Income Tax Officer, Ward-3(2), Hyderabad, Hyderabad V. Vanaja Rao Quick Marriages P Ltd., Hyderabad

CO 63/HYD/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0348 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 28-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: P RAVI SESHAGIRI RAO
• Section: 194C

Judgement Text

ITA NO.1518 & C.O NO.63 OF 2014 VANAJA RAO QUICK MA RRIAGES P LTD HYD. PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1518/HYD/2014 (ASSESSMENT YEAR: 2005-06) INCOME TAX OFFICER WARD 3(2) HYDERABAD VS. M/S. VANAJA RAO QUICK MARRIAGES PRIVATE LTD 402, VIJAYA SREE APARTMENTS, NAGARJUNA NAGAR, AMEERPET HYDERABAD 500073 PAN: AABCV 7435 J (APPELLANT) (RESPONDENT) C.O. NO.63/HYD/2014 (ARISING OUT OF ITA NO.1518/HYD/2014) (ASSESSMENT YEAR: 2005-06) M/S. VANAJA RAO QUICK MARRIAGES PRIVATE LTD 402, VIJAYA SREE APARTMENTS, NAGARJUNA NAGAR, AMEERPET HYDERABAD 500073 PAN: AABCV 7435 J VS. INCOME TAX OFFICER WARD 3(2) HYDERABAD (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY: SHRI RAMAKRISHNA B ANDI, (DR) ASSESSEE BY: SHRI P. RAVI SESHA GIRI RAO, DATE OF HEARING: 3/2/2015 DATE OF PRONOUNCEMENT: 6/2/2015 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, J.M. THIS IS AN APPEAL BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (A)-IV HYDERABAD, DATED 11 TH JULY, 2014 RELATING TO A.Y 2005-06. ITA NO.1518 & C.O NO.63 OF 2014 VANAJA RAO QUICK MA RRIAGES P LTD HYD. PAGE 2 OF 8 2. BRIEFLY STATED, THE ASSESSEE IS CARRYING ON THE BUSINESS OF MARRIAGE BUREAU. THE ASSESSEE HAD PAID A SUM OF RS. 17,00,000 OUT OF THE TOTAL ADVERTISEMENT EXPENSES TO VARIOUS NEWSPAPERS FOR PUBLICATION OF MATRIMONIAL ADVERTISEMENTS. THE PAYMENT TO EACH PUBLISHER EXCEEDED RS.50,000 IN A YEAR. THE AS SESSEE CLAIMED THAT THE PAYMENTS WERE MADE ON BEHALF OF IT S CLIENTS AND THE PAYMENT RANGED BETWEEN RS.600 TO RS.1200 EACH. ASSESSEE ALSO SUBMITTED BEFORE THE AO THAT ADVERTISEMENTS WE RE ISSUED BY IT IN THE CAPACITY OF AN AGENT OF ITS CUSTOMERS. 3. AO DID NOT ACCEPT THE EXPLANATION AND HELD THAT SECTION 194C CAST AN OBLIGATION ON A PERSON WHO IS RESPONS IBLE FOR PAYING ANY AMOUNT TO THE RESIDENT (CONTRACTOR) THA T THE ASSESSEE WAS RESPONSIBLE FOR MAKING PAYMENT TO THE CONTRACTO R AND THEREFORE LIABLE U/S 194C FOR DEDUCTING TAX. AO ALS O HELD THAT THE ASSESSEE HAD CHARGED LUMP SUM AMOUNTS FROM ITS CLIE NTS FOR THE SERVICES RENDERED, THAT THE SERVICES INCLUDED PUBLI SHING ADVERTISEMENTS IN THE NEWSPAPERS AND THEREFORE, SEC TION 194C APPLIED TO THE EXPENSES INCURRED ON ADVERTISEMENTS. AO ALSO HELD THAT FOR PURPOSES OF SECTION 194C(3), WHAT WAS RELE VANT WAS THE AMOUNT PAID BY THE ASSESSEE TO THE PUBLISHER AND NO T THE AMOUNT CHARGED BY THE ASSESSEE FROM ITS INDIVIDUAL CLIENTS AND THAT SINCE THE PAYMENTS FOR THE ADVERTISEMENTS EXCE EDED THE PRESCRIBED LIMITS, THE ASSESSEE WAS OBLIGED TO DEDU CT TAX. AO FURTHER HELD THAT THE ASSESSEES CLAIM THAT IT WAS AN AGENT TO ITS CUSTOMERS WAS NOT RELEVANT SINCE IT WAS THE ASSESSE E WHO WAS ITA NO.1518 & C.O NO.63 OF 2014 VANAJA RAO QUICK MA RRIAGES P LTD HYD. PAGE 3 OF 8 MAKING THE PAYMENT TO THE NEWS PAPER PUBLISHERS AND THEREFORE, IT WAS THE ASSESSEE WHICH WAS RESPONSIBLE FOR DEDUC TING THE TAX. 4. AGGRIEVED IN THE APPELLATE PROCEEDINGS, THE ASSE SSEE REITERATED ITS SUBMISSIONS MADE BEFORE THE AO THAT RS.17,00,000 INCURRED ON MATRIMONIAL COLUMNS PUBLISHED IN VARIOU S NEWS PAPERS WAS MADE BY THE ASSESSEE IN THE CAPACITY OF AN AGENT AND THAT THERE WAS NO CONTRACTUAL RELATIONSHIP BETWEEN THE ASSESSEE AND THE NEWSPAPERS. THE CIT (A) HELD THAT SECTION 1 94C APPLIES WHEN THE PAYMENTS ARE MADE IN PURSUANCE OF THE CONT RACT AND THERE IS NO EVIDENCE THAT A CONTRACTUAL RELATIONSHI P EXIST BETWEEN THE ASSESSEE AND THE NEWSPAPER PUBLISHERS FOR CARRY ING ADVERTISEMENTS PLACED BY THE ASSESSEE AND HENCE 194 C IS NOT APPLICABLE. THE CIT (A) ALSO OBSERVED THAT MERE FAC T THAT THE ASSESSEE HAD PLACED ADVERTISEMENTS ON A REGULAR BAS IS THROUGHOUT YEAR FOR WHICH PAYMENTS IN EXCESS OF RS. 50,000 HAD BEEN MADE TO THE PUBLISHER, DOES NOT CREATE A CONTR ACTUAL RELATIONSHIP BETWEEN THE ASSESSEE AND THOSE PUBLISH ERS, HENCE SECTION 194C DOES NOT APPLY TO PAYMENTS MADE TO THE NEWSPAPERS FOR ADVERTISEMENTS. 5. AGGRIEVED, THE REVENUE IS IN APPEAL AND THE ASSE SSEE HAS ALSO FILED CROSS OBJECTION. THE GROUNDS OF APPEAL R AISED BY THE REVENUE READ AS FOLLOWS: 1. THE LD CIT (A) ERRED BOTH IN LAW AND ON FACTS O F THE CASE. 2. WHETHER LD CIT (A) IS CORRECT IN LAW IN HOLDING THAT THERE IS NO CONTRACTUAL RELATIONSHIP BETWEEN THE ITA NO.1518 & C.O NO.63 OF 2014 VANAJA RAO QUICK MA RRIAGES P LTD HYD. PAGE 4 OF 8 ASSESSEE AND THE NEWSPAPER PUBLISHERS IN VIEW OF TH E FACT THAT THE ASSESSEE IS THE PERSON RESPONSIBLE FO R PLACING THE ADVERTISEMENTS IN THE NEWSPAPERS. 3. WHETHER LD CIT (A) IS CORRECT IN LAW IN HOLDING THAT SECTION 194C DOES NOT APPLY TO THE PAYMENTS MADE TO THE NEWSPAPER PUBLISHERS FOR ADVERTISEMENTS WAS GIVEN BY THE ASSESSEE AS A SERVICE PROVIDER TO ITS CLIENTS IN RUNNING THE MATRIMONIAL SERVICES. 4. WHETHER THE LD CIT (A) IS CORRECT IN LAW IN HOLD ING THAT THE ASSESSEE IS NOT COVERED UNDER THE PROVISIO NS OF SECTION 194C IN THE ABSENCE OF ANY CONTRACTUAL RELATIONSHIP WITH NEWSPAPER PUBLISHERS, INSPITE OF THE FACT THAT THE ASSESSEE ITSELF HAD ACCEPTED FOR DISALLOWANCE OF EXPENDITURE INCURRED TOWARDS ADVERTISEMENT IN ELECTRONIC MEDIA U/S 40(A)(IA), WI TH WHOM ALSO THE ASSESSEE DID NOT HAVE ANY AGREEMENT AS OBSERVED DURING THE SCRUTINY PROCEEDINGS . 6. WE FIND FROM THE FACTS ON RECORD THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DEBITED EXPENDITURE UNDER THE HEAD ADVERTISEMENT FOR AN AMOUNT OF RS.19,47,817, OUT OF WHICH RS.2,47,731 WAS PAID TO THE ELECTRONIC MEDIA. THE ASSESSEE ON ITS OWN ADMISSION STATED THAT PAYMENTS TO THREE ELECTRONIC MEDIAS TO THE EXTENT OF RS.1,80,600 ATTR ACT DEDUCTION OF TAX U/S 194C. THE ASSESSEES STAND THAT IT ACTED AS AN AGENT TO ITS CUSTOMERS AND THAT THERE IS NO CONTRACTUAL R ELATION WITH THE NEWSPAPER PUBLISHERS FOR CARRYING ON THE ADVERT ISEMENT PLACED BY THE ASSESSEE IS CORRECT. THE ASSESSEE HAS A CONTRACTUAL RELATIONSHIP WITH ONLY CLIENTS FOR PROVIDING MARRIA GE RELATED SERVICES FOR WHICH THE ASSESSEE PLACED MATRIMONIAL ADVERTISEMENTS IN THE NEWSPAPERS. FURTHER, THE PAYM ENTS MADE ITA NO.1518 & C.O NO.63 OF 2014 VANAJA RAO QUICK MA RRIAGES P LTD HYD. PAGE 5 OF 8 ON BEHALF OF THE CLIENTS AND THE PAYMENTS RANGED BE TWEEN RS.600 TO RS.1200 EACH. HENCE IT APPEARS THAT THE A SSESSEE HAS PLACED ADVERTISEMENTS FROM TIME TO TIME AS PER REQU IREMENTS OF ITS BUSINESS. THOUGH, THE PAYMENTS FOR THE ENTIRE Y EAR WAS IN EXCESS OF RS.50,000, IN THE ABSENCE OF A CONTRACTUA L RELATIONSHIP BETWEEN THE ASSESSEE AND THE PUBLISHERS, SECTION 19 4C DOES NOT APPLY TO THE PAYMENTS MADE TO THE NEWSPAPER PUBLISH ERS FOR THE ADVERTISEMENTS MADE BY THE ASSESSEE. HENCE, WE CONF IRM THE ORDER OF THE CIT (A). 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. C.O. NO.63/HYD/2014 8. IN THE CROSS OBJECTION, THE ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. THE LD CIT (A) OUGHT TO HAVE HELD THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE I.T. ACT AS THE AMOUNTS WERE PAID DURING THE PREVIOUS YEAR RELEVANT FOR THE A.Y AND THEY WERE NOT REMAINING UNPAID AT THE END OF THE PREVIOUS YEAR. 2. THE LD CIT (A) OUGHT TO HAVE HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) HAVE NO APPLICATION TO THE AMOUNTS PAID DURING THE PREVIOUS YEAR. 9. WE FIND THAT THE ISSUES AGITATED BY THE ASSESSEE IN THE CROSS OBJECTION ARE SQUARELY COVERED BY THE DECISIO N OF THE COORDINATE BENCH IN THE CASE OF M/S. ARCADIA SHARES & STOCK ITA NO.1518 & C.O NO.63 OF 2014 VANAJA RAO QUICK MA RRIAGES P LTD HYD. PAGE 6 OF 8 BROKERS PVT. LTD IN ITA NO.1871/MUM/2015 FOR THE A. Y 2006- 07, WHEREIN IT HAS BEEN HELD AS FOLLOWS: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RECORD. WE SHALL FIRST TAKE UP THE LAST ALTERNATIVE GROUND, I.E. WHEN THE PAYMENT IS MADE B Y THE ASSESSEE WHETHER SECTION 40(A)(IA) CAN BE ATTRACTED ? ON THIS ISSUE THIS VERY BENCH, IN THE CASE OF AMIT NAR ESH SHAH (ITA NO. 4154/MUM/2013), HAD TAKEN A CONSISTENT STA ND THAT IN THE LIGHT OF THE DECISION RENDERED BY HON'B LE SUPREME COURT, IN THE FORM OF DISMISSAL OF REVENUE S SLP IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD. SE CTION 40(A)(IA) IS NOT APPLICABLE WITH REFERENCE TO PAYME NTS ALREADY MADE SINCE THE EXPRESSION PAYABLE HAS TO BE SATISFIED FOR INVOKING PROVISIONS OF SECTION 40(A)( IA). THE BENCH, IN THE AFORECITED DECISION, OBSERVED IN THIS REGARD AS UNDER: - 4. BEFORE US, DEPARTMENTAL REPRESENTATIVE(DR) STAT ED THAT ORDER OF THE SPECIAL BENCH DELIVERED IN THE CA SE OF MERILYN SHIPPING & TRANSPORTS (SUPRA)HAS BEEN KEPT IN ABEYANCE OF THE HON'BLE ANDHRA PRADESH HIGH COURT, THAT THE HON'BLE GUJARAT HIGH COURT HAD TAKEN A DIFFEREN T VIEW. AUTHORISED REPRESENTATIVE (AR) SUPPORTED THE ORDER OF THE FAA. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL BEFORE US. WE FIND THAT EXPENSES RELATED T O PROFESSIONAL FEES, ADVERTISEMENT AND MANAGEMENT WER E DEBITED IN P&L ACCOUNT, THAT SAME WERE PAID. THEREF ORE, IN OUR VIEW, NO DISALLOWANCE U/S 40(A)(IA) OF THE A CT SHOULD BE MADE. WE FURTHER FIND THAT WHILE DECIDING THE APPEAL IN THE CASE OF JANAPRIYA ENGINEERS SYNDICATE (I.T.T.A. NO. 352 OF 2014- DT. 24.06.2014) THE HON' BLE ANDHRA PRADESH HIGH COURT HAS CLARIFIED THE ISSUE O F INTERIM STAY GRANTED BY IT IN THE CASE OF MERILYN S HIPPING & TRANSPORTS (SUPRA). WE WILL LIKE TO REPRODUCE THE RELEVANT PART OF THE SAID ORDER AND SAME READS AS U NDER: '4. WE ARE OF THE VIEW THAT UNTIL AND UNLESS THE DECISI ON OF THE SPECIAL BENCH IS UPSET BY THIS COURT, IT BINDS SMAL LER BENCH AND COORDINATE BENCH OF THE TRIBUNAL. UNDER T HE CIRCUMSTANCES, IT IS NOT OPEN TO THE TRIBUNAL, AS R IGHTLY CONTENDED BY MR. NARASIMHA SARMA, LEARNED COUNSEL, TO ITA NO.1518 & C.O NO.63 OF 2014 VANAJA RAO QUICK MA RRIAGES P LTD HYD. PAGE 7 OF 8 REMAND ON THE GROUND OF PENDENCY ON THE SAME ISSUE BEFORE THIS COURT, OVERLOOKING AND OVERRULING, BY NECESSARY IMPLICATION, THE DECISION OF THE SPECIAL BENCH. WE SIMPLY SAY THAT IT IS NOT PERMISSIBLE UNDER QUAS I JUDICIAL DISCIPLINE'. FROM THE CLARIFICATION ISSUED BY THE HON'BLE HIGH COURT, IT IS CLEAR THAT UNTIL AND UNLE SS THE DECISION OF MARILYN SHIPPING & TRANSPORT (SUPRA) IS REVERSED BY THE COURT, IT IS BINDING ON ALL THE BEN CHES OF THE TRIBUNAL. WE FIND THAT HON'BLE COURT HAS HELD T HAT JUDICIAL DISCIPLINE MANDATES THAT THE DECISION OF T HE SPECIAL BENCH HAS TO BE FOLLOWED BY OTHER BENCHES. AS ON TO DAY, THE STAY ORDER GRANTED BY THE HONBLE COURT HAS BEE N VACATED AND THE ORDER OF THE SPECIAL BENCH IS BINDI NG ON OTHER BENCHES OF THE TRIBUNAL. THEREFORE, RESPECTFU LLY FOLLOWING THE SAME, WE HOLD THAT THE FAA WAS JUSTIF IED IN FOLLOWING THE ORDER OF MARILYN SHIPPING & TRANSPORT (SUPRA). CONSIDERING THE FACTS OF THE CASE AND THE CLARIFICATION ISSUED BY THE HON'BLE ANDHRA PRADESH HIGH COURT ON 24.06.2014 IN THE CASE OF JANAPRIYA ENGINE ERS SYNDICATE, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE AND CONFIRM THE ORDER OF THE FAA. 7. REVERTING TO THE FACTS ON HAND, THE TAX AUTHORI TIES HAD NOT DISPUTED THE FACT THAT THE ASSESSEE PAID DEPOSI TORY CHARGES WITHOUT DEDUCTING THE TAX AND TAXES ARE ALR EADY PAID BY THE RECIPIENT [SEE PARA 3.3 & 3.4 OF THE OR DER PASSED BY THE CIT(A)]. SINCE THE AMOUNT WAS ALREADY PAID AND THE TAXES ARE PAID BY THE RECIPIENT, IN OUR OPI NION, THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MARILY N SHIPPING & TRANSPORTS (SUPRA) IS APPLICABLE AND BY FOLLOWING THE DECISION OF THE ITAT, MUMBAI BENCHES (SUPRA) WE HOLD THAT THE TAX AUTHORITIES HAVE WRONG LY INVOKED PROVISIONS OF SECTION 40(A)(IA) IN THE INST ANT CASE. WE, THEREFORE, SET ASIDE THE ORDERS PASSED BY THE T AX AUTHORITIES DISALLOWING RS.6,27,423/-. IN THE LIGHT OF THE DECISION ON MERIT IT IS NOT NECESSARY FOR US TO DEA L WITH THE OTHER ASPECTS URGED BEFORE US SINCE THEY WILL BE OF ACADEMIC IMPORTANCE. SUFFICE TO SAY THAT DISALLOWAN CE MADE BY THE AO IS NOT CALLED FOR IN THE CIRCUMSTANC ES OF THE CASE, IN THE LIGHT OF THE DECISION OF THE ITAT (SUPRA), WHICH IN TURN WAS BASED UPON THE DECISION OF THE HO N'BLE ITA NO.1518 & C.O NO.63 OF 2014 VANAJA RAO QUICK MA RRIAGES P LTD HYD. PAGE 8 OF 8 SUPREME COURT IN THE CASE OF VECTOR SHIPPING SERVIC ES (P) LTD. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 10. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DEC ISION, WE ALLOW THE CROSS OBJECTION FILED BY THE ASSESSEE. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED AN D THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH FEBRUARY, 2015. S D/ - S D/ - (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 6 TH FEBRUARY, 2015. VNODAN/SPS COPY TO: 1. INCOME TAX OFFICER WARD 3(2) 7 TH FLOOR, B BLOCK IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD 500034 2. M/S. VANAJA RAO QUICK MARRIAGES PRIVATE LTD 402, VIJAYA SREE APARTMENTS, NAGARJUNA NAGAR, AMEER PET HYDERABAD 500073 3. THE CIT(A)-IV HYDERABAD 4. THE CIT HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER