JCIT, Bangalore V. M/s Hewlett Packard India Sales Pvt. Ltd., Bangalore

ITA 1065/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95368 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 13-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1065/BAN G/2015 (ASST. YEAR 2007-08) THE JT. COMMISSIONER OF INCOME-TAX, LTU, BANGALORE. . APPELLANT VS. M/S HEWLETT PACKARD INDIA SALES PVT. LTD., NO.24, SALARPURIA ARENA HOSUR MAIN ROAD, ADUGODI, BANGALORE 560 030. . RESPONDENT PAN: AAACC 9862F APPELLANT BY : SMT. NEERA MALHOTRA, CIT RESPONDENT BY : SHRI SHARATH RAO, CA DATE OF HEARING : 19-11-2015 DATE OF PRONOUNCEMENT : 30-11 -2015 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME-TAX (APPEALS) 14 (LTU), BANGALORE DATED 27 .4.2015 FOR THE ASSESSMENT YEAR 2007-08. ITA NO.1065/B/15 2 2. THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTU RE AND TRADING OF COMPUTER SYSTEMS AND COMPONENTS. RETURN OF INCOME FOR AY 2007-08 WAS FILED ON 31.10.2007 DECLARING A TOTA L INCOME OF RS.292,70,55,585/- WHICH WAS ASSESSED U/S 143(3) TH ROUGH ORDER DT. 28/12/2010 AT RS.293,91,65,911/-. SUBSEQUENTLY, TH E CIT, LTU PASSED AN ORDER U/S 263 DT. 26.3.2013 HOLDING THAT THE EXPENDITURE INCURRED FOR THE PAYMENT OF ADVERTISEMENT CHARGES T O M/S TLG INDIA ATTRACTED TDS ON THE ENTIRE AMOUNT BY VIRTUE OF BOA RDS CIRCULAR NO.715 DT. 8.8.1995. THE ASSESSMENT ORDER WAS, ACC ORDINGLY, SET ASIDE. AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE, THE AO COMPLETED THE SET ASIDE ASSESSMENT THROUGH ORDER DT . 13.3.2014 WHICH HAS BEEN CONTESTED IN THIS APPEAL. 3. DURING THE COURSE OF APPELLANT PROCEEDINGS BEFOR E CIT(A), THE AR FILED A COPY OF THE HONBLE ITAT, BANGALORES OR DER DT. 30.12.2014 IN ITA NO.737(BANG)/2013 FOR AY 2007-08 BY WHICH THE CITS ORDER U/S 263 WAS QUASHED ON THE GROUND THAT THE INGREDIENTS NECESSARY FOR INVOKING SUCH POWERS U/S 263 I.E THAT THERE SHOULD BE AN ERROR IN THE ORDER AND SUCH ERROR SHOULD BE PREJUDI CIAL TO THE INTEREST OF REVENUE, WERE ABSENT IN THE ASSESSEES CASE. ITA NO.1065/B/15 3 4. THE CIT(A) HELD THAT SINCE THE ORIGINAL ORDER U/ S 263 NO LONGER EXISTS, THE AOS ORDER PASSED TO GIVE EFFECT TO THE DIRECTIONS OF THE CIT U/S 263 CANNOT SUBSIST. THE APPEAL WAS, THEREFORE, ALLOWED. 5. AGGRIEVED THE DEPARTMENT HAS RAISED THE FOLLOWIN G GROUNDS:- (1)EXPENDITURE INCURRED FOR PAYMENT OF ADVERTISEMEN T CHARGES ATTRACTED TDS ON THE ENTIRE AMOUNT BY VIRTU E OF BOARDS CIRCULAR NO.715 DATED 8/8/1995. (2) THE ITAT VIDE ITS ORDER DATED 30/12/2014 IN ITA NO.737(BANG)2013 HAS QUASHED THE CITS ORDER U/S 26 3 ON THE GROUND THAT THERE SHOULD BE AN ERROR IN THE ORD ER AND SUCH ERROR SHOULD BE PREJUDICIAL TO THE INTEREST OF REVENUE, WERE ABSENT IN THIS CASE. (3) THE CIT, LTU, BANGALORE VIDE LETTER DATED 12/6 /2015 HAS DIRECTED THE AO TO FILE FURTHER APPEAL BEFORE T HE HONBLE HIGH COURT OF KARNATAKA ON THE ABOVE ISSUE IN THE CASE IN ITA NO.737/BANG/2013 FOR AY 2007-08). (4) THE ITATS ORDER ON 263 ORDER IS NOT ACCEPTED A ND APPEAL TO HIGH COURT IS FILED VIDE AUTHORIZATION DA TED 12/6/2015. FURTHER APPEAL FILED TO MAINTAIN CONSIS TENCY. 6. WE HAVE HEARD BOTH PARTIES. WE FIND THAT THE TR IBUNAL IN ITA NO.737(BANG)2013 FOR THE SAME ASST. YEAR 2007-08 BY ORDER DATED 30.12.2014 QUASHED THE ORDER U/S. 263 OF THE ACT DA TED 26.3.2013 PASSED BY CIT(LTU), BANGALORE. THE RELEVANT PORTION OF THE TRIBUNALS ORDER DATED 30.12.2014 IS EXTRACTED BEL OW:- ITA NO.1065/B/15 4 4. IN REPLY TO THE ABOVE NOTICE, ASSESSEE SUBMITTE D THAT IT HAD AN AGREEMENT WITH M/S TLG INDIA PVT. LTD., F OR BUYING MEDIA SPACE FROM PRINT MEDIA, ELECTRONIC MED IA ETC., AS PER THE ASSESSEE MEDIA BUYING COST WERE BILLED B Y THE CONCERNED MEDIA TO M/S TLG INDIA. PVT. LTD. LATTER CONCERN HAD CLAIMED SUCH AMOUNT AS REIMBURSEMENT FR OM THE ASSESSEE. AS PER THE ASSESSEE, INVOICES RAISED BY M/S TLG IND. PVT. LTD. COMPRISED OF TWO COMPONENTS. ON E WAS REIMBURSEMENT FOR MEDIA SPACE AND THE SECOND WAS COMMISSION PAYABLE BY THE ASSESSEE TO M/S TLG IND. PVT. LTD., AS PER THE ASSESSEE ON SUCH COMMISSION SEC. 194H STOOD ATTRACTED AND ACCORDINGLY, IT HAD DEDUCTED TA X AT SOURCE ON SUCH COMMISSION. ARGUMENT OF THE ASSESS EE WAS THAT ON REIMBURSEMENT FOR MEDIA SPACE BUYING COST, THERE WAS NO NECESSITY FOR DEDUCTING TAX AT SOURCE. THE RE WAS NO INCOME COMPONENT THEREIN. THE AUDITORS HAD MADE A QUALIFICATION IN THEIR REPORT MAINLY RELYING ON THE CBDT CIRCULAR NO.715 DATED 08-08-1995. AS PER THE ASSES SEE, THE CBDT CIRCULAR COVERED ONLY PAYMENTS COMING WITHIN T HE AMBIT OF SECTION 194C WHERE THERE WERE CONSOLIDATED PAYMENTS BASED ON ADVERTISING CONTRACT. HOWEVER, THE CIT WAS NOT IMPRESSED BY THE ABOVE ARGUMENT. ACCORDI NG TO HIM, THE CIRCULAR MENTIONED SUPRA, CLEARLY COVERED THE TYPE OF PAYMENTS EFFECTED BY THE ASSESSEE TO M/S TLG IND IA PVT. LTD. ASSESSEE HAVING NOT DEDUCTED TAX AT SOURCE AS REQUIRED U/S 194C OF THE ACT, LEARNED CIT HELD SECTION 40A(I A) OUGHT TO HAVE BEEN INVOKED BY THE AO. SINCE THE AO HAS NOT DONE THAT CIT HELD THE ASSESSMENT DONE TO BE ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF REVENUE. 10. THAT CBDT CIRCULARS CANNOT GIVE INTERPRETAT ION BEYOND THE PROVISIONS OF THE ACT AND OVERRIDING THE RULINGS OF APPELLATE AUTHORITIES, IS TRITE LAW. HONBLE AP EX COURT HAS TIME AND AGAIN CONSIDERED THIS POSITION AND AFF IRMED IT AS DONE IN HINDUSTAN AERONAUTICS LTD CASE(SUPRA). ASSESSEE HAD DEDUCTED TAX AT SOURCE U/S 194H ON THE COMMISSION AMOUNTS COMPRISED IN THE BILLINGS RAISED ON IT ITA NO.1065/B/15 5 BY M/S TLG INDIA PVT. LTD. THE AO WAS SATISFIED WI TH REGARD TO THE TREATMENT GIVEN BY THE ASSESSEE AND D EDUCTION OF TAX AT SOURCE BY IT. IN OUR OPINION, THE CIT WA S ONLY SUBSTITUTING HIS VIEW WITH A LAWFUL VIEW TAKEN BY T HE AO. REVISIONARY POWERS U/S 263 CANNOT BE INVOKED FOR TH IS PURPOSE. THE INGREDIENTS NECESSARY FOR INVOKING SU CH POWERS ARE THAT THERE SHOULD BE AN ERROR IN THE ORD ER AND SUCH ERROR SHOULD PREJUDICIAL TO THE INTEREST OF RE VENUE. THESE, IN OUR OPINION ARE ABSENT HERE. WE THEREFOR E, QUASH THE ORDER U/S 263 PASSED BY THE CIT. 7. WE CONFIRM THE ORDER OF CIT(APPEALS) IN HOLDING THAT THE ORDER U/S 263 NO LONGER EXISTS AND, THEREFORE, AOS ORDER GIVING EFFECT TO THE DIRECTIONS OF CIT, U/S 263, CANNOT SU BSIST. HENCE THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. WE ARE OF THE OPINION THAT THE REASONING GIVEN BY THE CIT(A) IN A LLOWING THE ASSESSEES APPEAL IS CORRECT. HENCE, WE DISMISS TH E APPEAL OF THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2015. SD/- SD/- (INTURI RAMA RAO) (ASHA VIJAY ARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 30 TH NOVEMBER, 2015. VMS / DS / ITA NO.1065/B/15 6 COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGI STRAR, ITAT, BANGALORE.