The ACIT, TDS Circle, Ahmedabad V. M/s. Hakmichand D & Sons, Ahmedabad

ITA 2194/AHD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8401 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 24-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAJNU PARAMITA
• Keywords: Non-deduction of tax

Judgement Text

, *,L *,L*,L *,L- -- -,E ,E,E ,E- -- -LH LHLH LH- -- -* * * * IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA VEJTHR FLAG] LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA VEJTHR FLAG] LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA VEJTHR FLAG] LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA VEJTHR FLAG] YS[KK LNL; DS LE{KA YS[KK LNL; DS LE{KA YS[KK LNL; DS LE{KA YS[KK LNL; DS LE{KA (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ) ./ I.T.A. NO. 2194/AHD/2016 ( / ASSESSMENT YEAR :2010-11) THE ACIT, TDS CIRCLE, AHMEDABAD - 380014 / VS. M/S. HAKIMCHAND D. & SONS G/4, NITYANAND APARTMENTS, NR. VAKIL WADI, MANINAGAR, AHMEDABAD - 380009 ./ ./ PAN/GIR NO. : AHMH 00879 E ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PRAJNU PARAMITA, SR. D.R. / RESPONDENT BY : SHRI URVASHI SODHAN, A.R. / DATE OF HEARING 22/09/2017 !'# / DATE OF PRONOUNCEMENT 27/09/2017 $% / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, AHMEDABAD, DATED 14/06/2016 FOR THE ASSESSMENT YEAR (AY) 2010-11, ON THE FOLLOWING GROUNDS: I. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DEL ETING THE PENALTY LEVIED U/S. 271C OF THE IT ACT OF RS.21,01, 154/- FOR A.Y.2010-11. INSPITE OF THE FACT THAT THE ASSESS.EE MADE DEFAULT IN DEDUCTING TDS. ITA NO.2194/AHD /2016 ACIT VS. M/S. HAKIMCHAND D & SONS ASST.YEAR 2010-11 - 2 - II. THE LD. CIT(A) ERRED IN NOT CONSIDERING THE FACT TH AT ASSESSES IN DEFAULT FOR NON DEDUCTION OF TAX AT SOURCE ON LICEN SE FEE PAID TO M/S INDIAN RAILWAYS CATERING & TOURISM CORPORATION (IRCTC), WHICH FALL WITHIN THE PURVIEW OF SECTION 194J(1)(D) R.W.S. 28(VA)(B) OF THE I.T. ACT AND LIABLE FOR PENALTY U/ S.271C OF ACT FOR FAILURE TO DEDUCT TAX AT SOURCE. III. THE LD. CIT(A) HAS ALSO CONFIRMED THE ORDER U/S.201 (1)/201(1A) OF THE I.T. PASSED BY THE A.O. IN APPEAL NO. CIT(A) -8/364/14-15 IN THE CASE OF ASSESSEE COMPANY ON THE SAME ISSUE. IV. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 2. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT RECORD. THIS APPEAL IS DIRECTED AGAINST THE DECISIO N OF LD. CIT(A), VIDE ORDER DTD.14/03/2016 IN RESPECT OF DELETING THE PEN ALTY LEVIED U/S.271C OF THE I.T. ACT FOR THE ASST. YEAR UNDER CONSIDERATION . IN THIS CONNECTION, WE FIND THAT THE COORDINATE BENCH OF THE ITAT, AHMEDAB AD, IN ITA NO.1206 TO 1211/AHD/2016 VIDE ITS ORDER DTD.09/11/2 016 FOR THE ASST. YEAR 2006-07 TO 2011-12 HAS DELETED THE