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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Hon’ble Shri M.Balaganesh, AM ]
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH : KOLKATA [Before Hon’ble Shri N.V.Vasudevan, JM & Hon’ble Shri M.Balaganesh, AM ] I.T.A No. 1686/Kol/2016 Assessment Year : 2011-12 ACIT, Circle-33, Kolkata -vs- M/s Mitra Guha Builders (India) Co. [PAN: AAFFM 2988 Q] (Appellant) (Respondent)
For the Appellant : Shri Arindam Bhattacharjee, Addl. CIT For the Revenue : Shri J.M.Thard, Advocate
Date of Hearing : 09.01.2018 Date of Pronouncement : 12.01.2018
ORDER Per M.Balaganesh, AM
This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax (Appeals)-9, Kolkata [in short the ld CITA] in Appeal No. 39/CIT(A)- 9/Wd-33(3)/2014-15/Kol dated 27.05.2016 against the order passed by the ITO, Ward-33(3), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 28.02.2014 for the Assessment Year 2011-12.
The only issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the disallowance u/s 40(a)(ia) of the Act in the facts and circumstances of the case.
2 ITA No.1686/Kol/2016 M/s Mitra Guha Builders (India) Co. A.Yr.2011-12 3. The brief facts of this issue is that the assessee is a civil contractor and had filed its return of income for the Asst Year 2011-12 on 30.9.2011 declaring total income of Rs 5,85,930/-. During the course of assessment proceedings, the ld AO observed that the assessee had made payment of hire charges as under:-
a) B.M. Cranes Services Rs 2,25,012/- b) Eshwar Infratech Pvt Ltd Rs 10,42,097/- c) Jai Durga Timber Rs 40,49,187/- d) R.S.Bagga Rs 7,13,953/- e) Balajee Timber Store Rs 8,54,414/- ----------------------- Rs 68,84,663/- The assessee was asked to produce the evidence of deduction of tax at soruce in respect of hire charges as they would get attracted as per section 194I of the Act. The assessee filed its explanation along with bills and stated that the above payments were made to the above parties mentioned in Sl.No. b) to e) for supplying materials and on which the VAT has been charged. Therefore there was no need to deduct tax at source on the said payments. In respect of the party mentioned in Sl. No. a) above, the assessee could not produce any explanation. The ld AO however from the bills observed that all the payments were made for the purpose of hire charges and not for outright purchases. Accordingly he disallowed the hire charges in the sum of Rs 68,84,663/- u/s 40(a)(ia) of the Act for violation of provisions of section 194I of the Act.
3.1. The ld AO also made disallowance of Rs 12,88,799/- u/s 40(a)(ia) of the Act in respect of site security charges for violation of provisions of section 194C of the Act.
3.2. The ld AO also made disallowance of Rs 2,60,163/- u/s 40(a)(ia) of the Act in respect of rent charges for violation of provisions of section 194I of the Act. 2
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3.3. The ld AO also made disallowance of Rs 83,163/- u/s 40(a)(ia) of the Act in respect of car hire charges for violation of provisions of section 194C of the Act.
3.4. The ld AO also made disallowance of Rs 5,91,288/- u/s 40(a)(ia) of the Act in respect of car hire charges for violation of provisions of section 194C of the Act.
3.5. The ld AO also made disallowance of Rs 3,30,000/- u/s 40(a)(ia) of the Act in respect of annual maintenance charges, job charges and generator hire charges for violation of provisions of section 194C of the Act.
Before the ld CITA, the assessee furnished the PAN of the various payees to whom payments were made without deduction of tax at source, details of recipients such as name and their addresses. The assessee also pleaded that since the respective payees had included the subject mentioned payments made by the assessee as income in their returns and paid taxes thereon. The assessee furnished evidences in this regard and pleaded that in view of the amendment made in second proviso to section 40(a)(ia) of the Act brought in the statute by the Finance Act 2012, no disallowance could be made u/s 40(a)(ia) of the Act in the hands of the assessee payer. The assessee also filed Form 26A from four parties namely (i) Balaji Timber Stores ; (ii) Eshwar Infratech Pvt Ltd ; (iii) Jai Durga Timber Traders and (iv) R.S.Bagga.
The ld CITA granted partial relief to the assessee by observing as under:- “4.1. Ground no. 3 to 9: I have carefully considered the submissions of the appellant along with impugned assessment order. After going through the decisions referred by the appellant I agree with the submissions of the appellant that the second proviso to section 40(a)(ia) of the I.T.Act will apply in the present case also which was introduced by the Finance Act, 2012 w.e.f. 01.04.2013 was retrospective in operation and was to apply w.e.f. 01.04.2005 being the date from which sub-clause (ia) of sec. 40(a) was inserted by Finance (no.2) Act, 2004. The Hon’ble Delhi High Court in the case of CIT vs. Ansal Landmark Township Pvt. Ltd. reported in 377 ITR 635 has taken 3
4 ITA No.1686/Kol/2016 M/s Mitra Guha Builders (India) Co. A.Yr.2011-12 the view that insertion of second proviso to section 40(a)(ia) of the I.T. Act is retrospective and will apply from 01.04.2005. In this regard I find that the appellant has furnished name, address and PAN particulars of the recipients of payment by the appellant. Respectfully following the decision of Hon’ble Delhi High Court in the case of Ansal Landmark Township Pvt. Ltd., it is held that the appellant is entitled to the benefit of second proviso to section 40(a)(ia) of the Act. Further, respectfully following the decisions of Hon’ble Kolkata ITAT in the cases of M/s Vas Electronics (I.T.A. No. 662/Kol/2013- order dated 24.11.2015) and M/s Abhoy Charan Bakshi (I.T.A. No. 1492/Kol/2015- order dated 06.04.2016), the AO is directed to delete the disallowances in respect of four parties namely (i) Balaji Timber Stores (ii) Eshwar Infratech Pvt. Ltd. (iii) Jai Durga Timber Traders and (iv) R.S.Bagga Steel Shuttering Pvt. Ltd. because appellant have submitted copy of Form No. 26A of above mentioned parties, and for balance parties AO is directed to verify whether recipients have included the amount paid by the appellant in their respective return of income and also paid taxes on the same by calling information u/s 133(6) or u/s 131 of the Income Tax Act, 1961. In case the recipient has shown the income in their I.T. return and paid taxes, the disallowance u/s 40(a)(ia) should be deleted to that extent.”
Aggrieved, the revenue is in appeal before us.
We have heard the rival submissions. The ld DR argued that the details filed by the assessee before the ld CITA were additional evidences and the ld AO was not given any opportunity to examine the said details. Moreover, even as per the ld CITA’s order, the payee’s income tax returns details were not given for all the persons. Hence the same requires verification by the ld AO. Since the ld CITA had directed the ld AO to examine one party, let all the parties be examined by the ld AO was the ultimate argument of the ld DR. In response to this, the ld AR vehemently relied on the order of the ld CITA. We find that in the facts and circumstances of the case, the entire matter requires verification by the ld AO as admittedly he was not given any opportunity to verify the additional details / evidences filed before the ld CITA by the assessee. In these facts and circumstances, we are inclined to agree with the arguments advanced by the ld DR that in case if the assessee is able to produce evidences to prove that the payees had disclosed the subject mentioned payments made
5 ITA No.1686/Kol/2016 M/s Mitra Guha Builders (India) Co. A.Yr.2011-12 by the assessee in their respective income tax returns and paid taxes due thereon, if any, then the assessee should not be invited with the disallowance u/s 40(a)(ia) of the Act. The legislature also had taken this aspect into account by bringing in an amendment by Finance Act 2012 by insertion of second proviso to section 40(a)(ia) of the Act thereon. This second proviso has been held to be retrospective in operation by the decision of the Hon’ble Delhi High Court in the case of Ansal Landmark Township Pvt Ltd reported in 377 ITR 635 (Del) and decision of Hon’ble Jurisdictional High Court in the case of Principal CIT vs Tirupati Construction – GA No. 2146 of 2016 with ITAT No. 287 of 2016 dated 23.8.2016. Hence we deem it fit and appropriate to remand this issue to the file of the ld AO for verification of the evidences submitted / to be submitted by the assessee in line with the second proviso to section 40(a)(ia) of the Act and if it is so proved, then no disallowance u/s 40(a)(ia) of the Act could be made in the hands of the assessee. The assessee is also at liberty to adduce fresh evidences in support of its claim. Hence the grounds raised by the revenue are allowed for statistical purposes.
In the result, the appeal of the revenue is allowed for statistical purposes.
Order pronounced in the Court on 12.01.2018
Sd/- Sd/- [N.V. Vasudevan] [ M.Balaganesh ] Judicial Member Accountant Member
Dated : 12.01.2018 SB, Sr. PS
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Copy of the order forwarded to: 1. ACIT, Circle-33, Kolkata, 10B, Middleton Row, 3rd Floor, Kolkata-700071. 2. M/s Mitra Guha Builders (India)Co., 8/2, K.S.Roy Road, F-33, 3rd Floor, Kolkata- 700001. 3..C.I.T.(A)- , Kolkata 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.