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Income Tax Appellate Tribunal, DELHI BENCH: “G”, NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI 0.P. KANT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: “G”, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI 0.P. KANT, ACCOUNTANT MEMBER ITA No.1086/Del/2013 Assessment Year: 2007-08 Shri Sudesh Sabharwal, Vs. Income Tax Officer, 57A, Central Avenue, Sainik Ward-22(1), New Delhi Farm, New Delhi PAN :AATPS3269A (Appellant) (Respondent) Appellant by Shri A.K. Srivastava, CA Respondent by Shri N.K. Bansal, Sr.DR
Date of hearing 21.01.2019 Date of pronouncement 30.01.2019
ORDER PER O.P. KANT, A.M.: The present appeal by the assessee is directed against the order of CIT(A)-XXIII, New Delhi, dated 06.01.2012 raising the following grounds of appeal:
The order of CIT (A) is bad in law and on facts. 2. The order passed by Ld. AO is barred by limitation since the order dated 21/12/2009 was received by the assessee only on 18/03/2010. 3. On the facts and under circumstances of the case, the Id. CIT (A) has erred in sustaining the addition of Rs 1, 52,250/- disallowed by the AO on account of non-deduction of TDS on rental payments under section 40(a)Jia) of the Act without appreciating that the assessee
2 ITA No.1086/Del/2013 has deducted and duly deposited applicable tax at source of Rs. 25,625/-.Further the provisions of section 40(a)(ia) are applicable to expenses remains payable at the end of the financial year and not to paid expenses. 3. The CIT (A) has completely erred in sustaining the disallowance of Rs 1, 52,250/- ignoring that there is no loss to revenue on these payments since the payee to whom these payments'were made has already offered this income for taxation purposes. 4. The CIT(A) has erred in sustaining the disallowance of Rs 3,00,000/- made by the AO u/s 40(a)(ia) of the Act, on account of non-deduction of TDS on the payments made for hiring DG set. While confirming the addition the CIT (A) has erred in not considering the legal provisions of section 40(a)(ia) which provisions are applicable to expenses remains payable at the end of the financial year and not to paid expenses. 5. The CIT(A), while confirming the disallowance of Rs 3,00,000/- on account of hiring charges has further failed to appreciate that there is no loss to revenue on this count, in as much as the payee has already offered this income for taxation purposes. 6. The CIT(A) has further erred in sustaining the disallowance of Rs 7,16,868/- made by the AO u/s 40(a)(ia) of the Act, on account of non deduction of TDS on hiring charges paid by the assessee against the lease of machinery. While colifirmThg' the addition the CIT (A) has erred in not considering the legal provisions of section 40(a)(ia) which provisions are applicable to expenses remains payable at the end of the financial year and not to paid expenses. 7. The CIT (A), while confirming the disallowance of Rs 7, 16,868/- on account of hiring charges has further failed to appreciate that there is no loss to revenue on this count, in as much as the payee has already offered this income for taxation purposes. 8. That the Appellant craves leave to amend alters, add or forego any of the above grounds.
2.1 The learned counsel for the assessee submitted that the assessee filed an application dated 20.02.2013 for condonation of the delay of 365 days along with affidavit stating the reasons for delay. It is submitted by learned counsel for the assessee that the assessee was suffering from high diabities and blood pressure due to which the assessee was not conscious about his appellate
3 ITA No.1086/Del/2013 remedy, as is remedy from the medical records of the assessee. It is further submitted that the assessee was also suffering from financial crisis, due to his deadly disease and was unable to obtain an expert opinion in respect of the CIT(A) order. Accordingly, he submitted that delay in filing appeal may be condoned.
2.2 At the outset, the Ld. Sr. DR, submitted that appeal has been filed by the delay of 356 days from the due date of filing of appeal and the application filed for condonation of delay is without sufficient cause and, therefore, the delay might not be condoned and the appeal may be rejected.
2.3 We have heard the rival submission on the issue of condonation of the delay in filing the appeal. We find that the Registry pointed out the delay of 365 days in filing the appeal. We find the assessee has expressed sufficient cause for delay in filling the appeal. Accordingly, in the interest of substantial justice, the delay of 365 days in filling the appeal is condoned.
Brief facts of the case are that the assessee was engaged in the business of fabrication and trading of the garments in the name and style of proprietor concern of M/s. B.B. International. The assessee filed its return electronically on 30.10.2007, declaring total income Rs.52,607/-. The case was selected for scrutiny and notice under Section 143(2) of the Income-tax Act, 1961 (for short ‘the Act’) was issued and complied with. In the assessment completed under Section 143(3) of the Act on 21.12.2009, the Assessing Officer observed default on the part of the assessee in non-deducting of the tax at source on following
4 ITA No.1086/Del/2013 payments and accordingly, made the disallowance under Section 40(a)(ia) of the Act:
i. DG Set hire charges Rs. 3,00,000/- ii. Machinery lease charges Rs.10,75,900/- iii. Rent Charges Rs. 1,52,250/-
3.1 Aggrieved, the assessee filed appeal before the Ld. CIT(A), however, could not succeed. Aggrieved with the finding of the Ld. CIT(A), the assessee is before the Tribunal, raising the grounds as reproduced above. 4. Before us, the learned counsel for the assessee supporting the grounds, submitted that the deductees have already paid tax on the payments received by them and, therefore, there is no loss to Revenue and in view of the decision of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage (P.) Ltd. Vs. CIT [2007] 293 ITR 226, the disallowance in the case of the assessee may be deleted. 5. On the contrary, the Ld. DR relied on the order of the lower authorities and submitted that even before the Tribunal the assessee has not submitted the evidence in support of the claim that deductees or the payee have already paid tax on the said payments. 6. We have heard the rival submissions and perused the relevant material on record. In the grounds raised by the assessee, two set of arguments have been taken by the assessee. First argument is that the provisions of Section 40(a)(ia) of the Act are applicable to the expenses payable at the end of the financial
5 ITA No.1086/Del/2013 year and not to paid expenses. The second argument taken is that the payee has already paid the tax in the return of income filed by them. 7. As regards the arguments with reference to the ground(s) related to amount payable or paid at the end of the year, is concerned, the controversy has been put to an end by the Hon’ble Supreme court in the case of M/s Palam Gas Services Vs. CIT, Civil Appeal No. 551/2017, dated 03.05.2017, where Hon’ble Supreme Court has held that the word ‘payable’ includes word ‘paid’. The relevant part of the judgment is reproduced as under:
“15. Ms. Dhugga invited our attention to a judgment of the Division Bench of Madras High Court in Tube Investments of India Ltd. v. Assistant Commissioner of Income-Tax (TDS), [2010] 325 ITR 610 (Mad). The Division Bench referred to the statistics placed before it by the Department which disclosed that TDS collection had augmented the revenue. The gross collection of advance tax, surcharge, etc. was Rs. 2,75,857.70 crores in the financial year 2008-09 of which the TDS component alone constituted Rs. 1,30,470.80 crores. The Division Bench observed that introduction of Section 40(a)(ia) had achieved the objective of augmenting the TDS to a substantial extent. The Division Bench also observed that when the provisions and procedures relating to TDS are scrupulously applied, it also ensured the identification of the payees thereby confirming the network of assessees and that once the assessees are identified it would enable the tax collection machinery to bring within its fold all such persons who are liable to come within the network of tax payers. These objects also indicate the legislative intent that the requirement of deducting tax at source is mandatory. 16. The liability to deduct tax at source is, therefore, mandatory.” The aforesaid interpretation of Sections 194C conjointly with Section 200 and Rule 30(2) is unblemished and without any iota of doubt. We, thus, give our imprimatur to the view taken. As would be noticed and discussed in little detail hereinafter, the Allahabad High Court, while interpreting Section 40(a)(ia), did not deal with this aspect at all, even when it has a clear bearing while considering the amplitude of the said provision.
