IN THE ITAT CHANDIGARH BENCH ‘B’
Punjab State Cooperative Federation of Housing Building Societies Ltd.
v.
Deputy Commissioner of Income-tax
IT APPEAL NO. 834 (CHD.) OF 2011
[ASSESSMENT YEAR 2008-09]
MAY 31, 2012
ORDER
Ms. Sushma Chowla, Judicial Member
The present appeal filed by the assessee is against the order of Commissioner of Income-tax (Appeals), Chandigarh dated 15.06.2011 relating to assessment year 2008-09 against the order passed under section 143(3) of the Income-tax Act (in short ‘the Act’).
2. The assessee has raised the following grounds of appeal:
1. That the order of the assessing officer as upheld by the Commissioner of Income Tax (Appeals) Chandigarh is bad in law and is beyond all the cannons of law and justice.
2. That the order of the Assessing Officer as upheld by the Commissioner of Income Tax (Appeals) Chandigarh disallowing Rs. 1,01,33,9537- u/s 40(a)(ii) of the Income Tax Act being the amount of advance made to the contractor for acquisition of its capital asset more so when the same has been adjusted within 3 months and tax has been deducted and deposited before the filing of the return is bad in law and needs to be set-aside.
3. The only issue raised in the present appeal is against the disallowance made by the Assessing Officer by invoking provisions of section 40(a)(ia) of the Act for non-deduction of tax at source under section 194C of the Act.
4. The brief facts of the case are that the assessee is a cooperative society and is providing credit facility to its member cooperative societies within the State of Punjab. The assessee is also engaged in the activity of constructing residential houses in the State of Punjab which are allotted in favour of primary cooperative housing societies under the scheme of Government of Punjab from time to time. The lands for the said project are allotted by the Government of Punjab and the plans are also approved by them. During the year under consideration the assessee had made payment of Rs. 1,21,75,828/- on 22.2.2008 to M/s Deepak Builders. As per the contract between the parties, the assessee had to pay 75% of the estimated value of any material that had to be procured and stored. As per the statement of facts filed by the assessee, the explanation filed before the Assessing Officer during the assessment proceedings was as under :
“In order to satisfy the said clause the above noted assessee at paid and/advance of Rs. 50,61,506.25 paise vide Ch. No. 984219 dated 22.02.20083 The details of the material against which advance has been made are being enclosed for your perusal and record. Similarly [another advance on the same date i.e. 22.02.2008 amounting to Rs. 71,14,322.25 paise was paid to M/s Deepak Builders Ludhiana vide Ch. No. 984218 dated 22.02.2008. The details of the material against which advance has been made are being enclosed for your perusal and record. These advances were paid for project at Ludhiana and Amritsar respectively Since these advances were paid at the fag and of the year under consideration as such these advances were adjusted out of the payments made to the contractors against the work done on 18.03.2008 at Rs. 55,84,598.35 paise being the gross value of the bill out of which advance amounting to Rs. 20,41,8757- has been adjusted on which TDS amounting to Rs. 1,26,5477- has been deducted, on 02.05.2008 at Rs. 17,21,787.50 paise, on 09.06.2008 at Rs. 23,98,9507-, on 08.07.2008 at Rs. 37,93,612.50 paise. In respect of Amritsar Project and Rs. 55,26,8867- on 02.05.2008 in respect of Ludhiana project am also enclosing herewith photocopies of the bills paid on 02.05.2008 showing the deduction made on account of Income Tax at Rs. 1,79,6377- on the gross value of the bill at Rs. 79,27,5117-, a photocopy of the bill for Rs. 1,01,95,1457- paid on 09.06.2008 out of which income tax amounting to Rs. 2,31,0227- has been deducted on the gross value of the bill, a photocopy of the bill and vouchers for Rs. 89,30,960.50 paise being the value out of which Rs. 1,38,0697- in respect of the Amritsar project i.e. Rs. 50,61,506.25 paise. Further I am also enclosing a copy of the bill and other connected documents in respect of Ludhiana project whereby the advance of Rs. 55,26,886.70 paise has been adjusted out of the gross amount of the bill at Rs. 1,37,30,122.70 paise against which tax has been deducted at Rs. 3,11,1257- on the gross value of the bill. It may however be submitted here that after seeking the legal advice in this behalf the above noted assessee deducted TDS at the time of payment only i.e. in the case of secured advances at the time of extending the advance however the same was adjusted while deducting the tax at source at the time of making the payment of the bill.”
5. The TDS deducted on the said payment was deposited on or before 8.7.2008 i.e. before the date of filing the return of income which in the present case was 30.9.2008.
6. The Assessing Officer while completing the assessment had allowed the benefit of adjustment made at Rs. 20,41,875/- on 18.3.2010 and made disallowance of Rs. 1,01,33,953/- for non deduction of tax at source in line with the provisions of section 40a(ia) of the Act.
7. The CIT (Appeals) upheld the order of the Assessing Officer for non deduction of tax at source and consequent disallowance under section 40a(ia) of the Act.
8. The learned A.R. for the assessee pointed out that the issue in the present case stands covered by the order of the Special Bench of Vishakhapatnam reported in Merilyn Shipping & Transports v. Addl. CIT [2012] 136 ITD 23/20 taxmann.com 244.
9. The learned D.R. for the Revenue placed reliance on the orders of the authorities below.
10. We have heard the rival contentions and perused the record. The issue arising in the present appeal is against the disallowance a of expenses for non deduction of tax at source in view of the provisions of section 40a(ia) of the Act. The assessee had made an advance payment of Rs. 1,21,75,828/- to M/s Deepak Builders on 22.2.2008. The said payment as per the contract between the party was to be adjusted on a later date and the same was adjusted. The case of the assessee is that the said amount was paid to the said party in view of the agreement between the parties for making advance payment for supply of material requisitioned for the construction of the project undertaken by the assessee. The assessee was to pay 75% of the amount of the bill in advance and when the amount was paid in total the assessee claimed to have deduced the TDS and deposited the same. The tabulated details of the amount adjusted against the payments due from the assessee and the consequent deduction on TDS are as under:
