MEHRA EYETECH PVT. LTD, MUMBAI V. ADD. CIT CIRCLE6(3), MUMBAI

ITA 1760/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8185 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 26-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAM ATHA SR
• Assessee Lawyers: N R AGARWAL
• Keywords: Bonafide belief; TDS
• Section: 40(a)(ia); 194C; 201(1); 192; 13; 22; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ( V I RT UAL COURT DB - II ) , MUMBAI BEFORE SHRI PAWAN SINGH , JM & SHRI M.BALAGANESH, AM I TA NO. 1760 /MUM/ 2019 ( ASSESSMENT YEAR : 2010 - 11 ) M/S. MEHRA EYETECH PVT. LTD., 801/B, LOTUS CORPORATIO N PARK, GRAHAM F IRTH STEEL COMPOUND GOREGAON (E), MUMBAI - 400063 VS. ADD.CIT, CIR CLE 6 (3) 1 ST FLOOR, AAYAKAR BHA VAN MUMBAI 400 020 PAN/GIR NO. AAACU2684H (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI N R AGARWAL REVENUE BY MS. SAMATHA , SR. AR DATE OF H EARING 0 8 / 07 /2020 DATE OF PRONO U NCEMENT 13 / 07 /2020 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 1760 /MUM/201 9 FOR A.Y. 2010 - 11 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 1 3 , MUMBAI IN A PPEAL NO . CIT(A) - 13/A DDL.CIT - 7(2)(2) /90/2015 - 16 D ATED 05/12/2018 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) BY THE LD. ADDL . COMMISSIONER OF INCOME TAX, RANGE - 6(3), MU MBAI (H EREINAFTER REFERRED T O AS LD. AO). ITA NO . 1760 /MUM/ 2019 M/S. MEHRA EYETECH PVT. LT D., 2 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CON F IRMING THE DISALLOWANCE MADE U/S.40( A)(IA) OF THE ACT IN THE SUM OF RS.19 , 05 , 112/ - ON ACCOUNT OF EXHI BITION EXP ENSES PAID T O IDEA HOUSE PVT. LTD. WITHOUT DEDUCTION OF TAX AT SOURCE. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABL E ON RE CO RD. WE FIND FROM THE FACTS PLACED ON RECORD BY THE ASSESSEE THAT ASSESSEE HAD MADE PAYMENT TO IDEA HOUSE P V T. LTD TOTAL SUM OF RS.20 , 65 , 675/ - WHICH INCLUDED SUPPLY OF TEMPORARY FURNI TURE ETC., TO TH E TU NE OF RS.19 , 05 , 112/ - AND FOR AGENCY FEES OF RS.1 , 60 , 563/ - . THE SAID FURNITURE S W ERE ERECTED IN THE STALL TAKEN IN THE EXHIBITION HALL ON HIRE FOR ADVERTIS ING P RODUCTS O F THE ASSESSEE COMPANY. WE FIND THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF IMPORT A ND SALE OF EYE TESTING EQUIPMENT . THE ASSESSEE IMPORTS EQUIPMENT MAINLY FROM M/S.TOPCON ASIA PVT. LTD., SINGA PORE AND S ELLS THEM TO EYE DOCTORS, EYE HOSPITALS , MEDICAL COLLE GES ETC., ALL OVER INDIA. THE ASSESSEE ALSO PROCURED ONLY MAINTENANC E CONTRACTS, BRAK E - DOWN JOBS AND OTHER SERVICES TO THE CUSTOMER THROUGH ITS ENGINEERS. THE ENTIRE BILLS FOR PAYMENT OF RS.20 , 6 5 , 675/ - TO I DEA HOUSE PVT. LTD., WERE SUBMITTED BY THE A SSESSEE BEFORE THE LD. AO. THE LD. AO O N EXAMINATION O F THOSE BILLS AND INVO ICES OBSERVED THAT PAYMENTS WERE MADE TO IDEA HOUSE PVT. LTD., TOWARDS CONCEPTUALIZATION , D ESIGN AND EXECUTION OF MEHRA EYETECH STALLS AT COIMBATORE, MUMBAI AND KOLKATA. S ER VICE TAX @10.3% WAS CL AIMED BY IDEA HOUSE PVT. LTD., ON THE TOTAL BILL AMOUNT . ACCORDINGLY, WE FIND THAT THE LD. AO HAD OBSERVED THAT THE CONS OLIDATED BILL AMOUNT OF RS.20 , 6 5 , 675/ - PAID TO IDEA HOUSE PVT. LTD., WOULD SUFFER DEDUCTION OF TAX AT SOURCE , W HERE AS , THE ASSESSEE HAS DEDUCTED TAX AT SOURCE ONLY IN RESPECT OF PAYMENT OF RS.1 , 60 , 563/ - T OWARDS AGENCY FEES INCLUDED IN THE ITA NO . 1760 /MUM/ 2019 M/S. MEHRA EYETECH PVT. LT D., 3 SAID CONSOLIDATED BILL. ACCORDINGLY, THE LD. AO PROCEEDED TO DISALLOW THE REMAINING EXHIBITION EXPENSES IN THE SU M OF RS.19,05,1 12/ - FOR NON - DEDUCTION OF TAX AT SOURCE U/S.40(A) (IA) OF ACT IN THE ASS ESSMEN T WHICH WAS UPHELD BY THE LD. CIT(A) IN FIR ST APPEAL. 3.1. B EFORE US, THE LD. AR ARGUED THAT SIMILAR TYPES OF P AYMENT S WERE MADE BY THE ASSESSE E TO VARIOUS PARTIES IN THE LAST 25 YEARS WITHOUT DEDUCTION OF TAX AT SOURCE AND HENCE THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE SAID PAYMENTS DOES NOT ATTRACT DEDUCTION OF TAX AT SOURCE. THE PAYMENT S MADE IN THE EARLIER YEARS WERE ACCEPTED BY THE REVENU E AND HENCE, THE BONAFIDE BELIE F OF THE ASSESSEE THAT THE SAID PAYMENTS DO NOT ATTRACT ANY TDS PROVISIONS CANNOT BE DOUBTED OR FA ULTED WITH. THE LD. AR FURTHER SUBMITTED THAT THE REVENUE HAD ACCEPTED THE STAND OF THE ASSESSEE IN THE SCRUTI NY ASSESSMENT PROCEEDINGS FOR A.Y.2007 - 08 AND 20 09 - 10, COPI ES OF WHICH ORDERS ARE ENCLOSED IN PAGES 12 AND 22 OF THE PAPER B OOK RESPECTIVELY. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KOTAK SEC UR ITIES LTD., REPORTED IN 340 ITR 333. WE FIND TH AT THIS ARGUMENT O F THE LD. AR CANNOT BE ENTERTAINED AS THAT WOULD MAK E THE ENTIRE PROVISIONS OF SECTION 40(A)( IA) OF THE ACT RE DUNDANT . WE FIND THAT THE HON BLE MADRAS HIGH COURT HAD ALREADY UPHELD THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT . HENCE, QUESTIONING THE LEG ISLATIVE WISDOM OF THE PARLIAMENT CANNOT BE ENTERTAINED BY THE TRIBUNAL. WE HAVE ALSO GONE THROUGH THE SAID DECISION OF THE HON BLE JU RISDICTIONAL H IGH COURT IN THE CASE OF KOTAK SEC URITIES LTD., RELIED UPON BY THE LD. AR. WE FIND THAT IN THAT CASE, THE ASSESSMENT INVOLVED WAS A.Y.2005 - 06 WHICH WAS THE FIRST YEAR OF I NTRODUCTION OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN THE STATUTE BOOK AND SINCE BOTH THE REVENUE AS WELL AS THE ASSESSEE WERE UNDER THE B ONAFIDE BELIEF FROM T HE YEARS 1995 - 2004 THAT THE TRANSACTION ITA NO . 1760 /MUM/ 2019 M/S. MEHRA EYETECH PVT. LT D., 4 CHARGES PAID BY THE ASSESSEE TO STOCK EXCHANGE FOR TRADING WERE NOT LIABLE FOR TDS, THE BE NEFIT OF DOUBT AND THE BONAFIDE BELIEF OF THE ASSESSEE WAS GIVEN WEIGHTAGE AND ACCORDINGLY, THE HON BLE B OMBAY HIGH CO URT HELD THAT FOR THE A.Y.2005 - 06, BEING THE FIRST YEAR OF INTRODUCTION OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, NO DISALLOWANCE COULD BE MADE U/S .40(A ) (IA) OF THE ACT . WE HOLD THAT THE JUDGMENT RENDERED BY THE HON BLE JURISDICTIONAL HIG H COURT HAD TO BE V IEW ED FROM THE CONTEXT AND THE SURRO UNDING CIRCUMSTANCES IN WHICH IT WAS RENDERED AND CANNOT BE MADE APPLICABLE FOR ALL ASSESSMENT YEARS. HENC E, IN OUR CONSIDERED OPINION, WE HOLD THAT THE RELIANCE PLACED ON THE HON BLE JURISDICTIONAL HI GH COURT BY THE LD. AR WOULD NOT ADVANCE THE CASE OF THE ASSESSEE. 3. 2 . HOWEVER, WE FIND LOT OF FORCE IN THE ALTERNATIVE ARGUMENT ADVANCED BY THE LD. AR THAT THE ENTIRE PAYMENTS MADE TO IDEA HOUSE PVT. LTD., HAD BEEN DULY DISCLOSED BY THE PAYEE I N ITS IN COME TAX RE TURNS FI LED FOR A.Y.2010 - 11 WHICH IS ALSO SUPPORTED BY A CERTIFICATE UNDER F IRST PROVISO TO SECTI O N 201(1) OF THE ACT BY THE CHA RTER ED ACCOUNT ANT IN THE PRESCRIBED FORM AND DULY CERTIFYING THAT THIS SUM OF RS.20,65,675/ - HAS BEEN DULY INCLUDED I N THE ACCOUNTS OF T HE PAYEE I.E. IDEA HOUSE PVT. LTD., FOR THE A.Y.2010 - 11. HENCE, THE ASSESSEE S CASE SQUARELY FALL WITHIN THE AMBIT OF SE COND PROVISO OF SECTION 40( A)(IA) R.W. S. 201(1) OF THE ACT THEREO N . SINCE, THE S UBJECT MENTIONED TRANSACTION HAS BEEN DULY CONSIDERED IN THE I NCOME TAX RETURNS OF THE PAYEE, NO DISALLOWANCE U/S.40(A)(IA) OF THE ACT COULD BE MADE IN THE HA NDS OF THE ASSESSEE PAYER . WE FIND THAT THIS AMENDMENT IN SECOND PROVISO HAS BEEN INTRODUCED IN THE STATUTE ONLY W .E.F. A.Y. 2013 - 14 ON WARDS . BUT THE SAID AMENDM ENT HAS BEEN HELD TO BE RE TROSPECTIVE IN OPERATION BY THE HON BLE DELHI H IGH COURT IN THE CASE OF CIT VS. ANS A L LANDMARK HOUSING DEVELOPMENT LT D., REPORTED IN 377 IT R 635 . HOWEVER, W E FIND THAT THE DECISION OF THE HON BLE KERALA H IGH ITA NO . 1760 /MUM/ 2019 M/S. MEHRA EYETECH PVT. LT D., 5 COURT IN THE CASE OF THOMAS GEORG E MUTHOO T VS. CIT VIDE ORDER DATED 03/07/2015 IS AGAINS T THE ASSESSEE ON THE VERY SAME ISSUE WHEREIN THE SECOND PROVISO TO SECTION 40(A)(IA) R.W.S. 201(1) OF THE ACT HAD BEEN HELD TO BE PROSPECTIVE IN OPERATION. HENCE, WE COULD FIND THAT THERE ARE DIVER GEN T VIEW S TAKEN BY DIFFERENT NON - JU RISDICTIONAL HIGH COURTS. IN SUCH A SCENARIO, THE HON BLE SUPREME COURT IN THE CASE OF V EGETABLE P RODUCTS REPORTED IN 88 ITR 192 HAD HELD THAT THE CONSTRUCTI ON THAT IS FAVOURABLE TO THE ASSESSEE SHOULD HAVE TO BE CONSIDERED. A CCORDINGLY, WE WOULD LI KE TO PLACE RELIANCE ON THE DECISION OF THE HON BLE DELHI HIGH COURT REFERRED TO SUPRA AND H O LD THAT ASSESSEE HEREIN BEING A P AYER CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT AND CONSEQUENT LY , NO DISALLOWANCE U/S.40(A)(IA) OF THE ACT C OULD BE MADE IN THE HANDS OF THE AS S ESSEE HEREIN. ACCORDINGLY, GROUND NO.1 RAISED BY THE ASSESSEE IS ALL OW ED. 4. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS WITH REGARD TO THE ACTION OF THE LD. CIT(A) IN CO NFI RMING THE DISALLOWANCE MADE BY THE LD. AO U/S.40(A)(IA) OF THE ACT IN THE SUM OF RS.56 , 997/ - ON ACCOUNT OF ADVERTISE MENT EXP ENSES INCURRED WITHOUT DEDUC T ION OF TAX AT SOURCE. 4.1. WE HAVE HEARD RIVAL SUBMISSIONS A ND PERUSED THE MATERIAL AVAIL ABLE ON RECO RD. WE FIND THAT ASSESSE E HAD SUBMITTED TH AT THE PAYMENT IS MADE TO THE HINDU NEWSPAPER FOR ADVERTISING FOR HI RING STAFF. IT WAS SUBMITTED THAT THIS PAYMENT WAS IN THE NATURE OF ONE TIME PAYMENT AND NO CONTRACT EXIST WITH THE NEWSPAPER AND ACCOR DINGLY, T HE PROVISIONS OF SECTION 194C OF THE ACT WOULD NOT BE APPLICABLE. THE ASSESSEE ENCLOSED ENTIRE DETAILS OF INCURRENCE OF THIS EXPENDITURE BEFORE THE LD. AO. THE LD. AO AND THE LD. CIT(A) OBSERVED THAT PAYMENT WAS NOT MADE BY THE ASSESSEE DIRECTL Y TO T HE HI NDU , BUT INSTEAD IT WAS MADE TO HARSHA ITA NO . 1760 /MUM/ 2019 M/S. MEHRA EYETECH PVT. LT D., 6 AGENCIES WHICH IS A FRANCHISEE OF T HE HINDU AND ACCORDINGLY, ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S.194C OF THE ACT THEREON. 4.2. WE FIND THAT THERE IS ABSOLUTELY NO DISPUTE THAT THE SAID PAYMENT WAS MA DE TOWARDS ADVERTISEMENT CHARGES TO HARSHA AGENCIES WH ICH IS A FRANCHISEE OF THE HINDU . ON BARE READING OF PROVISIONS OF SECTION 194C OF THE ACT, WE FIND THAT ANY PERSON RESPONSIBLE FOR P AY ING ANY SUM TO ANY RES IDENT FOR CA RRYING OUT ANY WORK IN PUR SUANC E OF A CONTRACT SHALL DEDUCT TAX AT SOURCE THEREON. EX PLANATION TO SECTION 194C OF THE ACT DEFINES THE TERM WORK TO IN CLUDE ADVERTISING . HENCE, THE VERY FACT THAT ASSESSEE HAD GIVEN THE ADVERTISEMENT MATERIAL TO M /S. HARSHA AGENCIES, CONSTITUTES A CONT RACT ENTERE D INTO B Y ASSESSEE AND HAR SHA AGENCIES . H ENCE, ALL THE INGREDIENTS OF SECTION 194C OF THE ACT GET SQUARELY ATTRACTED IN THE INSTANT CASE. HENCE, WE HOLD THAT ASSESSEE IS INDE ED LIABLE FOR DEDUCTION OF TAX AT SOU RCE ON THE SAID PAYMENT OF RS.56,9 97/ - . ACCORDINGLY, THE LD. AO IS JUSTIFIED IN MAKIN G DISALLOWANCE U/S.40(A)(IA) OF THE ACT FOR THE SAID SUM F OR VIOLATION OF TDS PROVISIONS. ACCORDINGLY, THE GROUND NO.2 RAISED BY T HE ASSESSEE IS DISMISS ED. 5. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFI RMING THE DISALLOWANCE OF TRANS PORT EXPENSES MADE U/S. 40(A)(IA) OF THE ACT IN THE SUM OF RS.2 , 06 , 255/ - PAID WITHOUT DEDU CTION O F TAX AT SOURCE. 5.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE HAD MADE PAYMENT TO THE FOLLO WING TRANSPORTERS : - SAM B HATH E CARRIERS - RS. 95,600/ - (PAN - AGOPP6247 J) ITA NO . 1760 /MUM/ 2019 M/S. MEHRA EYETECH PVT. LT D., 7 G A TI LIMITED - R S.1 , 10 , 655/ - (PAN - AADCG2 096A) 5.2. ASSESSEE SUBMITTED THAT SINCE PAN WAS OB TAINED F ROM THE RESPECTIVE TRANSPORTERS TO WHOM PAYMENTS WERE MA DE, PURSUANT TO THE AMENDMENT BROUGHT IN THE PROVISIONS OF SECTION 194C OF THE ACT W.E.F. 01/10 /2009, THERE WAS NO REQUIREMENT FOR THE ASSESSEE PAYER TO DEDUCT TAX AT SOURCE ONCE PAN IS OBTAINED. WE F IND THAT THE LD. AO HOWEVER, IGNORED THE CONTENTIONS OF THE ASSESSEE AND OBSERVED THAT THE SAID PAYMENT WOULD ATT RACT PROVISIONS OF SECTION 19 4C OF THE ACT AND PROCEEDED TO MAKE DISALLOWANCE OF RS.2,06,255/ - U/S.40(A) ( IA) OF THE ACT IN THE ASSESSMENT. WE F IND THAT BEFORE THE LD. CIT(A), THE ASSESSEE HAD INDEE D MADE A SUBMISSION THAT THE RESPECTIVE TRANSPORTERS H AD INCLUDED THESE SUMS IN THEIR RETURNS AND HENCE, THE ASSESSEE SHOULD NOT BE INV ITED WITH DISALLOWANCE U/S. 40(A )(IA) OF THE ACT IN TERMS OF SECOND PROVISO TO SECTION 40(A)(IA) R.W.S. 201(1) OF THE ACT . THE ASSESSEE ALSO PLACED RELIANCE ON THE DE CISION OF THE HON BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA - COLA BEVERA GES PVT. LTD., REPORTED IN 293 ITR 226 T O SUPPORT ITS CONTENTIONS IN THIS REGARD. WE FIND THAT THE LD. CIT(A) HAD NOT DISCUSSED O N THIS P ARTICULAR SUBMISSION OF THE ASSESSEE AT ALL AND HAD NOT GIVEN ANY FINDING IN ITS APPELLATE ORDER REGARD ING THE SAME. WE FIND THAT THIS IS A STATUTORY BENEFIT PROVIDED TO THE ASSESSEE WHICH SHOULD NOT BE TAKE N AWAY. HOW EVER, EVEN BEFORE US, WE FIND THAT THE LD. AR EXCEOT MA KING ORAL STATEMENT THAT THE PAYEES HAVE INCLUDED THE SAID RECEIPTS IN TH EIR INCOME TAX RETURNS , HAD NOT PRODU CED ANY DOCUMENTARY EVIDENCE B EFORE US. HOWEVER, IN ORDER TO AVOID D OUBLE TAXATION, WE DEEM IT FIT AND APPROPRIATE, IN THE IN TER EST OF JUSTICE AND F AIR PLAY , TO REMAND THIS ISSUE TO THE FILE OF THE LD. AO FOR THE LIMITED PURPOSE O F VERIFICATION OF THE INCOME TAX RETURNS FOR THE ASST YEAR 2010 - 11 OF TH E RESPECTIVE PAYEES IN ITA NO . 1760 /MUM/ 2019 M/S. MEHRA EYETECH PVT. LT D., 8 THE LIGHT OF THE SECOND PROVISO OF S E CTION 40(A) (IA) R.W.S. 201(1) OF THE ACT. WE HAVE ALREA DY HELD THAT SECOND PROVISO HAS AL READY BEEN HELD TO BE RE TROSPECTIVE IN OPERATION B Y THE DECISION OF THE HON BLE DELHI HIGH COURT REPORTED IN 377 ITR 635 SUPRA . WE HO LD THAT I F THE PAYEES HAVE INCLUDED TH E S UBJECT MENTIONED TRANSACTION IN THEIR INCOME TAX RETURNS, THEN THE ASSESS EE PAYER SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT AND DISALLOWANCE U/S.40(A) (IA) OF THE ACT SHOU LD B E DELETED IN ITS HANDS. IF THE SUBJECT MENTIONED TRANSACTION IS NOT REFLECTED IN THE INCOME TAX RETURNS OF THE PAYEES, THEN DISALLOWAN CE MADE IN THE HANDS OF THE ASSESSEE U/S 40(A )( IA) OF THE ACT WOULD REM AIN IN FORCE. ACCORDINGLY, THE GROUND NO.3 R AISED BY THE ASSESSEE IS ALLOWED FOR STATIST ICAL PURPOSES SUBJECT TO DIRECTIONS CONTAINED HEREINABOVE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 13 / 07 / 2020 BY WAY OF PROPER M ENTIONING IN THE NOTICE BOARD. SD/ - ( PAWAN SINGH ) SD/ - (M.BALAGANESH) JUD ICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13 / 07 / 2020 KARUNA , SR.PS ITA NO . 1760 /MUM/ 2019 M/S. MEHRA EYETECH PVT. LT D., 9 COPY OF THE O RDER FORWARDED TO : BY ORDER, ( ASSTT. REGIST RAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITA T, MUMBAI 6. GUARD FILE. //TRUE COPY//