Mrs. Arati Mitra, Kolkata V. ITO, Ward - 11(2), Kolkata, Kolkata

CO 3/KOL/2012

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9423 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 13-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 18-01-2012
• Court: TRIBUNAL
• Department Lawyers: P B PRAMANIK
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Keywords: Business income
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE HONBLE SRI ABRAHAM P.GEORGE, AM & HONBL E SRI GEORGE MATHAN, JM] ITA NO.1671/KOL/2011 ASSESSMENT YEAR : 2008-09 ( APPELLANT ) (RESPONDENT) I.T.O., WARD-11(2), -VS- SMT. ARATI MITRA KOLKATA KOLKATA (PAN AFEPM 2541 G) C.O.NO.03/KOL/2012 A/O ITA NO.1671/KOL/2011 ASSESSMENT YEAR : 2008-09 ( APPELLANT ) (RESPONDENT) SMT.ARATI MITRA . -VS- I.T.O., WARD-11(2), KOLKATA KOLKATA (PAN:AFEPM 2514 G) FOR THE DEPARTMENT SHRI P.B.PRAMANIK, JCIT (SR.DR) FOR THE ASSESSEE : SHRI SOUMITRA CHOWDHURY, ADVOCATE DATE OF HEARING : 12.02.2014 DATE OF PRONOUNCEMENT : 14. 02.2014. ORDER PER SHRI GEORGE MATHAN, JM ITA NO.1671/KOL/2011 IS AN APPEAL FILED BY THE REVE NUE AGAINST THE ORDER OF LD. C.I.T.(A)- XII, KOLKATA IN APPEAL NO.357/XII/11 (2)/10-11 DATED 29.09.2011 FOR ASSESSMENT YEAR 2008-09. THE REVENUE HAS ALSO FILED AN ADDITIONAL GROUND ON 14.02.2012. C.O. NO.03/KOL/2012 IS A CROSS OBJECTI ON FILED BY THE ASSESSEE IN THE REVENUES APPEAL IN ITA NO.1671/KOL/2012. 2. SHRI P.B.PRAMANIK, LD.,JCIT, SR.(DR) REPRESENTE D ON BEHALF OF THE REVENUE AND SHRI SOUMITRA CHOUDHURY,ADVOCATE REPRESENTED ON B EHALF OF THE ASSESSEE. ITA NO.1671/KOL/2011 & C.O.NO.03/KO L/2012 SMT.ARATI MITRA A.YR.2008-09 2 3. AT THE TIME OF HEARING THE LD. AR SUBMITTED THA T HE DID NOT WANT TO PRESS THE CROSS OBJECTION. CONSEQUENTLY THE CROSS OBJECTION F ILED BY THE ASSESSEE STANDS DISMISSED. . 4. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL:- 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF ACCRUED INTEREST ON F.D. U /S 68B IN SPITE OF THE FACT THAT THE ASSESSEE MAINTAINED MERCANTILE SYSTEM OF ACCOUNTING . IT WAS THE SUBMISSION THAT IN THE SAID GROUND SECTI ON 68B WAS TO BE READ AS 69B. 5. IN THE ADDITIONAL GROUND THE REVENUE HAS RAISED THE FOLLOWING GROUND:- 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) IS CORRECT IN DELETING ADDITION U/S 40(A)(IA) DESPITE THE FAIL URE ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE IN TERMS OF SECTION 194C FROM THE AMO UNTS PAID TO THE CONTRACTOR. 6. IN RESPECT OF GROUND NO.1 RAISED BY THE REVENUE IT WAS THE SUBMISSION BY THE LD. DR THAT THE ASSESSEE WAS FOLLOWING THE MERCANTI LE SYSTEM OF ACCOUNTING. IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT IT WAS NOTICED THAT THE ASSESSEE DID NOT INCLUDE THE INTEREST ON THE FIXED DEPOSITS ACCRUED TO THE EXTENT OF RS.9,63,365/-. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD DELETED THE SAME BY HOLDING THAT THE ASSESSEE HAD OFFERED THE INTEREST INCOME DURING ASSESSMENT Y EAR 2009-10. IT WAS THE SUBMISSION BY THE LD. DR THAT THE ASSESSEE FOLLOWING THE MERCA NTILE SYSTEM OF ACCOUNTING THE INTEREST ACCRUED WAS LIABLE TO BE ASSESSED DURING T HE RELEVANT ASSESSMENT YEAR ITSELF. 7. IN REPLY THE LD. AR SUBMITTED THAT THE INTEREST INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND ALTHOUGH THE A SSESSEE WAS DISCLOSING HER BUSINESS INCOME ON MERCANTILE BASIS THE INTEREST IN COME WAS OFFERED UNDER THE HEAD INCOME FROM OTHER SOURCES ON CASH BASIS. IT WAS T HE SUBMISSION THAT THE INCOME HAD BEEN OFFERED FOR A.YEAR 2009-10 AND THE SAME HAD AL SO BEEN ASSESSED AND ACCEPTED. HE ALSO DREW OUR ATTENTION TO PAGE 52 OF THE PAPER BOOK WHICH WAS THE INCOME EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31.03.2009 W HEREIN THIS AMOUNT OF RS.9,63,433/- HAD BEEN OFFERED TO TAX. HE VEHEMENTL Y SUPPORTED THE ORDER OF THE LD. CIT(A). ITA NO.1671/KOL/2011 & C.O.NO.03/KO L/2012 SMT.ARATI MITRA A.YR.2008-09 3 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE ORDER OF LD.CIT(A) CLEARLY SHOWS THAT THE LD. CIT(A) HAS CATEGORICALLY GIVEN A FINDING THAT ALL ALONG THE ASSESSEE HAS BEEN FOLLOWING CASH SYSTEM OF ACCOUNTI NG UNDER THE HEAD INCOME FROM OTHER SOURCES. THIS FINDING OF THE LD. CIT(A) HAS NOT BEEN SHOWN TO BE WRONG OR ERRONEOUS. FURTHER IT IS ALSO ADMITTED BY THE REVEN UE THAT THE SAME INCOME HAD BEEN OFFERED BY THE ASSESSEE FOR A.YR.2009-10. ONCE THIS IS SO AND THE ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING IN RESPECT OF HER INT EREST INCOME WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCE AND THE S AME HAS ALSO BEEN OFFERED TO TAX AND ACCEPTED, THEN THE AO CANNOT CHANGE THE METHOD OF ACCOUNTING FOR THE PURPOSE OF ASSESSING THE SAME INCOME IN THE EARLIER YEAR. IN T HE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FINDING OF LD. CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. GROUND NO.1 RAISED BY THE REVENUE STANDS DISMISSED. 9. IN THE ADDITIONAL GROUND RAISED BY THE REVENUE I T WAS SUBMITTED BY THE LD DR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CI T(A) IN DELETING THE ADDITION MADE BY AO U/S 40(A)(IA) OF THE ACT ON ACCOUNT OF FAILURE O N THE PART OF ASSESSEE TO DEDUCT TAX AT SOURCE U/S 194C OF THE ACT ON THE PRINTING CHARG ES PAID BY THE ASSESSEE. IT WAS SUBMITTED BY THE LD.DR THAT THE ASSESSEE WAS DOING THE BUSINESS OF PRINTING AND BINDING WORK. IT WAS THE SUBMISSION THAT THE ASSESS EE HAD PAID AN AMOUNT OF RS.2,34,63,450/- TO VARIOUS PERSONS UNDER THE HEAD PRINTING CHARGES. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD NOT DEDUCTED TDS. CONSEQUENTLY THE AO HAD INVOKED THE PROVISION OF SECTION 40(A)(IA) OF THE A CT AND HAD DISALLOWED THE PRINTING CHARGES PAID BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE PRINTING WAS DONE AS PER THE SPECIFICATIONS GIVEN BY THE ASSESSEE. THE LD. D R DREW OUR ATTENTION TO CIRCULAR NO.715 ISSUED BY CBDT DATED 08.08.1995 WHEREIN IN T HE QUESTION ANSWER IT HAS BEEN MENTIONED THAT 194C WOULD APPLY IN RESPECT OF SUPPL Y OF PRINTING MATERIALS AS PER THE PRESCRIBED SPECIFICATIONS. IT WAS THE SUBMISSION TH AT THE LD.CIT(A) HAD DELETED THE ADDITION MADE BY THE AO BY HOLDING THAT THE ASSESSE E WAS NOT GETTING ANY PRINTING JOBS SPECIFICALLY DONE BUT IT WAS THE WORKS CONTRAC T AS ALSO ON THE GROUND THAT THE EXPLANATION III TO SECTION 194C OF THE ACT WAS BROU GHT IN BY THE FINANCE ACT 2009 ITA NO.1671/KOL/2011 & C.O.NO.03/KO L/2012 SMT.ARATI MITRA A.YR.2008-09 4 WHEREIN CLAUSE (E) HAS BEEN INSERTED AND CONSEQUENT LY THE SAID AMENDMENT WAS NOT APPLICABLE FOR A.YR.2008-09. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AO. 10. IN REPLY THE LD. AR SUBMITTED THAT THE PRINTING JOB WAS A CONTRACT FOR SALE AND IT WAS NOT A WORKS CONTRACT. IT WAS THE SUBMISSION THA T THE PRINTING JOB GIVEN BY THE ASSESSEE WAS NOT WORK AS DEFINED IN CLAUSE (A),(B), (C) AND (D) OF EXPLANATION-III TO SECTION 194C OF THE ACT. IT WAS THE SUBMISSION THAT THE PRINTING WORK INCLUDED THE SUPPLY OF THE MATERIALS AS HAD BEEN BROUGHT OUT BY THE LD. CIT(A). IT WAS THE SUBMISSION THAT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BDA LTD. VS ITO (T DS) 281 ITR 99 AS ALSO THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF ITO VS M/S.UMBIKA AGENCIES IN ITA NO.2055/KOL/2008 DATED 12.06.2009 W HEREIN FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BDA LTD. THE COORDINATE BENCH OF THIS TRIBUNAL HAD HELD AS FOLLOWS :- 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED BEFORE US. THE DISPUTE BEFORE US IS WHETHER THE ASSESSEE IS A TRADER OF PR INTING MATERIAL OR IT IS ENGAGED IN PRINTING CONTRACT. THE A.O. ON THE BASIS OF AUDITED P/L ACCOUNT, WHEREIN RECEIPT OF PRINTING CHARGES HAS BEEN SHOWN IN CREDIT SIDE AND PAYMENT FOR THE SAME WAS REFLECTED IN DEBIT SIDE, HELD THAT THE ASSESSEES WORK WAS PU RELY CONTRACTUAL WORK AND HENCE LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C. THE ASSESSEE FILED A COPY OF LETTER FROM ITS AUDITOR M/S. DAWN & ASSOCIATES, C.A. DATED 14/12/20 07 CLARIFYING THAT DUE TO INADVERTENCE AND UNINTENTIONAL FAULT, SALES AND PUR CHASES OF ADVERTISING MATERIALS HAVE BEEN SHOWN IN THE P/L ACCOUNT FOR THE YEAR UNDER AP PEAL UNDER THE RESPECTIVE HEADS OF PRINT & PROCESS CHARGES (CREDIT) AND PRINTING CH ARGES PAID (DEBIT). HE, THEREFORE, CONFIRMED AND CERTIFIED AS UNDER :- IT IS CONFIRMED AND CERTIFIED BY ME THAT PRINT & PROCESS CHARGES (CR) AND PRINTING CHARGES PAID(DR) SHALL BE TREATED, CONSI DERED AND RECKONED AS SALES AND PURCHASES RESPECTIVELY OF THE FIRM FOR THE AFORESAI D YEAR. WE FURTHER FIND THAT THE ASSESSEE IS REGISTERED UND ER VAT RULES AS WHOLESELLER OF PRINTED MATERIALS. FROM THE TRIAL BALANCE OF THE AS SESSEE PLACED AT PAGES 17 TO 19 OF THE PAPER BOOK, IT IS SEEN THAT PRINTED MATERIALS ARE S HOWN UNDER SALES ACCOUNT AND PURCHASE ACCOUNT. EVEN FROM THE PURCHASE & SALE REG ISTERS AND BILLS OF THE ASSESSEE AS WELL AS M/S. V.TECH. WORKS PVT. LTD. PLACED IN THE PAPER BOOK, TRANSACTIONS ARE SHOWN UNDER PURCHASES AND SALES HEADS RESPECTIVELY. FURTH ER, AS CERTIFIED BY THE AUDITOR, THE ASSESSEE PURCHASED ADVERTISING MATERIALS LIKE BANNE RS, HOARDINGS ETC. AND SOLD THE SAME TO ITS CUSTOMERS. PROVISIONS OF SEC.194C WOULD APPL Y ONLY IN RELATION TO WORK CONTRACTS AND LABOUR CONTRACTS AND WOULD NOT COV ER CONTRACTS FOR SALE OF GOODS. IF A MANUFACTURER PURCHASES MATERIAL ON HIS OWN AND MANU FACTURES A PRODUCT AS PER THE REQUIREMENT OF A SPECIFIC CUSTOMER, IT IS A CASE OF SALE AND NOT A CONTRACT FOR CARRYING ITA NO.1671/KOL/2011 & C.O.NO.03/KO L/2012 SMT.ARATI MITRA A.YR.2008-09 5 OUT ANY WORK. THE FACT THAT THE GOODS MANUFACTURED WERE ACCORDINGLY TO THE REQUIREMENT OF THE CUSTOMER DOES NOT MEAN OR IMPLY THAT ANY WORK WAS CARRIED OUT ON BEHALF OF THAT CUSTOMER. THE RATIO OF THE DECISION IN THE CASE OF BDA LTD. VS ITO (TDS) (SUPRA) RELIED UPON BY THE ASSESSEE IS SQUARELY APP LICABLE TO THIS CASE. IN THE ABOVE CASE, THEIR LORDSHIPS OF HONBLE BOMBAY HIGH COURT UNDER IDENTICAL FACTS HAVE HELD AS UNDER :- THAT WHEN THE PRINTING WORK WAS BEING CARRIED OUT IN THE PREMISES OF M.THOUGH AS PER THE SPECIFICATIONS OF THE ASSESSEE, THE SUPPLY WAS LIMITED TO THE QUANTITY SPECIFIED IN THE PURCHASE ORDER. THERE WAS NOTHING ON RECORD TO SHOW THAT, ALL OTHER ANCILLARY COSTS LIKE THE LABELS, INK, PAPERS, SCREEN-PRINTING , SCREENS ETC. WERE BEING SUPPLIED BY THE ASSESSEE TO M. IN THE FACTS OF THIS CASE, THE S UPPLY OF PRINTED LABELS BY M TO THE ASSESSEE WAS A CONTRACT OF SALE AND IT COULD NOT BE TERMED A WORKS CONTRACT. HENCE THE PROVISIONS OF SECTION 194C WERE NOT APPLICABLE. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AS ALSO EVIDENCES PLACED BEFORE US, IN OUR CONSIDERED OPINION, THE ASSESSEE S NATURE OF BUSINESS WAS TRADING IN PRINTED MATERIALS AND NO CONTRACTUAL JOB ELEMENT WA S INVOLVED THEREIN. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF HO NBLE BOMBAY HIGH COURT WE HOLD THAT PROVISIONS OF SEC. 194C ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND THE C.I.T.(A) HAS RIGHTLY DELETED THE ADDITION OF RS.72 ,36,292/- MADE BY THE A.O. U/S 40(A)(IA) OF THE ACT. GROUND OF APPEAL OF THE REVEN UE ON THIS ISSUE IS, THEREFORE, REJECTED. 10.1. IT WAS THE SUBMISSION THAT ON THE ORDER GIVEN BY THE ASSESSEE THE PRINTERS USED TO PURCHASE THE MATERIAL ON HIS OWN AND DO THE WORK AS PER THE REQUIREMENTS AND CONSEQUENTLY IT WAS A SALE OF GOODS AND NOT A CONTR ACT FOR CARRYING OUT ANY WORK. THERE WAS NO PRINTING WORK DONE ON BEHALF OF THE AS SESSEE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET A PERUSAL OF ORDER OF THE LD. CIT(A) CLEARLY SHOWS THAT THE LD. CIT(A) HA S TAKEN INTO CONSIDERATION THE FACT THAT CLAUSE (E) TO EXPLANATION III TO SECTION 194 C OF THE ACT HAS BEEN BROUGHT IN BY THE AMENDMENT BY THE FINANCE ACT 2009. CONSEQUENTLY THE ACTIVITIES OF THE SUPPLIERS NAMELY THE MANUFACTURING OR SUPPLY OF A PRODUCT ACC ORDING TO THE REQUIREMENT OR SPECIFICATIONS OF THE CUSTOMER DOES NOT COME INTO P LAY FOR A.YR. 2008-09 WHICH IS THE ASSESSMENT YEAR BEFORE US. EVEN OTHERWISE A READING OF CLAUSE (E) SHOWS THAT THE MANUFACTURING OR SUPPLYING OF A PRODUCT ACCORDING T O THE REQUIREMENT OR SPECIFICATION OF THE CUSTOMER MUST BE BY USING THE MATERIALS PURC HASED FROM SUCH CUSTOMERS. IN ANY CASE THE ASSESSEE HAS NOT SOLD ANYTHING TO THE PERS ONS WHO HAVE DONE THE PRINTING WORK. EVEN ON THIS GROUND CLAUSE (E) TO EXPLANATION III TO SECTION 194C OF THE ACT ITA NO.1671/KOL/2011 & C.O.NO.03/KO L/2012 SMT.ARATI MITRA A.YR.2008-09 6 CANNOT BE BROUGHT INTO PLAY IN THE CASE OF ASESSEE. FURTHER, A PERUSAL OF THE FACTS IN THE PRESENT CASE CLEARLY SHOW THAT THE ASSESSEE WAS BUY ING THE PRINTED MATERIAL FROM THE VARIOUS PERSONS. THIS FACT HAS NOT BEEN DISPUTED BY THE REVENUE. ONCE IT IS SEEN THAT THE ASSESSEE IS BUYING PRINTED MATERIALS FROM VARIO US PERSONS IT BECOMES A CONTRACT FOR SALE AND NOT ONE OF WORKS CONTRACT. CONSEQUENTLY WE ARE OF THE VIEW THAT THE FINDING OF LD. CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING A ND DOES NOT CALL FOR ANY INTERFERENCE. THIS VIEW OF OURS ALSO FIND SUPPORT FROM THE DECISI ON OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BDA LTD. VS ITO REFERRED TO SUPRA AS ALSO THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS M/S. U MBIKA AGENCIES REFERRED TO SUPRA. CONSEQUENTLY THE ADDITIONAL GROUND FILED BY THE REV ENUE STANDS DISMISSED. 12. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS NOT PRESS ED. ORDER PRONOUNCED IN THE COURT ON 14.02.2014. SD/- SD/- [ABRAHAM P.GEORGE] [ GEORGE MATHAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 14.02.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. SMT.ARATI MITRA, OLD JESSORE ROAD, GANGANAGAR, DARB ARI COMPLEX, MADHYAMGRAM, KOLKATA-123. 2 I.T.O., WARD-11(2), KOLKATA 3 . CIT(A)-XII, KOLKATA 4. CIT - KOLKATA. 5. CIT(A)DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NO.1671/KOL/2011 & C.O.NO.03/KO L/2012 SMT.ARATI MITRA A.YR.2008-09 7