M/s Spice Mobility Ltd., Noida V. Addl. CIT (TDS), Noida

ITA 2288/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0776 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 27-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MEENAL GOYAL
• Keywords: Principle of natural justice; Non-deduction of tax
• Section: 194C; 201(1)

Judgement Text

1 ITA NO. 2286/DEL/2016 & ORS IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER ITA NO.2289/DEL/ 2016 ( A.Y 2011-12) SPICE MOBILITY LTD. 19A & 19B, FLOOR NO. 5 GLOBAL KNOWLEDGE PARK, SECTOR-125 NOIDA AABCM5619D (APPELLANT) VS ADDL. CIT(TDS) NOIDA (RESPONDENT) ITA NO.2286//DEL/2016 ( A.Y 2011-12) SPICE MOBILITY LTD. 19A & 19B, FLOOR NO. 5 GLOBAL KNOWLEDGE PARK, SECTOR-125 NOIDA AABCM5619D (APPELLANT) VS ACIT(TDS) NOIDA (RESPONDENT) ITA NO.2288/DEL/2016 ( A.Y 2012-13) SPICE MOBILITY LTD. 19A & 19B, FLOOR NO. 5 GLOBAL KNOWLEDGE PARK, SECTOR-125 NOIDA AABCM5619D (APPELLANT) VS ACIT(TDS) NOIDA (RESPONDENT) ITA NO.2287/DEL/2016 ( A.Y 2012-13) SPICE MOBILITY LTD. 19A & 19B, FLOOR NO. 5 GLOBAL KNOWLEDGE PARK, SECTOR-125 NOIDA AABCM5619D (APPELLANT) VS ACIT(TDS) NOIDA (RESPONDENT) APPELLANT BY SH. AJAY VOHRA, SR. ADV, SH. ADITYA VOHRA, ADV & MS. MEENAL GOYAL, CA RESPONDENT BY SH. ATIQ AHMED, SR. DR 2 ITA NO. 2286/DEL/2016 & ORS ORDER PER SUCHITRA KAMBLE, JM THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29/02/2016 PASSED BY CIT(A)-1, NOIDA. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO.2289/DEL/2016 (A.Y. 2011-12) 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER HOLDING THE APPELLANT TO BE AN ASSESSEE IN DEFAULT UNDER SECTIO N 201(1) FOR THE ALLEGED FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OF THE INCOME-TAX ACT, 1961 (THE ACT) FROM THE AMOUNT REIMBURSED TO REGIONAL DISTRIBUTORS (RDS) IN RESPECT OF ADVERTISEMENT EXPENSES INCURRED BY THEM. 1.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE REGIONAL DISTRIBUTORS (RDS) WERE NOT ADVERTISING AGENCIES AND DID NOT CARRY OUT ANY ADVE RTISING WORK FOR THE APPELLANT AND THE ADVERTISEMENT EXPENDITURE REIMBUR SED TO THEM DID NOT FALL WITHIN THE AMBIT OF SECTION 194C OF THE ACT. 1.2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN NOT HOLDING THAT NO TAX WAS REQUIRE D TO BE DEDUCTED UNDER SECTION 194C OF THE ACT FROM ADVERTISEMENT EXPENSES REIMBURSED TO RDS AS THERE WAS NO INCOME ELEMENT EMBEDDED THEREIN. 1.3. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT HOLDING THAT TA X NOT DEDUCTED AT SOURCE UNDER SECTION 194C FROM ADVERTISING EXPENSES REIMBU RSED TO RDS, WAS NOT RECOVERABLE FROM THE APPELLANT, BEING THE PAYER, UN DER SECTION 201(1) OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT DELETING INTEREST OF RS.15,41,5 31 CHARGED UNDER SECTION DATE OF HEARING 25.06.2018 DATE OF PRONOUNCEMENT 19.09.2018 3 ITA NO. 2286/DEL/2016 & ORS 201(1 A) OF THE ACT IN RESPECT OF TAX ALLEGED TO BE DEDUCTIBLE UNDER SECTION 194C OF THE ACT BUT NOT DEDUCTED FROM ADVERTISEMENT EXPENSES REIMBURSED TO RDS. 2.1. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING LEVY OF INTEREST OF RS.15,41,531 UNDER SECTION 201(1 A) OF THE ACT WITHOUT APPRECIAT ING THAT THE SAME HAD NOT BEEN COMPUTED CORRECTLY BY THE ASSESSING OFFICER. 2.2. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING TH AT THE INTEREST UNDER SECTION 201(1 A) OF THE ACT WAS CHARGEABLE, IF AT ALL, FROM THE DATE OF PAYMENT/ CREDIT TO THE DUE DATE OF FILING RETURN OF INCOME BY THE P AYEE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE C1T(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER LEVYING INTEREST UNDER SECTION 201(1 A) OF THE ACT, FOR THE ALLEGED FAILURE OF THE APPELLANT TO DEDUCT TAX AT SOURCE UNDER SECTION 192(1) OF THE AC T, FROM THE AMOUNT PAID TOWARDS SALARY, AT AVERAGE RATE OF TAX. 3.1. WITHOUT PREJUDICE, THAT ON FACTS AND CIRCUMSTA NCES OF THE CASE AND IN LAW, THE C1T(A) ERRED IN NOT APPRECIATING THAT T HERE IS NO OVERALL SHORT DEDUCTION OF TAX UNDER SECTION THE ACT AND INTEREST COULD NOT BE LEVIED ON THE BASIS OF MONTHLY SHORTAGE U/S 201(1A) OF THE ACT. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE C1T(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER LEVYING INTEREST UNDER SECTION 201(1A) OF THE ACT ON THE PROVISION M ADE FOR RECRUITMENT EXPENSES. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER LEVYING INTEREST FOR ALLEGED LATE DEPOSIT OF TDS UNDER SECTION 201(1 A) OF THE ACT, IN RESPECT OF PROVISION MADE FOR COMMISSION TO DIRECTORS. ITA NO.2286/DEL/2016 (A.Y. 2011-12) 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE ORDER PASSED UNDER SECTION 271C OF THE INCOME-TAX ACT, 1961 (TH E ACT) BY THE ASSESSING OFFICER LEVYING PENALTY OF RS.36,70,312 FOR ALLEGED FAILURE TO DEDUCT TAX AT SOURCE FROM REIMBURSEMENT OF ADVERTISEMENT EXPENSES . 4 ITA NO. 2286/DEL/2016 & ORS 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD R EASONABLE CAUSE FOR NOT DEDUCTING TAX AT SOURCE FROM THE AFORESAID PAYMENT AS THE APPELLANT WAS UNDER BONA FIDE BELIEF THAT THE SAME WERE NOT SUBJE CT TO TAX DEDUCTION AT SOURCE UNDER CHAPTER XVII-B OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER OR VARY THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. ITA NO.2288/DEL/2016 (A.Y. 2012-13) 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER HOLDING THE APPELLANT TO BE AN ASSESSEE IN DEFAULT UNDER SECTIO N 201(1) FOR THE ALLEGED FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OF THE INCOME-TAX ACT, 1961 (THE ACT) FROM THE AMOUNT REIMBURSED TO REGIONAL D ISTRIBUTORS (RDS) IN RESPECT OF ADVERTISEMENT EXPENSES INCURRED BY THEM. 1.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE REGIONAL DISTRIBUTORS ('RDS) WERE NOT ADVERTISING AGENCIES AND DID NOT CARRY OUT ANY ADVE RTISING WORK FOR THE APPELLANT AND THE ADVERTISEMENT EXPENDITURE REIMBUR SED TO THEM DID NOT FALL WITHIN THE AMBIT OF SECTION 194C OF THE ACT. 1.2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN NOT HOLDING THAT NO TAX WAS REQUIRE D TO BE DEDUCTED UNDER SECTION 194C OF THE ACT FROM ADVERTISEMENT EXPENSES REIMBURSED TO RDS AS THERE WAS NO INCOME ELEMENT EMBEDDED THEREIN. 1.3. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT HOLDING THAT TA X NOT DEDUCTED AT SOURCE UNDER SECTION 194C FROM ADVERTISING EXPENSES REIMBU RSED TO RDS, WAS NOT RECOVERABLE FROM THE APPELLANT, BEING THE PAYER, UN DER SECTION 201(1) OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT DELETING INTEREST OF RS.78,173 CHARGED UNDER SECTION 201(1 A) OF THE ACT IN RESPECT OF TAX ALLEGED TO BE DEDUC TIBLE UNDER SECTION 194C OF THE ACT BUT NOT DEDUCTED FROM ADVERTISEMENT EXPENSE S REIMBURSED TO RDS. 2.1. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING LEVY OF INTEREST OF RS.78,173 UNDER 5 ITA NO. 2286/DEL/2016 & ORS SECTION 201(1 A) OF THE ACT WITHOUT APPRECIATING TH AT THE SAME HAD NOT BEEN COMPUTED CORRECTLY BY THE ASSESSING OFFICER. 2.2. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING TH AT THE INTEREST UNDER SECTION 201(1 A) OF THE ACT WAS CHARGEABLE, IF AT ALL, FROM THE DATE OF PAYMENT/ CREDIT TO THE DUE DATE OF FILING RETURN OF INCOME BY THE P AYEE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER LEVYING INTEREST UNDER SECTION 201(1 A) OF THE ACT, FOR THE ALLEGED FAILURE OF THE APPELLANT TO DEDUCT TAX AT SOURCE UNDER SECTION 192(1) OF THE AC T, FROM THE AMOUNT PAID TOWARDS SALARY, AT AVERAGE RATE OF TAX. 3.1. WITHOUT PREJUDICE, THAT ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW, THE C1T(A) ERRED IN NOT APPRECIATING TH AT THERE IS NO OVERALL SHORT DEDUCTION OF TAX UNDER SECTION 192(1) OF THE ACT AN D INTEREST COULD NOT BE LEVIED ON THE BASIS OF MONTHLY SHORTAGE UNDER SECTI ON 201(1 A) OF THE ACT. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER HOLDING THE APPELLANT TO BE AN ASSESSEE IN DEFAULT UNDER SECTIO N 201(1) FOR NON-DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H IN RESPECT OF P ROVISION MADE FOR RECRUITMENT EXPENSES. 4.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE C1T(A) ERRED IN NOT APPRECIATING THAT PROVISIONS OF SECTION 194H OF THE ACT WERE NOT APPLICABLE IN RESPECT OF AFORESAID AMOUNT PAYABLE TOWARDS RECRUITMENT EXPENSES. 4.2. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT HOLDING THAT TA X ALLEGED TO BE DEDUCTIBLE UNDER SECTION 194H OF THE ACT FROM AFORESAID AMOUNT PAYABLE TOWARDS RECRUITMENT EXPENSES, WAS NOT RECOVERABLE' FROM TH E APPELLANT, BEING THE PAYER, UNDER SECTION 201(1) OF THE ACT. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE C1T(A) ERRED IN NOT DELETING INTEREST OF RS.24,693 CHARGED UNDER SECTION 201(1 A) OF THE ACT FROM THE AFORESAID AMOUNT PAYABLE TOW ARDS RECRUITMENT EXPENSES, ALLEGED TO BE DEDUCTIBLE UNDER SECTION 19 4H OF THE ACT. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE 6 ITA NO. 2286/DEL/2016 & ORS CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER HOLDING THE APPELLANT TO BE AN ASSESSEE IN DEFAULT UNDER SECTIO N 201(1) FOR NON-DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE FOR TESTING EXPEN SES. 6.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN AFFIRMING THE ORDER PASSED UNDER S ECTION 201(1) WITHOUT APPRECIATING THAT THE ASSESSING OFFICER FAILED TO S PECIFY UNDER WHICH SECTION THE APPELLANT DEFAULTED IN DEDUCTING TAX AT SOURCE ON PAYMENTS MADE TOWARDS TESTING EXPENSES. 6.2. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT HOLDING THAT TA X ALLEGED TO BE DEDUCTIBLE FROM AFORESAID AMOUNT PAID TOWARDS TESTING EXPENSES , WAS NOT RECOVERABLE FROM THE APPELLANT, BEING THE PAYER, UNDER SECTION 201(1) OF THE ACT. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE C1T(A) ERRED IN NOT DELETING INTEREST OF RS.7,951 C HARGED UNDER SECTION 201 (1 A) OF THE ACT FROM THE AFORESAID AMOUNT PAYABLE TOW ARDS TESTING EXPENSES. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER OR VARY THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. ITA NO.2287//DEL/2016 (A.Y. 2012-13) 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE ORDER PASSED UNDER SECTION 271C OF THE INCOME-TAX ACT. 1961 (TH E ACT) BY THE ASSESSING OFFICER LEVYING PENALTY OF RS.4,01,140 FOR ALLEGED FAILURE TO DEDUCT TAX AT SOURCE FROM REIMBURSEMENT OF ADVERTISEMENT EXPENSES , RECRUITMENT EXPENSES AND TESTING EXPENSES. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD R EASONABLE CAUSE FOR NOT DEDUCTING TAX AT SOURCE FROM THE AFORESAID PAYMENT AS THE APPELLANT WAS UNDER BONA FIDE BELIEF THAT THE SAME WERE NOT SUBJE CT TO TAX DEDUCTION AT SOURCE UNDER CHAPTER XVII-B OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER OR VARY THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 3. FIRSTLY, WE TAKE UP A.Y. 2011-12. THE ASSESSEE I S A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING OF MOBIL E PHONES HANDSETS, MANUFACTURING TRADING, SERVICING, MAINTENANCE OF CO MPUTER HARDWARE. THE 7 ITA NO. 2286/DEL/2016 & ORS ASSESSEE FOR THE FINANCIAL YEAR 2010-11 FILED QUART ERLY RETURNS OF TAX DEDUCTED AT SOURCE UNDER VARIOUS SECTIONS ON DUE DATES. THE PROCEEDINGS RELATING TO VERIFICATION OF QUARTERLY TDS RETURNS, WERE INITIAT ED BY THE ASSESSING OFFICER, AFTER WHICH ORDER DATED 28.03.2014 WAS PASSED UNDER SECTION 201(1)/201(1A) OF THE INCOME TAX ACT, 1961, TREATING THE ASSESSEE AS AN 'ASSESSEE IN DEFAULT' FOR FAILURE TO DEDUCT TAX AT SOURCE FROM CERTAIN PA YMENTS DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSEE, DURING THE RELEVANT PR EVIOUS YEAR, PAID RS. 18,35,15,604/- TO REGIONAL DISTRIBUTORS ON ACCOUNT OF REIMBURSEMENT OF EXPENSES AGAINST THIRD PARTY BILLS, INCURRED BY THE M FOR ADVERTISEMENT IN RELATION TO THE ASSESSEE'S PRODUCTS SOLD BY THEM ON THEIR OWN ACCOUNT. THESE EXPENSES INCLUDED MANPOWER REIMBURSEMENT TO RDS, SA LESMAN INCENTIVES AND OTHER REIMBURSEMENT TO RDS. IN THE ASSESSMENT ORDER , THE ASSESSING OFFICER HELD THE ASSESSEE AS 'ASSESSEE IN DEFAULT' UNDER SE CTION 201 (1) OF THE ACT AND ALSO LEVIED INTEREST UNDER SECTION 201 (1A) OF THE ACT, IN RESPECT OF FAILURE TO DEDUCT TAX AT SOURCE IN RESPECT OF THE AFORESAID PA YMENTS MADE TO VARIOUS DISTRIBUTORS/DEALERS. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE DEDUCTED TAX AT SOURCE AMOUNTING TO RS. 2,22,40,792/- FROM T HE AMOUNTS PAID AS SALARY. THE RATE OF TAX DEDUCTED AT SOURCE WAS CALCULATED A T 'AVERAGE RATE OF INCOME- TAX' COMPUTED ON THE BASIS OF THE RATES IN FORCE ON THE ESTIMATED INCOME OF THE PAYEE FOR THE RELEVANT FINANCIAL YEAR. THE ASSESSIN G OFFICER COMPUTED THE AMOUNT OF TAX TO BE DEDUCTED ON MONTH TO MONTH BASI S OF AVERAGE TAX DEDUCTED. 4. BEING AGGRIEVED BY THE ORDER U/S 201(1)/201(1A) OF THE ACT, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSE D THE APPEAL OF THE ASSESSEE. 5. AS REGARDS GROUND NOS.1, 1.1, 1.2 AND 1.3, RELAT ING TO FAILURE TO DEDUCT TAX AT SOURCE U/S 194C OF THE ACT FROM THE AMOUNT R EIMBURSED TO REGIONAL DISTRIBUTORS IN RESPECT OF ADVERTISEMENT EXPENSES I NCURRED BY THEM, THE LD. AR SUBMITTED THAT AS PER CLAUSE 2.6 OF THE AGREEMENT, THE DISTRIBUTOR IS NOT THE AGENT. THEREFORE, THIS IS THE AMOUNT PAID FROM PRI NCIPAL TO PRINCIPAL. 8 ITA NO. 2286/DEL/2016 & ORS THEREFORE, THE REIMBURSEMENT OF THIS AMOUNT WAS CLA IMED BY THE ASSESSEE. FOR ASSESSMENT YEAR 2009-10, THE TRIBUNAL IN CASE O F M/S. S. MOBILITY LTD. (ITA NO. 3898/DEL/2013 AND CO NO. 245/DEL/2013 ORDE R DATED 29.12.2014) HELD THAT THE TRIBUNAL AGREE WITH THE CONTENTION OF THE ASSESSEE THAT NO TDS PROVISIONS ARE ATTRACTED WHERE IT IS A PURELY REIMB URSEMENT AND THERE WAS NO PROFIT ELEMENT FOR THE PAYEE, AS HELD BY THE CIT(A) , BUT THE TRIBUNAL FURTHER HELD THAT HOWEVER, IT WAS A STRUCTURE ARRANGEMENT W HEREIN THE PAYMENTS ARE ROUTED THROUGH THE DISTRIBUTORS TO CIRCUMVENT THE P ROVISIONS OF CHAPTER XVII-B OF THE ACT. THE TRIBUNAL FURTHER OBSERVED THAT THE BILL RAISED BY THE ADVERTISEMENT AGENCY WAS NOT IN THE NAME OF THE DIS TRIBUTOR, THEREFORE, THE TRIBUNAL REMANDED BACK THE ISSUE TO THE FILE OF THE AO AND DIRECTED THE ASSESSEE TO PRODUCE THE EVIDENCES BEFORE THE ASSESS ING OFFICER TO ESTABLISH THAT THE PARTIES TO WHOM THE REIMBURSEMENTS HAVE BE EN MADE HAD ACTUALLY COMPLIED WITH THE PROVISIONS OF CHAPTER XVII-B. THE LD. AR SUBMITTED THAT IN THE PRESENT CASE THE ASSESSEE WAS RAISED THE BILL I N THE NAME OF PAYEE, THE CIT(A) HAS TAKEN INTO ACCOUNT OF THESE FACTORS AND ITS A CRYPTIC ORDER. THE LD. AR FURTHER SUBMITTED THAT THERE IS NO ELEMENT OF PR OFIT INVOLVED. THE LD. AR RELIED UPON THE HONBLE ALLAHABAD HIGH COURT DECISI ON IN CASE OF JAGRAN PRAKASHAN LTD. VS. DCIT(TDS) 345 ITR 288 (ALL HC) W HICH WAS FOLLOWED BY AGRA BENCH OF THE TRIBUNAL IN CASE OF ALIGARH MUSLI M UNIVERSITY VS. ITO 189 TTJ 794 (AGRA ITAT). 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). THE LD. DR SUBMITTED THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AS AND FROM THE RECORD IT SHOWS THAT DEDUCTOR IS IN DEFAUL T FOR HAVING NOT DEDUCTED THE TDS ON THE AMOUNTS OF RS.18,35,15,604/- FOR FINANCI AL YEAR 2010-11 AND RS. 1,30,28,911/- FOR THE FINANCIAL YEAR 2011-12 AND IS LIABLE FOR THE TDS U/S 194C WHICH AMOUNTS TO RS.183,515,604/- UNDER THE HE AD OF PUBLICITY EXPENSES FOR ASSESSMENT YEAR 2010-11 AND RS. 13,028 ,911/- FOR FINANCIAL YEAR 2011-12. SINCE, THE ASSESSEE HAS NOT PRODUCE ANY DETAILS THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION. 9 ITA NO. 2286/DEL/2016 & ORS 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. FROM THE TRIBUNALS DECISION IN THE ASSESS EES OWN CASE FOR ASSESSMENT YEAR 2009-10. THE TRIBUNAL HAS CATEGORI CALLY GIVEN FINDING THAT THERE WAS A STRUCTURE ARRANGEMENT WHEREIN THE PAYME NTS ARE ROOTED THROUGH THE DISTRIBUTORS TO CIRCUMVENT THE PROVISIONS OF CH APTER XVII-V OF THE ACT. THEREFORE, THE TRIBUNAL HAS CONFIRMED THE CIT(A)S DIRECTION AS TO DIRECTING THE ASSESSEE TO PRODUCE THE EVIDENCES BEFORE THE ASSES SING OFFICER TO ESTABLISH THAT THE PARTIES TO WHOM THE REIMBURSEMENT HAVE BEE N MADE HAD ACTUALLY COMPLIED WITH THE PROVISIONS OF CHAPTER XVI-V. IN THE PRESENT ASSESSMENT YEAR, THE ASSESSEE DURING THE PREVIOUS YEAR PAID RS . 18,35,15,604/- TO REGIONAL DISTRIBUTORS ON ACCOUNT OF REIMBURSEMENT O F EXPENSES AGAINST THIRD PARTY BILLS, INCURRED BY THEM FOR ADVERTISEMENT IN RELATION TO THE ASSESSEES PRODUCTS SOLD BY THEM ON THEIR OWN ACCOUNT. FROM TH E RECORDS IT IS SEEN THAT THESE EXPENSES INCLUDED MANPOWER REIMBURSEMENT TO R DS, SALESMAN INCENTIVES AND OTHER REIMBURSEMENT TO RDS. THUS, T HE ASSESSEE RAISED THE BILL IN THE NAME OF PAYEE AND THE ASSESSEE ALSO PRODUCED EVIDENCES BEFORE THE ASSESSING OFFICER TO ESTABLISH THAT THE PARTIES TO WHOM THE REIMBURSEMENT HAVE BEEN MADE HAD ACTUALLY COMPLIED WITH THE PROVI SIONS OF CHAPTER XVII-V. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS N OT LOOKED INTO THE EVIDENCES PRODUCED BEFORE THE ASSESSING OFFICER AS WELL AS BE FORE CIT(A). THUS, GROUND NOS. 1, 1.1, 1.2 AND 1.3 OF ASSESSEES APPEAL ARE A LLOWED. 8. AS RELATED TO GROUND NO. 2, 2.1 AND 2.2 REGARDIN G LEVY OF INTEREST THE SAME IS CONSEQUENTIAL, HENCE THE SAME DO NOT REQUIR E ADJUDICATION. 9. AS REGARDS GROUND NO. 3 AND 3.1 RELATING TO LEVY OF INTEREST UNDER SECTION 201(1A) OF THE ACT, FOR THE ALLEGED FAILURE OF THE APPELLANT TO DEDUCT TAX AT SOURCE UNDER SECTION 192(1) OF THE ACT, FROM THE AMOUNT PAID TOWARDS SALARY, AT AVERAGE RATE OF TAX, AS WELL AS SHORT DE DUCTION OF TAX THE INTEREST LEVIED ON THE BASIS OF MONTHLY SHORTAGE U/S 201(1A) , THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER, WRONGLY LEVIED INTEREST UNDE R SECTION 201 (1A) OF THE ACT 10 ITA NO. 2286/DEL/2016 & ORS FOR THE ALLEGED FAILURE TO DEDUCT TAX AT SOURCE UND ER SECTION 192 (1) OF THE ACT, FROM THE AMOUNT PAID TOWARDS SALARY. THE LD. AR FUR THER SUBMITTED THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT WHERE T HERE IS NO OVERALL SHORT DEDUCTION OF TAX UNDER SECTION 192 (1) OF THE ACT, INTEREST CANNOT BE LEVIED ON THE BASIS OF MONTHLY SHORTAGE UNDER SECTION 201 (1A ) OF THE ACT. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE COMPANY MADE A PROVISION FOR RECRUITMENT EXPENSES, WHERE TDS HAS BEEN DEDUCTED AT THE TIME O F ACTUAL PAYMENT OR CREDIT TO THE PARTY. THUS THERE IS NO DEFAULT IN TD S DEDUCTION. HOWEVER, THE ASSESSING OFFICER LEVIED THE INTEREST UNDER SECTION 201(1A) OF THE ACT. 10. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE RECORDS IT CAN BE SE EN THAT DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE DEDUCTED TAX AT SOURCE AMOUNTING TO RS. 2,22,40,792/- FROM THE AMOUNTS PAID AS SALARY. THE RATE OF TAX DEDUCTED AT SOURCE WAS CALCULATED AT AVERAGE RATE OF INCOME TA X COMPUTED ON THE BASIS OF THE RATES ON THE ESTIMATED INCOME OF THE PAYEE FOR THE RELEVANT FINANCIAL YEAR. BUT THE ASSESSING OFFICER PROCEEDED TO COMPUTE THE AMOUNT OF TAX TO BE DEDUCTED ON MONTH TO MONTH BASIS OF AVERAGE TAX DED UCTED. THIS NEEDS TO BE VERIFIED AS THE LD. AR MADE SUBMISSION BEFORE US TH AT THE ASSESSING OFFICER HAS NOT GIVEN ANY CREDIT FOR INTEREST WHERE THERE I S NO SURPLUS PAYMENT OF TDS, WHILE CHARGING INTEREST ON DEFICIT AMOUNT. THUS, TH IS ISSUE IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING AS TO WHETHER THE INTEREST CLAUSE IS APPLICABLE OR NOT AND IF APPLICABLE WHETHER THER E IS SURPLUS PAYMENT OF TDS OR NOT. AFTER VERIFYING THE SAME THE ASSESSING OFFI CER DECIDE THIS ISSUE. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. THUS, GROUND NOS. 3 AND 3.1 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 11 ITA NO. 2286/DEL/2016 & ORS 12. AS RELATED TO GROUND NO. 4, REGARDING PROVISION S MADE FOR RECRUITMENT EXPENSES, THE LD. AR SUBMITTED THAT THE ASSESSEE CO MPANY MADE A PROVISION FOR RECRUITMENT EXPENSES, WHERE TDS HAS BEEN DEDUCT ED AT THE TIME OF ACTUAL PAYMENT OR CREDIT TO THE PARTY. THUS, THE LD. AR SU BMITTED THAT THERE IS NO DEFAULT IN TDS DEDUCTION. THE LD. AR FURTHER SUBMIT TED THAT THE ACTION OF THE ASSESSING OFFICER IN TREATING THE ASSESSEE AS AN A SSESSEE-IN-DEFAULT AND LEVYING INTEREST UNDER SECTION 201(1A) OF THE ACT I S THUS NOT BASED ON PROPER APPRECIATION OF THE FACTS OF THE CASE. 13. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER AND THE ORDER OF THE CIT(A). 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE MATERIAL AVAILABLE ON RECORD. IT CAN BE SEEN THAT THE ASSESSEE COMPANY M ADE A PROVISION FOR RECRUITMENT EXPENSES, WHERE TDS HAS BEEN DEDUCTED A T THE TIME OF ACTUAL PAYMENT OR CREDIT TO THE PARTY. THUS, THERE IS NO D EFAULT IN TDS DEDUCTION. THEREFORE, THE ACTION OF THE ASSESSING OFFICER IN T REATING THE ASSESSEE AS AN ASSESSEE-IN-DEFAULT AND LEVYING INTEREST UNDER SE CTION 201(1A) OF THE ACT IS NOT BASED ON PROPER APPRECIATION OF THE FACTS OF TH E CASE. GROUND NO. 4 IS ALLOWED. 15. AS RELATES TO GROUND NO.5, COMMISSION TO THE DI RECTOR, THE ASSESSING OFFICER HAS NOT MADE ANY DEDUCTION THAT ONLY INTERE ST HAS BEEN LEVIED. THE LD. AR SUBMITTED THAT THE ASSESSEE MADE A PROVISION FOR COMMISSION TO DIRECTORS AT THE END OF THE YEAR, WHICH CAN BE PAID STRICTLY IN ACCORDANCE WITH SECTION 211 OF THE COMPANIES ACT, 1956 AND TDS CAN BE DEDUC TED AND PAID, WHEN ACTUAL LIABILITY IS ASCERTAINED, WHICH GENERALLY HA PPENS AFTER FIVE/SIX MONTHS FROM THE END OF THE FINANCIAL YEAR. FURTHER, IN FIN ANCE BILL, 2012, SECTION 194J OF THE INCOME TAX ACT, 1961 HAS BEEN AMENDED AND A CLAUSE (BA) TO SUB SECTION (1) OF THE SECTION 194J EFFECTIVE FROM 1ST JULY, 2012 HAS BEEN INTRODUCED WHEREIN TAX IS REQUIRED TO BE DEDUCTED O N THE REMUNERATION PAID TO DIRECTOR, WHICH IS NOT IN NATURE OF SALARY, AT THE RATE OF 10% OF SUCH 12 ITA NO. 2286/DEL/2016 & ORS REMUNERATION. THUS, THIS CLAUSE IS APPLICABLE W.E.F . 1.07.2012. HOWEVER, THE ASSESSING OFFICER LEVIED THE INTEREST UNDER SECTION 201(1A) OF THE ACT. 16. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER AND THE ORDER OF THE CIT(A). 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE MADE A PROVISION FOR COMMISSION TO DIRECTORS AT THE END OF THE YEAR, WHICH CAN BE PAID STRICTLY IN ACCORDANCE WITH SECTION 211 OF THE COMPANIES ACT, 1956 AND TDS CAN BE DEDUC TED AND PAID, WHEN ACTUAL LIABILITY IS ASCERTAINED, WHICH GENERALLY HA PPENS AFTER FIVE/SIX MONTHS FROM THE END OF THE FINANCIAL YEAR. FURTHER, IN FIN ANCE BILL, 2012, SECTION 194J OF THE INCOME TAX ACT, 1961 HAS BEEN AMENDED AND A CLAUSE (BA) TO SUB SECTION (1) OF THE SECTION 194J EFFECTIVE FROM 1ST JULY, 2012 HAS BEEN INTRODUCED WHEREIN TAX IS REQUIRED TO BE DEDUCTED O N THE REMUNERATION PAID TO DIRECTOR, WHICH IS NOT IN NATURE OF SALARY, AT THE RATE OF 10% OF SUCH REMUNERATION. THUS, THE CONTENTION OF THE LD. AR TH AT THIS CLAUSE IS APPLICABLE W.E.F. 1.07.2012 IS JUST AND PROPER. GROUND NO. 5 I S ALLOWED. 18. IN RESULT, APPEAL BEING ITA NO. 2289/DEL/2016 F OR A.Y. 2011-12 FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURP OSE. 19. FOR ASSESSMENT YEAR 2012-13 BEING ITA NO.2288/D EL/2016, EXCEPT GROUND NOS. 6, 6.1, 6.2 AND 7 THE REST OF THE GROUN DS ARE IDENTICAL TO THE EARLIER ASSESSMENT YEAR I.E. 2011-12. THE GROUND NOS. 6, 6. 1, 6.2 AND 7 REGARDING TESTING EXPENSES. THE LD. AR SUBMITTED THAT PAYMEN T MADE FOR PURCHASE OF MATERIAL AND NOT IN NATURE OF SERVICE. THUS, INTER EST CANNOT BE LEVIED. THE LD. DR RELIED UPON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS GROUND NOS. 1, 1.1, 1.2 AND 1.3 AS WELL AS GROUND NOS. 2, 2.1 AND 2.2 ARE IDENTICAL IN NATURE TO THAT OF A.Y. 2011-12, HENCE, ALLOWED. AS REGARDS GROUND NOS. 3 AND 3.1 AR E IDENTICAL IN NATURE TO 13 ITA NO. 2286/DEL/2016 & ORS THAT OF A.Y. 2011-12 AND HENCE PARTLY ALLOWED FOR S TATISTICAL PURPOSE. AS REGARDS GROUND NOS. 4, 4.1 AND 4.2 AS WELL AS 5 ARE IDENTICAL IN NATURE TO THAT OF A.Y. 2011-12, HENCE, ALLOWED. AS REGARDS GROUND NOS. 6, 6.1, 6.2 AND 7, FROM THE RECORDS IT CAN BE SEEN THAT PAYMENT MADE F OR PURCHASE OF MATERIAL AND NOT FOR SERVICES AND THUS, THE ASSESSING OFFICE R AS WELL AS THE CIT(A) WAS NOT RIGHT IN MAKING THE ADDITIONS. HENCE, GROUND NO S. 6, 6.1, 6.2 AND 7 ARE ALLOWED. 21. IN RESULT, APPEAL BEING ITA NO. 2288/DEL/2016 F OR A.Y. 2012-13 FILED BY ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 22. AS REGARDS, PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 BOTH THE ASSESSMENT YEARS ARE CONCERNED, SINCE THE QUANTUM F OR BOTH THE ASSESSMENT YEARS ARE DECIDED HEREINABOVE, THE SAME IS CONSEQUE NTIAL AND HENCE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 23. IN RESULT, APPEALS BEING ITA NO.2286/DEL/2016 F OR A.Y. 2011-12 AND ITA NO. 2287/DEL/2016 FOR A.Y. 2012-13 ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSE. 24. IN RESULT, ALL FOUR APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER, 2018 . SD/- SD/- (O. P. KANT) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 19/09/2018 R. N* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTR AR 14 ITA NO. 2286/DEL/2016 & ORS ITAT NEW DELHI DATE OF DICTATION 1 3 .06 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 1 4 .0 6 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 9 .0 9 .2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 9 .0 9 .2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 9 .0 9 .2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER