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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI M. BALAGANESH, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI M. BALAGANESH, HON'BLE ACCOUNTANT MEMBER ITA Nos. 170 & 171/MUM/2019 (A.Ys. 2012-13 & 2013-14) M/s. Sapiens Technologies v. Dy. Commissioner of Income-tax – 6(3)(1) Room No. 506, Aayakar Bhavan (1982) India Pvt. Ltd., Churchgate, Mumbai – 400 020 22 New Pushpa Milan 67, Worli Hills, Mumbai – 400018 PAN: AAACI8674H (Appellant) (Respondent) Assessee by : Shri Ajit Jain Department by : Shri V. Vinod Kumar
Date of Hearing : 17.09.2019 Date of Pronouncement : 17.09.2020
O R D E R PER C.N. PRASAD (JM) 1. These two appeals are filed by the assessee against different orders of the Learned Commissioner of Income Tax (Appeals)-14, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 23.08.2018 and 21.08.2018 in sustaining the disallowance made u/s.40(a)(ia) of the Act for the A.Y.2012-13 and A.Y. 2013-14.
2 ITA Nos. 170 & 171/MUM/2019 (A.Ys. 2012-13 & 2013-14) M/s. Sapiens Technologies (1982) India Pvt. Ltd., 2. Assessee has raised following common grounds except for figures which are as under: - “Disallowance under section 40(a)(ia) of the Act of short deduction of tax at source 1. On the facts, and in the circumstances of the case, and in law, the learned CIT(A) erred in disallowing an amounting of INR 7,861,627/- under section 40(a)(ia) of the Act by overlooking the fact that the provisions of section 40(a)(ia) of the Act are attracted in case of non-deduction of tax, but not in case of short deduction of tax at source. 2. On the facts, and in the circumstances of the case, and in law, the learned CIT(A) erred in deleting the disallowance under section 40(a)(ia) of the Act, whereas the jurisdictional Hon'ble Mumbai Tribunal, in it's order dated 10 October 2017 in case of Dish TV India Ltd. vs. Assistant Commissioner of Income-tax has confirmed that the provisions of section 40(a)(ia) of the Act shall not be applicable in case of short deduction of tax at source. 3. Without prejudice to ground no.1 and 2 and on the facts, and in the circumstances of the case, and in law, the learned CIT(A) erred in directing the learned AO to allow the proportionate amount of salary on which the taxes have been deducted by the Appellant.”
Briefly stated the facts are that, the assessee firm engaged in the business of development of customized software and software implementation services and filed return of income on 27.09.2012 and 29.09.2013 declaring total income of ₹.1,56,48,340/- and ₹.1,80,73,280 for the A.Y. 2012-13 and A.Y. 2013-14 respectively. While completing the assessment Assessing Officer observed there is a short fall in deduction of TDS and the details are given as under: -
3 ITA Nos. 170 & 171/MUM/2019 (A.Ys. 2012-13 & 2013-14) M/s. Sapiens Technologies (1982) India Pvt. Ltd., Total Tax Total Short Tax Taxable Employee Name Deducted Tax Due Deducted Salary (RS.) (RS.) (RS.) (Rs) Narsimhan Parthsarathy 30,26,558 4,29,286 7,82,768 3,53,482 Keshav Kaushik 12,17,707 11,750 2,23,830 2,12,080 P T Sanin 13,07,221 13,500 2,51,491 2,37,991 Narendra Rapeti 10,26,474 55,000 1,64,740 1,09,740 Ravi Warudkar 7,66,651 45,250 87,886 42,638 Shriram Shrinivasan 5,17,016 19,000 36,465 17,465 Ranjan Total 78,61,627
Since the assessee has made short deduction of TDS, Assessing Officer invoking provisions of section 40(a)(ia) of the Act and disallowed entire salary payments amounting to ₹.78,61,627/-. On appeal Ld.CIT(A) sustained the disallowance made by the Assessing Officer.
Learned Counsel for the assessee submitted that, this is a case of short deduction of TDS and not non-deduction of TDS and in case of short deduction of TDS the provisions of section 40(a)(ia) of the Act have no application. Reliance was placed on the following decisions in support of his contentions: - (i) DCIT v. Chandabhoy and Jassobhoy – ITAT Mumbai (ii) Dish TV India Ltd. v. ACIT dated 10.10.2017 (ITAT, Mumbai) (iii) CIT v. S.K. Tekriwal [361 ITR 432 (Cal)]
Ld. DR vehemently supported the orders of the authorities below.
4 ITA Nos. 170 & 171/MUM/2019 (A.Ys. 2012-13 & 2013-14) M/s. Sapiens Technologies (1982) India Pvt. Ltd., 7. We have heard the rival submissions, perused the orders of the authorities below and the case laws relied on. We noticed that the issue in appeal has been decided by the Coordinate Benches of the Tribunal in number of cases, wherein it has been held that the provisions of section 40(a)(ia) of the Act have no application when there is a short deduction of TDS.
In the case of ACIT v. M/s. TV 18 Home shopping Network Ltd., in ITA.Nos. 4725 & 4726/Mum/2018 dated 19.02.2020 the Coordinate Bench of the Tribunal held as under: - “2. Briefly stated the facts are that during these two assessment years the assessee incurred expenses towards channel placement fees on which assessee deducted TDS @2% as per provisions of section 194C of the Act. However, the Assessing Officer was of the view that these expenses were in the nature of “Royalty” and TDS is liable to be deducted @10% u/s. 194J of the Act. The assessee was required to explain as to why the provisions of section 194J are not applicable. The assessee has submitted a detailed reply as to non-applicability of why the provisions of section u/s.194J of the Act. The assessee also contended that no disallowance U/s.40(a)(ia) of the Act should be made for short deduction of TDS. Not convinced with the reply filed by the assessee the Assessing Officer disallowed channel placement fees of ₹.10,20,88,270/- and ₹.8,40,82,020/- for the A.Ys. 2013-14 & 2014-15 respectively u/s. 40(a)(ia) of the Act treating these payments as Royalty. 3 On appeal the Ld.CIT(A) following the decision of the Mumbai Bench in the case of DCT v. Cox & Kings (I) Ltd & Anr [160 DTR 201] and Dish TV Indai Ltd v. ACIT [159 DTR 257] deleted the disallowance made u/s.40(a)(ia) of the Act. In these decisions the Coordinate Bench held that when there is a short deduction of TDS there cannot be any disallowance u/s.40(a)(ia) of the Act. 4. Ld. DR strongly supported the orders of the Assessing Officer and the Ld. Counsel for the assessee placed reliance on the decisions of the Tribunal
5 ITA Nos. 170 & 171/MUM/2019 (A.Ys. 2012-13 & 2013-14) M/s. Sapiens Technologies (1982) India Pvt. Ltd., particularly in the case of ACIT v. Hindustan Thompson Associated Pvt. Ltd., in ITA.No. 6729/Mum/2014 dated 13.07.2016 and ACIT v. M/s. UBJ Brodcasting Pvt. Ltd., in ITA.No. 1205/Mum/2018 dated 19.03.2019. 5. We have heard the rival submissions and perused the orders of the authorities below and the case laws relied on. On a perusal of the decisions of the Coordinate Bench, we find that the identical issue has been decided by the Coordinate Bench wherein in the case of ACIT v. Hindustan Thompson Associated Pvt. Ltd., (supra) Coordinate Bench observed as under: - “5. We have heard the rival contentions and perused the orders of the authorities below and the decision of the Co-ordinate Bench in assessee’s own case for Assessment Years 2008-09 and 2009-10. The Co-ordinate Bench for the Assessment Year 2009-10 in ITA No. 746/M/2014 dated 19.02.2016 considered similar issue and held that provisions of Sec. 40(a)(ia) have no application when there is short deduction of tax observing as under: “We have heard the rival submissions and perused the material before us. We find that the Hon’ble Kerala High Court in the case of P V S Memorial Hospital(supra), has held that deduction of TDS under wrong provision of law will not save assessee from disallowance u/s. 40(a)(ia)of the Act. However, the Kolkata High Court in the matter of Samir Tekriwal(supra), has held that expenses are not liable to be disallowed u/s.40(a)(ia)on account of short deduction of tax. The Hon’ble jurisdictional High Court has not decided the issue. Thus, we are faced with two diagonally opposite views about applicability of the provisions of section 40 (a)(ia)of the Act. We find that the Hon’ble Bombay High Court has in the case of Ashok Kumar Parekh (186 IT R212)has dealt with the binding precedence of the High Court judgments.Here,we would also like to reproduce the a portion of the judgment delivered by the Hon’ble Bombay High Court in the case of Siemens India Ltd.(156ITR11) and same reads as under : “So far as the legal position is concerned, the ITO would be bound by a decision of the Supreme Court as also by a decision of the High Court of the State within whose jurisdiction he is (functioning), irrespective of the pendency of any appeal or special leave application against that judgment. He would equally be bound by a decision of another High Court on the point, because not to follow that decision would be to cause grave prejudice to the assessee. Where there is a conflict between different High Courts, he must follow the
6 ITA Nos. 170 & 171/MUM/2019 (A.Ys. 2012-13 & 2013-14) M/s. Sapiens Technologies (1982) India Pvt. Ltd., decision of the High Court within whose jurisdiction he is (functioning), but if the conflict is between decisions of other High Courts, he must take the view which is in favour of the assessee and not against him. Similarly, if the Tribunal has decided a point in favour of the assessee, he cannot ignore that decision and take a contrary view, because that would equally prejudice the assessee.” Considering the above, we are taking the view which is in favour of the assessee. We are following the judgment of Samir Tekriwal (supra)of the Hon’ble Kolkata High Court as well as the orders of the Mumbai Tribunal delivered by it for the earlier years. Effective ground of appeal is decide against the AO.” Respectfully following the said order, we uphold the order of the Ld. CIT(A) on this issue and dismiss the Revenue’s appeal.” 6. Similarly, in the case of ACIT v. M/s. UBJ Brodcasting Pvt. Ltd., (supra) the Coordinate Bench held as under: - “5. We have carefully considered the submissions and material on record including the decisions cited before us. The undisputed position that emerges is that the assessee has suffered impugned disallowance u/s 40(a)(ia) for want of deduction of tax at source at higher rate i.e. 10%. It is undisputed fact that the assessee has deducted tax @2% and the additions have been made for short- deduction of tax as per Section 40(a)(ia). We find that the facts of the present case are squarely covered by the cited decision of this Tribunal rendered in ACIT Vs. M/s T.V.Vision Ltd. [supra] wherein the co-ordinate bench, after considering various decisions, decided the issue in assessee’s favor, in the following manner:- 7. We notice that the Ld. CIT(A) has deleted the disallowance in question holding that carriage fees does not come within the ambit of the definition of Royalty. Therefore, the assessee was not required to deduct the tax at source u/s 194J. Further the Ld. CIT(A) has held that it is not the case of ‘no TDS’ but the case of ‘less TDS’ therefore, the disallowance made by the AO is bad in law. The Ld. CIT(A) has relied on the decision of the Hon’ble Calcutta High Court rendered in CIT vs S. K. Tekriwal 48 SOT 515 and the decisions of coordinate Bench of the Tribunal in the cases of CIT vs M/s Star Den Media Services pvt .Ltd( ITA No 1413/MUM/2014) and Chandabhoy & Jassobhoy vs DCIT 49 SOT 448 (Mumbai ITAT). As pointed out by the Ld. counsel for the assessee this issue is covered
7 ITA Nos. 170 & 171/MUM/2019 (A.Ys. 2012-13 & 2013-14) M/s. Sapiens Technologies (1982) India Pvt. Ltd., by the judgment of the Hon’ble Bombay High Court delivered in CIT vs. M/s UTV Entertainment Television Ltd. in Income Tax Appeal (supra) in favour of the assessee. Similarly, the Hon’ble Gujarat High Court in CIT vs. Prayas Engineering Ltd., (supra) and the Karnataka High Court in CIT vs. Kishore Rao & others (HUF) (supra) have held that in case of shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, no disallowance can be made by invoking provisions of 40(a)(ia) of the Act. Respectfully following the same, we confirm the stand of first appellate authority in the impugned order.” 7. As could be seen from the above decisions wherein the Coordinate Benches have held that when there is a short fall in deduction of TDS there cannot be any disallowance u/s.40(a)(ia) of the Act. Undoubtedly in the case on hand the assessee deducted TDS @2% u/s 194C of the Act on the channel placement fees paid. However, the Assessing Officer was of the view that provisions of section 194J would apply and therefore the TDS would have been deducted @10% as against 2%. Therefore, this is a case of short deduction of TDS. Thus, respectfully following the said decisions, we uphold the order of the Ld.CIT(A) and reject the ground raised by the revenue. 8. In the result appeals of the revenue are dismissed.”
Undoubtedly in the appeals before us the Assessing Officer made disallowance on the ground that assessee made short deduction of TDS. Therefore, this decision squarely applicable to the facts of the case. Respectfully following the said decision, we delete the disallowance made u/s. 40(a)(ia) of the Act.
At the time of hearing Ld. Counsel for the assessee submitted that Ground No.3 of grounds of appeal and also the additional grounds filed
8 ITA Nos. 170 & 171/MUM/2019 (A.Ys. 2012-13 & 2013-14) M/s. Sapiens Technologies (1982) India Pvt. Ltd., are not pressed. Thus, Ground No.3 of regular grounds and additional grounds are dismissed as not pressed.
In the result, appeals of the assessee are partly allowed.
Order pronounced on 17.09.2020 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.
Sd/- Sd/- (M. BALAGANESH) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai / Dated 17/09/2020 Giridhar, Sr.PS
Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.
//True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum