RMKV FABRICS PVT LTD,TIRUNELVELI vs. DCIT CIRCLE 1, TIRUNELVELI

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ITA 1377/CHNY/2019Status: DisposedITAT Chennai19 February 2021AY 2012-134 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the assessee did not directly pay rent to the landlord, but reimbursed its share to another entity which allegedly paid the landlord. Therefore, the disallowance under Section 40(a)(ia) was questioned.

What were the facts?

The assessee disputed a disallowance under Section 40(a)(ia) for non-deduction of TDS on rent. The Assessing Officer initially made a rectification under Section 154 and then noticed the TDS issue, leading to the disallowance.

What were the issues?

Whether the disallowance under Section 40(a)(ia) is applicable when the assessee only reimbursed rent to an intermediary, and not directly paid the landlord. Whether the Assessing Officer had the jurisdiction to make the disallowance through rectification.

Which sections of the Income-tax Act were involved?

Section 154,Section 40(a)(ia),Section 143(3)

AI-generated summary — verify with the full judgment below

Before: Shri Duvvuru RL Reddy & Shri S. Jayaraman

Hearing: 02.02.2021Pronounced: 19.02.2021

आयकर अपीलीय अिधकरण, ‘‘ए’’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI �ी धु�ु� आर.एल रे�ी, �ाियक सद� एवं �ी एस जयरामन, लेखा सद� के सम� Before Shri Duvvuru RL Reddy, Judicial Member & Shri S. Jayaraman, Accountant Member आयकर अपील सं./ Year:2012-13 M/s. RMKV Fabrics Pvt. Ltd., The Deputy Commissioner of Vs. 176F, RMKV Complex, Trivandrum Income Tax, Circle 1, Road, Vannarpettai, Tirunelveli 627003. Tirunelveli. [PAN: AAFCR4022H] (अपीलाथ� /Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri G. Baskar, Advocate ��थ� की ओर से/Respondent by : Shri G. Chandrababu, Addl. CIT सुनवाई की तारीख/ Date of hearing : 02.02.2021 घोषणा की तारीख /Date of Pronouncement : 19.02.2021 आदेश /O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER:

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 1, Madurai dated 26.03.2019 relevant to the assessment year 2012-13. In the grounds of appeal, besides challenging confirmation of the order passed under section 154 of the Income Tax Act, 1961 [“Act” in short], the assessee also disputed confirmation of disallowance made under section 40(a)(ia) of the Act.

2.

Brief facts of the case are that the assessment under section 143(3) the Act was completed on 30.03.2015. Upon filing of application for rectification of mistake apparent from record under section 154 of the Act towards rental payment was wrongly typed as ₹.1,88,49,478/- thereby quantum addition of ₹.1,49,33,115/- was made, after verification of the records, the Assessing Officer rectified the mistake apparent from record and reduced he same from the assessed income. However, while verifying records, the Assessing Officer observed that the assessee has not deducted TDS on the rent of ₹.1,07,95,944/- paid to M/s. RmKV Silks Pvt. Ltd. Since the above non- payment of TDS was not noticed by the Assessing Officer while concluding the assessment under section 143(3) of the Act, the non-payment of TDS on the rent paid by the assessee would attract disallowance under section 40(a)(ia) of the Act and accordingly, brought to tax. On appeal, the ld. CIT(A) confirmed the disallowance made under section 40(a)(ia) of the Act.

2.1 Before us, the assessee has challenged the jurisdiction of the Assessing Officer for making disallowance under section 40(a)(ia) of the Act. After hearing both the sides, we find that as per section 154 of the Act, the Assessing Officer is fully empowered to rectify the mistake apparent from records either of his own motion or rectification application filed by the assessee. Thus, since the Assessing Officer has rightly exercised his jurisdiction in rectifying the mistake apparent from the records, the ground raised by the assessee stands dismissed.

3.

With regard to the disallowance of ₹.1,07,95,944/- made under section 40(a)(ia) of the Act, by filing copy of the ledger account of M/s. RMKV Silks Pvt. Ltd., it was the submissions of the ld. Counsel for the assessee that the main concern viz., M/s. RMKV Silks Private Limited paid the rent to the land lord and the assessee has reimbursed its share to M/s. RMKV Silks Pvt. Limited. It was further submission that the assessee has not directly paid the rent to the land lord and therefore, the question of application of section 40(a)(ia) of the Act would not arise. Thus, the ld. Counsel prayed for allowance of the above expenditure. On the other hand, the ld. DR supported the orders of authorities below.

4.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. We find force in the arguments of the ld. Counsel that since the assessee has not directly paid the rent to the land lord and therefore, the question of deducting TDS would not arise. In view of the above, we remit the matter back to the file of the Assessing Officer to verify as to whether M/s. RMKV Silks Private Limited paid the entire rent to the land lord after deducting TDS and the assessee has only reimbursed the rent to M/s. RMKV Silks Pvt. Ltd. and decide the issue in accordance with law after allowing an opportunity of being heard to the assessee. Thus, the ground raised by the assessee is allowed for statistical purposes.

5.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes.

Order pronounced on the 19th February, 2021 at Chennai.

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