AQUAFIL POLYMERS CO.PVT.LTD.,AHMEDABAD vs. THE DY.CIT, TDS CIRCLE,, AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Mahavir Prasad, Judicial Member And Shri Amarjit Singh, Accountant Member ITA No. 684 /Ahd/2015 Assessment Year 2011-12

Aqafil Polymers Co. Pvt. The DCIT, Ltd. 202, 203 Shyamak TDS Circle, Complex, Vs Ahmedabad B/h. Kamdhenu Complex, (Respondent) Polytechnic, Ahmedabad- 380015 PAN: AABCA7902R (Appellant)

Revenue by: Shri Prasoon Kabra, Sr. D.R. Assessee by: Ms. Urvashi Shodhan, A.R.

Date of hearing : 02-05-2018 Date of pronouncement : 22-05-2018 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-

This assessee’s appeal for A.Y. 2011-12, arises from order of the CIT(A)- 8, Ahmedabad dated 13-02-2015, in proceedings under section 201(1)/201(1A) of the Income Tax Act, 1961; in short “the Act”.

I.T.A No. 684/Ahd/2015 A.Y. 2011-12 Page No 2 Aquafil Polymers Co. Pvt. Ltd. vs. DCIT

b) The Id. CIT(A) has failed to appreciate that the Appellant Company neither paid nor claimed the interest expenditure of Rs. 19,46,092/- in its return of income for A.Y. 201 1 - 2012. 2. The Id. CIT(A) has grossly erred in law and on facts in confirming the levy of interest of Rs. 1,34,280/- 201(1A). 3. The Id. CIT(A) has grossly erred in law and on facts in not working out correct interest u/s. 201(1A).”

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u/s. 201(1A) of Rs. 1,34,280/-). The ld. counsel has placed reliance on the decision of the Co-ordinate Bench of the ITAT in the case of the assessee itself for assessment year 2012-13 vide ITA no. 1139/Ahd/2015 dated 21/03/2018. He has contended that vide the aforesaid order on the similar fact the issue has been decided in favour of the assessee. The relevant part of the decision of the Co-ordinate Bench stated as supra in the case of the assessee is reproduced as under:- “In the present cases, the assessee was supposed to deduct tax on the alleged payment of Rs.22,31,797/-, and in case it failed to deduct or after deduction failed to deposit in the government treasury then it would be considered as assessee-in-default. But the assessee did not claim interest expenditure of total amount i.e. Rs.22,31,797/-. This amount was included in the taxable income of the assessee, therefore, protection provided by the proviso will be applicable upon the assessee and would not be construed the assessee as assessee-in-default. We allow appeal of the assessee and delete payment raised by the AO under section 201(1)7201(1A) of the Act. In other words, demand of Rs. 3,37,000/- is deleted.”

It is undisputed fact that during the course of survey a specific question no. 10 was asked from the director and its reply, the director of the assessee company Shri. Hitesh Babubhai Shah has stated as under:- "Q. 10. I am showing you the provision of section 194A(1) of the I.T, Act, 1961. As per section 194A(1), the TDS has to be deducted either at the time of making entry in the books of account (crediting income in the payee’s name) or, while making actual payment whichever is earlier. Under such circumstances, please explain as to why you should not be considered as assessee-in-default u/s.201(1)/201(1)A of the I.T.Act, 1961. Ans : The provision for interest made by the company in anticipation and is contingent in nature. Though section 194A ways that tax should be deducted at the time of payment or credit, whichever is earlier, the company firmly believes that when the liability is not certain, there will not arise any liability of TDS. Further, the company has not claimed any expenditure towards interest in the return of income. (UNQUOTE) Again in the post survey inquiry the Appellant Company vide its letter dt.26-12-2013 filed on the same date, reiterated following facts vide para : reproduced under: "During the course of the proceedings you have asked the assesses company to furnish the working of interest u/s.201(l A) so as to enable your office to pass the order, accordingly to avoid further proceedings of section 154. Though, the assessee company is under no legal obligation to work out the Interest u/s. 201(1A) and quantify the demand, the working of Interest u/s.201 (1 A) arc as-under:

I.T.A No. 684/Ahd/2015 A.Y. 2011-12 Page No 4 Aquafil Polymers Co. Pvt. Ltd. vs. DCIT

Financial Remarks Year 2010-11 The assesses company has provided for Interest payable by Mangalore Refinery and Petrochemicals Ltd, under protest, and has deducted sax at sources there from appearing as TDS payable in the final accounts. The assesses company has disallowed the said expenditure in its return of income of respective year and entire amount will be reversed on 2011-12 settlement with Mangalore Refinery and Petrochemicals Ltd.

2013-14 (Page : 1 to 7)

After considering the above facts and material on record, we have noticed that the assessee company has disallowed the said expenditure of Rs. 19,46,092/- u/s, 40(a)(ia) and added to the total income which is evident from the computation of total income filed with the return of income as per page no. 1 to 6 of the paper book filed by the assessee company. The assessee company has filed the return of income much prior to the survey action as on 30/09/2011 by disallowing the said interest expenses of Rs. 19,46,092/- u/s. 40(a)(ia) of the act and paid the due taxes on returned income. It was also explained that the provision of the interest made by the assessee company was in anticipation and was contingent in nature. The liability of the company was not certain. The interest expenditure of Rs. 19,46,092/- provided in the audited book under protest as payable to Mangalore Refinery Petrochemicals Ltd. was neither paid to the said party nor claimed as business expenditure. After considering the above facts and the findings of the Co-ordinate Bench, we allow the appeal of the assessee and delete the addition of Rs. 3,28,890/- made by the assessing officer vide order dated 20/01/2014

I.T.A No. 684/Ahd/2015 A.Y. 2011-12 Page No 5 Aquafil Polymers Co. Pvt. Ltd. vs. DCIT

Ahmedabad : Dated 22/05/2018 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद