Income Tax Appellate Tribunal - Mumbai
Ravi K. Poddar, Mumbai vs Ito 31(3)(3), Mumbai on 5 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"I" Bench, Mumbai
Before Shri P K Bansal, Vice President
and Shri Pawan Singh, Judicial Member
ITA No.3213 /Mum/2017
(Assessment Year: 2012-13)
Shri Ravi K. Poddar Income Tax Officer-31(3)(3)
201/202, Keshav Priya Room No. 408A, C-13
H.F. Society Road No. 3 Vs. Pratyaksha Kar Bhavan
Natver Nagar, Jogeshwari (E) Bandra (E), Mumbai 400051
Mumbai 400051
PAN - AALPP0952D
Appellant Respondent
Appellant by: Shri M. Subramanian
Respondent by: Shri Purushottam Kumar
Date of Hearing: 05.09.2017
Date of Pronouncement: 05.09.2017
ORDER
Per P.K. Bansal, Vice President This appeal has been filed by the assessee against the order of the CIT(A)-42, Mumbai dated 15.03.2017 for A.Y. 2012-13 on the following effective grounds of appeal: -
"1. (a) The Learned CIT (Appeals) erred in confirming the addition of Rs. 1,50,000/- in respect of Loan received from Mr. Eknath Gaikwad and enhancing the Addition by Rs.2,75,000/- to Rs.4,25,000/- by treating the loan as not genuine.
(b) The Learned CIT (Appeals) erred in stating that the Assessee has not filed any reply to the Show Cause vide order sheet dated 19/12/2016 ignoring the written submissions-2 filed vide letter dated 26/12/2016 explaining the source of loan given by Mr. Eknath Gaikwad.
2. The Learned CIT (Appeals) erred in disallowing Interest of Rs.13,163/- paid for late payment of T.D.S. on the ground that interest on TDS is interest on income tax only , having failed to appreciate the interest on late payment of TDS deducted in the course of a business is compensatory in nature and is properly allowable as business expense.2 ITA No. 3213/Mum/2017
Shri Ravi K. Poddar
3. The Learned CIT (Appeals) erred in disallowing Interest of Rs.5255/- paid for late payment of Sales Tax (MVAT) on the ground that orders levying interest are not produced, having failed to appreciate the interest is compensatory in nature and is properly allowable as business expense.
4. The Learned CIT (Appeals) erred in disallowing Property Tax of Rs. 54,134/- paid for premises occupied and used as retail store on the ground that the owner has not accounted this amount as its income, having failed to appreciate that the owner has not claimed deduction for this property tax which is allowable in its hand if paid by it."
2. In respect of ground No. 1(a) & (b) we noted that the assessee has taken a loan of Rs.4,25,000/- from Shri Eknath Gaikwad, an employee of the assessee. The AO made an addition of Rs.1,50,000/- as he noted that the employee before giving the loan to the assessee on 24.10.2011 had deposited a sum of Rs.1,50,000/- in cash on 09.10.2011 in three installments of Rs.50,000/- each. When the matter went before the CIT(A), the CIT(A) enhanced the said addition to Rs.4,25,000/-. Although the CIT(A) had issued a show cause notice to the assessee as per the order sheet dated 19.12.2016 but the assessee had made the submission to the CIT(A) view his letter dated 26.12.2016. We noted that the CIT(A) while enhancing the addition from Rs.1,50,000/- to Rs.4,25,000/- did not consider the submission made by the assessee on 26.12.2016. In our view the submission made by the assessee on 26.12.2016 will have a bearing on the addition sustained by the CIT(A). We, therefore, set aside the order of the CIT(A) on this issue and restore this issue to the file of the CIT(A) with the direction that the CIT(A) shall re-decide this issue about sustaining of the addition of Rs.1,50,000/- as well as enhancing of this addition to Rs.4,25,000/- after giving proper and sufficient opportunity to the assessee and also after appreciating the evidences as may be produced by the assessee in this regard. The assessee is also directed to produce necessary evidences before the CIT(A) on which he may rely in this regard. Thus, ground No. 1(a) & (b) are allowed for statistical purposes.
3. Ground No. 2 relates to the disallowance of interest on late payment of TDS paid by the assessee amounting to Rs.13,163/-. This issue in our 3 ITA No. 3213/Mum/2017 Shri Ravi K. Poddar view is no more res integra in view of the decision of the Hon'ble Supreme Court in the case of Bharat Commerce & Industries Ltd. vs. CIT 230 ITR 733 in which the Hon'ble High Court has held that when interest is paid for committing a default in respect of statutory liability to pay advance tax, the amount paid and expenditure incurred in that connection is in no way connected with the preserving or promoting the business of the assessee. The Hon'ble Madras High Court in the case of CIT vs. Chennai Properties & Investment Ltd. 239 ITR 435 held that the payment of interest takes colour from the nature of the levy with reference to which such interest is paid and the tax required to be paid but not paid in time. This renders the assessee liable for payment of interest and the interest paid under section 201(1A) would not assume the character of business expenditure and cannot be regarded as a compensatory payment. Thus, we dismiss the ground taken by the assessee.
4. Ground No. 3 relates to the disallowance of interest of Rs.5,255/- for late payment of sales tax. After hearing the submission of Revenue and going through the orders of the Tax Authorities below we noted that this payment has been made by the assessee towards interest paid for late payment of Sales Tax. This in our opinion cannot be regarded to be a penalty disallowable under section 37(1). This is a payment compensatory in nature and has to be allowed. In our opinion the issue is covered by the decision of the Hon'ble Supreme Court in the case of Lachmandas Mathuradas vs. CIT 122 Taxman 828 (SC). As pr the scheme of Sales Tax interest paid on late payment of sales tax cannot be regarded to be a penalty but compensatory in nature. Thus, this ground stands allowed.
5. Ground No. 4 relates to disallowance of property tax amounting to Rs.54,134/- pad by the assessee for occupying the premises. We heard the rival submissions and carefully considered the same alongwith the orders of the Tax Authorities below. We noted that this payment has been made by the assessee towards property tax as the assessee was running his proprietary business in the premises owned by M/s. Shah Construction Co. Ltd. The assessee has not paid any rent to M/s. Shah Construction Co.
4 ITA No. 3213/Mum/2017Shri Ravi K. Poddar Ltd. The assessee was using the premises by only paying the property tax. The amount, in our view, has been paid wholly and exclusively for the purpose of business and during the course of carrying on the business. We, therefore, set aside the order of the CIT(A) on this issue and delete the said disallowance.
6. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 5th September, 2017.
Sd/- Sd/-
(Pawan Singh) (P.K. Bansal)
Judicial Member Vice President
Mumbai, Dated: 5th September, 2017
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) -42, Mumbai
4. The Pr. CIT - 31, Mumbai
5. The DR, "I" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.