Hakmichand D & Sons, Ahmedabad V. The Dy.Commissioner of Income Tax,TDS-Circle, Ahmedabad

ITA 1209/AHD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0078 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 133A; 194C; 201(1)

Judgement Text

ITA NOS.1 206 TO 1 211 /AHD/201 6 ASSESSMENT YEAR S : 200 6 - 07 TO 2011 - 12 PAGE 1 O F 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR , AM AND MAHAVIR PRASAD, JM ] I.T.A. NO S . 1206 TO 1211 /AHD/201 6 ASSESSMENT YEAR S : 2006 - 07 TO 2011 - 12 HAKMICHAND D & SONS, ........ ... .. APPELLA NT G / 4, NITYANAND APARTMENTS, NEAR VAKIL W ADI, MANINAGAR, AHMEDABAD 380 008. [P AN: AACFH 5016 P] VS. DY. COMMISSIONER OF INCOME TAX, TDS CIRCLE , AHMEDABAD. . . . RESPONDENT APPEARANCES BY: S.N. SOPARKAR FOR THE APPELLANT SUMIT KUMAR VERMA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 0 8 . 11 .2016 DATE OF PRONOUNC ING THE ORDER : 0 9 . 1 1 .2016 O R D E R PER BENCH : 1. THE S E SIX APPEALS, PERTAIN TO THE SAME ASSESSEE , INVOLV E A COMMON ISSUE AND WERE HEARD TOGETHER. AS A MATTER OF CONVENIENCE, THERE F ORE, ALL THE S E SIX APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. IN SUBSTANCE, THE SHORT AND COMMON GRIEVANCE, ARISING IN ALL THE S E APP E ALS, IS THAT THE LEARNED CIT ( A ) ER RE D IN UPHOLDING THE TAX WITHHOLDING DEMANDS RAI SED UNDER SECTION 201(1) R.W.S. 194J, AND UNDER SECTION 201 ( 1A) R.W.S. 194J, IN RESPECT OF LICENCE ITA NOS.1 206 TO 1 211 /AHD/201 6 ASSESSMENT YEAR S : 200 6 - 07 TO 2011 - 12 PAGE 2 O F 5 FEES PAID TO INDIAN RAILWAY CATERING & TOURISM CORPORATION LIMITED (IRCTC) AS FOLLOWS : - ASSESSMENT YEAR AMOUNT (RS.) 2006 - 07 1,67,09,358/ - 2007 - 08 4,9 6,03,342/ - 2008 - 09 4,95,44,808/ - 2009 - 10 5,42,69,182/ - 2010 - 11 5,91,89,716/ - 2011 - 12 3,34,86,993/ - 3. TO ADJUDICATE ON THESE APPEALS, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEE HAS MAD E THE PAYMENTS, AS SET OUT ABOVE, A S LICENCE FEES FOR BEING AWARDED LICENCE FOR RENDITION AND MANAGEMENT OF ON BOARD SERVICES ON CERTAIN TRAINS. THERE IS ALSO NO DISPUTE ABOUT THE FACT THAT NO T AXE S WERE DEDUCTED AT S OURCE FROM THESE PAYMENTS . ON THESE F ACTS, WHEN A SURVEY UNDER SECTION 133A WAS CONDUCTED FOR VERIFYING COMPLIANCE WITH T A X DEDUCTION AT SOURCE OBLIGATIONS , IT WAS NOTED THAT THERE IS A FAILURE ON T HE PART OF THE ASSESSEE TO DEDU CT TAX AT SOURCE UNDER SECTION 194J. THE ASSESSING OFFICER WAS OF T HE VIEW THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE UNDER SECTION 194J , AS LICENCE FEE PAYMENTS WERE DULY COVERED BY THE SCOPE OF THAT SECTION. THE ASSESSING OFFICER, ACCORDINGLY , PASSED ORDERS UNDER SECTION 201(1) AND 201(1A) R.W.S. 194J , HOLDING THE ASSESSEE AT FAULT FOR NON - COMPLIANCE AS ABOVE. AGGRIEVED, ASSESSEE CA RR IED THE MATTER IN APPEAL BEFORE THE LEARNED C IT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. ITA NOS.1 206 TO 1 211 /AHD/201 6 ASSESSMENT YEAR S : 200 6 - 07 TO 2011 - 12 PAGE 3 O F 5 4. WE HAVE HEARD THE RIVAL CO NTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. 5 . THE ISSUE IN APPEAL IS NO LONGER RES INTEGRA . A CO - ORDINATE BENCH OF THIS TRIBUNAL, IN ASSESSEE S OWN CASE IN RESPECT OF ASSESSME NT UNDER SECTION 143(3) FOR THE ASSESSMENT YEA R S 2006 - 07 TO 2011 - 12, HAS, INTER ALIA, OBSERVED AS FOLLOWS : - 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, ON MERITS, THE ASSESSEE DESERVES TO SUCCEED ON THESE COUNTS IN VIEW OF THE FOLLOWING: - A . THE IMPUGNED LICENSE FEE IS PAID BY ASSESSEE TO IRCTC FOR AWARDING LICENSED RIGHTS. PAYMENTS CANNOT BE CONSTRUED FOR RENDERING ANY SPECIALIZED SERVICES OR PASSING ON OF ANY MANAGERIAL OR TECHNICAL SKILL OR SERVICES, MUCH LESS EVEN A SERVICE. THE LICENSE FEE PAYMENTS ARE ATTRIBUTABLE TO A SET OF LEGAL OBLIGATIONS FLOWING FROM LICENSE. VIEWING FROM THE PARAMETERS LAID DOWN BY HON BLE SUPREME COURT IN THE CASES OF KOTAK SECURITIES AND BHARTI CELLULAR, THERE IS NEITHER AN Y ELEMENT OF SERVICE OR RENDERING OF TECHNICAL SERVICES WHATSOEVER. IN OUR CONSIDERED VIEW SEC. 194J IS NOT APPLICABLE TO ASSESSEES CASE. B . SIMILARLY SEC. 194C IS ALSO NOT APPLICABLE SINCE THE BASIS OF ALLOTMENT OF CATERING RIGHTS ON LICENSE FEE INVOLVES PE CULIAR FEATURES. THE IRCTC IS THE CONTRACTOR WHO AWARDS RIGHTS AND ASSESSEE IS THE CONTRACTEE OBLIGED TO PAY LICENSE FEE FOR AVAILING THOSE RIGHTS. SEC. 194C FASTENS LIABILITY ON CONTRACTOR WHEN AMOUNT IS PAID TO CONTRACTEE AND NOT VICE VERSA. THEREFORE PA YMENT OF LICENSE FEE BY CONTRACTEE TO CONTRACTOR CAN BY NO STRETCH OF IMAGINATION BE ASSUMED TO COME UNDER THE PURVIEW OF SEC. 194C. THERE BEING NO TDS LIABILITY EITHER U/S 194C OR 194J, LICENSE FEE PAID CANNOT BE DISALLOWED UNDER SEC. 40(A)(IA) OF ACT UND ER ANY CIRCUMSTANCES. C . THE LICENSE FEE PAYMENT IS NOT COVERED U/S 28(VA) ALSO, WHICH IS SPECIFICALLY FOR PAYMENTS TO SHARING ANY KNOW HOW, PATENT , COPY RIGHT , TRADE MARK, LICENSE, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE ETC. THE SIMILAR NATURE OF GREAT SIGNIFICANCE AND THE IMPUGNED LICENSE FEE NOT BEING PAID FOR SHARING ANY KNOW HOW, PATENT , COPY RIGHT , TRADE MARK, LICENSE, FRANCHISE CANNOT FALL UNDER ITS PURVIEW. D . APROPOS ADDITIONAL GROUND ALSO RESPECTFULLY HON BLE SUPREM E COURT JUDGMENTS SOM PRAKASH REKHI HAS LAID DOWN PARAMETERS AS TO WHEN A CORPORATION CAN BE CALLED A STATE FOR LEGAL AND PRACTICAL PURPOSES. INCOME TAX LAW PROVIDES SOME BENEFICIAL AND RELAXING PROVISIONS FOR GOVT. LOCAL BODIES ETC. FOR EASE OF ADMINISTRA TION AND FLEXIBILITY. TDS IS A MECHANISM TO AVOID NONPAYMENT OF TAXES BY PAYEES. LEGISLATURE IN ITS SUPERIOR WISDOM HAS INTENDED THAT GOVT. BODIES WILL NOT VENTURE INTO NONPAYMENT OF THEIR ITA NOS.1 206 TO 1 211 /AHD/201 6 ASSESSMENT YEAR S : 200 6 - 07 TO 2011 - 12 PAGE 4 O F 5 INCOME TAX, THEREFORE THEY ARE EXEMPTED FROM TDS. IT IS MORE SO AS MOSTLY THEY ARE GOVT. FUNDED, UNDER STRICT REGULATORY AND FINANCIAL CONTROL AND ARE COMPLIMENTARY ARMS OF GOVT. TO PERFORM PARTICULAR FUNCTIONS. LOOKING INTO ALL THESE NECESSITIES AND PRACTICAL DIFFICULTY THE WORD STATE HAS BEEN INTERPRETED TO AVOID THE RIGOR OF LITERAL CONSTRUCTION WHICH WAS LEADING TO UNINTENDED RESULTS, HON BLE SUPREME COURT LAID DOWN THESE PARAMETERS. THEY HAVE BEEN DEFTLY FOLLOWED BY PUNE BENCH IN KIRLOSKAR BROS. CASE. IN OUR CONSIDERED VIEW IN THE GIVEN FACTS AND CIRCUMSTANCES IRCTC FALLS WITHIN THOSE PARAMETERS. FOLLOWING HON BLE SUPREME COURT IN SOM PRAKASH REKHI AND COORDINATE ITAT PUNE BENCH, WE HOLD THAT IRCTC AMOUNTS TO GOVT. THEREFORE, ASSUMING EVEN THERE WAS ANY TDS LIABILITY; ASSESSEE WAS NOT LIABLE TO DEDUCT ANY TDS FROM LI CENSE FEE PAID TO IRCTC. E . THE ITAT SPECIAL BENCH IN BHARATI AUTO PRODUCTS AND IN GUJARAT PIPAVAV PORT LTD (SUPRA) HAS HELD THAT THE PROVISO TO SECTION 201 IS RETROSPECTIVE AND IF THE PAYEE HAS PAID TAXES (WHERE PAYABLE) THE PAYER CANNOT BE DEEMED TO BE IN DEFAULT OF TDS LIABILITY. ASSESSEE BY IRCTC DATED 27.03.2014 AND FORM NO 26 HAS DEMONSTRATED THAT LICENSE FEES PAID BY HIM FOR FY 2005 - 06 TO 2010 - 11 HAS BEEN INCLUDED BY IRCTC IN ITS ANNUAL PROFIT & LOSS ACCOUNT, BALANCE SHEET AND THEIR RETURNS OF INC OME. IN VIEW THEREOF WE SEE NO REASON AS TO WHY THE ASSESSEE SHALL BE HELD TO BE LIABLE FOR TDS AND DISALLOWANCE U/S 40(A)(IA). 8.1 IN VIEW OF FOREGOING FACTS, CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS AS MENTIONED ABOVE WE HOLD THA T ASSESSEE S LICENCE FEE PAYMENTS TO IRCTC WERE NOT LIABLE FOR TDS AND CANNOT BE DISALLOWED U/S. 40(A)(IA). THUS WE ALLOW THE ASSESSEE GROUNDS ON MERITS ALSO IN THIS BEHALF AND DISMISS RELEVANT REVENUE GROUNDS IN THE IMPUGNED YEARS. 6. RESPECTFULLY FOLLOW ING T HE ESTEEMED VIEWS SO EXPRESSED BY THE CO - ORDINATE BENCH, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO CANCEL T HE IMPUGNED DEMANDS UNDER SECTION 201(1) AND 201(1A) R.W.S. 194J. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 7 . IN THE RESULT, THE APPEALS ARE ALLOWED IN THE TERMS ABOVE. PRONOUNC ED IN THE OPEN COURT TODAY ON 9 TH DAY OF NOVEMBER, 2016. SD / - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 9 TH DA Y OF NOVEMBER , 2016. PBN/ * ITA NOS.1 206 TO 1 211 /AHD/201 6 ASSESSMENT YEAR S : 200 6 - 07 TO 2011 - 12 PAGE 5 O F 5 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMED ABAD