Snowtemp Commercial Private Ltd., Kolkata V. Income Tax Officer-Ward-12(2), Kolkata, Kolkata

ITA 2709/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9423 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 30-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 04-12-2013
• Court: TRIBUNAL
• Assessee Lawyers: G R SAHA
• Keywords: Non-deduction of tax
• Section: 143(3); 194C

Judgement Text

1 ITA NO.2709/KOL/2013 SNOWTEMP COMMERCIAL PVT. LTD.. AY 2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S. S. VISWA NETHRA RAVI, JM] I.T.A NO. 2709/KOL/2013 ASSESSMENT YEAR: 2006-07 SNOWTEMP COMMERCIAL PVT. LTD. VS. INCOME-TAX OFF ICER, WD-12(2), KOLKATA (PAN: AADCS7999G) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 30.01.2017 DATE OF PRONOUNCEMENT: 03.02.2017 FOR THE APPELLANT: SHRI G. R. SAHA, ADVOCATE FOR THE RESPONDENT: SHRI SALLONG YADEN, ADDL. CIT ORDER PER SHRI M. BALAGANESH, AM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XII, KOLKATA VIDE APPEAL NO. 512/XII/12(2)/08-09 DATED 09.10.2013. ASSESSMEN T WAS FRAMED BY ITO, WD-12(2), KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR AY 2006-07 VIDE HIS ORDER DATED 26.12.2008. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CIT(A) IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSES SEE IS A CLOSELY HELD COMPANY ENGAGED IN THE BUSINESS OF SOFT COKE AND OTHER BY-PRODUCTS OF COAL AND ALSO STEEL PRODUCTS. THE ASSESSEE COMPANY HAD TWO DIVISIONS VIZ C.F.R.I. DIV ISION AND S.S.F. DIVISION. WHEREAS BUSINESS ACTIVITY OF S.S.F. DIVISION DURING THE REL EVANT PERIOD WAS LIMITED TO MANUFACTURING AND SELLING OF COKE ONLY, C.F.R.I. DIVISION HAD SOM E TRADING ACTIVITIES OF COAL AND SOME SUPERVISION ACTIVITIES APART FROM MANUFACTURING AND TRADING OF MANUFACTURED COKE. THE ASSESSEE CLAIMED EXPENSES ON ACCOUNT OF SUPERVISION CHARGES OF RS. 2,00,000/- AND RS.1,72,000/- FOR C.F.R.I DIVISION AND S.S.F. DIVI SION RESPECTIVELY. THE ASSESSEE FILED THE DETAILS OF THE SAID EXPENDITURE AND EXPLAINED THAT THE SUPERVISION CHARGES ARE REQUIRED FOR ARRANGING AND GETTING THE COAL LOADED ON TO THE TRU CKS AT COLLIERY END IN ORDER TO AVOID PILFERAGE IN THE QUANTITY OF COAL. THE LD AO CONCL UDED THAT THE SAID PAYMENTS WERE MADE 2 ITA NO.2709/KOL/2013 SNOWTEMP COMMERCIAL PVT. LTD.. AY 2006-07 PURSUANT TO CONTRACTS ENTERED INTO BY THE ASSESSEE WITH THOSE PARTIES CARRYING ON SUPERVISION WORK WHICH ATTRACTS DEDUCTION OF TAX AT SOURCE IN T ERMS OF SECTION 194C OF THE ACT AND FAILURE OF WHICH, HE INVOKED DISALLOWANCE U/S 40(A) (IA) OF THE ACT AND DISALLOWED THE SUM OF RS. 3,72,000/- IN THE ASSESSMENT. 4. THE LD CIT(A) HELD THAT THE AMOUNT HAS BEEN INC URRED ON ACCOUNT OF SUPERVISION CHARGES PAID TO SOME PARTIES AND THERE WAS NO CONTR ACTUAL AGREEMENT WHATSOEVER FOR THE SAME WITH SUCH PARTIES AND THEREFORE THE ASSESSEE N EED NOT DEDUCT TAX ON THIS AMOUNT. HE OBSERVED THAT THE WORK CARRIED OUT IN THE NATURE OF SUPERVISION CHARGES DOES NOT FALL UNDER THE AMBIT OF THE TERM CONTRACT AS COVERED IN SECT ION 194C OF THE ACT. HE OBSERVED THAT THE PROVISIONS OF SECTION 194C OF THE ACT WERE WRONGLY INVOKED BY THE LD AO. HOWEVER, THE LD CIT(A) OBSERVED THAT THE WORK OF SUPERVISION CAN ON LY BE DONE BY THE EXPERT / PROFESSIONAL PERSONS AND HENCE IT FALLS UNDER THE AMBIT OF SECTI ON 194J OF THE ACT WARRANTING DEDUCTION OF TAX AT SOURCE AND HE CONCLUDED THAT THE PAYMENTS WE RE MADE FOR PROFESSIONAL SERVICES RENDERED BY THOSE PARTIES. ACCORDINGLY HE UPHELD T HE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S ON THE FOLLOWING GROUNDS:- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) ERRED IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.3,72,000/- MADE BY THE ASSESSING OFFICER PURPORTEDLY U/S. 40(A)(IA) OF THE ACT FOR ALLEGED F AILURE TO DEDUCT TAX U/S. 194C. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN LAW IN CONFIRMING THE ABOVE SAID DISALLOWANCE FOR ALLEGED FAILURE TO DEDUCT TAX U/S. 194J OF THE ACT INSTEAD OF S. 194C OF THE ACT AS DONE BY THE AO. 3. FOR THAT THE DISALLOWANCE IS UNSUSTAINABLE IN E ITHER CASE OF ALLEGED FAILURE U/S. 194C OR S. 194J OF THE ACT AS NO LIABILITY WAS THEREON THE APP ELLANT TO DEDUCT TAX ON THE SUBJECT AMOUNT OF EXPENDITURE. 5. THE LD AR ARGUED THAT IT IS NOT IN DISPUTE THAT THE WORK CARRIED OUT WERE IN THE NATURE OF SUPERVISORY JOB. HE ARGUED THAT FOR CARRYING OU T THIS JOB, NO SPECIAL EXPERTISE WARRANTING THE PRESENCE OF PROFESSIONAL SKILLS ARE REQUIRED. IT IS MORE OF A JOB RENDERED BY A WATCHMAN FOR SAFE LOADING OF COAL TO THE TRUCKS FROM THE COL LIERY IN ORDER TO AVOID PILFERAGE. FOR DOING THIS JOB WHAT IS REQUIRED IS ONLY PERSONS OF HIGHES T INTEGRITY AND SMARTNESS AND SUCH PERSONS NEED TO BE ONLY VIGILANT AND HAVE A STRONG EYE TO A VOID PILFERAGE IN THE QUANTITY OF COAL. HENCE, THE PERSONS RENDERING THOSE SERVICES NEED NO T POSSESS ANY SPECIAL PROFESSIONAL SKILLS AND HENCE THEIR SERVICES CANNOT BE CATEGORIZED AS P ROFESSIONAL SERVICES WITHIN THE MEANING OF SECTION 194J OF THE ACT. THE TERM PROFESSIONAL SERVICES IS DEFINED IN SECTION 194J OF THE 3 ITA NO.2709/KOL/2013 SNOWTEMP COMMERCIAL PVT. LTD.. AY 2006-07 ACT AND PAYMENTS MADE HEREIN DO NOT FALL UNDER THAT CATEGORY. HE ALSO FILED THE ENTIRE DETAILS OF SUPERVISION CHARGES WHICH ARE ENCLOSED I N PAGE 1 OF THE PAPER BOOK AS BELOW:- SL. NO. NAME OF PARTIES ADDRESS PAN NO. AMOUNT (RS. ) 1. TUSHAN INTEGRATED FINANCE PRIVATE LIMITED 101, 1 ST FLOOR, 18, PRINCE ANWAR SHAH ROAD, KOLKATA-700033 AAACT9911G 97,650.00 2. RAVI COAL UDYOG PRIVATE LIMITED 101, 1 ST FLOOR, 18, PRINCE ANWAR SHAH ROAD, KOLKATA-700033 AABCR2830B 98,250.00 3. AWADESH KUMAR 3 O SHREE GOPAL COMPLEX, RANCHI-834001 36,497.00 4. RAVI SRIVASTAV 403, LEE DESIRE COMPLEX, OPP. HARIOM TOWER, CIRCULAR ROAD, RANCHI 29,216.00 5. SHASIRAM TRANSPORT NAGAR, MAIN ROAD, KUJJU, DIST. RAMGARH 3,460.00 6. ANIL YADAV C/O RAVI KUMAR, AT- CHARCHI, POST-CHARHI, DIST. HAJARIBAGH, PIN- 825336 3,300.00 7. RAJESH KUMAR C/O ARUN MAHTO, AT- INDRA, POST JARWA, DIST HAJARIBAGH, PIN-825336 47,595.00 8. RAM PARVESH HOUSE NO. 6, NEW AREA, GANDHI NAGAR, HINOO, RANCHI-834002 27,127.00 9. PAPPU JAISWAL C/O RAVI PAL, MAJOR KOTI, ITKI ROAD, RANCHI, PIN- 834005 28,905.00 372,000.00 HE STATED THAT AT LEAST THE TWO PARTIES TO WHOM PA YMENTS WERE MADE HAD MENTIONED THEIR PERMANENT ACCOUNT NUMBERS AND HAD DULY INCLUDED THE SUBJECT MENTIONED PAYMENTS IN THEIR RETURNS OF INCOME AND PAID TAXES. HE ARGUED THAT INFACT THE DETAILS OF ITR ACKNOWLEDGEMENT OF THESE TWO PAYEES WERE ALSO FILED BEFORE THE REVENUE WHICH WERE IGNORED BY THEM. HE PLACED RELIANCE ON THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ANSAL LANDMARK TOWNSHIP P LTD RE PORTED IN 377 ITR 635 (DEL) WHEREIN IT WAS HELD THAT THE AMENDMENT IN SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT HAD BEEN HELD TO BE RETROSPECTIVE IN OPERATION. WITH REGAR D TO OTHER PAYMENTS MADE TO VARIOUS INDIVIDUALS, AS ARGUED EARLIER , THE SERVICES RENDE RED BY THEM DO NOT FALL UNDER THE CATEGORY OF PROFESSIONAL SERVICES AS STATED BY THE LD CIT(A) . THEY ARE MERELY SUPERVISION CHARGES PAID TO CASUAL LABOURERS OF THE ASSESSEE AND ALSO D OES NOT FALL UNDER THE CONTRACT AS COVERED IN SECTION 194C OF THE ACT. MOREOVER, THE REVENUE I S NOT IN APPEAL AGAINST THE DIFFERENT 4 ITA NO.2709/KOL/2013 SNOWTEMP COMMERCIAL PVT. LTD.. AY 2006-07 FINDING GIVEN BY THE LD CIT(A) THAT THE SUBJECT MEN TIONED PAYMENTS FALL UNDER THE AMBIT OF SECTION 194J AS AGAINST SECTION 194C OF THE ACT MEN TIONED BY THE LD AO. HENCE HE ARGUED THAT WHAT IS TO BE ADJUDICATED IS ONLY FROM THE CON TEXT OF SECTION 194J OF THE ACT. IN RESPONSE TO THIS, THE LD DR ARGUED THAT LET THE ENT IRE MATTER BE RELOOKED BY THE LD AO TO VERIFY THE APPLICABILITY OF CORRECT PROVISIONS OF C HAPTER XVIIB OF THE ACT IN ORDER TO AVOID CONFUSION AND ACCORDINGLY PRAYED FOR SETTING ASIDE OF THIS ISSUE TO THE FILE OF THE LD AO FOR FRESH VERIFICATION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILS FILED IN THE PAPER BOOK OF TH E ASSESSEE COMPRISING OF PAGES 1 TO 108. IT IS NOT IN DISPUTE THAT THE PAYMENTS WERE MADE ONLY FOR SUPERVISION CHARGES. WE AGREE WITH THE ARGUMENTS OF THE LD AR THAT THE SAID PAYMENTS W ERE MADE ONLY TO SUPERVISE THE MOVEMENT OF COAL FROM COLLIERY IN ORDER TO AVOID PI LFERAGE WHILE LOADING THE SAME INTO THE TRUCKS. IT IS QUITE USUAL THAT CERTAIN PERSONS WO ULD HAVE TO BE EMPLOYED FOR CARRYING OUT THIS SUPERVISION JOB WHICH IS MORE OF A WATCHMAN JO B AS RIGHTLY POINTED OUT BY THE LD AR. THIS ADMITTEDLY DOES NOT WARRANT ANY POSSESSION OF ANY PROFESSIONAL SKILL SO AS TO FALL WITHIN THE AMBIT OF SECTION 194J OF THE ACT. AS RIGHTLY P OINTED OUT BY THE LD AR THAT THOUGH THE ADDITION HAS BEEN MADE FOR VIOLATION OF SECTION 194 C OF THE ACT, THE LD CIT(A) HAD SHIFTED THE SAME TO SECTION 194J OF THE ACT, AGAINST WHICH , THE REVENUE IS NOT IN APPEAL BEFORE US. HENCE WE REFRAIN TO GIVE OUR OPINION ON THE APPLICA BILITY OF SECTION 194C OF THE ACT IN THE PRESENT CASE. WE HOLD THAT THE PAYMENTS WERE MADE TOWARDS SIMPLE SUPERVISION CHARGES , WHICH DO NOT FALL UNDER THE CATEGORY OF PROFESSIONA L SERVICES AS DEFINED IN SECTION 194J OF THE ACT AND HENCE WE HOLD THAT THERE IS NO OBLIGATI ON TO DEDUCT TAX AT SOURCE. ACCORDINGLY, NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT WOULD OPER ATE. HENCE THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 03.02.201 7 SD/- SD/- (S.S. VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 3 RD FEBRUARY, 2017 JD.(SR.P.S.) 5 ITA NO.2709/KOL/2013 SNOWTEMP COMMERCIAL PVT. LTD.. AY 2006-07 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SNOWTEMP COMMERCIAL PVT. LTD., 18, PRIN CE ANWAR SHAH ROAD, 1 ST FLOOR, FLAT NO. 101, KOLKATA-700 033. 2 RESPONDENT ITO, WD-12(2), KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .