ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2,, NASHIK vs. M/S. ZEAL INFRA PROJECTS PRIVATE LIMITED,, NASHIK

आदेश / ORDER PER ANIL CHATURVEDI, AM :

Assessee is a company stated to be engaged as Builder and Developer. The assessment in the case of assessee for A.Y. 2012-13 was initially framed u/s 143(3) of the Act vide order dated 28.03.2015 and the total income was assessed at Rs.41,680/-. Thereafter, the

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case was re-opened by issuing notice u/s 148 of the Act. Thereafter,

assessment was framed u/s 143(3) r.w.s. 147 of the Act vide order

dt.30.12.2016 and the total income was determined at Rs.41,680/-.

Aggrieved by the order of AO, assessee carried the matter before

Ld.CIT(A) who vide order dated 10.09.2018 (in appeal No.PN/CIT(A)-

12/10333/2017-18) granted substantial relief to the assessee.

Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal and has

raised the following grounds :

“1. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in allowing relief on non-deduction of TDS on interest of Rs.4,69,57,184/- by holding the amendment to Sec.40(a)(ia) from 01.04.2013 as retrospective in nature. 2. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding the second proviso to section 40(a)(ia) is retrospective ignoring the decision of Hon’ble Kerala High Court in the case of prudential Logistics and transports vs. ITO (2014) 51 taxman.com 426.”

together.

Sun Infrastructure Pvt. Ltd., and had paid interest of Rs.4,69,57,184/-

on which TDS was not deducted by the assessee. AO was of the view

that non-deduction of TDS on payment of interest attracts provisions

of Sec.40(a)(ia) of the Act and accordingly, the interest was liable to be

disallowed. The assessee was asked to show as to why the interest

expense not be disallowed. To the query of AO, assessee made

submissions inter-alia stating that the interest paid by the assessee to

M/s. Sun Infrastructure Pvt. Ltd., has been considered by it in its

Profit and Loss account in the return of income filed by it. It was

therefore submitted that the provisions of Sec.40(a)(ia) of the Act are

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not applicable. The submission of the assessee was not found

acceptable to the AO as he was of the view that the second proviso to

Sec.40(a)(ia) of the Act comes into effect from 01.04.2013 i.e., for A.Y.

2013-14 onwards and not applicable to the year under consideration.

He accordingly disallowed the interest expenses of Rs.4,69,57,184/-

u/s 40(a)(ia) of the Act. Aggrieved by the order of AO, assessee carried

the matter before Ld.CIT(A), who after relying on the decision of

Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark

Township Pvt. Ltd., reported in (2015) 377 ITR 635 and other decisions

cited in his order decided the issue in favour of the assessee by

observing as under :

“3.1 I have considered the materials placed before me. Brief facts are that the appellant while return of income u./s 139(1) on 30.09.2012 total income of Rs.41,680/- which was accepted by the AO in the order passed u/s 143(3) on 28.03.2015. Thereafter, the AO noticed that the appellant had paid interest on unsecured loan amounting to Rs. 4,69,57,184/- to M/s. Sun Infrastructure Pvt. Ltd. on which appellant failed to deduct TDS as per provisions of section 194A of the IT Act. The AO noted that non deduction of TDS was violation of provisions of section 40(a)(ia) therefore, it was not an allowable expenses. Hence, the AO reopened the assessment proceeding u/s 147 of the IT Act after obtaining approval from the concerned authority. In response to notice issued u/s 148 dated 25.02.2016, the appellant filed return of income on 14.03.2016 declaring total income of Rs. 41,680/-. During the reassessment proceedings on being asked as to why the interest expenses of Rs. 4,69,57,184/- should not be disallowed u/s 40(a)(ia), the appellant submitted that the said expenses cannot be disallowed for non deduction of TDS since the appellant had not debited the interest expenses in the P & L A/c instead the interest expenses was capitalized by adding the value of closing WIP. The appellant further contended the interest paid to M/s Sun Infrastructure Pvt. ltd. was duly accounted for in the return filed by the said company therefore the appellant was not an assessee in default under the first proviso to sub-section (1) to section 201, hence the assessee was not liable for disallowance u/s 40(a)(ia).The AO rejected the both arguments of the appellant. The AO noted that capitalization of interest expenses only defers the claim of expenses and not giving up of claim of such expenses. The AO also noted that provisions of section 201 for not treating an assessee as assessee in default in case where the receiver of interest had shown the amount of interest received in the return of income filed and paid taxes on it came in effect from 1st April, 2013 which is applicable from AY 2013-14, the assessment year under consideration is AY 2012-13 to which the said proviso of section 201 is not applicable. The AO accordingly disallowed the amount of Rs.

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4,69,57,184/- as per the provisions of section 40(a)(ia) and since the appellant added the expenses to the closing WIP, the AO reduced the value of WIP disallowing claim of interest cost included in WIP in subsequent years. During the appellate proceedings the appellant reiterated that the amendment to section 201 came in 01.04.2013 which was a retrospective amendment, clarificatory in nature to remove the hardship of double taxation. The interest earned by M/s Sun Infrastructure Pvt. Ltd. from the appellant company was duly shown by Sun Infrastructure Pvt. Ltd. in the return of income filed and taxes paid on the interest received, therefore, the amended provision of section 201 would apply and no disallowance u/s 40(a)(ia) was warranted. The appellant in support of the contentions raised relied on the decision of Pune Tribunal in the case of ACIT vs Bhavook Chandraprakash Tripathi, ITA No.1372/PN/2013 dated 18-03-2015 and ITO vs. M/s Gaurimal Mahajan & Sons vide ITA NO.1852/PN/2012 dated 06.01.2014, and of Agra Tribunal in the case of Rajiv Kumar Agarwal Vs. ACIT, ITA NO. 3371Agral2013 dated 29/0512013 as well as High Court of Delhi in the case of CIT Vs. AnsaL Land Mark Township (P.) Ltd., ITA No. 160 of 2015 dated 26/0812015. I have considered the documents placed before me. The Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd. (supra) held that the second proviso to section 40(a)(ia) is declaratory and curative and it has retrospective effect from 01.04.2005. The Hon’ble Delhi High Court while deciding the issue held as under :

“3. xxxx .…… ……. 16. xxxx”

The Hon'ble Delhi High Court in the above mentioned judgment categorically held that as regards the rationale behind the insertion of the second proviso to Section 40(a)(ia) of the Act was that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005. Therefore, considering the ratio of this judgment of Hon'ble Delhi High Court the appellant's case is covered with the amendment came on 01.04.2013 for provisions of section 201 and section 40(a)(ia) considering the appellant being not an assessee in default in case where the expenses debited was included by the receiver in the return of income filed and' tax was paid thereon. Since, the Sun Infrastructure Pvt. Ltd. has included the amount of interest income of Rs. 4,69,57,184/- received from the appellant in the return of income filed and paid taxes on the same, the appellant cannot be held as assessee in default u/s 201 of the IT Act and was not liable for disallowance u/s 40(a)(ia) in view of the judgment of Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd. (supra) holding the amendment to section 201 and 40(a)(ia) introduced on 01.04.2013 was clarificatory and curative in nature and was applicable retrospectively from 01.04.2005 i.e. from the period of insertion of the section 40(a)(ia). The AO is directed to delete the disallowance made u/s 40(a)(ia) of Rs. 4,69,57,184/- reducing the value of closing WIP. Ground raised by the appellant is hereby allowed.”

Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal

before me.

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Ld.A.R. on the other hand submitted that in principal the appeal filed

by the Revenue needs to be dismissed on account of low-tax effect. He

further submitted that even on merits, Ld.CIT(A) has decided the issue

in favour of the assessee by following the decision in the case of CIT

Vs. Ansal Land Mark Township Pvt. Ltd., (supra) and the aforesaid

decision has also been followed by ITAT, Pune Bench in various other

decisions. He submitted that there is no contrary binding decision in

Revenue’s favour. He thus supported the order of Ld.CIT(A).

record. The issue in the present ground is with respect to disallowance

u/s 40(a)(ia) of the Act. It is the case of Revenue that on the interest of

Rs.4,69,57,184/- that was paid by the assessee to M/s. Sun

Infrastructure Pvt. Ltd., the necessary TDS was not deducted by the

assessee and therefore provisions of Sec.40(a)(ia) of the Act are

applicable. Assessee’s case is that the aforesaid interest paid by the

assessee has been considered as income by M/s. Sun Infrastructure

Pvt. Ltd., in its return of income and has also paid taxes on the same

and therefore relying on the decision of CIT Vs. Ansal Land Mark

Township Pvt. Ltd., (supra) wherein it has held that insertion of second

proviso to Sec.40(a)(ia) of the Act is declaratory and curative in nature

and has retrospective effect from 01.04.2005. I find that Ld.CIT(A)

relying on the decision in the case of CIT Vs. Ansal Land Mark

Township Pvt. Ltd., (supra) has given a finding that M/s. Sun

Infrastructure Pvt. Ltd., has included the amount of interest paid by

the assessee in its return of income and has paid taxes on the same.

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Considering the aforesaid facts, I am of the view that Ld.CIT(A) has rightly deleted the addition made by the AO and in such circumstances, I find no reason to interfere with the order of Ld.CIT(A). Thus, the grounds of Revenue are dismissed.

Order pronounced on 7th day of June, 2019.

Sd/-- (ANIL CHATURVEDI) लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 7th June, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-12, Pune. 4. Pr. CIT, Central, Nagpur. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक सद�य” / DR, ITAT, “SMC” Pune; 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER // True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.