PFIZER LTD, MUMBAI V. DCIT(TDS) -2(1), MUMBAI

CO 201/MUM/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2182 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 21-08-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMAPANI BORA
• Assessee Lawyers: KIRIT KUMAR
• Keywords: Non-deduction of tax; TDS
• Section: 201(1); 201; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH MUM BAI BEFORE SHRI C.N.PRASAD, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.3938/MUM/2018 ( ASSESSMENT YEAR: 2012-13 ) DCIT(TDS)-2(1) ROOM NO.614, K.G.MITTAL BLDG. CHARNI ROAD MUMBAI-400 020 VS. PFIZER LTD. PATEL ESTATE, S.V.ROAD JOGESHWAR (WEST), MUMBAI-400 012 PAN/GIR NO.AAACP3334M APPELLANT ) .. RESPONDENT ) & C.O. NO. 201/MUM/2019 (ARISING OUT OF ITA NO.3938/MUM/2018) (ASSESSMENT YEAR: 2012-13) PFIZER LTD. PATEL ESTATE, S.V.ROAD JOGESHWAR (WEST), MUMBAI-400 012 VS. DCIT(TDS)-2(1) ROOM NO.614, K.G.MITTAL BLDG. CHARNI ROAD MUMBAI-400 020 PAN /GIR NO. AAACP3334M ( APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI. KUMAR PADMAPANI BORA, DR ASSESSEE BY SHRI. KIRIT KUMAR, AR DATE OF HEARING 20/11 /2019 DATE OF PRONOUNCEME NT 27 / 11 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON FILED BY THE ASSESEE IS DIRECTED AGAINST ORDER OF THE LD. CO MMISSIONER OF INCOME TAX (APPEALS)60, MUMBAI DATED 21/03/2018 FO R THE AY 2012-13. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR ITA NO.3938/MUM/2018 CO.NO.201/MUM/2019 PFIZER LTD. 2 THE SAKE OF CONVENIENCE, THE APPEAL FILED BY THE RE VENUE AND CROSS OBJECTION FILED BY THE ASSESEE WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. ITA NO.3938/MUM/2018:- 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DECIDING THE ISSUE UNDER SECTION 194J, WHEREAS ASSESSING OFFICER HAS PASSED ORDER CONSIDERING COMM ISSION PAYMENT UNDER SECTION 194H AND DELETED THE DEFAULT OF RS. 2 ,03,46,0127- U/S 201(1) AND RS. 73,24,564/-U/S.201(1A)?' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD, CIT(A) ERRED IN HOLDING THAT THE ASSESSEE AND T REATING IT AS PRINCIPAL TO PRINCIPAL TRANSACTION WITHOUT CONSIDERING NATURE OF BUSINESS OF SUCH ALLEGED STOCKIEST, WHO IS GETTING FIXED COMMISSION OF 2% OF SALE PRICE AND NOT TAKING ANY OR ALL RISK AS OF PRINCIPAL WHILE RE TAILERS? 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DELETED THE NON- DEDUCTION U/S201(1) AND I NTEREST U/S.201(1A) WITHOUT APPRECIATING THE FACT THAT PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTH ER PERSON FOR SERVICES RENDERED OR FOR ANY SERVICES IN THE COURSE OF BUYIN G AND SELLING OF GOODS WITHIN THE MEANING OF SECTION 194H OF THE ACT? 4. ' WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE PRECEDENCE GIVEN TO THE MODE AND MANNER OF TRANSACT ION OVER LEGISLATIVE INTENT WHICH APPARENTLY INTENDED TO APPLY IDS UNDER SECTION 194H ON CONSIDERATION UNDER WHATEVER, NAME , ALLOWED OR PAI D IN AN ALTERNATIVE MANNER IN LIE OF SERVICES RENDERED BY THE AGENT TO THE PRINCIPAL IS JUSTIFIED?' 