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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Dr.Arjun Lal Saini, AM]
GTFS Multi Services Limited -vs.- D.C.I.T., Circle-6, Kolkata Kolkata. [PAN : AACCG 1216 D] (Respondent) (Appellant) For the Appellant : Shri Somnath Ghosh, FCA For the Respondent : Shri Arindam Bhattacharjee, Addl.CIT Date of Hearing : 05.12.2017. Date of Pronouncement : 18.12.2017. ORDER Per N.V.Vasudevan, JM This is an appeal by the assessee against the order dated 06.05.2016 of CIT-(A)- 16, Kolkata relating to A.Y.2007-08. .
The Assessee is a company. It is engaged in the business of conducting Vocational Training Programs and issuing Co-ordinator Certificate in insurance sector. For A.Y.2006-07 an order of assessment u/s 143(3) of the Income Tax Act, 1916 (Act) dated 19.12.2008 determining the total income of the assessee at Rs.3,52,59,430/- was passed by the AO. Subsequently the AO noticed that the assessee had paid commission to M/s. Golden Trust Financial Services of Rs.1,93,11,599/- on which tax at source as required u/s 194AH of the Act of Rs. 10,83,381/- was not deducted and deposited in the Government account on or before the last date of the previous year. The TDS had been deducted in the month of February, 2006 and therefore TDS ought to have been deposited in the Government account on or before 31.03.2006. The assessee deposited the TDS amount to the credit of the Government only on 01.09.2006. Since the TDS has not been deposited within the due date the AO was of the view that under the provision
GTFS Multi Services Limited A.Y.2007-08 of section 40(a)(ia) of the Act the commission of Rs.1,93,11,599/- which was claimed as deduction while computing income from business ought to have been disallowed and added to the total income. The failure to do so was a mistake apparent from the record and the AO in exercise of his powers u/s 154 of the Act passed an order dated 16.05.2011 making the disallowance of the commission payment and determining the total income of the assessee at Rs.5,45,71,029/-.
Under section 40(a)(ia) of the Act if any sum is disallowed for failure to deduct tax at source or pay the same to the credit of Central Government after deducting tax at source, then the assessee will be entitled to claim the said sum as deduction in computing the income of the previous year in which such tax has been paid to the credit of the Central Government. In the present case the tax deducted at source had been paid to the credit of the Government on 01.09.2006 falling with the previous year relevant to A.Y.2007-08. The assessee should therefore get deduction of a sum of Rs.1,93,11,599/- being commission paid as deduction in computing the total income for A.Y.2007-08. Unfortunately the assessment for A.Y.2007-08 in the case of the assessee was completed by an order u/s 143(3) of the Act dated 24.12.2009 and therefore the assessee could not make a claim for deduction in A.Y.2007-08. The assessee however moved an application u/s 264 of the Act before Hon’ble C.I.T.-2, Kolkata for A.Y.2007-08 praying for allowing the commission expenses as deduction in computing the total income for A.Y.2007-08. This petition was time barred and therefore the CIT by order dated 17.01.2003 directed the assessee to avail remedy u/s 154 of the Act.Rectification of error apparent on the face of the record.The following were the relevant observations of CIT in the said order : “As already mentioned in the first paragraph of this order, the petition u/s 264 is a delayed petition. Being time barred and assessee having available time u/s 154, the petition is u/s 264 is rejected. “
GTFS Multi Services Limited A.Y.2007-08 4. Thereafter the assessee filed an application for rectification u/s 154 of the Act before the AO for A.Y.2007-08 praying for allowing the expenditure of commission as deduction while determining the total income for A.Y.2007-08. Vide an order dated 18.08.2013 the AO dismissed the application holding that the mistake in question is not apparent from record. The following are the relevant observations of the AO :- “Sub :- Rectification Petition filed u/s 154 of the Income Tax Act, 1961 for A.Y. 2007-08 -Regarding
Please refer to the above,
As per record available, you have not claimed the deduction in respect of expenditure of commission of Rs. 1,93,11,599/- u/s 40(a){ia) for A.Y. 2007-08 at the time of furnishing the return of income and. also during the Scrutiny proceeding. As it is not apparent from record, it cannot be rectified u/s 154 of the Act, 1961.Therefore your rectification petition filed on 13.03.2013 is being rejected.”
Aggrieved by the aforesaid order the assessee preferred appeal before CIT(A). The CIT(A) firstly held that the mistake in question cannot said to be apparent on the face of the record. Secondly, the CIT(A) held that the assessee has not made the afiresaid claim by filing a revised return of income nor had he claimed in the original return of income. He referred to the decision of the Hon’ble Supreme Court in the case of Goetze India Ltd. Vs CIT 284 ITR 323(SC) and held that the claim made without a revised return cannot be entertained by the AO. For the above reasons, the CIT(A) dismissed the appeal of the assessee.
Aggrieved by the order of CIT(A) the assessee has preferred the present appeal before the Tribunal.
We have heard the rival submissions. The ld. Counsel for the assessee reiterated the submissions as were made before the lower authorities. The ld. DR relied on the order of CIT(A). 3
GTFS Multi Services Limited A.Y.2007-08 8. We have given a very careful consideration to the rival submissions. The provision of section 40(a)(ia) of the Act reads as follows :- Sub-cl. (ia) of cl. (a) as inserted w.e.f. 1st April, 2005 by the Finance (No. 2) Act, 2004 reads as follows :
(ia) any interest, commission or brokerage, fees for professional services or fees for technical services payable 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 during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200 : Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.
It is clear from the proviso to section 40(a)(ia) of the Act as applicable for A.Y.2007-08 that deduction of expenditure which is disallowed for non payment of TDS should be allowed as deduction in computing the income for the previous year in which the said tax deducted or deductible at source is paid to the credit of the Central Government. As we have already seen that the tax in question has been paid to the credit of the Central Government by the assessee on 01.09.2006 falling within the previous year relevant to A.Y.2007-08. The assessee is therefore entitled to claim deduction A.Y.2007-08. There cannot be any debate or dispute on this position. Therefore the approach of AO or CIT(A) was erroneous.
As far as the plea of the order of CIT(A) rejecting the claim of the assessee on the ground that the revised return of income has been filed by the assessee and placed reliance on the decision of the Hon’’ble Supreme court in the case of Goetze India Ltd. We are of the view that the same is not sustainable. The CIT(A) as a first appellate GTFS Multi Services Limited A.Y.2007-08 authority has the power to entertain a new claim even in the absence of a revised return of income. The Supreme Court in case of Goetze (India) Ltd. (supra) has clarified that "the decision was restricted to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return, and did not impinge on the power of the Appellate Tribunal under section 254 of the Income-tax Act, 1961”. This has been interpreted in several judicial pronouncements as applicable even to the first appellate authorities. The Hon’ble Delhi High Court in the case of Jai parabolic Springs 306 ITR 42 (Delhi) has held that the appellate authorities under the Act, were free to consider a claim made by an Assessee even in the absence of a revised return of income and that the requirement for filing a revised return of income as laid down by the Hon’ble Supreme Court in the case of Goetz India Ltd. (supra) is applicable only when a claim is made contrary to the return of income before the AO. The Hon’ble Delhi High Court in the case of Bharat Aluminium 163 Taxman 430J, has inter-alia ruled that assessee can file revised computation in the course of ongoing assessment proceedings under the Act, without making recourse to revised return, despite the fact that time limit for revising return under section 139(5) had expired. In the light of the aforesaid decisions, we are of the view that the CIT(A) was not right in refusing to entertain and allow the claim of the assessee as made in its application u/s 154 of the Act.
For the reasons given above, we allow the appeal of the assessee and direct the sum in question to be allowed for deduction in computing total income of A.Y.2007-08.
In the result the appeal of the assessee is allowed. Order pronounced in the Court on 08.12.2017.