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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri S.S.Godara & Dr. A.L. Saini
आदेश /O R D E R PER S.S.Godara, Judicial Member:- This assessee’s appeal for assessment year 2007-08 arises against the Commissioner of Income Tax (Appeals)-2, Kolkata’s order dated 01.05.2017 passed in case No.484/CIT(A)-2/14-15, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.
The assessee raises following substantive grounds in the instant appeal:- “3. For that the CIT(A) erred in confirming that disallowance of Rs.4,19,796/- made by the Assessing Officer (A.O) under section 40(a))(ia) of the Act on the ground that no tax was deducted from the said payment made for use of common facilities provided by EIH
ITA No1686/Kol/2017 A.Y.2007-08 Oberoi Holdings Pvt. Ltd Vs. DCIT, Ciri-6, Kol Page 2 Limited such as air-conditioning and other common services. The CIT(A) failed to appreciate the fact that the said payment was not in respect to nature of rent as defined under section 194I of the Act and no tax was required to be deducted on the said payment. 4. For that further and in any event without prejudice to the above the CIT(A) failed to consider the fact that the said payment made by the appellant to EIH Limited was duly accounted for by them in the return for assessment year 2007-08 and due tax was paid on the said income by the said service provider and as such the department could not recover tax on the same income by treating the appellant to be an assessee in default. The CIT(A) to consider this fact and grant appropriate relief. 5. For that the CIT(A) erred in confirming the disallowance of Rs.44,896/- under section 40(a0(ia) of the Act out of the remuneration paid to the Auditors on account of short deduction of tax at source. The CIT(A) failed to appreciate the fact that due to increase in Auditors’ remuneration at a later date tax could not be deducted earlier but was duly deducted later and paid before the date of filing of Return and as such no disallowance was called for and the same should have been deleted. 6. For that the CIT(A) erred in confirming the disallowance of Rs.3,04,633/- under section 14A of the Act read with Rule 8D. The CIT(A) failed to appreciate the fact that during the relevant previous year Rule 8D was not applicable and the disallowance made by the AO was liable to be deleted.” 3. We come to the first issue of sec. 40(a)(ia) r.w.s. 194I disallowance of ₹4,19,796/- made in both the lower proceedings on account of non-deduction of TDS on payments made to M/s EIH ltd. for use of common facilities such as air-conditioning etc. Mr. Gupta’s only case during the course of hearing is that sec. 40(a)(ia) 2nd proviso makes it clear that the impugned disallowance is not applicable in case the deductor assessee is not the assessee in default sec. 201(1) of the Act on the ground that the concerned payee already stands assessed. The Revenue’s case on the other hand is that sec. 40(a)(ia) 2nd proviso to this effect applies from 01.04.2013 onwards whereas we are dealing with assessment year 2007-08. We find no merit in Revenue’s instant argument as hon'ble Delhi high court in CIT vs. Ansal Landmark Township (P)
ITA No1686/Kol/2017 A.Y.2007-08 Oberoi Holdings Pvt. Ltd Vs. DCIT, Ciri-6, Kol Page 3 Ltd (2015) 377 ITR 635 (Del) holds the above proviso to be curative in nature having retrospective effect. We therefore restore this first issue back to the Assessing Officer for necessary factual verification as per law after affording adequate opportunity of hearing to the taxpayer who shall be entitled to raise all legal / factual arguments in consequential proceedings. This first substantive issue is treated as accepted for statistical purposes.
Next comes second issue of sec. 40(a)(ia) disallowance of ₹44,896/- on account of non-deduction of TDS qua remuneration paid to auditor. The assessee’s only argument during the course of hearing is that he had duly deducted / paid the TDS in issue before the due date of filing return and therefore, both the lower authorities have erred in law as well as on fact whilst invoking the impugned disallowance. The Revenue’s case on the other hand is that sec. 40(a)(ia) first proviso to this effect allowing deduction to this effect in case deduction and payment of TDS is not retrospective in nature. We find that hon'ble apex court’s decision in CIT vs. M/s Calcutta Export Co. in Civil Appeal No.4339-43340/ 2018 decided on 24.4.2018 has settled the law that sec. 40(a)(ia) 1st proviso substantiated vide Finance Act, 2010 w.e.f. 01.04.2010 allowing deduction in case the taxpayer / deductor deducts TDS and payees the same before due date of filing return; is retrospective in nature. We therefore direct the Assessing Officer to verify the necessary facts as per law in consequential proceedings. This second substantive ground is decided in assessee’s favour in above terms.
Lastly comes sec. 14A r.w.s 8D disallowance of ₹3,04,633/-pertaining to assessee’s dividend income of ₹15,392,675/- as exempt u/s 14A of the Act. Suffice to say, we are in assessment year 2007-08 wherein sec. 14A r.w.s. 8D prescribing computation of disallowance is not applicable. Hon'ble jurisdictional high court’s decision CIT vs. M/s R.R. Sen & Brothers (P) Ltd. in GA No. 3019 of 2012 ITAT No.243 of 2012 decided on 04.01.2013 restricts such disallowance @ 1% of dividend income by applying thumb rule. We also
ITA No1686/Kol/2017 A.Y.2007-08 Oberoi Holdings Pvt. Ltd Vs. DCIT, Ciri-6, Kol Page 4 follow suit therefore to direct the Assessing Officer to restrict the impugned disallowance @ 1% coming to ₹1,53,926/-. The assessee gets part relief accordingly. 6. This assessee’s appeal is partly allowed in above terms. Order pronounced in the open court 17/05/2019 Sd/- Sd/- (लेखा सद%य) (�या'यक सद%य) (Dr.A.L. Saini) (S.S.Godara) (Accountant Member) (Judicial Member) Kolkata, *Dkp, Sr.P.S (दनांकः- 17/05/2019 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-Oberoi Holdings Pvt Ltd., 4, Mangoe Lane, 6th Fl, Kolkakta-700001 2. ��यथ�/Respondent-DCIT, Cir-6, Aayakar Bhavan, P-7, Chowringhee Square, Kolkata-69 3. संबं3धत आयकर आयु4त / Concerned CIT Kolkata 4. आयकर आयु4त- अपील / CIT (A) Kolkata 5. 7वभागीय �'त'न3ध, आयकर अपील�य अ3धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड< फाइल / Guard file. By order/आदेश से, /True Copy/ सहायक पंजीकार आयकर अपील�य अ3धकरण, कोलकाता ।