M/s.Innovative Marketing Group, Malappuram V. ITO, Tirur

CO 3/COCH/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8695 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 06-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-03-2013
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Assessee Lawyers: SHAJI PAULOSE
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 37/COCH/2013 ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, WARD-2, TIRUR. VS. M/S. INNOVATIVE MARKETING GROUP, CA COMPLEX, MUKKOM ROAD, AREACODE, MALAPPURAM DIST. [PAN: AACFI 3826N] (REVENUE-APPELLANT) (ASSESSEE-R ESPONDENT) C.O. NO. 03/COCH/2013 (ARSG. OUT OF I.T.A. NO. 37/COCH/2013 ASSESSMENT YEAR : 2008-09 M/S. INNOVATIVE MARKETING GROUP, CA COMPLEX, MUKKOM ROAD, AREACODE, MALAPPURAM DIST. [PAN: AACFI 3826N] VS. THE INCOME TAX OFFICER, WARD-2, TIRUR. (ASSESSEE-APPELLANT) (REVENUE-R ESPONDENT) REVENUE BY SMT. SUSAN GEORGE VARGHESE, SR. DR ASSESSEE BY SHRI SHAJI PAULOSE, CA DATE OF HEARING 24/06/2013 DATE OF PRONOUNCEMENT 31/07/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 22-11-2012 PAS SED BY THE LD. CIT(A)-II, KOZHIKODE AND THEY RELATE TO THE ASSESSMENT YEAR2008-09. 2. THE SOLITARY ISSUE URGED IN THIS APPEAL OF REVEN UE IS WHETHER THE LD. CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE UNDER SECTIO N 40(A)(IA) OF THE ACT. IN THE CROSS OBJECTION, THE ASSESSEE IS CONTENDING THAT THE LD C IT(A) SHOULD HAVE ALSO GRANTED RELIEF I.T.A. NO.37/COCH/2013 & C.O. NO.03/COCH/2013 2 ON THE GROUND THAT THERE IS NO INCOME ELEMENT IN TH E COMMISSION AMOUNT DIVERTED BY THE ASSESSEE. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE HEREIN IS A FRANCHISEE FOR M/S. TATA TELESERVICES LIMITED. FRO M THE RETURN OF INCOME FILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE AS SESSEE HAD DISCLOSED COMMISSION INCOME ONLY TO THE EXTENT OF RS. 12,02,486/- WHICH WAS AT VARIANCE WITH THE GROSS COMMISSION AMOUNT OF RS. 1,07,80,641/- SHOWN IN THE TDS CERTIFICATES. THE ASSESSEE HAD ALSO CLAIMED TDS CREDIT TO THE TUNE OF RS.7,10, 414/- AS PER THE TDS CERTIFICATES. WHEN ENQUIRED ABOUT THIS CONTRADICTION, THE ASSESSE E SUBMITTED A CERTIFICATE OBTAINED FROM M/S TATA TELESERVICES LIMITED, WHEREIN IT WAS MENTIONED THAT A SUM OF RS.89,00,189/- WAS ROUTED THROUGH THE ASSESSEE TO O THER CUSTOMERS OF M/S. TATA TELESERVICES LIMITED. THUS, THE ASSESSEE HAD DEDUC TED THE SAME FROM THE GROSS COMMISSION INCOME AND DECLARED ONLY THE NET COMMISS ION IN ITS RETURN OF INCOME. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE S HOULD HAVE DEDUCTED TAX AT SOURCE ON THE AMOUNT OF RS.89,00,189/-, SINCE IT WAS ROUTE D THROUGH IT. SINCE NO TAX DEDUCTION WAS MADE, THE ASSESSING OFFICER DISALLOWE D THE SAME BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DEL ETED THE ABOVE SAID DISALLOWANCE BY FOLLOWING THE DECISION OF COCHIN BENCH OF ITAT I N THE CASE OF M/S. CEE PEE GRANITES PVT. LTD. VS. ACIT IN I.T.A. NOS. 400 &401/COCH/201 1. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5. THE LD. DR SUBMITTED THAT THE TRIBUNAL HAD DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF M/S. CEE PEE GRANITES PVT. LTD., REFERRED SUPRA, BY FOLLOWING THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (136 ITD 23), WHEREIN IT WAS HELD THAT THE PROVISIO NS OF SEC. 40(A)(IA) WOULD APPLY TO THOSE AMOUNTS WHICH REMAIN PAYABLE AS AT THE YEAR E ND AND THE AMOUNTS WHICH HAS ALREADY BEEN PAID WITHOUT DEDUCTION OF TAX AT SOURC E WOULD NOT BE ATTRACTED BY SEC. 40(A)(IA) OF THE ACT. THE LD. DR SUBMITTED THAT TH E HONBLE HIGH COURT OF ANDHRA I.T.A. NO.37/COCH/2013 & C.O. NO.03/COCH/2013 3 PRADESH HAS GRANTED INTERIM SUSPENSION OF THE DECIS ION RENDERED IN THE CASE OF MERILYN SHIPPING & TRANSPORTS BY THE SPECIAL BENCH. THE LD . DR FURTHER SUBMITTED THAT THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS WAS NOT ACCEPTED BY HONBLE HIGH COURTS OF CALCUTTA AND GUJARAT. 6. ON THE CONTRARY, THE LD. AR SUBMITTED THAT THE A SSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ON THE GROUND THAT THE ASSESSEE H AS PAID THE IMPUGNED AMOUNT. HOWEVER, THE FACT REMAINS THAT THE ASSESSEE HAS ACT ED AS A CHANNEL IN ROUTING THE AMOUNTS TO OTHER DEALERS. FURTHER THERE IS NO INCOM E ELEMENT IN THE IMPUGNED AMOUNT AND THE CONTRACT IS BETWEEN M/S TATA TELE SERVICES LTD AND ITS OTHER CUSTOMERS. HENCE THERE IS NO LIABILITY ON THE PART OF THE ASSESSEE T O DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF SEC. 194C OF THE ACT. THE LD A.R FUR THER SUBMITTED THAT THE LD CIT(A) DID NOT CONSIDER THE ISSUE IN THE LIGHT OF ABOVE SAID C ONTENTIONS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. AS SUBMITTED BY THE LD. DR, THE LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE OF M/S. CEE PEE GRANITES PVT. LTD.(REFERRED SUPRA), WHICH IN TURN WAS RENDER ED BY FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRA NSPORTS (REFERRED SUPRA). WE NOTICE THAT THE HONBLE HIGH COURT OF CALCUTTA, VIDE ITS O RDER DATED 28-03-2013 IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE IN ITAT NO. 20/201 3, HAS HELD THAT THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF MERILY N SHIPPING & TRANSPORTS IS NOT ACCEPTABLE. WE ALSO NOTICE THAT THE HONBLE HIGH C OURT OF GUJARAT VIDE ITS ORDER DATED 02-05-2013 IN THE CASE OF CIT VS. SIKANDARKHAN N. T UNVAR (TAX APPEAL NO. 905/2012 & ORS.) HAS HELD THAT THE SPECIAL BENCH IN THE CASE O F MERILYN SHIPPING & TRANSPORTS DOES NOT LAY DOWN THE CORRECT LAW. ACCORDINGLY, BOTH TH E HIGH COURTS DID NOT APPROVE THE DECISION RENDERED BY THE SPECIAL BENCH IN THE ABOVE SAID CASE. 8. IN THE CASE OF KANEL OIL & EXPORT INDS. LTD ( 121 ITD 596) (AHD)(TM), THE HONBLE THIRD MEMBER CONSIDERED THE ISSUE, VIZ., WHICH OF T HE DECISION IS REQUIRED TO BE FOLLOWED WHEN THE DECISIONS RENDERED BY THE