ACCME (URVASHI PUMPS) ENGINEERS PVT. LTD.,JAIPUR vs. INCOME TAX OFFICER, WARD-4-2, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH ‘A’, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k Before : Shri Vijay Pal Rao, JM & Shri Vikram Singh Yadav, AM vk;dj vihy la-@ITA No. 316/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2014-15 cuke M/s. Accme (Urvashi Pumps) Engineers (P) Ltd. The ITO Vs. A-407, A/A Road No. 14 VKI Area, Ward- 4(2) Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@ PAN/GIR No.: AABCA 5655 R vihykFkhZ@Appellant izR;FkhZ@Respo ndent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rohan Sogani, CA jktLo dh vksj ls@ Revenue by : Ms. Chanchal Meena, JCIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 25/02/2020 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27 /02/2020 vkns'k@ ORDER PER VIJAY PAL RAO, JM This appeal by the assessee is directed against the order of ld. CIT(A)-2, Jaipur dated 24-01-2019 for the Assessment Year 2014-15. The assessee has raised the following grounds. ‘’1. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of AO in making disallowance of Rs. 1,53,053/- u/s 40(a)(ia) of the I.T. Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief

2 ITA No.316/JP/2019 M/s. Acme (Urvashi Pumps) Engineers Pvt.Ltd. , Ward- 4(2), Jaipur may please be granted by quashing the disallowance made by the AO and confirmed by the ld. CIT(A).

2.1 The Ground No. 1 of the assessee is regarding disallowance of

interest paid to M/s. Reliance Capital Ltd. and M/s. HDB Financial

Services Ltd. for want of TDS u/s 40(a)(ia) of the Act.

2.2 The ld.AR of the assessee submitted that the assessee paid interest

of Rs. 1,53,053/- to these two NBFCs though without deduction of TDS.

However, since the interest was paid to NBFCs and those NBFCs have

included this amount in their income and filed the return of income.

Therefore, as per second proviso to Section 40(a)(ia) of the Act, no

disallowance is called for. The ld.AR of the assessee thus relied on

various decisions of this Tribunal

2.3 On the other hand, the ld. DR submitted that the assessee had failed

to furnish the certificate in Form No. 26A to support its claim that NBFCs

have included this amount in the income declared in the return of income

3 ITA No.316/JP/2019 M/s. Acme (Urvashi Pumps) Engineers Pvt.Ltd. , Ward- 4(2), Jaipur filed u/s 139(1) of the Act. Therefore, in the absence of any such

certificate, the second proviso to Section 40(a)(ia) of the Act cannot be

applied. The ld. DR thus relied on the orders of the lower authorities.

2.4 We have considered the rival submissions as well as relevant

materials available on record. There is no dispute that the assessee has

paid interest of Rs. 2,507/- to M/s. Reliance Capital Ltd. and Rs.

1,52,803/- to M/s. HDB Financial Services Ltd. total amounting to Rs.

1,53,053/- without deduction of TDS. The AO disallowed the said

amount by invoking the provisions of Section 40(a)(ia) of the Act.

Though the assessee claimed the benefit of second proviso to Section

40(a)(ia) of the Act, however, the ld. CIT(A) has confirmed the

disallowance made by the AO in para 3.3 of his order as under:-

‘’3.3 I have perused the facts of the case the assessment order and the submissions of the appellant. The second ground relates to non-deduction of TDS on interest paid by the assessee company to NBFCs, Reliance Capital and M/s. HDB Financial Services Ltd.

AO on observing the facts that no TDS was deducted, disallowed the above interest expenses u/s 40(a)(ia) of I.T. Act, 1961.

Ld. AR of the assessee contended that the AO has nowhere objected the genuineness of the expenditure made by the assessee company. Also, the income must have considered

4 ITA No.316/JP/2019 M/s. Acme (Urvashi Pumps) Engineers Pvt.Ltd. , Ward- 4(2), Jaipur by these NBFCs while computing the taxable income for A.Y. 2014-15.

It is established that the assessee company has not deducted TDS on payments made to these NBFCs. Also, the company has failed to furnish Form 26A to support its claim. The law clearly states that on account of non-deduction of TDS, the provisions of Section 40(a)(ia) shall come into play. Thus, in view of the above, the disallowance made u/s 40(a)(ia) requires no intervention. The ground of appeal is dismissed.’’

The ld.AR has not disputed the fact that the assessee has not filed the

requisite certificate in the form no. 26A to show that these recipient

NBFCs have included this amount in their income and filed the return of

income u/s 139(1) of the Act. Though the assessee has not produced

requisite certificate yet it is expected from the NBFCs in the case in hand

that they must have filed their return of income and considered this

amount of interest as part of the income declared by them. Therefore, the

matter is set aside to the record of the AO to verify this fact and the

assessee is directed to produce the certificate in Form No. 26A before the

AO. Needless to say that the assessee be given appropriate opportunity of

hearing of appeal before passing the fresh order. Thus the appeal of the

assessee is allowed for Statistical purposes.

5 ITA No.316/JP/2019 M/s. Acme (Urvashi Pumps) Engineers Pvt.Ltd. , Ward- 4(2), Jaipur 3.1 The Ground No. 2 of the assessee is regarding disallowance of

employee’s contribution to PF & ESI Act.

3.2 The ld.AR of the assessee has pointed out that the payments were

made by the assessee before due date of filing of return u/s 139(1) of the

Act. The ld.AR of the assessee has referred to the details of payments in

the month of July, 2013 to March 2014 and submitted that the issue is

covered by various decisions of Hon'ble Jurisdictional High Court as

well as decision of this Tribunal dated 24-04-2019 in the case of

Rajasthan Cottage Industries vs ITO (ITA No. 983/JP/2018 for the

Assessment Year 2013-14).

3.3 On the other hand, the ld. DR has relied on the orders of the

authorities below and also relied on the decision of Hon'ble Kerala High

Court in the case of CIT vs Mercham Ltd. 378 ITR 443 (Ker.).

3.4 We have considered the rival submissions as well as relevant

materials available on record. At the outset, we note that identical issue

has been considered by this Tribunal in the case of Rajasthan Cottage

Industries vs ITO (supra) in para 2 as under:-

‘’2. The only issue in this appeal is regarding disallowance of employees contribution to PF & ESI after the due date of payment as per respective Acts PF & ESI however, it was paid before the due date of filing of return of income U/s 139(1) of the

6 ITA No.316/JP/2019 M/s. Acme (Urvashi Pumps) Engineers Pvt.Ltd. , Ward- 4(2), Jaipur Act. The ld. CIT(A) has accepted the fact that the assessee has paid the contribution towards to PF & ESI prior to due date of filing of return of income U/s 139(1) of the Act but the claim was disallowed on the basis of the decision of Hon’ble jurisdictional High Court in case of in case of PCIT vs. M/s Rajasthan Renewable Energy Corporation Limited in DB ITA No. 10,11 & 12/2018 dated 13.03.2018 which was misunderstood by the ld. CIT(A). We note that there was typographical mistake in the said decision of the Hon’ble jurisdictional High Court whereas the Hon’ble High Court has followed the earlier decision in case of CIT vs. Jaipur Vidyut Vitran Nigam Ltd. 363 ITR 307. The ld. AR has pointed out that the decision of Hon’ble Jurisdictional High Court in case of PCIT vs. Rajasthan State Beverages Corporation Ltd. 250 taxmann 32 has been upheld by the Hon’ble Supreme Court reported in 250 taxmann 16. Thus, the issue is covered by a series of decisions of Hon’ble Jurisdictional High Court including the decision in case of PCIT vs. Rajasthan State Beverages Corporation Ltd. (supra) as held in para 5 as under:-

“5. So far as the question relating to privilege fees amounting to Rs.26.00 Crores in the instant year as well as the deduction of claim of Rs.17,80,765/- on account of Provident Fund (PF) and ESI is concerned, this Court has extensively considered the aforesaid two questions in assessee's own case vide judgment and order dt.26.05.2016 referred to (supra) and has held that the privilege fees being a revenue expenditure, is required to be allowed as a revenue expenditure. This court in the aforesaid case has also allowed the claim of the assessee, in so far as payment of PF & ESI etc. is concerned, on the finding of fact that the amounts in question were deposited on or before the due date of furnishing of the return of

7 ITA No.316/JP/2019 M/s. Acme (Urvashi Pumps) Engineers Pvt.Ltd. , Ward- 4(2), Jaipur income and taking in consideration judgment of this Court in Commissioner of Income Tax Vs. State Bank of Bikaner & Jaipur and Commissioner of Income Tax Vs. Jaipur Vidyut Vitaran Nigam Ltd. (2014) 363 ITR 70 (Raj.) and accordingly both the questions are covered by the aforesaid judgment and against the revenue.”

The said decision was challenged by the Revenue before the Hon’ble Supreme Court but the SLP filed by the Revenue has been dismissed by the Hon’ble Supreme Court reported 250 taxmann 32. Accordingly, disallowances/additions made by the AO on account of employees contribution to PF & ESI is deleted and claim of the assessee is allowed.’’

Thus it is apparent that this issue has been decided by the Hon'ble

Jurisdictional High Court in favour of the assessee in number of cases as

referred in the above cited decisions. Further, the Hon'ble Supreme Court

has also dismissed SLP filed by the Revenue in case of PCIT vs.

Rajasthan State Beverages Corporation Ltd. (supra). Hence, in view of

the binding precedents of Hon'ble Jurisdictional High Court as well as the

decision of this Tribunal (supra), we decide this issue in favour of the

assessee and consequently the addition made by the AO is deleted. Thus

Ground No. 2 of the assessee is allowed.

8 ITA No.316/JP/2019 M/s. Acme (Urvashi Pumps) Engineers Pvt.Ltd. , Ward- 4(2), Jaipur 4.0 In the result, the appeal of the assessee is partly allowed for

Statistical purposes.

Order pronounced in the open court on 27 /02/2020.

Sd/- Sd/- ¼ foØe flag ;kno ½ ¼fot; iky jko½ (Vikram Singh Yadav) (Vijay Pal Rao) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 27/02/ 2020

*Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1vihykFkhZ@The Appellant- M/s. Accme (Urvashi Pumps) Engineers (P) Ltd., Jaipur 2izR;FkhZ@ The Respondent- ITO, Ward- 4(2), Jaipur 3.vk;dj vk;qDr¼vihy ) @ CIT(A), 4.vk;dj vk;qDr@ CIT, 5.विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6.xkMZ QkbZy@ Guard File (ITA No. 316/JP/2019) vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत