2019 (11) TMI 704 - AT - Income Tax

Addition on account of suppression of gross turnover - assessee has claimed benefit of TDS made against the said amount - HELD THAT - We find that CIT(A) after considering various decisions cited in his order has deleted the addition made by Assessing Officer. Before us, the Revenue could not point out any fallacy in the findings of CIT(A). In view of this, we find no reason to interfere with the order of CIT(A) and thus, the ground No.1 of Revenue is dismissed. Addition u/s 43B - auditor had reported being the amount of professional tax deducted from the employees but was not deposited till the date of filing the return of income - HELD THAT - Appellant was prevented by reasonable cause due to which professional tax deducted from the salary of the employees could not be deposited to the Government Exchequer. It is also an undisputed fact that the appellant had credited the amounts so deducted to a separate account, secondly, undisputedly, debit to Profit Loss A/cis on account of Salary and not Professional Tax. Section 43B does not include in its ambit expenditure in the nature of salary‟ which is distinct from bonus and leave encashment, therefore, there is no question of disallowance of expenditure in the nature of salary debited to Profit Loss A/c. Hence, the disallowance made by the A.O is deleted Disallowance u/s. 40(a)(ia) - HELD THAT - No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. What is common to both the provisos to Section 40 (a) (ia) and Section 210 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. Addition on account of service tax collected but not deposited - HELD THAT - We find that no order has been passed on the M.A. whereby the original order of the Tribunal has been recalled by the Tribunal. In such a situation, we are of the view that the original order of the Tribunal for earlier year is a valid order and in that case the Tribunal on identical facts, has decided the issue in favour of assessee. We further find that Hon bleDelhi High Court in the case of CIT Vs. Noble Hewitt (India) (P) Ltd. 2007 (9) TMI 238 - DELHI HIGH COURT has held that when assessee has not debited the amount of service tax to the P L A/c and has not claimed it as expenditure, the question of disallowance does nor arise. Before us, the Revenue has not placed any contrary binding decision in its support. In view of this, we find no reason to interfere with the order of CIT(A) and thus, the ground No.4 of Revenue is dismissed.

Issues Involved:
1. Deletion of addition on account of suppression of gross turnover.
2. Deletion of addition under Section 43B for outstanding professional tax.
3. Deletion of disallowance under Section 40(a)(ia) for interest and finance charges paid to NBFCs without TDS deduction.
4. Deletion of addition due to non-deposited service tax collected.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Suppression of Gross Turnover:
The Revenue challenged the deletion of an addition of ?10,43,114/- made by the Assessing Officer (AO) for suppression of gross turnover. The AO added the amount, arguing it should have been offered to tax as it was mobilization advance from Mangalam Cement Ltd. with TDS deducted. The CIT(A) deleted the addition, reasoning that the mobilization advance is customary in this business and does not convert to income merely because TDS was deducted. The Tribunal upheld CIT(A)'s decision, noting the Revenue failed to show any error in CIT(A)’s findings.

2. Deletion of Addition under Section 43B for Outstanding Professional Tax:
The AO added ?96,505/- under Section 43B for professional tax deducted but not deposited. The CIT(A) deleted the addition, stating the professional tax was credited to a separate account and not debited to the Profit & Loss Account (P&L A/c). The Tribunal agreed with CIT(A), noting that Section 43B does not apply to salary expenses, and the Revenue could not demonstrate any flaw in CIT(A)’s findings.

3. Deletion of Disallowance under Section 40(a)(ia) for Interest and Finance Charges Paid to NBFCs Without TDS Deduction:
The AO disallowed ?4,66,658/- under Section 40(a)(ia) for non-deduction of TDS on interest paid to NBFCs. The CIT(A) deleted the disallowance, citing judicial precedents and amendments to Section 40(a)(ia) that provide relief to taxpayers. The Tribunal restored the issue to the AO to verify if the payees included the amounts in their income returns and paid taxes, as the Revenue contended there was no evidence of such compliance.

4. Deletion of Addition Due to Non-Deposited Service Tax Collected:
The AO added ?1,90,81,660/- under Section 43B for service tax collected but not deposited. The CIT(A) deleted the addition, explaining that service tax is not part of the appellant’s revenue and was not debited to the P&L A/c. The Tribunal upheld CIT(A)’s decision, referencing similar decisions in the assessee’s favor from earlier years and the Delhi High Court ruling in CIT Vs. Noble & Hewitt (India) (P) Ltd., which held that service tax not debited to the P&L A/c cannot be disallowed under Section 43B.

Separate Judgments for Different Years:
For A.Y. 2011-12, the issues were similar to those of A.Y. 2010-11. The Tribunal applied the same reasoning and decisions mutatis mutandis, resulting in the dismissal of the Revenue’s grounds on suppression of gross turnover and service tax, while allowing the issue of disallowance under Section 40(a)(ia) for statistical purposes.

Conclusion:
The Tribunal partly allowed the Revenue’s appeals for statistical purposes, remanding the issue of TDS compliance back to the AO for verification. Other grounds raised by the Revenue were dismissed, upholding the CIT(A)’s deletions of additions and disallowances.

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