M/s. Umesh Silk Fabrics, Surat V. The Income tax Officer,Ward-2(4), Surat

ITA 17/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1763 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAHESH SHAH
• Section: 37(1)

Judgement Text

ITA NO.17 / AHD/20 1 3 A.Y. 200 8 - 09 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHRI S.S. GODARA , JUDICIAL MEMBER I TA NO. 17 /AHD /201 3 ASSESSMENT YEAR: 200 8 - 09 M/S. UMESH SILK FABRICS , VS. INCOME TAX OFFICER, 403, CORPORATE OFFICE BUILDING, WARD 2(4), SURAT. BOMBAY MARKET, UMARWAD, SURAT. [PAN A AAFU 6086 C ] (APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI RAHESH SHAH, A.R RESPONDENT BY : S HRI ASHISH POPHARE, SR. D.R. DATE OF HEARING : 2 6 .04 . 20 16 DATE OF PRONOUNCEMENT : 29 .04.2016 O R D E R PER S.S. GODARA , J.M. TH IS ASSESSEE S APPEAL FOR ASSESSMENT YEAR 200 8 - 09 , ARISE FROM THE ORDER OF THE C I T(A) - II , SURAT DATED 2 6.10.2012 PASSED IN CASE NO.C AS - II/228/10 - 11 IN PROCEE DINGS UNDER SECTION 1 43(3) OF THE INCOME T AX ACT, 196 1; IN SHORT THE ACT . 2. THE ASS ESSEE S FIRST SUB STANTIVE GROUND CHALLENGES COR RECTNESS OF DISAL LOWANCE OF RS.2,81,744/ - UNDER SECTION 40 (A)(IA) READ WITH SECTION 194H OF THE ACT MADE BY THE A SSESSING OFFICER IN ASSESSMENT ORDER DATED 14.12.2010 AND AFFIRMED IN TH E LOWER APP ELLATE PROCEEDINGS. THE A SSESSING OFFICER IN THE COURSE OF SCRUTI N Y NOTICED THE ASSES SEE WHO HAVE PAID/CREDITED COMMISSION OF RS.1,40,872 / - EACH TO ITS PARTNERS SHRI MULCHAND MAGA NLAL JAIN AND SHRI PRAVINCHAND MAGANLAL JAIN AS PER AGREEMENT DATED 20. 0 2.2006. T HERE IS NO DISPUTE THAT IT HAD NOT DEDUCTED ANY TDS THEREUPON . THE A SSESSING OFFICER SOUGHT TO NOTE REASONS ITA NO.17 / AHD/20 1 3 A.Y. 200 8 - 09 PAGE 2 OF 4 THEREOF. THE ASS ESSEE STATED IN REPLY THAT THE ABOVE STATED COMM ISSION PAYMENT S WER E IN LIEU OF SALARY TO ITS PARTNERS UNDER SECTION 40(B) OF THE ACT AND THE ABOVE STAT UTORY DEDUCTION PROVISION DID NOT APPLY IN SUCH AN EVENTUALITY. THE A SSESSING OFFICER QUOTED SECTI O N 194H OF THE ACT TO INVOKE THE IMPUGNED SECTION 40 ( A)(IA) DISALLOWANCE . 3. THE ASS ESSEE ARGUED IN THE LOWER APP ELLATE PROCEEDINGS THAT THE ABOVE STATED SECTION 194 H DID NOT APPLY IN CASE OF THE IMPUGNED COMMISSION PAYMENT IN LI EU OF SALARY PAID TO ITS PARTNERS. CIT ( A ) DECLIN ED THE SAME IN HIS FINDINGS R EADING AS UNDER : - 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND GONE THROUGH THE TERMS AND CONDITIONS OF THE AGREEMENT AND FOUND THAT THERE IS NO SUBSTANCE IN THE CLAIM OF APPELLANT. SECTION 194H OF THE ACT CLEARLY SAYS THAT TAX HAS TO BE DEDUCTED @ 10% ON ANY PAYMENTS BY WAY OF COMMISSION OR BROKERAGE MADE BY PERSON OTHER THAN INDIVIDUAL OR HUF IF THE AMOUNT EXCEEDS RS.5,000/ - . IN THE CASE OF APPELLANT, ALL THE CONDITIONS OF SECTION 194H ARE APPLICABLE. SIMILARLY, THE PROVISIONS OF SECTION 4 0(A)(IA) ARE ALSO SQUARELY APPLICABLE. THE REASONS GIVEN BY APPELLANT THAT THE NOMEN C LATURE USED AS 'COMMISSION' IS ACTUALLY SALARY/REMUNERATION DOES NOT HAVE ANY BASIS. THE COPY OF AGREEMENT CLEARLY REFLECTS THAT THE WORD 'COMMISSION' HAS B EEN USED AND ITS WORKING HAS ALSO BEEN PROVIDED IN THE AGREEMENT. HAD IT BEEN A MISTAKE ON THE PART OF FIRM OR ITS PARTNERS, IT WOULD HAVE BEEN CORRECTED IN THE LATER PERIOD AS THE FIRM CONTINUED FOR TWO YEARS AFTER THE EXECUTION OF AGREEMENT. BUT IT WAS NOT DONE . NOW THE AO HAS DETECTED THE DEFAULT OF TDS PROVISIONS AND DISALLOWED THE EXPENDITURE, APPELLANT HAS COME UP WITH ABOVE EXPLANATION AND TALKING ABOUT THE ESSENCE OF NOMENCLATURE USED IN THE AGREEMENT. IN MY OPINION, THE DEFAULTS MADE BY APPELLANT ARE CLEARLY ATTRACTED BY THE TDS PROVISIONS OF SECTION 194H AND AO HAS RIGHTLY DISALLOWED THE EXPENSES OF COMMISSION IN VIEW OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE GROUND OF APPEAL TAKEN BY APPELLANT I S DISMISSED. 4. WE HAVE HEARD BOTH PARTIES W HO REITERATE D THE IR R E SPECTIVE PLEADINGS. TH E RE IS NO DISPUTE THAT THE IMPUGNED SECTION 40 (A)(IA) DIS ALLOWANCE HAS ARISEN FOR ASS ESSEE S FAILURE IN DEDUCTING TDS UPON THE IMPUGNED COMMISSION PAYMENTS MADE TO ITS PARTNERS. IT S CASE IS THAT THE SAME ARE IN THE NATURE OF ACTUA L ITA NO.17 / AHD/20 1 3 A.Y. 200 8 - 09 PAGE 3 OF 4 SALARY / REMUNERATION NOT REQUIRING ANY TDS DEDUCTION. THE REVENUE STRONGLY SUPPORT ED THE C IT(A) S ORDER UNDER CHALLENGE. W E FIND THAT A CO - OR DINATE BENCH O F THE TRIBUNAL IN ITA NO. 759/CHD/2011 A CIT VS. M/S. ASSAM TEA H OUSE DEALS WITH AN ID ENTICAL SITUAT ION TO HOLD THAT SECTION 194H DOES NOT APPLY IN CASE OF COMMISSION PAID TO A FIRM S PARTNER BY W AY OF REMUNERATION SINCE THIS S T ATUTORY PROVISION IS INVOKED ONLY IN CASE OF A DISTINCT IDENTITY BEING PRESENT BETWEEN THE PAYER AND THE PAYEE IN QUESTION. IT OBSERVES THA T SUCH A FALLACY DOES NOT EXIST BETWEEN A FIRM AND IT S PARTNERS. THE R EVENUE IS UNABLE TO POINT OUT ANY DISTINCTION ON FACTS OR LAW THEREIN. WE ACCEPT ASS ESSEE S A RGUMEN T S IN THESE FACTS AND CIRCUMSTANCES . THIS FIRST DISALLOWANCE /ADDITION O F RS.2,81,744/ - UNDER SECTION 40(A)(IA) STANDS DELETED. 5. NEXT COMES ASS ESSEE S LATTER SUB STANTIVE GROUND C HALLENGING DISAL LOWANCE /ADDITION OF RS.7 , 194 / - BEING 20% OF DIWALI BONI AND S HOP EXPENSES. AFTER ARGUING FOR SOME TIME AND QUOTING SECTION 37(1) O F THE ACT, L EARNED AUTHORISED REPRESENTATIVE DOES NOT WISH TO PRESS THE SAME KEEPING IN MIND SMALLNESS OF THE AMOUNT INVOLVED IN THIS GROUND. THE S AME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 6. THIS ASS ESSEE S APPEAL IS PARTLY ALLOWED. PRONOUNCED IN TH E OPEN COURT TODAY ON TH E 2 9 TH DAY OF APRIL , 201 6 . SD/ - SD/ - ANIL CHATURVEDI S .S. GODARA (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, THE 29 TH DAY OF APRIL , 2016 PBN/* ITA NO.17 / AHD/20 1 3 A.Y. 200 8 - 09 PAGE 4 OF 4 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD