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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: HON’BLE S/SHRI JOGINDER SINGH (JM), & RAJESH KUMAR,(AM)
आयकर अपीऱीय अधिकरण, म ुंबई न्यायपीठ “ए” म ुंबई IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE HON’BLE S/SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR,(AM) आमकय अऩीर सं./I.T.A. No.4714/Mum/2015 (ननधधायण वषा / Assessment Year : 2012-13) M/s India Steel Works Ltd, बनाम/ Income Tax Officer, TDS 1101 Tower 2, 1(2)(4), Vs. India Bulls Finance Centre, Mumbai. Senapati Bapat Marg, Elphiston, Mumbai-400013 (अऩीरधथी /Appellant) (प्रत्मथी / Respondent) ..
स्थधमी रेखध सं./जीआइआय सं./PAN/TAN No. :AANFA6118Q अऩीरधथी ओय से / Appellant by: Dr.P.Danial प्रत्मथी की ओय से/Respondent by Shri A Ramchandran सुनवधई की तधयीख / Date of Hearing : 26.7.2016 घोषणध की तधयीख /Date of Pronouncement : 29.7.2016 आदेश / O R D E R Per RAJESH KUMAR, Accountant Member: This is an appeal filed by the assessee and is directed against the order of the Ld. CIT(A)-59, Mumbai dt.2.6.2015 pertaining to A.Y. 2012-13.
The only ground raised by the assessee is against the confirmation of order of AO by the ld. CIT(A) as passed under section 201(1) and 201(1A) of the Income Rx Act, 1961 for non deduction of TDS. 3. Brief facts of the case are that the assessee is engaged in the manufacturing of steel billets, hot rolled bars/wire roads and also manufacturing the same on job work. A survey action under section 133A of
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the Act was conducted on 31.3.2013 in the office premises of the assessee to verify TDS compliance as per TDS provisions and it was observed that the assessee was not regularly depositing TDS amount and in some cases the assessee was found to be deposited late. During the course of survey the assessee has not deducted TDS on labour charges on Rs.16,45,982/-, legal and professional fee Rs.1,50,300/-, Interest and finance expenses Rs.8,58,595/-, audit fees Rs.1,25,000/- and clearing and forwarding charges Rs.4,32,627/- aggregating to Rs.32,12,504/-. The assessee explained that the default by submitting that the assessee has not deducted tax on the above said payments, however, the same were disallowed suo mottu in computation of income for the assessment year 2012-13 u/s 40(a)(ia) of the Act and also stated that the said expenses were also not claimed in the subsequent year i.e. AY 2013-14. The assessee also stated that it has duly paid interest on the delayed payment of TDS for the assessment year 2012- 13 by filing detailed workings. The AO not accepting the contentions and submissions of the assessee came to the conclusion that TDS provisions were applicable even if the expenses were disallowed u/s 40(a)(ia) while filing the income tax return and treated the assessee in default under section 201(1) and 201(1A) of the Act by raising demands of Rs.2,20,483/-. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), who dismissed the appeal of the assessee.
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The ld. DR submitted before us that the order passed by the ld. CIT(A) was against the spirit of provisions of Act as mere disallowance at the time of filing of return under section 40(a)(ia) of the Act suomottu on the basis of tax audit report in no way absolved the assessee from the applicability of deduction of tax at source under the provisions of section 201(1) of the Act. The ld. DR further submitted that the AO has rightly raised the demand under section 201(1) and 201(1A) of the Act which was cancelled by the ld. CIT(A) by mis-appreciating the facts and law applicable as regard the TDS provisions and finally prayed that the order of ld.CIT(A) be set aside and that of AO be restored.
The ld. AR, per contra, strongly opposed the arguments of the ld.DR and submitted that the case of the assessee is fully covered in its favor by the order of co-ordinate bench of the Tribunal in the case of Pfizer Ltd(supra), wherein it has been held that once the expenses on which no TDS was deducted has been disallowed u/s 40(a)(ia) for non deduction of tax at source, demands u/s 201 cannot be raised. The ld. AR also strongly relied on the decision in the case of Hindustan Coca Cola Beverage Pvt Ltd(2007) 393 ITR 228(SC) and the decision o Co-ordinate Bench in the case of Pfizer Ltd V/s ITO (2013) 55 SOT 277 (Mum) and finally prayed that in view of the above mentioned judicial decision, the appeal of the assessee be allowed.
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We have heard both the parties, perused the material placed before us and also gone through the orders of authorities below including the case laws cited by the parties. We find that the assessee has not deducted TDS on various expenses aggregating to Rs.32,12,504/- and at the time of filing of return of income suomottu added back and disallowed the same u/s 40(a)(ia) of the Act. The AO framed the order u/s 201(1) and 201(1A) of the Act by raising demands of Rs.2,20,483/- by holding that even if the assessee suo mottu disallowed expenses u/s 40(a)(ia), the same does not absolve the assessee from the application of provision of tax at source. The ld. CIT(A) reversed the order of AO by holding that once the disallowance u/s 40(a)(ia) was made no further demand under the provisions of section 201(1) and 201(1A) would be raised. We find merit in the contention of the ld.AR that the case of the assessee stands covered in favour of the assessee by the case of Pfizer Ltd(supra). The relevant portion of the decision rendered in the case of Pfizer Ltd is reproduced below : “ When the payment/credit was made to the individual payee identified, all the provisions of TDS are made applicable whether to a resident or to a non-resident as the case may be. In the absence of any identifiable payee, the provisions of TDS are not applicable. [Para 10] • The payee is not identifiable in this case also at the time of making provision, no TDS need to be made on the above amount. Further the entire provision has been written back in the next year and the actual amounts paid/credited were subjected to TDS as per the detailed statements filed before the authorities on which there is no dispute. Therefore, the assessee is following the provisions of TDS as and when the amounts are paid/credited to respective parties. [Para 11]
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• As already explained and evidenced from the computation of income as well as the orders of the Assessing Officer in the assessment proceedings, the entire provision has been disallowed under section 40(a)(ia ) and section 40(a)( i). Once the amount has been disallowed under the provisions of section 40(a )(i) on the reason that tax has not been deducted, it is surprising that the Assessing Officer holds that the said amounts are subject to TDS provisions again so as to demand the tax under the provisions of section 201 and also levy interest under section 201(1A).The same could not be considered as covered by the provisions of section 194C to 194J. The assessee has already disallowed the entire amount in the computation of income as no TDS has been made. • Once as amount was disallowed under section 40(a)(i )/(ia) on the basis of the audit report of the chartered accountant, the same amount cannot be subject to the provisions of TDS under section 201(1) on the reason that assessee should have deducted the tax. If the order of the Assessing Officer were to be accepted then disallowance under section 40(a)(i ) and 40(a)( ia) cannot be made and provisions to that extent may become otiose. In view of actual disallowance under section 40(a)(i ) by assessee having been accepted by the Assessing Officer, the said amount cannot be considered as amount covered by provisions of section 194C and 194J so as to raise TDS demand again under section 201 and levy of interest under section 201(A). Therefore, the assessee's ground on this issue are to be allowed as the entire amount has been disallowed under the provisions of section 40(a )(i)/(ia ) in the computation of income on the reason that TDS was not made. For this reason alone the assessee's grounds was to be allowed. Considering the facts and reasons stated above assessee's ground are allowed. [Para 12]”
Considering the facts of the case and in the light of the ratio laid down in the above case law, we are of he considered view that the order of ld. CIT(A) is not correct and suffers from several infirmities. Accordingly, we set aside the order of ld.CIT(A) by we allowing the appeal of the assessee.
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In the result the appeal of the assessee is allowed. The above order was pronounced in the open court on 29th July, 2016. घोषणध खुरे न्मधमधरम भें ददनधंकः 29th July, 2016 को की गई । Sd sd (JOGINDER SINGH) ( RAJESH KUMAR) Judicial Member Accountant Member भुंफई Mumbai: 29th July, 2016. व.नन.स./ SRL , Sr. PS आदेश की प्रतिलऱपप अग्रेपिि/Copy of the Order forwarded to : अऩीरधथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A)- concerned 3. आमकय आमुक्त / CIT concerned 4. ववबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / 5. DR, ITAT, Mumbai concerned 6. गधर्ा पधईर / Guard file. आदेशधनुसधय/ BY ORDER, True copy सहधमक ऩंजीकधय (Asstt. Registrar) आमकय अऩीरीम अधधकयण, भुंफई /ITAT, Mumbai