FORTUNE COMMUNICATIONS LTD. (NOW HTA MARKETING SERVICES PVT. LTD.), MUMBAI V. A.C.I.T.(OSD)-2(1), MUMBAI

ITA 222/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2222 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 08-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR BARLA
• Keywords: Wholly owned subsidiary

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI BEFORE SHRI N.K. BILLAIYA , AM AND SHRI PAWAN SINGH, JM ./I.T.A. NO.222/MUM/13 ( / ASSESSMENT YEAR: 2009-10) FORTUNE COMMUNICATIONS LTD LAXMI BUILDING, 2 ND FLOOR, SIR P.M ROAD, FORT, MUMBAI 400 001. / VS. ACIT (OSD)-2(1), AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400 020. ./ ./PAN/GIR NO. AAACF 0692A ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI PAWAN KUMAR BARLA / DATE OF HEARING : 08/12/15 / DATE OF PRONOUNCEMENT : 08/12/2015 !' / O R D E R PER PAWAN SINGH , J. M.: 1. THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 15/10/2012, IN RESPECT OF AY-2009-10, ON FOLL OWING GROUNDS. 1.1 THE COMMISSIONER OF INCOME TAX (APPEALS)-4, MUMBAI (HEREINAFTER REFERRED TO AS CIT(A)) ERRED IN HOLDING THAT THE AS SISTANT COMMISSIONER OF INCOME TAX (OSD)-2(1), MUMBAI (HERE IN AFTER REFERRED TO AS THE ACIT) WAS RIGHT IN DISALLOWING A CTUAL REIMBURSEMENT OF STAFF SALARIES TO THE APPELLANTS H OLDING COMPANY AMOUNTING TO RS. 1,90,35,493/- UNDER SECTION 40(A)( IA) OF THE ACT ON THE GROUND THAT THE APPELLANTS HAD NOT DEDUCTED TAX UNDER SECTION 194J OF THE ACT. 2 ITA NO. 222/MUM/13 1.2 WITHOUT PREJUDICE TO ABOVE, THE APPELLANTS HAVE REI MBURSED TAX DEDUCTED UNDER SECTION 192 BY THE HOLDING COMPANY A ND THEREFORE THE PROVISIONS OF SECTION 40(A)(IA) IS NOT APPLICAB LE. 1.3 WITHOUT PREJUDICE TO 1.1 AND 1.2 ABOVE, THE PAYMENT S MADE BY THE APPELLANTS ARE COVERED UNDER SECTION 192 AS THE APP ELLANTS ARE ECONOMIC EMPLOYER AND THEREFORE THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. THE APPELLANTS THEREFORE PRAY THE ACIT BE DIRECTED TO DELETE THE DISALLOWANCE OF RS.1,90,35,493. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF ADVERTISING AND COMMUNICATION FILED HIS RETURN OF INCOME ON 29.09.2009 FOR ASSESSMENT YEAR 2009-10, DECLARING T OTAL INCOME OF RS. 94,28,730/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. STATUTORY NOTICE WAS SERVED AND AFTER GIVING THE OPPORTUNITY PASSED THE ORDER OF ASSESSMENT, WHILE MAKING THE ASSESSMENT THE AO MADE THE DISALLO WANCE OF RS.1,90,35,493/- U/S 40(A) (IA) OF THE ACT. THE AO FURTHER DISALLOWED THE SUM OF 10% OF RS.4,43,040 ON ACCOUNT OF REASONABLE COMMISSION IN CASE FOR THE PAYMENT TO M/S. RELIANCE LIFE INSURANCE AND INI TIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT ACT, IN ITS ORD ER DATED 05-12-2011, AGAINST WHICH THE FIRST APPEAL WAS FILED BEFORE CIT (A)-4 MUMBAI. 3. THE LD. CIT(A) CONFIRMED THE ADDITIONS MADE BY THE AO U/S 40(A)(IA) AND DELETED THE ADDITION MADE ON ACCOUNT OF PAYMENT MAD E TO RELIANCE LIFE INSURANCE, IN THE IMPUGNED ORDER DATED 15.10.2012, AGAINST WHICH THE PRESENT APPEAL IS FILED BY ASSESSEE BEFORE THIS TRI BUNAL. 4. TODAY NONE, HAS APPEARED ON BEHALF OF ASSESSEE DESP ITE REPEATED CALLS, FROM THE ORDER SHEET IT IS REVEALED THAT LD. AR OF THE ASSESSEE APPEARED ON 27/10/2014, AND SOUGHT ADJOURNMENT IN THEPRESENT APPEAL AND THE SAME WAS ADJOURNED FOR 8/12/2015. AS NONE APPEARED TODAY ON BEHALF OF ASSESSEE THUS THE APPEAL WAS HEARD TO EX-PARTY. 3 ITA NO. 222/MUM/13 5. THE LD. DR OF THE REVENUE HAS ARGUED THAT APPEAL FI LED BY THE ASSESSEE IS LIABLE TO BE DISMISSED AS THE DISALLOWANCE U/S40( A)(IA) WAS RIGHTLY MADE BY THE AO ,AS NO TDS ON PAYMENT OF RS. 1,90,35,493/ - MADE TO HINDUSTAN THOMPSON PVT. LTD.(HTA) WAS DEDUCTED BY THE ASSESSE E. IT IS SEEN THAT THE ASSESSEE HAS SUBMITTED BEFORE THE AO THAT ASSESSEE IS 100% SUBSIDIARY OF HINDUSTAN THOMPSON PVT. LTD, WHO ENGAGED IN THE BUS INESS OF ADVERTISING AND DO NOT HAVE ANY EMPLOYEES ON THEIR PAY ROLL. TH E ADVERTISING IS A SERVICE ORIENTED BUSINESS AND THE ASSESSEE DO NOT HAVE ANY EMPLOYEES ON THE PAY ROLL. AND THE EMPLOYEES OF THE HOLDING COMPANY ARE DEPUTED TO CARRY OUT THE ADVERTISING AND OTHER RELATED ACTIVITIES. DETAILS O F THE DEPUTED EMPLOYEES OF THE DEPUTED BY THE ASSESSEE WERE GIVEN TO AO ALONG WITH THE BASIC SALARY, TOTAL SALARY , DEDUCTIONS TOWARDS PROVIDENT FUND, I NCOME TAX (TDS) WAS ALSO FURNISHED AND FURTHER EXPLAINED THAT SALARY OF THOS E EMPLOYEES WERE PAID BY THE HOLDING COMPANY DIRECTLY. 6. THE AO OBSERVED IN ITS ORDER THAT THE ASSESSEE IS N OT HAVING ANY EMPLOYEE ON ITS PAY ROLL AND MAKES THE PAYMENT TO THE EMPLOY EES OF HTA AND THE PAYMENTS ARE BIFURCATED AND THE SALARIES ARE PAID D IRECTLY TO THE EMPLOYEES AND OTHER PAYMENTS TO HTA AND THE FORM 16A WAS ISSU ED TO THE EMPLOYEES IN THE NAME OF HTA WHICH CREATES THE LIABILITY OF T DS TO BE DEDUCTED FOR OBTAINING TECHNICAL AND PROFESSIONAL SERVICES AND W ERE LIABLE TO TAX U/S 194J OF THE IT ACT. 7. FURTHER, WE HAVE SEEN THAT THE LD. THE FIRST APPELL ATE AUTHORITY/ LD. CIT(A) WHILE DEALING WITH THIS GROUND, IN PARAGRAPH, 5 OF ITS ORDER HAS OBSERVED AS UNDER. 5. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISS IONS OF THE ASSESSEE. ADMITTEDLY, THE PERSONS WHO HAVE WORKED O N THE JOBS OF THE ASSESSEE COMPANY BELONG TO HTA AND THEY ARE NOT THE EMPLOYEES OF THE ASSESSEE COMPANY. ASSESSEE HAS CLAIMED THAT THE SE EMPLOYEES 4 ITA NO. 222/MUM/13 HAVE BEEN DEPUTED BY HTA TO THE ASSESSEE COMPANY AN D THEREFORE, IT IS FOR THE ASSESSEE TO PROVE WITH EVIDENCE THAT THE RE IS AN AGREEMENT FOR DEPUTATION OF EMPLOYEES AND THEN SHOW THAT THE SAME HAS BEEN FOLLOWED BY THE ASSESSEE WITH REGARD TO THE WORK OF THE EMPLOYEES AND THEIR PAYMENT. WHEREAS, ASSESSEE FILED NO SUCH AGRE EMENT OR CONTRACT WITH HTA EITHER BEFORE THE A.O. OR DURING APPELLATE PROCEEDINGS AND NO OTHER EVIDENCE IN THIS REGARD HAS BEEN PRODUCED OR FILED. THEREFORE, ASSESSEE FAILED TO PROVE THAT THE EMPLOY EES OF HTA HAVE BEEN DEPUTED MERELY AS EMPLOYEES AND NOTHING MORE. THEREFORE, IT IS CLEAR THAT WHATEVER PAYMENTS HAVE BEEN MADE BY THE ASSESSEE EITHER TO HTA OR TO ITS EMPLOYEES, THEY ARE CONSTRUED AS P AYMENTS TO HTA ONLY. SE PAYMENTS ARE MADE FOR CERTAIN CONSIDERATIO N WHICH MAY BE SUPPLY OF MANPOWER OR OTHER PROFESSIONAL WORK, WHIC H IS CARRIED OUT BY THESE EMPLOYEES AND THEREFORE, THESE PAYMENTS AR E FOR A CONTRACT OR AGREEMENT WHICH EXISTS BETWEEN HTA AND THE ASSES SEE, IN WRITING OR BY WAY OF UNDERSTANDING BUT SUCH PAYMENT CANNOT BE SAID TO BE A PAYMENT OF SALARIES. HENCE, THESE ARE PAYMENTS FOR WORK. AS HAS BEEN ACCEPTED BY THE ASSESSEE, IT IS FOR THE WORK RELATI NG TO ITS PROFESSION, THEREFORE, THE PAYMENTS ARE FOR PROFESSIONAL WORK, HENCE, THEY ARE SUBJECT TO TDS PROVISIONS U/S.194J. WHEREAS, ASSESS EE HAS FAILED TO MAKE TDS FROM THESE PAYMENTS AND DEPOSIT TO GOVERNM ENT ACCOUNTS. THEREFORE, AO HAS RIGHTLY REJECTED THE SUBMISSIONS AND MADE ADDITION TO THE INCOME OF THE ASSESSEE U/S40A(IA) OF INCOME- TAX ACT. ANY TDS MADE OR DEPOSITED BY HTA ON ACCOUNT OF SALARIES PAI D AND NOT ON ACCOUNT OF PROFESSIONAL FEE, THEREFORE, THE TDS BY HTA CANNOT BE SUBSTITUTED FOR THE TDS TO BE MADE BY THE ASSESSEE. ASSESSEE HAS ALSO CLAIMED THAT THE TDS WAS REQUIRED TO BE MADE U/S.19 2 AND NOT 194J, BUT THE EMPLOYEES WHO CARRIED OUT THE PROFESSIONAL WORK ARE NOT THE EMPLOYEES OF THE ASSESSEE AND THEREFORE, ASSESSEE W AS NOT LIABLE FOR TDS U/S.192 WHEREAS, SERVICES RENDERED BY HT A EMPL OYEES ARE OF PROFESSIONAL NATURE, THEREFORE, THE TDS WAS TO BE M ADE U/S.194J. 8. WE HAVE PERUSED THE ORDER OF THE AUTHORITIES BELOW AND FOUND THAT THERE IS NO ILLEGALITIES OR INFIRMITY IN THE ORDER PASSED BY THE AO IN RESPECT OF ADDITION MADE U/S 40(A)(IA) WHICH WAS CONFIRMED BY THE FIRST APPELLATE 5 ITA NO. 222/MUM/13 AUTHORITY AND THUS THE ORDER DOES NOT REQUIRE ANY F URTHER INFERENCE AT OUR END. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 8 TH , 2015 SD- SD- (N.K. BILLAIYA) (PAWAN SINGH) # $ ! / ACCOUNTANT MEMBER ! / JUDICIAL MEMBER % & MUMBAI; '! DATED : 08 .12.2015 ASHWINI GAJAKOSH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. -. / $$01 , 01 , % & / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, % & / ITAT, MUMBAI