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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
Per Shri D.S.Sunder Singh, Accountant Member : This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-6, Hyderabad in Appeal No. 10324/2018-19/B2/CIT(A)-6/2018-19 dated 31.01.2019 for the Assessment Year (A.Y.) 2013-14.
2 I.T.A. No.63/Viz/2019, A.Y.2013-14 Sanapala Satyanarayana, Visakhapatnam 2. All the grounds of appeal are related to the addition of Rs.5,77,426/- made by the AO u/s 40(a)(ia) of the Act. During the assessment proceedings, the Assessing Officer (AO) found that the assessee has debited the finance charges of Rs.38,94,493/- to the Profit & Loss a/c for the year ending 31.03.2013. The AO called for the details and bills in respect of finance charges and found that a sum of Rs.5,77,426/- was paid to Shriram Finance Limited without deduction of tax at source(TDS). During the assessment proceedings, AO called for the explanation of the assessee as to why the finance charges should not be disallowed u/s 40(a)(ia) of the Act and the assessee submitted before the AO that though the TDS was not made, the recipient had admitted the income and filed the return of income, hence requested not to disallow the said sum of Rs.5,77,426/- u/s 40(a)(ia) of the Act. The AO called for the certificate from C.A. as required under the Act and the assessee failed to furnish the same to the AO. Therefore, the AO made the addition u/s 40(a)(ia) of the Act.
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and submitted the copy of Form 26A along with the certificate from the C.A., certifying that the recipient had admitted the income. The Ld.CIT(A) found from the certificate of the C.A. that the recipient Shri Shriram Finance Limited has filed the return of income on 28.11.2013,
3 I.T.A. No.63/Viz/2019, A.Y.2013-14 Sanapala Satyanarayana, Visakhapatnam relevant to the Financial Year 2013-14 which is corresponding to the A.Y.2014-15, hence, upheld the addition and held that the assessee is entitled for benefit of deduction only in the subsequent assessment year i.e. 2014-15. Accordingly, the appeal of the assessee is partly allowed. Against which the assessee filed appeal before us.
During the appeal hearing, the Ld.AR brought to our notice regarding the amendments made in the Finance Act 2019 and argued that with an intention to ease the rigors provisions of section 201 and 40, the Act was amended and as per the amended provisions, the payment made to non residents u/s 40(a)(i) in a case where, the assessee failed to deduct the tax at source and remit to Government account in accordance with the provisions of Chapter XVII-B on any sum paid to non residents, but is not deemed to be assessee in default as per the first proviso to section 201, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing the return of income by the payee referred to in the proviso. The Ld.AR submitted that there was amendment to section 40(a)(i), but no amendment was made to 40(a)(ia) of the Act, however, the language used in both the sections is identically worded, hence argued that relaxation provided to the non residents is equally applicable to the residents also. Thus, argued that the benefit of deduction is to be allowed
4 I.T.A. No.63/Viz/2019, A.Y.2013-14 Sanapala Satyanarayana, Visakhapatnam in the impugned assessment year to the assessee and it should not be postponed to the subsequent year. Accordingly, requested to delete the addition made by the AO and set aside the order of the Ld.CIT(A).
On the other hand, the Ld.DR submitted that in the instant case, the assessee has not deducted the TDS as required u/s 194A of the Act and the recipient did not file the return of income before the due date for filing the return of income. Therefore, the Ld.DR argued that, since, the assessee has failed to deduct the TDS and remit to Government account and the return of income was filed during the F.Y.2013-14 which is relevant to the A.Y. 2014-15, the Ld.CIT(A) has rightly allowed the deductions in the subsequent assessment year and no interference is called for in the order of the Ld.CIT(A), accordingly requested to uphold the order of the Ld.CIT(A).
We have heard both the parties and perused the material placed on record. In the instant case, the assessee has made the payment without deduction of tax at source and the recipient has filed the return of income on 28.11.2013 relevant to the F.Y. 2013-14 which is relevant to the A.Y. 2014-15. As per second proviso to sub section 40(a)(ia) of the Act, if the assessee is not deemed to be assessee in default in accordance with the
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provisions of Chapter XVII-B of the Act, on the said sum it shall be deemed that the assessee has deducted the TDS and paid the tax on such sum on the date of furnishing the return of income by the recipient referred to in said proviso, if the recipient has admitted the income and paid the tax thereon. In the instant case, the payee has filed the return of income on 28.11.2013 which is relevant to the A.Y.2014-15. Therefore as rightly held by the Ld.CIT(A), the assessee is entitled to claim the benefit of second proviso in the subsequent A.Y. i.e. 2014-15, but not for the A.Y. 2013-14. The Ld.CIT(A) has clearly brought out the facts and discussed the issue in detail in his order. For the sake of clarity the relevant part of the order of the Ld.CIT(A) is extracted as under : 8.2.3. I have examined the facts of the case and the evidence filed by the assessee in the shape of Form 26A issued by M/s Shriram Transport Finance. As such, the assessee has invoked the second proviso to Sec. 40(a)(ia) of the Act in order to claim relief from the rigours of Sec. 40(a)(ia) of the Act. 8.2.4. At this juncture, it is important to note that as per the second proviso to section 40(a) (ia) of the Act, it is categorically stated that the assessee would be treated as an assessee not in default from the date of filing the return of income by the, recipient/resident payee. In this regard, the relevant portion of the statute is reproduced below for ready reference and better understanding of the statutory position. Section 40. Amounts not deductable : “Section 40(a)(ia) any interest, commissioner or brokerage [rent, royalty] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub- contractor, being resident, for carrying out any work (including supply of labour for carrying out any work)], on which tax is deductible at source under Chapter XVII-B and such tax has not been
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deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139:
Provided that where In respect of any such sum, tax has been deducted In any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section(1) of section 139,
Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201 then, for the purpose of this sub-clause, 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 by the resident payee referred t in the said proviso.”
8.2.5. As seen As seen from the emphasized portion of the statute, the stress is on the date on which the recipient/resident payee has furnished the return of income In the instant case, as per Form 26A filed, the return of income in respect of M/s Shriram Transport Finance was filed in the FY 2013-14 relevant to the AY 2014-15. The details of the same are given below : S.No. Name of the recipient of interest / Date of filing the return deductee of income 1. M/s Shriram Transport Finance 28.11.2013
As seen from the above, the recipient of finance charges has filed its return of income on28 11 2013 relevant to FY 2013-14 which corresponds to the AY 2014-15
8.2.6. In view of the aforementioned factual matrix and statutory position, I am of the considered opinion that the assessee cannot avail the benefit of the second proviso to section 40(a)(6) of the Act, inasmuch as the recipient of finance charges/resident payee i.e. M/s Shriram Finance Limited has filed its return of income for AY 2013-14 in the FY 2013-14 corresponding to the AY 2014.15 Accordingly, the assessee is entitled to claim the benefit of second proviso only in the subsequent assessment year i.e. AY 2014-15. Thus, the grounds of appeal raised by the assessee on this issue are partly allowed.”
6.1. The assessee placed reliance on the explanatory notes to F.Y.2019. The said amendments were effective A.Y.2020-21 and the subsequent assessment years. Further the amendment was brought in for section
7 I.T.A. No.63/Viz/2019, A.Y.2013-14 Sanapala Satyanarayana, Visakhapatnam 40(a)(i) which is relevant to the non-resident with a view to ease the difficulty of non- residents and to remove the discrimination between the residents and non-residents. Therefore, we do not find any error in the order of the Ld.CIT(A), hence no interference is called for.
6.2. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the assessee.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 15th November, 2019.
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नदनधंक /Dated : 15.11.2019 L.Rama, SPS
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आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee - Sanapala Satyanarayana, D.No.11-8-25, Plot No.21, Dasapalla Hills, Visakhapatnam 2. रधजस्व/The Revenue - Asst. Commissioner of Income Tax, Circle-1(1), Visakhapatnam 3. The Principal Commissioner of Income Tax-1, Visakhapatnam 4. The Commissioner of Income Tax (Appeals), Hyderabad 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्ड फ़ाईि / Guard file
आदेशािुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, Visakhapatnam