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
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Sri R.V. Chakrapani
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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
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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
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Sri R.V. Chakrapani
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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:
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"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
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Sri R.V. Chakrapani
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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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