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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER Smt. P. MADHAVI DEVI, J.M. : This is assessee’s appeal against the order of the Commissioner of Income Tax (Appeals)-3, Hyderabad, dated 01-06-2018. Assessee has raised the following grounds of appeal:
“1. The order of the CIT (A) is erroneous both on facts and in Law. 2. (a) The appellate decision of the CIT(A) is in violation of the principles of natural justice, in as much opportunity of hearing was not afforded to the assessee. (b) The CIT(A) ought not to have entertained an authorized person to represent the assessee, as the person (Shri R Lakshmana Rao) mentioned at Page 1 of the Appellate Order) is not a person
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authorized by the assessee in terms of section 288 of the Income tax Act, 1961. 3. The CIT(A) erred in dismissing the appeal on assumed representation; and totally following a different and unrelated issues/assumptions. 4. The CIT(A) ought to have appreciated that provisions of section 194A are not applicable in the case as the assessee has not paid the amount and the interest on the mobilization advances was recovered by the contractee from the running bills before releasing the contract charges to the account of the assessee. 5. Crave leave to urge/raise any ground that might be necessary at the time of hearing”.
At the outset, Ld. Counsel for the assessee submitted that assessee does not wish to press Ground Nos. 2 & 3. Accordingly the said two grounds are dismissed as not pressed. Ground Nos. 1 & 5 are general in nature and hence, need no adjudication.
As regards the Ground No. 4, the brief facts are that, the assessee-company, engaged in execution of engineering and construction works, e-filed its return of income for the AY. 2013-14 on 29-09-2013 admitting income at Rs. 58,10,110/-. During the assessment proceedings u/s. 143(3) of the Income Tax Act [Act], Assessing Officer observed that assessee has received interest on mobilization advance from IOCL and the same is deducted by IOCL at the time of payment of RA Bills. Assessing Officer observed that assessee has not made TDS on such interest, amounting to Rs. 9,07,706/- and therefore the assessee has violated the provisions of Section 194A of the Act.
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Therefore, he invoked the provisions of Section 40(a)(ia) to disallow the interest on mobilization of advance amounting to Rs. 9,07,706/-.
3.1. Aggrieved, assessee preferred an appeal before the CIT(A), who confirmed the order of Assessing Officer and again aggrieved, assessee is in second appeal before us.
Ld. Counsel for the assessee submitted that the similar issue had come up before ‘B’ Bench of this Tribunal in the case of ACIT Vs. M/s. UAN Raju IVRCL in ITA No. 1425/Hyd/2010, dt. 18-10-2013, wherein the Hon'ble ITAT has held that the provisions of Section 194A are not attracted when the contractee has recovered the interest on mobilization advance from running bills before releasing the contract charges to the assessee. A copy of the said order is filed before us.
Ld.DR on the other hand relied on the orders of the authorities below.
Having regard to the rival contentions and material on record, we find that the Co-ordinate Bench of this Tribunal in the above referred case at para 8 of its order, dealing with similar issue, has held as under:
“8. We have considered submissions of the parties and perused the material on record. As can be seen from the finding of the Assessing Officer, he has not disputed the fact that the interest on mobilisation advance was recovered by the contractee M/s Konkan Railway Corporation Ltd., from running bills of the assessee and the Assessing Officer also accepts that 6 it is difficult on the part of the
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assessee for making TDS as interest was recovered by the contractee M/s Konkan Railway Corporation Ltd., while making the payment of contract charges. Therefore, in real sense it cannot be said that the assessee has credited the interest to the account of the contractee in terms of section 194A of the Act. As observed by the CIT (A) in his order the terms of the contract entered into between the parties authorises the contractee to recover interest on the mobilisation advances and also prescribes the mode and manner of calculation of interest. Therefore, when the interest on mobilisation advance was recovered by the contractee from the running bills before releasing the contract charges to the assessee, it cannot be said that the assessee has credited the interest paid or payable to the account of the assessee. In fact, the CIT (A) has also noted that the assessee has not credited any such amount towards payment of interest to the account of the contractee in its books of accounts. In the aforesaid factual situation, it cannot be said that there is any violation of provisions of section 194A of the Act. A liability cannot be fastened on the assessee or a default cannot be attributed to the assessee for not discharging an obligation which is impossible on its part to perform. The decision of the Hon’ble Madras High Court in case of Viswapriya Financial Services and Securities Ltd., vs. CIT (supra) is also not applicable to the facts of the present case as in that case the assessee actually made the payment but did not treat it as interest. In aforesaid view of the matter, we do not find any infirmity in the order of the CIT (A)”. 6.1. Since the facts and circumstances of the case before us are exactly same, respectfully following the above decision, we hold that the provisions of Section 194A are not applicable in the present facts of the case. Hence, this ground of appeal raised by the assessee is allowed.
In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 30th January, 2019
Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 30th January, 2019 TNMM
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Copy to : 1. M/s. Srico Projects Private Limited, 178/A, MLA Colony, Road No. 12, Banjara Hills, Hyderabad. 2. The Income Tax Officer, Ward-3(3), Hyderabad. 3. CIT(A)-3, Hyderabad. 4. Pr.CIT-3, Hyderabad. 5. D.R. ITAT, Hyderabad. 6. Guard File.