M/s. Jalan Distributors Pvt. Ltd., Kolkata V. ITO, Ward - 3(2), Kolkata, Kolkata

ITA 1574/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48061 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 09-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTAM MONDAL
• Section: 40A(3); 194C; 37

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA () BEFORE , , /AND . !., '# [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI C. D. RAO , AM] $ $ $ $ / ITA NO. 1574 /KOL/2010 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2005-06 M/S. JALAN DISTRIBUTORS PVT. LTD. VS INCOME-TAX OFFICER, WD-3(2), KOLKATA (PAN AAACJ 6704 F) (*+ / APPELLANT ) (,-*+/ RESPONDENT ) FOR THE APPELLANT: . /SHRI RAVI TULSIYAN FOR THE RESPONDENT : ./ SHRI GOUTAM MONDAL '/ / ORDER PER SHRI C. D. RAO, AM/ . .. . ! ! ! !. .. . , , , , '# '# '# '# THE APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE LD. CIT(A), KOLKATA DATED 01.06.2010 FOR ASSESSMENT YEA R 2005-06. 2. GROUND NOS. 1 AND 5 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 3. GROUND NO. 4 OF THE ASSESSEES APPEAL IS AS FOLL OWS : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE U/S. 40A(3) OF TH E I. T. ACT, 1961 OF RS.4750/- BEING 20% OF THE PAYMENT MADE TO SHRI P. DEBRAJ IN CASH AT HIS INSISTENCE. 3.1. AT THE TIME OF HEARING, LD. COUNSEL FOR THE AS SESSEE HAS NOT PRESSED GROUND NO.4. HENCE, THE SAME IS DISMISSED BEING NOT PRESSED. 4. GROUND NO. 2 OF THE ASSESSEES APPEAL IS AS UNDE R : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONSIDERING THE EXPENDITURE OF RS.2,68,536/- ON ACCOUNT OF MANA GEMENT TRAINEE FEES AS NOT INCURRED WHOLLY & EXCLUSIVELY FOR THE PURPOSE OF BU SINESS OF THE APPELLANT COMPANY AND IN THAT VIEW IN SUSTAINING THE DISALLOWANCE OF THE EXPENDITURE. 4.1. BRIEFLY STATED FACTS OF THE CASE ARE THAT WHI LE DOING THE SCRUTINY ASSESSMENT THE ASSESSING OFFICER FOUND AN AMOUNT OF RS.2,68,536/- WAS DEBITED TO PROFIT & LOSS ACCOUNT AS EXPENSE OF MANAGEMENT TRAINEE FEES ON AC COUNT OF TRAINING OF SRI KUSHAGRA 2 JALAN. THE SAID EXPENSE WAS INCURRED FOR THE HIGHE R EDUCATION OF SRI KUSHAGRA JALAN IN AUSTRALIA AS PER AN AGREEMENT ENTERED INTO WITH HIM , WHEREBY HE WAS REQUIRED TO WORK FOR THE COMPANY AFTER COMPLETION OF HIS EDUCATION. IT WAS EXPLAINED THAT SRI JALAN SUBSEQUENTLY JOINED THE COMPANY AS DIRECTOR AND INV OLVED IN THE DAY-TO-DAY WORKING OF THE COMPANY. THE ASSESSING OFFICER DISALLOWED THE SAID EXPENSE BY APPLYING PROVISIONS OF SECTION 40A(2)(B) OF THE I. T. ACT ON ACCOUNT OF THE FACT THAT HE WAS THE SON OF ONE OF THE DIRECTORS OF THE COMPANY. ON APP EAL, THE LD. CIT(A) HAS CONFIRMED THE SAME BY OBSERVING AS UNDER : THE MERE FACT THAT THIS EXPENDITURE WAS APPROVED BY A RESOLUTION OF THE BOARD DOES NOT MEAN THAT IT WAS FOR THE BUSINESS OF THE ASSESSEE AS REQUIRED UNDER THE I. T. ACT. SIMILARLY, JUST BECAUSE AN AGREEMENT HAS BEEN SIGNED WITH SHRI KUSHAGRA JALAN BINDING HIM TO WORK FOR THE COMPANY AFTER COMPLETIO N OF THE STUDY ALSO DOES NOT MEAN THAT THE EXPENDITURE IS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. THE FACT THAT SHRI KUSHAGRA JALAN WAS A 19 YEAR OLD BOY WHO WAS OTHERWISE ALSO REQUIRED TO COMPLETE AN UNDERGRADUATE DEGREE SHOWS THAT THIS EXPENDITURE WAS MAINLY MEANT FOR HIS PERSONAL BENEFIT EVEN THOUGH I T MAY HAVE HELPED THE COMPANY TO SOME EXTENT AFTER HIS JOINING THE COMPANY. IN VIEW OF THE ABOVE, I FEEL THAT THE AMOUNT OF RS. 2,68,536/- IS NOT EXPENDED WHOLLY & EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASS ESEE AND THEREFORE, IT CANNOT BE ALLOWED UNDER SECTION 37 OF THE I. T. ACT, 1961. BEING FURTHER AGGRIEVED, THE ASSESSEE IS NOW IN APP EAL BEFORE US. 4.2. WE HAVE HEARD RIVAL CONTENTIONS, GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE AND THE ORDERS OF THE AUTHORITIES BELOW. WE F IND FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NO WHERE GIVEN A FINDING THAT THE EXPENSES INCURRED FOR THE HIGHER EDUCATION OF SRI KUSHAGRA JALAN ARE EXCESSIVE OR UN REASONABLE AS IS THE MANDATE OF THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE AS SESSEE COMPANY ALSO CERTIFIED THAT SRI KUSHAGRA JALAN WAS SERVING THIS COMPANY IN THE CAPA CITY OF DIRECTOR FOR THE PERIOD BETWEEN 10 TH SEPTEMBER, 2001 AND 31 ST AUGUST, 2002. IT WAS ALSO AGREED BY AND BETWEEN THE ASSESSEE COMPANY AND MR. KUSHAGRA JALAN THAT AFTER SUCCESSFUL COMPLETION OF HIS COURSE IN AUSTRALIA HE WILL JOIN THE COMPANY AS CHIEF BUSINESS EXECUTIVE. THE ASSESSING OFFICER HAS NOT INVOKED THE PROVISIONS OF SECTION 37 OR 36, AS THE CASE MAY BE, FOR MAKING THIS DISALLOWANCE. THERE ARE NO FIND INGS BY THE REVENUE THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT GENUINE OR IT IS BOGUS. ONCE EXPENDITURE IS NOT DISALLOWED BY INVOKING THE PROVISIONS OF SECTIO N 37 OR 36 OF THE ACT, THE ASSESSING 3 OFFICER HAS TO RECORD A FINDING THAT THE EXPENDITUR E INCURRED BY THE ASSESSEE IS EXCESSIVE OR UNREASONABLE FOR INVOKING THE PROVISIONS OF SECT ION 40A(2)(B) OF THE ACT. THIS IS NOT THE CASE HERE. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IS UNJUSTIFIED AND UNLAWFUL, THEREFORE, THE SAME IS HEREBY DELETED. THIS VIEW O F OURS IS ALSO SUPPORTED BY THE DECISION OF COORDINATE BENCH IN THE CASE OF ITO VS. M/S. PREMIER NIRMAN PVT. LTD., ITA NO. 546/K./2010, ASSESSMENT YEAR 2004-05 DATED 9 TH MARCH, 2011, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH F ACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ASSESSMENT ORDER THAT THE A SSESSING OFFICER HAS NO WHERE GIVEN A FINDING THAT THE EXPENSES INCURRED ARE EXCE SSIVE OR UNREASONABLE AS IS THE MANDATE OF THE PROVISIONS OF SECTION 40A(2)(B) OF T HE ACT. THE ASSESSEE COMPANY ALSO FILED A CERTIFICATE THAT SRI ABHISEKH AGARWAL HAS J OINED THIS COMPANY AFTER COMPLETING HIGHER STUDIES WITH THE ASSESSEE AND HE IS ON REGUL AR ROSTER OF THE ASSESSEE AND ALSO PROVIDING SERVICES. THE ASSESSING OFFICER HAS NOT INVOKED THE PROVISIONS OF SECTION 37 OR 36, AS THE CASE MAY BE, FOR MAKING THIS DISALLOW ANCE. THERE ARE NO FINDINGS BY THE REVENUE THAT THE EXPENDITURE INCURRED BY THE ASSESS EE IS NOT GENUINE OR IT IS BOGUS. ONCE EXPENDITURE IS NOT DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 37 OR 36 OF THE ACT, THE ASSESSING OFFICER HAS TO RECORD A FIND ING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS EXCESSIVE OR UNREASONABLE FOR INVOK ING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THIS IS NOT THE CASE HERE AN D ACCORDINGLY, WE ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAME. THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE ASSE SSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS HEREBY DELETED. THIS GROUND OF APPEA L OF THE ASSESSEE IS ALLOWED. 5. GROUND NO. 3 OF THE ASSESSEES APPEAL IS AS UNDE R : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN SUSTAINING THE DISALLOWANCES OF THE AMOUNTS OF RS.4,50,147/- B EING PROCESSING & PRINTING CHARGES PAID TO M/S. PRASAD FILM LABORATORIES (P) L TD. AND OF RS.1,93,597/- BEING POSTER MAKING CHARGES PAID TO M/S. SAPPHIRE INDUSTR IES, UNDER SECTION 40(A)(IA) OF THE I. T. ACT, 1961 5.1. BRIEFLY STATED FACTS OF THE CASE ARE THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE HAS NOT DEDUCTED THE TAX ON THE FOLLOWING PAYMENTS : B) PROCESSING & PRINTING CHARGES PAID TO CONTRACTOR M/S. PRASAD FILM LABORATORIES (P) LTD. (5,85,792 PURCH ASE 1,35,645) RS.4,50,147/- C) POSTER MAKING CHARGES PAID TO CONTRACTOR M/S. SA PHIRE INDUSTRIES RS.1,93,597/- 4 ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE SAME BY OBSERVING THAT ON EXAMINATION OF THE BILLS OF M/S. SAFFIRE INDUST RIES PRODUCED BY THE A/R, IT IS SEEN THAT THE HEADING FOR THE DESCRIPTION IN THE BILL IS POSTERS NAME. UNDER THIS HEADING IN ALL THE BILLS THE VARIOUS DESCRIPTION T YPE ARE DEBDOOT [ART PAPER], DEBDOOT [PHOTO CARD + 6 DESIGNS] ETC. THIS SHOWS THAT THE ASSESSEE IS NOT JUST PURCHASING SOME ART PAPER FROM THIS CONCERN. IT I S CLEAR THAT THIS CONCERN IS MAKING POSTERS AND POST CARDS FOR THE FILM DEBDOOT PRODU CED BY THE ASSESSEE. IN MAKING THESE POSTERS THE CONCERN M/S. SAFFIRE INDUSTRIES I S CARRYING OUT A CONTRACT WORK FOR THE ASSESEE AND NOT JUST SELLING SOME GOODS. IT IS A D IFFERENT MATTER THAT IN THE CHARGES CHARGED BY THIS CONCERN THE COST OF THE PAPER USED FOR MAKING THOSE POSTERS MAY ALSO HAVE BEEN INCLUDED. BUT AS PER THE PROVISIONS OF SE CTION 194C WHEN THIS CONCERN HAS DONE THE JOB WORK OF PRINTING OF POSTERS ETC. FOR THE ASSESSEE IT HAS DONE CERTAIN WORK AS PROVIDED UNDER SECTION 194C AND THEREFORE ON THE PAYMENT MADE TO THIS CONCERN, THE ASSESSEE SHOULD HAVE DEDUCTED TDS. ON EXAMINATION OF DETAILS OF VARIOUS CHARGES PAID T O M/S. PRASAD FILM LABORATORIES (P) LTD. I FIND THAT MAJORITY OF THE ENTRIES ARE FOR TH E SERVICES SUCH AS NEGATIVE PROCESSING, DUBBING, RUSH PRINT, RECORDING ETC. RENDERED BY THI S CONCERN. THESE SERVICES ARE NOTHING BUT THE WORK DONE BY THIS CONCERN FOR THE A SSESSEE AND TDS ON PAYMENT FOR THESE HAS TO BE DEDUCTED U/S. 194C. IN RESPECT OF THE PURCHASE OF REELS ETC., IT IS SEEN THAT THE A.O. HAS HIMSELF IDENTIFIED THE AMOUNTS R ELATED TO SALE OF GOODS AND REDUCED FROM THE TOTAL PAYMENT MADE TO THIS CONCERN. THE T OTAL AMOUNT CREDITED IN THE NAME OF THIS CONCERN WAS RS.5,85,792/- OUT OF WHICH RS.1,35 ,645/- WAS RELATED TO PURCHASE OF GOODS AND THE A.O. HAS REDUCED THIS AMOUNT BEFORE MAKING THE DISALLOWANCE OF RS.4,50,147/-. IN VIEW OF THE ABOVE DISCUSSION, I FEEL THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TDS ON THE AMOUNT OF RS.4,50,147/- WHICH WA S PAID TO M/S. PRASAD FILM LABORATORIES (P) LTD. FOR VARIOUS FILM RELATED SERV ICES RENDERED BY THEM. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 5.2. AT THE TIME OF HEARING BEFORE US, THE LD. COUN SEL FOR THE ASSESSEE BY REFERRING TO PAPER BOOK PAGE NOS. 13 TO 35, WHICH CONTAINS COPIE S OF VARIOUS PAYMENT VOUCHERS, CONTENDED THAT FROM THESE PAYMENT VOUCHERS, IT IS E VIDENT THAT ALL THE PAYMENTS ARE BELOW RS.20,000/-. THEREFORE, THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS IN RESPECT OF POSTER MAKING CHARGES PAID TO CONTRACTOR M/S. SAPHI RE INDUSTRIES OF RS.1,93,597/-. AS REGARDING PAYMENTS MADE TO PRASAD LABORATORIES, BY REFERRING TO PAPER BOOK PAGES 1 TO 3, HE SUBMITTED THAT THE ASSESSEE HAS ALREADY RECOV ERED TDS ON ACCOUNT OF RS. 91,194/- IN RESPECT OF DUBBING CHARGES WHICH COMES UNDER THE CONTRACT WHEREAS IN RESPECT OF OTHER CHARGES I.E. RAW STOCK, NEGATIVE PROCESSING C HARGES AS WELL AS RUSH PRINT CHARGES, THESE ARE THE ITEMS COME UNDER THE HEAD PURCHASES , HENCE NO TDS IS REQUIRED. HE, THEREFORE, REQUESTED TO DELETE THE SAME. 5 5.3. ON THE OTHER HAND, THE LD. DR RELIED ON THE OR DERS OF THE REVENUE AUTHORITIES. 5.4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE BEFORE US. WE FIND FROM THE NATURE OF PAYMENT ITSELF THAT NEG ATIVE PROCESSING CHARGES, RUSH PRINTING CHARGES AS WELL AS RELEASE PRINT CHARGES COME UNDER THE WORK CONTRACT, THEREFORE, IN OUR CONSIDERED OPINION THESE THREE AM OUNTS I.E. RS.71,787/-, RS.1,23,783/- AND RS.1,21,171/- RESPECTIVELY ARE SUBJECT TO TDS. AS REGARDING DUBBING CHARGES OF RS.91,194/- SINCE ASSESSEE HAS ALREADY DEDUCTED TDS AND FILED FORM NO. 16A, WHICH IS AVAILABLE AT PAPER BOOK PAGE 3, WE ARE OF THE VIEW THAT NO DISALLOWANCE IS REQUIRED ON ACCOUNT OF DUBBING CHARGES OF RS.91,194/-. IN RE GARD TO THE OTHER, SINCE THE AMOUNTS INVOLVED ARE LESS THAN RS.20,000/- NO TDS IS REQUIR ED TO BE DEDUCTED. WE CONFIRM THE DISALLOWANCE ON ACCOUNT OF THREE ITEMS I.E. NEGATI VE PROCESSING CHARGES, RUSH PRINTING CHARGES AS WELL AS RELEASE PRINT CHARGES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART AS INDICATED ABOVE. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.04.2011 SD/- SD/- , , , , . !., , , , '# (MAHAVIR SINGH) (C. D. RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (!# !# !# !#) )) ) DATED : 13 TH APRIL, 2011 01 %23 4 JD.(SR.P.S.) '/ 5 ,6 7'6'8- COPY OF THE ORDER FORWARDED TO: 1 . *+ /APPELLANT - M/S. JALAN DISTRIBUTORS PVT. LTD., 1 83/1, LENIN SARANI, KOLKATA-13. 2 ,-*+ /RESPONDENT ITO, WARD-3(2), KOLKATA. 3 . /% / THE CIT, KOLKATA 4 . /% ( )/ THE CIT(A), KOLKATA. 5 . ?@ ,% / DR, KOLKATA BENCHES, KOLKATA -6 ,/ TRUE COPY, '/%A/ BY ORDER, 3 /ASSTT. REGISTRAR .