Spice Mobility Ltd., Noida V. ACIT, Meerut

ITA 2341/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0251 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 21-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 40(a)(ia); 194C

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER, AND SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO. 2341 /DEL/201 5 [ASSESSMENT YEAR: 20 1 1 - 1 2 ] SPICE MOBILITY LIMITED VS. THE A.C. I.T. [FORMERLY S. MOBILITY LTD] CIRCLE - 2 19A & 19B, FLOOR NO. 5 M EERUT GLOBAL KNOWLEDGE PARK SECTOR 125, NOIDA PAN : AABCM 5619 D [APPELLANT] [RESPONDENT] DATE OF HEARING : 28 . 0 3 .201 9 DATE OF PRONOUNCEMENT : 2 9 .0 3 .201 9 ASSESSEE BY : SHRI AJAY VOHRA , SR ADV . SHRI ADITYA VOHRA , ADV MS. MEENA L GOYAL, CA REVENUE BY : S HRI J.K. MISHRA , CIT . DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL B Y THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] , MEERUT DATED 2 6 .0 3 .201 5 PERTA INING TO ASSESSMENT YEAR 201 1 - 1 2 . 2 2. THE SUBSTANTIVE GR IEVANCE RAISED BY THE ASSESSEE IS THAT THE CIT(A) ERRED IN HOLDING THAT THE ASSE SSEE WAS REQUIRED TO WITHHOLD TAX U/S 194C OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT ] FROM THE AMOUNT REIMBURSED TOWARDS ADVERTISEMENT EXPENDITURE INCURRED BY THE DISTRIBUTORS AND THAT T H E DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT WAS SUSTAINABLE. 3. OTHER GRIEVANCES HAVE NOT BEEN PRESSED BEFORE US. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT ASSESSEE COMPANY IS ENGAGED IN TRADING OF MOBILE HAND - SETS AND MANUFACTURING, TRADING, SERVICING AND MAINTENANCE OF COMPUTER HARDWARE. T H E RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 29 .09.201 1 DECLARING TOTAL INCOME OF RS. 71.28 CRORES . THEREAFTER, THE RETURN WAS REVISED ON 27.09.2012 AND REVISED INCOME WAS 71.28 CRORES. 3 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS MADE PAYMENT OF RS. 15,93,23,093/ - ON WHICH NO TAX WAS DEDUCTED AT SOURCE. THE PAYMENTS WERE AS UNDER: (I) REIMBURSEMENT TO RDS RS. 10,01,90,492/ - (II) SALESMAN INCENTIVE RS. 3,45,52,601/ - (III) MAN POWER REI MBURSEMENT RDS RS. 2,45,80,000/ - TOTAL RS. 15,93,23,093/ - 6. THE ASSESSEE WAS ASKED TO EXPLAIN A S T O WHY THIS PAYMENT SHOULD NOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT. THE ASSESSEE EXPLAINED THAT THESE ARE NOTHING BUT REIMBURSEMENTS OF EXPENDIT URE INCURRED BY THE REGIONAL DISTRIBUTOR S F O R BRAND PROMOTION OF THE COMPANYS PRODUCTS BY ADVERTISEMENT IN VARIOUS FORMS. 7. THE CONTENTION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE ASSESSING OFFICER WHO WAS OF THE FIRM BELIEF THAT THE ASSESSEE WAS LIA BLE TO DEDUCT TAX AT SOURCE, FAILING WHICH THE 4 PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WOULD CLEARLY APPLY AND, ACCORDINGLY, MADE THE ADDITION OF RS. 15,93,23,093/ - . 8 . THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) AND REITERATED ITS CONTENTIONS. 9 . AFTER CONSIDERING THE FACTS AND DETAILED SUBMISSIONS, THE LD. CIT(A) FOUND THAT IN A.Y 2009 - 10, HIS PREDECESSOR HAD THE OCCASION TO CONSIDER A SIMILAR GRIEVANCE AND HAS ALLOWED THE APPEAL OF THE ASSESSEE. THE CIT(A) FURTHER FOUND THAT THE MATTER TRAVELL ED UPTO THE TRIBUNAL AND FOUND THAT THE TRIBUNAL HAS DIRECTED FOR VERIFICATION OF REIMBURSEMENT AND WHETHER THE TAX HAS BEEN DEDUCTED BY THE DISTRIBUTOR. TAKING A LEAF OUT OF THE DECISION OF THE TRIBUNAL IN A.Y 2009 - 10, THE CIT(A) HELD AS UNDER: 3.5 THE APPELLANT IS DIRECTED TO PRODUCE BEFORE THE AO PROOF/EVIDENCE TO THE EFFECT THAT THE PARTIES TO WHOM REIMBURSEMENT HAD BEEN MADE HAD ACTUALLY DEDUCTED TDS WHILE MAKING PAYMENTS TO THE FINAL RECIPIENTS. TO THE EXTENT SUCH VERIFICATION IS POSITIVE, THE LIAB ILITY OF DEDUCTING TDS CANNOT BE 5 FASTENED ON THE ASSESSEE. IN THIS SITUATION, THERE WILL BE NO DISALLOWANCE UNDER SECTION 40 (A)(IA). HOWEVER, TO THE EXTENT SUCH VERIFICATION IS NEGATIVE, IT IS HELD THAT APPELLANT WAS LIABLE FOR MAKING TDS AND THEREFORE TH E PROVISION OF SECTION 40 (A)(IA) WILL BE TRIGGERED AND CONSEQUENTLY SUCH EXPENSES WILL STAND DISALLOWED. 10 . BEFORE US, THE LD. AR STRONGLY SUBMITTED THAT ONCE IT HAS BEEN ACCEPTED THAT THE IMPUGNED PAYMENT WAS REIMBURSEMENT OF EXPENSES, NO FURTHER VERIF ICATION IS REQUIRED. THE LD. AR STRONGLY PLACED RELIANCE ON THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF JAGRAN PRAKASHAN LTD VS. DCIT 345 ITR 288. IT IS THE SAY OF THE LD. AR THAT IT IS A W E L L SETTLED PROPOSITION OF LAW THAT NO TDS IS REQU IRED ON REIMBURSEMENTS AS HELD BY THE HON'BLE J U R I S D I C T I O N A L HIGH COURT OF DELHI IN THE CASE OF FORTIS HEALTHCARE LTD 181 TAXMANN 257 AND DLF COMMERCIAL PROJECT CORPORATION ITA NO. 507 OF 2013. 11. THE LD. AR FURTHER DREW OUR ATTENTION TO THE RELEVANT CLAUSES OF THE A GREEMENT WITH ONE OF THE DISTRIBUTORS NAMELY, DELTA PRIME MARKETING PVT LTD. AND POINTED OUT THAT UNDER THE HEADING RELATION OF BUYER AND SELLER, IT HAS BEEN 6 SPECIFICALLY MENTIONED THAT THIS AGREEMENT DOES NOT CREATE ANY AGENCY, JOINT VENTURE OR PARTNERS HIP BETWEEN SPICE AND THE DISTRIBUTOR . THE LD. AR REITERATED THAT THE PAYMENT OF RS. 15.93 CRORES IS NOTHING BUT REIMBURSEMENT TO REGIONAL DISTRIBUTOR AND THEREFORE, THE PROVISIONS OF SECTION 194C DO NOT APPLY AND, ACCORDINGLY, SECTION 40(A)(IA) OF THE AC T IS NOT AT ALL APPLICABLE. 12 . PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER AND VEHEMENTLY SUBMITTED THAT TO PREVENT REVENUE LEAKAGE, PROVISIONS OF TDS HAVE BEEN ENACTED SO THAT AT LEAST ONE PERSON SHOULD BE LIABLE TO D EDUCT AND PAY TAX . IF THE PAYER CLAIMS THAT THE PAYMENT IS REIMBURSEMENT, THEN IT NEEDS TO BE VERIFIED WHETHER THE PAYEE HAS PAID THE TAX OR NOT. 1 3 . WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUG H THE RELEVANT DOCUMENTARY EVIDENCE BROUGHT ON RECORD U/R 18(6) OF THE ITAT RULES. EXHIBIT 1 IS THE INVOICE RAISED BY DELTA PRIME MARKETING PVT LTD, ONE OF THE REGIONAL DISTRIBUTOR OF 7 THE ASSESSEE WHICH SHOWS THAT IT HAS RAISED CERTAIN CLAIMS IN RESPECT O F ADVERTISEMENT AND MARKETING. EXHIBIT 2 IS THE BILL OF SHUBH ADVERTISING AND MARKETING PVT LTD WHICH IS RAISED IN THE NAME OF DELTA PRIME MARKETING PVT LTD. SIMILARLY, EXHIBIT 19 IS THE INVOICE OF TENET AGENCIES FOR SPICE CARRY BAG OF RS. 60,000/ - AND EXHIBIT 20 IS THE INVOICE RAISED BY COLORS MEDIA AND ADVERTISING RAISED IN THE NAME OF TENET AGENCIES WHICH IS THE REGIONAL DISTRIBUTOR OF RADIANT DISTRIBUTORS FOR ADVERTISING AND MARKETING AND EXHIBIT 27 IS THE INVOICE RAISED BY STREET SMART IN THE NAME O F RADIANT DISTRIBUTORS WHICH IS THE REGIONAL DISTRIBUTOR. 1 4 . AFTER CONSIDERING THESE SAMPLE INVOICES, WE ARE OF THE CONSIDERED OPINION THAT THE PAYMENT S MADE BY THE APPELLANTS TO ITS REGIONAL DISTRIBUTOR S A R E NOTHING BUT REIMBURSEMENT OF EXPENSES. HOWEVE R, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE DEEM IT FIT TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE IS DIRECTED TO FURNISH ALL THE INVOICES RAISED BY ITS REGIONAL DISTRIBUTOR ON THE BASIS OF WHICH IT HAS MADE PAYMENT O F RS. 1 5 . 9 3 C R O R E S A S R E I M B U R S E M E N T . T H E ASSESSING OFFICER I S D I R E C T E D T O V E R I F Y 8 T H E I N V O I C E A N D D E C I D E T H E I S S U E WHETHER T H E I M P U G N E D PAYMENTS A R E R E I M B U R S E M E N T S O R N O T . W E W O U L D L I K E T O M A K E I T CLEAR T H A T A F T E R VERIFICATION , T H E ASSESSING OFFICER I S F R E E T O M A K E A N Y E N Q U I R Y H E D E E M S I T F I T T O B E M A D E I N T H E H A N D S O F THE R E G I O N A L D I S T R I B U T O R A S P E R T H E PROVISIONS O F L A W . 1 5 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS A L L O W E D F O R S T A T I S T I C A L P U R P O S E S . THE ORDER IS PRON OUNCED IN THE OPEN COURT ON 2 9 . 0 3 .201 9 . S D / - S D / - [ K.N. CHARY ] [N.K. BILLAIYA] J UDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 9 T H MARCH, 2019. VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CI T 4 . CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 9 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 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 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF I TAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 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