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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-9, Pune,
dated 13-01-2017 for the Assessment Year 2012-13.
Grounds raised by the assessee read as under :
“1. The learned Commissioner of Income Tax(Appeals) erred on facts and in law in upholding disallowance of Rs. 35,07,252 being interest expenses u/s 40(a)(ia) of the Act for non-deduction of tax at source. 2. The learned Commissioner of Income Tax (Appeals) erred on facts and in law in not admitting and appreciating the contentions/arguments /fresh evidence furnished by the assessee during appellate proceedings on technical grounds without appreciating that these related to a legal ground/plea set up by the assessee and he ought to have considered/admitted these. In any case, he erred on placing reliance on Kerala High Court's decision in 364 ITR 689 wherein the facts were entirely different. 3. The learned Commissioner of Income Tax(Appeals) erred on facts and in law in not appreciating that the amendment made vide second proviso to sec. 40(a)(ia) has a retrospective effect as has been judicially held and consequently no disallowance u/s. 40(a)(ia) was warranted.
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The appellant craves leave to add, alter, delete or substitute all or any of the above grounds of appeal.
Briefly stated relevant facts are that assessee is an individual and in the
engaged in the business of sale of footwear on wholesale basis. Assessee filed
the return of income on 24-09-2012 declaring total income of Rs.9,03,032/-. In
the scrutiny proceedings, AO noticed that assessee debited certain interest
expenses amounting to Rs.42,17,138/- without deducting TDS. The details of the
same are given as under :
Sr.No. Name of the party to whom interest paid Total amount paid 1 Interest on loan paid to Shriram Finance Rs.66,180 2 Interest on loan paid to Edelweiss Finance Rs.11,98,065 3 Interest on loan paid to City Finance Rs.5,12,217 4 Interest on loan paid to Future Money Rs.23,97,566 5 Interest on loan paid to Barclay Finance Rs.42,480 Total Rs.42,17,138
In response to the AO’s proposal to invoke the provisions of section 40(a)(ia) of
the Act, the assessee explained that an amount of Rs.7,09,886/- relates to pre-
closure and processing charges paid to Future money listed at Sl.No.4. Assessee
could not explain the balance amount. AO rejected the assessee’s submission that
the amended provisions of section 40(a)(ia) of the Act helps the assessee. Thus,
the AO made the addition of Rs.35,07,252/- invoking the provisions of section
40(a)(ia) of the Act. While making disallowance, the AO relied on the judgments
of Hon’ble Calcutta and Gujarat High Court in the case of CIT Vs. Crescent Exports
Syndicate 33 taxman.com 259 (Calcutta) and CIT Vs. Sikandar Khan N. Tunwar 33
taxman.com 133 (Gujarat)
Before the First Appellate proceedings, the assessee furnished certificates
in Form 26A in respect of ECL Finance Ltd. (Edelweiss Finance) and Capital First
Ltd. (Formerly known as Future Capital Holdings Ltd. However, the CIT(A) held
that no such submissions were made before the AO regarding these additional
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evidences and the assessee has not made any request under Rule 46A of the Act.
CIT(A) confirmed the disallowance ignoring the assessee’ submissions relying on
the order of Agra Bench of the Tribunal in the case of Rajeev Kumar Agarwal Vs.
CIT in ITA No.337/Agra/2013, dated 29-05-2013.
Aggrieved with the order of CIT(A) the assessee filed the present appeal
before the Tribunal with the grounds extracted above.
Before me, at the outset, Ld. Counsel for the assessee submitted that the
issue raised in the grounds needs to be remanded to the file of AO considering the
ratio laid down by the Pune Bench of the Tribunal in the case of Vivek Dattatraya
Gupte-HUF in ITA Nos. 406 and 407/PN/2014, dated 16-12-2015. He submitted
that this is a case where the assessee made interest payments on the loans taken
from the 5 parties mentioned above.
On the other hand, Ld. DR for the Revenue relied on the orders of the
AO/CIT(A).
I heard both the parties on this issue and perused the decision relied on by
the Ld. Counsel for the assessee. I find that the Tribunal in the case of Vivek
Dattatraya Gupte-HUF Vs. ITO (supra) while remanding the issue to the file of AO
relied on the decision of Pune Bench of the Tribunal in the case of ACIT Vs.
Bhavook Chandraprakash Tripathi (2015) 43 CCH 292 (Pune Tribunal). For the
sake of completeness, I proceed to extract the operational paras of the order of
Tribunal (supra)
“7. The learned Authorized Representative for the assessee pointed out that Pune Bench of Tribunal have taken a consistency view that the provisions of section 40(a)(ia) of the Act were attracted to an expenditure to which provisions of tax deduction at source are applicable, irrespective of the fact whether the same is paid at any time during the previous year and was not payable at the close of year. The learned Authorized Representative for the assessee further pointed out that Pune Bench of Tribunal however, has further taken note of second proviso to section 40(a)(ia) of the Act, which was inserted by the Finance Act, 2012 w.e.f. 01.04.2013, wherein it is provided that the said provisions would not be applicable if the assessee
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was not deemed to be an assessee in default under first proviso to section 201(1) of the Act. The matter was restored back to the file of Assessing Officer to consider the plea of the assessee based on the second proviso to section 40(a)(ia) of the Act. Reliance in this regard was placed on the ratio laid down in ACIT Vs. Bhavook Chandraprakash Tripathi (2015) 43 CCH 292 (Pune-Trib).
The learned Departmental Representative for the Revenue has placed reliance on the orders of authorities below.
We have heard the rival contentions and perused the record. The first issue arising in the present appeal is whether the provisions of section 40(a)(ia) of the Act are attracted to an expenditure, which was not payable at the close of the year. The Pune Benches of Tribunal have consistently taken view that the said provisions are attracted irrespective of the expenditure being paid during the year and nothing being payable at the close of the year. Hence, where the assessee had made payment on account of interest expenditure to which the provisions of section 194A of the Act are applicable, the onus was upon the assessee to deduct TDS and in absence of the same, the said expenditure is liable to the disallowed in the hands of assessee, in view of the provisions of section 40(a)(ia) of the Act. We uphold the order of CIT(A) in this regard.
Now, coming to the second aspect of the issue i.e. new legal plea raised by the assessee in view of second proviso to section 40(a)(ia) of the Act, which was inserted by the Finance Act, 2012. The Tribunal in ACIT Vs. Bhavook Chandraprakash Tripathi (supra) while adjudicating similar issue had observed as under:-
“4. Following the aforesaid precedent, we hereby reverse the decision of the CIT(A). However, at the time of hearing, the Ld. Representative for the respondent-assessee made a new legal argument that second proviso to section 40(a)(ia) of the Act was inserted by Finance Act, 2012 w.e.f. 01.04.2013, whereby it is provided that the disallowance u/s 40(a)(ia) of the Act would not be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the Act. The stand of the assessee is that the said proviso should be understood as retrospective in nature as it has been introduced to eliminate unintended consequences which may cause undue hardships to the tax payers. It was pointed out that in similar circumstances, the Pune Bench of the Tribunal in the case of ITO vs. M/s Gaurimal Mahajan & Sons vide ITA No.1852/PN/2012 dated 06.01.2014 following the decision of the Cochin Bench of the Tribunal in the case of Antony D. Mundackal vs. ACIT vide ITA No.38/Coch/2013 dated 29.11.2013 has restored the matter back to the file of the Assessing Officer. In the precedent dated 06.01.2014 (supra), the Tribunal noted that such a plea was raised for the first time before the Tribunal and the correctness or otherwise of the contentions raised was not examined by the lower authorities. Therefore, the Tribunal restored the matter back to the file of the Assessing Officer for examination afresh, following the decision of the Cochin Bench of the Tribunal in the case of Antony D. Mundackal (supra) in a similar circum stance. The Ld. Representative submitted that the matter be restored back to the file of the Assessing Officer in the light of the order of the Tribunal dated 06,01.2014 (supra). The aforesaid plea of the respondent-assessee has not been seriously opposed by the Ld. Departmental Representative appearing for the Revenue.
Following the aforesaid precedent, we therefore deem it fit and proper to restore the matter back to the file of the Assessing Officer who shall consider the plea of the assessee based on the second
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proviso to section 40(a)(ia) of the Act inserted by the Finance Act w.e.f. 01.04.2013 in the light of the directions of the Tribunal contained in its order dated 06.01.2014 (supra). Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard before passing an order afresh on this aspect as per law.” 11. The issue raised in the present appeals is squarely covered by the order of Tribunal (supra) and following the same parity of reasoning, we deem it fit to restore the matter back to the file of Assessing Officer, who shall consider the plea of the assessee based on the provisions of the Act inserted by the Finance Act, 2012 w.e.f. 01.04.2013 and in line with earlier order of the Tribunal dated 06.01.2014 (supra), the Assessing Officer is directed to adjudicate the issue in accordance with law after affording reasonable opportunity of hearing to the assessee. 12. The facts and issues in ITA No.407/PN/2014 are identical to the facts and issues in ITA No.406/PN/2014 and our decision in ITA No.406/PN/2014 shall apply mutatis mutandis to ITA No.407/PN/2014.”
Considering the facts of the case before the Tribunal (supra) are identical
to the facts of the present case, I remit the issue back to the file of AO for fresh
adjudication with similar directions. Accordingly, the grounds raised by the
assessee are allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced on this 25th day of May, 2018.
Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 25th May, 2018. Satish आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-9, Pune 3. आयकर आयु� / The CIT-9, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune