M/s. Gavhane Shikshan Prasarak Mandal, Nanded V. Income-tax Officer,

ITA 125/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7340 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-10-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 28-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Assessee Lawyers: N O N E
• Keywords: Business income
• Section: 201(1); 10; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO S. 124 & 125 /P U N/201 5 / ASSESSMENT YEAR S : 20 10 - 11 & 2011 - 12 M/S. GAVHANE SHIKSHAN PRASARAK MANDAL, 49, INDUSTRIAL AREA, BEHIND SBH BANK, SHIVAJI NAGAR, NANDED 431602 PAN : AABTG4689A ....... / APPELLANT / V/S. ACIT (OSD) 10(1), MUMBAI / RESPONDENT ASSESSEE BY : N O N E REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 04 - 10 - 2017 / DATE OF PRONOUNCEMENT : 13 - 10 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH ESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, NASHIK PASSED U/S. 201(1) AND 201(1A) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR THE ASSESSMENT YEARS 2010 - 11 AND 2011 - 12, RESPECTIVELY. BOTH THE IMPUGNED ORDERS ARE DATED 10 - 11 - 2014. SINCE, THE ISSUES RAISED IN BOTH THE APPEALS ARE ARISING FROM SAME SET OF FACTS AND THE GROUNDS RAISED IN 2 ITA NO S. 124 & 125/PUN/2015, A.YS. 2010 - 11 & 2011 - 12 BOTH THE APPEALS ARE IDENTICAL , THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DECIDED B Y THIS COMMON ORDER. 2. THE FIRST NOTICE OF APPEAL S FOR 03 - 05 - 2017 WAS SENT TO THE ASSESSEE ON 16 - 01 - 2017. THE SAID NOTICE HAS NOT BEEN RECEIVED BACK UN - SERVED OR OTHERWISE. SINCE, THE BENCH DID NOT FUNCTION ON 03 - 05 - 2017 THE APPEALS WERE ADJOURNED TO 09 - 08 - 2017. ON THE SAID DATE FRESH NOTICE WAS ISSUED TO THE ASSESSEE FOR 04 - 10 - 2017. THE NOTICE OF HEARING OF APPEALS WAS SENT TO THE ASSESSEE THROUGH RPAD. THE NOTICE WAS DULY SERVED. THE ACKNOWLEDGMENT OF SERVICE OF NOTICE IS AVAILABLE ON RECORD. D ESPITE SERVICE OF NOTICE , NEITHER THE ASSESSEE NOR ANY AUTHORIZED REPRESENTATIVE OF THE ASSESSEE IS PRESENT IN COURT. THE APPEAL WAS CALLED SECOND TIME AFTER PASSOVER. NO ONE WAS PRESENT ON BEHALF OF ASSESSEE. THEREFORE, THESE APPEALS ARE DECIDED ON THE BASIS OF DOCUMENTS AVAILABLE ON RECORD AND THE SUBMISSIONS MADE BY LD. DR. 3. DR. VIVEK AGGARWAL REPRESENTING THE DEPARTMENT SUBMITTED THAT THE ASSESSEE HAS MADE PAYMENT TO THE TUNE OF RS.10,43,500/ - IN ASSESSMENT YEAR 2010 - 11 WITHOUT DEDUCTING TAX AT SOURCE TO SMT. REWATI BHARAT GAVANE , P ROPRIETOR M/S. GAVHANE EDUCATIONAL SERVICE FOR USE OF PREMISES 49 - B, INDUSTRIAL AREA, SHIVAJI NAGAR, NANDED. SMT. REWATI BHARAT GAVANE IS THE ABSOLUTE OWNER OF AFORESAID PREMISES. THE SAID PREMISES WERE PROVIDED FOR RUNNING SCHOOL. AS PER AGREEMENT THE OWNER OF PREMISES PROVIDED BUILDING , FURNITURE, LAB EQUIPMENTS, ETC. FOR RUNNING THE SCHOOL. THE LD. DR SUBMITTED THAT THOUGH THE NOMENCLATURE OF AGREEMENT IS A GREEMENT OF FRANCHISEE BUT IN ACTUAL THE AGREEMENT IS F OR USE OF ASSETS AGAINST PAYMENT OF RENT. THE ASSESSEE VIOLATED THE PROVISIONS OF SECTION 194I OF THE ACT AND PAID RENT FOR USE OF ASSETS WITHOUT DEDUCTION OF TDS IN 3 ITA NO S. 124 & 125/PUN/2015, A.YS. 2010 - 11 & 2011 - 12 BOTH THE ASSESSMENT YEARS . THE LD. DR POINTED THAT SMT. REWATI BHARAT GAVHANE RECEIVED R S .41,70,530/ - FROM ASSESSEE WITHOUT DEDUCTION OF TAX AT SOURCE IN ASSESSMENT YEAR 2011 - 12. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE HAS UPHELD THE ORDER OF ASSESSING OFFICER IN BOTH THE IMPUGNED ASSESSMENT YEARS. THE LD. DR PRAYED FOR DISMISSING THE APPEAL OF ASSESSEE AND CONFIRMING THE IMPUGNED ORD ERS. 4. THE GROUNDS RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2010 - 11 ARE AS UNDER : 1. HONOURABLE COMMISSIONER (APPEALS) HAS ERRED IN CONFIRMING ASSESSING OFFICERS ORDER U/S. 201(1)/201(1A) AND 201(1A) OF THE INCOME TAX ACT, 1961. SAME MAY PLEASE BE CANCELLED. 2. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE. CIT(A) HAS ERRED IN NOT APPLYING THE PROVISO TO SECTION 201 INTRODUCED W.E.F. 01.07.2012 (ORDER IS DATED 12.07.2012) AND APEX COURT DECISION IN CASE OF HINDUSTAN COCO - COLA LTD. 3. APPELLANT PRAYS FOR JUST AND EQUITABLE RELIEF. IDENTICAL GROUNDS HAVE BEEN RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2011 - 12. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY THE LD. DR AND HAVE PERUSED THE DOCUMENTS AVAILABLE ON RECORD. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED THAT THE BUILDING OWNED BY SMT. REWATI BHARAT GAVANE , P ROPRIETOR M/S. GAVHANE EDUCATIONAL SERVICE HAS BEEN SPECIFICALLY DESIGNED AND CONSTRUCTED WITH A VIEW TO HOUSE SCHOOL . M/S. GAVHANE EDUCATIONAL SERVICE IS A FRANCHISEE AND THE ASSESSEE IS A FRANCHISER. THE ASSESSEE HAS PURPORTEDLY MADE PAYMENTS TO FRANCHISEE ON ACCOUNT OF BUSINESS TRANSACTIONS. THE REVENUE HAS DISPUTED THE NATURE OF PAYMENTS SO MADE . THE CONTENTION OF REVENUE IS THAT THE PAYMEN TS ARE IN THE 4 ITA NO S. 124 & 125/PUN/2015, A.YS. 2010 - 11 & 2011 - 12 NATURE OF RENT FOR USE OF BUILDING , FURNITURE ETC. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS UPHELD THE FINDINGS OF ASSESSING OFFICER BY OBSERVING AS UNDER : 6.2 THE APPELLANT HAS RAISED THE QUESTION OF WHETHER THE ITO, TDS HAS THE POWE R TO DECIDE THE CORRECT HEAD OF INCOME IN THE HANDS OF THE DEDUCTOR. IN MY VIEW, THE ITO, TDS HAS THE POWER TO DECIDE SUCH ISSUE. UNLESS THE CHARACTER OF THE INCOME AND THE CORRECT HEAD OF THE INCOME IS DETERMINED, IT WILL NOT BE POSSIBLE TO APPLY THE PR OVISIONS OF I.T. LAW RELATING TO TDS INCLUDING SECTION 1941 OF THE I.T. ACT. IN THIS CASE, THERE IS AN ATTEMPT BY THE APPELLANT (FRANCHISER) AND THE FRANCHISEE TO SHOW THE INCOME FROM HOUSE PROPERTY AS BUSINESS INCOME WITH A VI E W TO AVOID DEDUCTING TAX U/ S. 194I OF THE ACT AND TO REDUCE THE TAXABLE INCOME IN THE HANDS OF THE RECIPIENT (THE FRANCHISEE) BY CLAIMING INADMISSIBLE EXPENSES. THEREFORE, THE APPELLANTS SUBMISSION THAT THE RECIPIENT (THE FRANCHISEE) HAS PAID THE TAX ON THE INCOME RECEIVED FROM TH E APPELLANT IS NOT FULLY CORRECT AND THEREFORE, CAN NOT BE ACCEPTED. LOOKED FROM THIS ANGLE, THERE IS ESCAPEMENT OF INCOME IN THE HANDS OF THE FRANCHISEE SMT. REWATI. IN SUCH SITUATION, IT CAN NOT BE SAID THAT THE RECIPIENT HAS SHOWN THE INCOME IN HER RE TURN OF INCOME AND HAS PAID TAXES. NO TAX HAS BEEN PAID ON THE ESCAPED PORTION OF THE INCOME ON ACCOUNT OF WRONG HEAD OF INCOME BEING APPLIED BY THE TWO PARTIES INVOLVED. THIS BEING THE CASE, THE AO IS JUSTIFIED IN DECLARING THE APPELLANT AS AN ASSESSEE IN DEFAULT AND IN ASSESSING THE TAX LIABILITY AND INTEREST OF RS.1,63,820/ - U/S. 200(1) AND 201(1A) OF THE I.T. ACT. IN SHORT, THE ORDER OF THE AO IS UPHELD. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS MADE SIMILAR OBSERVATIONS IN BOTH THE IMPUGNED ASSESSMENT YEARS. 6 . IN THE ABSENCE OF ANY CONTRARY MATERIAL WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, GROUND NO. 1 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED. 7. IN GROUND NO. 2 THE ASSESSEE HAS MADE AN ALTERNATE SUBMISSION TO DECIDE THE ISSUE IN THE LIGHT OF PROVISO TO SECTION 201 AND THE JUDGMENT OF HONBLE SUPREME COURT OF INDIA RENDERED IN THE CASE OF HINDUSTAN COCA 5 ITA NO S. 124 & 125/PUN/2015, A.YS. 2010 - 11 & 2011 - 12 COLA BEVERAGE (P) LTD. VS. COMMISSIONER OF INCOME TAX REPORTE D AS 293 ITR 226. IT IS AN UNDISPUTED FACT THAT THE REVENUE HAS INVOKED THE PROVISIONS OF SECTION 201(1) AND 201(1A) AFTER VERIFICATION OF RETURN OF INCOME AND COMPUTATION OF INCOME OF SMT. REWATI BHARAT GAVANE FOR ASSESSMENT YEAR 2011 - 12. THUS, THE AMOU NT RECEIVED BY SMT. REWATI BHARAT GAVANE FROM THE ASSESSEE HAS BEEN REFLECTED IN HER RETURN OF INCOME . IN HINDUSTAN COCA COLA BEVERAGE (P) LTD. VS. COMMISSIONER OF INCOME TAX (SUPRA) , THE HONBLE APEX COURT REFERRING TO CBDT CIRCULAR DATED 29 - 01 - 1997 OBSE RVED : BE THAT AS IT MAY, THE CIRCULAR NO. 275/201/95 - IT(B), DT. 29TH JAN., 1997 ISSUED BY THE CBDT, IN OUR CONSIDERED OPINION, SHOULD PUT AN END TO THE CONTROVERSY. THE CIRCULAR DECLARES 'NO DEMAND VISUALIZED UNDER S. 201(1) OF THE IT ACT SHOULD BE ENFOR CED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER - IN - CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE - ASSESSEE. HOWEVER, THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST UNDER S. 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY TH E DEDUCTEE - ASSESSEE OR THE LIABILITY FOR PENALTY UNDER S. 271C OF THE IT ACT. IN THE INSTANT CASE, THE APPELLANT HAD PAID THE INTEREST UNDER S. 201(1A) OF THE ACT AND THERE IS NO DISPUTE THAT THE TAX DUE HAD BEEN PAID BY DEDUCTEE - ASSESSEE (M/S PRADEEP OIL CORPORATION). IT IS NOT DISPUTED BEFORE US THAT THE CIRCULAR IS APPLICABLE TO THE FACTS SITUATION ON HAND. 8. SUBSEQUENTLY, A PROVISO TO SECTION 201 WAS INSERTED BY THE FINANCE ACT, 2012 WHICH TAKES CARE OF SITUATIONS WERE THE ASSESSEE WAS LIABLE TO DE DUCT TAX AT SOURCE ON THE PAYMENTS MADE BUT HAS FAILED TO DO SO, SHALL NOT BE DEEMED TO BE ASSESSEE IN DEFAULT, IF HE IS ABLE TO SHOW BY FURNISHING A CERTIFICATE THAT THE RECIPIENT OF THE AMOUNT HAS DECLARED THE AMOUNT SO RECEIVED IN ITS RETURN OF INCOME A ND HAS PAID TAX DUE ON THE SAID AMOUNT. 9. IN THE INSTANT CASE, WE OBSERVE THAT IN BOTH THE IMPUGNED ASSESSMENT YEARS THE REVENUE HAS DISCOVERED THE PAYMENT OF AMOUNT 6 ITA NO S. 124 & 125/PUN/2015, A.YS. 2010 - 11 & 2011 - 12 (RENT) BY ASSESSEE TO SMT. REWATI BHARAT GAVANE FROM HER RETURN OF INCOME AND COMPUTATION OF INCOME. THOUGH THE PROVISO TO SECTION 201 HAS BEEN INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01 - 07 - 2012, BUT THE RATIO LAID DOWN IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. VS. COMMISSIONER OF INCOME TAX (SUPRA) SQUARELY APPLIES TO THE FACTS OF THE CASE. THUS, WE REMIT THE FILE BACK TO ASSESSING OFFICER TO APPLY THE SAME. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND NO. 2 RAISED IN THE APPEAL BY THE ASSESSEE IS THUS ALLOWED. 10. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON FRIDAY, THE 13 TH DAY OF OCTOBER, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 13 TH OCTOBER, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2, NASHIK 4. / THE CIT - TDS, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE