M/s. The Royal Regency, CHENNAI V. DCIT, CHENNAI

ITA 1419/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51678 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 30-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K ME GHANATH CHAUHAN
• Assessee Lawyers: T VASUDEVAN
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI (BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER) .. I.T.A. NO. 1419/MDS/2010 ASSESSMENT YEAR : 2007-08 M/S THE ROYAL REGENCY, NO.26/27, POONAMALLEE HIGH RD., PERIAMET, CHENNAI 600 003. PAN : AAEFT4080D (APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE XII, CHENNAI 600 034. (RESPONDENT) APPELLANT BY : SHRI T. VASUDEVAN RESPONDENT BY : SHRI K. ME GHANATH CHAUHAN, JCIT O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A)-VI, CHENNAI DATED 11.06.20 10 FOR ASSESSMENT YEAR 2007-08. I.T.A. NO. 1419/MDS/10 2 2. GROUND NOS. 2 AND 3 TAKEN BY THE ASSESSEE ARE AS UNDER: 2. 2 THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER MAKING THE DISALLOWANCE OF RS.2. 50 LAKHS MADE ON ACCOUNT OF FRONT OFFICE EXPENSES FOR T HE PURPOSE OF RUNNING THE HOTEL BUSINESS. THE CIT(A) FAILED TO APPRECIATE THAT THE NATURE OF EXPENSES BEING PAYMENT MADE TO DRIVERS BRINGING IN PEOPLE FOR LODGING, THE SAME CAN BE MAINTAINED ONLY BY SELF VOUCHERS AND HENCE THE DISALLOWANCE ON THIS ACCOUNT WAS WHOLLY UNJUSTIFIED AND IN ANY EVENT WAS VERY HIGH AND UNREASONABLE. 3. THE BRIEF FACTS RELATING TO GROUNDS NOS. 2 AND 3 ARE THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF BOARDING AN D LODGING. IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT YEAR, THE APPELLANT HAD INTER-ALIA CLAIMED A SUM OF RS. 15,06,272/- UNDER THE HEAD FRONT OFFICE EXPENSES MOSTLY SUPPORTED BY SELF MADE VOUC HERS ONLY. THE SAME WAS EXPLAINED TO THE A.O. TO BE IN THE NATURE OF COMMISSION IN CASH PAID TO BROKERS, AUTO/CAR DRIVERS FOR BRING ING GUESTS INTO THE I.T.A. NO. 1419/MDS/10 3 HOTEL. THE A.O. DISALLOWED A SUM OF RS. 2,50,000/ - OUT OF THE ABOVE CLAIM IN ABSENCE OF ANY INDEPENDENT SUPPORTIN G EVIDENCE. 4. THE LD. CIT(A) HAS DECIDED THIS ISSUE BY OBSERVI NG AS UNDER: REGARDING GROUND NOS. 2 TO 4, IT IS FOUND THAT THE DISALLOWANCE WORKS OUT TO ONLY 16% (APPROX.) OF THE CLAIM MADE TOWARDS FRONT OFFICE EXPENSES. KEEPING IN VIE W THE REASONS FOR DISALLOWANCE, NO INTERFERENCE IS CALLED FOR AND THE A.O.S ACTION IN THIS REASON IS UPHELD AND GROUND NO .3 IS DISMISSED. GROUND NO.2 AND 4 ARE ARGUMENTATIVE GROUND S RELATED TO SUBSTANTIATE GROUND NO.3. 5. THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE PAID COMMISSION TO TAXI DRIVERS WHO BROUGHT CUSTOMERS TO THE ASSESSEES HOTEL. THE ASSESSING OFFICER HAS OBSERVED THAT THE EXPENDITURE WAS SUPPORTED BY INTERNAL VOUCHERS ONLY AND THEREFORE, OUT OF THE TOTAL EXPENDITURE MADE BY THE ASSESSEE OF RS. 15,06,722/ - HE MADE A DISALLOWANCE OF RS. 2,50,000/- AS THEY WERE NOT SU PPORTED BY INDEPENDENT EVIDENCES. HE SUBMITTED THAT THE ASSES SING OFFICER I.T.A. NO. 1419/MDS/10 4 HAS MADE A DISALLOWANCE OF APPROXIMATELY 16% OF THE EXPENSES AND THE SAME MAY BE REDUCED TO 10%. 6. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE OR DER OF THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER DISALLOWED RS. 2,50,000/- OUT OF TOTAL EXPENDITURE OF RS. 15,06,722/- AS THE EXPENSES WERE SUPPORTED BY EXTERNAL VOUCHERS ONLY AND NO OTHER EVIDENCE IN SUPPORT OF T HE EXPENDITURE WAS FILED BY THE ASSESSEE. THE ONLY SUBMISSION MAD E BY THE LD. A.R. OF THE ASSESSEE WAS THAT THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) WORKS OUT T O 16% OF THE TOTAL EXPENDITURE AND THE SAME IS ON A HIGHER SIDE AND THEREFORE, MAY BE REDUCED TO 10% OF THE TOTAL EXPENDITURE. WE FIND THAT THE LD. A.R. OF THE ASSESSEE COULD NOT FILE ANY MATERIA L ON RECORD TO SHOW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE OF RS. 15,06,272/- WAS REASONABLE. IN THE ABSENCE OF SUCH MATERIAL, WE I.T.A. NO. 1419/MDS/10 5 DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE O RDERS OF THE LOWER AUTHORITIES. HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 8. GROUNDS NOS. 4 TO 9 READ AS UNDER: 3. 4. THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.54,80,649 MADE BY THE OFFICER BY INVOKING THE PROVISIONS OF S EC 40(A)(IA) OF THE ACT. 5. THE CIT(A) FAILED TO APPRECIATE THAT THE PAYMENT WA S MADE TO ONE, SCHOCHAN RESTAURANT PVT. LTD. FOR THE MANUFACTU RE AND SUPPLY OF FOOD MATERIALS AND HENCE IS OUTSIDE THE P URVIEW OF SEC.194C OF THE ACT. 6. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT THE ASS ESSEE HAVING COMMENCED ITS BUSINESS ON 6.3.06 HAD TO MAKE ARRANG EMENTS FOR THE SUPPLY OF FOOD TO ITS CUSTOMERS AND HENCE TH E ENTIRE FOOD SUPPLY WAS ONLY BY WAY OF PURCHASE AND SALE FRO M THE OTHER PARTY FOR WHICH THE PAYMENT WAS MADE AND CONS IDERING THIS, THE APPLICATION OF SEC.194C DOES NOT ARISE WA RRANTING THE DISALLOWANCE U/S 40(A)(IA). I.T.A. NO. 1419/MDS/10 6 7. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT THE DI SALLOWANCE ITSELF WAS MADE ON A MISTAKEN PREMISE AND THAT THE ASSESSEE'S CASE SQUARELY FALLS CLEARLY WITHIN THE EXCLUSION CLAUS E UNDER THE EXPLANATION TO SEC.194C AS TO THE MANUFACTURE AND SU PPLY OF FOOD MATERIALS, HENCE INVOKING THE PROVISIONS OF SE C 40(A)(IA) DOES NOT ARISE AT ALL. 8. THE CIT(A), IN ANY VIEW OF THE MATTER, OUGHT TO HAV E SEEN THAT THE PAYMENT MADE TO SCHOCHUN RESTAURANT WAS ESSENTIAL LY IN THE NATURE OF A SALE TRANSACTION ALONG WITH A PROFIT ELEMENT AND HENCE THERE WAS NO OBLIGATION TO EFFECT TDS ON THE PAYMENTS MADE FOR THE PURPOSE. 9. THE CIT(A), IN ANY EVENT, WAS NOT JUSTIFIED IN CONFI RMING THE DISALLOWANCE U/S 40(A)(IA) WITHOUT DUE REGARD TO THE F ACTS OF THE CASE, IN AS MUCH AS, THE PAYMENT MADE FOR PURCHA SE IS OUTSIDE THE AMBIT OF SEC. 194C OF THE ACT. 9. THE LD. CIT(A), NARRATING THE FACTS HAS HELD AS UNDER: THE FACTS, IN BRIEF, RELATING TO GROUND NOS. 4 TO 9 ARE THAT THE A.O. ALSO NOTICED THAT THE APPELLANT HAD DISCLO SED SHARE FROM RESTAURANT INCOME AT RS. 31,67,348/- IN THE PR OFIT AND I.T.A. NO. 1419/MDS/10 7 LOSS ACCOUNT, NATURE OF WHICH WAS EXPLAINED BY THE A PPELLANT AS UNDER TO THE A.O. AS REPRODUCED IN THE IMPUGNED ASSESSMENT ORDER ON PAGE 2 THEREOF. SHARE FROM RESTAURANT INCOME: THE ASSESSEE FIRM HA D OUTSOURCED ITS RESTAURANT OPERATION TO M/S SCHOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI. AS PER THE UNDERSTANDING REACHED BETWEEN THEM, THE ASSESSEE FIR M IS ENTITLED TO SHARE OF PROFIT IN THE FOLLOWING RATION , 35% OR PROFIT ON SALE TO BANQUET HALL, 30% OF PROFIT ON SAL ES TO RESTAURANT AND 30% OF PROFIT ON SALES IN ROOM SERVIC E. THE SHARE FROM RESTAURANT INCOME REPRESENTS THE TOTAL PR OFIT DUE TO THE ASSESSEE COMPANY ON ACCOUNT OF VARIOUS ITEMS DESCRIBED ABOVE. THE ABOVE SHARE OF PROFIT REPRESE NTS THE CONSIDERATION OF LEASING OUT THE ABOVE RESTAURANT OPE RATION TO THEM. IT IS NOT EARNED FROM ANY OTHER PARTNERSH IP FIRM. AS A RESULT NO PARTNERSHIP DEED IS FILED. I.T.A. NO. 1419/MDS/10 8 FROM THE ABOVE REPLY, THE A.O. CONCLUDED THAT THE AP PELLANT HAD ENTERED INTO CONTRACT WITH M/S SCHOCHAN RESTAURA NT PRIVATE LIMITED, CHENNAI, TO RUN THE RESTAURANT BUSINE SS BUT HAD NOT DEDUCTED TDS U/S 194C ON THE PAYMENTS MADE TO M/S SCHOCHAN RESTAURANT PRIVATE LIMITED TOTALING TO RS. 54,80,649/- AS PER THEIR LEDGER ACCOUNT IN THE APPEL LANTS BOOKS OF ACCOUNT. SO THE A.O. DISALLOWED THE ENTIR E SUM OF RS. 54,80,649/- U/S 40(A)(IA) OF THE I.T. ACT, 196 1. THE APPELLANT CHALLENGES THE ABOVE DISALLOWANCES AN D HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF THE DEPUTY COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE XII, CHENNAI-6 (HEREIN AFTER REFERRE D AS THE ASSESSING OFFICER) IS NOT CORRECT ON THE FACT S OF THE CASE AND AGAINST THE PRINCIPLES OF LAW. 2. THE ASSESSING OFFICER HAD FAILED TO APPRECIATE THE FACT THAT IT IS INHERENT TO THE NATURE OF THIS BUSINESS O F BOARDING AND LODGING THAT FRONT OFFICE EXPENSES ARE TO I.T.A. NO. 1419/MDS/10 9 BE NECESSARILY TO BE INCURRED AND IT IS ALSO NOT PRACTICABLE TO OBTAIN VOUCHERS FROM THIRD PARTIES. 3. THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING AN AD HOC DISALLOWANCE OF RS. 2,50,000/- UNDER FRONT OFFIC E EXPENSES WITHOUT ANY BASIS AND THERE IS NO VALID REA SON OR GROUND FOR SUCH A HUGE ADDITION. 4. THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THE FACT THAT THE PREVIOUS YEAR 2006-07, RELEVANT TO ASSESSMENT YEAR 2007-08, IS THE FIRST YEAR OF COMME RCIAL OPERATION AND THE APPELLANT HAS TO ESTABLISH HIS NA ME IN THE CUSTOMERS MIND BY INCURRING NECESSARY FRONT OFFI CE EXPENSES IN ORDER TO MEET THE ACUTE COMPETITION FROM NEARLY 20 LODGING HOUSES SITUATED AROUND THE CENTRAL RAILWAY STATION, CHENNAI 5. THE ASSESSING OFFICER MADE A GRAVE MISTAKE IN CONCLUDING THAT TDS PROVISIONS ARE ATTRACTED FOR I.T.A. NO. 1419/MDS/10 10 PAYMENTS MADE TO M/S SCHOCHAN RESTAURANT PRIVATE LIMITED. 6. THE ASSESSING OFFICER FAILED TO APPRECIATE AND UNDERSTAND THE FACT THAT THE PAYMENTS WERE MADE TO SETTLE THE COST OF FOOD AND BEVERAGES PURCHASED FROM M/S SCHOCHAN RESTAURANT PRIVATE LIMITED. 7. THE ASSESSING OFFICER IS NOT CORRECT TO CONCLUDE THA T THE APPELLANT HAD GIVEN A CONTRACT TO M/S SCHOCHAN RESTAURANT PRIVATE LIMITED TO RUN THE RESTAURANT BUSINESS. 8. THE ASSESSING OFFICER FAILED TO UNDERSTAND THE FACT THAT IN FACT THERE WAS A PROFIT SHARING ARRANGEMENT BETW EEN THE APPELLANT AND M/S SCHOCHAN RESTAURANT PRIVATE LT D. AND THE DETAILS WERE FURNISHED BY THE APPELLANT HAD NOT BEEN PROPERLY UNDERSTOOD BY THE ASSESSING OFFICER 9. THE ASSESSING OFFICER MADE A GRAVE MISTAKE BY CONCLUDING THAT THE AMOUNT PAID TOWARDS PROFIT SHARIN G I.T.A. NO. 1419/MDS/10 11 ARRANGEMENT IS LIABLE FOR DEDUCTION OF TDS AND HE HA S COMMITTED A MISTAKE BY DISALLOWING THE PAYMENT MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA). REGARDING GROUND NO.5 TO 9, I AGREE WITH THE A.O. TH AT THE APPELLANT HAD ENTERED INTO A CONTRACT FOR CATERING WITH M/S SCHOCHAN RESTAURANT PRIVATE LIMITED IN THE LIGHT OF APPELLANTS ADMISSION IN GROUND NO.6 THAT THE PAYMEN TS WERE MADE TO SETTLE THE COST OF FOOD AND BEVERAGE PURCHA SED FROM THEM. SIMPLY BECAUSE THE PAYMENTS WERE MADE TO THEM TOWARDS PROFIT SHARING ARRANGEMENT CANNOT ALTER THE NATURE OF PAYMENTS IN PURSUANCE OF CONTRACT FOR CATERING TO SUPPLY FOODS AND BEVERAGES TO THE CUSTOMERS / GUESTS OF THE HOTEL. AS THE CATERING IS INCLUDED IN THE DEFINITION OF WORK AS PER EXPLANATION (IV) TO SECTION 194C, THE PAYMENTS MADE TO M/S SCHOCHAN RESTAURANT PRIVATE LIMITED ARE COVERED BY SECTION 194C AND WERE LIABLE FOR TDS. AS THE APPEL LANT HAS FAILED TO DEDUCT TDS ON THE SAME, THE SAME ARE LIABL E TO BE DISALLOWED U/S 40(A)(IA) OF THE I.T. ACT, 1961. THE ASSESSING I.T.A. NO. 1419/MDS/10 12 OFFICERS ACTION OF DISALLOWANCE UNDER SECTION 40(A) (IA) IS UPHELD AND NO INTERFERENCE IS CALLED FOR GROUND NO.5 AND 9 ARE ACCORDINGLY DISMISSED. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, ASSESSEE IS ENGAGED IN THE BUSINESS O F LODGING SERVICES. DURING THE YEAR UNDER CONSIDERATION, THE RESTAURANT OF THE ASSESSEE WAS NOT COMMENCED AND, THEREFORE, TO PROVIDE FOOD A ND BEVERAGES TO THE CUSTOMERS RESIDING IN THE LODGE OF THE ASSES SEE, ASSESSEE ENTERED INTO AN ARRANGEMENT WITH M/S SCHOCHAN RESTA URANT PRIVATE LIMITED, CHENNAI. THE ABOVE FACTS ARE NOT IN DISPU TE. IN PURSUANCE OF THE SAID ARRANGEMENT, ASSESSEE RECEIVED RS. 31, 67,348/- WHICH THE ASSESSEE DISCLOSED IN ITS PROFIT AND LOSS ACCOU NT UNDER THE HEAD SHARES FROM RESTAURANT INCOME. ACCORDING TO THE ASSESSING OFFICER, ON VERIFICATION OF THE ABOVE INCOME, DISCL OSED BY THE ASSESSEE, HE OBSERVED THAT THERE WAS NO WRITTEN AGR EEMENT BETWEEN THE ASSESSEE AND THE SAID M/S SCHOCHAN REST AURANT PRIVATE LIMITED, CHENNAI. ON QUERY, THE ASSESSEE EXPLAINED BEFORE HIM I.T.A. NO. 1419/MDS/10 13 THAT THE ABOVE INCOME REPRESENTS THE CONSIDERATION OF LEASING OUT THE RESTAURANT OPERATION TO THE SAID M/S SCHOCHAN R ESTAURANT PRIVATE LIMITED, CHENNAI AND THERE WAS NO WRITTEN A GREEMENT WITH THE SAID M/S SCHOCHAN RESTAURANT PRIVATE LIMITED, C HENNAI. FROM THE PERUSAL OF THE LEDGER ACCOUNT OF M/S SCHOCHAN R ESTAURANT PRIVATE LIMITED, CHENNAI, THE ASSESSING OFFICER OBS ERVED THAT M/S SCHOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI SHARE OF INCOME WAS RS. 54,80,649/- WHICH WAS PAID BY THE ASSESSEE. T HE ASSESSING OFFICER FURTHER OBSERVED THAT ACCORDING TO HIM, THE ASSESSEE HAD IN FACT, ENTERED INTO AN AGREEMENT WITH M/S SCHOCHAN R ESTAURANT PRIVATE LIMITED, CHENNAI AND LET THEM RUN THE RESTA URANT BUSINESS WHICH IS NOTHING BUT GIVING CONTRACT TO M/S SCHOCHA N RESTAURANT PRIVATE LIMITED, CHENNAI TO RUN THE RESTAURANT BUSI NESS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS LIABLE TO DEDUCT TDS ON RS. 54,80,649/- PAID BY IT TO M/S SC HOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI AND THEREFORE, HE ADDED RS. 54,80,649/- TO THE INCOME OF THE ASSESSEE BY INVOKI NG PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. I.T.A. NO. 1419/MDS/10 14 13. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND ACCORDING TO THE LD. CIT(A), THE PAYMENT OF RS. 54,80,649/- WAS COVERED BY THE PROVISIONS OF S ECTION 194C OF THE ACT. 14. BEFORE US, THE LD. A.R. OF THE ASSESSEE SUBMITT ED THAT IT HAS NOT ENTERED INTO ANY AGREEMENT FOR WORK WITH M/S SC HOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI AND THEREFORE, THE PROVISIONS OF SECTION 194C OF THE ACT WERE NOT ATTRACTED. HE SUBMITTED THAT HE ASSESSEE ALLOWED M/S SCHOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI TO CARRY ON THEIR BUSINESS IN THE PREMISES OF THE ASSESSEE AND IN CONSIDERATION OF THIS PROVISION, THEY HAVE R ECEIVED A SHARE OF INCOME EARNED BY M/S SCHOCHAN RESTAURANT PRIVATE LI MITED, CHENNAI. THUS, THE ASSESSEE EARNED INCOME FROM LEA SING OUT OR LETTING OUT OF ITS PROPERTY OR RIGHT. HE ALSO SUBM ITTED THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE ASSESSEE WAS OBLIGED UNDER A CONTRACT TO MAKE P AYMENT TO SUCH RESTAURANT FOR ANY SERVICES RENDERED BY M/S SCHOCHA N RESTAURANT PRIVATE LIMITED, CHENNAI TO THE ASSESSEE. HE ALSO POINTED OUT THAT I.T.A. NO. 1419/MDS/10 15 THE ASSESSEE NOWHERE CLAIMED ANY DEDUCTION FOR RS. 54,80,649/- AND THEREFORE, THE QUESTION OF DISALLOWANCE OF THAT DEDUCTION BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DOES NOT ARISE. 15. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE O RDERS OF THE LOWER AUTHORITIES. 16. WE FIND THAT IN THE INSTANT CASE, NO MATERIAL H AS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT RS. 54,80,64 9/- WAS PAID BY THE ASSESSEE TO M/S SCHOCHAN RESTAURANT PRIVATE LIM ITED, CHENNAI UNDER ANY CONTRACT FOR ANY SERVICES RENDERED TO THE ASSESSEE. ON THE OTHER HAND, WE FIND THAT THE ASSESSING OFFICER HIMSELF, AFTER VERIFICATION, FOUND THAT THE ASSESSEE HAD ENTERED I NTO AN AGREEMENT TO ALLOW M/S SCHOCHAN RESTAURANT PRIVATE LIMITED, C HENNAI TO CARRY ON THEIR BUSINESS AT THE ASSESSEES PREMISES. THUS , ON CONSIDERATION OF THE ABOVE, WE FIND THAT THE ASSESSEE HAS IN FACT , RECEIVED CONSIDERATION FOR ALLOWING M/S SCHOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI TO CARRY OUT THEIR BUSINESS AT THE ASSESSEE S PREMISES. IT IS NOT A CASE WHERE THE ASSESSEE WAS CARRYING ON SOME OUTDOOR I.T.A. NO. 1419/MDS/10 16 CATERING BUSINESS AND IT HAS SUB-CONTRACTED THAT BU SINESS TO M/S SCHOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI. NO M ATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE WA S LEGALLY ENTITLED TO RS. 54,80,649/- WHICH IT PAID TO M/S SC HOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI. ON THE OTHER HAND, WE FIND THAT THE ASSESSEE HAD RECEIVED CONSIDERATION FROM M /S SCHOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI FOR LETTING THE M CARRY ON THEIR BUSINESS AT THE ASSESSEES PREMISES. IN VIEW OF TH E ABOVE FACTS, IN OUR CONSIDERED OPINION, THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE IN RESPECT OF ITS TRANSACTION WITH M/S SCHOCHAN RESTAU RANT PRIVATE LIMITED, CHENNAI. FURTHER, WE ALSO FIND FORCE IN T HE ARGUMENT OF THE ASSESSEE THAT WHEN THEY NEVER CLAIMED ANY DEDUC TION FOR RS. 54,80,649/- WHICH WAS PAID BY THEM TO M/S SCHOCHAN RESTAURANT PRIVATE LIMITED, CHENNAI, THEREFORE, QUESTION OF MA KING DISALLOWANCE OF RS. 54,80,649/- BY INVOKING PROVIS IONS OF SECTION 40(A)(IA) OF THE ACT DOES NOT ARISE. AS THE ASSESS EE HAS NOT CLAIMED ANY DEDUCTION FOR RS. 54,80,649/-, THE QUESTION OF DISALLOWING THE I.T.A. NO. 1419/MDS/10 17 SAME BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA ) DOES NOT ARISE. WE, THEREFORE, ALLOW THIS GROUND OF APPEAL OF THE A SSESSEE. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2011. SD/- SD/- (HARI OM MARATHA) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 5 TH AUGUST, 2011. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-IV, CHENNAI (4) CIT-IX, CHENNAI (5) D.R. (6) GUARD FILE