Nisan Developers & Properties Pvt. ... vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH: KOLKATA [Before Hon'ble Shri Mahavir Singh, J.M. & Hon'ble Shri Shamim Yahya, A.M.]

I.T.A. No.1577/Kol/2012 : Assessment Year : 2006-07

DCIT, Circle-11, Kolkata -Vs- M/s.Nisan Developers & Properties (P) Ltd. (Appellant) PAN : AAKCS 5342Q .. (Respondent)

Date of concluding the hearing : 18.12.2014 Date of pronouncing the Order : 09.01.2015

Appearances : For the Department : Smt. M.M.Ghosh, JCIT, Sr.DR : For the Assessee : None

Per Shri Mahavir Singh :

This appeal by the Revenue is arising out of the order of CIT(A)-XII, Kolkata in Appeal No.416/XII/Cir-11/11-12 dated 08.08.2012 for the assessment year 2006-07.

2. The first issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance of expenses like (i) security charges, (ii) advertisement and (iii) rent total amounting to Rs.3,63,813/- for non-deduction of TDS under the provision of section 194C and 194-I of the Act by invoking the provisions of section 40(a)(ia) of the Act by the AO. For this, the Revenue has raised the following two grounds1 & 2.

"1. Whether on the facts and in circumstances of the case Ld. CIT(A) was justified in deleting the disallowed of Rs.3,63,813/- made u/s.40(a)(ia) ignoring the facts that the amendment in the section was applicable with effect from 01-04-2005.

2. Whether on the facts and in circumstances of the case Ld. CIT(A) was justified in deleting the disallowance of Rs.3,63,813/- made u/s.40(a)(ia) ignoring the fact that the TDS before the month of March has to be deposited before the end of financial year as per then existing provisions."

2. We have heard the ld. Sr. DR and gone through facts and circumstances of the case. We find that the assessee has deducted the TDS and the details are given by the assessee before the CIT(A), which are as under:

Amount TDS "Security Charges :

Quick Work Centre - Rs.38,200 Rs. 781 Otis Elevator Co. Pvt. Ltd. - Rs.22,591 Rs. 419 Shiva Enterprises - Rs. 4,612 Rs. 94 Rs.65,403 Rs.1,294 Advertisement :

Reform Publicity - Rs.16,000 Rs. 164

Payment of Rent of Rs.90,000 being below the specified limit of Rs.1,20,000/- the provisions of TDS were not attracted at all."

It was the contention of the assessee that these amount being payment in the month of March, 2006 and TDS was deducted and deposited before the due date of filing of return of income under section 139(1) of the Act. We find that this issue is clearly covered in favour of the assessee and against the Revenue by the decision of the Hon'ble Calcutta High Court in the case of CIT-vs- Virgin Creations in ITA No.302 of 2011, G.A. No.3200 of 2011 dated 23.11.2011, wherein it is held that the amendment to section 40(a)(ia) of the Act by the Finance Act, 2010 w.e.f. 01.04.2010 to provide that the TDS has to be paid on or before the due date of filing of income was prospective and not in retrospective. Respectfully following the Hon'ble Calcutta High Court's decision, we hold that the assessee's payment of TDS after the end of financial year but before the due date of filing of return of income is as per the provisions of the Act and no disallowance can be made by invoking this section. Accordingly, we dismiss this issue of Revenue's appeal.

3. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by the AO on account of rent receivable of Rs.58,500/-. For this, the Revenue has taken the following ground no.3.

"3. Whether on the facts and in circumstances of the case Ld. CIT(A) was justified in deleting addition of Rs.58,500/- made on account of rent receivable, ignoring the fact that the assessee was maintaining its accounts on Mercantile System. "

4. We have heard the ld. Sr. DR and gone through the facts and circumstances of the case. The AO, during the course of assessment proceedings, noticed from the balance-sheet that the assessee had declared rent receivable of Rs.1,12,700/- but offered for tax in the Profit & Loss a/c. of Rs.54,200/- and balance Rs.58,500/- was taken as receivable. The AO treated this rent receivable as income and made the addition. Aggrieved, the assessee preferred appeal before the CIT(A), who deleted this addition. Aggrieved, now the Revenue is in appeal before us.

4.1 Admittedly, the rent receivable has not been received during the year, i.e. amounting to Rs.58,500/- and in view of the provisions of section 25AA of the Act, the unutilized rent received subsequently is to be charged to income as income of that previous year, in which such rent is realized, whether the assessee is the owner of that property or not in that previous year. It means that this rent is to be charged to income-tax in the year of realization. The AO should not have made this addition on accrual basis, which has not been actually received by the assessee. The assessee has also not accounted for the same. In terms of the above, we dismiss this issue of Revenue's appeal.

5. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance made by the AO for non-deduction of TDS on account of payment made for electric al installation work (contractual job work under section 194C of the Act) by invoking the provision of section 40(a)(ia) of the Act by the AO. For this, the Re venue has taken the following ground no.4.

"4. Whether on the facts and in circumstances of the case Ld. CIT(A) was justified in deleting the disallowan ce of Rs.50,70,850/- made u/s.40(a)(ia) ignoring the fact that the payment was made for electrical installation work, (the contractual job), shown under the head Work in progress and the tax was not deducted at source."

6. We have heard the ld. Sr. DR and gone through the facts and circumstances of the case. The AO, during the course of assessment proceedings, noticed that the assessee has claimed the electrical installation charges at Rs.50,70,850/- but on this contractual payment, tax was not deducted. As no TDS was deducted, while making the payment, the AO invoked the provision of section 40(a)(ia) of the Act and disallowed this payment of electrical installation charges of Rs.50,70,850/-. Aggrieved the assessee preferred appeal before the CIT(A). The CIT(A) deleted the addition. Before the CIT(A), it was pleaded that this payment for electrical installation work is not on account of contractual payment for electrical installation but these are for purchase of electrical goods from traders for the flat being developed under different projects by the assessee. Admittedly, as admitted by the AO in his assessment order, the assessee is a promoter and developer of buildings and he has made purchases of electrical goods but this fact was brought to the notice before the CIT(A) for the first time and these were not at all verified by the CIT(A) as is evident from his cryptic order, which is being reproduced as under:

"4. I have considered the findings of the A.O. and the written submission filed by the A.R. The ground no.1 is against the disallowance of Rs.5070850/- as electrical installation expenses. The a.O. has made addition of Rs.5070850/- on the ground that since no TDS has been deducted on the amount, therefore, it is to be added u/s.40(a)(ia) of the I.T. Act, 1961. The a.R. has filed a written submission in which he has contended that Rs.5070850/- is the amount which was spent for the purchase of electrical wires and fittings. Since, all the bills were made in the name of the assessee company showing purchases made of electrical items, therefore, no TDS was to be deducted on this amount. I have considered the finding of the A.O. and the submission made by the A.R. and various bills submitted along with. I find that these payments were made for purchases of electrical items, so in my opinion TDS was not to be deducted on this amount. So appeal on ground no.1 is allowed."

6.1 In view of the above facts and circumstances of the case, we feel that let the issue be examined by the AO whether these payments for electrical installation for the purchase of electrical goods or these are contractual payments. In the event of purchase of materials from traders, no TDS is to be deducted by the AO but if these are paid for electrical installation, definitely the assessee has to deduct TDS. But for this, investigation is to be carried out and finding of fact is required. In such circumstances, we remit this issue back to the file of the AO and this issue of Revenue's appeal is allowed for statistical purposes.

7. In the result, the appeal of the Revenue is partly allowed for statistical purposes.

This Order is pronounced in the Court on 9th January, 2015.

Sd/- Sd/- (Shamim Yahya) (Mahavir Singh) Accountant Member Judicial Member Dated : 9th January, 2015

Talukdar(Sr.P.S.)

Copy of the order forwarded to: 1.

M/s. Nisan Developers & Properties (P) Ltd., Poddar Court, 9th floor, 18, Rabindra Sarani, Kolkata - 700 001.

2. DCIT, Circle-11, Kolkata

3. The CIT(A),

4. CIT,

5.

DR, Kolkata Benches, Kolkata

True Copy, By order,

Asstt. Registrar, ITAT, Kolkata

6 I.T.A. No.1577/Kol/2012 M/s.Nisan Developers & Properties (P) Ltd. A.Y. 2006-07