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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM & Shri Waseem Ahmed, AM]
ORDER Per Shri Mahavir Singh, JM:
This appeal by revenue is arising out of order of CIT(A)-XXXIII, Kolkata in Appeal No.356/CIT(A)-XXXIII/DCIT,Cir-Hal/09-10 dated 18.07.2012. Assessment was framed by DCIT, Circle-Haldia u/s. 144 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2007-08 vide his order dated 24.12.2009.
At the outset, it is noticed that the revenue has moved adjourned petition in almost 19 cases out of the listed case of 23. This en block adjournment is not possible and hence, the possible case, we have taken up for hearing and decided the issue by rejecting the adjournment petition. In this case also, we have rejected the adjournment petition and heard the appeal.
The only issue in this appeal of revenue is against the order of CIT(A) deleting the disallowance made by AO u/s. 40(a)(ia) of the Act by following the decision of Special bench of ITAT, Visakhapatnam in the case of Merilyn Shipping & Transport Ltd. Vs. ACIT, ITA No. 477/VIZAG/2008. For this, revenue has raised following ground: “The Ld. CIT(A) erred in restricting the disallowance u/s. 40(a)(ia) of the I. T. Act to the outstanding balance lying at the end of the previous year only and deleting the disallowances for the paid portion during the year relying on the judgment in the case of M/s. Merilyn Shipping & Transport Ltd. Vs. ACIT, of Special Bench of ITAT, Vishakhapatnam and M/s. Woodplast Agency Vs. ITO, ITA No. 241/Kol/2010 of ITAT, Kolkata.”
2 Shri Shyamal Kr. Dey AY 2007-08 4. Briefly stated facts are that the assessee is a transporter and claimed freight charges of Rs.80,20,365/-. As the assessee failed to deduct TDS on freight charges, the AO made disallowance by invoking the provisions of section 40(a)(ia) of the Act for a sum of Rs.80,20,365/-. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) has divided these freight charges in two parts - 1st, the payments below Rs.50,000/- in aggregate in a year and 2nd - payments above Rs.50,000/- in aggregate in a year. The CIT(A) has asked for remand report from the AO that how much payment is below Rs.50,000/- in aggregate in a year and how much is above Rs.50,000/- in aggregate in a year. The AO vide Remand Report No. ACIT/Cir-Haldia/Remand/2012-13/169 dated 04.06.2012 has stated as under: “As directed, hearing was fixed on 22.05.2012, 28.05.2012 and again on 04.06.2012. The A/R of the assessee Shri V. D. Sharma appeared and gave written submission (copy enclosed) in respect of list of trucks owned by same person. The matters were discussed. As per discussion and written submission it is observed that the assessee had done payment of transport charges to some persons for the year above Rs.50,000/- during the relevant previous year without deducting tax at source, violating the provisions of section 194C of the I. T. Act. The aggregate of total such payment is Rs.13,30,707/- which are liable to be disallowed u/s. 40(a)(ia) of the I. T. Act as per the submission given by the assessee.”
