Shri Praful D. Thakkar, Ahmedabad V. The Income Tax Officer, Ward-2(2), Ahmedabad

ITA 2026/AHD/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9198 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 09-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H L DAXINISR
• Keywords: Retrospective amendment; TDS
• Section: 143(3); 142(1); 40(a)(ia); 194C; 148

Judgement Text

, SMC - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC BEFORE SHRI PRAMOD KUMAR, HONBLE VICE PRESIDENT &SMT. MADHUMITA ROY, JUDICIAL MEMBER . ITA NO. 2026/AHD/2015 / ASSTT. YEAR: 2008-09 SUSHILABEN PRAFULBHAI THAKKAR, L/H OF LATE PRAFULBHAI D. THAKKAR, 40, LAD SOCIETY, B/H AKASH TOWER, BODAKDEV, AHMEDABAD- 380054 PAN:AAU PT8 595 L VS. ITO WARD-2(2) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI TUSHAR P. HEMANI, AR REVENUE BY : SHRI H.L. DAXINI,SR. DR !'/ DATE OF HEARING : 01/01/2019 #$% !'/ DATE OF PRONOUNCEMENT: 29/03/2019 &'/ O R D E R PER MADHUMITA ROY- JM : THE INSTANT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER DATED 12.05.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- 10, AHMEDABAD ARISING OUT OF THE ORDER DATED 04.10.2013 PASSED BY THE ITO WARD-2 (2), AHMEDABAD U/S. 143(3) OF THE ACT, 1961(HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARIN G TOTAL INCOME AT RS. 9,89,300/- ON 18.09.2008 WHICH WAS COMPLETED ON 29.11.2010 U/S . 143(3) OF THE ACT UPON ASSESSED INCOME AT RS. 10,09,490/-. SUCH ASSESSMEN T WAS REOPENED U/S. 148 BY ISSUANCE OF A NOTICE DATED 27.07.2012 UPON APPROVAL OF THE HIGHER AUTHORITIES. ON 05.11.2012 A NOTICE U/S. 143(2) AND 142(1) ALONG WI TH THE QUESTIONNAIRE CALLING FOR CERTAIN DETAILS WERE SERVED UPON THE ASSESSEE. ITA NO. 2026/AHD/2015 A.Y. 2008-09 2 3. THE FIRST GROUND OF APPEAL CHALLENGING THE REOPE NING OF ASSESSMENT HAS BEEN NOT PRESSED BY THE LD. COUNSEL APPEARING FOR THE AS SESSEE AT THE TIME OF HEARING OF THE MATTER. HENCE, THE SAME IS DISMISSED AS NOT PRESSE D. 4. THE ASSESSEE HAS CLAIMED OF RS. 10,31,090/- UNDE R THE HEAD LABOUR PAYMENT, RS. 15,68,067/- UNDER THE HEAD ADVERTISEMENT EXPENS ES AND RS. 91,888/- UNDER THE HEAD INTEREST EXPENSES. SUCH PAYMENT MADE TO THREE PARTIES EXCEEDED RS. 50,000/-. ACCORDING TO THE LD. AO IN TERMS OF SEC. 194C AND S EC. 194A TDS WAS REQUIRED TO BE DEDUCTED ON SUCH PAYMENTS BUT ASSESSEE DEDUCTED ONL Y ON PAYMENT OF RS. 12,78,277/-. THE ASSESSEE WAS ISSUED A SHOW-CAUSE AS TO WHY TDS ON BALANCE OF PAYMENT OF RS. 14,12,801/- SHOULD NOT BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. THE DETAILS FURNISHED BY THE ASSESSEE ALONG WITH HIS EXPLANATION WAS FOUN D NOT ACCEPTABLE AND DISALLOWANCE U/S. 40(A)(IA) OF THE ACT TO THE TUNE OF RS. 14,12, 801/- WAS MADE BY THE LD. AO WITH THE FOLLOWING BREAKUP LABOUR EXPENSES : RS. 10,31,090/- ADVERTISEMENT EXPENSES : RS. 20,800/- INTEREST EXPENSES : RS. 91,888/- RS. 10,43,778/-. THE SAME WAS PARTLY ALLOWED BY THE LD. CIT(A) WITH THE FOLLOWING OBSERVATION:- IT IS SEEN THAT THE APPELLANT HAD CLAIMED RS. 10,3 1,090/- UNDER THE HEAD LABOUR EXPENSES. TDS WAS DEDUCTIBLE ON THIS AMOU NT AS PER PROVISIONS OF SECTION 194C OF THE ACT. HOWEVER, THE APPELLANT DI D NOT DEDUCT TDS. THE EXPLANATION OF THE APPELLANT IS THAT EXPENSES INCUR RED UNDER THE HEAD LABOUR EXPENSES ARE ACTUALLY INCURRED ON PURCHASES FROM A KSHAR IMAGE, AKSHAR SCREEN AND SATYA NARAYAN MASALA FACTORY. HOWEVER, TO AVOID PROBLEM WITH VAT DEPARTMENT, THE PURCHASE EXPENSES HAVE BEEN BOO KED UNDER THE HEAD LABOUR EXPENSES. THIS EXPLANATION OF THE APPELLA NT IS NOT ACCEPTABLE AS IT IS DEVOID OF MERIT. THE EXPLANATION GIVEN IS NOT CRED IBLE. ONE DOES NOT CHANGE THE HEAD OF EXPENSE TO HOODWINK ANOTHER GOVERNMENT DEPARTMENT. FURTHER, A PERUSAL OF BILLS OF AKSHAR IMAGE AND AKSHAR SCREEN FILED IN SUPPORT OF HIS CONTENTION SHOWS THAT ON ALL THESE BILLS IT IS MENT IONED AS FOLLOWS:- ONLY LABOUR CHARGE THUS, IT IS CLEAR THAT THE PAYMENTS HAVE BEEN MADE FOR LABOUR CHARGE. SINCE PAYMENTS ARE MADE FOR LABOUR CHARGES, TDS WAS DEDUCTIBLE ON THE SAME WHICH HAS NOT BEEN DEDUCTED. ITA NO. 2026/AHD/2015 A.Y. 2008-09 3 IN VIEW OF DISCUSSION ABOVE, I HOLD THAT THE AO WA S JUSTIFIED IN DISALLOWING SUM OF RS. 10,31,090/- U/S. 40(A)(IA) O F THE ACT. ACCORDINGLY, ADDITION OF RS. 10,31,090/- IS UPHELD AND THE SAME IS CONFIRMED. HENCE, THE INSTANT APPEAL BEFORE US. 5. THE ASSESSEE, AYURVEDIC MEDICINE MANUFACTURER HA S TO PACK MEDICINE IN PLASTIC BAGS AND LABEL THEM OR HAVE TO BOX PACK SUC H MEDICINE. FOR THE SAID PURPOSE THE ASSESSEE PURCHASED LABELS, BAGS AND PACKING MAT ERIALS FROM AKSHAR IMAGE AND AKSHAR SCREEN; SUCH EXPENSES WAS DEBITED AS TAX FRE E PURCHASES SINCE VAT WAS NOT APPLICABLE ON SUCH ITEMS. HOWEVER, TO AVOID PROBLE MS WITH THE VAT DEPARTMENT WHO USE TO ASK FOR 100% BILLS IN RESPECT OF SUCH TAX FR EE PURCHASES THE ASSESSEE CHANGED THE NAME OF SUCH EXPENSES FROM TAX FREE PURCHASES TO LABOUR EXPENSES, FOR THE PARTICULAR REASON THAT THE VAT DEPARTMENT DOES NOT FOR ANY INFORMATION PERTAINING TO LABOUR EXPENSES. THIS ACCORDING TO THE ASSESSEE, W OULD NOT CHANGE THE VERY NATURE OF EXPENSES. SECTION 194C CONTEMPLATES DEDUCTION OF T AX AT SOURCE IN RESPECT OF PAYMENT OF ANY SUM TO A CONTRACTOR IN TERMS OF TH E CONTRACT. IN THE CASE IN HAND THERE IS NO SUCH CONTRACT BETWEEN THE ASSESSEE AND THE RECIPIENT, RATHER THIS OF CASE OF OUTRIGHT PURCHASE. FURTHER THAT IT WAS ALSO ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE LD. CIT(A) ERRONEOUSLY HELD THAT THE UNDERLINE BILLS WE RE IN RESPECT OF LABOUR CHARGES ENTIRELY OVER-LOOKING THE EXPLANATION FURNISHED BY THE ASSESSEE. SIMILARLY THE ASSESSEE HAS ALSO BOOKED PURCHASED GROUNDS SPICES FROM NARAY ANA MASALA FACTORY AS LABOUR EXPENSES WHICH ALSO DOES NOT ATTRACT TDS PROVISIONS . THE MISCELLANEOUS CASH PURCHASES AS A SMALL COMPONENT OF EXPENSES FURTHER DO NOT ATTRACT TDS AND THEREFORE THE ENTIRE DISALLOWANCE OF RS. 10,31,090/- REQUIRES