The ITAT Mumbai in the case of Jitendra Mansukhlal Shah, 191, Pilla Building, Nagdevi Street, Mumbai 400003 vs. Dy. Commissioner of Income Tax, Central Circle 45, Mumbai, ITA NO.2293/MUM/2013 and ITA NO.2294/MUM/2013, for assessment years 2005-06 and 2006-07, held that there shall be no disallowance for amounts already paid without TDS.
The said judgment was pronounced on 4.3.2015 by J. I.P. Bansal and Shri R. C. Sharma, Accountant member.
The Appellant was represented by Shri Prakash Jhunjhunwala and Ketan Jain. On the other hand Shri Akhilendra Yadav appeared on behalf of the Respondent.
The two appeals were filed by the assessee and were directed against the consolidated order passed by Ld. CIT (A)-38, Mumbai on 19.12.2012 for assessment year 2005-06 and 2006-07.
The hearing was held on 4.3.2015 and the judgment was passed on the same day.
Contentions of the parties:
Apart from main grounds of appeal the assessee also challenged the validity of reopening of the assessment. However, at the time of hearing the learned counsel appearing on behalf of the assessee did not press any ground except the ground No. 4(b) which appeared in both the appeals and stated that the provision of Sec. 40(a) (ia) shall apply only for the amounts payable at the end of the year and not for the amounts already paid by the appellant during the year.
The Assessee contended that provision of Sec. 40(a) (ia) applies only to the amounts payable at the end of the year and not on the payments already made by the appellant.
The learned counsel appearing on behalf of the Revenue contended that disallowance should be made irrespective of the fact that whether payment is made in the relevant year or not. The learned advocate appearing on behalf of the Revenue relied upon the decision of Mumbai Tribunal in ITO vs. Pratibhuti Viniyog Ltd. order dated 22/08/2014 in ITA No.1689/Mum/2011.
The learned counsel for the assessee submitted that though there are contrary decisions of the Hon’ble Calcutta High Court and Hon ‘ble Gujarat High Court, however in the light of the decision of the Hon ‘ble Allahabad High Court it can be said that in case of contradicting decisions, the judgment should be passed in the light of the decision of the Hon ‘ble Supreme Court.
The learned counsel appearing on behalf of the Revenue could not place any contrary judgment on the issue. Though the counsel promised to file written submissions on his behalf, the same were not filed. For the said reason it was observed that there was no contrary decision on this issue.
After hearing both the parties and their contentions and upon carefully considering their documents, it was observed that recently the Mumbai Tribunal has decided a similar issue in favor of the assessee by considering the previous decisions. The Judicial Member was one of the parties to the said decision.
The ITAT Mumbai respectfully followed the decision of the co-ordinate Bench in the case of M/s. Vivil Exports P. Ltd. vs. ITO (supra) and accordingly deleted the disallowance. The Tribunal relying upon the said decision held that though many grounds were agitated in the appeal, but during the hearing the learned counsel for the assessee submitted that the assessee has already made the payment for which section 40(a)(ia) should not be attracted as it deals with the amount “payable” but does not cover that has been “already paid” by the assessee.
The judgments of the ITAT at Chennai in the cases of Assistant Commissioner of Income Tax vs. M/s. Eskay Designs, ITA No. 1951/Mds/2012 passed on 09.12.2013 and ITO vs. Theekathir Press, ITA No. 2076/Mds/2012 & CO No. 155/Mds/2013 passed on 18.09.2013 were relied upon. Therein it was categorically held that section 40(a)(ia) could be applied only to cases where the amounts remain payable by the end of the previous year. However for payments which have already been made, the section does not apply.
The Hon’ble High Court at Allahabad in the case of CIT vs. Vector Shipping Services (P) Ltd. (supra) has held that for disallowing expenditures in connection with business and profession for the reason that TDS has not been deducted, the amount should be payable and not which has been already paid. The judgment of the Hon’ble Allahabad High Court was subjected to Special Leave Petition filed before Hon’ble Apex Court and the same was dismissed vide order dated 02/07/2014 in CC No.8068/2014.
In view of above discussions, the ITAT Mumbai accepted the claim of the assessee to the extent of labor payments were made during the relevant financial year and no disallowance should be made. The Tribunal also directed the Assessing Officer to check the claim of the assessee and if the same was in accordance with the view taken herein, it might be considered. Regarding the levy of interest under section 234B and 234C of the Income Tax Act, it was held that the same was consequential in nature and should not be considered separately.
Accordingly, the appeal filed by the assessee was partly allowed for statistical purposes. The judgment was pronounced in the open court on 4.3.2015.