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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM]
Assessment Year : 2006-07 A.C.I.T., Circle-49 (1) -vs.- M/s Global Venture Corporation Kolkata Kolkata [PAN : AACFG 9172 F] (Appellant) (Respondent) For the Appellant : Shri Sallong Yaden, Addl. CIT For the Respondent : Shri Soumitra Chowdhury, Advocate Date of Hearing : 28.02.2018. Date of Pronouncement : 01.03.2018. ORDER Per N.V.Vasudevan, JM
This is an appeal by the revenue against the order dated 10.11.2016 of CIT(A)- 15, Kolkata relating to AY 2006-07. 2. The grounds of appeal raised by the revenue reads as follows: “1 That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in applying the provision of second proviso of section 40(a)(ia) retrospectively for A. V 2006-07 despite the fact that these provisions were inserted by the Finance Act, 2012 w. e. f. 01.04.2013.
2 That on the facts and in the circumstances of the case& in law, the Ld. CIT(A) is not justified in admitting fresh evidence by way of returns, P&L A/c. & Balance Sheet of the payee M/s. Agarpara Kutir Shilpa Pratisthan as filed by the assessee before him at the appeal stage for the first time without referring such document to the A.O. for verification, thus violating Rule 46A.
3 That on the facts & in the circumstances of the case & in law, the Ld. ClT(A) has erred in granting relief of Rs.68,73,025/- to the assessee by deleting the addition made U/s.40(a)(ia) without verification of specific condition as per clause (ii) under proviso to Sec.201(1) i.e. whether the payee party M/s. Agarpara Kutir Shilpa Pratisthan had taken into account such sum for computing income in such return of income.
4 That on the fact & in the circumstances of the case & in law, the Ld. CIT(A) has erred in granting relief to the assessee without fulfillment of specific conditions as per clause (iii) under proviso to Sec. 201(1) i.e. (a) that the payee M/s Global Venture Corporation A.Y.2006-07 2 party M/s. Agarpara Kutir Shilpa Pratisthan has paid the tax due on income declared by him in such return of income & (b) that the assessee has furnished a certificate to this effect from an accountant in such form as may be prescribed.
5 That the appellate craves leave to add alter, modify any or all the grounds before or during hearing of appeal.”
The Assessee is a partnership firm. It is engaged in the business of manufacture and export of garments. The Assessee incurred the following expenses under the head processing charges, cutting and stitching charges.
Since tax was not deducted at source on the aforesaid payment u/s.194C of the Income Tax Act, 1961 (Act) which according to the AO was a payment to a contractor for carrying out work, the AO disallowed the claim of the Assessee for deduction of the aforesaid sums by invoking the provisions of Sec.40(a)(ia) of the Act. The addition was ultimately subject matter of appeal before the ITAT and the ITAT remanded the issue of disallowance u/s.40(a)(ia) of the Act.
The AO disallowed the aforesaid sums in the proceedings after the order of the ITAT. The Assessee filed appeal against the said order before CIT(A). Before CIT(A) the assessee submitted that as the second proviso to section 40(a)(ia) of the Act read with proviso to section 201(1) of the Act inserted by Finance Act 2012 w.e.f. 01.04.2013 and 01.07.2012 respectively, if it is established that the person to whom made the payments made are disallowed u/s 40(a)(ia) of the Act has furnished return of income u/s 139 of the Act and has also taken into account the sum received from the assessee in computing in such return of income and if he had paid tax on the income declared by him on such income, then the assessee cannot be deemed to be an M/s Global Venture Corporation A.Y.2006-07 3 assessee in default u/s 201(1) of the Act and no disallowance u/s 40(a)(ia) of the Act should be made. In this regard the assessee placed reliance on the decision of the Hon’ble Delhi High Court in the case of CIT vs Ansal land Mark Township Pvt. Ltd. 377 ITR 635 (Del) wherein it was held that the aforesaid amendments to the proviso to section 201(1) and 40(a)(ia) of the Act were retrospective and were applicable right from the time when section 40(a)(ia) of the act were enacted. The details of the payees and the details of their filing income tax returns were filed before CIT(A).
The CIT(A) examined the aforesaid claim of the Assessee and accepted the contention of the Assessee that if the receipients have included the sum paid by the Assessee in their return of income, then there can be no disallowance u/s.40(a)(ia) of the Act. Thereafter the CIT(A) examined the claim of the Assessee and found that Agarpara Kutir Shilpa Pratisthan, had included the sum received from the Assessee in their return of income filed for the relevant AY within the due date u/s.139(1) of the Act. To that extent, the CIT(A) deleted the addition made by the AO viz., to the extent of Rs.41,23,377.16 being processing charges paid to the aforesaid party and Rs.27,49,648.50 being cutting and stitching charges paid to the aforesaid party. Aggrieved by the relief allowed by the CIT(A), the revenue has preferred the present appeal before the Tribunal.
We have heard the rival submissions. The learned DR reiterated stand of the revenue as reflected in the grounds of appeal
. The learned counsel for the Assessee relied on the order of the CIT(A) and further filed before us copy of the decision of the Hon’ble Calcutta High Court in the case of Principal CIT Vs. M/s.Tirupati Construction GA No.2146 of 2016 with ITAT No.287 of 2016 judgment dated 23.8.2016 wherein the Hon’ble Calcutta High Court has accepted the ruling of the Hon’ble Delhi High Court in the case of Ansal Land Mark Towship Pvt.Ltd. (supra) wherein it was held that the aforesaid amendments to the proviso to section 201(1) and 40(a)(ia) of the Act were retrospective and were applicable right from the time when section 40(a)(ia) of the act were enacted.
7. We have given a very careful consideration to the rival submissions. The Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (I)
M/s Global Venture Corporation A.Y.2006-07 4 Pvt.Ltd., in judgment dated 26.8.2015 has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005. Similar view has also been taken by the Hon’ble Calcutta High Court in the case of M/S.Tirupati Construction (supra). Therefore the Assessee is entitled to the benefit of 2nd proviso to Sec.40(a)(ia) of the Act. The CIT(A) has verified and found that the recipient of payment from the Assessee M/S.Agarpara Kutir Pratisthan, filed return of income for the relevant previous year within time allowed u/s.139(1) and also included the sum received from the Assessee in their return of income. Since the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same, no disallowance u/s.40(a)(ia) of the Act should be made. In our view the CIT(A) was fully justified in allowing the relief to the Assessee. We find no grounds to interfere with the order of the CIT(A). Consequently, appeal by the Revenue is dismissed.
In the result, appeal by the revenue is dismissed.