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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 07/11/2024 Date of Order – 18/11/2024
O R D E R PER K.M. ROY, A.M.
The present appeal has been filed by the assessee challenging the impugned order dated 23/01/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2019–20.
When the appeal was called for hearing, no one was present on behalf of the assessee–appellant to represent the case and assist the Bench in disposing the appeal filed by the assessee itself. There is no application for adjournment of hearing either. Therefore, we proceed to dispose off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material available on record.
2 Raghav Agritech
In its appeal, the assessee has raised following grounds:
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1. On the facts and in the circumstances of the case and in law, the intimation passed u/s 143(1) of the I. T. Act, 1961 by the Assistant Dir. of Income Tax CPC is bad in law and the Ld. AddI/JCIT (A) erred in confirming the same.
2. On the facts and circumstances of the case and in law, the addition made by the Asstt Dir CPC in intimation passed u/s 143(1) without giving any intimation to the assessee of such adjustments either in writing or electronic mode is invalid and bad in law and the Ld. AddI/JCIT (A) erred in confirming the same.
3. On the facts and circumstances of the case and in law, the addition of Rs 61,95,000/- made by CPC in intimation issued u/s 143(1) on a debatable and controversial issue is bad in law and the Ld. AddI/JCIT (A) erred in confirming the same. Further the Ld. Addl/JCIT(A) has erred in not adjudicating the issue.
4. On the facts and circumstances of the case and in law, the addition made by the Asstt Dir CPC in intimation passed u/s 143(1) by making adjustments that do not fall within the purview of adjustments that can be made under clause i to vi of sub- section 1a of section 143 is bad in law. Further the Ld. AddI/JCIT (A) has erred in not adjudicating the issue. 5 That the Ld. AddI/JCIT (A) erred in holding that since the tax at source (TDS) on payment of Rs 2,06,50,000/- to the building contractor has not been deducted u/s 194C, 30% of the amount paid to the building contractor i.e. Rs 61,95,000/- is disallowable u/s 40(a)(ia) r.w.s 194C of the act. On the facts of the case, the expenditure has been capitalised and has not been claimed as revenue expenditure and hence no TDS is required to be deducted.
6. That the Ld. AddI/JCIT (A) erred in confirming the addition of interest u/s 234A, 234b and 234C of the act.
7. The appellant craves leave to add or amend any ground of appeal with the permission of the Hon'ble members.”
Facts in Brief:– The assessee is engaged in the business of manufacturing of all types of Agriculture Shed Net and is regular in filing its return of income which has been assessed to tax since last several years. The assessee filed its return of income on 15/09/2020, for the year under consideration under section 139 of the Income Tax Act, 1961 ("the Act")
3 Raghav Agritech declaring total income of ` 6,26,010. The assessee firm is subject to audit and Audited Balance Sheet and Tax Audit Report in Form No.3CD, was also filed with the return of income and is on record of the Department. The learned Asstt. Director of Income Tax, Central Processing Centre, Bangalore (hereinafter called as “the Assessing Officer”) processed the return of income and passed intimation under section 143(1) of the Act on 03/01/2021, determining total income of ` 65,11,260. The intimation was received by the assessee vide mail on 20/01/2021. The assessee had made payment of ` 2,06,50,000, to the contractor for building construction and has not claimed payment made to contractor as revenue expenditure in its Profit and Loss Account. The Assessing Officer made addition of ` 61,95,000, under section 143(1a) of the Act on the ground that TDS on payment of ` 2,06,50,000, to contractor for building construction has not been deducted and hence 30% of sum paid is disallowable under section 40(a)(ia) though the assessee had disallowed ` 3,09,750, being 30% of depreciation claimed by it. The assessee being aggrieved filed appeal before the first appellate authority.
The learned CIT(A) confirmed the order passed by the Assessing Officer by observing as under:–
“As can be seen from the above Sec. 40(a) does not make any distinction between revenue expenditure and capital expenditure. Therefore, Sec. 40(a)(i) covers both revenue expenditure and capital expenditure provisions of sec. 40 are in the nature of overriding provisions - It starts with the words "notwithstanding anything contrary in sections 30 to 38", which shows that even if an expenditure or allowance comes within the purview in all the sections from 30 to 38 as well as sec. 40, the provisions of sec. 40 will prevail. This rationale has been upheld by the Hon'ble Benches of Mumbai Tribunal in the cases of SPACO Carburettors (1) Ltd. Vs ACIT (ITAT, Mum) 3 SOT 798 and V Kay Translines (P) Ltd. Vs ITO 2011-TIOL-318-ITAT-MUM. Therefore, I uphold the order of the CPC u/s 143(1) disallowing 30% of the amount
4 Raghav Agritech paid to the contractor without deduction of tax for violating the provisions of section 40(a)(ia) r.w.s. 194C(1). The appellant's appeal on this ground is therefore dismissed.”
None appeared on behalf of the assessee.
Since the facts of the present case lies in a narrow domain, we proceed to adjudicate the issue with the assistance of the learned Departmental Representative.
We have given a thoughtful consideration to the arguments made by the rival parties and perused the material available on record. It is important to extract below the provisions of section 40(a)(ia) of the Act.
“40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",— (a) in the case of any assessee— …….. (ia) thirty per cent of any sum payable to a resident, 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 on or before the due date specified in sub-section (1) of section 139 :”
It is a trite law that only expenditure which are otherwise allowable under sections 30 to 38 of the Act can be disallowed for non–deduction of tax at sources when it is undisputedly a capital expenditure and not claimed as a deduction while computing income from projects and gain of business and profession, there cannot be any disallowance in the intimation under section 143(1)(a) of the Act. Hence there is no merit in the order passed by the learned CIT(A) which is hereby set aside and the grounds of appeal raised by the assessee are allowed.
5 Raghav Agritech
In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 18/11/2024