Ragona Lubricant Technolgy Pvt.Ltd., ... vs Assessee

ITA No.3104/Ahd/2011 Assessment Year: 2007-08

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IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD "A" BENCH, AHMEDABAD

[Coram: Pramod Kumar AM and S.S. Godara JM]

ITA No.3104/Ahd/2011 Assessment Year: 2007-08

Ragona Lubricant Technology Pvt. Ltd., ...........................Appellant 34, Chitrakut Bunglow, Nehru Park, Vastrapur, Ahmedabad [PAN: AABCR 0233 J]

Vs.

Income Tax Officer, ........................Respondent Ward 5(3), Ahmedabad.

Appearances by:

S.N. Divetia, for the appellant Dinesh Singh, for the respondent

Date of concluding the hearing : April 28, 2015 Date of pronouncing the order : July 21, 2015

O R D E R

Per Pramod Kumar:

1. By way of this appeal, the assessee appellant has called into question correctness of the ld. CIT(A)'s order dated 30 th September, 2011 in the matter of assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2007-08, on the following grounds :-

1.1 The order of assessment passed u/s 250 on 30.09.2011 for A.Y. 2007-08 by the CIT(A)-XI, Ahmedabad upholding the disallowance of Rs.93,406/- made by the AO is wholly illegal, unlawful and against the principles of natural justice.

1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant.

ITA No.3104/Ahd/2011 Assessment Year: 2007-08

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2.1 The Ld. CIT(A) has grievously erred in law and or on facts in confirming the disallowance of interest u/s 40(a)(ia) of Rs.93,406/-.

2.2 That the facts and circumstances of the case as well as in law, the learned CIT(A) ought to have made the above said disallowance of interest u/s.40(a)(ia) of Rs.93,406/-.

2. To adjudicate on this appeal, only a few material facts need to be taken note of. During the course of the assessment proceedings, the Assessing Officer noticed that the assesse has made interest payments aggregating to Rs 93,406. These payments, made to G M Nsit (HUF), R G Nsit (HUF), C N Nasit and Rupali R Nsit, were made without deducting tax at source. It was explained by the assesse that in these cases form 15 G were filed by the recipients which were duly filed in the office of the Chief Commissioner of Income Tax. However, the Assessing Officer rejected this submission on the ground that the covering letter, by way of which these forms were said to have been filed before the CCIT, did not contain all the details. It was in this background that a disallowance under section 40(a)(ia) for Rs 93,406 was made. Aggrieved, assesse carried the matter in appeal before the CIT(A) but without any success. The CIT(A) held that as the AO had not issued any certificate under section 197 approving the non deduction of tax at source for the payments made to the recipients in question, the assesse was clearly in error in not deducting tax at source. The disallowance under section 40(a)(ia) was thus upheld. Learned CIT(A) also rejected assesse's reliance on the Tribunal's decision in the case of Vaibhai Khanbhai Mankad Vs DCIT (46 SOT 469) on the ground that this decision was in the context of Section 194 C and not 194 A. The assesse is aggrieved and is in further appeal before us.

3. We have heard the rival contentions, perused the material on record and we have duly considered the facts of the case in the light of the applicable legal position.

ITA No.3104/Ahd/2011 Assessment Year: 2007-08

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4. We have noted that it is an undisputed position that the assesse had duly obtained form 15G from the recipients of interest and it is also not in dispute that the payments made to these persons individually donot exceed maximum amount not liable to be taxed in the hands of the assesse. Therefore, under section 197A(1A), the assesse did not have any obligation to deduct the tax at source. The lapse, if at all, is in respect of submission of forms 15G in the income tax office. However, as is the settled legal positon now in the light of Hon'ble jurisdictional High Court's judgment in the case of CIT vs Valibhai Khanbhai Mankad [(2013) 261 CTR 538 (Guj)] such a default is only a venial breach of law and disallowance under section 40(a)(ia) cannot be made in respect of the same. In any case, there is no dispute that recipients have taken this amount into account in computation of their taxable income and, therefore, in the light of decision of this Tribunal in the case of Rajeev Kumar Agarwal Vs ACIT (149 ITD

363), the disallowance under section 40(a)(ia) cannot be made. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assesse and delete the impugned disallowance of Rs 93,406. The assesse gets the relief accordingly.

5. In the result, the appeal is allowed. Pronounced in the open court today on 21 st day of July 2015.

Sd/- Sd/-

S. S. Godara Pramod Kumar (Judicial Member) (Accountant Member)

Ahmedabad, the 21 st day of July, 2015

Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order etc

Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad