2019 (3) TMI 1588 - AT - Income Tax

Tribunal decision: Assessee's appeals partly allowed on TDS, depreciation, and interest issues.

The Tribunal partly allowed the assessee's appeals, quashing the CIT's order on the TDS provisions issue while upholding the CIT's actions on the ... Revision u/s 263 - disallowance u/s 40(a)(ia) - Non deduction of tds u/s 194C - scope of amendment made to sec.40(a)(ia) by Finance Act, 2010 - whether the action of the CIT fulfilled the twin test or not and whether the Ld CIT has conducted minimal enquiry or not ? - HELD THAT:- In case the assessee had delayed in depositing the TDS amount in the year under consideration, but had deposited the same before the due date for filing return of income, then the assessee would be entitled to the deduction of the said expenditure, i.e., no disallowance u/s 40(a)(ia) is called for. The above said section along with the proviso would make is clear that the disallowance u/s 40(a)(ia) is not required to be made, if the TDS amount is paid on or before the due date for filing return of income. By virtue of the decisions rendered in the matter of Virgin Creations [2011 (11) TMI 348 - CALCUTTA HIGH COURT] ; CIT v. Ansal Landmark Township P. Ltd [2015 (9) TMI 79 - DELHI HIGH COURT] the amendment made to sec.40(a)(ia) by Finance Act, 2010 was held to be declaratory and curative in nature with retrospective effect from 01.04.2005. CIT while invoking the jurisdiction u/s.263 of the Act, mainly relied upon the circular issued by the Board in the year 2009 and had ignored the amendment brought into the statute by the Finance Act, 2010. In our view, the order passed by the CIT u/s.263 was based on a wrong premise and on incorrect interpretation of the provisions of sec. 194C. Further the CIT has also not considered the amended provision which came into effect from 01.04.2010, which was held to applicable retrospectively from 01.04.2005. In this view of the matter, we are of the view that the Ld CIT has failed in his duty to make minimal enquiry as mandated u/s 263. Since there is no requirement to make any disallowance u/s 40(a)(ia) as per the amended provision and also as per the provisions of sec.194C(2) of the Act, it cannot be held that the impugned assessment orders are prejudicial to the interests of the revenue. Hence one of the twin mandatory conditions fails in the facts of the present cases. 0rder of the Commissioner setting aside the order passed by the assessing officer for non-deduction of tax (TDS) is required to be set aside firstly Commissioner has not correctly interpreted the provisions of sec.194C(2) of the Act and also did not consider the law amended in sec.40(a)(ia) which is held to be applicable retrospectively from 1 April 2005; secondly the order of the Commissioner was not correct as the Commissioner failed to verify and conduct the minimal enquiry about the status of alleged non-deduction of TDS and deposit of TDS in the government treasury before the due date for filing the return of income, despite availability of material on record and thirdly, the order passed by the CIT does not satisfy both the twin tests laid in Malabar Industrial Co 2000 (2) TMI 10 - SUPREME COURT] and Max India Ltd [2007 (11) TMI 12 - SUPREME COURT] Depreciation claim @ 100% on the “Effluent treatment plant” when the records show that the assets were put to use for a period less than 180 days - HELD THAT:- Action of the CIT was based on the dates mentioned in the invoices which were submitted by the assessee. The CIT has examined the records, made preliminary finding that some of the invoices related to the machinery are of dates after August, thereby leading to a suspicion that the machinery could have been in use for less than 182 days. This finding of fact arising out of the enquiry of the CIT is not controverted by the assessee. While the assessee has tried to explain the same, the fact remains that this issue needed verification and this requirement has arisen after a preliminary enquiry by the CIT. Therefore, No infirmity in the action of the CIT. As regard the conclusion recorded by the CIT for 2009-10 Ld. AR for the assessee had submitted no objection to the addition of depreciation, the same issue requires no adjudication and verification. Interest u/s 244A allowed in contravention of the provisions of the Act, as the amount of refund is less than 10% of the tax - HELD THAT:- It is true that various remedies available for rectifying the mistakes of the assessing officer operate in their own sphere and use of one remedy in a place where the other needs to be used may not be appropriate. However, in this case, considering that the mistake of grant of refund u/s 244A was detected after an enquiry on the amount of tax and considering that the assessee has itself accepted the action of the CIT, the action of the CIT is upheld. Appeals of the assessee are partly allowed. Issues Involved:1. TDS provisions on year-end provisions and disallowance under section 40(a)(ia).2. Depreciation claim on Effluent Treatment Plant (ETP).3. Interest under section 244A.Issue-wise Detailed Analysis:1. TDS Provisions on Year-End Provisions and Disallowance under Section 40(a)(ia):The CIT initiated proceedings under section 263 on the grounds that the assessee did not deduct TDS on various liabilities provided for, thereby necessitating disallowance under section 40(a)(ia). The assessee contended that the provisions were made on an estimated basis due to the non-receipt of bills and that TDS was subsequently deducted and paid before the due date for filing the return of income. The Tribunal observed that the CIT's reliance on the audit report without conducting a minimal enquiry was insufficient. The Tribunal found merit in the assessee's argument that the liability to deduct TDS arises only upon receipt of bills, and since TDS was paid before the due date, no disallowance under section 40(a)(ia) was warranted. The Tribunal also noted the retrospective applicability of the amendment to section 40(a)(ia) by the Finance Act, 2010, and concluded that the CIT's order did not satisfy the twin conditions of being erroneous and prejudicial to the interests of the revenue. Consequently, the Tribunal quashed the CIT's order on this issue.2. Depreciation Claim on Effluent Treatment Plant (ETP):For the assessment years 2008-09 and 2009-10, the CIT challenged the assessee's claim of 100% depreciation on the ETP, asserting that the plant was used for less than 180 days. The assessee provided a certificate from the Pollution Control Board indicating the plant's operation from August 2007. The CIT's preliminary findings based on invoice dates suggested that some machinery was installed after August, necessitating further verification. The Tribunal upheld the CIT's action for the assessment year 2008-09, acknowledging the need for verification. However, for the assessment year 2009-10, the assessee did not object to the addition of depreciation, and thus, the Tribunal dismissed the grounds on this issue.3. Interest under Section 244A:The CIT contended that interest under section 244A amounting to Rs. 17,38,707 was wrongly allowed to the assessee. The assessee argued that this was a computational issue that should be rectified under section 154 rather than through revision under section 263. The Tribunal acknowledged the various remedies available for rectifying mistakes but upheld the CIT's action, considering the mistake was detected after an enquiry on the amount of tax and the assessee's acceptance of the CIT's action.Conclusion:The Tribunal partly allowed the assessee's appeals, quashing the CIT's order on the TDS provisions issue while upholding the CIT's actions on the depreciation claim for the assessment year 2008-09 and the interest under section 244A. The order was pronounced in the open court on 22nd March 2019.