ASHIMA CHEMICALS & DYECHEM P. LTD, MUMBAI v. ITO (TDS) 1(1), MUMBAI

ITA 2816/MUM/2011 | 2005-2006
Pronouncement Date: 22-07-2011 | Result: Allowed

Appeal Details

RSA Number 281619914 RSA 2011
Assessee PAN AADCA4497M
Bench Mumbai
Appeal Number ITA 2816/MUM/2011
Duration Of Justice 3 month(s) 11 day(s)
Appellant ASHIMA CHEMICALS & DYECHEM P. LTD, MUMBAI
Respondent ITO (TDS) 1(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 22-07-2011
Date Of Final Hearing 08-05-2012
Next Hearing Date 08-05-2012
Assessment Year 2005-2006
Appeal Filed On 11-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI R.K.PANDA (A .M) ITA NO.2816/MUM/2011(A.Y. 2005-06) ASHIMA CHEMICALS & DYECHEM P. LTD. C/O. B. S.SHARMA & CO. CAS 507-508 SUNDER NAGAR S.B.ROAD DADAR (W) MUMBAI 28. PAN:AADCA 4497M (APPELLANT) VS. THE ITO TDS 1(1) AAYKAR BHAVAN MK ROAD MUMBAI 20. (RESPONDENT) APPELLANT BY : SHRI B.S.SHARMA RESPONDENT BY : SHRI N.K.B.MENON ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 2/2/2011 OF CIT(A) 14 MUMBAI RELATING TO ASSESSMENT YEAR 2005-0 6. THE PRESENT APPEAL ARISES OUT OF AN ORDER PASSED BY THE CIT(A) IN AN A PPEAL BY THE ASSESSEE AGAINST THE ORDER OF ITO TDS 1(1) MUMBAI UNDER SEC TION 201(1) AND 201(1A) OF THE INCOME TAX ACT 1961 (THE ACT) FOR ASSESSMEN T YEAR 2005-06. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF DEALING IN SHARES AND FINANCE ETC. THE ASSESSEE HAD BORROWED M ONIES FROM SITI CABLE NETWORK LTD. AND HAD PAID A SUM OF RS. 2 61 67 068/ - AS INTEREST ON THE AFORESAID BORROWINGS DURING THE PREVIOUS YEAR RELEV ANT TO AY 05-06. WHILE COMPLETING THE ASSESSMENT OF THE ASSESSEE U/S.143(3 ) OF THE ACT FOR AY 05- 06 THE AO NOTICED THAT THE ASSESSEE HAD NOT DEDUCT ED TAX AT SOURCE ON THE ITA NO.2816/MUM/2011(A.Y. 2005-06) 2 INTEREST AMOUNT PAID TO SITI CABLE NETWORK LTD. AS REQUIRED UNDER SEC.194- A OF THE ACT. UNDER PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT ANY PAYMENT OF INTEREST TO A RESIDENT TAX HAS TO BE DEDUCTED AT S OURCE IN ACCORDANCE WITH PROVISIONS OF CHAPTER XVII-B; AND IF NO SUCH TAX IS DEDUCTED THEN THE INTEREST PAID WILL NOT BE ALLOWED AS A DEDUCTION WH ILE COMPUTING TOTAL INCOME OF THE ASSESSEE. IT APPEARS THAT SITI CABLE NETWORK LTD. HAD OBTAINED CERTIFICATE OF NIL DEDUCTION OF TAX AT SOURCE U/S. 197(1) OF THE ACT FROM THE ITO(TDS) WARD 51(4) NEW DELHI. THIS CERTIFICATE B EARS CERTIFICATE NO. 3140 DATED 31.3.2005; COPY OF THE SAME IS AT PAGE NO. 54 OF THE ASSESSEES PAPER BOOK. PERUSAL OF THE AFORESAID CERTIFICATE SHOWS TH AT ON THE PROPOSED PAYMENT OF THE INTEREST OF RS. 2 64 36 329/- BY THE ASSESSEE TO SITI CABLE NETWORK LTD. THE ASSESSING OFFICER HAS AUTHORIZED THE ASSESSEE NOT TO DEDUCT TAX ON THE AFORESAID