Appeal details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 5359 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 1 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-08-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2011-2012
Appeal Filed On
13-07-2015
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO. 2064/AHD/2015 / ASSESSMENT YEAR: 2011-12 M/S. MATRIX COMSEC PVT LTD C-1, 394, GIDC, MAKARPURA, BARODA PAN : AABCM 5892 Q VS. DY. COMMISSIONER OF INCOME-TAX, CIRCLE 2(1)(2), BARODA / (APPELLANT) / (RESPONDENT) ASSESSEE BY : MS. URVASHI SODHAN, AR REVENUE BY : SHRI MUDIT NAGPAL, SR DR / DATE OF HEARING : 20/08/2019 / DATE OF PRONOUNCEMENT: 21/08/2019 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF THE LD. CIT(A)-2, VADODARA DATED 28.05.2015 PASSED FOR ASSESSMENT YEAR 2011- 12. 2. THOUGH THE ASSESSEE HAS TAKEN THREE GROUNDS OF A PPEAL, BUT ITS GRIEVANCES REVOLVE AROUND A SINGLE ISSUE VIZ. THE L EARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ADVERTISEMENT EXPENS E OF RS.14,15,038/- WHICH WAS DISALLOWED BY THE ASSESSING OFFICER WITH THE AID OF SECTION 40(A)(IA) OF THE INCOME-TAX ACT ON ACCOUNT OF NON-D EDUCTION OF TDS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 23.09.2011 DECLARING TOTAL INCOME AT RS.33,18,890/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY ITA NO. 2064/AHD/2015 MATRIX COMSEC PVT LTD VS. DCIT FOR AY: 2011-12 2 OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFIC ER THAT THE ASSESSEE HAS DEBITED THE EXPENDITURE ON ACCOUNT OF ADVERTISEMENT ETC. HE HAS REPRODUCED THE DETAILS OF SUCH PAYMENTS ON PAGE NOS . 5 & 6 OF THE ASSESSMENT ORDER. HE FURTHER OBSERVED THAT EXPENDI TURE OF RS.15,76,424/- WAS DEBITED UNDER THE HEAD ADVERTISEMENT DOMESTIC (INDIRECT) AND RS.2,32,868/- WAS DEBITED UNDER THE HEAD EXHIBITION EXPENSES DOMESTIC (INDIRECT) . THE ASSESSEE HAS CONTENDED THAT THESE ARE EXPENS ES WHICH WERE INCURRED BY THE ASSESSEE TOWARDS REIMBURSEMENT; SOM EHOW, LEARNED ASSESSING OFFICER NOT SATISFIED WITH THE EXPLANATIO N OF THE ASSESSEE AND OBSERVED THAT ASSESSEE HAS MADE TOTAL PAYMENT OF RS .19,32,177/-, ON WHICH IT FAILED TO DEDUCT THE TDS AND, THEREFORE, DISALLO WANCE DESERVES TO BE MADE. 4. APPEAL TO THE LEARNED CIT(A) DID NOT BRING MUCH RELIEF TO THE ASSESSEE. 5. LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET CONTENDED THAT, OUT OF TOTAL EXPENDITURES, LEARNED CIT(A) HAS ALLOW ED SOME OF THE EXPENDITURES AND, WITH RESPECT TO RS.12,96,125/- AN D RS.1,18,913/- ARE CONCERNED, ACCORDING TO THE ASSESSEE, THESE WERE IN THE NATURE OF REIMBURSEMENT, HENCE NO REQUIREMENT OF MAKING TDS W AS THERE; HOWEVER, BY PLACING RELIANCE ON THE ORDER OF THE LEARNED CIT (A) PASSED FOR ASSESSMENT YEAR 2010-11, LEARNED CIT(A) IN THE PRESENT YEAR U PHELD THE DISALLOWANCE. SHE TOOK US THROUGH THE FINDINGS OF THE LEARNED CIT (A) RECORDED IN PARAGRAPH 6.3.1, WHICH READS AS UNDER:- 6.3.1. SO FAR AS BALANCE PAYMENTS OF RS.12,96,125/ - AND RS.1,18,913/- ARE CONCERNED, THE APPELLANTS CLAIM IS THAT THESE ARE IN THE NATURE OF REIMBURSEMENT AND HENCE, NO REQUIREMENT OF MAKING T DS ON SUCH PAYMENTS IS THERE. SIMILAR ISSUE WAS INVOLVED IN APPELLANT S OWN CASE FOR AY 2010-11. IN THE APPELLATE ORDER PASSED ON 22.08.2013 IN APPE AL NO. CAB/III-258/12- 13, IT HAS BEEN HELD THAT THE APPELLANT WAS REQUIRE D TO MAKE TDS ON THESE ITA NO. 2064/AHD/2015 MATRIX COMSEC PVT LTD VS. DCIT FOR AY: 2011-12 3 PAYMENTS. FOLLOWING THE SAME, IN THE CURRENT YEAR ALSO THE APPELLANTS CONTENTIONS ARE REJECTED AND THE DISALLOWANCE OF TH ESE EXPENSES U/S 40(A)(IA) IS UPHELD. 6. LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENT ED THAT IN ASSESSMENT YEAR 2010-11 THE DISPUTE WAS TRAVELLED UPTO THE TRI BUNAL IN ITA NOS. 2446 & 2907/AHD/2013 AND THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND THE DISALLOWANCE WAS DELETED. SHE ALSO PLACED RELIANCE ON THE ORDER OF THE TRIBUNAL DATED 24.04.2018 IN THE AFORESAID CASE. 7. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESEN TATIVE RELIED UPON THE ORDER OF THE LEARNED CIT(A). 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT IN ASSESSMENT YEAR 2010-11 THE ASSESSEE HAS DEBITED THE EXPENDITURE OF RS.19,32,177/- WHICH WAS INCURRED TOWARDS REIMBURSEMENT OF ADVERTISEMENT EXPENSES. LEARNED A SSESSING OFFICER HAS DISALLOWED THIS EXPENDITURE AND THE ISSUE TRAVELLED UPTO THE TRIBUNAL. THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE BY R ECORDING THE FOLLOWING FINDING:- 13. GRIEVANCE RAISED BY THE ASSESSEE-APPELLANT IS AS FOLLOWS:- THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS O F THE APPELLANTS CASE IN CONFIRMING THE ACTION OF THE LEARNED AO OF DISALLOWING REIMBURSEMENT OF ADVERTISEMENT EXPENSE OF RS.19,32, 177/- U/S.40(A)(IA) OF THE ACT ON THE ERRONEOUS PLEA THAT TDS WAS DEDUCTIBLE ON THE SAME AND THE APPELLANT HAS NOT DEDUCTED THE SAME. 14. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE HAS INCURRED CERTAIN ADVERTISEMENT AND EXHIBITION EXPENSES, THROUGH AN INTERMEDIARY NAMELY ASHISH MISTRY, BUT NOT DEDUCTED TAX AT SOURCE. THE ASSESSEE DID POINT OUT THAT THESE EXPE NSES REPRESENT ONLY CREDIT NOTES FOR REIMBURSEMENT OF EXPENSES TO THE EXTENT O F 35% AND 50% AS PER RESPECTIVE AGREEMENTS AND THE EXPENSES WERE NOT ACT UALLY INCURRED BY THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER DID NOT AC CEPT THE EXPLANATION OF THE ITA NO. 2064/AHD/2015 MATRIX COMSEC PVT LTD VS. DCIT FOR AY: 2011-12 4 ASSESSEE AND HELD THAT THE ASSESSEE OUGHT TO HAVE D EDUCTED TAX AT SOURCE FROM THESE PAYMENTS BUT THE ASSESSEE HAS NOT DONE SO. A S A COROLLARY TO THIS FINDING, THE ASSESSING OFFICER PROCEEDED TO DISALLO W THE SAID EXPENSES WHICH AGGREGATED TO RS.19,32,177/-. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCES S. THE CIT(A) INITIALLY DID NOT EVEN DEAL WITH THIS GRIEVANCE OF THE ASSESS EE. WHEN ASSESSEE POINTED IT OUT BY WAY OF A RECTIFICATION PETITION, LEARNED CIT(A) DEALT WITH THE MATTER ON MERITS BUT REJECTED THE GRIEVANCES ANYWAY THIS TIME ON MERITS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 15. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 16. WE FIND THAT THERE IS NO DISPUTE THAT WHAT IS P AID BY THE ASSESSEE IS A REIMBURSEMENT, A PARTIAL REIMBURSEMENT IN FACT, OF THE ADVERTISEMENT AND EXHIBITION EXPENSES. IT IS NOT IN THE NATURE OF INC OME AT THIS STAGE BUT IS ONLY A REIMBURSEMENT OF EXPENSES TO THE PERSON WHO HAS A CTUALLY INCURRED THE ADVERTISEMENT EXPENSES AND EXHIBITION CHARGES. THE CHARACTER OF PAYMENT, SO FAR AS THE ASSESSEE IS CONCERNED, IS SIMPLY OF REIM BURSEMENT OF EXPENSES. ON MATERIALLY SIMILAR FACTS, HONBLE JURISDICTIONAL HI GH COURT, IN THE CASE OF CIT VS. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD, [(2014) 361 ITR 192 (GUJ)], HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE, AND OBSERVED, INTER ALIA, AS FOLLOWS:- 2. IT APPEARS THAT THE ASSESSEE CLAIMED DEDUCTION UN DER SECTION 40(A)(IA) OF RS. 6,93,372/- TOWARDS REIMBURSEMENT O F CHA CHARGES PAID TO C & F AGENT AND RS. 76,00,509/- TOWARDS REI MBURSEMENT OF EXPENSES TOWARDS CONSIGNMENT AGENTS. THE AFORESAID EXPENSES WERE DISALLOWED BY THE ASSESSING OFFICER SOLELY ON THE G ROUND THAT THE ASSESSEE HAS NOT DEDUCTED THE TDS ON THE AFORESAID ACCOUNTS. 3. IN AN APPEAL BY THE ASSESSEE THE COMMISSIONER (AP PEALS) ALLOWED SUCH DEDUCTIONS OBSERVING THAT SO FAR AS TH E AMOUNT OF RS. 6,93,372/- IS CONCERNED AS SUCH THE AGENT HAD ALREA DY DEDUCTED THE TDS AND DEPOSITED IN THE GOVERNMENT AND, THEREFORE, THERE WAS NO FURTHER LIABILITY OF THE ASSESSEE TO DEDUCT THE TDS . WITH RESPECT TO RS. 76,00,509/-, THE CIT(A) OBSERVED THAT THE SAID AMOU NT WAS TOWARDS THE REIMBURSEMENT OF THE EXPENSES TO THE CONSIGNMEN T AGENT, WHICH WAS IN FACT INCURRED ON BEHALF OF THE ASSESSEE AND THERE WAS NO PROFIT ELEMENT. THE CIT(A) HELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TDS ON SUCH REIMBURSEMENT AND, THEREFORE, THE A SSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ABOVE DISALLOWANCE AND ACCORDINGLY DIRECTED TO DELETE THE SAME. BEING AGGRIEVED AND DI SSATISFIED WITH THE ORDER PASSED BY THE CIT(A) IN HOLDING THE ABOVE THE APPELLANT-REVENUE ITA NO. 2064/AHD/2015 MATRIX COMSEC PVT LTD VS. DCIT FOR AY: 2011-12 5 PREFERRED APPEAL BEFORE THE INCOME TAX APPELLATE TR IBUNAL AND BY THE IMPUGNED ORDER THE INCOME TAX APPELLATE TRIBUNAL HA S CONFIRMED THE ORDER PASSED BY THE CIT(A). IT IS REQUIRED TO BE NO TED THAT WHILE CONFIRMING THE ORDER PASSED BY THE CIT(A) AND DELET ING THE DISALLOWANCE, IT HAS BEEN SPECIFICALLY OBSERVED BY THE TRIBUNAL THAT IN FACT THE EXPENSES WERE INCURRED BY THE AGENT ON BEH ALF OF THE ASSESSEE FOR TRANSPORTATION AND OTHER CHARGES, WHICH HAS BEE N SPELT OUT IN THE BILL ITSELF INCLUDING THE COMMISSION TO THE AGENT. THE LEARNED TRIBUNAL ALSO OBSERVED THAT THE RELATION BETWEEN THE ASSESSE E AND THE AGENT IS PRINCIPAL AND AN AGENT. THE LEARNED TRIBUNAL ALSO O BSERVED THAT SO FAR AS THE OBLIGATION TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF TRANSPORT CHARGES AND OTHER CHARGES IS CONCERNED, T HE SAME WAS COMPLIED WITH BY THE AGENT, WHO HAD MADE PAYMENT ON ITS BEHALF. ON THE AFORESAID FACTS THE LEARNED TRIBUNAL ALSO OBSER VED THAT THE CIRCULAR RELIED UPON BY THE REVENUE THAT IT IS THE LIABILITY OF THE ASSESSEE AS PRINCIPAL AGENT TO DEDUCT THE TDS WILL NOT BE APPLI CABLE AND THE SAID CIRCULAR WOULD BE APPLICABLE FOR PAYMENT MADE TO PR INCIPAL TO PRINCIPAL. CONSIDERING THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE, WHEN THE LEARNED TRIBUNAL HAS CONFIRMED THE O RDER PASSED BY THE CIT(A) QUASHING AND SETTING ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER IN DELETING THE DISALLOWANCE OF RS. 6,93,37 2/-AND RS. 76,00,509/- CLAIMED BY THE ASSESSEE UNDER SECTION 4 0(A)(IA) OF THE INCOME TAX ACT, WE SEE NO REASON TO INTERFERE WITH THE SAME. NO ERROR HAS BEEN COMMITTED BY THE LEARNED TRIBUNAL IN CONFI RMING THE ORDER PASSED BY THE CIT(A). NO QUESTION OF LAW, MUCH LESS SUBSTANTIAL QUESTION OF LAW, ARISES IN THE PRESENT APPEAL. HENC E, THE PRESENT APPEAL DESERVES TO BE DISMISSED AND IS ACCORDINGLY DISMISS ED. 17. QUITE CLEARLY, REIMBURSEMENTS OF EXPENSES DO NO T REQUIRE TAX DEDUCTION AT SOURCE. THE TAX DEDUCTION LIABILITY A RISES ONLY AT THE POINT OF TIME WHEN PAYMENT IS FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT FOR THE SPECIFIED PURPOSES. THE PAYMENT, IN THE PRESENT CASE, IS NOT FOR CARRYING OUT ANY WORK OF THE SPECIFIED NATURE B UT ONLY A PARTIAL REIMBURSEMENT OF SUCH A PAYMENT OF SPECIFIED NATURE . THE DISTINCTION IS SUBTLE AND SIGNIFICANT. THE LOWER AUTHORITIES CLEA RLY LOST SIGHT OF THE ABOVE ASPECT OF THE MATTER, AND PROCEEDED TO TREAT REIMBU RSEMENT OF EXPENSES AS INCURRING OF EXPENSES. 18. LEARNED CIT(A) HAS ALSO STATED THAT THERE IS NO EVIDENCE OF THE FACT THAT THE TAX DEDUCTION AT SOURCE WAS MADE BY THE PE RSON ACTUALLY MAKING PAYMENT OF EXPENDITURE. IN OUR CONSIDERED VIEW, THI S IS WHOLLY IRRELEVANT. ALL THAT WE ARE CONCERNED AT THIS STAGE IS WHETHER THE ASSESSEE HAS FAILED TO DISCHARGE HIS TAX WITHHOLDING OBLIGATION, AND WHEN THE ASSESSEE HAS NOT ITA NO. 2064/AHD/2015 MATRIX COMSEC PVT LTD VS. DCIT FOR AY: 2011-12 6 COMMITTED ANY SUCH FAILURE, THERE IS NO QUESTION OF HIS BEING VISITED WITH THE CONSEQUENCES OF SUCH A NON-EXISTENT FAILURE. 19. IN THE LIGHT OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE OF RS.19,32,177 /-. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 9. IN THE PRESENT YEAR ALSO, ON PERUSAL OF FINDINGS OF THE LEANED CIT(A) EXTRACTED SUPRA, IT WOULD REVEAL THAT THE DISALLOWA NCES OF RS.12,96,125/- AND RS.1,18,913/- WERE MADE OUT OF THE EXPENDITURE INCU RRED TOWARDS REIMBURSEMENT. LEARNED CIT(A) PUT RELIANCE UPON T HE ORDER OF THE CIT(A) PASSED IN ASSESSMENT YEAR 2010-11 WHICH HAS BEEN RE VERSED BY THE ITAT IN THE FINDINGS REPRODUCED ABOVE. THEREFORE, THERE IS NO DISPARITY ON FACTS AND RELYING UPON THE ORDER OF THE ITAT IN THE IMMEDIATE LY PRECEDING ASSESSMENT YEAR, WE DELETE THE DISALLOWANCE AND ALL OW THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 21 ST AUGUST, 2019 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 21/08/2019 BIJU T., SR.PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! # / CONCERNED CIT 4. # ( ) / THE CIT(A) 5. & ! , ! , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) ', / ITAT, AHMEDABAD ITA NO. 2064/AHD/2015 MATRIX COMSEC PVT LTD VS. DCIT FOR AY: 2011-12 7 1. DATE OF DICTATION- 20.08.2019.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE D ICTATING MEMBER .20.08.2019 OTHER MEMBER 21.08.2019. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S ./P.S. - 21.08.2019. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DI CTATING MEMBER FOR PRONOUNCEMENT 21.08.2019.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK21.08 .2019 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER
