Arvind Murjani Brands Pvt.Ltd., ... vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER आयकर अपील सं./ ./ ITA No. 2382/Ahd/2011 िनधा रण वष /Assessment Year: 2008-09 Arvind Murjani Brands Pvt Ltd V/s. ACIT, Arvind Mills Premises, Circle-1, Naroda Road, Ahmedabad Ahmedabad PAN : AAECA 3768 J

अपीलाथ / अपीलाथ / (Appellant) ू!यथ यथ / थ / (Respondent)

Assessee(s) by : Shri V.R. Choksi, AR Revenue by : Shri Dinesh Singh, Sr. DR.

सुनवाई क$ तार&ख/ / Dateof Hearing : 01/06/2015 घोषणा क$ तार&ख / Date of Pronouncement: 05/06/2015

आदे श/O R D E R

PER G.D. AGRAWAL, VICE PRESIDENT:

This is an appeal filed by the assessee and is directed against the order of the Ld. Commissioner of Income-tax(Appeals)-VI, Ahmedabad dated 26.07.2011, pertaining to Assessment Year 2008-09.

2. The first ground of the assessee's appeal reads as under:-

1. On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that the appellant company is not entitled to deduction of Rs.3,34,815/- being Employees' Contribution to Provident Fund, on the ground that the same was deposited by the appellant company beyond the time limit prescribed under the Provident Fund Act.

3. At the time of hearing before us, the ld. Counsel for the assessee was fair enough to admit that this issue is covered against the assessee by the ITA No. 2382/Ahd/2011 Arvind Murjani Brands Pvt Ltd vs. ACIT For AY 2008-09 2

decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Gujarat State Road Transport Corporation, reported in (2014) 366 ITR 170 (Guj). Respectfully following the same, we reject Ground No.1 of the assessee's appeal.

4. Ground No.2 of the assessee's appeal reads as under:-

2. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming disallowance of Rs.5,51,327/- made by the Assessing Officer by disallowing provision for Cess on royalty.

5. At the time of hearing before us, it is submitted by ld. Counsel that during the accounting year relevant to assessment year under consideration the assessee has created a provision of Rs.5,51,327/- on account of Cess on royalty. However, in the subsequent year, the Cess was not required to be paid by the assessee and therefore, this provision was reversed and offered to tax in the subsequent year. He, therefore, submitted that the assessee has no objection in disallowance of Cess in the year under consideration; however, the same income cannot be taxed doubly because in the subsequent year the assessee has already reversed the provision and offered the income. He, therefore, submitted that if the addition is sustained in the year under consideration, then in the subsequent year in which the assessee has offered the income, no addition should be made.

6. The ld. Departmental Representative, on the other hand, relied upon the orders of the authorities below.

7. We have carefully considered the arguments of both the sides and perused the material placed before us. So far as the allowability of provision of Rs.5,51,327/- in the year under consideration is concerned, the assessee's ITA No. 2382/Ahd/2011 Arvind Murjani Brands Pvt Ltd vs. ACIT For AY 2008-09 3

Counsel has fairly submitted that the Cess was ultimately not payable and therefore, in substance, there was no liability of Cess on the royalty. In the above circumstances, in our opinion, the disallowance made by the Assessing Officer and sustained by the CIT(A) is fully justified. The ld. Counsel for the assessee has submitted that the assessee has reversed the provision in the subsequent year and offered the same amount i.e. Rs.5,51,327/-. Therefore, if the addition is sustained in this year, then suitable direction may be given in the other year wherein this provision is reversed. However, the ld. Counsel for the assessee has not filed any supporting document in support of his contention that the provision is reversed in the subsequent year and the income is offered. He has not even mentioned the assessment year in which the provision is reversed. In the above circumstances, we decline to issue any direction so far as the other year is concerned. However, the assessee will be at liberty to put up the proper claim in the year in which the provision is reversed and the income is offered. With this remark, we sustain the addition of Rs.5,51,327/- made by the Assessing Officer in the year under consideration by way of disallowing the provision. Accordingly, the Ground No.2 of the assessee's appeal is rejected.

8. Ground No.3 of the assessee's appeal reads as under:-

2. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the finding of the Assessing Officer that the appellant firm is not entitled to get credit for TDS of Rs.9,62,952/-

9. We have heard both the parties and perused the material placed before us. The Assessing Officer did not allow the credit of TDS on the ground that the tax has been deducted on the rent received by the assessee. The assessee has not offered the rent as the income of the assessee and therefore, the credit for TDS cannot be allowed. The same is sustained by ITA No. 2382/Ahd/2011 Arvind Murjani Brands Pvt Ltd vs. ACIT For AY 2008-09 4

the CIT(A). However, we find that the identical issue is considered by the ITAT Mumbai Bench in the case of the assessee for Assessment Year 2007- 08, vide ITA No.6708/Mum/2010, wherein the ITAT directed the Assessing Officer to allow the credit for the Tax Deducted at Source with the following findings:-

"15. Thus it emerges that the major function of section 199 is to allow credit for tax deducted at source to the payee. The modus operandi for the discharge of such function is in-built in the section itself. It is done by finding out the year in which the income on which tax was deducted, is assessable to tax. It is quite natural that the credit for tax deducted at source from the amount of income should be allowed simultaneous with the event of chargeability of such income to tax. So once the year of chargeability of the amount received in the nature of income is determined, the credit for tax deducted has to be allowed to the payee in such year. This is the only mandate of section 199. This section basically deals with the question of determination of the year in which the credit for the tax deducted at source should be allowed. The object of this section is to avert the situation of claiming credit of the tax deducted at source in the year of assessee's choice. That is why it has been made clear that the credit should be allowed in the year in which the income on which such tax has been deducted, is assessable so as to make it explicitly clear that the assessee may not claim the credit for such tax deducted at source in an earlier or a later year.

Once the question is decided that the income is chargeable in a particular year in the hands of the payee, then the scope of section extinguishes inasmuch as there remains no doubt in allowing credit for such tax to the payee in the relevant year. After that there cannot be any dispute that the credit should have been allowed in a later or an earlier year. It is for this reason that when the question has been determined that the income has accrued or received in one year then it should be assessed in that year and credit for tax deducted at source should be allowed in that year alone. A problem may arise in giving effect to the prescription of section 199 (that is, allowing credit of tax deducted at source to the payee) if the question is determined that the amount received is not at all an income assessable to tax either in the year of receipt or in any earlier or later year. Such problem has arisen in the present case. It is noticed that the amount of rent has suffered deduction of tax at source at two stages but income is chargeable to tax only once and that too not in the hands of the assessee.

The Revenue has received the tax due on such rent by way of deduction of tax at source made by M/s Arvind Brands Limited, who eventually paid the net amount of rent to the landlords after due deduction of tax at source. The AO has unequivocally held that the amount is not chargeable to tax in the hands of the assessee. The finding of the AO is not that such receipt is liable to tax in ITA No. 2382/Ahd/2011 Arvind Murjani Brands Pvt Ltd vs. ACIT For AY 2008-09 5

the hands of the assessee in a later or an earlier year. Rather it is that the amount received by the assessee is not at all chargeable to tax either in the current year or in an earlier or a later year. If the AO had held that the amount received by the assessee as chargeable to tax in a later or an earlier year, then of course, the assessee could not have validly claimed the credit for tax deducted at source against its income for the current year. As the amount on which tax was deducted at source is not at all chargeable to tax, then the command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for the tax deducted at source in the year of the receipt of the amount, on which tax was deducted at source. If the view point canvassed by the Revenue is accepted and the assessee is not allowed credit for the tax deducted at source, an arduous situation will arise. The amount of tax deducted at source will remain in limbo . The Revenue will never be in position to allow credit for such tax because the amount is not chargeable to tax in the hands of the assessee and it cannot retain such amount with it in contravention of Article 265 of the Constitution of India. To circumvent such a situation, the only possible solution is to allow credit for the tax deducted at source to the payee of the amount in the year for which such tax was deducted and the amount was paid after deduction of tax at source. As in the present case the assessee received the amount after deduction of tax at source from Guys & Gals and such amount is not admittedly chargeable to tax in its hands, we hold that the credit for the tax deducted at source should be allowed in the instant year. We, therefore, set aside the impugned order on this issue and direct that the credit for the tax deducted at source amounting to Rs.8,77,881 be allowed to the assessee in the previous year relevant to the assessment year under consideration.

10. Admittedly, the facts of the year under consideration are identical. We, therefore, respectfully following the above decision of the ITAT in assessee's own case, direct the Assessing Officer to allow the credit for the Tax Deducted at Source, amounting to Rs.9,62,952/-.

11. In the result, the assessee's appeal is partly allowed.

Order pronounced in the Court on 5th June, 2015 at Ahmedabad.

Sd/- Sd/-

(KUL BHARAT) (G.D. AGRAWAL) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 05/06/2015 Biju T., PS ITA No. 2382/Ahd/2011 Arvind Murjani Brands Pvt Ltd vs. ACIT For AY 2008-09 6

षत Copy आदे श क$ ूितिल,प अमे,षत/ of the Order forwarded to : 1. अपीलाथ / The Appellant 2. ू!यथ / The Respondent. 3. संबंिधत आयकर आयु. / Concerned CIT 4. आयकर आयु.(अपील) / The CIT(A)

5. ,वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

/ BY ORDER, आदे शानु सार

TRUE COPY

Dy./Asstt.Registrar) उप/सहायक पंजीकार ( उप/ अिधकरण, अहमदाबाद / आयकर अपीलीय अिधकरण, ITAT, Ahmedabad