ACIT, CHENNAI vs. RED BRICK REALTORS PVT. LTD., CHENNAI

The first issue in the appeal of the Revenue is that Commissioner of Income Tax (Appeals) erred in deleting the disallowance made under section 40(a)(ia) of the Act in respect of professional fees paid without deduction of tax at source. The Assessing Officer while completing the and therefore, Assessing Officer disallowed the said amount under section 40(a)(ia) of the Act. On appeal, Commissioner of Income Tax (Appeals) following the decision of Special Bench of the Tribunal (Visakhapatnam Bench) in the case of Merilyn Shipping & Transports Vs. Addl. CIT (136 ITD 23) (SB), deleted the disallowance as these amounts were already paid before the end of the year, therefore provisions of section 40(a)(ia) are not attracted.

The Income-tax Appellate Tribunal, Visakhapatnam-Special Bench, had held in the case of Merilyn Shipping and Transports vs. Addl. CIT, 16 ITR (Trib) 1, that the provisions of section 40(a)(ia) do apply only to those amounts remained payable by the end of the previous year and the said provisions do not apply to the amounts already paid by the assessee before the close of the relevant previous year. In that way, the order of the Commissioner of Income- tax(Appeals) in the present case is conducive to the decision of the Special Bench. The very same view has been upheld by the Hon’ble Allahabad High Court in the case of CIT vs. M/s. Vector Shipping Services(P) Ltd. The Hon’ble Allahabad High Court, through their judgment dated 9-7- 2013 in of 2013, has held that the decision of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports vs. Addl. CIT is good law. In that way, the present appeal filed by the Revenue is liable to be dismissed.

But, at the same time, the learned Joint Commissioner of Income-tax appearing for the Revenue has relied on three other judgments rendered by the Hon’ble Calcutta High Court and Gujarat High Court, in which their Lordships have held that the law stated by the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports vs. Addl.CIT was not acceptable. The Hon’ble Calcutta High Court, through their judgment delivered on 3rd April, 2013 in of 2013 in the case of CIT vs. Crescent Export Syndicates, has held that the order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports vs. Addl.CIT is not acceptable. The same view has again been repeated by the Hon’ble Calcutta High Court in the case of CIT vs. Md. Jakir Hossain Mondal, through their judgment delivered on 4th April, 2013 in ITA No.31 of 2013. The Hon’ble Gujarat High Court in the case of CIT vs. Sikandarkhan N.Tunvar, 33 Taxman.com.133, has also held that the disallowance under section 40(a)(ia) does not distinguish between amounts “paid” and “payable”. In view of the above judgments of two High Courts, the learned Officer contended that the appeal of the Revenue needs to be allowed.

We find that the judgment of the Hon’ble Allahabad High Court is in favour of the assessee. At the same time, we find that the orders of the Calcutta High Court and the Gujarat High Court are against the assessee. In such circumstances, the rule of Judicial Precedence demands that the view favourable to the assessee must be adopted, as held by the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd., 88 ITR 192. Following the above fundamental rule declared by the Hon’ble Supreme Court, we have to follow the judgment of the Hon’ble Allahabad High Court,

Respectfully following the said decision, we uphold the order of the Commissioner of Income Tax (Appeals) on this issue and reject the grounds raised by the Revenue.

The next issue in the appeal of the Revenue is that Commissioner of Income Tax (Appeals) erred in allowing relief of `3,80,075/- towards land levelling expenses. The Assessing Officer while completing the assessment noticed that assessee has debited ` 15,20,300/- in the profit and loss account towards sand charges. The assessee was required to produce evidence in support of the said expenditure. But the assessee did not comply with the request of the Assessing Officer. Therefore in the absence of any proper evidences furnished by the assessee, 50% of the charges amounting to ` 7,60,150/- was disallowed by the Assessing Officer. On appeal, Commissioner of Income Tax (Appeals) considering the submissions of assessee deleted 50% of

Departmental Representative submits that assessee has not produced any evidence for having incurred any expenses and therefore Assessing Officer was right in disallowing 50% of the said expenses. The Commissioner of Income Tax (Appeals) is not justified in further reducing the expenses to 50%

Counsel for the assessee relies on the order of the Commissioner of Income Tax (Appeals).

Heard both sides. Perused orders of lower authorities.

In the result, appeal of the Revenue is dismissed.