Referred Sections:
Section 201
Section 209(1)(d).
Section 194A
Section 2(28A) of the Act
Section 40(a)(ia) of the Act
Referred Cases / Judgments:
National Thermal Power Company Ltd. Vs. CIT [1998] 229 ITR 383 (SC).
Director of Income Tax, International Taxation Vs. G.E.Packaged Power Ink [2015] 56 taxmann.com 190 (Del)
DIT(IT) Vs. G.E.Packaged Power Ink,
Tripura State Electricity Corporation Ltd., Vs. DCIT,
ITAT in the case of Neena Kaul Vs. ACIT 24(3),
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 1 of 12
, ` ,
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES `F', NEW DELHI
BEFORE Ms.SUCHITRA KAMBLE, JUDICIAL MEMBER
AND SHRI O.P.MEENA, ACCOUNTANT MEMBER
.../I.T.A No.206/Del/2019
/Assessment Year: 2013-14
Umaxe Projects (P) Ltd., Vs Deputy Commissioner of Income
D-332, 3rd Floor, Vivek Vihar, . Tax,
New Delhi 110095. Circle-27(1), New Delhi.
[PAN: AAACU 9250 F]
/ Appellant /Respondent
/Assessee by Shri R.K.Kapoal FCA
/Revenue by Shri S.N.Meena Sr.DR
/ Date of hearing: 20.11.2019
/Pronouncement on: 22.11.2019
/O R D E R
PER O.P.MEENA, AM:
1. This appeal by the Assessee is directed against the order of
Ld.Commissioner of Income Tax(Appeals)-9, New Delhi dated
17.10.2018 for the assessment year 2013-14.
Additional Ground:
2. During the course of pendency of appeal, the assessee is
taken additional ground regarding chargeable of interest
u/s.234B/C of the Income Tax Act.
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 2 of 12
3. The ld.Counsel submitted that the additional ground of
appeal be admitted as it is being purely legal issue, goes to the
route of the matter and no further enquiry is required for deciding
the same as all facts are already on record and issue arises out of
impugned order. The ld.Counsel also placed reliance in the case
of National Thermal Power Company Ltd. Vs. CIT [1998] 229 ITR
383 (SC).
4. Per contra, the ld.Departmental Representative did not
seriously opposed the admission of additional ground.
5. We have considered the facts and material available on
record and find that the additional ground is being legal one,
hence, same is admitted in the light of decision of Hon'ble
Supreme Court in the case of National Thermal Power Company
Ltd. Vs. CIT [1998] 229 ITR 383 (SC) wherein it was held that the
additional ground of appeal can be admitted where the issue
involved is pure question of law, not involving any investigation of
facts.
6. Now, we discuss this ground on merit. The ld.Counsel for
the assessee submitted that the whole income of the assessee is
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 3 of 12
subjected to TDS. The various courts have held that when whole
income is subjected to TDS, then provisions of payment and
advance tax u/s.234B are not applicable. The ld.Counsel further
placed reliance on the decision of Hon'ble Delhi High Court in the
case of Director of Income Tax, International Taxation Vs.
G.E.Packaged Power Ink [2015] 56 taxmann.com 190 (Del)
wherein it was held that where the assessee was non-resident
companies, entire tax was to be deducted at source of payments
made by payer to it and there was no question of payment of
advance tax by assessee, therefore, Revenue could not charge any
interest u/s.234B from assessee.
7. Per contra, the ld.DR relied on the orders of the Lower
Authorities.
8. We have heard the rival submissions and perused the
material available on record. The assessee has claimed that
whole of its income is subjected to TDS, therefore, the payer who
was obliged to deduct tax at source and therefore, the assessee
was not liable to pay tax and to what extent and require to tax
deduct at source as per provisions of the Act, the assessee was
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 4 of 12
not required to pay advance tax. In such circumstances, the
assessee was entitled to claim the credit of TDS deducted by the
payer. If the legitimate tax has not been deducted by the payee,
then the payee would be treated as the assessee in default
according to section 201 and the payee/assessee would not be
permitted tax credit under the proviso in section 209(1)(d). The
ld.Counsel has placed reliance on the decision in the case of
DIT(IT) Vs. G.E.Packaged Power Ink, wherein it was held that
where the assessee were non-resident companies, entire tax was
to be deducted at source of payments made by payer to it then
there was no question of payment of advance tax by the assessee,
therefore, Revenue could not charge any interest u/s.234B from
the assessee. We are therefore of the opinion that the interest
u/s.234B/C is not chargeable, if the entire income of the assessee
was subjected to TDS. However, this issue has not been
examined by the AO as to whether payer was to deduct TDS or
assessee's income was subjected to TDS. Therefore, we deem it fit
to remit back this issue to the file of the AO to verify where the
entire income of the assessee was liable to TDS on the payments
made from the payer, if so then there was no question of payment
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 5 of 12
of advance tax by the assessee and the Revenue could not charge
the interest u/s.234B of the Act. In view of this, additional
ground is set-aside for limited purpose to the file of the AO.
