M/S Orbit Medicare (I) Limited,, ... vs Assessee
- CitationITA No.96/Hyd/2013
Ratio decidendi
The rule this decision rests on
The disallowance under section 40(a)(ia) cannot stand merely because interest was credited to the assessee's books as payable at year-end; where the assessee's books record that the tax deducted at source was in fact paid to the Revenue, on its behalf, by a sister concern, and the payee was issued Form 16A and claimed credit accordingly, the recorded outstanding status of the amount does not by itself attract disallowance, and the existence and effect of such payment and certification must be examined on the facts. Where the tax-deduction and payment position is evidenced by ledger entries and Form 16A certificates, the absence of proceedings under section 201(1) is a relevant indication that TDS was made, and the authority must examine those documents before deciding whether any disallowance is warranted, rather than deciding on legal principles alone.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
This appeal is by assessee against the order of Ld.CIT(A)-V, Hyderabad dated 12-07-2012 on the issue of disallowance u/s.40(a)(ia) of the I.T.Act. Assessee raised five grounds in the appeal and also filed additional grounds contesting that proceedings u/s.201(1) are not initiated and further the TDS has been paid and taxed in others hand, so disallowance does not arise. These additional grounds being legal in nature and does not require examination of any fresh facts, are admitted. We have heard Ld. Counsel and Learned Departmental Representative and AR at our instance filed details of ledger copies in paper book.
2. Briefly stated facts are that assessee debited an amount of Rs.82,75.638 towards interest on unsecured loans 2 ITA.No.96/Hyd/2013 M/s. Orbit Medicare (I) Ltd., Hyderabad
in the P & L A/c. Noticing that the amounts are outstanding at the end of the year and no TDS was deducted on the amounts at the time of credit, Assessing Officer invoked provisions of section 40(a)(ia) and disallowed the same. Before Ld.CIT(A), it was contented that the amount was not outstanding and so principles laid down by the Special Bench of ITAT in the case of M/s. Merlyn Shipping and Transports vs. ACIT, Range-1, Visakhapatnam vide ITA No.477/Viz/2008 dt. 29-03-2012 will apply. Further, it was contented that the TDS amount was remitted by sister concern from their funds and necessary certificates issued to the parties were filed in support. The Ld.CIT(A) however, did not accept and rejected the contentions stating as under :
"4.3. I have considered carefully the facts and evidence. The A.O. made the aforementioned addition under section 40(a)(ia) of the Act because the amounts in question were debited towards interest on secured and unsecured loans and were outstanding i.e., unpaid as on 31.03.2007. In other words, the amount in question was payable as on aforementioned date. The argument of the appellant that the amounts were paid is not valid because the appellant's own books of account shown the amounts as payable and there is no evidence or any bank entry to show that the payment had been made. Further, the argument of the appellant regarding payment having been made by the sister concern is neither borne from the record nor from any evidence. The appellant is not even been able to identify the sister concern. In any case, the relevant entry must appear in the books of account of the appellant and the amounts can't then be reflected as "payable".
4.3.1. Reliance on the aforementioned orders of the ITAT, Vizag Bench will not help the case of the appellant because the aforementioned order clearly states that the amounts which are payable will have to be added back under section 40(a)(ia) of the Act. Given the above facts and circumstances, I hold that the addition of Rs.82,75,638/- made by the A.O. is correct and no interference is called for."
3 ITA.No.96/Hyd/2013 M/s. Orbit Medicare (I) Ltd., Hyderabad
3. After considering the rival contentions and documents placed on record, we are of the opinion that the Assessing Officer and CIT(A) did not consider the factual position and decided only on legal principles. As submitted and as evidenced by the entries in the books of account placed before us, assessee did provide the amounts in the books of account as interest payable on unsecured loans and claimed in P&L A/c. At the same time, since they did not have sufficient funds, assessee sister concern M/s.CDR Healthcare Ltd., made the TDS payments and passed relevant ledger entries. Assessee did issue the form No.16A to the parties and the parties also claimed the amounts accordingly. Since, TDS was deducted and paid on behalf of assessee to the Revenue, disallowance u/s.40(a)(ia) does not arise. Moreover, proceedings u/s.201(1) were also not initiated which indicate that TDS has been made. However, these ledger copies and form 16A issued were neither examined by Assessing Officer nor considered by Ld.CIT(A). In view of this, we restore the issue to the file of Assessing Officer to examine the documents and give relief as per the provisions of Act and facts. The grounds are considered allowed for statistical purposes.
4. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 02.01.2015.
Sd/- Sd/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 02 nd January, 2015
VBP/- 4 ITA.No.96/Hyd/2013
M/s. Orbit Medicare (I) Ltd., Hyderabad
Copy to :
1. M/s. Orbit Medicate (I) Ltd., Hyderabad.
C/o. P. Murali & Co., Chartered Accountants, 6- 3-655/2/3, 1 st Floor, Somajiguda, Hyderabad-500 082.
2. The Income Tax Officer, Ward-16(1), Hyderabad.
3. CIT(A)-V, Hyderabad.
4. CIT-IV, Hyderabad
5. The D.R. ITAT "B" Bench, Hyderabad.
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