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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI CHALLA NAGENDRA PRASAD
Per Challa Nagendra Prasad, JM:
This appeal is filed by the Revenue against the order of
the Commissioner of Income Tax (Appeals)-I, Chennai dated
14.03.2013 for the assessment year 2008-09.
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
2 ITA No.1372 /Mds/2013 assessment disallowed ` 18,00,000/- paid towards architect fees as the assessee did not deduct TDS on such payment
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.
Counsel for the assessee places reliance on the order
of the Commissioner of Income Tax (Appeals) and also the order of this Tribunal in the case of ITO Vs.Theekathir Press in ITA No.2076/Mds/2012 dated 18.9.2013 wherein the
Tribunal held that no disallowance is warranted when the payments were made by the assessee by the end of the accounting year, in view of various decisions of High Courts on this issue. 4. Departmental Representative supports the order of the Assessing Officer in disallowing the architect fees for non-
deduction of TDS.
3 ITA No.1372 /Mds/2013
On going through the orders of lower authorities, and
the decisions of this Tribunal, we find that the issue has been
decided in favour of the assessee inasmuch as the
provisions of section 40(a)(ia) have no application when the
amounts were paid by the assessee before the end of the
accounting year. The co-ordinate Bench of this Tribunal in the
case of ITO Vs. Theekathir Press (supra) held as under:-
“2. In the present case, the Assessing Officer has disallowed the claim of certain expenditure made by the assessee under section 40(a)(ia) on the ground that tax has not been deducted at source and paid to the credit of Government of India. But, the Commissioner of Income- tax(Appeals) deleted the disallowance stating that the amount ‘payable’ alone would attract the disallowance under section 40(a)(ia) and the amount already paid would not attract the above provision. The Revenue is aggrieved and, therefore, this second appeal before us. 3. 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 ITA No.122 of 2013, has held that the
4 ITA No.1372 /Mds/2013
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. 4. 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 ITA No.20 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. 5. 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,
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which is in favour of the assessee. Accordingly, we hold that the disallowance under section 40(a)(ia) applies only to those amounts ‘payable’ and not to those amounts ‘paid’. Accordingly, we uphold the order of the Commissioner of Income tax(Appeals) in the present case. The appeal filed by the Revenue is liable to be dismissed.”
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
6 ITA No.1372 /Mds/2013 `7,60,150/- and the balance 50% is disallowed against which the Revenue is in appeal before us.
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.
The Assessing Officer disallowed 50% of the sand expenses stating that assessee has not produced proper evidence in support of the expenses. The Commissioner of Income Tax (Appeals) considering the submissions of the assessee where the assessee submitted that evidences were produced and these expenses were incurred for levelling the access road to a property which was sold from which commission
income was also returned by the assessee. The
7 ITA No.1372 /Mds/2013
Commissioner of Income Tax (Appeals) also considered that
invoices are self-made. Considering these submissions, the
Commissioner of Income Tax (Appeals) restricted the disallowance to 50% of `7,60,150/- to ` 3,80,075/-. On
reading of the order of the Commissioner of Income Tax
(Appeals), we do not find any good reason to interfere with
the same. The order of the Commissioner of Income Tax
(Appeals) on this issue is sustained.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on Friday, the 13th day of February, 2015 at Chennai.
Sd/- Sd/- (ए. मोहन अलंकामणी) (च�ला नागे�� �साद) ( A.Mohan Alankamony ) ( Challa Nagendra Prasad ) लेखा सद�य / Accountant Member �या�यक सद�य /Judicial Member
चे�नई/Chennai, �दनांक/Dated 13th February, 2015 somu आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु�त (अपील)/CIT(A) 4. आयकर आयु�त/CIT 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.