DCIT, COIMBATORE vs. QUANTUM KNITS PVT. LTD., COIMBATORE

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ITA 304/CHNY/2015Status: DisposedITAT Chennai18 January 2017AY 2011-124 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that if the recipient has accounted for the income and paid tax thereon, the assessee should not be subjected to the rigors of Section 40(a)(ia). However, it directed the AO to verify if the payee had indeed accounted for the receipts and paid tax.

What were the facts?

The Revenue appealed against the CIT(Appeals) deletion of disallowance made under Section 40(a)(ia). The assessee had made a payment without deducting TDS, and the AO disallowed it. The CIT(Appeals) deleted the disallowance, finding that the recipient had accounted for and paid tax on the receipt.

What were the issues?

Whether the disallowance under Section 40(a)(ia) is justified when the recipient has accounted for and paid tax on the income. The applicability of amendments to Section 40(a)(ia) and 201(1) made by the Finance Act, 2012.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 201(1)

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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI [CAMP: COIMBATORE]

Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE

For Respondent: Shri S. Sridhar, Advocate
Hearing: 18.01.2017Pronounced: 18.01.2017

आदेश /O R D E R

PER BENCH:

1.

In this appeal filed by the Revenue its grievance is that the CIT(Appeals) deleted the disallowance made under Section 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act').

2.

The Ld. representative for the Revenue submitted that the CIT(Appeals) had deleted the disallowance made by the A.O. with a finding that M/s KPR Mills Ltd. to whom the assessee had made the payment, had accounted such receipts in their books of account and paid tax thereon. As per the Ld. D.R., the CIT(Appeals) had reached this conclusion without verifying the facts of the case. As per the Ld. D.R., amendment made to Section 201(1) of the Act through Finance Act, 2012 with effect from 01.07.2012 could not be retrospectively applied.

3.

Per contra, the Ld.counsel for the assessee strongly supported the order of the CIT(Appeals).

4.

We have perused the orders and heard the rival submissions.

The assessee had effected payment to one M/s KPR Mills Ltd. without deducting tax at source. The A.O. had considered it as part of “bundle of services” in the nature of business promotion expenses. According to the Ld. A.O., assessee failed to deduct tax at source. The A.O. made disallowance under Section 40(a)(ia) of the Act. The CIT(Appeals) while affirming this view of the A.O., observed that M/s KPR Mills Ltd. who accounted these receipts under the head “Miscellaneous receipts”, had paid tax thereon. The CIT(Appeals) relied on the amendment to Section 40(a)(ia) of the Act.

Retrospectivity of amendment to Section 40(a)(ia) and 201(1) of the Act made through Finance Act, 2012 was an issue which was dealt with by Hon'ble Delhi High Court in the case of CIT v. M/s Ansal Land Mark Township (P.) Ltd. (377 ITR 635). The view taken by the Hon'ble Delhi High Court was in favour of the assessee. There is no decision of jurisdictional High Court on this issue. This being the situation, we are of the opinion that the CIT(Appeals) was justified in taking a view that if the recipient had accounted the income and paid the tax, assessee could not be subjected to rigours of Section 40(a)(ia) of the Act. We do not find any reason to interfere with this view taken by the Ld. CIT(Appeals). However, whether the payee had accounted the receipts and paid tax thereon, in our opinion, requires verification by the Ld. A.O. We remit the issue back to the A.O. for this limited purpose.

5.

In the result, the appeal filed by the Revenue is allowed for statistical purposes.

Order pronounced in the open court on 18th January, 2017 at Coimbatore.

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