6 ITA No.1086/Del/2013 In the aforesaid backdrop, let us now deal with the issue, namely, the word 'payable' in Section 40(a)(ia) would mean only when the amount is payable and not when it is actually paid. Grammatically, it may be accepted that the two words, i.e. 'payable' and 'paid', denote different meanings. The Punjab & Haryana High Court, in P.M.S. Diesels & Ors., referred to above, rightly remarked that the word 'payable' is, in fact, an antonym of the word 'paid'. At the same time, it took the view that it was not significant to the interpretation of Section 40(a)(ia). Discussing this aspect further, the Punjab & Haryana High Court first dealt with the contention of the assessee that Section 40(a)(ia) relates only to those assessees who follow the mercantile system and does not cover the cases where the assessees follow the cash system. Those contention was rejected in the following manner: “19. There is nothing that persuades us to accept this submission. The purpose of the section is to ensure the recovery of tax. We see no indication in the section that this object was confined to the recovery of tax from a particular type of assessee or assessees following a particular accounting practice. As far as this provision is concerned, it appears to make no difference to the Government as to the accounting system followed by the assessees. The Government is interested in the recovery of taxes. If for some reason, the Government was interested in ensuring the recovery of taxes only from assessees following the mercantile system, we would have expected the provision to so stipulate clearly, if not expressly. It is not suggested that assessees following the cash system are not liable to deduct tax at source. It is not suggested that the provisions of Chapter XVII-B do not apply to assessees following the cash system. There is nothing in Chapter XVII-B either that suggests otherwise. 20. Our view is fortified by the Explanatory Note to Finance Bill (No. 2) of 2004. Sub-clause (ia) of clause (a) of Section 40 was introduced by the Finance Bill (No. 2) of 2004 with effect from 01.04.2005. The Explanatory Note to Finance Bill-2004 stated:- “….. ….. ….. ….. .. With a view to augment compliance of TDS provisions, it is proposed to extend the provisions ofsection 40(a)(i) to payments of interest, commission or brokerage, fees for professional services or fees for technical services to residents, and payments to a resident contractor or sub-contractor for carrying out any work (including supply of labour for carrying out any work), on which tax has not been deducted or after deduction, has not been paid before the expiry of the time prescribed under sub-section(1) of section 200 and in accordance with the other provisions of Chapter XVII-B. ……”
7 ITA No.1086/Del/2013 21. The adherence to the provisions ensures not merely the collection of tax but also enables the authorities to bring within their fold all such persons who are liable to come within the network of tax payers. The intention was to ensure the collection of tax irrespective of the system of accounting followed by the assessees. We do not see how this dual purpose of augmenting the compliance of Chapter XVII and bringing within the Department's fold tax payers is served by confining the provisions of Section 40(a)(ia) to assessees who follow the mercantile system. Nor do we find anything that indicates that for some reason the legislature intended achieving these objectives only by confining the operation Section 40(a)(ia) to assessees who follow the mercantile system.”
In view of the above, the grounds no. 3, 5 and 7 of the appeal are dismissed.
The second issue which has been raised is that the assessee payees have already paid tax on the payment made by the assessee to them. In this regard, the learned counsel was asked to furnish necessary evidences in support of his claim, however, he failed to produce any evidence that the payee has paid tax on the said payments in their hands. In absence of any such evidences, the issue cannot be restored to the file of the lower authorities without justifying that he fulfils the requirement of eligibility of relief relying on the decision of Hon’ble Supreme Court in the case of M/s. Hindustan Coca Cola Beverage (P.) Ltd. (supra). Accordingly, the grounds no. 4, 6 and 8 of the appeal are also dismissed.
Grounds no. 1 and 9, being general in nature, are not required to adjudicate upon.
Ground no. 2 was not pressed by the learned counsel. Accordingly, the same is dismissed as not pressed.
8 ITA No.1086/Del/2013 12. In the result, the appeal of the assessee is dismissed.
Order is pronounced in the open court on 30th January, 2019.
Sd/- Sd/- [BHAVNESH SAINI] [O.P. KANT] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30th January, 2019. RK/-[d.t.d.s] Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR
Asst. Registrar, ITAT, New Delhi