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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’ NEW DELHI
Before: SHRI B.P. JAIN
ORDER This appeal of the assessee arises from the order of learned CIT(A)- XXVII, New Delhi vide order dated 15.09.2014 for the assessment year 2010-11. 2. The assessee has raised the following grounds of appeal.
“1. That the Ld.CIT(Appeal) has erred in law and on facts in confirming the applicability of the provisions of Section 40(a)(ia).
That the Ld. ClT (Appeal) has erred in law and on facts in confirming the addition of Rs.11,07,043/ -in respect of payment of interest of loan.
That the Ld. CIT (Appeal) has erred in law and on facts in confirming the addition of Rs.32,894/ -out of the indirect expenses.
That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
That the Appellant craves leave to add/ alter any / all grounds of appeal before or at the time of hearing of the Appeal.”
2. Grounds No.4 and 5 are general in nature, therefore, do not require any adjudication.
3. As regards ground no.1 and 2, the brief facts of the case are that the assessee debited Rs.14,94,509/- as interest in the Profit & Loss Account. As per the details of interest furnished during the assessment proceedings, the assessee paid interest of Rs.5,80,070/- to Tata Finance Ltd., Rs.4,38,258/- to Cholamandalam DBS Finance Ltd. and Rs.88,715/- to Citi Financial Consumer Finance India Ltd. during the relevant assessment year. According to the Assessing Officer, there is violation of provision of 194A as the appellant had failed to deduct tax on this interest payments to the above three concerns. The relevant portion of the assessment order is as follows:
The reply filed by the Company has been considered. There is no waiver clause for disallowance of interest under section 40(a)(ia) of the Income Tax Act,1961 as under: (ia) any interest, commission or brokerage, rent, royalty, fees for professional services to a resident or amounts payable to a contractor or sub-contractor, being resident for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under chapter XVII-B and such tax has not been deducted or after deduction has not been paid or before the due date specified in sub-section (I) of section 139. As the assessee has filed to deduct tax at source under section 194 on interest paid amounting to Rs.11,07,043/- to the companies as mentioned above, the assessee has violated provisions of section 40(a)(ia) of the Income Tax Act, 1961. Hence in terms of section 40(a)(ia) interest of Rs.11,07,043/- debited to Profit & Loss Account of M/s. Prem Crane & Transport Services in the year ended 31.07.2010, is disallowed and added to the income of the assessee.
4. I have heard the rival contentions and perused the facts of the case, it was brought to my notice that the decision in the case of ITO vs. Shri Anoop Khandelwal in paper book A at pages 1 to 4 decided by ITAT Bench ‘A’ New Delhi in order dated 17th October, 2014 where the learned CIT(A) held as under: “It has to be concluded that, provisions of Section 40(a)(ia) are applicable only to the amounts of expenditure, which are payable as on the date of 31st March every year and it cannot be invoked to disallow expenditure, which has been actually paid during the previous year without deduction of TDS.”
5. Revenue filed the appeal before the ITAT and the ITAT vide its order dated 17.10.2014 mentioned hereinabove decided the issue in paragraph 5 to 8 as under: “5. Ld. A.R. on the other hand submitted that while Hon'ble Calcutta High Court in the case of CIT vs. Crecent Export Syndicate 216 Taxman 250 = 2013-TIOL-404-HC-KOL-IT and Hon'ble Gujarat High Court in the case of CIT Vs Sikandarkhan N Tunvar 357 ITR 312 = 2013-TIOL-389-HC-AHM-IT has overruled the Special Bench decision in the case of Merilyn Shipping & Transports Vs ACIT 136 ITD 23 = 2012-TIOL-184-ITAT-VIZAG-SB. However, the Special Bench Decision has been approved by Hon'ble Allahabad High Court in CIT Vs Vector Shipping Services (P) Ltd. 357 ITR 642 = 2013-TIOL- 599-HC-ALL-ITand moreover, SLP filed by the Department against Hon'ble Allahabad High Court decision in the case of Vector Shipping Services has been dismissed by Hon'ble Supreme Court and therefore, the Hon'ble Supreme Court order has become the law on this issue. Without prejudice to the above, it was submitted that in view of Hon'ble Supreme Court decision in the case of CIT Vs Vegetable Products Ltd. 88 ITR 192 = 2002-TIOL-S74-SC- IT-LB,the assessee is entitled to application of judgement benefiting to it and therefore Hon'ble Allahabad High Court judgement should be applied to the assessee.
As regards the rebate and discounts taken by revenue in the 3rd ground of appeal
, Ld. A.R. relied upon the order of Ld. CIT(A).
7. We have heard the rival submissions and have gone through the material placed on record. We find that there are contrary judgements of Allahabad High Court as compared to Calcutta and Gujarat High Courts. However, appeal filed by the Department with Hon'ble Supreme Court against the order of Hon'ble Allahabad High Court has been dismissed by Hon'ble Supreme Court in limine. Moreover, as per the Hon'ble Supreme Court order in the cases of Vegetable Products as relied upon by Ld. A. R. in the case of conflicting judgements that judgment is to be applied to an assessee which is beneficial to it. Therefore, we do not see any infirmity in the order of Ld. CIT(A) in this context. As regards the issue of rebate & discount, in our view CIT(A) has taken a reasoned view keeping in view the facts and circumstances of the case.
8. In view of the above, the order of Ld. CIT(A) is upheld and therefore, appeal filed by the Revenue is dismissed”
6. The decision in the case of Shri Anoop Khandelwal (supra) was followed by M/s. Optitech Software Pvt. Ltd. of ITAT Delhi Bench ‘E’ New Delhi, vide order dated 25.03.2015 and the relevant paragraph is reproduced hereinbelow: “5. We have hard rival parties and have gone through the material placed on record. We find that the issue of addition u/s.40(a)(ia) is duly covered in favour of assessee because it is an undisputed fact that payments were made during the year itself and therefore, were not outstanding as payable. The Special Bench in the case of Merylin Shipping &Transport Co. in 136 ITD 23 has clearly held that disallowance u/s 40(a)(ia), can be made of the amounts which are payable and cannot be made of the amounts which have already been paid. Similar findings has also been made by Hon'ble Allahabad High Court in case of Vector Shipping Service Pvt. Ltd. reported at 357 ITSR 642 against which SLP filed by the department has also been dismissed. Though Hon'ble Calcutta High Court in the case of CIT Vs. Cresent Export Syndicate 216 Taxman 250 and Hon'ble Gujarat High Court in the case of CfT vs Sikander Khan 357 ITR 312 are not in favour of assessee but keeping in view of Hon'ble Supreme Court decision in the case of CIT Vs. Vegetable products 88 ITR 92, the assessee is entitled to application of judgement benefiting to it and, therefore, applying the Hon'ble Allahabad High Court judgement, the 1st ground of appeal is decided in favour of assessee and is therefore, allowed.”
7. Since the issue is identical in the present case, therefore, the issue is decided in favour of the assessee and grounds no.1 and 2 of the assessee are allowed.
8. As regards ground no.3, the AO has made adhoc disallowance of Rs.98,682/- being 15% of conveyance expenses, telephone expenses and depreciation on car. It was argued by learned counsel for the assessee, Mr. Prakash Yadav, Advocate that each and every vouchers were produced before both the authorities below and specific defect has not been pointed out, books of account were also produced and no defect in the same has been pointed out. In the circumstances and facts of the case, the AO should not have made any disallowance on this count and any disallowance so made by the AO and disallowance sustained by the learned CIT(A) is directed to be deleted. Thus, the ground no.3 of the assessee is allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this day 24 April, 2017