2013 (5) TMI 872 - AT - Income Tax

ITAT rules against Revenue appeals on interest levy & disallowance under Income Tax Act.

Dy. Commissioner of Income tax Circle 16 (1), Hyderabad Versus M/s. NMDC Limited

The appeals of the Revenue were dismissed by the ITAT Hyderabad. The levy of interest under S.115P of the Act for the assessment years 2008-09 and 2009-10 ... Levy of interest under S.115P - Held that:- There can not be any declaration of dividend unless the same is approved by Board and by General body of the company. There is no merit in the action of AO in levying interest on notional basis. Revenue’s grounds on this issue are accordingly rejected. Disallowance made under S.40(a)(ia) - non deduction of tds - Held that:- Since the assessee is not entitled to export directly and export by the MMTC was on principal-principal basis, there can be no commission payment to MMTC, as such the question of sustaining the order of the Assessing Officer in estimating the commission and disallowing the same under S.40(a)(ia) does not arise. Infact there is no claim of commission by assessee. So question of deduction of tax does not arise and consequently disallowance u/s 40(a)(ia). Accordingly, the order of the CIT(A) is upheld and Revenue’s ground on this issue is rejected. Issues:1. Levy of interest under S.115P of the Act for assessment years 2008-09 and 2009-10.2. Deletion of disallowance made under S.40(a)(ia) of the Act for assessment year 2008-09.Detailed Analysis:1. The common issue in both appeals pertains to the levy of interest under S.115P of the Act. The appellant, a public limited company, set aside an amount for the declaration of dividend as of March 31 of the relevant year. The Assessing Officer contended that the company should have remitted tax by April 14 since the amount was provided for on March 31. However, the Commissioner of Income-tax(Appeals) and the ITAT in a previous assessment year's order held that the declaration of dividend is not automatic upon finalization of accounts. The declaration is within the domain of the Board of directors, and the date of declaration is when it is actually declared. As the facts were similar, the CIT(A) followed the ITAT's order, upholding that there can be no declaration of dividend unless approved by the Board and the General body of the company. Therefore, the levy of interest on a notional basis was deemed unjustified, and the Revenue's grounds on this issue were rejected.2. Another issue in the Revenue's appeal for the assessment year 2008-09 concerns the deletion of disallowance made under S.40(a)(ia) of the Act. The Assessing Officer disallowed an amount as commission payable based on the sales declared by MMTC, a government organization through which the assessee exported iron ore. However, the CIT(A) deleted the disallowance following a decision by the Visakhapatnam Bench of the Tribunal in the assessee's own case. The Tribunal held that since the assessee was not entitled to export directly and the export by MMTC was on a principal-principal basis, there was no commission payment to MMTC. As there was no claim of commission by the assessee, the question of sustaining the Assessing Officer's order in estimating and disallowing the commission under S.40(a)(ia) did not arise. The order of the CIT(A) was upheld, and the Revenue's ground on this issue was rejected.In conclusion, both appeals of the Revenue were dismissed based on the detailed analysis and findings on the issues presented in the judgment delivered by the ITAT Hyderabad.