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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 revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-1, Guntur vide ITA No.98/CIT(A-1)/GNT/2013-14 dated 23.03.2015 for the Assessment Year (A.Y.) 2010-11.
2 I.T.A. No.211/Viz/2015, A.Y.2010-11 Gude Venkata Krishna Rao, Guntur 2. In this case, the assessee filed the return of income declaring total income of Rs.30,15,890/- on 25.02.2012 for the A.Y.2010-11. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee has debited an amount of Rs.66,49,830/- under the head ‘finance charges’ and out of which the assessee has not deducted the tax at source on finance charges of Rs. 45,67,400/- u/s 194A of the Act. Therefore, the AO made the addition of Rs.45,67,400/- u/s 40(a)(ia) of the Act for the assessee’s failure to deduct tax at source.
Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A), followed the decision of Hon’ble Special Bench in the case Merilyn Shipping and Transports Vs. Addl. CIT, Visakhapatnam reported in 146 TTJ 1 (Vizag) and held that TDS has no application for the amounts already paid before 31st March of the concerned year and accordingly directed the AO to work out the disallowance u/s 40(a)(ia) of the Act, based on amounts payable as on 31st March 2010. Thus, allowed the appeal of the assessee partly.
Against the order of the CIT(A), the department has filed the appeal before this Tribunal. ITAT vide order dated 21.04.2017 in I.T.A.
3 I.T.A. No.211/Viz/2015, A.Y.2010-11 Gude Venkata Krishna Rao, Guntur No.211/Viz/2015 dismissed the appeal of the revenue following the decision of ITAT Special Bench in the case of Merilyn Shipping & Transports Ltd. (supra).
Against the order of the ITAT, Visakhapatnam, the revenue has filed Miscellaneous Application for recalling the order in pursuance of the decision of Hon’ble Supreme Court in the case of Palam Gas Service Vs. Commissioner of Income Tax [ 81 Taxman.com 43(SC) (2017)], wherein the Hon’ble Supreme Court held as under : “in view of the aforesaid discussion we hold that the view taken by the High Courts of Punjab & Haryana, Madras and Calcutta is the correct view and the judgement of the Allahabad High Court in CIT Vs. Victor Shipping Services (P) Ltd. [2013] 357 ITR 642 did not decide the question of law correctly” And the appeal of the assessee is accordingly, dismissed with no costs. The court thus held that the word payable in section 40(a)(ia) also covers cases where amounts have been paid.” 5.1. ITAT, Visakhapatnam following the order of the Hon’ble Supreme Court in the case of Palam Gas Service (supra) recalled the order, vide order in MP/57/Viz/2017 dated 23.08.2018 and fixed the case for hearing on 04.09.2019.
During the appeal hearing, the Ld.DR submitted that the case falls under exceptional category as provided in para No.3 of Board Circular dated 08.08.2019 read with Circular No.3/2018. In the instant case, the AO
4 I.T.A. No.211/Viz/2015, A.Y.2010-11 Gude Venkata Krishna Rao, Guntur was of the view that the assessee is required to deduct the tax at source. Since, the assessee has failed to deduct the tax at source, the expenditure debited to Profit & Loss account required to be disallowed u/s 40(a)(ia) of the Act. Since the issue involved is with regard to validity of the disallowance u/s 40(a)(ia) for non deduction of tax at source, the case covered under exception in para No.10 of CBDT Circular No.3/2018 dt.11.07.2018. The Ld.DR further stated that in first appeal, the Ld.CIT(A) did not decide the issue on merits with regard to the disallowance made u/s 40(a)(ia) of the Act for the amounts already paid before 31.03.2010, following the decision of Hon’ble Special Bench in the case of Merilyn Shipping & Transports. The question with regard to the disallowance to be made u/s 40(a)(ia) of the Act was not adjudicated upon by the Ld.CIT(A) and the Hon’ble Supreme Court in the case of Palam Gas Services (supra) held that TDS required to be made even on the amounts paid. Therefore, argued that the issue involved is validity of provision of section 40(a)(ia) and the same was answered in favour of the department by Hon’ble apex court, hence falls under the exceptional category as per Board Circular, therefore requested to admit the appeal as exception in Board Circular and adjudicate the issue.
5 I.T.A. No.211/Viz/2015, A.Y.2010-11 Gude Venkata Krishna Rao, Guntur 7. On the other hand, the Ld.AR argued that there is no exception in this case as provided in the Board Circular, when the quantum of tax effect is less than Rs.50 lakhs, hence, argued that the appeal is not maintainable, and accordingly requested to dismiss the appeal of the revenue. On merits, the Ld.AR argued that the receipts were admitted as income in the hands of the recipient, therefore, argued that there is no case for making the addition u/s 40(a)(ia) of the Act as per second proviso to section 40(a)(ia) and accordingly requested to remit the matter back to the file of the lower authorities to verify the admission of income in the hands of the recipients and decide the appeal accordingly.
We have heard both the parties and perused the material placed on record. In the instant case, the AO held that the assessee has made the payments under the head ‘finance charges’ which attracts the TDS provisions u/s 194A of the Act and the assessee failed to deduct the tax at source, hence, made the addition u/s 40(a)(ia) of the Act. On appeal before the CIT(A), the Ld.CIT(A) relied on the decision of Merilyn Shipping and Transports (supra) and partly allowed the appeal of the assessee. Subsequently, the Hon’ble Supreme Court held that the TDS is required to be deducted on the payments already made also and non deduction of tax
6 I.T.A. No.211/Viz/2015, A.Y.2010-11 Gude Venkata Krishna Rao, Guntur attracts the disallowance u/s 40(a)(ia) of the Act. Therefore, we concur with the submission made by the Ld.DR that the case falls under exception as per Circular No.3/2018 dated.11.07.2018 and 08.08.2019.
In the instant case, the Ld.CIT(A) has not examined the issue with regard to the TDS that is required to be made on the payments made on or before 31.03.2014 and the consequent disallowance u/s 40(a)(ia) of the Act, in view of Special Bench decision cited (supra). Consequent to the reversal of the order of the Special Bench and the Law laid down by the Hon’ble Supreme Court in the case of Palam Gas Services (supra), TDS is required to be made even on the payments made on or before 31st March also. Therefore, the case falls under exceptional case, and the issue required to be examined on merits. Since the issue was not examined by the Ld.CIT(A), we are of the considered view that the issue required to be remitted back to the file of the Ld.CIT(A) to decide the issue afresh on merits, keeping in view of the decision of Hon’ble Supreme Court in the case of Palam Gas Services (supra). The Ld.CIT(A) also directed to verify the contention of the Ld.AR with regard to admission of income by the recipients and the consequent application of second proviso to section
7 I.T.A. No.211/Viz/2015, A.Y.2010-11 Gude Venkata Krishna Rao, Guntur 40(a)(ia) of the Act. It is needless to say that the Ld.CIT(A) should give reasonable opportunity to the assessee before deciding the appeal.
In the result, appeal of the revenue is allowed for statistical purpose.
Order pronounced in the open court on 4th October, 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 : 04.10.2019 L.Rama, SPS
8 I.T.A. No.211/Viz/2015, A.Y.2010-11 Gude Venkata Krishna Rao, Guntur
आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. रधजस्व/The Revenue - Asst.Commissioner of Income Tax, Circle-2(1), Guntur 2. ननधधाऩरती/ The Assessee - Sri Gude Venkata Krishna Rao, D.No.4-2-17/8, 18th Lane, Chandramouli Nagar, Guntur 3. The Pr.Commissioner of Income Tax, Guntur 4. The Commissioner of Income Tax (Appeals)-1, Guntur 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