 252(2), which is strictly circumscribed on the scope of mistake apparent from record. Even the other contentions which have been raised have not been raised before the Tribunal either at the time of hearing or before the learned Commissioner (Appeals). Thus, the same cannot be entertained now. Insofar the reliance placed on the Special Bench decision in Merlin Shipping and Transport v/s JCIT, the same is distinguishable and is not applicable at all to the facts of the present case as it was not a case where the issue involved was with regard to the "paid" or "payable" amount. Moreover, the said Special Bench decision has now been overruled by the Hon'ble Calcutta and Gujarat High Courts. Thus, insofar as the first issue raised in the present application is concerned, we do not find any mistake apparent on record which can be rectified and, hence, the contentions raised by the assessee are dismissed.
7. Regarding the second issue of disallowance of ` 1,20,000 wherein the assessee has submitted that the car hiring falls within the nature of rent under section 194I is also a new plea which was not been raised before the learned Commissioner (Appeals) or before the Tribunal. Otherwise also the definition of rent as given in section 194I which is now being relied upon a new plea which was not raised at any stage. Otherwise also, the definition of rent as given in section 194I, does not speak about care hire charges. On the other hand, the Tribunal has held that hiring of car was within the terms of a contract which comes within the purview of work in pursuance of a contract as defined under section 194C. At this stage, to enter into controversy whether the care hire charges falls within the ambit of section 194C or 194I is a debatable issue and, hence, beyond the scope proceedings under section 254(2). Thus, this contention of the assessee is devoid of merits and, hence, the same is not sustainable. Accordingly, the miscellaneous application preferred by the assessee is dismissed.
Deora Trading Co.
68. प रणामतः नधा रती क व वध आवेदन खा रज मानी जाती है ।
8. In the result, assessee's M.A. is treated as dismissed.
आदे श क धोषणा खले
ु यायालय म दनांकः 5th July 2013 को क गई ।
Order pronounced in the open Court on 5th July 2013 Sd/- Sd/-
पी.
पी.एम.
एम. जगताप अ मत शु ला
लेखा सद य या यक सद य
P.M. JAGTAP AMIT SHUKLA
ACCOUNTANT MEMBER JUDICIAL MEMBER
मंुबई MUMBAI, दनांक DATED: 5th July 2013
आदे श क त ल प अ े षत / Copy of the order forwarded to:
(1) नधा रती / The Assessee;
(2) राज व / The Revenue;
(3) आयकर आयु (अपील) / The CIT(A);
(4) आयकर आयु / The CIT, Mumbai City concerned;
(5) वभागीय त न ध, आयकर अपील य अ धकरण, मंुबई / The DR, ITAT, Mumbai;
(6) गाड फाईल / Guard file.
स या पत त / True Copy
आदे शानसार
ु / By Order
द प जे. चौधर / Pradeep J. Chowdhury
वर नजी स चव / Sr. Private Secretary
उप / सहायक पंजीकार / (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मंुबई / ITAT, Mumbai