ITO, Ward - 31(1), Kolkata, Kolkata V. M/s. Samriddhi Advertising and Marketing, Kolkata

ITA 156/KOL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2597 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 11-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 25-01-2010
• Court: TRIBUNAL
• Department Lawyers: P KOLHE
• Assessee Lawyers: S K BASU
• Keywords: TDS; Set aside
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI C. D. RAO , AM] I.T.A. NO.156/KOL/2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, WD-31(1), KOLKATA. VS- M/S. S AMRIDDHI ADVERTISING & MARKETING (PA NO. AAKFS 3982 R) (APPELLANT) (RESPONDENT) APPELLANT BY : SRI P. KOLHE RESPONDENT BY : SRI S. K. BASU O R D E R PER D. K. TYAGI, JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE LD. CIT(A), KOLKATA DATED 06.11.2009 FOR ASSESSMENT YEA R 2006-07 ON THE FOLLOWING GROUNDS : 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN TREATING THE ADDITION OF RS.3,84,795/- AS SALARY TO STAFF, W HICH IS ACTUALLY DEBITED IN THE P & L A/C UNDER THE HEAD COMMISSION, ON WHICH THE ASSESSE E HAD FAILED TO DEDUCT TAX AT SOURCE VIOLATING THE PROVISION OF CHAPTER XVIIB OF THE ACT. 2. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) ERRED IN TREATING THE ADDITION OF RS.2,65,000/- AS PARTNERS REMUNERA TION, WHICH IS ACTUALLY DEBITED IN THE P&L A/C UNDER THE HEAD COMMISSION ON WHICH THE ASSE SEE HAD FAILED TO DEDUCT TAX AT SOURCE VIOLATING THE PROVISION OF CHAPTER XVIIB OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM. AT THE TIME OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE AS SESSEE CLAIMED DEDUCTION FOR VARIOUS EXPENSES IN HIS P & L ACCOUNT OUT OF WHICH HE CLAIMED EXPENSES UNDER THE SUB HEADS I) COMMISSION II) PRODUCTION CHARGES AND III) PRINTING CHARGES. TAXES WERE DEDUCTIBLE FOR THESE EXPENSES UNDER CHAPTER XVII B OF THE ACT. BUT HE DID NOT DEDUCT TAX AT ALL FOR PAYMENTS OF COMMISSION . UNDER THE CIRCUMSTANCES EXPLANATIONS WERE CALLED FOR FROM THE ASSESSEE THE ASSESSEE FILED HI S EXPLANATION IN COMPLIANCE TO THE AOS NOTICE DATED 22.10.2008. CONSIDERING THE REPLY OF THE ASSESSEE, THE AO OBSERVED THAT TAX IS DEDUCTIBLE UNDER CHAPTER XVIIB WHEN HE IS PAYING COMMISSION TO ANY PERSON, MAY BE STAFF. THE FIRST PROVISO TO SECTION 194H SPECIFICALLY SPEAKS ABOUT DEDUCTION OF TAX IN CASE THE AMOUNT OF PAYMENT EXCE EDS RS.2,500/- ONLY. AS SUCH TAX IS DEDUCTIBLE IN THE CASE OF PAYMENT LESS THAN RS.20,0 00/-. THE ASSESSEE HAS NEVER SAID THAT THE AMOUNT OF PAYMENT WAS IN ANY CASE LESS TH AN RS.2,500/-. HE SHOULD HAVE DEDUCTED TAX FOR PAYMENT LESS THAN RS.20,000/- BUT MORE THAN RS.2,500/- EACH WHERE 2 SEC. 194H CLEARLY SPEAKS FOR DEDUCTION OF TAX ON PAYMENT EXCEEDING RS.2500/- ONLY. ON PERUSAL OF ASSESSEES EXPLANATION IT IS UNDERST OOD THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE CAUSES FOR NON- DEDUCTION OF TAX. UNDE R THE CIRCUMSTANCES, THE EXPLANATION SUBMITTED BY THE ASSESSEE SEEMED TO BE INSUFFICIENT AND ALSO UNSATISFACTORY FOR THE AO AND HE REJECTED THE ASSESSEES EXPLANATION AND DISA LLOWED THE ENTIRE AMOUNT OF RS.6,66,404/- (RS.3,84,795/- (THE CORRECT AMOUNT IS RS.3,04,795/-) AND RS.2,65,000/- TOTALING TO RS.6,66,404/-) UNDER SECTION 40(A)(IA) OF THE ACT. ON APPEAL, THE LD. CIT(A) HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING DISALL OWANCE OF ENTIRE AMOUNT OF RS.6,66,404/- U/S. 40(A)(IA) OF THE ACT AND HE REST RICTED THE ADDITION TO THE EXTENT OF RS.94,109/-, THE DETAILS WHEREOF HAS BEEN GIVEN IN THE APPEALLATE ORDER. AGGRIEVED BY THIS ORDER, NOW THE REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US, THE LD. DR PLA CED RELIANCE ON THE ORDER OF THE AO AND URGED BEFORE THE BENCH TO SET ASIDE THE ORDE R OF THE LD. CIT(A) AND RESTORE THAT OF AO. HE ALSO SUBMITTED THAT THE LD. CIT(A) WAS N OT JUSTIFIED IN TREATING THE ADDITIONS OF RS.3,04,795/- AND RS.2,65,000/- AS SALARY TO STA FF ND AS PARTNERS REMUNERATION, WHICH ARE ACTUALLY DEBITED IN THE P & L ACCOUNT UNDER THE HEAD COMMISSION ON WHICH THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE VIOLATI NG THE PROVISIONS OF CHAPTER XVIIB OF THE ACT. HE LASTLY URGED BEFORE THE BENCH TO CONFI RM THE ACTION OF THE AO. 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE RELIED ON THE ORDER OF THE LD,. CIT(A) AND URGED BEFORE THE BENCH TO CONFIRM THE SA ME. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HAS DEALT THE MATTER AS UNDER : (7) I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE LEDGER EXTRACTS OF THE EXPENSES DISALLOWED U/S. 40(A)(IA) AS WELL AS THE P & L A/C. OF THE YEAR UND ER CONSIDERATION. 7.1) ON PERUSAL OF P & L A/C. FOR YEAR ENDED ON 31. 3.06, IT IS OBSERVED HAT THE APPELLANT HAS DEBITED RS.6,66,404/- UNDER THE HEAD COMMISSIO N. ON EXAMINATION OF LEDGER ACCOUNT IT IS SEEN THAT OUT OF TOTAL DEBIT OF RS.6, 66,404/-, THE PAYMENT OF RS.3,04,795/- WAS IN NATURE OF SALARY TO SIX EMPLOYEES, I.E., JAY ANTA GANGULY (RS.9,910/-), RAMVINOD MONDAL (RS.41,700/-), RANJAN PAL (RS.46,485/-), TAR UN CHAKRABORTY (RS.72,200/-), AJAY MAITY (RS.69,570/-) AND JOYDEB SAHA (RS.64,930/-). BESIDES, PAYMENT OF RS.2,65,000/- TO THE TWO PARTNERS, I.E. A. BATTACHARYYA (RS.1,50, 000/-) AND B. BHATTACHARYYA (RS.1,15,000/-) WAS IN THE NATURE OF PARTNERS REMUN ERATION. ON VERIFICATION OF P & L A/C. IT IS OBSERVED THAT BESIDES THE DEBIT UNDER TH E HEAD COMMISSION, THE APPELLANT HAS NOT DEBITED ANY AMOUNT UNDER THE HEADS SALARY AND PARTNERS REMUNERATION SEPARATELY. THEREFORE, ONLY BALANCE AMOUNT OF RS.96 ,609/- WAS IN THE NATURE OF COMMISSION PAID TO 8 DIFFERENT PERSONS PIYALI GUHA - RS. 20,000 3 NANDA DUARY - RS. 5,700 M. BHATTACHARYA- RS. 5,000 MIRA BHATTACHARYA - RS. 12,000 SUNIL DEY - RS. 10,125 SUDIP PAKHIRA - RS. 2,500 SUBRATA GUHA ROY - RS. 34,790 BISWANATH BISWAS - RS. 6,494 TOTAL : RS. 96,609 THE APPELLANT WAS REQUIRED TO DEDUCT THE TAX ON PAY MENT OF COMMISSION U/S. 194H OF THE I.T. ACT ON THE PAYMENTS MADE EXCEEDING RS.2,50 0/-. HOWEVER, THE APPELLANT HAS FAILED TO DEDUCT THE TAX U/S. 194H OF THE ACT. THE A.O. HAS DISALLOWED THE ENTIRE AMOUNT OF RS.6,66,404/- TREATING THE SAME AS PAYMENT OF CO MMISSION. THE A.O. HAS NOT ASSIGNED ANY REASON FOR NOT ACCEPTING THE EXPLANATION OF THE APPELLANT THAT THOUGH DEBITED UNDER THE HEAD COMMISSION, BUT IT CONSISTS OF PAYMENT O F SALARY TO EMPLOYEES AS WELL AS THE PARTNERS REMUNERATION. I AM OF THE OPINION THAT THE PROVISIONS OF TDS WOULD NOT ATTRACT ON THE BASIS OF NOMENCLATURE UNDER WHICH EXPENSES, WERE DEBITED, BUT ON THE BASIS OF NATURE OF PAYMENT. THE PROVISIONS OF SEC. 194H WOUL D NOT BE ATTRACTED ON PAYMENT OF SALARY TO STAFF AND THE PARTNERS REMUNERATION EVEN IF THEY HAVE BEEN DEBITED UNDER THE HEAD COMMISSION. THEREFORE, THE A.O. WAS NOT JUST IFIED IN MAKING DISALLOWANCE OF ENTIRE AMOUNT OF RS.6,66,404/- U/S. 40(A)(IA) OF TH E ACT. THE PROVISIONS OF SEC. 40(A)(IA) WOULD BE ATTRACTED ONLY ON RS.94,109/- (RS.96,609 2,500) PAID AS COMMISSION. THE A.O. IS DIRECTED TO RESTRICT THE ADDITION TO THE EX TENT OF RS.94,109/-. THE APPELLANT GETS RELIEF OF RS.5,72,295. AT THE TIME OF HEARING BEFORE US, THE LD. DR DID NO T CONTROVERT THE AFORESAID FINDINGS OF THE LD. CIT(A) BY PRODUCING ANY MATERIAL EVIDENCE. THEREFORE, IN THE ABSENCE OF ANY CONTROVERTING MATERIAL, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THE APPEAL OF THE REVENUE IS THE REFORE, DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 7. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14. 5.10 SD/- SD/- (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14 TH MAY, 2010 COPY TO : 1. ITO, WARD-31(1), KOLKATA 2. M/S. SAMRIDDHI ADVERTISING & MARKETING, COMMERCE PO INT, 79, LENIN SARANI, KOLKATA-13 3. CIT(A), KOLKATA. 4. CIT, KOLKATA. 5. D.R., ITAT, KOLKATA. TRUE COPY BY ORDER DEPUTY REGISTRAR JD.(SR.P.S.) I.T.AT., KOLKATA