Madras High Court
Commissioner Of Income Tax vs Tribe Investments And Services ... on 20 June, 2022
TCA Nos. 613 & 614 of 2017
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 20.06.2022
CORAM :
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ
Tax Case Appeal Nos. 613 and 614 of 2017
---
Commissioner of Income Tax
Corporate Circle III
Chennai .. Appellant in both TCAs
Versus
Tribe Investments and Services Private Limited
(Formerly Vijayshree Spinning Mills Private Limited)
New No.8, (Old No.36)
Arch Bishop Mathias Avenue,
Chennai – 600 028
PAN: AAACV 2098 Q .. Respondent in both TCAs
Appeals filed under Section 260 (A) of the the Income Tax Act,
1961 against the orders dated 27.03.2017 passed by the Income Tax Appellate
Tribunal “C” Bench, Chennai, in I.T.A.Nos.929/Mds/2015 and
2196/Mds/2015.
For Appellant : Ms. S. Premalatha
in both the appeals
For Respondent : Mr. R. Vijayaraghavan
for Mr. Subbaraya Aiyar
https://www.mhc.tn.gov.in/judis
TCA Nos. 613 & 614 of 2017
COMMON JUDGMENT
(Judgment of the Court was delivered by R.MAHADEVAN, J.)
These tax case appeals have been filed by the Revenue challenging
the common order dated 27.03.2017 passed by the Income Tax Appellate
Tribunal “C” Bench, Chennai, in I.T.A.Nos. 929/Mds/2015 and 2196/Mds/
2015, relating to the assessment year 2006-07.
2. By order dated 08.12.2017, this court admitted the
aforesaid tax case appeals on the following substantial question(s) of law:
“(i) Whether the Tribunal was right in deleting the
proportionate disallowance u/s 40(a)(ia) for short
deduction of tax at source?
(ii) Whether the Tribunal is right in deleting the
disallowance u/s 40(a)(ia) for non deduction of tax at
source holding that the second proviso to Section 40(a)(ia)
inserted in Finance Act, 2012 with effect from 01.04.2013 is
curative in nature and hence has retrospective effect from
01.04.2005?"
3. The assessee is engaged in the business of manufacture of
Synthetic and Cotton yarns. They have filed return of income for the
assessment year 2006-2007 on 07.12.2006 admitting an income of
Rs.11,74,263/- and the same was processed under Section 143 (1) of The
Income Tax Act (in short, the Act) on 05.03.2008. The return filed by the
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TCA Nos. 613 & 614 of 2017
assessee was selected for scrutiny and a notice under Section 143 (2) of the
Act was issued. In compliance with the notice, the representative of the
assessee appeared before the Assessing Officer and produced the documents
called for. On scrutiny, the Assessing Officer found that the assessee had made
certain payments as per the statement in para No.5, but they have not deducted
Tax at Source (TDS) on such payments, besides there is a short deduction of
TDS on the payments aggregating a sum of Rs.36,42,452/-. Therefore, the
Assessing Officer, by an order of assessment dated 24.12.2008 disallowed the
said amount under Section 40(a)(ia) apart from making other additions and
ultimately assessed the total income of the assessee at Rs.2,38,64,294/- under
Section 143 (3) of the Act.
4. After passing an order under Section 143 (3) of the Act on
24.12.2008, the assessing officer re-opened the case under Section 147 of the
Act and issued a notice dated 22.03.2013 to the assessee. According to the
assessing officer, the reasons for re-opening the assessment are that the
assessee paid yarn conversion charges to the extent of Rs.60.46 lakhs, but
TDS was effected only for Rs.45 lakhs and for the balance sum of Rs.15 lakhs,
TDS was not effected. The assessing officer, after hearing the representative
of the assessee, passed a revised assessment order dated 28.02.2014 adding a
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TCA Nos. 613 & 614 of 2017
sum of Rs.15,46,000/- to the income already assessed against the assessee.
5. Challenging the original assessment order dated
24.12.2008 as well as the revised order of assessment dated 28.02.2014, the
Assessee filed appeals before the appellate authority and questioned the
correctness of the order passed by the Assessing Officer relating to
disallowance under Section 40 (a) (ia) of the Act. However, the Appellate
Authority without considering the grounds raised by the appellant, rejected
the appeals. The assessee therefore filed further appeals before the Tribunal.
The Tribunal, by the common order dated 27.03.2017 allowed the appeals filed
by the assessee, which has given rise to the filing of the present appeals.
6. The learned standing counsel for the appellant/revenue has
submitted that the Tribunal deleted the disallowance under Section 40(a)(ia)
solely on the ground that the recipient has offered the income to tax in the
income tax assessment. The Tribunal did not take note of the fact that there
was failure on the part of the assessee to deduct tax at source and remit it
before the expiry of the time prescribed under Sub-Section (1) of Section 200
and therefore, the Assessing Officer as well as the Appellate Authority were
wholly justified in disallowing Rs.36,42,452/- and in adding the same to the
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TCA Nos. 613 & 614 of 2017
total income. Further, the Tribunal erred in holding that the second proviso to
Section 40 (a) (ia) inserted in Finance Act, 2012 from 01.04.2013 is curative in
nature and hence has retrospective effect from 01.04.2005 is legally not
sustainable. Therefore, the learned standing counsel prayed for allowing the
appeals by setting aside the order passed by the Tribunal.
7. On the other hand, the learned counsel for the respondent-
assessee, would submit that the Tribunal had not allowed the appeals
preferred by the respondent but has remanded the matter to the Assessing
Officer for fresh consideration. As against such an order of the Tribunal, the
instant appeals filed by the Revenue are not maintainable. There is no
question of law involved in these appeals for adjudication and therefore, he
prayed for dismissal of the appeals.
8. We have heard the learned counsel for both sides and
perused the materials placed on record.
9. In the common order dated 27.03.2017, which is
impugned in these appeals, the Tribunal, after considering the rival
submissions, remanded the matter back to the Assessing Officer for fresh
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TCA Nos. 613 & 614 of 2017
consideration. The relevant portion of the common order dated 27.03.2017 of
the Tribunal is reproduced hereunder.
"6. .....In the present case, out of total
disallowance, Rs.25,95,010/- was towards short deduction of
TDS by the assessee and we following the judicial decisions
direct the Assessing Officer to delete the addition and allow the
ground of the assessee.
7. The Ld.AO has invoked the provisions of
section 40(a) (ia) of the Act, in respect of payments where the
assessee has not deducted the tax. The Ld.AR submitted that
the Recipient/payee has offered the income in the income tax
assessment, but we find no evidence was produced before the
Ld.AR or CIT (A) by the assessee supporting with income tax
return particulars and assessment details. No doubt the second
provisions of section 40(a)(ia) is declaratory and curative in
nature and has retrospective effect from 1st April, 2005. We
are of the opinion, the second provisions of section 40(a) (ia)
shall be invoked, where the assessee satisfy with evidence that
recepient/ payee has paid tax and made compliance. We rely
on the Hon'ble High Court decision of CIT vs. Ansal Landmark
Township (P) Ltd., 377 ITR 0635 (Del) and in the interest of
justice, we remit the disputed issue Rs.10,47,442/- on which
TDS is not deducted by the assessee to the file of AO and
provide opportunity to the assessee to substantiate its claim
relying on decision of CIT vs. Ansal Landmark Township
(supra), submitting income tax details of payee and the AO
shall pass a speaking order and the ground of the assessee is
allowed for statistical purpose.
8. Now, we take up ITA No.2196/Mad/2015.
The assessee has raised two grounds on (i) re-opening of
assessment and (ii) disallowance u/sec.40 (a) (ia) of the Act for
short deduction of TDS. At the time of hearing, the Ld.AR of
the assessee has not pressed the ground on re-opening of
assessment and made endorsement and on second disputed
issue of short deduction of TDS, we have decided the issue in
ITA No.929/Mds/2015 at Para 6 and same shall apply and
allow the ground and accordingly the appeal of the assessee is
allowed.
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TCA Nos. 613 & 614 of 2017
9. In the result, assessee appeal in ITA
No.929/Mds/2015 is allowed for statistical purpose and ITA
No.2196/Mds/2015 is allowed"
10. It is evident that before the Tribunal, two appeals were
filed by the Assessee, one as against the disallowance of short deduction of
TDS under Section 40(a)(ia) of the Act and another in respect of re-opening of
the concluded assessment. However, before the Tribunal, on behalf of the
assessee, it was submitted that the relief in so far as it relates to re-opening of
the assessment is not pressed.
11. In so far as the issue relating to disallowance under Sec.
40 (a) (ia) of the Act, the Tribunal rendered a finding, on facts, that there was
short deduction of TDS on the part of the assessee. Thus, there is a dispute
with respect to quantum of the amount payable by the assessee towards TDS
and for that purpose, the matter was remanded back to the Assessing Officer
by the Tribunal. We do not find any reason to interfere with such an order of
remand passed by the Tribunal. The questions of law raised in these appeals
are left open. However, we wish to observe that the Assessing Officer shall
consider the issue with respect to short fall in payment of TDS by the Assessee
after affording an opportunity of hearing and pass appropriate orders within a
period of eight weeks from the date of receipt of a copy of this order.
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TCA Nos. 613 & 614 of 2017
12. Accordingly, both the Tax Case Appeals are disposed of.
No costs.
[R.M.D., J.] [M.S.Q., J.]
20.06.2022
Index : yes/no
Internet : yes/no
av/rsh
To
1. The Income Tax Appellate Tribunal “C” Bench,
Chennai.
2. The Commissioner of Income Tax,
Corporate Circle III
Chennai
3. The Deputy Commissioner of Income Tax,
Corporate Circle III (4),
Chennai - 600 034.
4. The Commissioner of Income Tax (Appeals) - 11,
Chennai.
https://www.mhc.tn.gov.in/judis
TCA Nos. 613 & 614 of 2017
R. MAHADEVAN, J
and
MOHAMMED SHAFFIQ, J
av/rsh
TCA Nos.613 & 614/2017
20.06.2022
https://www.mhc.tn.gov.in/judis
