M/S. MOTHER MIRA INDUSTRIES LTD.,CHENNAI vs. ACIT, CHENNAI

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ITA 2135/CHNY/2013Status: DisposedITAT Chennai28 October 2016AY 2009-104 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that while the recipient paying taxes might negate disallowance, the discrepancy between the total lease rent paid and the amount accounted for by the recipient needs examination. It also needs verification if the recipient actually paid taxes on the entire amount.

What were the facts?

The assessee paid lease rent to a company without deducting tax at source. The recipient company later provided a certificate stating they had accounted for a portion of the lease rental and paid taxes on it.

What were the issues?

Whether disallowance under Section 40(a)(ia) is warranted when the recipient has accounted for and paid taxes on the lease rent, and what happens to the un-accounted portion.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

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

Hearing: 12.09.2016Pronounced: 28.10.2016

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – II, Chennai, dated 24.10.2013 and pertains to assessment year 2009-10.

2.

The only issue arises for consideration is with regard to disallowance made by the Assessing Officer under Section 40(a)(ia) of the Income-tax Act, 1961 (in short "the Act") for non-deduction of tax in respect of lease rent paid.

3.

Sh. R. Vijayaraghavan, the Ld. counsel for the assessee, submitted that the assessee has paid a sum of `3,40,68,670/- towards lease rent to M/s Mohan Breweries and Distilleries Limited.

In fact, the assessee took vehicles on lease and paid the lease rental. However, no tax was deducted. Referring to the certificate issued by M/s Mohan Breweries and Distilleries Limited on 03.02.2015, the Ld. counsel submitted that M/s Mohan Breweries and Distilleries Limited has accounted the lease rental to the extent of `2,40,67,200/-, therefore, in respect of lease rental accounted by M/s Mohan Breweries and Distilleries Limited cannot be assessed in the hands of the assessee. The Ld. counsel placed his reliance on the judgement of Delhi High Court in CIT v. Ansal Land Mark Township (P) Ltd. (20150 93 CCH 214 and submitted that second proviso to Section 40(a)(ia) of the Act was retrospective in operation, therefore, when the recipient has paid the taxes, there cannot be any disallowance in the hands of the assessee.

4.

We have heard Shri Durai Pandian, the Ld. Departmental Representative, also. Admittedly, the assessee has paid a sum of `3,01,08,357/- towards lease rental to M/s Mohan Breweries and Distilleries Limited. Admittedly, no tax was deducted. Now the assessee filed a copy of certificate said to be issued by M/s Mohan Breweries and Distilleries Limited on the ground that they have accounted the lease rental to the extent of `2,40,67,200/- in their accounts for the purpose of computation of tax liability. In view of the judgement of Delhi High Court in Ansal Land Mark Township (P)

Ltd. (supra), this Tribunal is of the considered opinion that when the recipient has paid the taxes on the amount received from the assessee, there may not be any disallowance in the hands of the assessee. However, when the assessee claims that a sum of `3,01,08,357/- was paid towards lease rental, what was certified by M/s Mohan Breweries and Distilleries Limited is only to the extent of `2,40,67,200/-. Therefore, it has to be examined what happened to the balance amount. Moreover, it needs to be verified whether tax was actually paid by M/s Mohan Breweries and Distilleries Limited as claimed by them. Since both the authorities below have not examined this issue, this Tribunal is of the considered opinion that the matter needs to be reconsidered. Accordingly, the orders of both the authorities below are set aside and the disallowance of `3,01,08,357/- is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and find out whether any tax was paid by M/s Mohan Breweries and Distilleries Limited in respect of the amount received from the assessee towards lease rental and thereafter decide the issue in accordance with law, after giving a reasonable opportunity to the assessee.

5.

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

Order pronounced on 28th October, 2016 at Chennai.

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