Javeri Fiscal Services Ltd, Mumbai vs Assessee

/Assessee by : Shri Ajay R. Singh /Revenue by : Shri Akhilendra Yadav

Date of Hearing : 2nd March, 2015 Date of Pronouncement 11th March,2015

ORDER

PER R.C.SHARMA (A.M):

The assessee has filed this appeal against the order of CIT(A),

dated 30-8-2011 for the assessment year 2010-11, in the matter of order

passed u/s.143(3) of the Act.

2. The first grievance of the assessee relates to disallowance of

Rs.90,354/- u/s.40(a)(ia) in respect of interest paid on car loan taken from

non-banking financial institute M/s Reliance Capital Ltd.

3. The AO has disallowed the amount of interest on the plea that

assessee has not deducted tax at source on the payment of interest. By

the impugned order, CIT(A) confirmed the action of the AO, against which

assessee is in further appeal before us.

2 ITA No.6046/13 4. We found that the amount of interest so claimed has already been

paid by assessee and it was not due as on last date of accounting year ie.

31-3-2010. Keeping in view the decision of coordinate bench in the case

of M/s Arcadia Share & Stock Brokers Pvt. Ltd., ITA No.1871/Mum/2003,

dated 22-12-2014, wherein it was held that the provision of Section

40(a)(ia) is not applicable with reference to the payments already made

since the expression "payable" has to be satisfied for invoking provisions

of Section 40(a)(ia). The precise observation of Tribunal was as under:-

6. We have heard the rival submissions and carefully perused the record. We shall first take up the last alternative ground, i.e. when the payment is made by the assessee whether section 40(a)(ia) can be attracted? On this issue this very Bench, in the case of Amit Naresh Shah (ITA No. 4154/Mum/2013), had taken a consistent stand that in the light of the decision rendered by Hon'ble Supreme Court, in the form of dismissal of Revenue‟s SLP in the case of Vector Shipping Services (P) Ltd. section 40(a)(ia) is not applicable with reference to payments already made since the expression „payable‟ has to be satisfied for invoking provisions of section 40(a)(ia). The Bench, in the aforecited decision, observed in this regard as under: -

"4. Before us, Departmental Representative(DR) stated that order of the Special Bench delivered in the case of Merilyn Shipping & Transports (supra)has been kept in abeyance of the Hon'ble Andhra Pradesh High Court, that the Hon'ble Gujarat High Court had taken a different view. Authorised Representative (AR) supported the order of the FAA. We have heard the rival submissions and perused the material before us. We find that expenses related to professional fees, advertisement and management were debited in P&L Account, that same were paid. Therefore, in our view, no disallowance u/s 40(a)(ia) of the Act should be made. We further find that while deciding the appeal in the case of Janapriya Engineers Syndicate (I.T.T.A. No. 352 of 2014- dt. 24.06.2014) the Hon'ble Andhra Pradesh High Court has clarified the issue of interim stay granted by it in the case of Merilyn Shipping & Transports (supra). We will like to reproduce the relevant part of the said order and same reads as under: "

4. We are of the view that until and unless the decision of the Special Bench is upset by this Court, it binds smaller Bench and coordinate Bench of the Tribunal. Under the 3 ITA No.6046/13

circumstances, it is not open to the Tribunal, as rightly contended by Mr. Narasimha Sarma, learned counsel, to remand on the ground of pendency on the same issue before this Court, overlooking and overruling, by necessary implication, the decision of the Special Bench. We simply say that it is not permissible under quasi judicial discipline". From the clarification issued by the Hon'ble High Court, it is clear that until and unless the decision of Marilyn Shipping & Transport (supra) is reversed by the Court, it is binding on all the benches of the Tribunal. We find that Hon'ble Court has held that judicial discipline mandates that the decision of the special bench has to be followed by other benches. As on today, the stay order granted by the Hon‟ble Court has been vacated and the order of the special bench is binding on other benches of the Tribunal. Therefore, respectfully following the same, we hold that the FAA was justified in following the order of Marilyn Shipping & Transport (supra). Considering the facts of the case and the clarification issued by the Hon'ble Andhra Pradesh High Court on 24.06.2014 in the case of Janapriya Engineers Syndicate, we decide the effective ground of appeal in favour of the assessee and confirm the order of the FAA."

7. Reverting to the facts on hand, the Tax Authorities had not disputed the fact that the assessee paid depository charges without deducting the tax and taxes are already paid by the recipient [see para 3.3 & 3.4 of the order passed by the CIT(A)]. Since the amount was already paid and the taxes are paid by the recipient, in our opinion, the decision of the Special Bench in the case of Marilyn Shipping & Transports (supra) is applicable and by following the decision of the ITAT, Mumbai Benches (supra) we hold that the Tax Authorities have wrongly invoked provisions of section 40(a)(ia) in the instant case. We, therefore, set aside the orders passed by the Tax Authorities disallowing Rs.6,27,423/-. In the light of the decision on merit it is not necessary for us to deal with the other aspects urged before us since they will be of academic importance. Suffice to say that disallowance made by the AO is not called for in the circumstances of the case, in the light of the decision of the ITAT (supra), which in turn was based upon the decision of the Hon'ble Supreme Court in the case of Vector Shipping Services (P) Ltd.

8. In the result, the appeal filed by the assessee is allowed.

Respectfully following the decision of the coordinate bench, we do not find

any merit for disallowance of interest which have already been paid

before the close of accounting year. Accordingly, the AO is directed to

delete the disallowance of Rs.90,354/-.

4 ITA No.6046/13 5. The next grievance of the assessee relates to disallowance of

depreciation on motor car expenses amounting to Rs.2,04,717/- on the

plea that the motor car was in the name of individual director and not in

the name of assessee company. We found that the issue is squarely

covered by the decision of coordinate bench in the case of M/s Vijay

Fabrics, ITA No.7057&7058/mum/2011, order dated 27-9-2012, wherein

after following the decision of Hon'ble High Court in the case of Dilip

Singh Sardarshingh Bagga, 201 ITR 995 (Bom). The bench held as

under:-

"6. We have heard both the parties and their contentions have carefully been considered. It is not disputed that the vehicle on which depreciation has been disallowed is standing in the balance sheet of the assessee. For the sake of convenience the vehicle was got registered in the name of director only for the reason that it would facilitate if the vehicle is sold to get it transferred in other name. According to the ratio laid down in the aforementioned decision of Hon'ble Bombay High Court, registration of vehicle per- se in the name of assessee is not a condition precedent for allowability of depreciation on the said vehicle. In the present case the vehicle is in the name of the director of the assessee company. Therefore, we are of the opinion that depreciation claim of the assessee has wrongly been disallowed that too by way of a rectification order. Such rectification could not have been done as it cannot be said that there was any mistake apparent from record. The assessee could rely upon the aforementioned decision of Hon'ble Bombay High.-Court to content that it is entitled to get depreciation on the vehicle registered in the name of its director. The value of the vehicle has been shown to be incurred by the assessee company itself and the vehicle is shown as asset in the balance sheet of the assessee company. In view of the above discussions, we allow both the appeals filed by the assessee. The AO is directed to allow depreciation."

6. Respectfully following the decision of the coordinate bench as well

as the decision of the Hon'ble Bombay High Court, we do not find any

merit for decline of claim of depreciation in respect of motor car 5 ITA No.6046/13

purchased by assessee company but registered in the individual name of

director, insofar as use of car for the purpose of business of assessee has

not been disputed.

7. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on this 11/03/2015.

Sd/- Sd/-

( ) ( ) (I. P. BANSAL) (R.C.SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER Mumbai; Dated 11/03/2015 /pkm, PS Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. / BY ORDER, 3. / The CIT(A), Mumbai. 4. / CIT (Asstt. Registrar) 5. / DR, ITAT, Mumbai / 6. Guard file. ITAT, Mumbai

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