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2015 (11) TMI 746 - ITAT JAIPUR

2015 (11) TMI 746 - ITAT JAIPUR - TMI - Addition U/s 69 - unexplained investment - CIT(A) deleted the addition - Held that:- The assessee has explained the process of supply the goods through contract to VVNL. The assessee first awarded the contract by the VVNL. Thereafter he supplied the goods which is tested in the laboratory by the engineers, thereafter approved by it. In the present case, the assessee procured the material to be supplied to the electricity company from M/s Galaxy Concab (I) .....

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keeper of the electricity company. The Ld. DR has not controverted the finding given by the ld CIT(A), therefore, we uphold the order of the ld. CIT(A). - Decided against revenue.

Addition U/s 40(a)(ia) - payment of interest to Non-banking Finance Company (In short NBFC) without deducting TDS - CIT(A) deleted the addition - Held that:- On issue of amount already paid during the year or amount shown payable as on 31st March of every year, the various courts have different views i.e. i .....

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by these NBFC by including these interests receipts as their income. Therefore, we do not find any reason to interfere in the order of the Ld. CIT(A).- Decided against revenue. - ITA No. 757/JP/2012 - Dated:- 10-4-2015 - SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM For The A ppellant: Shri Purushottam Kashyap For The Respondent: Shri P.C. Parwal (C.A.) ORDER PER: T.R. MEENA, A.M. This is an appeal filed by the revenue against the order dated 05/06/2012 passed by the learned CIT(A)-II, Jaipur .....

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est paid to non banking financial companies. (iii) Deleting addition of ₹ 15,07,235/- made by the A.O. on account of unexplained investment by holding that assessee sold more quantity than the purchases quantity. 2. Grounds No. (i) and (iii) of the revenue s appeal are against deleting the addition of ₹ 51,66,768/- made by the Assessing Officer U/s 69 of the Income Tax Act, 1961 (hereinafter referred as the Act) and ₹ 15,07,235/- made by him on account of unexplained investment .....

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VVNL, Ajmer VVNL and Jodhpur VVNL. The Assessing Officer observed that on verification of the trading and P&L account, there was no opening stock but on examination of sale book of the assessee, it was seen that a sale of ₹ 51,66,768/- of 101.813 KM of cable was made on 17/04/2008, while assessee had no stock of its own. Further the purchases made by the assessee were only on 18/04/2008 of 50.404 KM and on 19/04/2008 of 50.265 KM from M/s Galaxy Concab (I) Pvt. Ltd. The Assessing Offi .....

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le with the assessee wherefrom he supplied the goods on 17/04/2008 for ₹ 51,66,768/- of 101.813 KM of cable. Thus, he treated the purchase in transaction dated 17/04/2008 at ₹ 51,66,768/- through undisclosed source and made the addition of the same. Further he also verified the total sales during the year was 610.715 KMs, however, the purchases were shown of 562.810 KMs cable. There were difference in sale and purchase by 47.905 KMs. The Assessing Officer gave further reasonable oppo .....

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of ₹ 51,66,268/-. 3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the appeal by observing as under:- 3.1 I have considered the submissions of the appellant. The appellant has been following standard procedure for supply of material to the various Electrical Companies and he was engaged in the work of installation of underground cables for Jaipur Vidyut Vitran Nigam Limited, Ajmer Vidyut Vitran Nigam Limit .....

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Limited then inspected the goods at the factory site of the supplier. After inspection, the goods were sent for testing at the laboratory of the electrical companies. After the sample was approved and communicated to the assessee, he raised the bill. However, goods were directly supplied by the contractor/supplier at the site of electrical companies. The assessee raised a challan for the actual quantity of goods supplied by his supplier directly to the electrical companies. On this challan, endo .....

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e goods were directly supplied by the supplier of the assessee. From the various documents submitted by the appellant and the procedure of supply of goods being followed, it is noticed that on 17.04.2008, only sale bill was raised and the actual goods were supplied on 18.04.2008 and 19.04.2008 by making purchases from M/s Galaxy Concab India Private Limited. The material was tested in the laboratory of Jaipur Vidyut Vitran Nigam Limited 17.04.2008. Since the material was approved, the appellant .....

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goods received by JVVNL duly certified by the JVVNL engineer and other official were mentioned. It also proved that on 17.04.2008, only the bill was raised. The actual goods were supplied on 18.04.2008 and 19.04.2008 after making purchases from M/s Galaxy Concab India Private Limited. The A.O. had also not disputed the challan and bills of the suppliers. Considering all these facts, I find that the A.O. had not brought any evidence on record to support his allegation that the goods had been actu .....

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appeal are allowed. The Ld. CIT(A) for addition of ₹ 15,07,235/- has decided as under:- 4.1 I have considered the submissions of the appellant. The A.O. noticed that the assessee had sold 610.715 KM of cables to Jaipur Vidyut Vitran Nigam Ltd. but in the books of account, the purchases of cables were declared at 562.810 Kms. The assessee however explained that there was lesser supply of the material than the invoiced quantity for which deduction was made by JVVNL. It happened many a times .....

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lding that the assessee had failed to prove that the deductions made by JVVNL were in respect of the short supply of the material of 47.905 km. On the other hand, the counsel of the appellant has argued that the variation was on account of lesser supply of the material and partly the use of the old/dismantled cables for which the JVVNL had made the deductions under the head RMD deductions . In support of this, the payment advice issued by JVVNL showing the RMD deduction were filed by the assesse .....

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ed by him in the sale proceeds. Thus when entire sale proceeds were declared in sales, there was no reason to make further addition for investment which was otherwise also verifiable from the deductions made by JVVNL in respect of the sale bills raised. Under these circumstances, the addition made by the A.O. has no legs to stand and cannot be sustained. I, therefore, direct the A.O. to delete the addition of ₹ 15,07,235/-. This ground of appeal is allowed. 4. Now the Revenue is in appeal .....

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red into. In pursuance to the said agreement the assessee is to supply the goods. (b) If the items are not manufactured by the successful bidder it is specified that the same is to be arranged by the contractor. Since the assessee is not a manufactures of the cable the same was procured/arranged by the assessee from Galaxy Concab India Private Limited. (c) The goods so arranged is inspected at the factory site of the assessee s supplier. After inspection, a sample of the material is taken for te .....

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raises a Challan of the actual quantity of goods supplied by its supplier directly to the site of the electricity companies. (f) On this Challan endorsement is made by the store incharge of the electricity companies certifying the receipt of the material with the necessary details of the truck no. and the bill number through which the supplier of the assessee supplied the material. (g) Thereafter bill is passed for making necessary payment. 2. In the present case, the assessee procured the mater .....

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electricity company through four delivery challan no. 17 & 18 dated 18-04-2008 and 19 & 20 dated 19-04-2008. The delivery challan contain the details of the truck no. and the actual quantity supplied. The supplied quantity is 100.669 km as against the invoiced quantity of 101.813 km. After the entire quantity was supplied assessee issued a delivery Challan no.18 dated 30-04-2008. On the back of this Challan the store keeper has certified the receipt of the material indicating the comple .....

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, the order of the CIT(A) be upheld by dismissing the ground of the department. The Ld. A.R. further submitted as under:- 1. The issue which arise for consideration in this ground is whether the difference in the quantity mentioned in the bills raised by the assessee and the quantity procured by the assessee is undisclosed investment of the assessee or such variation is on account of lesser supply of the quantity than the invoiced quantity or use of old material of cable lines dismantled for whi .....

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whereas assessee has invoiced the goods to the electricity companies on the basis of the quantity informed by the supplier. It is for this reason that the electricity companies made deduction from the invoice raised by the assessee on account of RMD Penalty/duty. Further in some cases the old cable dismantled is also used by the assessee for which also electricity company made deduction under the head RMD penalty. The details of the deductions made by the Jaipur VVNL are as under:- Bill Details .....

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1 444633 50815 876563 46160 89426 15/16 (17.11.2008) 5084167 1779458 203367 3508075 184736 357889 19 (21.1.2009) 2536679 887838 101467 1750309 92171 271877 129754 Total 1805766 Copy of all the above bills is at. From the above table it can be noted that the JVVNL has made the deductions for lesser supply of the material/use of dismantled cables vis a vis the invoiced quantity in the name of RMD penalty. The deductions made are almost equal to the value of the addition of short purchases made by .....

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ereafter he supplied the goods which is tested in the laboratory by the engineers, thereafter approved by it. In the present case, the assessee procured the material to be supplied to the electricity company from M/s Galaxy Concab (I) Pvt. Ltd.. The material was inspected on 11/4/2008, which was tested in the laboratory on 17/4/2008. Once the material was passed by the competent authority, the assessee was communicated, accordingly he raised the bill on electricity company for supply of cable. T .....

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he Assessing Officer U/s 40(a)(ia) of the Act. The ld Assessing Officer observed that the assessee had made payment of interest of ₹ 9,21,058.12 to Non-banking Finance Company (In short NBFC) without deducting TDS. The Ld. Assessing Officer gave reasonable opportunity of being on this issue. It is submitted before the Assessing Officer that the payment to these NBFC were in the nature of payment to bank and these were having no deduction certificate. However, no such certificate has been s .....

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the order of the Assessing Officer, the assessee carried the matter before the Ld. CIT(A), who had allowed the appeal by observing that Section 40(a)(ia) of the Act is fiction of law, which required to be construed strictly. The language of Section 40(a)(ia) of the Act provides for non deductibility of certain amounts which is payable on which tax is deductible and such tax has not been deducted. Therefore, the non deductibility would arise only when tax is not deducted on an amount which is pa .....

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yn Shipping & Transport Vs. ACIT (136 ITD 23). In Section 40(a)(ia) word payable used is to be assigned strict interpretation in view of the object of the Legislation, which was intended from the replacement of words in the proposed and enacted provision from the work amount credited or paid to payable, This view is also supported by the decision of jurisdictional ITAT, Jaipur Bench in the case of JVVNL Vs DCIT ITA No. 132/JP?2009 dated 30/04/2009 and ACIT Vs. Sethi Construction Company ITA .....

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e outset, the ld AR for the assessee has submitted as under:- 1. The legislative intent for introducing section 40(a)(ia) is explained in CBDT Circular No.5/2005 dt. 15.07.2005 reported at 269 ITR 101 (statute). In the present case there is no dispute as to the fact that interest has actually been paid to above finance companies and as on 31.03.2009 no amount of interest was payable. The Special Bench of ITAT in case of Merilyn Shipping & Transport Vs. ACIT 16 ITR (Trib) 1 (PB 62-63) has hel .....

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ver, the Allahabad High Court in case of CIT Vs. Vector Shipping Services (P) Ltd. 94 DTR 101/357 ITR 642 held that it is only the amount which is payable and not that which has been already paid by the end of the year that can be disallowed u/s 40(a)(ia). Against the said decision of Allahabad High Court, the department filed a Special Leave Petition (SLP) in the Supreme Court which was dismissed by the Supreme Court vide its order dt.02.07.2014. Thus, there are two views on this issue, one in .....

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owing case laws: (i) DCIT Vs. Ananda Marakala (2014) 150 ITD 323 (Bang.) (Trib.) (ii) ITO Vs. M/s Theekathir Press (Chennai)(Trib.) ITA No. 2076(Mds)2012 dt. 18.09.2013 The issue of applicability of TDS on amount payable as on 31st march only is also covered by the decision of the Hon ble ITAT Jaipur Bench in case of JVVNL V. DCIT 123 TTJ 888 wherein it was held that section 40(a)(ia) applies only when the amount is payable and not where the expenditure is paid. Therefore where the assessee has .....

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ch sum on the date of furnishing of return by the resident payee. All the finance companies to which assessee have paid interest are large companies and assessed to tax. Therefore, the presumption is that these companies have included the interest paid by the assessee to them in their income and paid tax thereon. The Delhi High Court in case of CIT Vs. Trans Bharat Aviation Pvt. Ltd. 320 ITR 671 has held that since deductee is a Government undertaking, the taxes may be presumed to have been paid .....

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. It is a settled law that second proviso to section 40(a)(ia) inserted w.e.f. 01.04.2013 has retrospective effect as held in Bangalore Bench in case of Sh. G. Shankar Vs. ACIT in ITA No.1832/Bang/2013 dt. 10.10.2014, Agra Bench in case of Rajeev Kumar Agarwal Vs. ACIT (2014) 34 ITR(Trib.)479, Delhi Bench in case of ITO Vs. Dr. Jaideep Kumar Sharma (2014) 34 ITR(Trib.)565, Bangalore Bench in case of DCIT Vs. Ananda Marakala (2014) 150 ITD 323 as the amendment was made to remove the undue hardshi .....

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sed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed. The Finance Minister while introducing the amendment in para 207 of the Budget Speech has stated as under:- 207. Currently, where an assessee fails to deduct and pay tax on specified payments to residents, 100 percent of such payments are not allowed as deduction while computing his in .....

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