INTEREST. IT APPEARS T HAT ONLY A XEROX COPY OF THE AFORESAID TDS CERTIFICATE GIVEN TO THE ASSESSEE. TH IS IS BECAUSE IN RESPECT OF THE PAYMENT OF INTEREST TO ANOTHER PERSON BY SIT CA BLE NETWORK LTD. THE VERY SAME CERTIFICATE ALLOWS NIL DEDUCTION OF TAX AT SOU RCE. BASED ON THE ABOVE CERTIFICATE THE ASSESSEE DID NOT DEDUCT TAX AT SOU RCE AND PAID INTEREST TO SITI CABLE NETWORK LTD. IT APPEARS THAT ORIGINALLY EVEN XEROX COPY OF THE CERTIFICATE U/S. 197(1) OF THE ACT WAS NOT FILED BE FORE THE ASSESSING OFFICER. HOWEVER INFORMATION RELATING TO THE SAME WAS SUBMI TTED. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE DESPITE S UFFICIENT OPPORTUNITY COULD NOT FILED NIL TDS CERTIFICATE ISSUED BY THE ASSESSI NG OFFICER AND IN THOSE CIRCUMSTANCES HE DISALLOWED THE CLAIM OF THE ASSES SEE FOR DEDUCTION U/S. 40(A)(IA) OF THE ACT. 3. THE ABOVE ORDER OF THE ASSESSING OFFICER WAS PA SSED ON 27.12.2007. THE ASSESSEE FILED AN APPLICATION U/S. 154 OF THE ACT O N 10.1.2008 AFTER OBTAINING CERTIFICATE OF NIL DEDUCTION OF TAX AT SO URCE. THE ASSESSEE ALSO FILED AN APPEAL BEFORE LEARNED CIT(A) AGAINST THE ORDER O F THE AO DATED 27.12.2007. BEFORE LEARNED CIT(A) THE ASSESSEE POI NTED OUT THAT BECAUSE OF ITA NO.2816/MUM/2011(A.Y. 2005-06) 3 INABILITY OF THE ASSESSEE TO PRODUCE NIL DEDUCTION OF TAX AT SOURCE CERTIFICATE THE ASSESSING OFFICER HAD MADE IMPUGNED DISALLOWANC E AND THAT THE ASSESSEE ON OBTAINING THE CERTIFICATE HAS FILED AN APPLICATION U/S. 154 OF THE ACT. THE LEARNED CIT(A) HELD AS FOLLOWS :- THE UNDERSIGNED HAS CAREFULLY PERUSED THROUGH THE C ERTIFICATE U/S. 197(1) ISSUED BY THE ITO TDS 51(4) NEW DELHI IN W HICH THE APPELLANT COMPANY HAS AUTHORIZED NOT TO DEDUCT ANY TAX ON INT EREST (OTHER THAN INTEREST ON SECURITIES) PAYABLE BY IT TO SITI CABLE NETWORK LTD. A COPY OF THE CERTIFICATE HAS ALSO BEEN ENCLOSED ALOGNWITH TH E PETITION U/S. 154 FILED WITH THE ASSESSING OFFICER. IN VIEW OF THE AB OVE MENTIONED FACTS THE ASSESSING OFFICER IS DIRECTED TO DISPOSE OFF TH E PETITION U/S. 154 FILED BEFORE HIM. 4. AGGRIEVED BY THE ABOVE ORDER OF LEARNED CIT(A) THE REVENUE PREFERRED APPEAL BEFORE THE TRIBUNAL IN ITA NO.6322/M/08. TH E TRIBUNAL HELD AS FOLLOWS: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. IN OUR VIE W THE ISSUE NEEDS TO BE ADJUDICATED IN THE LIGHT OF THE CERTIFI CATE U/S. 197(1) WHICH WAS FILED BY THE ASSESSEE BEFORE THE ASSESSIN G OFFICER ALONG WITH THE APPLICATION U/S. 154 OF THE ACT. WE THEREFORE R EMAND THE ISSUE TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN TH E LIGHT OF THE CERTIFICATE U/S. 197(1) FILED BY THE ASSESSEE ALONG WITH APPLICATION U/S. 154 OF THE ACT. 5. PURSUANT TO THE AFORESAID ORDER OF THE TRIBUNAL THE ASSESSING OFFICER PASSED AN ORDER DATED 27/12/2010 UNDER SECTION 143( 3) R.W.S. 254 OF THE ACT TO GIVE EFFECT TO THE ORDER OF THE TRIBUNAL IN WHICH THE ASSESSING OFFICER DELETED THE ADDITION MADE UNDER SECTION40(A)(IA) OF THE ACT. THUS EXISTENCE OF A NO DEDUCTION CERTIFICATE UNDER SECTION 197(1) OF THE ACT WAS ACCEPTED BY THE ASSESSING OFFICER IN-CHARGE OF MAKING ASSESSMEN T OF INCOME ON THE ASSESSEE. ITA NO.2816/MUM/2011(A.Y. 2005-06) 4 6. THE ITO TDS 1(1) MUMBAI INITIATED PROCEEDINGS U NDER SECTION 201(1) AND 201(1A) OF THE ACT ON THE ASSESSEE ON THE GROUN D THAT THE ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE AND HAD NOT DEDUCTE D TAX AT SOURCE AND THEREFORE LIABLE TO BE TREATED AS AN ASSESSEE IN D EFAULT IN RESPECT OF THE TAX NOT DEDUCTED AT SOURCE AND INTEREST THEREON. IN TH E SAID PROCEEDINGS THE ASSESSEE FILED COPIES OF CERTIFICATE UNDER SECTION 197 OF THE ACT. SINCE THE ORIGINAL CERTIFICATE UNDER SECTION 197 WAS NOT PROD UCED THE ASSESSING OFFICER TREATED THE ASSESSEE AS AN ASSESSEE IN DEFAULT AND RAISED A DEMAND FOR TDS AND INTEREST ON TDS. 7. BEFORE CIT(A) THE ASSESSEE POINTED OUT THAT IN T HE REGULAR ASSESSMENT FOR A.Y 2005-06 THE ASSESSING OFFICER HAS ACCEPTED THE EXISTENCE OF A NO DEDUCTION OF TAX AT SOURCE CERTIFICATE UNDER SECTI ON 197 OF THE ACT AND THEREFORE IT WAS NOT OPEN TO THE ITO TDS 1(1) MUM BAI TO TAKE A CONTRARY VIEW. ON THE ABOVE SUBMISSION THE CIT(A) HELD AS F OLLOWS: HOWEVER THE ISSUE DECIDED BY THE ASSESSING OFFICE R IN ASSESSMENT WAS ON DIFFERENT FACTS. DURING THE ASSESSMENT PROC EEDINGS THE APPELLANT FAILED TO FURNISH XEROX COPY OF THE CERTI FICATES THAT IS WHY THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF T HE ENTIRE PAYMENT OF INTEREST AS PER THE PROVISIONS OF SEC. 40(A)(IA). LATER ON THE COPY OF SUCH CERTIFICATE WAS FILED BY THE APPELLANT BEFORE THE ASSESSING OFFICER FOR CONSIDERATION U/S. 154. THE ASSESSING OFFICER HAS NOT DECIDED THE ISSUE U/S. 154. THEREFORE NECESSARY DIRECTIONS WE RE GIVEN BY THE CIT(A) / ITAT IN THIS REGARD. WHEREAS THE ITO (TDS ) FROM THE VERY BEGINNING ASKED FOR PRODUCTION OF ORIGINAL CERTIFI CATE AS HE DOUBTED THE AUTHENTICITY OF THE XEROX COPY. THE ORIGINAL CERTIFICATE WAS NEITHER FILED BY THE APPELLANT BEFORE THE ITO (TDS) NOR DUR ING THE APPELLATE PROCEEDINGS. THEREFORE THE POSITION REMAINS THE S AME. IN VIEW OF THE FACT THE CONTENTION OF THE APPELLANT IS NOT AGREEA BLE AS THE XEROX COPY OF THE SO CALLED CERTIFICATE IS NOT ACCEPTABLE. AC CORDINGLY THE ACTION OF THE ASSESSING OFFICER (TDS) IS CONFIRMED. ITA NO.2816/MUM/2011(A.Y. 2005-06) 5 8. THE CIT(A) WAS THUS OF THE VIEW THAT THE FAILURE TO PRODUCE THE ORIGINAL CERTIFICATE UNDER SECTION 197 OF THE ACT WOULD JUST IFY TREATING ASSESSEE AS AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) OF THE ACT . 9. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSE E HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL SUB MISSIONS. IT IS SEE N THAT M/S. SITI CABLE NETWORK LTD. (NOW KNOWN AS WIRE & WIRELESS INDIA LT D.) TO WHOM THE ASSESSEE PAID INTEREST WITHOUT DEDUCTION OF TAX AT SOURCE HAD ADDRESSED THE LETTER DATED 11/9/2008 TO THE ITO TDS 1(1) MUMBAI . IN THE SAID LETTER APPEAL IT WAS CATEGORICALLY ASSERTED BY THEM THAT T HE MUMBAI COMMISSIONERATE OF INCOME TAX AND DELHI COMMISSIONE RATE OF INCOME TAX WERE EXERCISING CONCURRENT JURISDICTION ON IT UNDER THE PROVISIONS OF THE IT ACT 1961. IT HAS ALSO BEEN ASSERTED BY THEM THAT T HE CERTIFICATE UNDER SECTION 197 WAS ISSUED BY THE TDS WARD 51(4) DELH I DATED 28/3/2006 FOR A.Y 2005-06 A COPY OF WHICH WAS ALSO ENCLOSED. IN A FURTHER LETTER DATED 4/10/2008 THEY HAVE CLARIFIED THAT THE ORIGINAL OF THE TDS CERTIFICATE IS NOT TRACEABLE AND THAT THEY HAVE APPROACHED THE CONCERN ED INCOME TAX OFFICE AT DELHI FOR ISSUE OF ANOTHER COPY BUT WERE INFORMED T HAT DUE TO A MAJOR FIRE IN THE OFFICE AT DELHI RECORDS WERE GUTTED AND DUPLIC ATE COPY WAS NOT AVAILABLE WITH THEM. A XEROX COPY OF THE CERTIFICATE ISSUED FOR A.Y 2005-06 HAS ALSO BEEN FIELD BEFORE US. 9. ON CONSIDERATION OF THE ENTIRE MATERIAL WE ARE OF THE VIEW THAT THE IMPUGNED ORDER OF THE CIT(A) CANNOT BE SUSTAINED. THE EXISTENCE OF THE CERTIFICATE UNDER SECTION 197(1) OF THE ACT FOR A.Y 2005-06 HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT OF THE A SSESSEE. IN THE PROCEEDINGS UNDER SECTION 201(1) AND 201(1A) OF THE ACT THE ITO TDS 1(1) MUMBAI CANNOT TAKE A CONTRARY STAND. FURTHER IN VI EW OF THE EXISTENCE OF A ITA NO.2816/MUM/2011(A.Y. 2005-06) 6 NO DEDUCTION OF TAX AT SOURCE CERTIFICATE UNDER SEC TION 197 OF THE ACT THE ASSESSEE HAS NO OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 194A OF THE ACT. THEREFORE AN ASSESSEE CANNOT BE TREATED AS A N ASSESSEE IN DEFAULT IN THE PROCEEDINGS UNDER SECTION 201(1) AND 201(1A) OF THE ACT. WE THEREFORE ALLOW THE APPEAL OF THE ASSESSEE AND HOLD THAT THE ORDER UNDER SECTION 201(1) AND 201(1A) OF THE ACT DESERVES TO BE CANCELLED. 10. IN THE RESULT THE APPEAL BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 22 ND DAY OF JULY 2011. SD/- SD/- (R.K.PANDA ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 22 ND JULY.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RA BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.2816/MUM/2011(A.Y. 2005-06) 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 18/7/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 19/7/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER