Income Tax Appellate Tribunal - Hyderabad
Ito, Ward-8(2), Hyd, Hyderabad vs Amardeep Textiles, Hyd, Hyderabad on 9 January, 2017
1
ITA.No.851/Hyd/2016 M/s. Amardeep Textiles,
Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" (SMC) : HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
ITA.No.851/Hyd/2016
Assessment Year 2008-2009
The Income Tax Officer, M/s. Amardeep Textiles,
Ward-8(2), Hyderabad vs. Hyderabad.
PIN 500 084. PAN AAMFS8988D
(Appellant) (Respondent)
For Revenue : Shri K.J.Rao
For Assessee : -None-
Date of Hearing : 09.01.2017
Date of Pronouncement : 09.01.2017
ORDER
This appeal by the Revenue is directed against the order passed by CIT(A)-2, Hyderabad and it pertains to the A.Y. 2008-2009. Though the case was posted from time to time, none appeared for the assessee and I, therefore proceed to dispose of the appeal ex-parte, qua the assessee. The Revenue has raised the following grounds :
1. "The Ld. CIT(A) erred in law and on facts while deciding the issues raised in appeal.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) is correct in ignoring the material facts that though section 40(a)(ia) had been incorporated recently, the provisions of the section 40(a)(ia) are in statute since long and no High Court had held that the provisions of these sections are applicable to only to payable amounts.
3. Whether on the facts and circumstances of the case, the Ld. CIT(A) is correct in ignoring the material facts that interest paid of Rs.1,85,947 without deducting TDS to Reliance Capital Limited which is a non-banking company and not falls under any clauses of the section 194A(3).2
ITA.No.851/Hyd/2016 M/s. Amardeep Textiles, Hyderabad.
4. Any other ground arises during the course of appeal proceedings."
2. The authorisation issued by the Commissioner under section 253(2) of the Act do not indicate as to what are the grounds which were proposed and authorised.
3. As could be noticed from the assessment order the assessee is involved in the business of textile trading. It admitted total income of Rs.9,84,940. The assessment was originally completed under section 143(3) of the Act by determining the income at Rs.10,31,800. Later on it was reopened on the ground that the income chargeable to tax has escaped assessment. After hearing the assessee the assessment was completed on a total income of Rs.13,93,750 by making the following three additions.
(i) Disallowance of rent u/s.40(a)(ia) Rs.1,26,000
(ii) Disallowance of interest u/s.40(a)(ia) Rs.1,85,947
(iii) Income accepted Rs. 50,000
4. The first addition refers to the rent paid without deducting the tax. The assessee paid rent to two persons viz., Smt. Geeta Rani Rs.1,26,000 and Sri Roank Raj Agarwal Rs.90,000. The A.O. further noticed that the provisions of section 194I are not applicable in the case of Sri Roank Raj Agarwal whereas the payment to Smt. Geeta Rani is within the prescribed limits and therefore, tax ought to have been deducted at source. The assessee's contention, on the other hand, was that Smt. Geeta Rani filed return of income duly admitting the rent received by her and therefore, the provisions of section 40(a)(ia) are not attracted. It was also submitted that the said provisions are applicable only in respect of amount 'Payable'.
3ITA.No.851/Hyd/2016 M/s. Amardeep Textiles, Hyderabad.
5. The Ld. CIT(A) observed that amendment in section 40(a)(ia) is incorporated w.e.f. 01.07.2012 and therefore, even if the recipient had filed the return of income the provisions of section 40(a)(ia) can be invoked in the case of the assessee who has paid the rent without deduction of tax. Accordingly, he added a sum of Rs.1,26,000.
6. The assessee also paid interest of Rs.1,85,947 to Reliance Capital Limited without deducting tax. The case of the assessee was that interest has been paid to a banking company and hence it is not attracted by the provisions of section 194A of the Act. It was also contended that the payment having already been made, section 40(a)(ia) is not applicable.
7. The A.O. observed that the assessee has not substantiated that the recipient of the interest is a banking company falling under section 194A of the Act. He also observed that on any payment made, the assessee has to deduct tax as otherwise, provisions of section 40(a)(ia) are attracted. It may be noticed that the A.O. has also made an addition of Rs.50,000. Since the assessee voluntarily offered the said sum at the time of original assessment, the assessee has not raised any objection in the appeal.
8. Aggrieved by the order of the A.O, it was contended before the CIT(A) that provisions of section 40(a)(ia) are not applicable in respect of payments already made, in the light of decision of ITAT, Special Bench, Visakhapatnam in the case of M/s. Merlyin Shipping & Transports vs. Addl. CIT, Range-1, Visakhapatnam 136 ITD 23 (Visakhapatnam) (SB). The Ld. CIT(A) deleted the addition of Rs.1,26,000 and Rs.1,85,947 by applying the ratio laid down by the ITAT, Special Bench, Visakhapatnam (supra) by observing that section 40(a)(ia) is applicable only to the expenditure which is incurred and 4 ITA.No.851/Hyd/2016 M/s. Amardeep Textiles, Hyderabad.
'Payable' as on 31st March of every year and cannot be invoked when it has already been paid during the previous year without deducting tax at source.
9. Aggrieved, Revenue is in appeal before the Tribunal. Though grounds are not specific with regard to the sum of Rs.1,26,000, Ld. D.R. submitted that it has to be assumed that the Commissioner has authorised the A.O. even with regard to rent paid to Smt. Geeta Rani. It deserves to be noticed that in umpteen number of cases the Bench having noticed that there is a variation between the direction given and the grounds raised before the Bench, I have been requesting the Ld. D.Rs. to place the grounds which were approved by the Commissioner but this is also one of such cases where the Revenue has not placed before me the grounds which were approved by the Commissioner. At any rate, the main issue is that whether amount paid can be taken into consideration for the purpose of invoking the provisions of section 40(a)(ia) of the Act. I am of the opinion that the decision of the Hon'ble Special Bench of the ITAT in the case of Merilyin Shipping & Transport vs. Addl. CIT, Range-1, Visakhapatnam (supra) is binding on the Co- ordinate Benches of ITAT. Since there is no amount outstanding at the end of the account year, no amount can be disallowed under the provisions of Section 40(a)(ia) of the Act. Be that as it may, this issue was considered by the Hon'ble Allahabad High Court in the case of CIT Vs. Vector Shipping Services (P) Ltd., [38 Taxmann.com (All)], which affirmed the said decision of the Special Bench in Merilyin Shipping & Transport vs. Addl. CIT, Range-1, Visakhapatnam (supra) that for disallowance u/s. 40(a)(ia) of the Act, the amount should be payable and not which has been paid during the year. This fact was also accepted by the CBDT in Circular No. 10/DV/2013 dt. 16-12-2013. Hon'ble Supreme Court of India has affirmed the decision of the Hon'ble 5 ITA.No.851/Hyd/2016 M/s. Amardeep Textiles, Hyderabad.
High Court of Allahabad as regards the applicability of Section 40(a)(ia) of the Act. In view of this, I am of the opinion that the Co- ordinate Bench has to follow the decision of the Special Bench, more so, the opinion expressed by the Special Bench is ultimately approved by the Hon'ble Supreme Court. For these reasons, I am of the opinion that the facts of the case, there can be no disallowance u/s.40(a)(ia).
10. In the case of ACIT vs. M/s. Janapriya Properties P. Ltd., in ITA.Nos.1614 & 1622 to 1624/Hyd/2012 dated 19.01.2015, the Coordinate Bench has considered similar issue and held as under :
"7. Upon hearing the rival submissions, we are of the view that the decision of the ITAT Special Bench is binding on the Tribunal, particularly in view of the clarificatory order passed by the Hon'ble High Court of Judicature at Hyderabad in the instant case, and thus, we respectfully follow the decision of Special Bench in the case of Merilyin Shipping & Transport (supra), and hold that the provisions of S. 40(a)(ia) cannot be invoked where the payments were already made by the assessee. We direct the Assessing Officer accordingly. In the result, appeals of the revenue insofar as the above issue is concerned, are hereby dismissed".
11. After perusing the orders of CIT(A) and the principles of law involved therein, I do not see any reason to interfere with the order of the Ld. CIT(A). Grounds are rejected
12. In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on 09.01.2017.
Sd/-
(D.MANMOHAN) VICE PRESIDENT Hyderabad, Dated 09th January, 2017.
VBP/-
6ITA.No.851/Hyd/2016 M/s. Amardeep Textiles, Hyderabad.
Copy to
1. The Income Tax Officer, Ward-8(2), 6th Floor, Signature Towers, Kothaguda, Kondapur, Opp. Botinical Garden, Serilingampally Mandal, Hyderabad - 500 084.
2. M/s. Amardeep Textiles, D.No.21-1-642/C1, God Gift Market, Rikab Gunj, Hyderabad - 500 002.
3. CIT(A)-2, Hyderabad.
4. Pr. CIT-2, Hyderabad.
5. D.R. ITAT "B" (SMC) Bench
6. Guard file.