9. Ground No.5 is not pressed before us, hence, the same is
treated as dismissed as not pressed.
10. Ground No.1 to 4 relates to disallowance of Rs.16,76,232/-
being interest debited to the Profit and Loss Account and the
balance amount appearing in RA bills as noted by the AO.
11. Briefly stated facts related to ground no.1 to 4 are that the
AO observed that the assessee has paid interest of
Rs.41,33,062/- which consisted interest paid to Air Force Naval
Housing Board at Rs.8,80,844/-, interest paid to BHEL for
advance paid for purchase of steel of Rs.11,06,165/-, interest
paid to BHEL for supply of steel at Rs.6,12,276/- interest paid to
BHEL for supply of steel for Rs.10,63,956/- and late payment
charges paid to M/s.Sri Ram Finance of Rs.1,87,176/- and
interest on loan paid to M/s.Magma Fin Corp Limited of
Rs.2,82,645/-. Since the TDS was not deducted, the interest
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 6 of 12
expenditure of Rs.41,33,062/- was disallowed u/s.40(a)(ia) of the
Act.
12. In appeal, it was contended that the interest expenses of
Rs.16,76,232/- were paid to Air Force Naval Housing Board and
BHEL which were debited to Profit and Loss Account of the
assessee. However, the no disallowance of Rs.36,63,241/- could
not have been made by the AO on this account. The assessee has
also filed bifurcation of the interest paid by the assessee.
Considering these facts, the ld.CIT(A) observed that the assessee
has debited interest of Rs.16,76,232/- only in the Profit and Loss
Account and the balance accounts appearing in RA Bills which
were to be adjusted from the advance received from parties or
were yet to be paid. Therefore, no disallowance in interest income
of Rs.16,76,232/- can be made. However, the ld.CIT(A) observed
that the contention of the assessee that interest paid was not
covered by the definition of interest as per section 194A r.w.s.
2(28A) of the Act is not acceptable as the plain reading of the
provision of section 2(28A) of the Act clearly brings out the
interest payable on any money borrowed or debit incurred, hence,
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 7 of 12
the disallowance on account of interest was restricted to
Rs.16,76,232/-.
13. Being aggrieved, the assessee filed this appeal before this
Tribunal. The ld.Counsel reiterated the same submissions as
made before the ld.CIT(A) and contended that the amount of
Rs.16,76,232/- was not paid by the assessee rather the same was
deducted by the payers while making payments to the appellant
company, therefore the same are not covered under the definition
of interest u/s.194A r.w.s. 2(28A) of the Act. In the alternative,
the ld.Counsel submitted that the amendment that disallowance
u/s.40(a)(ia) of the Act should be restricted to 30% of total
payment as per the amendment made vide Finance Act, 2014
w.e.f 01.04.2005 is curative one and having retrospective effect as
held by the ITAT Guwahati Bench in the case of Tripura State
Electricity Corporation Ltd., Vs. DCIT, Circle Agartala in ITA
No.30, 31 & 32/GAU/2015 dated 18.10.2019 and also in the light
of decision of ITAT `B' Bench, Mumbai in ITA No.1386/Mum/2017
dated 21.05.2019.
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 8 of 12
14. Per contra, the ld.Sr.DR relied on the order of the Lower
Authorities.
15. We have heard the rival submissions and perused the
material available on record. We find that the assessee has
debited interest of Rs.16,76,232/- in the Profit and Loss Account
which itself states that the interest was paid by the assessee of
which TDS was required to be made as per provisions of section
194A r.w. 2(28A) of the Act. We find that the interest is defined
u/s.2(28)(A) which says that interest payable on any-money
borrowed or that debt incurred this means that the assessee as
borrowed and mobilize as mobilization advance and debt was
incurred. Therefore, the transactions are duly covered by the
provisions of section 2(28A) of the Act, therefore the ld.CIT(A) has
rightly held that the interest payment of Rs.16,76,232/- was
subjected to TDS. However, considering the alternative ground of
the assessee, we find that the ITAT in the case of Neena Kaul Vs.
ACIT 24(3), Mumbai in ITAT No.1386/Mum/2017 dated
21.05.2019 and ITAT Guwahati in the case of Tripura State
Electricity Corporation Ltd., Vs. DCIT in ITA No.30, 31 &
32/GAU/2015 held that the amendment made by Finance Act
[2014] w.e.f. 01.04.2015 restricting disallowance made
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 9 of 12
u/s.40(a)(ia) from 100% to 30% is curative in nature and
therefore having retrospective effect. We, therefore direct the AO
to restrict the impugned disallowance to the extent of 30% only,
accordingly the ground no.1 to 4 are partly allowed.
16. Ground No.6 to 8 relates to disallowance u/s.40(a)(ia) in
respect of expenses of Rs.6,54,79,350/- on account of non-
payment of TDS.
17. Brief facts are that the AO noted that the assessee company
has shown TDS payable of Rs.18,81,605/- as on 31.03.2013. It
was claimed that the TDS provisions are not applicable to the
extent in question as they fall below the taxable limit. Therefore,
provision of section 40(a)(ia) of the Act are not applicable.
However, the AO observed that the assessee has not filed any
invoice or confirmation from the parties to whom such payments
were made. It was further submitted that the payments were
made for sale, purchase transactions and not to for works
contract and in business parlance they could term the supplier as
the contractor. However, the AO observed that the audited books
of accounts of the assessee shows that the payments are due to
the contractors. Therefore, the claim is afterthought, that no TDS
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 10 of 12
is required for disallowance of these payments. Accordingly,
based on the submission of the assessee the AO disallowed
expenditure of Rs.6,54,79,350/- on account of non-deduction of
TDS as per provision of section 40(a)(ia) of the Act.
18. Being aggrieved, the assessee carried the matter before the
ld.CIT(A). However, the ld.CIT(A) made observation that the
disallowance of expenses related to payments made to the
contractors, hence, the AO has rightly disallowed the same
u/s.40(a)(ia). With regard to the contention that as per amended
provisions of section 40(a)(ia) the disallowance of 30% total
expenditure should be made. However, the Ld. CIT(A) was of the
view that this contention of the assessee is not tenable in law as
the amendment referred by the assessee was made by Finance
Act, 2014 and it was applicable w.e.f. 01.04.2015, hence, same
cannot be applied for the A.Y.2013-14, accordingly this
contention of the assessee was rejected.
19. Being aggrieved, the assessee filed this appeal before this
Tribunal. The ld.Counsel repeated the same submissions has
made before the Lower Authorities. Further, the ld.Counsel
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 11 of 12
further submitted that as alternative ground that the deduction of
expenses of Rs.6,54,79,350/- should be restricted to 30% of the
total expenditure as per amendment provision of section 40(a)(ia)
of the Act which is retrospective in nature and curative as held by
the ITAT Guwahati Bench in the case of Tripura State Electricity
Corporation Ltd., Vs. DCIT, Circle Agartala in ITA No.30, 31 &
32/Gau/2015 dated 18.10.2019 and also in the light of decision
of ITAT `B' Bench, Mumbai in ITA No.1386/Mum/2017 dated
21.05.2019.
20. We have heard the rival submissions and perused the
material on record. We find that the payment of expenditure is in
the nature of payment to suppliers which is evident from the
audited books of accounts, therefore the Lower Authorities are
justified in holding that this expenditure was subjected to TDS as
per the provision of the Act, accordingly disallowance of
expenditure u/s.40(a)(ia) has been rightly made. However,
considering the alternative ground of the assessee, we find that
the ITAT in the case of Neena Kaul Vs. ACIT 24(3), Mumbai in
ITAT No.1386/Mum/2017 dated 21.05.2019 and ITAT Guwahati
in the case of Tripura State Electricity Corporation Ltd., Vs. DCIT
Umaxe Projects Ltd., V. DCIT, Circle-27(1), New Delhi / ITA No.209/Del/2019/ for A.Y. 2013-14 Page 12 of 12
in ITA No.30, 31 & 32/GAU/2015 held that the amendment made
by Finance Act [2014] w.e.f. 01.04.2015 restricting disallowance
made u/s.40(a)(ia) from 100% to 30% is curative in nature and
therefore having retrospective effect. We, therefore direct the AO
to restrict the impugned disallowance to the extent of 30% only,
accordingly the ground no.6 to 8 are partly allowed.
21. In the result, appeal of the assessee is partly allowed.
22. Order pronounced in the open court on 22-11-2019.
Sd/- Sd/-
(SUCHITRA KAMBLE) (O.P.MEENA)
( /JUDICIAL MEMBER) ( /ACCOUNTANT MEMBER)
/New Delhi, Dated: 22 November, 2019/S.Gangadhara Rao, Sr.PS
nd
Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT.
By order
/ / TRUE COPY / /
Assistant Registrar, New Delhi
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