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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A.MOHAN ALANKAMONY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:- This appeal by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-2, Chennai, dated 21.03.2017 in ITA No.247/CIT(A)-2/2015-16 for the assessment year 2013-14 passed U/s.250(6) r.w.s. 143(3) of the Act.
2 The assessee has raised four grounds in its appeal however the crux of the issue is that the Ld.CIT(A) has erred in
2 ITA No.1346/Chny/2017 confirming the order of the Ld.AO with respect to addition of
Rs.1,80,000/- invoking the provisions of Section 40(a)(ib) of the Act
The brief facts of the case are that the assessee is a firm,
filed its return of income for the assessment year 2013-14 on 30.09.2013 admitting total income of Rs.26,70,300/-. Initially the return was processed U/s.143(1) of the Act and subsequently the
case was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued on 02.09.2014. Finally assessment order was passed U/s.143(3) of the Act on 29.02.2016 wherein the
Ld.AO made several additions amongst which one of the addition pertains to disallowance of expenditure invoking Section 40(a)(ib) of the Act towards non-deduction of tax for the payment made to NRI.
During the course of scrutiny assessment, it was observed that the assessee firm had paid rent of Rs.1,80,000/- to
Shri N. Venkat Ramani who was a NRI residing in Sweden without deduction of tax at source. On query it was submitted by the assessee firm that the rent of Rs.1,80,000/- was paid to Shri
Venkat Ramani in India which was remitted in his HDFC bank
3 ITA No.1346/Chny/2017 account. It was further submitted that Shri Venkat Ramani had
informed the assessee firm that the bank had deducted TDS on its
fixed deposit interest. Since the assessee had not deducted tax at
source on the payment of rent to Shri Venkat Ramani, who is a
non-resident, the Ld.AO invoked the provisions of Section 195 of
the Act and thereby invoking the provisions of Section 40a(ib) of
the Act and thereby disallowed the claim of expenditure incurred
towards rent of Rs. 1,80,000/-. On appeal, the Ld.CIT(A) confirmed
the order of the Ld.AO by observing as under:-
“5.5. A careful perusal of the provisions of the proviso to Section 40(a)(ia) read alongwith the proviso to Section 201(1) of the Act, makes it very clear that the reprieve provided to an assessee who fails to effect TDS, in the form of filing of certificate from an Accountant in Form 26A, certifying that the payee has duly taken into account the sum with respect to which TDS was not made, in his return of income, is applicable only in respect of payments made to residents. It is pertinent to note that there is no such corresponding provision in the Act, with respect to payments made to non- residents, without effecting TDS. In other words, the appellant, having made the payment of rent of Rs.1,80,000/- to a non-resident, cannot take recourse to claiming, that the appellant is not an assessee in default, as per the provisions of Section 201(1) and its proviso.
Hence, the submissions made by the appellant and the filing of certificate in Form 26A filed, do not serve the purpose of granting relief to the appellant since the payment of rent without TDS, itself is made to an NRI, Shri N. Venkata Ramani. The provisions of Section 40(a)(ia)of the Act are squarely applicable to the payment of rent of Rs.1,80,000/- made by the appellant-firm to an NRI without TDS and hence, the entire expenditure of Rs.1,80,000/- is exigible to tax as per the clear provisions of Section 40(a)(i)(B) of the Act. The addition of Rs.1,80,000/- is hence confirmed.
This ground is dismissed.”
4 ITA No.1346/Chny/2017 5. Before us the Ld.AR submitted that the NRI Shri Venkat
Ramani had filed his return of income in the relevant assessment year and paid the tax. Therefore relying in the decision of the Hon’ble Apex Court in the case Transmission Corporation of AP &
other vs. ITO reported in 239 ITR 587, the Ld.AR argued by stating that, when there is no tax liability in the case of the recipient of the rent then the provisions of Section 195 of the Act cannot be
invoked. It was therefore pleaded that the addition made by the Ld.AO may be deleted. The Ld.DR on the other hand relied on the orders of the Ld.Revenue Authorities.
We have heard the rival submissions and carefully perused the materials on record. We find merit in the submissions of the Ld.AR. When the recipient of the rent who is a NRI has paid tax in
India and there is no outstanding demand from the Revenue then the provisions of Section 195 cannot be invoked as held by the Hon’ble Apex court in the case cited supra. Hence respectively following the decision of the Hon’ble Apex court we hereby direct the Ld.AO to verify whether the recipient of the rent Shri Venkat Ramani has filed his return of income and paid tax then delete the
addition made by invoking the provisions of Section 195 and
5 ITA No.1346/Chny/2017 40a(ia) of the Act. If found otherwise, pass appropriate order in accordance with merits and law.
In the result, appeal of the assessee is allowed for statistical purposes as indicated herein above.
Order pronounced on the 16th April, 2018 at Chennai.
Sd/- Sd/- (एन.आर.एस. गणेशन) (ए. मोहन अलंकामणी) (N.R.S. Ganesan) (A. Mohan Alankamony) लेखा सद�य/Accountant Member �याियक सद�य/Judicial Member चे�नई/Chennai, �दनांक/Dated 16th April, 2018 RSR आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A) 4. आयकर आयु�त/CIT 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF