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Income Tax Appellate Tribunal, ‘PANAJI’ BENCH, PANAJI
Before: SHRI CHANDRA MOHAN GARG & SHRI GIRISH AGRAWAL
IN THE INCOME TAX APPELLATE TRIBUNAL, ‘PANAJI’ BENCH, PANAJI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.122/PAN/2018 Assessment Year: 2012-13 M/S. DEMPO RESORTS ACIT, CIRCLE-2, Margao PRIVATE LIMITED Empressa Dempo, Mala Vs. Fontainhas, Panaji, Goa – 403 001. PAN: AACCD 2126 R (Appellant) (Respondent) Present for: Appellant by : Shri Rajesh Naik, Accountant Respondent by : Shri Mayur Kamble, Sr. DR Date of Hearing : 13.06.2022 Date of Pronouncement : 15.06.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal by the assessee is arising out of the order of Ld. CIT(A) – 2, Panaji in ITA No. 390/CIT(A)/PNJ-1/2014-15 re-numbered as ITA No. 342/CIT(A)-2/PNJ/2017-18 dated 23.01.2018 against the order passed by ACIT, Circle-1(1), Panaji u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) dated 29.12.2014.
The grounds taken by the assessee in the present appeal are reproduced as under:
“1. The Learned Commissioner of Income Tax (Appeals) has erred on fact and in law in upholding the order of the Learned Assessing Officer adding income u/s. 40(a)(ia) for non-deduction of TDS. 2. The Learned Commissioner of Income Tax (Appeals) has erred in upholding the order of the Learned Assessing Officer levying TDS on expense already offered for tax by the individual recipient of corresponding income.
2 ITA No.122/PAN/2018 M/s. Dempo Resorts Private Limited A.Y. 2012-13 3. The Learned Commissioner of Income Tax (Appeals) has failed to appreciate that the income recipient parties, have filed their return of income and offered the amount for tax in their individual income. 4. The Learned Commissioner of Income Tax (Appeals) has erred in upholding that amendment to section 40(a)(ia) brought by Finance Act 2012 for the claim of expenditure made without TDS is prospective and applicable from A.Y. 2013-14. 5) The Learned Commissioner of Income Tax (Appeals) has failed to appreciate that Second proviso to s. 40(a)(ia) inserted w.e.f. 1.4.2013 should be treated as retrospectively applicable from 1.4.2005 and no disallowance for want of TDS can be made if payee has paid tax thereon. 6) The Learned Commissioner of Income Tax (Appeals) be directed to allow the expenditure of Rs. 15,50,000/- accordingly.” 3. Brief facts of the case are that the assessee filed its return of income on 27.09.2012 reporting a loss of Rs. 59,10,253/-. In the course of assessment proceedings, the ld. AO noted that the assessee paid professional fees to Ms. Neha Sreedharan in the sum of Rs. 8,50,000/- and Rs. 7,00,000/- paid to M/s. Design and U, proprietor, Shri Shrijith Shreedharan towards repairs and maintenance. The assessee was asked to provide details of these expenses and to submit whether tax has been deducted at source on these payments. The ld. AO held that assessee was not able to explain the reason for non-deduction of tax at source and thus proceeded to disallow the claim of these expenses u/s 40(a)(ia) of the Act. Accordingly, the total loss was assessed at Rs. 43,60,000/- which was allowed to be carry forward.
Aggrieved, the assessee went in appeal before the Ld. CIT(A).
In the course of appellate proceeding before ld. CIT(A), assessee submitted the copy of returns of the persons to whom the payments were made without deduction of tax by stating that deductees have offered the said receipts as their turnover and, therefore, the provisions
3 ITA No.122/PAN/2018 M/s. Dempo Resorts Private Limited A.Y. 2012-13 of section 40(a)(ia) are not attracted by placing reliance on the decision of Hon’ble Delhi High Court in the case of CIT vs Ansal Land Mark Township Pvt. Ltd. 61 taxman.com 45 (Del). The assessee further submitted that the impugned year is assessment year 2012-13 whereas the amendment provided in section 40(a)(ia) in respect of second proviso is applicable from assessment year 2013-14 and it cannot be taken to be effective retrospectively.
The Ld. CIT(A) observed that Hon’ble Supreme Court had admitted SLP filed by the Revenue against the decision of Hon’ble Delhi High Court in the case of Ansal Land Mark Township Pvt. Ltd. (supra) and, therefore, declined to follow the same. While disposing of the appeal, the Ld. CIT(A) referred to the decision of Co-ordinate Bench of ITAT, Chennai in the case of ITO vs M. Sankar reported in 127 ITD 316 (Chennai). He thus upheld the disallowance made by the ld. AO u/s 40(a)(ia) amounting to Rs. 15,50,000/- by holding that amendment to section 40(a)(ia) brought by Finance Act, 2012 for the claim of expenditure made without TDS is held to be prospective and applicable from A.Y. 2013-14 and not applicable to the instant assessment year.
Aggrieved, the assessee is in appeal before the Tribunal.
Shri Rajesh Naik, Accountant of the assessee and Shri Mayur Kamble, Sr. DR from the Department represented the matter before us. The accountant of the assessee stated that a Paper Book containing 35 pages is already placed on record to substantiate the claim made by the assessee. He further relied on the statement of fact forming part of the appeal folder.
Per contra, the ld. DR placed reliance on the order of ld. AO.
4 ITA No.122/PAN/2018 M/s. Dempo Resorts Private Limited A.Y. 2012-13 10. We have considered the submissions made by both the parties and perused the material placed on record. We note that assessee is a private limited company engaged in the hotel industry. Ld. AO made a disallowance of Rs. 15,50,000/- u/s 40(a)(ia) of the Act for non- deduction of tax at source on the professional fees of Rs. 8,50,000/- and on repairs and maintenance of Rs. 7,00,000/-. From the written submission placed on record in the Paper Book, the assessee has pleaded before the authorities below that no disallowance ought to have been made in view of second proviso to section 40(a)(ia) of the Act which was inserted from 01.04.2013. According to second proviso, if the assessee is not in default u/s 201 of the Act, then, tax shall be deemed to be deducted u/s 40(a)(ia), which is clarificatory and explanatory in nature and, therefore, is to be applied retrospectively. We note that according to first proviso to section 201(1) of the Act, the assessee is deemed not to be in default where the impugned amounts have been included by the payee in their own returns of income and they have paid taxes thereon. We note that certificates issued by Chartered Accountant, S. Poddar & Co. are placed at page 4 of the Paper Book issued under first proviso to section 201(1) of the Act in Annexure A to Form 26A wherein it is certified that the assessee has paid Rs. 8,50,000/- to Ms. Neha Sreedharan without deduction of tax for which the payee i.e. Ms. Neha Sreedharan has taken into account the said amount for computing her taxable income in the return of income filed by her. Copy of the acknowledgement of return filed by Ms. Neha Sreedharan for A.Y. 2012-13 dated 30.03.2013 is placed at page 5 of the Paper Book. Similar documents are placed on record in the Paper Book at page no. 6 & 7 for the payment of Rs. 7,00,000/- to Mr. Shrijitha Sreedharan. Based on these documents, we note that in the assessee’s case the two payees have already included the impugned amounts in their own returns of income and have paid taxes thereon.
5 ITA No.122/PAN/2018 M/s. Dempo Resorts Private Limited A.Y. 2012-13 10.1 We find that Hon’ble High Court of Bombay in the case of PCIT vs Perfect Circle India Pvt. Ltd. in ITA No. 707 of 2016 dated 07.01.2019 held that the amendment to section 40(a)(ia) by inserting the second proviso is interpreted to be retrospective in nature. Hon’ble Bombay High Court while dealing with the issue, considered the decision of Hon”ble Delhi High Court in the case of Ansal Land Mark Township Pvt. Ltd. (Supra) and also relied on the decision of Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. vs CIT [2007] 293 ITR 226 (SC). Relevant portion of the judgement is extracted for ease of reference:
“2. It is not necessary to record background facts since the question of law raised by the Revenue is whether the second proviso to Section 40(a)(ia) of the Income Tax Act, T961 (“the Act” for short) would have retrospective effect. We may notice that the said proviso was inserted w.e.f 1.4.2013 and in essence, it provides that where an assessee fails to deduct whole or any part of the tax at source but is not deemed to be an assessee in default under the first proviso to Section 201(1), then for the purpose of clause 40(2)ia), it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee. The Revenue would content that the benefit of this proviso would be available to the assessee only prospectively w.e.f. 1.4.2013. Various Courts, however, have seen this proviso as beneficial to the assessee and curative in nature. The leading judgment on this point was of the Division Bench of Delhi Court in the case of CIT Vs. Ansal Land Mark Township P Ltd. The Court held that Section 40(a)(ia) is not a penalty and insertion of second proviso is declaratory and curative in nature and would have retrospective effect form 1.4.2005 i.e the date from the main proviso 40(a) ia) itself was inserted. Several High Courts have adopted the same lines. We may also note that the Supreme Court in the case of Hindustan Coca Cola Beverages P Ltd Vs. CIT2 even in absence of second proviso to Section 40(a)(ia) had noticed that the payee had already paid the tax. Under such circumstances, the Court held that the payer/ deductor can at best be asked to pay the interest on delay in depositing tax.” 10.2 We note that there are other judicial precedents which supports the case of the assessee which are noted as under:
6 ITA No.122/PAN/2018 M/s. Dempo Resorts Private Limited A.Y. 2012-13 “1. Sai Pushpa Sharada Alliance vs. ITO, ITAT Bench Pune, AY 2012- 13, ITA No. 595/PUN/2017. 2. Commissioner of Income Tax vs S.M. Anand, High Court Karnataka, A.Y. 2005-06 (2020) 120 taxmann.com 357. 3. Hindustan Coca Cola Beverage (P) Ltd. vs CIT, Supreme Court of India (2007) 163 taxman 355 (SC). 4. Dy. Commissioner of Income Tax vs Aditya Construction Company India Pvt. Ltd., ITAT Hyderabad, A.Y. 2011-12, ITA No. 1701/HYD/2016.” 11. Considering the certificates of Chartered Accountant confirming the inclusion of the impugned amounts by the payee in computing their taxable income for A.Y. 2012-13 and their acknowledgement for the returns filed by them along with the judicial precedent of Hon’ble High Court of Bombay in the case of Perfect Circle India Pvt. Ltd. (supra) and Hon’ble Delhi Court in the case of Ansal Land Mark Township Pvt. Ltd. (supra), we are inclined to delete the addition made by the ld. AO in respect of disallowance of Rs. 15,50,000/- made u/s 40(a)(ia) of the Act for non-deduction of tax at source. Accordingly, grounds of appeal of the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 15.06.2022.
Sd/- Sd/- (CHANDRA MOHAN GARG) (GIRISH AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Panaji, Dated:15.06.2022. Biswajit, Sr. P.S.
7 ITA No.122/PAN/2018 M/s. Dempo Resorts Private Limited A.Y. 2012-13
Copy to: 1. The Appellant: M/s. Dempo Resorts Private Limited 2. The Respondent: ACIT, Circle-2, Margao. 3. The CIT, Concerned, 4. The CIT (A) Concerned, 5. The DR Concerned Bench //True Copy// [ By Order
Sr. Private Secretary ITAT, Panaji (on tour)