TO BE DELETED. THE LD. ADVOCATE APPEARING FOR THE ASSESSEE RELIED UPON THE JUDGMENT PASSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE MAT TER OF CIT VS. GIRNAR FOOD AND BEVERAGE (P.) LTD. REPORTED IN 306 ITR 23 (GUJ.). ON THE CONTRARY THE LD. DR RELIED UPON THE ORDER P ASSED BY THE AUTHORITIES BELOW. ITA NO. 2026/AHD/2015 A.Y. 2008-09 4 6. HEARD THE PARTIES AND PERUSED THE RELEVANT MATER IALS AVAILABLE ON RECORD. WE HAVE CAREFULLY CONSIDERED THE ORDER PASSED BY THE H ONBLE GUJARAT HIGH COURT. IN THAT PARTICULAR CASE THE ASSESSEE PLACED ORDER FOR SUPPL Y OF PRINTED MATERIALS BUT THE STAND TAKEN BY THE REVENUE IS THIS THAT THE PRINTING WAS CARRIED OUT BY THE SUPPLIER AS PER SPECIFICATION OF THE ASSESSEE THE ARRANGEMENT WOULD AMOUNT TO WORKS CONTRACT. THE CASE OF THE ASSESSEE IS THIS THAT IT ENTERED INTO A CONTRACT OF PURCHASE AND/OR SUPPLY SIMPLICITER AND HENCE THE ENTIRE PRODUCT WAS SUPPLI ED AS SUCH, THAT THE SUPPLIER WAS NOT EXCLUSIVELY SUPPLYING SUCH GOODS TO THE ASSESSE E THAT THE ASSESSEE DID NOT GIVE ANY PRINTING CONTRACT AND THERE WAS ONLY OUTRIGHT PURCH ASE EITHER BY ORAL OR WRITTEN ORDERS. THE QUESTION FOR CONSIDERATION AS TO WHETHER THE AS SESSEE ENTERED INTO A WORKS CONTRACT SO AS TO ATTRACT TDS U/S. 194C HAS BEEN HE LD IN THAT GIVEN FACTS AND CIRCUMSTANCES OF THE CASE IN FAVOUR OF THE ASSESSEE HOLDING THAT SUPPLY OF PRINTING AND PACKAGING MATERIAL WAS A CONTRACT FOR SALE AND NOT A SERVICES/WORK CONTRACT. HENCE, NO DEDUCTION OF TAX AT SOURCE WAS REQUIRED. RESPECTFULLY RELYING UPON THE JUDGMENT PASSED BY T HE JURISDICTIONAL HIGH COURT IN THE IDENTICAL MATTER BEFORE US WE DO NOT HESITAT E TO HOLD THAT THE EXPENDITURE ON ACCOUNT OF PURCHASE OF PACKAGING DOES NOT ATTRACT T DS PROVISION AND HENCE DISALLOWANCE MADE U/S. 40(A)(IA) TO THE TUNE OF RS. 10,31,090/- IS DELETED. 7. THE LD. AO FURTHER MADE AN ADDITION OF RS. 2,89,823/- U/S. 40(A)(IA) OF THE ACT WHICH WAS RESTRICTED TO RS. 20,800 BY THE LD. C IT(A). IN FACT THE APPELLANT HAS PAID RS. 15,68,067/- AS ADVERTISEMENT EXPENSES WHER E IN TAX WAS DEDUCTED AT SOURCE OF RS. 12,78,244/-. THE ASSESSEES CASE WAS THIS THAT TAX DEDUCTED AT SOURCE WAS NOT DEDUCTIBLE OF PAYMENT OF RS. 71,660/- SINCE THE SAM E WERE SMALL PAYMENTS OF MISCELLANEOUS EXPENSES. UPON EXAMINING THE DETAILS FURNISHED BY THE ASSESSEE TOWARDS SUCH PAYMENT OF RS. 71,660/- IT APPEARS THA T SEVEN PAYMENTS TOTAL AMOUNTING TO RS. 50,860/- ARE BELOW THE THRESHOLD LIMIT OF RS . 20,000/-. HENCE, IN TERMS OF SEC. 194C NO TDS WAS DEDUCTIBLE ON SUCH PAYMENTS. HENCE , THE LD. CIT(A) RESTRICTED DISALLOWANCE TO THE TUNE OF RS. 20,800/- U/S. 40(A) (IA) OF THE ACT. ITA NO. 2026/AHD/2015 A.Y. 2008-09 5 8. AT THE TIME OF HEARING OF THE INSTANT APPEAL LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE INSERTION OF SECOND PROVISO TO SEC. 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE HAVING RETROSPEC TIVE EFFECT FROM 01.04.2005 AND IF THE RECIPIENT HAS ALREADY PAID TAX ON SUCH AMOUNT N O DISALLOWANCE U/S. 40(A)(IA) CAN BE MADE IN THE HANDS OF THE ASSESSEE. HE FURTHER R ELIED UPON THE JUDGMENT PASSED BY THE HONBLE TRIBUNAL IN THE CASE OF JANAK BHUPATRAI PAREKH HUF VS. ITO IN ITA NO. 2891/AHD/2011 WHEREIN THE JUDGMENT PASSED BY THE HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PVT. LTD. REPORTED IN 377 ITR 635 (DEL) HAS BEEN FOLLOWED. 9. ON THE CONTRARY THE LD. DR RELIED UPON THE ORDER PASSED BY THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL CONTENTIONS MADE BY THE PARTIES, WE HAVE ALSO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD AND ALSO CAREFULLY CONSIDERED THE JUDGMENT PASSED BY THE COORDINATE BENCH IN ITA NO. 2891/AHD/ 2011 WHEREIN TAKING INTO CONSIDERATION THE RETROSPECTIVE EFFECT OF SECOND PR OVISO OF SEC. 40(A)(IA) OF THE ACT IT HELD AS LONG AS RECIPIENT OF THE INCOME HAVE DISCHA RGED THEIR TAX LIABILITY, DISALLOWANCE U/S. 40(A)(IA) CANNOT BE MADE. RELIED UPON THE JUDGMENT PASSED BY THE COORDINATE BENCH WHICH FURTHER TOOK INTO CONSIDERAT ION PASSED BY THE DELHI HIGH COURT IN THE MATTER OF CIT VS. ANSAL LAND MARK TOWN SHIP PVT. LTD. WE ARE OF THE CONSIDERED VIEW TO DELETE SUCH ADDITION ON THE BASI S OF THE FACT THAT SINCE THE PAYEES HAVE ALREADY DISCHARGED THEIR TAX LIABILITIES, DISA LLOWANCE U/S. 40(A)(IA) IS NOT PERMISSIBLE. HENCE, THIS GROUND OF APPEAL IS ALLOW ED. 11. THE APPELLANT HAVE FURTHER PAID AN AMOUNT OF RS . 91,888/- AS INTEREST TO G. E MONEY AND CHOLAMANDALAM FINANCE BOTH BEING NON-BANK ING FINANCE COMPANIES (NBFCS). ACCORDING TO THE AUTHORITIES BELOW AS PER PROVISIONS OF SEC. 194A OF THE ACT THE APPELLANT IS REQUIRED DEDUCT TAX AT SOURCE ON SUCH PAYMENTS. SINCE TDS WAS NOT DEDUCTED DISALLOWANCE U/S. 40(A)(IA) TO THE TUN E OF RS. 91,888/- WAS MADE BY THE LD. AO WHICH WAS IN TURN CONFIRMED BY THE LD. CIT(A ). THE ARGUMENT ADVANCED BY THE LD. ADVOCATE APPEARING FOR THE ASSESSEE AS REGA RDS SECOND PROVISO TO SEC. 40(A)(IA) ITA NO. 2026/AHD/2015 A.Y. 2008-09 6 BEING DECLARATORY AND CURATIVE IN NATURE HAVING RET ROSPECTIVE NATURE ON 01.04.2005 AND HENCE IF RECIPIENT OF CONCERNED AMOUNT HAVE ALR EADY PAID TAX ON SUCH SUM NO DISALLOWANCE U/S. 40(A)(IA) IS CALLED FOR IN PRAYER S HAND AS ALSO THE JUDGMENT PASSED BY THE COORDINATE BENCH IN THE CASE OF JANAK BHUPA TRAI PAREKH HUF VS. ITO IN ITA NO. 2891/AHD/2011 IS ACCEPTED BY US IN VIEW OF THE OBSERVATION MADE BY US IN THE FOREGOING PARAGRAPHS. HENCE, ADDITION IS DELETED. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. [ORDER PRONOUNCED IN THE COURT ON 29-03-2019.] SD/- SD/- ( PRAMOD KUMAR ) ( MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 29/03/2019 TANMAY &'!()*+&*%/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. , / THE RESPONDENT. 3. -- . / CONCERNED CIT 4. . () / THE CIT(A) 5. *12(( , / DR, ITAT, 6. 2456 / GUARD FILE. &' / BY ORDER, 7/ -8 (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD