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Sri R.V. Chakrapani Hyderabad vs. The Asst. CIT Circle-6(1) Hyderabad Appellant Respondent
October, 14th 2013
         IN THE INCOME TAX APPELLATE TRIBUNAL
             HYDERABAD BENCH `B', HYDERABAD

 BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
          SHRI SAKTIJIT DEY, JUDICIAL MEMBER

                       ITA No. 894/Hyd/2012
                      Assessment year 2007-08

Sri R.V. Chakrapani             vs.   The Asst. CIT
Hyderabad                             Circle-6(1)
PAN: ACBPR3853R                       Hyderabad
Appellant                             Respondent

                   Appellant by: Sri Inturi Rama Rao
                 Respondent by: Sri D. Sudhakara Rao

                 Date of hearing: 01.10.2013
         Date of pronouncement: 01.10.2013


                            ORDER

PER CHANDRA POOJARI, AM:

      This appeal by the assessee is directed against the order of
the CIT-III, Hyderabad dated 30.3.2012 for A.Y. 2007-08.

2.    The assessee raised the following grounds:

      (1) The order of the learned Commissioner of
          Income Tax-Ill, Hyderabad dated 30th March,
          2012 passed u/s 263 of the IT Act is against the
          law and facts of the case.

      (2) The Commissioner of Income Tax-Ill, Hyderabad
          ought not to have assumed jurisdiction u/s 263
          in as much as the subject matter of 263
          proceedings was duly considered, examined on
          being satisfied with the explanation offered by
          the appellant, the Assessing officer had chosen
          not to make any addition in respect of those
          items.

      (3) The learned Commissioner of Income Tax-Ill,
          Hyderabad ought not to have assumed
          jurisdiction u/s 263 as the order sought to be
          revised is not erroneous as the assessment
                                    2             ITA No. 894/Hyd/2012
                                                    Sri R.V. Chakrapani
                                                 ==================

         order was passed in accordance with the law
         and the same cannot be branded as erroneous
         simply because the learned Commissioner of
         Income Tax-Ill, Hyderabad felt that expenditure
         amount of Rs. 79,03,201 is not allowable based
         on surmises, conjectures without bringing any
         further evidences on record.

      (4) The learned Commissioner of Income Tax-Ill,
          Hyderabad ought to have appreciated that,
          Section 40(a)(ia) is having a retrospective
          application so that, reasonable deduction can be
          given to the Section as well.

      (5) The learned Commissioner of Income Tax-Ill,
          Hyderabad ought to have appreciated that, the
          disallowance of expenditure of Rs. 79,03,201/- is
          not warranted.




      (6) The learned Commissioner of Income-tax-III,
          Hyderabad direction to the Assessing Officer to
          modify the order passed u/s. 143(3) dated 23rd
          December, 2009 by disallowing the amount of
          Rs. 79,03,201 is to be quashed.

3.    At the outset, the learned AR submitted that similar issue
came for consideration before this Tribunal in the case of Sri
Madineni Mohan vs. ITO, Suryapet in ITA No. 762/Hyd/2012 order
dated 31.5.2013. While deciding the issue in favour of the assessee,
the Tribunal observed as follows:

      "7. We have heard rival submissions and perused the
      material on record. There is no dispute to the fact that
      the assessee has deposited the TDS amount on 29-9-
      2005 as the Assessing Officer himself has mentioned
      this fact in the assessment order. An amendment was
      made to section 40(a)(ia) by Finance Act, 2010 which
      reads as under After the aforesaid amendment sec.
      40(a)(ia) reads as under:

      "any interest, commission or brokerage, (rent, royalty)
      fees for professional services or fees for technical
      services payable to a resident, or amounts payable to a
      contractor or sub-contractor, being resident, for
      carrying out any work (including supply of labour for
      carrying out any work), on which tax is deductible at
                                   3                ITA No. 894/Hyd/2012
                                                      Sri R.V. Chakrapani
                                                   ==================

       source under chapter XVII-B and such tax has not been
       deducted or, after deduction, has not been deducted or
       after deducting tax has not been paid on or before due
       date specified in sec. 139(1)."

       The Hon'ble Calcutta High Court in case of CIT vs.
       Virgin Creations in judgment dated 23-11-2011 in ITA
       No.302 of 2011 GA 3200/2011 held that amendment to
       the provisions of sec. 40(a)(ia) of the Act, by the
       Finance Act, 2010 would be applicable retrospectively
       from 1-4-2005. Following the aforesaid decision of
       Hon'ble Calcutta High Court, different benches of the
       Tribunal have also held that the amendment brought to
       section 40(a)(ia) by Finance Act, 2010 would apply
       retrospectively from 1-4-2005 and if an assessee has
       deposited the TDS amount before due date of filing of
       return u/s 139(1), no disallowance can be made u/s
       40(a)(ia) of the Act. The orders of the Tribunal relied
       upon by the learned authorised representative for the
       assessee also are in the similar line. In the facts of the
       present case, there is no dispute that the assessee has
       deposited TDS amount before the due date of filing the
       return u/s 139(1) of the Act. Hence, in view of the ratio
       laid down by the Calcutta High Court in case of CIT vs.
       Virgin Creations (supra) and decisions of different
       benches of Income-tax Appellate Tribunal, we hold that
       the assessee having deposited TDS amount before the
       due date of filing the return u/s 139(1) no disallowance
       can be made by invoking the provisions contained u/s
       40(a)(ia) of the Act. Accordingly, we direct the
       Assessing Officer to delete the addition of Rs.
       1,37,56,960/-."

4.     On the other hand, the learned DR relied on the order of the
CIT.

5.     We have heard both the parties and perused the material on
record. Admittedly, the same issue came before this Tribunal in the
case of Madineni Mohan (cited supra) wherein the issue was
decided in favour of the assessee.      Further, the Karnataka High
Court in the case of ITO vs. Anil Kumar & Co. (354 ITR 170) held as
follows:

       "It is not in dispute that on the date the assessee
       deducted the tax, he had no pay/remit the money
                                 4                 ITA No. 894/Hyd/2012
                                                     Sri R.V. Chakrapani
                                                  ==================

      within seven days from that date and if the amount is
      actually paid when the credit is given, then the tax is
      payable within two months.

      In the instant case, assessee did not comply with the
      legal requirement; therefore, the Assessing Authority
      was justified in making the disallowance, but on the
      date the appeal was filed, the section came to be
      amended, giving retrospective benefit. Therefore, the
      appellate authority extended the benefit of the
      amended provision and held that the disallowance is
      paid and the order has been upheld by the Tribunal.

      By Finance Act, 2008 which is given retrospective
      effect from 1.4.2005, the benefit of that provision had
      been extended to the assessee, though no fault was
      found with the assessment order passed initially. With
      change of law, when the effect of the amendment is to
      give benefit to the assessee, the appellate authority and
      the Tribunal were justified in extending the said
      benefit. Thus, order passed by the Tribunal is in
      accordance with law and does not call for interference.
      Therefore, the substantial question of law is answered
      in favour of the assessee and against the revenue."

6.    Further, the Gujarat High Court in the case of CIT vs. M/s.
J.K. Construction Co. in Tax Appeal No. 706 of 2010 held as follows:

      "Plainly speaking, assessee had to make deduction
      before 31st March of the year in question and as long as
      such amounts were deposited before last date of filing
      of the return, requirements of law would be fulfilled. It
      was on this basis that Tribunal was of the opinion that
      the assessee committed no wrong and was, therefore,
      entitled to seek deduction of Rs. 32,94,149/- from the
      income which amount the assessee had deducted from
      payments of contractors and had also deposited with
      Revenue before the last date of filing of the return. We
      do not find any illegality in order of Tribunal. Tax
      Appeal is therefore, dismissed."




7.    Further, this Tribunal in the case of DCIT vs. M/s. Liquidz
India Pvt. Ltd. in ITA No. 835/Hyd/2013 order dated 28.8.2013 held
as follows:
                                  5                 ITA No. 894/Hyd/2012
                                                      Sri R.V. Chakrapani
                                                   ==================

      "7. We have heard both the parties and perused the
      materials on record as well as gone through the orders
      of the authorities below. As held by the Delhi High
      Court in the case of CIT vs. Rajinder Kumar in Income
                                            st
      Tax Appeal No. 65/2013 dated 1 July, 2013, the
      impugned amendment to section 40(a)(ia) permits
      remittance of TDS to the Central Government account
      on or before the due date of filing return of income u/s.
      139(1) of the Act is retrospective in nature. Same view
      has been taken by the jurisdictional High Court in the
      case of CIT vs. PEC Electricals Pvt. Ltd., in ITA No. 263
      of 2013 dated 12.7.2013. The assessee in present case
      paid the TDS to the Central Government account
      before filing the return of income and the same is to be
      allowed as held by the above judgements. Accordingly,
      we do not find any infirmity in the action of the CIT(A)
      in directing the Assessing Officer to delete the addition
      made u/s 40(a)(ia) of the Act and, therefore, the order
      of the CIT(A) is hereby upheld on this count. This
      ground raised by the Revenue in this regard is
      dismissed."

8.    In view of the above discussion, we are inclined to hold that
when the assessee, though deducted TDS before 31st March of the
previous year relevant to the assessment year and paid the same in
to the Central Government Account before the due date of filing of
return of income, the expenditure cannot be disallowed u/s. 40(a)(ia)
of the Act. In the present case, there is no dispute regarding the
payment of TDS amount in to the Central Government account
before the due date of filing the return of income of the assessee.
Being so, exercising the power u/s. 263 of the Act by the CIT on this
issue is not justified. Accordingly, the grounds raised by the
assessee are allowed.

9.    In the result, appeal of the assessee is allowed.
                                            st
     Order pronounced in the open court on 1 October, 2013

             Sd/-                             Sd/-
        (SAKTIJIT DEY)                  (CHANDRA POOJARI)
      JUDICIAL MEMBER                  ACCOUNTANT MEMBER
Hyderabad, dated 1st October, 2013
tprao
                                6                ITA No. 894/Hyd/2012
                                                   Sri R.V. Chakrapani
                                                ==================

Copy forwarded to:

1.   Sri R.V. Chakrapani, c/o. P.R. Datla & Co., Chartered
     Accountants, 6-3-788/A/9, First Floor, Durga Nagar,
     Ameerpet, Hyderabad-500 016.
2.   The Asst. Commissioner of Income-tax, Circle-6(1),
     Hyderabad.
3.   The CIT-III, Hyderabad.
4.   The Addl. CIT, Range-6, Hyderabad.
5.   The DR ­ 'B' Bench, ITAT, Hyderabad

 
 
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