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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 10.01.2018 passed by the Commissioner of Income Tax (Appeals) -49, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2012- 13.
The revenue has raised the following grounds: - "
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance made u/s 40(a)(ia) of the IT Act,1961 when the assessee had not deducted tax at source on the interest payment of A.Y.2012-13 Rs.3,04,08,276/- even though the party to whom interest was paid had included the interest income in computing its returned taxable income.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CITA) was justified without appreciating the fact that the proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 with effect from 02.04.2013 and the same could not be held the be applicable retrospectively to the assessment year 2012-13.
3. Whether on the facts and in the circumstances of the case and in law, the Ld CITA) was justified in relying on the decision of Hon 'ble Delhi High Court in the case of Ansal Landmark Township Pin. Ltd. By ignoring the fact that the Department has not accepted the decision and SLP flied before Hon'ble Supreme Court has been granted in favour of Revenue on the basis of which Hon'ble ITAT has given relief.” The appellant prays that the order of CIT(A)-49, Mumbai on the above grounds be set aside and that of the Assessing Officer be restored."
3. The brief facts of the case are that the assessee filed its return of income on 26.09.2012 declaring loss to the tune of Rs.60,565/-. Thereafter, the case was selected for scrutiny under CASS. Thereafter, notices u/s 143(2) and 142(1) of the Act were issued and served upon the assessee. On verification, it was found that the assessee paid the interest in sum of Rs.3,04,08,276/- and failed to deduct the TDS. The show-cause notice was given as to why the above interest payment should not be disallowed u/s 40(a)(ia) of the I.T. Act, 1961. After the reply of the assessee, the interest in sum of Rs.3,04,08,276/- was disallowed and closing stock was reduced by 3,04,08,276/-. The closing stock was carried forward in sum of Rs.11,37,74,397/-. The income of the assessee was assessed at loss to the tune of Rs.60,560/-. Feeling aggrieved, the assessee filed an appeal before 2 A.Y.2012-13 the CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us.
ISSUE NOS. 1 to 3:- 4. All the issues are inter-connected, therefore, are being taken up together for adjudication. In fact, all the issues are in connection with the allowance of the claim of the assessee in connection with the interest paid of Rs.3,04,08,276/-. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly allowed the claim of the assessee, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has argued that the claim of the interest of the assessee has duly been covered by the decision of the Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. Vs. CIT-293 ITR 226, therefore, the claim of the assessee has rightly been allowed. It is also argued that the claim of the sister concern of the assessee in case of M/s. Vardha Vinayak Township Development Pvt. Ltd. has also been allowed by the Hon’ble ITAT. In view of the argument advanced by the Ld. Representative of the parties and perusing the record, we noticed that the assessee paid the interest in sum of Rs.3,04,08,276/- and failed to deduct the TDS at source. But it is also apparent on record that the payee has duly showed the said interest in his return of income and also paid the taxes thereon. On this factual issues, the legal position is now clear in the case of Hindustan Coca Cola Beverage (P) Ltd. Vs. CIT-293 ITR 226 in which it is specifically clarified that if the payee deposited the TDS with the state-exchequer then there would be no addition in connection with u/s 40(a)(ia) of the Act. Before going 3 A.Y.2012-13 further, we deem it necessary to advert the finding of the CIT(A) on record.:-
“The submissions of the learned counsel have been carefully considered. It is the contention of the learned counsel that the amendment of section 40(a)(ia) comes into effect retrospectively as it is a clarificatory amendment. Further, the assessee had capitalized the interest and therefore the provisions of section 40(a)(ia) are not applicable as the said provision applies to the deductions claimed in computing the income chargeable under the head profits and gains of business or profession. Further the appellant, on 10.1.2018 submitted copies of appellate orders of CIT (A) and Hon’ble ITAT, Mumbai in the case of a sister concern of the assessee i.e. MIS Vardha Vinayak Township Development Private Ltd on identical issue. The CIT (A) while deciding the issue held as under: "71 The only issue to be considered is whether the 2nd proviso to section 40(a) (i8), inserted by Finance Act, 2012 w.e.f. 01.04.2013 is retrospective in effect vs. ITO - 4(2)(2), Mumbai, the ITAT, SMC Bench has followed the decision of Hon'ble Delhi High Court in the case of CIT vs. Ansal Landmark Township Pvt. Ltd. (ITA No. 160 & 161 of 2015 dated 26.08.2015) wherein it was held that the amendment to Section 40(a)(ia) w.e.f. 01.04.2013, bringing in the 20d proviso was clarificatory and, hence retrospective. This view has been adopted by ITAT, Mumbai in 1081 Capital Markets vs. DCIT in dated 13.10.2015 and in the case of Mahindra Navistar Automotive Ltd. vs. DCIT - 2(2), Mumbai in ITA No. 3324 & 4645/Mum/2013 dated 13.05.2016. 7.2. 1 find that the appellant had filed a certificate from Chartered Accountant certifying that the appellant company has paid/credited an amount of Rs.1,68,44,1641- on 31.03.2012, by way of interest on loan to the account of Suryoday Buildwell and Farms Pvt. Ltd. and the payee has furnished its return of income for the AY 2012-13 on 29.09.2012 in which the said interest income has been taken into account for computing the taxable income. In view of the above, the appellant company cannot be said to be an assessee in default under l proviso to Section 201(1). Further, the appellant would be covered by ?d proviso to section 40(a)(ia) which is held to be retrospective and applicable for AY 2012-13, following the decisions cited by the appellant and also noted above in para 7.1. Accordingly, it is held that the 4 A.Y.2012-13 disallowance of interest u/s 40(a)(ia) of Rs.1,20,02,0641- as well as reduction of interest of Rs.48,42,1001- from the inventory, on the ground that tax was not deducted at source on such interest payment, is not correct and the AO is directed to allow the deduction of Rs.1,20,02,064/- and the capitalization of interest amount of Rs.48,42,100/- to the inventory. The grounds taken by the appellant in ground No. 2 are allowed." Further the Hon'ble ITAT while deciding the appeal filed by revenue on the aforesaid order of CIT (A) held as under: 6. I have heard both the Counsel and perused the records. I find that the impugned amendment as contested by the Revenue in the grounds of appeal above has already been held by Hon'ble Delhi High Court to be retrospective in nature. In the present case, the assessee has filed certificate from the Chartered Accountant, and Assessee Company has paid and the payee has furnished its return of income in which the said income has been taken into account for computation of taxable income. In such situation learned CIT (A) has held that disallowance u/s 40(a)(ia) is not required.
7. Upon careful consideration, I find that the issue has been decided by the learned CIT (A) following Hon'ble Delhi High Court decision. There is no contrary decision of Hon'ble jurisdictional High Court. In such situation, respectfully following the precedent as above, I do not find any infirmity in the order of the learned CIT (A). Accordingly, I uphold the same." The CIT (A) had relied upon the judgement of the Delhi High Court in the case of CIT vs. Ansal Landmark Township Private Ltd and 161 of 2015 dated 26.08.2015 and also a few of the Hon’ble Mumbai ITAT's judgements. The Hon’ble ITAT while deciding the appeal against this order of the CIT (A) held that there is no contrary decision of the jurisdictional High Court against the Hon’ble Delhi High Court's decision supra. Therefore, the honorable ITAT followed the same and confirmed the order of the CIT (A) deleting the disallowance under section 40 (a) (i a) and also the deduction of capitalized interest amount from the closing stock. Respectfully following the binding decision of the jurisdictional ITAT, as the facts are identical, the disallowance made by the AO and further reducing the inventories by the said amount i.e. Rs.3,04,08,276/- is deleted. This ground of appeal is ALLOWED.”
5 A.Y.2012-13