Parekh Pranjivan Devechand, Bhavnagar vs Assessee

आयकर अपील सं./I.T.A. No.2257/Ahd/2011 ( नधा रण वष / Assessment Year : 2008-09) M/s.Parekh Pranjivan बनाम/ The ACIT Devechand Nanavati Bazar Vs. Circle-2 Nanavati Bazar Bhavnagar MG Road Bhavnagar-364 001 थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AACFP 5849 C (अपीलाथ# /Appellant) .. ($%यथ# / Respondent)

अपीलाथ# ओर से / Appellant by : Shri H.V. Gandhi, AR $%यथ# क' ओर से/Respondent by : Shri Nimesh Yadav, Sr.DR

ु वाई क' तार*ख / सन Date of Hearing 26/03/2015 घोषणा क' तार*ख /Date of Pronounce ment 10/04/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-XX, Ahmedabad ('CIT(A)' in short) dated 11/02/2011 pertaining to Assessment Year (AY) 2008-09. The Assessee has raised the following grounds of appeal:-

ITA No.2257/Ahd/2011 M/s.Parekh Pranjivan Devchand vs. ACIT Asst.Year - 2008-09 -2-

1. The Hon'ble CIT(A) has erred in law and on facts in confirming the disallowance of Rs.3,03,000/- out of total disallowance of Rs.3,71,500/- made by the Ld.Assessing Officer u/s.40(a)(ia) of the I.T.Act, 1961.

2. The Hon'ble CIT(A) has also erred in not appreciated the facts that the amount of Tax Deducted at Source has been paid before the due date of filing the return of income u/s.139(1) and so it would not have been disallowed.

3. The Hon'ble CIT(A) has also erred in law and on facts in not following the decision of the Hon'ble ITAT Bench 'B', Ahmedabad in the case of Shri Kanubhai Ramjibhai Makwana, Anand, ITA No.3983/Ahd/2008 dated 03/12/2010 for A.Y. 2005-06 though the decision is on identical issue and the decision of superior forum.

4. The Hon'ble CIT(A) has also erred in law and on facts in rejecting the contention of the appellant that the amendment made by the Finance (No.2) w.e.f. 01-04-2010 was the retrospective and held that the Tribunal could not hold that the amendment was retrospective.

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 15/11/2010. The AO while framing the assessment, noticed that the payments made before the end of the month of February-2008, the TDS has been deducted on 31st March-2008 and deposited into the Government account only after the end of FY 2007-08. The AO observed that as per the provisions of section 40(a)(ia) of the Act, deduction on account of these payments cannot be claimed for FY 2007- 08 but rather can be claimed only in FY 2008-09. Therefore, the AO made disallowance of the expense and added back to the total income of ITA No.2257/Ahd/2011 M/s.Parekh Pranjivan Devchand vs. ACIT Asst.Year - 2008-09 -3-

the assessee. Thus, the AO made addition of Rs.3,71,500/-. Assessee feeling aggrieved by the order of the ld.CIT(A), preferred an appeal before the ld.CIT(A), who after considering the submissions partly allowed the appeal. While partly allowing the appeal, the ld.CIT(A) confirmed the addition of Rs.3,03,300/-. Aggrieved by the order of the ld.CIT(A), assessee preferred the present appeal.

3. The ld.counsel for the assessee submitted that there is no dispute on the fact that the payment was made in February-2008, the tax was deducted on 31/03/2008. However, the tax was deposited into the Government account before the due date of filing, i.e. on 07/04/2008. He drew our attention to exhibit-B at page No.20 of the paper-book being the taxpayers counter-foil of the challan. The ld.counsel for the assessee placed reliance on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT vs. J.K.Construction Co. reported at (2014) 361 ITR 181 (Guj.). He further submitted that the arbitrariness of the authorities below is evident from the fact that the ld.CIT(A) has ignored the ratio laid down by the Tribunal (ITAT 'B' Bench Ahmedabad) in the case of Shri Kanubhai Ramjibhai Makwana, Anand passed in ITA No.3983/Ahd/2008 for AY 2005-06, order dated 03/12/2010.

ITA No.2257/Ahd/2011 M/s.Parekh Pranjivan Devchand vs. ACIT Asst.Year - 2008-09 -4-

3.1. On the contrary, ld.Sr.DR supported the order of the AO.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee had deducted the tax on 31/03/2008. The assessee had also deposited the amount so deducted into the Government account on 07/04/2008, i.e. well before the due date of filing of the return of income. The ld.CIT(A) sustained the addition on the basis that the amendment to the provisions came with effect from 01/04/2010, however, the Coordinate Bench of this Tribunal in this case of Shri Kanubhai Ramjibhai Makwana in ITA No.3983/Ahd/2008 vide dated 03/12/2010 had ruled that the effect of the amendment would be retrospective. The Hon'ble Gujarat High Court in the case of CIT vs. J.K.Construction (supra) has observed as under:-

"3. Section 40(a)(ia) of the Act as amended with effect from 1.4.2005 read as under :

"(ia) any interest, commission, or brokerage,(rent, royalty) fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work(including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section(1) of section 139." "

4.1 Further, the Hon'ble Gujarat High Court held as under:-

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"4. Plainly speaking, assessee had to make deduction before 31st March of the year in question and as long as such amounts were deposited before last date of filing of the return, requirements of law would be fulfilled. It was on this basis that tribunal was of the opinion that the assessee committed no wrong and was therefore, entitled to seek deduction of Rs.32,94,149/- from the income which amount the assessee had deducted from payments of contractors and had also deposited with Revenue before the last date of filing of the return. We do not find any illegality in order of tribunal. Tax Appeal is therefore, dismissed."

4.2. Therefore, we are of the considered view that the ld.CIT(A) was not justified in sustaining the addition. Moreover, it is observed that the assessee relied upon the decision of the Tribunal rendered in the case of Shri Kanubhai Rajibhai Makwana in ITA No.3983/Ahd/2008 for AY 2005-06, order dated 03/12/2010, wherein it has been held that the amendment made by the Finance (No.2) w.e.f. 01/04/2010 was in retrospective in nature. The ld.Sr.DR could not produce any contrary judgement of the Hon'ble Jurisdictional High Court or the Hon'ble Supreme Court. Therefore, in the light of the judgement of Hon'ble Gujarat High Court in the case of CIT vs. J.K.Construction(supra), we hereby direct the AO to delete the disallowance made u/s.40(a)(ia) of the Act. Thus, grounds raised in the assessee's appeal are allowed.

ITA No.2257/Ahd/2011 M/s.Parekh Pranjivan Devchand vs. ACIT Asst.Year - 2008-09 -6-

5. In the result, the appeal of the Assessee is allowed.

Order pronounced in the Court on Friday, the 10th day of April, 2015 at Ahmedabad.

Sd/- Sd/- (एन.एस.सैनी) (कुल भारत) लेखा सद य या यक सद य ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 10/ 04 /2015 ट*.सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ# / The Appellant

2. $%यथ# / The Respondent.

3. संबं4धत आयकर आयु6त / Concerned CIT

4. आयकर आय6 ु त(अपील) / The CIT(A)-XX, Ahmedabad

5. 7वभागीय $ त न4ध, आयकर अपील*य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स%या7पत $ त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 30/3/2015 (dictation-pad 8+ pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ..7.4.2015

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......10.4.15

7. Date on which the file goes to the Bench Clerk.....................10.4.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................