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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAMIT KOCHAR
सुनवाई क" तार"ख /Date of Hearing : 22-6-2016 घोषणा क" तार"ख /Date of Pronouncement : 19-09-2016 आदेश / O R D E R
PER RAMIT KOCHAR, Accountant Member
1. This appeal, filed by the Revenue, being 18th August, 2014 passed by learned Commissioner of Income Tax (Appeals)- 23, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2007-08, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 22nd March, 2013 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 147 r.w.s. 143(3) of the Income Tax Act,1961 (Hereinafter called “the Act”).
ITA 6965/Mum/2014 2
2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) read as under:-
1. Whether on the facts and circumstances of the case and in law, the CTT(A) is right in holding that amendment introduced by the Finance Act, 2010 in section 40(a)(ia) is having retrospective effect. 2. The appellant prays that the order of the AO should be restored and order of the CIT(A) should be set aside
3. The brief facts of the case are that the assessee has filed return of income for the impugned assessment year 2007-08 on 28th October, 2007 which was processed u/s 143(1) of the Act and later on assessment was framed u/s 143(3) of the Act vide orders dated 01-12-2009 accepting the returned income of Rs.3,83,20,550/-. Thereafter, the case was reopened by the AO u/s. 147 of the Act on the ground, inter alia, that the assessee has deducted tax at source on amount of Rs. 1,29,63,647/- paid for contractors, brokerage, and professional fees and tax was required to be deposited to the credit of Government Treasury before 31st March, 2007 but since the assessee had deposited the tax at source only after expiry of the financial year, hence, disallowance of the amount was required to be made u/s 40(1)(ia) of the Act. Notice u/s 148 of the Act was issued on 21st February, 2012 which was served upon the assessee. The assessee, in response, submitted that as per the provisions of section 40(a)(ia) of the Act as amended by Finance Act 2010 it has now been provided that deposit of TDS amount prior to the due date for filing of return as specified in section 139(1) of the Act is sufficient compliance and in such cases disallowance u/s 40(a)(ia) of the Act would not be ITA 6965/Mum/2014 3 attracted. It was submitted that the TDS amount was deposited before the due date of filing return of income u/s. 139(1) of the Act, no disallowance was required to be made, hence, the assessee prayed that no disallowance should be made. The assessee submitted that Hon’ble Calcutta High Court in the case of CIT v. Virgin Creations (GA 3200/2011) vide orders dated 23.11.2011 as well decision of Tribunal, Mumbai in Piyush C. Mehta v. ACIT in ITA 321/Mum/2009 vide orders dated 11.04.2012 held that amendment to Section 40(a)(ia) of the Act is retrospective in nature.
The A.O. observed from the record that the assessee had deducted TDS on following payments during the first eleven months of the financial year 2006- 07 and deposited the TDS to the credit of Central Government on the dates as mentioned in the following table:-
S No. TDS Amount of Due date of Date of deducted(In Rs) payment(In remittance payment to Rs) Government Account CONTRACTORS 1 5021 223752 07.01.2006 24.05.2007 2 10669 475446 07.11.2006 21.05.2007 3 8100 360963 07.12.2006 21.05.2007 4 19512 869519 07.12.2006 21.05.2007 5 6446 287255 07.01.2007 28.04.2007 6 1411 62879 07.01.2007 21.05.2007 7 41140 1833333 07.01.2007 24.05.2007 8 11140 496435 07.02.2007 28.04.2007 9 104870 4673351 07.02.2007 21.05.2007 10 12060 537433 07.03.2007 28.04.2007 11 53822 2398485 07.03.2007 21.05.2007 BROKERAGE 12 1275 22727 07.01.2007 21.05.2007 ITA 6965/Mum/2014 4 13 19380 345455 07.03.2007 28.04.2007 14 15644 278865 07.03.2007 21.05.2007 PROFESSIONAL FEES 15 1467 26150 07.01.2007 28.04.2007 16 1977 35241 07.02.2007 28.04.2007 17 510 9091 07.02.2007 21.05.2007 18 1530 27273 07.03.2007 28.04.2007 315974 12963647 Thus it was observed by the AO that TDS deduction for the above payments were made prior to 1st March, 2007 but the said TDS was deposited to the credit of Central Government account after 31st March, 2007. The A.O. relied on the then existing provisions of section 40(a)(ia) of the Act which is reproduced as under:-
“(ia) any interest, commission or brokerage, [rent, royalty] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractors, 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]
(A) in a case where the tax was deductible and was so deducted during the last month of the previous year, or or before the due date specified in sub-section (1) of section 139; or ITA 6965/Mum/2014 5
(B) in any other case, on or before the last day of the previous year:]”
The A.O. observed that as per the un-amended provisions of Section 40(a)(ia), the TDS which has been deducted for payments made during the year for the first eleven months should have been deposited to the credit of Central Government account before the end of the financial year i.e. 31st March, 2007 which the assessee has failed to comply as per the un-amended provisions of section 40(a)(ia) of the Act and thus attracts disallowance u/s. 40(a)(ia) of the Act. It was observed by the AO that is an undisputed fact that the assessee in its reply has claimed that section 40(a)(ia) of the Act has been amended by the Finance Act, 2010 with retrospective effect in view of the decision of the Tribunal in the case of Piyush C. Mehta v. ACIT in dated 11th April, 2012. However, the Special Bench of ITAT in the case of Bharti Shipyard Ltd. in ITA No. 2404/Mum/2009 has held that the amendment by Finance Act, 2010 is prospective w.e.f. 2010 only and not retrospective from 2005 and in the light of the above decision of the Special Bench of ITAT, disallowance, inter alia, was made by the A.O. amounting to Rs. 1,29,63,647/- u/s 40(a)ia) of the Act vide assessment order dated 22nd March, 2013 passed u/ 147 r.w.s. 143(3) of the Act.
4.Aggrieved by the assessment order dated 22-03-2013 passed by the AO u/s. 143(3) read with Section 147 of the Act, the assessee carried the matter before the ld. CIT(A).
5. Before the ld. CIT(A) , the assessee challenged the reopening of the assessment u/s. 147/148 of the Act by the Revenue of the concluded ITA 6965/Mum/2014 6 assessment on the ground that the assessee has filed the return of income which was scrutinized u/s 143(3) of the Act vide assessment order dated 1- 12-2009 and it is merely a change of opinion whereby concluded assessment are re-opened which is not permitted under provisions of Section 147/148 of the Act. The assessee submitted that all the payments of TDS were deposited to the Credit of Central Government before the due date for filing of return of income 139(1) of the Act and all the facts were before the A.O. when he framed the assessment order for the first time u/s 143(3) of the Act vide assessment orders dated 01-12-2009 . It was also submitted before the learned CIT(A) that the facts of payment of TDS to the credit of Central Government were forming part of the tax-audit report issued by the Chartered Accountant /auditor u/s. 44AB of the Act and the same was considered by the A.O. while framing the assessment order u/s. 143(3) of the Act dated 1st December, 2009. It was also submitted before learned CIT(A) that as per the reasons recorded for re-opening of concluded assessment as appearing in page 1 & 2 of the assessment order passed u/s 147 read with Section 143(3) of the Act, it is clearly mentioned that no new facts have come to the possession of the A.O. whereby it can be concluded that the income has escaped assessment and it is only from the facts on record that the AO came to the conclusion that the income has escaped assessment which is merely a change of opinion. The assessee relied upon the following decisions:-
1. CIT v. Kelvinator of India Ltd., 256 ITR 1 (Affirmed by Hon’ble Supreme Court in 320 ITR 561 (SC)).
2. Asian Paints Ltd. v. DCIT,(2009) 308 ITR 195 (Bom) 3. NDT Systems v. ITO, 255 CTR 113 (Bom)
ITA 6965/Mum/2014 7 The ld. CIT(A) rejected the contentions of the assessee on the ground that the A.O. clearly recorded that the assessee has deducted TDS on amount of Rs. 1,29,63,647/- paid for contractors , professionals and brokerage in the first eleven months of the financial year 2006-07 and tax deducted at source on the said payment of Rs.1,29,63,647/- was required to be deposited before 31st March, 2007 and since the same was deposited only after the expiry of financial year although before the due date of filing of return u/s. 139(1) of the Act, the A.O. disallowed the same u/s 40(a)(ia) of the Act as existing in the statute at that relevant time. The learned CIT(A) observed that the issue was not examined by the AO while framing original assessment orders dated 01- 12-2009 the AO u/s 143(3) of the Act. The assessment was reopened within four years from the end of the relevant assessment year and since there is no material on record to suggest that this issue was examined by the A.O. , the reopening was held to be justified. Further as per Finance Act 2010 , amendment to Section 40(a)(ia) of the Act is prospective w.e.f. 2010 and not retrospective was the observation of learned CIT(A). Thus, reopening was held to be valid as nothing was brought on record that A.O. has examined the issue while framing the assessment u/s 143(3) of the Act vide orders dated 01-12-2009. In support, the ld. CIT(A) relied on the decision of the Special Bench of ITAT in the case of Bharti Shipyard Ltd. (supra) wherein the Special Bench held that amendment to Section 40(a)(ia) of the Act is prospective in nature w.e.f. 01-04-2010 although Hon’ble Calcutta High Court held in the case of Virgin Creations in GA no 3200/2011 that the said amendment to Section 40(a)(ia) of the Act was retrospective in nature applicable from 01-04- 2005.The AO clearly failed to examine the issue and validity of the re-opening of the assessment was held to be valid as in the opinion of learned CIT(A) there is no change of opinion as contemplated by the provisions of Section ITA 6965/Mum/2014 8 147/148 of the Act. The learned CIT(A) relied upon decision of Full Bench of Hon’ble Delhi High Court in the case of Usha International Limited 348 ITR 485 (Del) and decision of Full Bench of Hon’ble Delhi High Court in the case of Kelvinator of India Limited 256 ITR 1(Del HC) which was approved by Hon’ble Supreme Court in 320 ITR 521(SC). Thus, it was held that there was no opinion formed by the AO in original assessment proceedings and hence re-opening is valid as no opinion was formed by the AO and also the re- opening was done within four years of the end of the assessment year. Similarly, the plea of the assessee was rejected as there is violation of provisions of section 40(a)(ia) of the Act whereby amendment to section 40(a)(ia) of the Act was held to be prospective and hence the appeal of the assessee was dismissed on this ground.
With regard to the addition of Rs. 1,29,63,647/- u/s 40(a)(ia) of the Act, the assessee submitted before the ld. CIT(A) that the TDS amounts have been deposited on various dates before the due date for filing the return as per provisions of section 139(1) of the Act which is reflected in the chart given in the assessment order which has been reproduced in preceding para’s of this order. The assessee contended that undisputedly the entire TDS amount have been deposited before the due date of filing return of income u/s 139(1) of the Act and hence no disallowance is required to be made u/s 40(a)(ia) of the Act. The assessee in this regard relied upon the decision of Hon’ble Calcutta High Court in the case of CIT v. Virgin Creations (GA 3200/2011) dated 23.11.2011 whereby the amendment made to section 40(a)(ia) of the Act by Finance Act 2010 were held to be retrospective. The assessee also submitted that the Mumbai Tribunal in the case of Piyush C. Mehta v. ACIT (2012) 52 SOT 27 (Mumbai) considered the decision of the Special Bench in ITA 6965/Mum/2014 9 the case of Bharati Shipyard(supra) holding that the amendment by Finance Act , 2010 to Section 40(a)(ia) of the Act to be prospective and also decision of Hon’ble Calcutta High Court in the case of Virgin Creations(supra) holding the same to be retrospective , and the Mumbai Tribunal in Piyush C. Mehta(supra) , thereafter , held that in view of decision of Hon’ble High Court of Calcutta , the decision of Special Bench of the Tribunal is no longer a good law and decision of Hon’ble Calcutta High Court is to be followed. It was also submitted by the assessee that the decision of Special Bench of the Tribunal in Bharati Shipyard(supra) has been overruled by the decision of Hon’ble Delhi High Court in the case of CIT v. Rajinder Kumar , (2014) 362 ITR 241(Delhi) . It was also submitted that Hon’ble Gujarat High court has also held in the case of CIT v. Standard Buildcon (2014) 41 taxmann.com 155(Guj.) that if tax deducted at source was deposited prior to due date of filing of return of income u/s. 139(1) of the Act, then disallowance u/s. 40(a)(ia) of the Act is not called for and the amendment made by Finance Act, 2010 had retrospective effect. The assessee cited various other Case laws in support of its contention that since the tax deducted at source was paid prior to the due date of filing return of income u/s 139(1) of the Act, no disallowance u/s. 40(a)(ia) of the Act is called for.
The ld.CIT(A) after considering the submissions and the case laws cited by the assessee observed that it is an undisputed fact that the Tax deducted at source in the first eleven months of the financial year 2006-07 was paid to the credit of the Central Government before the due date of filing of the return of income u/s 139(1) of the Act by the assessee. However, as per the A.O. the tax deducted at source in the first 11 months of the financial year should have been deposited to the credit of the Central Government within ITA 6965/Mum/2014 10 the end of the financial year, i.e., on or before 31.03.2007 but the assessee had failed to do so and hence the AO disallowed the same u/s 40(a)(ia) of the Act. The AO relied on decision of Special Bench of the Tribunal in the case of Bharati Shipyard(supra) . However, it was observed by learned CIT(A) that admittedly the assessee had deposited the tax deducted at source on or before the due date for filing of return of income u/s 139 (1) of the Act and following the decision of Hon’ble Calcutta High Court in the case of Virgin Creations (supra) , and also decision of Mumbai Tribunal in the case of Piyush C. Mehta (supra) which analysed both Special Bench decision of Bharati Shipyard (supra) and Hon’ble Calcutta High Court decision in the case of Virgin Creations(supa) and followed the decision of Hon’ble Calcutta High Court in Virgin Creation(supra) being higher judicial forum decision to hold that amendment by Finance Act , 2010 to the provisions of Section 40(a)(ia) of the Act is retrospective in nature, which decision of Hon’ble Calcutta High Court in the case of Virgin Creations(supra) was also followed by the ITAT Bangalore Bench in the case of Santosh Kumar Shetty v. ACIT in IT Appeal No. 1194 (Bang) of 2012 for the assessment year 2008-09 whereby the appeal of the assessee was allowed. Accordingly, the learned CIT(A) directed the A.O. to delete the disallowance of Rs. 1,29,63,647/- made u/s 40(a)(ia) of the Act as the tax deducted at source was deposited to the credit of Central Government by the assessee before the due date of filing of return of income u/s. 139(1) of the Act , vide appellate order dated 18-08-2014 wherein the assessee appeal was allowed on merits with respect to this ground.
Aggrieved by the appellate order dated 18-08-2014 passed by the ld. CIT(A), the Revenue is in appeal before the Tribunal.
ITA 6965/Mum/2014 11
The ld. D.R. submitted that amendment to section 40(a)(ia) of the Act by Finance Act 2010 is prospective in nature. The ld. D.R. also relied on the order of the A.O..
The ld. Counsel for the assessee submitted before the Tribunal that section 40(a)(ia) of the Act was amended by the Finance Act, 2010. The assessee has admittedly paid the tax deducted at source on payment made to the contractors and on account of brokerage and professional fees aggregating to Rs. 1,29,63,647/-in the first eleven months of the financial year 2006-07 , before the due date of filing of return of income u/s 139(1) of the Act. The taxes were deducted at source under Chapter XVII-B of the Act which have been duly deposited by the assessee before the due date of filing of return of income u/s. 139(1) of the Act . The ld. Counsel submitted that it is an undisputed position that due taxes have been paid to the government treasury before the due date of filing of the return of income u/s 139(1) of the Act. It is submitted that section 40(a)(ia) of the Act was amended by Finance Act 2010 and it has been held to be applicable with retrospective effect w.e.f. 1st April, 2005 and no disallowance is called for u/s 40(a)(ia) of the Act. The learned counsel for the assessee supported the order of learned CIT(A) on merits of the case The assessee relied upon the following case laws in this regard.
CIT v Virgin Creations, ITAT No. 302 of 2011 GA 3200/2011(Calcutta) dated 23.11.2011.
Piyush C. Mehta v. ACIT, (2012) 52 SOT 27 (Mumbai).
CIT v. Standard Buildcon, (2014) 41 taxmann.com 155 (Gujarat)
ITA 6965/Mum/2014 12
CIT v. Naresh Kumar, (2013) 262 CTR 389 (Del)
Santosh Kumar Shetty v. ACIT, 38 taxmann.com 43 (2013) (Bangalore - Trib).
The assessee prayed that the appeal may be allowed and order of learned CIT(A) be confirmed/upheld on merits.
We have considered the rival contentions and also perused the material placed on record including the case laws relied upon by both the parties. We have observed that the assessee has made payment to contractors and also on account of brokerage and professional fees aggregating to Rs. 1,29,63,647/- which were made before 1-3-2007 i.e. within first eleven months of the financial year 2006-07 and taxes were deducted at source under Chapter XVII-B of the Act and admittedly the said taxes deducted at source were deposited to the Credit of Central Government by the assessee after the end of financial year 2006-2007 but before the due date of filing of return of income u/s 139(1) of the Act. It is an undisputed position that the assessee has duly paid the taxes deducted at source under Chapter XVII-B of the Act during the first eleven months of the financial year ended 31-03-2007 before the due date of filing of return u/s. 139(1) of the Act . Section 40(a)(ia) was amended by Finance Act, 2010 whereby under the amended provisions, the tax deducted at source under Chapter XVII-B of the Act if paid to the credit of Central government before the due date of filing of return u/s 139(1) of the Act, no disallowance u/s. 40(a)(ia) of the Act is called for . The decisions relied upon by the assessee supports the claim of the assessee, we hold that ITA 6965/Mum/2014 13 the assessee having made payment of tax deducted at source in the first eleven month of financial year ending 31-03-2007 to the credit Central Government before the due date of filing of return of income u/s. 139(1) of the Act, no disallowance can be made u/s 40(a)(ia) of the Act and accordingly we delete the disallowance made by the A.O. by holding that the amendment made by the Finance Act, 2010 to Section 40(a)(ia) of the Act is retrospective as held in the decisions relied upon by the assessee and cited in preceding para’s and consequently we dismiss the appeal filed by the Revenue by sustaining/confirming the appellate order of learned CIT(A) in which we find no infirmity so far challenge on merits of the case is concerned as per reasons as discussed above .We order accordingly.
In the result, appeal filed by the Revenue in 2007-08 is dismissed.