According to AO, the payment in excess of Rs.50,000/- in aggregate is only Rs.13,30,707/- and accordingly, CIT(A) deleted the addition in case of payments below Rs.50,000/- in aggregate in a year in view of the proviso to section 194C(5) of the Act. In regard to the payments exceeding Rs.50,000/- in aggregate in a year that comes to Rs.13,30,707/-, the CIT(A) deleted by following the decision of Special bench ITAT in the case of Merilyn Shipping & Transport Ltd., supra by observing in para 7 as under: “7. I have considered facts of the case. Though the assessment in this case was completed under the provisions of section 144, the only addition made was by way of disallowance of freight charges made u/s 40(a)(ia). Neither in the assessment order, nor in the remand report, the assessing officer has raised any doubt on genuineness of the expenses or any other issue. In his report, it has been stated by the assessing officer that out of total payments made, aggregate of the payments where amount paid to a person exceeded Rs. 50,000/- came to Rs. 13,30,707/- which was liable for disallowance u/s. 40(a)(ia). However, it has been claimed by the appellant that the entire transport charges were actually paid during the financial year itself and no amount remained outstanding. Recently, Special Bench of ITAT, Vishakhapatnam has held, by majority, in the case of Merilyn Shipping & Transports vs. ACIT, that the provisions of section 40(a) (ia) are attracted only on the amount remaining outstanding at the end of the year and cannot be invoked to disallow expenditure which had been actually paid during the previous year. The said decision has been followed by the jurisdictional bench of tribunal in the case of M/s. Woodplast Agency vs. ITO, ITA No. 241/Kol/2010 and several other cases. It is claimed by the appellant that all the freight charges under consideration have been actually paid during the year and nothing remained payable. However, this aspect has not been examined by the assessing officer while sending his report. In line with 3 Shri Shyamal Kr. Dey AY 2007-08 the principle of judicial discipline, I follow the ratio set by Special Bench of ITAT and followed by the jurisdictional bench, and direct the assessing officer to verify this point and restrict the disallowance only to the extent of the amount remaining outstanding at the end of the previous year.”
None appeared on behalf of revenue but Ld. Counsel for the assessee stated that the payment below Rs.50,000/- in aggregate in a year is now covered by the provision to section 194(5) of the act and no TDS is to be deducted and, therefore, there is no question for disallowance by invoking the provisions of section 40(a)(ia) of the Act. However, in respect to the payments exceeding Rs.50,000/- in aggregate in a year i.e. Rs.13,30,707/-, Ld. Counsel for the assessee stated that this is also covered by the second proviso to section 40(a)(ia) of the Act, which is held to be retrospective by Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd., & 161/Kol/2015.
We have Ld. Counsel for the assessee and gone through facts and circumstances of the case. We find that the CIT(A) has deleted the disallowance by observing that wherever the payments are covered by the proviso to section 194C(5) of the Act by virtue of which the payments upto Rs.50,000/- in aggregate in a year is allowed without deduction of tax and thereby no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act. We find no infirmity in this finding of CIT(A) and accordingly, the same is confirmed. 7. As regards to the disallowance of a sum of Rs.13,30,707/-, the payments exceeding Rs.50,000/- in aggregate in a year to each person, the assessee is liable to deduct TDS u/s. 194C of the Act but assessee failed to deduct TDS. The CIT(A) relying on the decision of Special Bench of this Tribunal of Vishakhapatnam Bench in the case of Merilyn Shipping & Transport Ltd., supra deleted the addition in respect to paid amount and directed the AO to delete the disallowance for the paid amounts but retained the disallowance on payable amounts. Now, Merilyn Shipping & Transport Ltd., supra has been reversed by Hon’ble Calcutta High Court in the case of CIT v. Crescent Exports Syndicate (2013) 216 taxman 258 (Cal) and held the same to be applicable to all the payments whether paid or payable. Accordingly, qua this aspect, we reverse the order of CIT(A) by following the judgment of Hon’ble jurisdictional High court cited above. The alternative plea of the assessee that now the second proviso to section 40(a)(ia) of the Act is held to be retrospective by 4 Shri Shyamal Kr. Dey AY 2007-08 Hon’ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd., supra, wherein it is held that in both the proviso to section 40(a)(ia) and section 201(1) of the Act is that as long as the payee has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid taxes on such income, the assessee would not be treated as a person in default. In view of the principle laid down by Hon’ble Delhi High Court, we are of the view that let the issue be set aside to the file of the AO for verification whether the recipient of income i.e. payee has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid taxes on such income. The assessee will file all the details regarding recipients. Accordingly, this issue is partly allowed for statistical purposes.
In the result, the appeal of revenue is partly allowed for statistical purposes.
Order is pronounced in the open court on 29.10.2015 Sd/- Sd/- (Waseem Ahmed) (Mahavir Singh) Accountant Member Judicial Member
Dated : 29th October, 2015 Jd. Sr. P.S Copy of the order forwarded to: