Three Star Granite P. Ltd, Trichur v. ACIT, Trichur

ITA 11/COCH/2011 | 2007-2008
Pronouncement Date: 25-04-2014 | Result: Allowed

Appeal Details

RSA Number 1121914 RSA 2011
Assessee PAN AAACT9044Q
Bench Cochin
Appeal Number ITA 11/COCH/2011
Duration Of Justice 3 year(s) 3 month(s) 15 day(s)
Appellant Three Star Granite P. Ltd, Trichur
Respondent ACIT, Trichur
Appeal Type Income Tax Appeal
Pronouncement Date 25-04-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 25-04-2014
Date Of Final Hearing 21-04-2014
Next Hearing Date 21-04-2014
Assessment Year 2007-2008
Appeal Filed On 10-01-2011
Judgment Text
1 ITA NO. 11/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 11/COCH/2011 (ASSESSMENT YEAR 2007-08) M/S THREE STAR GRANITES (P) LTD VS A.C.I.T. CIR. 1(1) 3/113 THAYYOOR P.O THRISSUR PAZHAVOOR ERUMAPETTY THRISSUR - 84 PAN : AAACT9044Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.M. KRISHNAKUMAR RESPONDENT BY : SHRI K.K. JOHN SR DR DATE OF HEARING : 21-04-2014 DATE OF PRONOUNCEMENT : 25-04-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE WAS DISPOSED OF BY THI S TRIBUNAL BY ORDER DATED 29/03/2012. THE ASSESSEE CARRIED THE M ATTER BEFORE THE HIGH COURT BY WAY OF APPEAL U/S 260A OF THE ACT. 2. THE HIGH COURT BY JUDGMENT DATED 26-11-2013 CO NFIRMED THE ORDER OF THIS TRIBUNAL HOLDING THAT THE ASSESSEE HAS TO D EDUCT TAX U/S 194-I OF THE ACT AND THE PROVISIONS OF SECTION 194C ARE NOT APPL ICABLE IN RESPECT OF 2 ITA NO. 11/COCH/2011 TRANSACTIONS BETWEEN THE ASSESSEE AND THE CONTRACTE E. HOWEVER WITH REGARD TO SHORT DEDUCTION OF TAX I.E. DEDUCTION OF TAX AT 2.06% INSTEAD OF 10% U/S 194-I AS TO WHETHER THE PROVISIONS OF SECT ION 40(A)(IA) WAS APPLICABLE OR NOT HAS BEEN REMANDED BACK TO THE FIL E OF THE TRIBUNAL BY THE HIGH COURT. THEREFORE ONLY FOR THE LIMITED PURPOS ES OF APPLICABILITY OF SECTION 40(A)(IA) OF THE ACT IN RESPECT OF SHORT DE DUCTION OF TAX I.E. DEDUCTION OF TAX AT 2.06% INSTEAD OF 10% U/S 194-I OF THE ACT THE HIGH COURT HAS RESTORED THE MATTER TO THE FILE OF THE TR IBUNAL. 3. WE HEARD SHRI V.M.KRISHNAKUMAR THE LD.REPRESENT ATIVE FOR THE ASSESSEE AND SHRI K.K. JOHN THE LD.DR. 4. THE ONLY CONTENTION OF THE LD.DR IS THAT THE ASS ESSEE HAD TO DEDUCT TAX U/S 10% U/S 194-I OF THE ACT; HOWEVER THE ASSE SSEE DEDUCTED TAX AT 2.06% U/S 194C OF THE ACT. ACCORDING TO THE LD.DR THE ASSESSEE FAILED TO DEDUCT ALMOST 8% OF THE TAX THAT WAS TO BE DEDUCTED U/S 194I OF THE ACT. SINCE THE HIGH COURT CONFIRMED THE ORDER OF THIS TR IBUNAL BY HOLDING THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX U/S 194-I OF T HE ACT AND NOT U/S 194C OF THE ACT THE REMAINING TAX OF 8% HAS TO BE DISALLOW ED U/S 40(A)(IA) OF THE ACT. 3 ITA NO. 11/COCH/2011 5. HAVING HEARD THE LD.REPRESENTATIVE FOR THE ASSES SEE AND THE LD.DR WE FIND THAT THE ISSUE WITH REGARD TO SHORT DEDUCTI ON OF TAX WAS CONSIDERED BY THIS TRIBUNAL ELABORATELY IN THE CASE OF APOLLO TYRES IN ITA NOS 31 & 74/COCH/2010 & C.O. NO.02/COCH/2010 ORDER DATED 29- 05-2013. AFTER CONSIDERING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND SECTION 201 OF THE ACT AS ALSO THE RELEVANT CASE LAWS ON THE SUBJE CT THE TRIBUNAL HAS OBSERVED AS FOLLOWS: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON REC ORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WHICH READS AS FOLLOWS: (IA) ANY INTEREST COMMISSION OR BROKERAGE RENT ROYALTY FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR BEING RESIDENT FOR CARRYING OUT AN Y WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK) ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AN D 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: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR HAS BEEN DEDUCT ED 4 ITA NO. 11/COCH/2011 DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DAT E SPECIFIED IN SUB-SECTION (1) OF SECTION 139 SUCH SUM SHALL B E ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVI OUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION.- FOR THE PURPOSES OF THIS SUB-CLAUSE.- (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME M EANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE S AME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME M EANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLA NATION III TO SECTION 194C; (V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) TO THE EXPLANATION TO SECTION 194-I; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EX PLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; THEREFORE SECTION 40(A)(IA) ENABLES THE ASSESSING OFFICER TO DISALLOW ANY PAYMENT TOWARDS INTEREST COMMISSION O R BROKERAGE FEE FOR PROFESSIONAL SERVICE FEES FOR T ECHNICAL SERVICE ETC. ON WHICH TAX IS DEDUCTIBLE AT SOURCE U NDER CHAPTER XVIIB AND IF SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID. 9. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIO NS OF SECTION 201(1A) WHICH READS AS FOLLOWS: 5 ITA NO. 11/COCH/2011 (1A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SE CTION (1) IF ANY SUCH PERSON PRINCIPAL OFFICER OR COMPA NY AS IS REFERRED TO IN THAT SUB-SECTION DOES NOT DEDUCT THE WHOLE OR ANY PART OF THE TAX OR AFTER DEDUCTING FAI LS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS ACT HE OR IT SHALL BE LIABLE TO PAY SIMPLE INTEREST - (I) AT ONE PER CENT FOR EVERY MONTH OR PART OF A MO NTH ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS DEDUCTED; AND (II) AT ONE AND ONE-HALF PER CENT FOR EVERY MONTH O R PART OF A MONTH ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTED TO THE DATE ON WHICH SU CH TAX IS ACTUALLY PAID AND SUCH INTEREST SHALL BE PAID BEFORE FURNISHING T HE STATEMENT IN ACCORDANCE WITH THE PROVISIONS OF SUB- SECTION (3) OF SECTION 200.) SECTION 201(1A) ENABLES THE ASSESSING OFFICER TO LE VY INTEREST IN CASE THE TAX WAS NOT DEDUCTED EITHER WHOLLY OR P ARTLY OR AFTER DEDUCTION IT WAS NOT PAID AS REQUIRED UNDER T HE ACT. IN FACT THE PROVISIONS OF SECTION 201(1A) WAS AMENDED BY FINANCE ACT 2001 WITH RETROSPECTIVE EFFECT FROM 01 -04-1962 AFTER THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN P.V. RAJAGOPAL (SUPRA) 6 ITA NO. 11/COCH/2011 10. AS RIGHTLY POINTED OUT BY THE LD.SENIOR COUNSEL FOR THE ASSESSEE IN SECTION 201(1A) THE LEGISLATURE INTENDE D TO LEVY INTEREST EVEN IN CASE OF SHORT DEDUCTION OF TAX. I N OTHER WORDS IF ANY PART OF THE TAX WHICH REQUIRED TO BE DEDUCTE D WAS FOUND TO BE NOT DEDUCTED THEN INTEREST U/S 201(1A) CAN BE LEVIED IN RESPECT OF THAT PART OF THE AMOUNT WHICH WAS NOT DE DUCTED. WHEREAS THE LANGUAGE OF SECTION 40(A)(IA) DOES NOT SAY THAT EVEN FOR SHORT DEDUCTION DISALLOWANCE HAS TO BE MAD E PROPORTIONATELY. THEREFORE THE LEGISLATURE HAS CL EARLY ENVISAGED IN SECTION 201(1A) FOR LEVY OF INTEREST O N THE AMOUNT ON WHICH TAX WAS NOT DEDUCTED WHEREAS THE LEGISLATURE HAS OMITTED TO DO SO IN SECTION 40(A)(I A) OF THE ACT. IN OTHER WORDS THE PROVISIONS OF SECTION 40(A)(IA) DOES NOT ENABLE THE ASSESSING OFFICER TO DISALLOW ANY PROPOR TIONATE AMOUNT FOR SHORT DEDUCTION OR LESSER DEDUCTION. 11. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF P.V. RAJAG OPAL (SUPRA). WHILE CONSIDERING THE PROVISIONS OF SECTI ON 201 WHICH STOOD FOR THE ASSESSMENT YEARS 1989-90 TO 1993-94 THE ANDHRA PRADESH HIGH COURT FOUND THAT THERE IS NOTHI NG IN THE SECTION TO TREAT THE EMPLOYER AS THE DEFAULTER WHER E THERE IS A SHORTFALL IN THE DEDUCTION OF TAX AT SOURCE. FOR T HE PURPOSE OF CONVENIENCE WE ARE REPRODUCING BELOW PARAGRAPHS 34 AND 35 OF THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT: 34. .. WE MAY NOW READ THE PROVISIONS OF SECTION 201. 7 ITA NO. 11/COCH/2011 CONSEQUENCES OF FAILURE TO DEDUCT OR PAY.- (1) IF ANY SUCH PERSON AND IN THE CASES REFERRED TO IN SECTION 194 THE PRINCIPAL OFFICER AND THE COMPANY OF WHICH HE IS THE PRINCIPAL OFFICER DOES NOT DEDUCT OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS ACT HE OR IT SHALL WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE OR IT MAY INCUR BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF THE TAX: PROVIDED THAT NO PENALTY SHALL BE CHARGED UNDER SEC TION 221 FROM SUCH PERSON PRINCIPAL OFFICER OR COMPANY UNLESS THE ASSESSING OFFICER IS SATISFIED THAT SUCH PERSON OR PRINCIPAL OFFICER OR COMPANY AS THE CASE MAY BE HAS WITHOUT GOOD AND SUFFICIENT REASONS FAILED TO DEDUCT AND PAY THE TAX. (1A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SEC TION (1) IF ANY SUCH PERSON PRINCIPAL OFFICER OR COMPA NY AS IS REFERRED TO IN THAT SUB-SECTION DOES NOT DEDUCT OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UN DER THIS ACT HE OR IT SHALL BE LIABLE TO PAY SIMPLE IN TEREST AT FIFTEEN PER CENT PER ANNUM ON THE AMOUNT OF SUCH TA X WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACT UALLY PAID. (2) WHERE THE TAX HAS NOT BEEN PAID AS AFORESAID AF TER IT IS DEDUCTED THE AMOUNT OF THE TAX TOGETHER WITH TH E AMOUNT OF SIMPLE INTEREST THEREON REFERRED TO IN SU B- 8 ITA NO. 11/COCH/2011 SECTION (1A) SHALL BE A CHARGE UPON ALL THE ASSETS OF THE PERSON OR THE COMPANY AS THE CASE MAY BE REFERRE D TO IN SUB-SECTION (1). 35. THIS SECTION HAS TWO LIMBS ONE IS WHERE THE EMPLOYER DOES NOT DEDUCT THE TAX AND THE SECOND WHE RE AFTER DEDUCTING THE TAX FAILS TO REMIT IT TO THE GOVERNMENT. THERE IS NOTHING IN THIS SECTION TO TR EAT THE EMPLOYER AS THE DEFAULTER WHERE THERE IS A SHORTFAL L IN THE DEDUCTION. THE DEPARTMENT ASSUMES THAT WHERE THE DEDUCTION IS NOT AS REQUIRED BY OR UNDER THIS A CT THERE IS A DEFAULT. BUT THE FACT IS THAT THIS EXPR ESSION AS REQUIRED BY OR UNDER THIS ACT GRAMMATICALLY REFERS ONLY TO THE DUTY TO PAY THE TAX THAT IS DEDUCTED AND CAN NOT REFER TO THE DUTY TO DEDUCT THE TAX. SINCE THIS IS A PENAL SECTION IT HAS TO BE STRICTLY CONSTRUED AND IT CAN NOT BE ASSUMED THAT THERE IS A DUTY TO DEDUCT THE TAX STRI CTLY IN ACCORDANCE WITH THE COMPUTATION UNDER THE ACT AND I F THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPI NION AS TO THE TAXABILITY OF ANY ITEM THE EMPLOYER CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT. 12. AFTER CONSIDERING THE PROVISIONS OF SECTION 201 (1A) BEFORE AMENDMENT BY FINANCE ACT 2001 THE ANDHRA P RADESH HIGH COURT FOUND THAT AS REQUIRED UNDER THIS ACT DOES NOT REFER TO MEAN TO DEDUCT TAX IN ACCORDANCE WITH COMP UTATION UNDER THE ACT. IN FACT THE PARLIAMENT AMENDED THE SECTION 201(1A) AFTER THIS JUDGMENT OF ANDHRA PRADESH HIGH COURT BY INCORPORATING THE WORDS THE WHOLE OR ANY PART OF T AX BY 9 ITA NO. 11/COCH/2011 FINANCE ACT 2001. THE DIVISION BENCH OF THE MUMBA I BENCH OF THIS TRIBUNAL IN THE CASE OF CHANDABHOY AND JASS OBHOY (SUPRA) HAD AN OCCASION TO CONSIDER AN IDENTICAL IS SUE. THE MUMBAI BENCH FOUND THAT SHORT DEDUCTION OF TDS IF ANY COULD HAVE BEEN CONSIDERED AS LIABILITY UNDER THE I NCOME-TAX ACT AS DUE FROM THE ASSESSEE. THEREFORE THE DISAL LOWANCE OF THE ENTIRE EXPENDITURE WHOSE GENUINENESS WAS NOT D OUBTED BY THE ASSESSING OFFICER IS NOT JUSTIFIED. A SIMIL AR VIEW WAS ALSO TAKEN BY THE KOKATTA BENCH OF THIS TRIBUNAL IN THE CASE OF CIT VS M/S S.K. TEKRIWAL (SUPRA). IN THIS CASE ON APPEAL BY THE REVENUE THE CALCUTTA HIGH COURT CONFIRMED THE ORDER OF THE KOLKATTA BENCH OF THE TRIBUNAL. 13. IN VIEW OF THE ABOVE THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT SECTION 40(A)(IA) DOES NOT ENVISAGE A SITUATION WHERE THERE WAS SHORT DEDUCTION / LESSER DEDUCTION AS IN CASE OF SECTION 201(1A) OF THE ACT. THERE IS AN OBVIOUS OMISSION TO INCLUDE SHORT DEDUCTION / LESSER DEDUCTION IN SECTI ON 40(A)(IA) OF THE ACT. THEREFORE THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT IN CASE OF SHORT / LESSER DEDUCTION OF TAX THE ENTIRE EXPENDITURE WHOSE GENUINENESS WAS NOT DOUBTE D BY THE ASSESSING OFFICER CANNOT BE DISALLOWED. ACCOR DINGLY THE ORDERS OF LOWER AUTHORITIES ARE SET SIDE AND THE EN TIRE DISALLOWANCE IS DELETED. 6. IN VIEW OF THE ABOVE DECISION OF THIS TRIBUNAL I N THE CASE OF APOLLO TYRES LTD (SUPRA) THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT SHORT DEDUCTION OF TAX CANNOT BE A REASON / BASIS FOR DIS ALLOWANCE U/S 40(A)(IA) 10 ITA NO. 11/COCH/2011 OF THE ACT. ACCORDINGLY THE ORDERS OF THE LOWER A UTHORITIES ARE SET ASIDE AND THE DISALLOWANCE MADE U/S 40(A)(IA) IS DELETED. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH APRIL 2014. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN DT : 25 TH APRIL 2014 PK/- COPY TO: 1. THREE STAR GRANITES PRIVATE LIMITED 3/113 THAY YOOR P.O PAZHAVOOR ERUMAPETTY THRISSUR 680 584 2. THE A.C.I.T. CIR.1(1) AAYAKAR BHAVAN THRISSUR 680 001 3. THE COMMISSIONER OF INCOME-TAX KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-III KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR INCOME-TAX APPELLATE TRIBUNAL COCHIN BENCH