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALT ER ANY GROUND OR ADD A NEW GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSA RY.' 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESEE IS ENGAGED IN THE BUSINESS OF TRADING, MANUFACTURE OF DRUGS, PHAR MACEUTICALS AND CONSUMER HEALTH CARE PRODUCTS. THE MODUS OPERANDI O F THE BUSINESS OF THE ASSESEE IS THAT THE STOCKIEST IS PLACED ORDE RS ON THE ASSESEE ITA NO.3938/MUM/2018 CO.NO.201/MUM/2019 PFIZER LTD. 3 AND GOODS ARE TRANSFERRED TO THE CLEARING AND FORWA RDING AGENTS. THE CFA PACKS AND DISPATCHES THE GOODS TO THE STOCK IST AGAINST THE PAYMENTS. THE ASSESEE HAS SOLD ITS PRODUCT THROUGH SUPER STOCKISTS. AS PER THE ARRANGEMENTS BETWEEN THE ASSESEE AND CFA , THE ASSESEE HAS ALLOWED 2% MARGIN ON TOTAL GOODS SOLD B Y THE STOCKIEST. DURING THE COURSE OF TDS PROCEEDINGS, THE LD. AO IS SUED NOTICE U/S 201(1) AND 201(1A) OF THE ACT, AND CALLED UPON THE ASSESEE TO EXPLAIN AS TO WHY TDS SHALL NOT BE COMPUTED, IN RES PECT OF MARGIN ALLOWED TO STOCKIEST U/S 194H OF THE I.T. ACT, 196 1. IN RESPONSE, THE ASSESEE SUBMITTED THAT AS PER THE ARRANGMENT BETWE EN THE PARTIES, THE ASSESEE SALES GOODS TO STOCKIEST ON A PRINCIPAL TO PRINCIPAL BASIS AND NOT ON PRINCIPAL TO AGENT AND ACCORDINGLY , NO TAX IS DEDUCTABLE AT SOURCE ON THE SALES MADE TO THE STOCK IEST. THE LD. AO, AFTER CONSIDERING RELEVANT SUBMISSION OF THE AS SESEE OBSERVED THAT THE CONTENTION OF THE ASSESEE APPEARS TO BE L ARGELY CORRECT, HOWEVER, HE, FURTHER STATED THAT THE ISSUE REMAINS UNDER DISPUTE AT HIGHER APPELLATE FORUMS AND ACCORDINGLY, HELD THAT THE ASSESEE IS AN ASSESEE IN DEFAULT U/S. 201(1) AND 201(1A) OF THE A CT, AND ACCORDINGLY COMPUTED SHORT DEDUCTION OF TDS ON TOTA L AMOUNT OF CONSIDERATION PAID TO STOCKIEST @10% U/S 194H OF T HE I.T. ACT, 1961.SIMILARLY, THE LD. AO HAS COMPUTED INTEREST U/ S 201(1A) ON SAID SHORT DEDUCTION OF TDS. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESEE HAS FILED A ELABORATE WRITTEN SUBMISSIONS ON THE ISSUE, WHICH HAS BEEN REPRODUCED IN PAGE NO. 3 TO 9 OF LD.CIT(A) ORDER. T HE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSES EE AND ALSO, BY ITA NO.3938/MUM/2018 CO.NO.201/MUM/2019 PFIZER LTD. 4 FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S INTERWORK INDIA PVT.LTD. IN ITA NO. 161/MUM/201 1, ORDER DATED 01/04/2014 HELD THAT THE TRANSACTIONS BETWEEN THE A SSESEE AND STOCKIEST IS IN THE NATURE OF SALE, BECAUSE THE ASS ESEE HAS RAISED INVOICES, WHICH INCLUDES EXCISE DUTY AND SALES TA X PAYABLE ON GOODS, AS IN CASE OF NORMAL SALE OF GOODS. THEREFOR E, HE OPINED THAT THERE IS NO NEED TO DEDUCT TDS ON MARGIN ALLOWED TO STOCKIEST, BECAUSE THE SAID TRANSACTIONS IS ON PRINCIPAL TO PR INCIPAL BASIS, BUT NOT ON PRINCIPAL TO AGENT BASIS. THE RELEVANT FINDI NGS OF THE LD. CIT(A) ARE AS UNDER:- DECISION I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMISSIO N OF THE APPELLANT AND ORDER PASSED UNDER SECTION 201(1)7/ 201(1A) OF THE ACT OF YEAR UNDER CONSIDERATION I HAVE ALSO GONE THROUGH ME APPELLATE ORDER PASSED BY MY PREDECESSOR ON 06.06.2014 WHERE THE IDENTICAL ISSUES WERE INVOLVED . I HAVE ALSO PERUSED THE COPY OF AGREEMENT. ON PERUS AL OF THE SAMPLE INVOICE RAISED BY THE APPELLANT AND THE ARGUMENT OF THE A R R. THAT INVOICES ARE INCLUSIVE OF EXCISE DUTY AND SAFES TAX AS IN CASE OF NORMAL S ALE OF GOOD IS FOUND TO BE IN ORDER. THE A.R. FURTHER STATED THAT AT THE TIME OF THE SALE TITLE OF GOOD WAS ALSO PASSED TO THE STOCKIEST. THEREFORE. THIS IS A COMPL ETE SALE. THE A.O. HAS NOT PRODUCED ANY EVIDENCE ON RECORD TO SNOW THAT IT WAS NOT A COMPLETE SALE. THE APPELLANT IS A PHARMACY COMPANY MANUFACTURING DRUGS WHICH HAS TO BE STORED IN PARTICULAR CONDITION. THUS THROUGH FT AGREEMENT FT IS ENSURING THAT THE DRUGS ARE STORED IN A PARTICULAR MANNER IF IT IS NOT DONE FT WILL NOT BE BENEFICIAL FOR END USERS. ENSURING THE FACILITY FOR OPTIMUM HANDLING O F DRUGS, NO WAY CONNOTES THAT THE STOCKIEST WERE PROVIDING MANAGERIAL SERVICES. THE APPELLANT HAS ALSO RELIED ON THE CASE LAWS ON T HIS ISSUE NAMELY :- A. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S . INTERVET INDIA PVT.LTD. IN ITA.NO.. 161 OF 2011 DATED 1 ST APRIL, 2014. B. HON'BLE ITAT (MUMBAI) IN THE CASES OF M/S. PIRAMAL HEA LTH CARE LTD. IN ITS ORDER IN ITA NO, 7789 TO 7792 & 7794/MUM/2011 DATED 09,05.2012 F OR A.YRS. 2007-08 TO 201 1-12. C. ITO(TDS) VS. UNICHEM LABORATORIES LTD. (46 CCH 525)(MUM ITAT) IN VIEW OF THE AFORESAID DISCUSSION, FACTS OF THE CASE, APPELLATE ORDER PASSED BY ME PREDECESSOR IN ASSESSEE'S OWN CASE FOR A, Y. 2010-1 1 S 2011-12 AND RELYING ON THE DECISION OF HON'BLE BOMBAY HIGH COURT AS WELL A S DECISIONS OF THE HON'BLE LTAT CITED ABOVE, I AM OF THE CONSIDERED OPINION, THAT T HE TRANSACTION BETWEEN THE APPELLANT AND THE STOCKIEST AMOUNTS TO SALE. THE PR OVISIONS OF TDS OF SECTION 194J ITA NO.3938/MUM/2018 CO.NO.201/MUM/2019 PFIZER LTD. 5 ARE NOT APPLICABLE IN VIEW OF FACTS OF THE CASE. TH E ADDITION OF RS. 2,03,46,012/- U/S. 201(1)/201(1A) STANDS DELETED. GROUND 2: LEVY OF INTEREST UNDER SECTION 201(1A) OF THE ACT A MOUNTING TO RS. 73, 24,5647 FACTS OF THE CASE AND ACTION OF THE AO IN THE ORDER DATED 26 MARCH 2014 PASSED UNDER SECTI ON 201(1) AND 201(1A) OF THE ACT, THE AO HAS LEVIED INTEREST UNDER SECTION 201(1A) OF THE AC T AMOUNTING TO RS. 73,24,564 ON ACCOUNT OF ALLEGED NON-DEDUCTION OF TAX AT SOURCE ON MARGINS E ARNED BY THE STOCKIEST IN PARA 6 OF THE ORDER, ALLEGED IN TEREST UNDER SECTION 201(1A) OF THE ACT AMOUNTING TO RS. 73,24,564 ON THE TAX DEDUCTIBL E AT SOURCE ON THE MARGINS EARNED BY THE STOCKIEST HAS BEEN COMPUTED AS SHOWN BELOW: - TAX UNDER SECTION 201(1) RATE OF INTEREST NUMBER OF MONTHS PERIOD AMOUNT OF INTEREST 2,03,46,012 1% 36 1 APRIL 2011 TO 31 MARCH 2014 73,24,564 APPELLANT'S SUBMISSION: AS SUBMITTED IN THE AFORESAID PARAS, THE APPELLANT WAS NOT IN DEFAULT FOR NON- DEDUCTION OF TAXES ON MARGINS EARNED BY STOCKIEST A NO 1 ACCORDINGLY, THERE WAS NO QUESTION OF LEVYING INTEREST UNDER SECTION 201(1 A) OF THE ACT, WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT THE AFORESAID INTEREST HAS BEEN COMPUTED FROM 1 APRIL 2011 WITHOUT APPRECIATIN G THE FACT THAT THE SALES MADE THROUGH THE STOCKIEST WERE SPREAD OUT THROUGHO UT THE YEAR AND ACCORDINGLY, THE INTEREST SHOULD NOT BE COMPUTED FR OM THE FIRST DAY OF THE FINANCIAL YEAR. DECISION SINCE THE APPELLANT HAS NOT BEEN TREATED AS THE DEE MED DEFAULTER U/S 201{1) AS HELD BY ME EARLIER IN THE ORDER, THE QUESTION OF LE VYING INTEREST U/S 201(1) OF THE ACT IS CONSEQUENTIAL IN NATURE AND HENCE JS ALSO DE LETED. IN TOTAL THE APPEAL IS ALLOWED 5. THE LD. DR SUBMITTED THAT THE LD.CIT(A) WAS ERRE D IN DECIDING THE ISSUE U/S 194J, WHEREAS THE LD. AO HAS PASSED O RDER CONSIDERING COMMISSION PAYMENT U/S 194H OF THE ACT, 1961. THE LD. DR, FURTHER SUBMITTED THAT THE LD.CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE RELATIONSHIP BETWEEN THE ASSESEE AND STOCKIEST ARE IN THE NATURE OF PRINCIPAL TO AGENT RELATIONSHIP AND A CCORDINGLY, WHATEVER MARGIN ALLOWED TO STOCKIEST IS IN THE NATU RE OF COMMISSION, WHICH ATTRACTS TDS PROVISIONS U/S 194H OF THE I.T. ACT, 1961. ITA NO.3938/MUM/2018 CO.NO.201/MUM/2019 PFIZER LTD. 6 6. THE LD. AR FOR THE ASSESEE, ON THE OTHER HAND, S TRONGLY SUPPORTING ORDER OF THE LD.CIT(A) SUBMITTED THAT TH IS ISSUE IS SQUARELY COVERED IN FAVOR OF THE ASSESEE BY THE DEC ISION OF ITAT, MUMBAI C BENCH, IN ASSESSEES OWN CASE FOR AY 201 2-13 IN ITA NO. 3295/MUM/2016, WHERE THE APPLICABILITY OF PROV ISIONS OF SECTION 194H, IN LIGHT OF AGREEMENT BETWEEN THE ASSESEE AND STOCKIEST HAS BEEN EXAMINED BY THE TRIBUNAL AND AFTER CONSIDERIN G RELEVANT FACTS, CAME TO THE CONCLUSION THAT THE TRANSACTIONS BETWEE N THE ASSESEE AND STOCKIEST ARE IN THE NATURE OF SALE OF GOODS, B UT NOT TRANSACTIONS IN THE NATURE OF PRINCIPAL TO AGENT. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE COORDINATE BENCH OF ITAT, MUMBAI C BENCH HAS EXAMINED THE ISSUE OF APPLICABILITY OF PROVISION OF SECTION 194H AND CONSEQUENT TDS LIABILITY ON THE ASSESEE ON PAYMENTS MADE TO STOCKIEST FOR THE IMPUGNED AY UNDER SECTION 263 PRO CEEDINGS AND AFTER CONSIDERING RELEVANT FACTS CAME TO THE CONCLU SION THAT THE TRANSACTIONS BETWEEN THE ASSESEE AND STOCKIEST ARE IN THE NATURE OF SALES OF GOODS, BUT NOT IN THE NATURE OF PRINCIPAL TO AGENT RELATIONSHIP AND CONSEQUENTLY, THE REQUIREMENT OF DEDUCTION OF TAX AT SOURCE U/S 194H OF THE I.T. ACT, 1961, DOES NOT ARISE. WE FURT HER NOTED THAT THE ASSESEE HAS FILED COMPLETE DETAILS BEFORE THE LD.CI T(A), INCLUDING AGREEMENT BETWEEN THE PARTIES, AS PER WHICH THE MOD US OPERANDI OF THE ASSESSES TO SALE OF GOODS HAS BEEN EXPLAINED, A S PER WHICH THE ASSESEE SALES GOODS TO STOCKIEST AND RAISES INVOICE S AND COLLETS APPLICABLE EXCISE DUTY AND VAT. FURTHER, THE TITLE IN THE GOODS IS TRANSFERRED TO THE STOCKIEST, AT THE TIME OF DELIVE RY. THEREFORE, WE ARE ITA NO.3938/MUM/2018 CO.NO.201/MUM/2019 PFIZER LTD. 7 OF THE CONSIDERED VIEW THAT THE ARRANGEMENTS BETWEE N THE ASSESEE AND THE STOCKIEST FOR SALE OF GOODS IS IN THE NATUR E OF PRINCIPAL TO PRINCIPAL BASIS, BUT NOT IN THE NATURE OF PRINCIPAL TO AGENT AND ACCORDINGLY, AMOUNT PAID BY THE ASSESEE TO STOCKIST S IS NOT IN THE NATURE OF COMMISSION, WHICH IS LIABLE FOR TDS U/S 1 94H. THE LD.CIT(A) AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESEE HAS RIGHTLY DELETED ADDITIONS MADE BY THE AO TOWARD SH ORT DEDUCTION OF TDS U/S 201(1) AND CONSEQUENT INTEREST U/S 201(1A) OF THE I.T. ACT, 1961. WE DO NOT FIND ANY ERROR IN FINDINGS OF THE L D.CIT (A) AND HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF LD .CIT(A) AND DISMISSED APPEAL FILED BY THE REVENUE. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. CO.NO. 201/MUM/2019 9. THE ASSESEE HAS FILED CROSS OBJECTION IN SUPPORT OF THE ORDER OF THE LD.CIT(A). WE FIND THAT THE APPEAL FILED BY THE REVENUE HAS BEEN DISMISSED FOR THE DETAILED REASONS RECORDED IN PREC EDING PARAGRAPH IN ITA 3938/MUM/2018. THEREFORE, THE CROSS OBJECTIO N FILED BY THE ASSESEE BECOMES INFRUCTUOUS AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED AND CROSS OBJECTION FILED BY THE ASSESEE IS ALSO DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 /11/2 019 ITA NO.3938/MUM/2018 CO.NO.201/MUM/2019 PFIZER LTD. 8 SD/- ( C.N.PRASAD ) SD/- ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 27 /11/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//