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Order u/s.254(1)of the Income-tax Act,1961(Act) Per Pawan Singh, J.M. �या�यक सद�य iou iou iou �संह के अनुसार: iou 1. The present appeal by assessee u/s 253 of the Income-Tax Act is directed against the order of ld. Commissioner of Income-tax (Appeals)-22, Mumbai (for short the CIT(A) dated 01.08.2014 for Assessment Year(AY) 2010-11. The assessee has raised the following grounds of appeal:
1. The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs.1,73,708/- under Section 40(a)(ia).
2. The learned CIT(A) erred in ignoring the order of the Income tax Appellate Tribunal in the Appellant s own case for' the Assessment Year 2009-10.
2. The brief facts of the case are that the assessee-company is engaged in the business of manufacturing of automobile parts and nonwoven fabrics, filed its return of income for relevant AY on 24.09.2010 declaring total income of Rs. 1,50,49,125/-. The assessment u/s 143(3) of the Act was completed on 12.03.2013. While making the assessment order, the Assessing Officer (AO) made the disallowance of Rs. 1,73,780/- u/s 40(a)(ia). On appeal before the ld. CIT(A), the disallowance was sustained. Hence, this second appeal before this Tribunal was filed.
3. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee argued that the issue raised in the present appeal is covered in favour of assessee by the decision of Tribunal in assessee’s own case for AY 2009-10. Ld. DR for the Revenue not disputed the factual position.
We have considered the rival contention of the parties and gone through the contents of 4. decision of Tribunal in assessee’s own case for AY 2009-10 vide Mum/2012 dated 09.10.2013. The Co-ordinate Bench of this Tribunal while relying upon the decision of earlier years in assessee’s own case for AY 2004-05 to 2008-09 and made the following order: 5. The issue raised in ground No. 5 relates to the disallowance of Rs. 2,04,056/- made by the A.O. u/s 40(a)(ia) of the Act and confirmed by the ld. CIT(A).
During the year under consideration, payment of Rs. 2,04,056/- was made by the assessee to M/s Vapi Waste and Effluent Management Co. Ltd. (VWEMCL). According to the A.O., the assessee was required to deduct tax at source from the said payment made on account of fee for technical services and since no such tax was deducted by the assessee, he disallowed the amount of Rs. 2,04,056/- paid by the assessee to M/s VWEMCL by invoking the provisions of section 40(a)(ia) of the Act. On appeal, the ld. CIT(A) confirmed the disallowance made by the A.O. on this issue for the following reasons given in para 3.3 of his impugned order:-
"3.3. 1 have gone through the assessment order, perused the submissions made by the appellant and also discussed the case with the A.R. of the appellant. Before me the appellant reiterated the submissions as made before A.O. and it was further submitted that in the assessment order of VWEMCL the income has been treated as exempt. However, on perusal of the copy of assessment order dated 31.12.2007, it is noted that the interest income received from the bank on fixed deposits have been treated as taxable and hence the income has not been treated as totally exempt by the A.O. of VWEMCL. The 4 ITA 2605/M/12 appellant is regularly paying "service charges" to VWEMCL and hence the appellant was required to make TDS on this payment. The appellant's attention was also invited to provisions of section 1 95J under which this payment was to be treated as fees for technical charges since VWEMCL is a company which is providing technical services of treating the effluent of the company, for which it is being paid regularly. The appellant stated that the payment made by it is for standard facility available to all. In view of these facts, I am of the considered opinion that the A.O. has rightly disallowed the sum of Rs.2,04,056/- uls.40(a)(ia), which is upheld".
We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. D.R. has strongly relied on the reasons given by the ld. CIT(A) in para 3.3 of his impugned order in support of the Revenue's case on this issue while the ld. counsel for the assessee has submitted that a similar issue involved in the case of M/s Ruby Macons Ltd. vs. DCIT for assessment year 2005-06 has been decided by the Tribunal in favour of the assessee vide its order dated 11th June, 2010 passed in ITA No. 4056/Mum/2008. He has also placed on record a copy of the said order and a perusal of the same shows that a similar disallowance made by the A.O. u/s 40(a)(ia) of the Act and confirmed by the ld. CIT(A) on account of payment made to M/s VWEMCL was deleted by the Tribunal for the following reasons given in para 14 & 15 of its order:-
"14. We may turn to the facts of the case on hand so as to appreciate as to whether the services rendered by VWEMCL involves human interface or was it merely a standard facility provided to all the members who were jointly involved in setting up affluent treatment plant. It is not in dispute that the rate is fixed depending on the actual water consumed by member unit and also based on discharge quality norms. It is also not in dispute that amount collected is on no profit no loss basis and if any excess amount is collected it is passed on to members by way of discount. This was accepted by the Assessing Officer while making an assessment under section 143 (3) of the Act in the case 3 Supreme Non-woven Industries Pvt. Ltd. of VWEMCL. Such being the case it has to be considered as a standard facility available to each member/industrial undertaking; VWEMCL is running a treatment plant providing a standard facility and if any work force is involved in maintaining the standard facility it cannot be said that a special skill/knowledge was passed on by individuals to the assessee in lieu of a specific fee collected. Such being the case, we are of the 5 ITA 2605/M/12 considered opinion that it cannot be considered as a payment in the form of "fee for technical services". In the case of recipient company the Assessing Officer accepted that charges were recovered from the member units by adopting mutuality concept.
In fact, in the subsequent years, Assessing Officer has not invoked the provisions of section 194J of the Act in assessee's own case. It appears that the assessee agreed to deduct 2% tax under section 194C of the Act based upon an understanding reached by all the industrial undertakings in that locality and such understanding was accepted by the Revenue. It may be pointed out that in the subsequent years the Assessing Officer admitted that provisions of section 194J of the Act are not applicable in respect of payments, made by member industrial undertakings to VWEMCL, in the form of affluent treatment charges. On a conscpectus of the matter, we are of the view that the impugned payments are not hit by the provisions of section 194J of the Act and consequently disallowance made by the Assessing Officer under section 40(a)(i) of the Act is not in accordance with law".
As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of A.Y. 2005-06, we respectfully follow the order of the co-ordinate Bench of this Tribunal dated 11th June, 2010 for A.Y. 2005-06 and delete the disallowance made by the A.O. u/s 40(a)(ia) of the Act and confirmed by the ld. CIT(A) on account of payment made by the assessee to M/s VWEMCL. Ground No. 5 of assessee's appeal is accordingly allowed.
Thus, considering the decision of Tribunal in assessee’s own case for AY 2009-10, the grounds of appeal raised in the present appeal are allowed. As a result, appeal filed by the assessee is allowed. फलतः �नधा�रती �वारा दा�खल क� गई अपील मंजूर क� जाती है. Order pronounced in the open court on 12th January,2017. आदेश क� घोषणा खुले �यायालय म� �दनांक 12 जनवर�,2017 को क� गई ।
Sd/- Sd/- (राजे�� / RAJENDRA (iou iou �संह / PAWAN SINGH)) iou iou लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई/Mumbai,�दनांक/Date: 12 .01.2017 SK आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. Assessee /अपीलाथ� 2. Respondent /��यथ� 3.The concerned CIT(A)/संब�ध अपील�य आयकर आयु�त, 4.The concerned CIT /संब�ध आयकर आयु�त 5. DR “E” Bench, ITAT, Mumbai /�वभागीय ��त�न�ध b खंडपीठ,आ.अ.�याया.मुंबई 6. Guard File/गाड� फाईल स�या�पत ��त //e Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपील�य अ�धकरण, मुंबई /ITAT, Mumbai