QUANTUM ADD ITION ON THE BASIS OF WHICH PENALTY WAS LEVIED U/S.271C OF THE ACT. TH E RELEVANT PARA OF THE ORDER IS REPRODUCED AS UNDER: '8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, ON MERITS, THE ASSE SSEE DESERVES TO SUCCEED ON THESE COUNTS IN VIEW OF THE FOLLOWING:- ITA NO.2194/AHD /2016 ACIT VS. M/S. HAKIMCHAND D & SONS ASST.YEAR 2010-11 - 3 - A. THE IMPUGNED LICENSE FEE IS PAID BY ASSESSEE T O IRCTC FOR AWARDING LICENSED RIGHTS. PAYMENTS CANNOT BE CONSTRUED FOR R ENDERING ANY SPECIALIZED SERVICES OR PASSING ON OF ANY MANAGERIA L OR TECHNICAL SKILL OR SERVICES, MUCH LESS EVEN A SERVICE. THE LICENSE FEE PAYMENTS ARE ATTRIBUTABLE TO A SET OF LEGAL OBLIGATIONS FLOWING FROM LICENSE. VIEWING FROM THE PARAMETERS LAID DOWN BY HON'BLE SUPREME CO URT IN THE CASES OF KOTAK SECURITIES AND BHARTI CELLULAR, THERE IS N EITHER ANY ELEMENT OF SERVICE OR RENDERING OF TECHNICAL SERVICES WHATSOEV ER. IN OUR CONSIDERED VIEW SEC. 194J IS NOT APPLICABLE TO ASSESSEES CASE . B. SIMILARLY SEC.194C IS ALSO NOT APPLICABLE SIN CE THE BASIS OF ALLOTMENT OF CATERING RIGHTS ON LICENSE FEE INVOLVE S PECULIAR FEATURES. THE IRCTC IS THE CONTRACTOR WHO AWARDS RIGHTS AND A SSESSEE IS THE CONTRACTEE OBLIGED TO PAY LICENSE FEE FOR AVAILING THOSE RIGHTS. SEC.194C FASTENS LIABILITY ON CONTRACTOR, WHEN AMOUNT IS PAI D TO CONTRACTEE AND NOT VICE VERSA. THEREFORE PAYMENT OF LICENSE FEE BY CONTRACTEE TO CONTRACTOR CAN BY NO STRETCH OF IMAGINATION BE ASSU MED TO COME UNDER THE PURVIEW OF SEC.194C. THERE BEING NO TDS LIABILI TY EITHER U/S.194C OR 194J, LICENSE FEE PAID CANNOT BE DISALLOWED UNDE R SEC.40(A)(IA) OF ACT UNDER ANY CIRCUMSTANCES. C. THE LICENSE FEE PAYMENT IS NOT COVERED U/S.28( VA) ALSO, WHICH IS SPECIFICALLY FOR PAYMENTS TO SHARING ANY KNOW HOW, PATENT, COPY RIGHT, TRADE MARK, LICENSE, FRANCHISE OR ANY OTHER BUSINES S OR COMMERCIAL RIGHT OF SIMILAR NATURE ETC. THE SIMILAR NATURE OF GREAT SIGNIFICANCE AND THE IMPUGNED LICENSE FEE NOT BEING PAID FOR SHARING ANY KNOW HOW, PATENT, COPY RIGHT , TRADE MARK, LICENSE, FRANCHISE CANNOT FALL UNDER ITS PURVIEW. D. APROPOS ADDITIONAL GROUND ALSO RESPECTFULLY HON' BLE SUPREME COURT JUDGMENTS SOM PRAKASH REKHI HAS LAID DOWN PARAMETER S AS TO WHEN A CORPORATION CAN BE CALLED A STATE FOR LEGAL AND PRA CTICAL PURPOSES. INCOME TAX LAW PROVIDES SOME BENEFICIAL AND RELAXIN G PROVISIONS FOR GOVT. LOCAL BODIES ETC. FOR EASE OF ADMINISTRATION AND FLEXIBILITY. TDS IS A MECHANISM TO AVOID NONPAYMENT OF TAXES BY PAYEES. LEGISLATURE IN ITS SUPERIOR WISDOM' HAS INTENDED THAT GOVT. BODIES WIL L NOT VENTURE INTO NONPAYMENT OF THEIR INCOME TAX THEREFORE THEY ARE E XEMPTED FROM TDS. IT IS MORE SO AS MOSTLY THEY ARE GOVT. FUNDED, UNDE R STRICT REGULATORY ITA NO.2194/AHD /2016 ACIT VS. M/S. HAKIMCHAND D & SONS ASST.YEAR 2010-11 - 4 - AND FINANCIAL CONTROL AND ARE COMPLIMENTARY ARMS OF GOVT. TO PERFORM PARTICULAR FUNCTIONS. LOOKING INTO ALL THESE NECESS ITIES AND PRACTICAL DIFFICULTY THE WORD 'STATE' HAS BEEN INTERPRETED TO AVOID THE RIGOR OF LITERAL CONSTRUCTION WHICH WAS LEADING TO UNINTENDE D RESULTS, HON'BLE SUPREME COURT LAID DOWN THESE PARAMETERS. THEY HAVE BEEN DEFTLY FOLLOWED BY PUNE BENCH IN KIRLOSKAR BROS. CASE. IN OUR CONSIDERED VIEW, IN THE GIVEN FACTS AND CIRCUMSTANCES IRCTC FA LLS WITHIN THOSE PARAMETERS. FOLLOWING HON'BLE SUPREME COURT IN SOM PRAKASH REKHI AND COORDINATE ITAT PUNE BENCH, WE HOLD THAT IRCTC AMOUNTS TO GOVT. THEREFORE, ASSUMING EVEN THERE WAS ANY TDS LI ABILITY; ASSESSEE WAS NOT LIABLE TO DEDUCT ANY TDS FROM LICENSE FEE P AID TO IRCTC. E. THE ITAT SPECIAL BENCH IN BHARATI AUTO PRODUCT S AND IN GUJARAT PIPAVAV PORT LTD (SUPRA) HAS HELD THAT THE PROVISO TO SECTION 201 IS RETROSPECTIVE AND IF THE PAYEE HAS PAID TAXES (WHER E PAYABLE) THE PAYER CANNOT BE DEEMED TO BE IN DEFAULT OF TDS LIABILITY. ASSESSEE BY IRCTC DATED 27.03.2014 AND FORM NO 26 HAS DEMONSTRATED TH AT LICENSE FEES PAID BY HIM FOR FY 2005-06 TO 2010-11 HAS BEEN INCL UDED BY IRCTC IN ITS ANNUAL PROFIT & LOSS ACCOUNT, BALANCE SHEET AND THEIR RETURNS OF INCOME. IN VIEW THEREOF WE SEE NO REASON AS TO WHY THE ASSESSEE SHALL BE HELD TO BE LIABLE FOR TDS AND DISALLOWANCE U/S 40(A )(IA). 8.1 IN VIEW OF FOREGOING FACTS, CIRCUMSTANCES AND R ESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS AS MENTIONED ABOVE WE HOLD THAT ASSESSEE'S LICENCE FEE PAYMENTS TO IRCTC WERE NOT LIABLE FOR T DS AND CANNOT BE DISALLOWED U/S. 40(A)(IA). THUS WE ALLOW THE ASSESS EE GROUNDS ON MERITS ALSO IN THIS BEHALF AND DISMISS RELEVANT REVENUE GR OUNDS IN THE IMPUGNED YEARS.' 6. IN VIEW OF THE ABOVE FACTS, THE QUANTUM ADDITION ON THE BASIS OF WHICH PENALTY WAS LEVIED HAS BEEN DELETED BY THE CO ORDINATE BENCH OF THE ITAT. THEREFORE, WE CONCLUDE IN THIS CASE, THER E IS NO QUESTION OF LEVYING PENALTY U/S.271C OF THE ACT. ITA NO.2194/AHD /2016 ACIT VS. M/S. HAKIMCHAND D & SONS ASST.YEAR 2010-11 - 5 - 7. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD. CIT(A). THEREFORE, APPEAL OF TH E REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 27/09/2017 SD/- SD/- VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG &' $ ( $ ) ()* $ ) ( AMARJIT SINGH ) ( MAHAVIR PR ASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 27/09/2017 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , -. / / CONCERNED CIT 4. / () / THE CIT(A)-8, AHMEDABAD 5. 012 **-. , -.# , '&$,$ / DR, ITAT, AHMEDABAD 6. 245 6 / GUARD FILE. % & / BY ORDER, 0 * //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD