ACIT, Circle-1(2), Hyderabad V. M/s. Continental Wines Pvt.Ltd., Vijayawada

ITA 1299/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53714 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Gift; Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEM BER ITA NO.1299/HYD/2011 : ASSESSMENT YEAR 2007-08 ASST. COMMISSIONER OF INCOME - TAX CIRCLE 1(2), HYDERABAD. V/S. M/S. CONTINENTAL WINES LTD., VIJAYAWADA ( PAN - AAACC 8954 G ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.SRINIVAS RESPONDENT BY : SHRI C.P.RAMASWAMY DATE OF HEARING 24.10.2011 DATE OF PRONOUNCEMENT 24.10.2011 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-II HYDERABAD DA TED 24.5.2011 FOR THE ASSESSMENT YEAR 2007-08. 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEA L READ AS FOLLOWS- '1.. 2. THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE I S NOT LIABLE TO DEDUCT TAX ON THE ADVERTISEMENT EXPENDITURE OF RS.2,05,87,862/ -. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAC T THAT THE CBDT CIRCULAR NO.715, DATED 08.08.1995 IS APPLICABLE IN THIS CASE . 4. THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 40A(IA) OF RS.2,05,87,86 2/-. ITA NO.1299/HYD/10 M/S. CONTINENTAL WINES LTD.,VJA . 2 5. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACTS D ISCUSSED BY THE AO DURING THE ASSESSMENT PROCEEDINGS ABOUT THE AGREEM ENT OF THE ASSESSEE COMPANY AND M/S. PRAYAG ENTERPRISES WHEREIN IT WAS CLEARLY OBSERVED THAT THE ASSESSEE HAS INCURRED ADVERTISEMENT EXPEN DITURE AND ALSO THERE WAS A SORT WORK AGREEMENT FOR DETAILS AND SPECIFICA TIONS OF THE MATERIAL TO BE SUPPLIED. 6. THE LEARNED CIT(A) IS NOT CORRECT IN NOT GIVING ANY FINDING ABOUT THE ASSESSEES SUBMISSIONS ON SECTION 194C, WHEREAS IN THE ASSESSMENT PROCEEDINGS, IT WAS CLEARLY PROVED BY THE AO THAT THE SAID ADVERTISEMENT EXPENDITURE IN FACT ATTRACTS SECTION194C PROVISIONS . 7. THE LEARNED. CIT(A) OUGHT TO HAVE NOTICED THAT T HE MATTER HAS NOT BECOME FINAL AS AN APPEAL IS FINED ON THIS ISSUE BE FORE THE HIGH COURT. THUS, THE DISPUTE INVOLVED IN THIS APPEAL RELATES T O DISALLOWANCE OF ADVERTISEMENT EXPENDITURE OF RS.2,05,87,862 MADE BY THE ASSESSING OFFICER, INVOKING THE PROVISIONS OF S.40(A)(IA) OF THE ACT, ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE. 3. WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERI AL ON RECFORD. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS COVERED AGAINST THE REVENUE WITH THE DECISION OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2006-07 IN I TA NO.428/HYD/2010, WHEREIN DELETION OF CORRESPONDING DISALLOWANCE MADE FOR THAT YEAR INVOKING THE PROVISIONS OF S.40(A)(IA) OF THE ACT, HAS BEEN UPHE LD BY THE TRIBUNAL, DISMISSING THE APPEAL OF THE REVENUE, IN THE FOLLO WING MANNER- 5. WE HAVE HEARD BOTH SIDES AND PERUSED THE ORDE RS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON R ECORD. IT IS EVIDENT FROM THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES T HAT THE EXPENDITURE OF RS.2,91,20,349 DISALLOWED BY THE ASSESSING OFFIC ER IN TERMS OF S.40A(IA), REPRESENTS THE AMOUNT PAID FOR THE PURC HASE OF T-SHIRTS BEARING THE ASSESSEE'S LOGO, FOR BEING DISTRIBUTED ON BEHALF OF THE ASSESSEE TO ITS RETAILERS. THIS EXPENDITURE HAS AC TUALLY BEEN INCURRED BY M/S. PRAYAG ENTERPRISES LIMITED, WITH WHOM AN AGREE MENT DATED 1.4.2005 HAS BEEN ENTERED BY THE ASSESSEE FOR MARKE TING ITS PRODUCTS. IN TERMS OF CLAUSE (12) OF THE SAID AGREEMENT, M/S. PRAYAG ENTERPRISES LIMITED WAS AUTHORISED TO DISTRIBUTE ALL COMPLIMENT S, GIFT ARTICLES, CASH INCENTIVES ON BEHALF OF THE ASSESSEE TO ITS RETAILE RS. ACCORDINGLY, M/S. PRAYAG ENTERPRISES LTD PURCHASED PRE-PRINTED T-SHIR TS FROM M/S. SHESHACHALAM TEXTILES LTD. AND SUPPLIED THE SAME TO THE ASSESSEE BY RAISING DEBIT NOTES ON THE ASSESSEE ON VARIOUS OCCA SIONS. THERE IS NO MATERIAL ON RECORD TO SHOW ASSESSEE HAS PROVIDED FO R ANY SPECIFICATIONS ITA NO.1299/HYD/10 M/S. CONTINENTAL WINES LTD.,VJA . 3 WITH REGARD TO THE T-SHIRTS TO M/S. SESHACHALAM TEX TILES LTD. OR M/S. PRAYAG ENTERPRISES LTD. FOR SUPPLYING SPECIFIED T-S HIRTS. THE ASSESSEE ADMITTEDLY HAS NOT SUPPLIED ANY RAW MATERIAL LIKE, YARN, THREAD OR INK FOR MAKING THE T-SHIRTS. IN THESE CIRCUMSTANCES, WE AG REE WITH THE CIT(A) THAT THE PREDOMINANT OBJECT UNDERLYING THE TRANSACT ION OF RECEIVING THE T-SHIRTS AND MAKING THE PAYMENTS IS LARGELY FOR PUR CHASE OF GOODS AND EVEN IF THERE IS SOME LOGO OF THE ASSESSEE PRINTED ON THE, IT WOULD NOT CHANGE THE NATURE OF THE TRANSACTION TO 'WORKS' CON TRACT, SO AS TO ATTRACT THE PROVISIONS OF S.194C OF THE ACT. THIS IS ISSUE IS ALSO COVERED BY THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CI T V/S. DABUR INDIA LTD. (283 ITR 197), WHICH IN FACT HAS BEEN FOLLOWED BY T HE CIT(A) IN THE IMPUGNED ORDER. IN THE CIRCUMSTANCES, WE FIND NO I NFIRMITY IN THE ORDER OF THE CIT(A), WHICH IS ACCORDINGLY UPHELD AND THE GROUNDS OF THE REVENUE IN THIS APPEAL ARE REJECTED. IN FACT, THE CIT(A) IN THE IMPUGNED ORDER HAS FOLLO WED THAT VERY DECISION OF THE TRIBUNAL FOR MAKING THE IMPUGNED ADDITION FOR THE A SSESSMENT YEAR UNDER APPEAL. IN THE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, THE ORDER OF THE CIT(A) IS CONFIRMED A ND THE GROUNDS OF THE REVENUE IN THIS APPEAL ARE REJECTED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 24. 10.2011 SD/- SD/- (ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 24TH OCTOBER, 2011 COPY FORWARDED TO: 1. M/S. CONTINENTAL WINES LTD., PLOT NO.8 & 10, IND USTRIAL ESTATE, VIJAYAWADA 2. ASST . COMMISSIONER OF INCOME - TAX CIRCLE 1(2), HYDERABAD. 3. COMMISSIONER OF INCOME - TAX(APPEALS) - II, HYDERABAD. 4. COMMISSIONER OF INCOME - TAX I HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.