ADDL. CIT, NEW DELHI vs. M/S. MOSER BAER ENTERTAINMENT LTD., NEW DELHI

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ITA 3578/DEL/2017Status: DisposedITAT Delhi15 January 2020AY 2012-135 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to delete the disallowance. The Tribunal found that the Assessing Officer failed to cite any specific section requiring TDS deduction on a slump sale transaction, and the CIT(A) correctly accepted the assessee's contention that no TDS was deductible as it was a slump sale and not a purchase of individual items.

What were the facts?

The assessee purchased a unit from its parent company under a Business Transfer Agreement (BTA) for Rs. 2,86,84,361/- without deducting TDS. The Assessing Officer disallowed this expenditure under Section 40(a)(ia) for non-deduction of TDS.

What were the issues?

Whether TDS was required to be deducted on a payment made for a slump sale under a Business Transfer Agreement, and if not, whether the disallowance under Section 40(a)(ia) was justified.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘E’, NEW DELHI

Before: SHRI AMIT SHUKLA & SHRI O.P. KANT

For Appellant: Ms. Pramit M. Biswas, Sr. DR
Hearing: 06.01.2020Pronounced: 15.01.2020

ORDER PER O.P. KANT, AM:

This appeal by the Revenue is directed against order dated 20/03/2017 passed by the learned Commissioner of Income-tax (Appeals)-33, New Delhi [in short ‘the ld. CIT(A)’] for assessment year 2012-13, raising following grounds:

1. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in, dieting disallowance of Rs. 2,86,84,361/- on account of payment made to the parent company (MB1L) against slump sale under Business Transfer Agreement (BTA) u/s 40(a)(ia) of the Income Tax Act (the Act) due to non-deduction of TDS by ignoring findings recorded by the Assessing officer (the AO) for making these disallowances?

2. Whether on the facts and in circumstances of the case, the CIT(A) is legally justified in deleting the disallowance made by the AO amounting to Rs 2,86,84,361/- u/s 40(a)(ia) of the Act for not deducting the tax at source on payment made to parent company (MBIL) on purchase of rights under the Business Transfer Agreement (BTA) ? 3. That the appellant craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time of the hearing.

2. At the outset, we may like to mention that despite notifying, none attended on behalf of the assesses, nor any adjournment was filed. Accordingly, we have heard the appeal ex-parte qua the assessee after hearing arguments advanced on behalf of the Revenue 3. Briefly stated facts of the case are that the assessee purchased a unit from the parent company (MBIL) against slump sale under Business Transfer Agreement (BTA). The assessee made payment of Rs.2,86,84,361/- to the parent company for this purchase under the BTA but no tax was deducted at source (TDS) on such payment. The Assessing Officer disallowed this purchase expenditure in the hands of the assessee under section 40(a)(ia) of the Income Tax Act, 1961 (in short ‘the Act’) due to non-reduction of tax at source observing as under :

“iv) Disallowance u/s 40(a) (ia): During the course of assessment proceedings, the assessee was asked vide letter dated 18.02.2015 assessee was asked to furnish details of TDS deducted and deposited on "All Rights Purchased" The assessee vide its reply dated 09.03.2015 has submitted as under: "Details of TDS deducted and deposited on all "Rights Purchased" during the year. Details is given in annexure II."

The reply of the assessee is examined on merit and not to be found tenable. The assessee has submitted the list of expenses on which TDS is deducted. On perusal of the list it is observed that assessee has purchased rights amounting to Rs.2,86,84,361/- from M/s Moser Baer India Ltd. on which no TDS has been deducted. In all other cases except above the TDS has been deducted. In the remarks given against the said purchases of right from M/s Moser Baer India Ltd. assessee mentioned " BTA transaction" without any further explanation why the TDS is not deductible on the said amount of Rs.28684361/-. In the absence of proper explanation for non deduction of TDS, I am of the view, that assessee has failed to deduct TDS and accordingly the expenses claimed in the P & L accounts amounting to Rs28684361/- is disallowed and added back to the total income of the assessee company for the year. (Disallowance of Rs.2,86,84,361/-)”

4.

Before the Ld. CIT(A), the assessee submitted that under the slump sale all assets and liabilities including right purchase related to entertainment business get vested with the assessee. The assessee submitted that such rights were acquired by the assessee out of BTA transaction as such as the stock-in-trade. The assessee submitted that liability to deduct TDS on purchase on such right was on MBIL and the MBIL has deducted the TDS on such right purchase. According to the assessee, these rights vested to the assessee under the slump sale and no individual item purchased by the assessee, therefore, question of deducting TDS on such right does not arise. In view of the submission of the assessee, the Ld. CIT(A) deleted the disallowance observing as under:

“8.3 I have considered the reasoning of the Assessing Officer and the submissions of the appellant. I have also noted that the appellant’s parent company, M/s. Boser Baer India Ltd. Had deducted tax at source at the time of purchase of these rights from various parties. I have also given due consideration to the fact that the appellant became the owner of these rights not by way of specific purchase of these rights but by virtue of transfer of business including all assets and liabilities from its parent company, M/s. Moser Baer India Ltd.” 8.5 Under the above narrated circumstances, I am unable to sustain the addition made by the Assessing Officer.”

5.

Before us, the Ld. DR relied on the order of the Assessing Officer and submitted that the assessee was required to deduct TDS on the payments made for purchase of rights i.e. assets under the slump sale.

6.

We have heard the submission of the ld. DR and perused the relevant material on record. We find that the Assessing Officer has not pointed out any specific section under which the assessee was required to deduct TDS. Before the Ld.CIT(A), the assessee has explained that the payment was made for purchase of the unit against slump sale under business transfer agreement and it was not purchase of individual item and therefore, there was no liability of the assessee to deduct the TDS. The Ld. CIT(A) accepted the contention of the assessee and deleted the disallowance. The AO has to discharge his onus of explaining the assessee the relevant provision of law applicable in the case of assessee. Before us, the ld. DR could not explain the relevant provision. We do not find any error in the order of the CIT(A) on the issue in dispute in view of no specific section cited by the Assessing Officer to hold the assessee liable for non-deduction of tax at source on the transaction of slump sale. We, accordingly, uphold the finding of the ld. CIT(A) on the issue in dispute and dismiss the ground of the Revenue raised in this regard. 7. In the result, the appeal of the Revenue is dismissed. Order is pronounced in the open court on 15th January, 2020.

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