M/S Bharat Exporters,, Hyderabad vs Assessee
- CitationITA No.391 of 2014 Bharat Exporters Hyderabad
Ratio decidendi
The rule this decision rests on
Where the assessee's payments of the disallowed expenses were made within the relevant financial year, section 40(a)(ia) of the Income Tax Act, 1961 does not operate to disallow them, following the Special Bench rule that disallowance under that provision is not to be made for amounts already paid before the end of the accounting year, and the Assessing Officer must verify whether such payments were made within the year and allow them accordingly.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
M/s. Bharat Exporters Asstt. Commissioner of Hyderabad Vs. Income Tax, Circle 6(1) PAN- AADFB 2948 R Hyderabad (Appellant) (Respondent)
For Assessee : Shri P. Murali Mohan Rao, CA For Revenue : Shri Rajat Mitra, DR
Date of Hearing : 10.03.2015 Date of Pronouncement : 11.03.2015
ORDER
Per Smt. Asha Vijayaraghavan, J.M.
This appeal by the assessee is directed against the order of the CIT(A) IV Hyderabad dated 28.01.2014 passed for A.Y 2009- 10 u/s 143(3) of the I.T. Act, 1961.
2. The assessee firm is engaged in the business of export of rice and spices. It filed its return of income on 29.09.2009 declaring total income of Rs.79,06,700 after claiming deduction u/s 10B of Rs.6,46,02,362. AO disallowed a sum of Rs.23,26,438 u/s 40(a)(ia) and assessed the total income at Rs.1,02,33,139.
3. Assessee in the course of the appellate proceedings, submitted that the assessee had incurred these expenses by way
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of reimbursement and therefore the TDS provisions were not applicable to these payments. The ld AR relied on the decision in the case of ACIT vs. Grand Prix Fab (d) Ltd (2010) 128 TTJ (Del) 60 and CIT vs. Bhagwati Steels (2010) 326 ITR 108 (P&H).
4. The ld AR also submitted that since the payments had already been made during the year itself and therefore section 40(a)(ia) was not applicable for it. He also relied on the decisions in the case of Teja Constructions vs. ACIT (2010) 39 SOT 13 (Hyd) (URO) and Jaipur Vidyut Vitaram Nigam Ltd vs. DCIT (2009) 123 TTJ 888.
5. The ld CIT (A) dismissed the appeal of the assessee. We find that this issue is covered by the decision of the Coordinate Bench by its order in ITA No.478/Hyd/2013 dated 28.01.2015 in the case of M/s. S.S. Networks vs. Income Tax Officer. The relevant portions of the order is extracted below:
"6. We have heard the parties and perused the orders of the revenue authorities and other materials on record. On a perusal of the assessment order, it is seen that in Para 3 of the assessment order, the AO has noted that the assessee has paid an amount of Rs.36.15 lakhs to various TV channels. If that is the case, then nothing remains payable by the assessee by the end of the relevant financial year. Accordingly the ratio laid down by the ITAT Visakhapatnam Special Bench in the case of Merillyn Shipping & Transport vs. Add CIT (Supra) squarely applies to the facts of assessee's case. Further, it is to be noted that the Coordinate Bench of this Tribunal in case of Ushodaya Enterprises vs. DCIT (Supra) following the judgement of the Hon'ble A.P. High Court dated 24.06.2014 in case of CIT vs. Janapriya Engineers Syndicate in ITA No.352/14 has held as under:
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"8. We have heard both the parties. We direct that the AO may follow the decision of the Special Bench in the case of Merilyn Shipping & Transports v. ACIT in ITA No.477/Viz/2008 dated 29.03.2012 and the disallowance u/s 40(a)(ia) may not be made by the AO for the amounts/payments which have already been paid before the end of the relevant accounting year, out of the amounts disallowed which have been upheld by the CIT (A). This ground is partly allowed for statistical purposes".
7. In view of the aforesaid decision, we direct the AO to follow the decision of ITAT, Special Bench in case of Merillyin Shipping & Transport vs. ACIT (Supra) and allow the expenditure of Rs.35,69,715/-, if it is found to have been paid within the relevant financial year. This ground is considered to be allowed for statistical purposes".
6. The ld Counsel for the assessee submitted before us that the payment had already been made during the year itself and therefore, section 40(a)(ia) was not applicable in this case. We direct the AO to verify whether the amounts have been paid during the year itself and after applying the decision of the Coordinate Bench in the case of SS Networks decide the issue in accordance with law.
7. Further assessee has raised ground No.5 as follows:
"5. The CIT (A)-IV Hyderabad ought to have appreciated the fact that any disallowance made will increase the exemption u/s 10B and will have no impact on the income of the appellant as stated by the decision of Hon'ble ITAT Hyderabad in the case of Planet Online Pvt. Ltd vide ITA No.1016/H/2007".
8. Since we have decided the issue u/s 40(a)(ia) by following the order of the Coordinate Bench and favourable to the
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assessee, ground No.5 raised by the assessee become infructuous.
9. In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 11th March, 2015.
Sd/- Sd/- (P.M. Jagtap) (Asha Vijayaraghavan) Accountant Member Judicial Member Hyderabad, dated 11th March, 2015.
Vnodan/sps Copy to:
1. P. Murali & Co. CAs, 6-3-655/2/3 1st Floor, Somajiguda, Hyderabad 500082
2. Asstt. Commissioner of Income Tax Circle 6(1) Hyderabad
3. The CIT(A)-IV Hyderabad
4. The CIT - III Hyderabad
5. The DR, ITAT, Hyderabad
6. Guard File
By Order
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