SPECIAL BENCH OF THE TRIBUNAL AND BY ANY I.T.A. NO.37/COCH/2013 & C.O. NO.03/COCH/2013 4 OF HIGH COURT CONTRADICTS WITH EACH OTHER. IN THI S REGARD, THE HONBLE THIRD MEMBER OBSERVED AS UNDER:- ONE IS OF A SPECIAL BENCH OF THE TRIBUNAL, AHMEDAB AD AND THE OTHER IS OF A HIGH COURT, THOUGH NOT THE JURISDICTIONAL HIGH COURT. A SIMPLE ANSWER WOULD BE THAT THE JUDGMENT OF A HIGH COURT, THOUGH NOT OF THE JUR ISDICTIONAL HIGH COURT, PREVAILS OVER AN ORDER OF THE SPECIAL BENCH EVEN TH OUGH IT IS FROM THE JURISDICTIONAL BENCH (OF THE TRIBUNAL) ON THE BASIS OF THE VIEW THAT THE HIGH COURT IS ABOVE THE TRIBUNAL IN THE JUDICIAL HIERARCHY. B UT THIS SIMPLE VIEW IS SUBJECT TO SOME EXCEPTIONS. IT CAN WORK EFFICIENTLY WHEN THER E IS ONLY ONE JUDGMENT OF A HIGH COURT ON THE ISSUE AND NO CONTRARY VIEW HAS BE EN EXPRESSED BY ANY OTHER HIGH COURT. BUT WHEN THERE ARE SEVERAL DECISIONS O F NON-JURISDICTIONAL HIGH COURTS EXPRESSING CONTRARY VIEWS, IT HAS BEEN RECOG NISED THAT THE TRIBUNAL IS FREE TO CHOOSE TO ADOPT THAT VIEW WHICH APPEALS TO IT.. WE HAVE ALREADY NOTICED THAT THE HONBLE HIGH COURT OF CALCUTTA AND THE HONBLE HIGH COURT OF GUJARAT HAVE NOT APPROVED THE DECISION REN DERED BY THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS AND NO OTHE R CONTRARY DECISION RENDERED BY ANY OF THE HIGH COURT WAS BROUGHT TO OUR NOTICE. H ENCE, WE ARE INCLINED TO FOLLOW THE DECISIONS RENDERED BY THE HONBLE HIGH COURTS OF CA LCUTTA AND GUJARAT. 9. THE LD. CIT(A) HAS DECIDED THE IMPUGNED ISSUE BY FOLLOWING THE DECISION RENDERED BY THIS BENCH OF TRIBUNAL, WHICH IN TURN P LACED RELIANCE ON THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF MERILY N SHIPPING & TRANSPORTS ON A LEGAL ISSUE. IN VIEW OF THE DECISIONS RENDERED BY THE HO NBLE HIGH COURTS OF CALCUTTA AND GUJARAT, THE DECISION RENDERED BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF CEE PEE GRANITES (P) LTD (SUPRA) IS NO MORE A GOOD LAW. HE NCE, THE ORDER OF LD CIT(A) IS LIABLE TO BE SET ASIDE AND WE ORDER ACCORDINGLY. 10. IN THE CROSS OBJECTION, THE ASSESSEE IS CON TENDING THAT THE LD CIT(A) DID NOT CONSIDER THE CONTENTIONS RAISED BY IT ON MERITS. W E HAVE ALREADY NOTICED THAT THE LD CIT(A) HAS DISPOSED OF THE APPEAL BY CONSIDERING ON LY A LEGAL ISSUE AND HE HAS NOT CONSIDERED THE IMPUGNED ISSUE ON MERITS. HENCE, WE ARE OF THE VIEW THAT THIS ISSUE NEEDS TO BE ADJUDICATED AFRESH AT THE END OF THE LD . CIT(A) AND ACCORDINGLY, WE RESTORE ALL THE MATTERS TO HIS FILE. I.T.A. NO.37/COCH/2013 & C.O. NO.03/COCH/2013 5 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 31-07-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 31ST JULY, 2013 GJ COPY TO: 1. M/S. INNOVATIVE MARKETING GROUP, CA COMPLEX, MUK KOM ROAD, AREACODE, MALAPPURAM DIST. 2. THE INCOME TAX OFFICER, WARD-2, TIRUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOZH IKODE. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN