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Income Tax Appellate Tribunal, MUMBAI BENCH “K”, MUMBAI
Before: SHRI G.S.PANNU & SHRI RAVISH SOOD
The captioned cross-appeals filed by the assessee and Revenue pertaining to A.Y. 2009-10 are directed against an order passed by Ld. CIT(A)-15, Mumbai dated 31/10/2014, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 26/04/2013.
In so far as the appeal of the assessee is considered, the solitary Ground of appeal raised reads as under:-
1. The Hon'ble CIT(A) has erred in confirming the disallowance of Rs.26,46,416!- being royalty paid by the appellant U/S 40( a)(i) of the Act on the ground that the tax deducted at source on the payment made U/S 195 of the Act has been deposited beyond the time prescribed U/S 200 of the Act. On the facts and circumstances of the case and in law, the said payment being made within the time prescribed U/S 200 of the Act, ought not to be disallowed as a deduction. 3. In the course of assessment proceedings, it was noted by the Assessing Officer that assessee had debited an amount of Rs.26,46,416/- in the P&L Account as royalty charges paid to M/s. Oerlikon Textile Gmbh & Co. The Assessing Officer has further noticed in para 4 of the assessment order that the royalty charges were payable for the period April,2008 to December, 2008 – Rs.22,70,442/- and for January 2009 to March 2009 – Rs.3,75,974/-. The Assessing Officer further notes that the due date of deposit of TDS of Rs.2,27,044/- on the first deposit was on 07/01/2009, whereas the actual date of payment was 28/04/2009 and with regard to the second payment, the due date of deposit of TDS of Rs.37,594/- was 31/5/2009, whereas the actual date of deposit was on 31/03/2010. On this basis, Assessing
3 (Assessment Year : 2009-10) Officer concluded that the tax deducted at source was deposited beyond the time stipulated under section 200 of the Act and, therefore, the corresponding expenditure of Rs.26,46,416/- was liable to be disallowed under section 40(a)(ia) of the Act. The assessee carried the aforesaid disallowance before the CIT(A) by pointing out that both amounts were credited to the account of the payee on 31/3/2009 and, thus, the due date of deposit of TDS into Government Treasury was 31/05/2009. The assessee also pointed out that deposit of TDS of Rs.2,27,044/- was made on 28/04/2009 and the balance of Rs.37,594/- was made on 14/05/2009, totalling to Rs.2,64,638/-. In this manner, assessee pointed out that the entire amount of TDS on the royalty payment of Rs.26,46,416/- stood deposited before the stipulated date of 31/5/2009. In particular, with respect to the deposit made on 14/05/2009, assessee pointed out that the requisite tax challan evidenced the same, whereas at the time of assessment proceedings, assessee had inadvertently annexed challan of service tax payment, which was dated 31/3/2010. In this manner, assessee pointed out that the date of 31/3/2010 has been wrongly noted by the Assessing Officer, which deserves to be corrected in view of the tax challan dated 14/05/2009 placed before CIT(A).
4. The CIT(A) construed the tax challan of Rs.37,597/- dated 14/05/2009 as an additional evidence, which was not before the Assessing Officer and, therefore, he refused to admit the same. Secondly, with respect to the deposit of TDS of Rs.2,27,044/-, with respect to the royalty payment of Rs.22,70,442/-, the CIT(A) referred to an observation in Form 3CD issued by the auditor under section 44AB of the Act, which according to him, reflected default in payment of TDS
4 (Assessment Year : 2009-10) amount, therefore, he upheld the action of the Assessing Officer on both the counts. Against such a decision of the CIT(A), assessee is in appeal before us.
Before us, Ld. Representative for the assessee vehemently pointed out that the CIT(A) has completely misdirected himself by referring to Note-5, attached to the tax audit report under section 44AB of the Act inasmuch as the same related to payment of professional fee and involved inadmissibility of a sum of Rs.1,17,300/- and that it makes no reference to the TDS on the impugned royalty payment. In this context, our attention was invited to copy of the Tax Audit Report placed in the Paper Book, in particular to the Note No.5 therein, which has been referred by the CIT(A). Secondly, our attention was also invited to the challan dated 14/5/2009 evidencing the deposit of TDS of Rs.37,594/-, into the Government Treasury with respect to the payment of royalty of Rs.3,75,974/-. Therefore, on this basis, it is sought to be made that the entire amount of TDS of Rs.2,64,638/- corresponding to the royalty payment of Rs.22,70,442/- + Rs.3,75,974/- totalling to Rs.26,46,416/- has been paid before the stipulated date of 31/5/2009 and, therefore, no disallowance under section 40(a)(ia) of the Act is justified.
On the other hand, Ld. Departmental Representative has not controverted any of the factual matrix brought out by the Ld. Representative for the assessee, but has placed reliance on the orders of the authorities below.
We have carefully considered the rival submissions and find that the lower authorities have completely misdirected themselves in 5 (Assessment Year : 2009-10) making the impugned disallowances. Quite clearly, it is not in dispute that the two royalty payment of Rs.22,70,442/- and Rs.3,75,974/-, totaling to Rs.26,46,416/- have been credited to account of the payee on 31/3/2009 and, therefore, the corresponding tax deducted at source (TDS) was required to be deposited into the Government Treasury on or before 31/05/2009 in terms of the provisions of the Act. There is no dispute to the aforesaid fact-situation as the same has not been repudiated by any of the lower authorities. It is also not in dispute that the corresponding TDS on the said payments i.e. Rs.2,27,044/- and Rs.37,957/- have been deposited in the Government Treasury on 28/04/2009 and 14/05/2009 respectively, thus, complying with the time stipulation provided under the Act. Therefore, invoking of section 40(a)(ia) of the Act in the present case is factually misplaced and deserves to be set-aside. We hold so.
7.1 So however, before parting, we may refer to the stand of the CIT(A) of not taking into consideration the tax payment challan furnished by the assessee on the ground that the said challan was not before the Assessing Officer and thus it could not be admitted as additional evidence. In our considered opinion, the approach of the CIT(A) is completely misplaced, inasmuch as, the tax challan is a part of the records of the Department itself as the challan is merely an acknowledgement of taxes received by the Department. Therefore, the CIT(A) ought to have taken cognizance of the same in an appropriate manner. Even with regard to the other leg of the TDS of Rs.2,27,044/- deposit, while CIT(A) did not dispute the date of deposit being 28/04/2009, but he referred to Note No.5 to the notes to tax audit report to justify the disallowance. Quite clearly, the aforesaid stand of 6 (Assessment Year : 2009-10) the CIT(A) is incomprehensible, because the notes to the tax audit report referred by him do not make any reference to the TDS on royalty payments. Thus, on both the aspects, we find that the stand of the CIT(A) is unsustainable.
7.2 In the result, we set-aside the order of the CIT(A) and direct the Assessing Officer to delete the disallowance of Rs.26,46,416/- made under section 40(a)(ia) of the Act. Thus, appeal of the assessee is allowed.
In so far as the cross appeal of the Revenue is concerned, the solitary dispute raised by the Revenue relates to the action of the CIT(A) in deleting an addition of Rs.26,46,416/- made by the Assessing Officer on determination of arm's length price of the royalty payments.
The CBDT vide Circular No.21/2015 dated 10/12/2015 has revised the monetary limits for filing of appeals by the Department before the Tribunal retrospectively. The tax effect in dispute in the captioned appeal is stated to be below the monetary limit of Rs.10.00 lacs specified in the CBDT Circular dated 10/12/2015 (supra).
In this background, Ld. Departmental Representative appearing for the Revenue was required to state his position. He has not brought out any material to suggest that the captioned appeal is protected by any of the circumstances prescribed in Para-8 of the Circular dated 10/12/2015 (supra) and as a consequence such appeal is liable to be treated as withdrawn/not pressed. The relevant portion of the circular dated 10/12/2015 (supra) is reproduced below:-
7 (Assessment Year : 2009-10) “ 3.Henceforth appeals/SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:- Sl. No. Appeals in Income-tax matters Monetary Limits (In Rs.) 1. Before Appellate Tribunal 10,00,000 2. Before High Court 20,00,000 3. Before Supreme Court 25,00,000 .................................................................................................................................
For this purpose, "tax effect" means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter referred to as "disputed issues"). However the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. …………………………………………………………………………… 8. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect: Where the Constitutional validity of the provisions of an Act or Rule are (a) under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets/ bank accounts. 9. The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute & rules. Further, filing of appeal in cases of Income Tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case. 10. This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/ Tribunals. Pending appeals
8 (Assessment Year : 2009-10) below the specified tax limits in para 3 above may be withdrawal not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.” (underlined for emphasis by us)
Without going into the merit of the issues raised in the Revenue’s appeal, it is deemed to be withdrawn/not pressed as it’s filing is in contravention of the CBDT Circular dated 10/12/2015(supra).
In the result, appeal of the assessee is allowed and that of Revenue is dismissed.
Order pronounced in the open court on 24/08/2016