M/s Panchajanya Constructions, Kakinada v. The ACIT, Circle-1, Kakinada

ITA 548/VIZ/2009 | 2005-2006
Pronouncement Date: 27-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 54825314 RSA 2009
Assessee PAN AAIFS0088C
Bench Visakhapatnam
Appeal Number ITA 548/VIZ/2009
Duration Of Justice 7 month(s) 29 day(s)
Appellant M/s Panchajanya Constructions, Kakinada
Respondent The ACIT, Circle-1, Kakinada
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 27-08-2010
Date Of Final Hearing 05-04-2010
Next Hearing Date 05-04-2010
Assessment Year 2005-2006
Appeal Filed On 29-12-2009
Judgment Text
ITA NO.548 OF 09 PANCHAJANYA CONSTRUCTIONS KAKINADA U/S 40(A)(IA) PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.548/VIZAG/2009 ASSESSMENT YEAR: 2005-06 PANCHAJANYA CONSTRUCTIONS KAKINADA VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 KAKINADA (APPELLANT) PAN NO:AAIFS 0088 C (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI CA RESPONDENT BY: SHRI SUBRATA SARKAR CIT(DR) ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26-10- 2009 PASSED BY LEARNED CIT RAJAHMUNDRY AND IT RELA TES TO THE ASSESSMENT YEAR 2005-06. 2. THE DIRECTION ISSUED BY THE LEARNED CIT TO THE A SSESSING OFFICER TO MAKE DISALLOWANCE U/S 40(A)(IA) OF THE ACT IN RESPE CT OF THE FOLLOWING INTEREST PAYMENTS IS BEING ASSAILED BY THE ASSESSEE IN THIS APPEAL. A) INTEREST PAID TO SMT. C. RUKMANI - RS.27 000/- B) INTEREST PAID TO SMT. P. LALITHA - RS.69 600/- C) INTEREST PAID TO M/S SNEHA BUILDERS- RS.76 552/- 3. THE ASSESSEE IS IN CIVIL CONSTRUCTION BUSINESS. THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 WAS COMPLETED IN THE HA NDS OF THE ASSESSEE U/S 143 (3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS.8 71 220/-. THE LEARNED CIT INITIATED REVISION PROCEEDINGS U/S 263 OF THE ACT AS HE WAS OF ITA NO.548 OF 09 PANCHAJANYA CONSTRUCTIONS KAKINADA U/S 40(A)(IA) PAGE 2 OF 4 THE VIEW THAT THE ASSESSING OFFICER HAS FAILED TO M AKE DISALLOWANCE U/S 40(A) (IA) OF THE ACT IN RESPECT OF INTEREST PAYMEN TS CITED SUPRA. AFTER HEARING THE ASSESSEE LEARNED CIT DIRECTED THE ASSE SSING OFFICER TO MAKE DISALLOWANCE OF INTEREST PAYMENTS CITED (SUPRA) AGG REGATING TO RS.1 73 152/- U/S 40(A)(IA) OF THE ACT. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. ACCORDING TO LEARNED AUTHORISED REPRESENTATIVE THE ASSESSING OFFICER HAS VERIFIED THE APPLICABILITY OF SEC. 40(A )(IA) IN THE HANDS OF THE ASSESSEE AND THE ASSESSING OFFICER HIMSELF HAS DISA LLOWED A SUM OF RS.59 195/- UNDER THAT SECTION. HE FURTHER SUBMITTE D THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX IN RESPECT OF INTEREST PAI D TO SMT. C. RUKMANI AND SMT. P. LALITHA AS BOTH THE PARTIES HAVE FILED DECL ARATIONS IN FORM NO.15G AS PER THE ACT FOR NON DEDUCTION OF TAX AT SOURCE. IN RESPECT OF INTEREST PAID TO M/S SNEHA BUILDERS THE CONTENTION OF THE ASSESSEE IS THAT IT IS EXEMPT FROM DEDUCTION OF TAX AT SOURCE U/S 194 A (3) (IV) OF TH E ACT. ON THE CONTRARY THE LEARNED DEPARTMENTAL REPRESENTATIVE STOOD BY THE OR DER OF THE LEARNED CIT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. ACCORDING TO THE ASSESSEE SMT. C. RUKMANI A ND SMT. P. LALITHA TO WHOM INTEREST WAS PAID HAVE FILED DECLARATIONS IN FORM NO.15G AS PRESCRIBED U/S 197A (1A) OF THE ACT. HOWEVER WE NO TICE THAT THE ASSESSEE HAS FAILED TO FILE THE COPY OF SAID FORM NO.15G WIT H THE CIT AS PER THE PROVISIONS PRESCRIBED UNDER SEC. 197A (2) OF THE AC T. THE ASSESSEE HAS OMITTED TO DECLARE THE SAME IN THE TDS RETURN ALSO. HOWEVER ACCORDING TO LEARNED AUTHORISED REPRESENTATIVE THE ACT PRESCRIB ES SEPARATE PROCEDURES FOR LEVYING PENALTY IN CASE OF SUCH FAILURES AND HE NCE THE OMISSION ON THE PART OF THE ASSESSEE TO FILE THE COPY OF DECLARATIO NS WITH THE LEARNED CIT CANNOT BE TAKEN AS A REASON FOR INVOKING PROVISION S OF SEC.40(A)(IA) OF THE ACT. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE AS ACCORDING TO 197A (1A) OF THE ACT NO DEDUCTION OF TAX SHALL BE MADE U/S 194A IF THE RECIPIENT ITA NO.548 OF 09 PANCHAJANYA CONSTRUCTIONS KAKINADA U/S 40(A)(IA) PAGE 3 OF 4 OF THE INTEREST FILES THE DECLARATION PRESCRIBED UN DER THE ACT WITH THE ASSESSEE. IN THE INSTANT CASE THE ASSESSEE HAS RECE IVED THE DECLARATION IN FORM NO.15G FROM THE ABOVE SAID TWO PARTIES AND HEN CE ACCORDING TO SECTION 197A (1A) THE ASSESSEE IS NOT LIABLE TO DE DUCT TAX AT SOURCE ON THE INTEREST PAID TO THEM. THE FAILURE ON THE PART OF T HE ASSESSEE TO SUBMIT A COPY OF DECLARATION TO LEARNED CIT IN ACCORDANCE WI TH SECTION 197A(2) IN OUR OPINION DOES NOT COME IN THE WAY OF ALLOWING T HE INTEREST EXPENDITURE COVERED BY THE SAID DECLARATION AS BOTH THE SECTIO N 197A (1A) AND SECTION 197A(2) OPERATE INDEPENDENTLY. IN ANY CASE THE ASS ESSING OFFICER HAS CONSIDERED THE APPLICATION OF SECTION 40(A) (IA) WH ILE FRAMING THE ASSESSMENT AND THE VIEW TAKEN BY HIM IN RESPECT OF THESE TWO PARTIES IS ONE OF THE POSSIBLE VIEWS. IN VIEW OF THE ABOVE WE SET ASIDE THE ORDER OF THE LEARNED CIT WITH REGARD TO THE INTEREST PAYMENT MADE TO SMT. C. RUKMANI AND SMT. P. LALITHA. 6. WITH REGARD TO THE INTEREST PAID TO M/S SNEHA BU ILDERS THE CONTENTION OF THE ASSESSEE IS THAT IT IS COVERED BY THE EXEMPTION PROVIDED U/S 194A (3)(IV) OF THE ACT. THE SAID SECTION EXEMP TS INTEREST PAID BY A FIRM TO ITS PARTNER. IT IS STATED THAT THE ASSESSEE FIRM IS A PARTNER IN ANOTHER FIRM NAMED M/S SNEHA BUILDERS THROUGH ITS MANAGING PARTN ER. THE ASSESSEE FIRM HAS OVERDRAWN MONEY FROM M/S SNEHA BUILDERS AND IN VIEW OF SUCH OVERDRAWING IT HAS PAID INTEREST TO THE FIRM. HOW EVER AS NOTICED EARLIER SECTION 197A(3)(IV) EXEMPTS ONLY THE INTEREST PAID BY THE FIRM TO THE PARTNER AND NOT VICE VERSA. HENCE IN OUR VIEW THE A SSESSING OFFICER HAS COMMITTED ERROR IN APPLYING THE PROVISIONS OF SEC. 197A(3)(IV) OF THE ACT IN RESPECT OF INTEREST PAID TO M/S. SNEHA BUILDERS. IN OUR VIEW AN INCORRECT APPLICATION OF PROVISIONS OF LAW WILL ENTAIL THE LE ARNED CIT TO INVOKE THE PROVISIONS OF SECTION 263 IN ORDER TO MAKE THE ASSE SSING OFFICER TO APPLY THE PROVISIONS OF LAW CORRECTLY. ACCORDINGLY WE ARE OF THE VIEW THAT THE LEARNED CIT IS RIGHT IN LAW IN DIRECTING THE ASSESS ING OFFICER TO MAKE ITA NO.548 OF 09 PANCHAJANYA CONSTRUCTIONS KAKINADA U/S 40(A)(IA) PAGE 4 OF 4 DISALLOWANCE OF INTEREST PAID TO M/S SNEHA BUILDERS AMOUNTING TO RS.76 552/-. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH AUGUST 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 27-08- 2010 COPY TO 1 M/S PANCHAJANYA CONSTRUCTIONS D.NO.2-19-3 FORES T OFFICE ROAD KAKINADA 2 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 KAKINADA 3 THE CIT RAJAHMUNDRY 4 THE DR ITAT VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM