Shri.Ramachandra Pai, Kanhandad V. The ITO, Kasargode

ITA 129/COCH/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2619 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 24-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R KRISHNAN SH K P GOPAKUMAR

Judgement Text

ITA NOS 128 TO 130/C/2014 & SPS 19 TO 21/C/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI B P JAIN , A M & GEORGE GEORGE.K , J M ITA NO S 128 TO 130/COCH/2014 (ASST YEAR S 2006 - 07, 2007 - 08 & 2009 - 10 ) & STAY PETITIONS NOS 19 TO 21/COCH/2014 LATE H RAMACHABNDRA PAI REP BY L/H S MT GEETHA R PAI RAM AGENCIES HOSDURG KANHANGAD 671 315 VS THE INCOME TAX OFFICER WARD 2 KASARAGOD ( APPELLANT /APPLICANT ) (RESPONDENT) PAN NO. AESPP2342E ASSESSEE BY SH R KRISHNAN REVENUE BY SH K P GOPAKUMAR SR DR DATE OF HEARING 15 TH MARCH 2016 DATE OF PRONOUNCEMENT 16 TH , MARCH 2016 ORDER PER BENCH : THESE APPEALS, AT THE INSTANCE OF THE ASSESSEE, ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE CIT(A) DATED 19.12.2013. THE RELEVANT ASSESSMENT YEARS ARE 2006 - 07, 2007 - 08 AND 2009 - 10. 2 SI NCE COMMON ISSUE IS INVOLVED IN THESE APPEALS AND THEY PERTAIN TO THE SAME ASSESSEE, THEY WERE HEARD TOGETHER AND DISPOSE OFF BY THIS CONSOLIDATED ORDER. ITA NOS 128 TO 130/C/2014 & SPS 19 TO 21/C/2014 2 3 THE SOLITARY ISSUE THAT IS RAISED IN THESE APPEALS IS WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTIO40(A)(IA) OF THE I T ACT. 4 BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A DISTRIBUTOR OF BSNL PRODUCTS, NAMELY SIM CARDS, RECHARGES COUPONS ETC. THE ASSESSMENTS FOR THE AYS 200 6 - 07, 2007 - 08 AND 2009 - 10 WERE COMPLETED BY ORDER DATED 31.8.2010,19.9.2012 AND 30.12.2011 RESPECTIVELY. IN THE SAID ASSESSMENT ORDERS, THE AO HAD DISALLOWED THE EXPENDITURE CLAIMED BEING THE DISCOUNT/COMMISSION PAID TO THE SUB - DEALERS BY INVOKING THE PRO VISIONS OF SECTION 40(A)(IA) OF THE I T ACT , ON THE GROUND THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF SECTION 194H OF THE ACT. THE ADDITIONS MADE U/S 40(A)(IA) FOR THE AYS 2006 - 07, 2007 - 08 AND 2009 - 10 ARE RS.36,17,312/ - , RS.1,13,78760/ - AND RS. 81,79,568/ - RESPECTIVELY. 5 AGGRIEVED, THE ASSESSEE PREFERRED APPEAL AL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE RELEVAN T FINDINGS OF THE CIT(A) READ AS FOLLOWS : 5. I HAVE CONSIDERED THE SUBMISSION OF THE ID COUNSEL AND HAVE ALSO PERUSED THE ASSESSMENT ORDERS. 5 . 1 THE FIRST ISSUE IS AGAINST THE DISALLOWANCE OF DISCOUNT/COMMISSION PAID TO SUB DEALERS U/S 40(A)(IA) OF THE ACT . I AM INCLINED TO FIND FAVOUR WITH THE ASSESS I NG ITA NOS 128 TO 130/C/2014 & SPS 19 TO 21/C/2014 3 OFFICER WHO HAS HELD THAT ASSESSEE I S REPRESENTING BSNL TO ITS SUB - DEALERS AND CUSTOMERS . IT IS THEREBY PROVIDING . SERVICE ON BEHALF OF BSNL DUE TO WHICH I T IS EARNING AND PAY I NG A COMMISSION. THEREFORE, THE DECISION OF HON ' BLE I TAT , COCHIN BENCH, LATER UPHELD BY HON'BLE KERALA HIGH COURT RELIED ON BY THE AO IS PROPER AND THE ADDITION IS UPHELD. 5 . 2 THE SECOND ISSUE PERTAINING TO ASSESSMENT YEARS 2007 - 08 AND 2009 - 10 IS AGAINST RESTRICTING TDS PROPORTION ATE TO THE AMOUNT OF COMMISS I ON D I SCLOSED BY THE ASSESSEE I N THE RETURNS OF INCOME . SINCE THE ENTIRE AMOUNT OF COMMISS I ON HAS BEEN BROUGHT TO TAX IN THE ASSESSMENTS, I DO NOT SEE ANY REASON TO RESTRICT THE TDS PROPORT I ONATE TO THE COMMISSION DISCLOSED BY T HE ASSESSEE IN THE RETURNS . I THEREFORE, DIRECT THE ASSESS I NG OFFICER TO GIVE CREDITFOR THE FULL AMOUNT OF TDS IN BOTH THE AYS 2007 - 08 AND 2009 - 10 . 6 ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASS ESSEE HAD UNFORTUNATELY DIED WHEN THE APPEAL WAS PENDING BEFORE THE TRIBUNAL AND THE LEGAL HEIR NAMELY, WIFE SMT GEETA R PAI HAS BEEN IMPLEADED. THE LD COUNSEL SUBMITTED THAT THE AO HAD ERRED IN APPLYING SECTION 40(A)(IA) OF THE I T ACT, SINCE NO AMOUN T HAS BEEN DEDUCTED AS COMMISSION IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. IT WAS CONTENDED THAT THE CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THERE IS CLEAR DISTINGUISH BETWEEN VODAFONE CASE AND THE CASE OF THE ASSESSEE, WHICH READ AS UNDER: SL NO VODAFONE CASE SH RAMACHANDRA PAI CASE 1 VODAFONE WAS MOBILE CELLULA R SERVICE PROVIDER TO CUSTOMER THE APPLICANT SH RAMACHANDRA PAI IS NOT PROVIDING ANY CELLU LA R SERVICE TO HIS OWN. 2 IT IS THE SIM CARD THAT LI NKS THE SUBSCRIBER TO THE VODAFONE NETWORK. HENCE VODAFONE IS THE PRINCIPAL THE APPELLANT DOES NOT HAVE ANY CELLULAR SERVICE NETWORK AND ASSESSEE IS NOT THE PRINCIPAL. BSL IS PRINCIPAL 3 VODAFONE IS ACCOUNTABLE UNDER THE SERVICE CONTRACT WHICH IS ARRANGED THE DISTRIBUTOR FOR THE ASSESSEE THE APPELLANT IS NOT ALL ACCOUNTABLE FOR ANY SERVICE CONTRACT WITH BSNL CUSTOMER FOR QUALITY AND QUANTITY OF SERVICES. 4 CRUX OF CONTRACT IS WITH VODAFONE CRUX OF CONTRACT IS NOT WITH ASSESSEE I.E.SH ITA NOS 128 TO 130/C/2014 & SPS 19 TO 21/C/2014 4 AND CUSTOMER RAMACHAN DRA PAI CONCLUSION DISCOUNT GIVEN BY THE CELLULAR PHONE OPERATOR TO THE DISTRIBUTOR AT THE TIME OF DELIVERY OF SIM CARDS OR RECHARGE COUPONS IS ONLY FOR RENDERING SERVICES TO THE ULTIMATE SUBSCRIBERS AND THERE IS NO SALE OF ANY GOODS AND THEREFORE, SUCH D ISCOUNT FALLS WITHIN THE DEFINITION OF COMMISSION OR BROKERAGE WITH THE MEANING OF CL(I) OF EXPLANATION TO SECTION 194H FROM WHICH TAX IS DEDUCTIBLE AT SOURCE. THE APPELLANT IS NEITHER A CELLULAR PHONE OPERATOR NOR HE WANTS CUSTOMER FOR HIS NETWORK. THE RA TIO OF JUDGMENT IN CASE OF VODAFONE IS APPLICABLE TO BSNL IN THE PRESENT ARRANGEMENT AND BSNL HAS DULY DEDUCTED TDS U/S 194H 6.1 IT WAS SUBMITTED THAT THE CIT(A) HAS NOT CONSIDERED THE VARIOUS JUDICIAL PRONOUNCEMENTS SUBMITTED BY THE ASSESSEE ON THE DATE OF HEARING W HILE PASSING THE IMPUGNED ORDER. THE JUDICIAL PRONOUNCEMENT RELIED ON BY THE ASSESSEE BEFORE THE CIT(A) ARE AS FOLLOWS: I) PAREEK ELECTRICALS (ITA NO. 354/CTK/2012 DT. 28.09 . 12) II) AHMEDABAD STAMP VENDOR ASSOCIATION VS. UOI (SC 257 ITR 20 2) III) KERALA STAMP VENDOR ASSOCIATION VS. 0/0 THE ACCOUNTANT GENERAL AND OTHERS (HC 282 ITR 07 KER) IV) M/ S HINDUSTAN ASSOCIATED TRADERS AND M/ S MORING STAR AGENCY VS CCR, COCHIN (CESAT APPEAL NO. 2007 - 1TS - 3390 DT 07.06.2007). V) MERILYN SHIPPIN G & TRANSPORTS VS. ADDL. CIT, 136 ITD 23 (VISAKHAPATNAM) VI)CEE PEE GRANITE PVT LTD AND CEE PEE MARBLES & GRANITE VS. ACIT, TIRUR (I . T.A NO 400 & 401/ COCH/2011) 6.2 FINALLY, IT WAS ARGUED THAT THE ISSUE HAS NOT BEEN EXAMINED PROPERLY BY THE AO NOR BY THE CIT(A). IT WAS STATED THAT THE ASSESSEE WAS A SMALL TIME DISTRIBUTOR OF BSNL PRODUCTS AND THE COMMISSION/DISCOUNT PAYMENTS WOULD BE LESS THAN RS. 2,500/ - . THEREFORE, IN VIEW OF THE FIRST PROVISO TO SECTION 194H OF THE ITA NOS 128 TO 130/C/2014 & SPS 19 TO 21/C/2014 5 ACT , NO TAX NEEDS TO BE DEDUCTED AT SOURCE. THEREFORE, IT WAS SUBMITTED THAT THE MATTER NEEDS A PROPER DELIBERATION AND EXAMINATION BY THE AO CONCERNED. 6.3 THE LD DR, PRESENT WAS DULY HEARD. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FOR EXAMINING THE IS SUE, IT IS NECESSARY TO ANALYZE THE SECTION 194H AND ITS FIRST PROVISO, WHICH READS AS UNDER: 194H. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF JUNE, 2001, TO A RESIDENT, ANY I NCOME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 194D ) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME - TAX THEREON AT THE RATE OF [TEN] PER CENT : PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTIO N IN A CASE WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED [FIVE THOUSAND RUPEES] 7.1 FROM THE ABOVE READING OF THE SECTION AND ITS FIRST PROVISO, IT IS EVIDENT THAT NO TDS NEED TO BE MADE WHEN THE PAYMENTS AGGREGAT ING TO LESS THAN RS. 5000 (LESS 2.500/ - DURING THE RELEVANT ASSESSMENT YEAR) IS MADE TO A PAR TICULAR PAYEE. IN THE INSTANT CASE, THE AO NOR THE CIT(A) HAVE EXAMINED WHETHER THE PAYMENT TO EACH OF THE PAYEE IS BELOW THE AMOUNT PRESCRIBED UNDER THE FIRST PROVISO TO SECTION 194H. THE OTHER CONTENTIONS RAISED BY THE ASSESSEE MENTIONED ABOVE ARE ALS O NOT EXAMINED IN GREAT DETAIL BY BOTH THE AUTHORITIES BELOW . THEREFORE, IN THE INTEREST OF JUSTICE AND EQUITY, WE ARE OF THE VIEW, THAT THE MATTER NEEDS ITA NOS 128 TO 130/C/2014 & SPS 19 TO 21/C/2014 6 FRESH EXAMINATION AT THE LEVEL OF THE AO. ACCORDINGLY, WE REMIT THE ISSUE FOR ALL THE ASSESSMENT YEA RS TO THE FILE OF THE AO FOR DO - NOVO CONSIDERATION. THE AO SHALL DISPOSE OF THE MATTER AS EXPEDITIOUSLY AS POSSIBLE, AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 8 IN THE RESULT, THE APPEALS FILED BY THE A SSESSEE FOR THE AYS 2006 - 07, 2007 - 08 AND 2009 - 10 ARE ALLOWED FOR STATISTICAL PURPOSE. STAY PETITIONS: 19 TO 21/COCH/2014: 9 SINCE ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSE , THE STAY PETITIONS FILED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND TH EREFORE , THE SAME ARE DISMISSED. 10 TO SUM - UP, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES ; WHEREAS THE STAY PETITIONS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH , DAY OF MARCH 2016 . SD/ - S D / - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 16 TH , MARCH 2016 RAJ* ITA NOS 128 TO 130/C/2014 & SPS 19 TO 21/C/2014 7 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN