M/s Agro Dutch Industries Limited, Chandigarh V. ACIT, Chandigarh

ITA 276/CHANDI/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7406 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 276/CHD/2010 ASSESSMENT YEAR: 2006-07 M/S AGRO DUTCH INDUSTRIES LTD., V ACIT, C-4(1), SCO 30, SECTOR 33, CHANDIGARH. CHANDIGARH. PAN: AABCA-2430Q (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AJAY JAIN RESPONDENT BY : SMT. JAISHREE SHARMA DATE OF HEARING : 25.01.2012 DATE OF PRONOUNCEMENT : 25.01.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), CHANDIGARH DATED 9.12.2009 RELATIN G TO ASSESSMENT YEAR 2006-07. 2. GROUND NO. 1 & 4 OF THE APPEAL ARE GENERAL IN NA TURE AND HENCE NO COMMENTS ARE BEING GIVEN. 3. GROUND NOS. 2 & 3 READ AS UNDER : 2. THAT THE LD. CIT(A) HAS WRONGLY MADE ADDITION AMOUNTING TORS.468811/- U/S 40(A)(IA) OF THE ACT FO R NON DEDUCTION OF TAX AT SOURCE U/S 194C ON REIMBURSEMENT OF STATUTORY EXPENSES TO THE CONTRACT OR WHICH WERE INCURRED BY THE CONTRACTOR WITHOUT APPRECIATING THE FACT THAT THE PAYMENTS MADE TO THE CONTRACTOR ON THIS ACCOUNT ARE NOT IN THE NATURE OF CONTRACT OR SERVICE CHARGES. 2 3. THAT THE LD. CIT(A) HAS MISINTERPRETED THE PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT BY APPLYING THE SAID SECTION TO EVEN AMOUNT ACTUALLY PAID BY DEDUCTION O F TAX AT SOURCE ON AMOUNT PAYABLE. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E AO MADE THE ADDITION OF RS.4,68,811/- U/S 40(A)(IA) OF THE INCOME-TAX ACT,1961 ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOUR CE U/S 194C OF THE ACT. IT IS CLAIMED THAT THE AMOUNT IN QUESTI ON BEING REIMBURSEMENT OF STATUTORY PAYMENTS TO THE CONTRACT OR, WHICH WERE MADE BY THE CONTRACTOR AND WHICH WERE NOT IN T HE NATURE OF CONTRACT OR SERVICE CHARGES. 5. ON APPEAL, THE CIT(A) CONFIRMED THE ADDITION FOR THE REASONS STATED IN PARA 6 & 7 OF THE IMPUGNED ORDER AND HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE LD. REPRESENTATIVE OF BOTH THE PARTIES AT LENGTH. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISIO N OF THIS BENCH OF THE TRIBUNAL DATED 16.11.2009 IN ASSESSEE' S OWN CASE IN ITA NO. 644/CHANDI/2009 RELATING TO ASSESSMENT Y EAR 2005- 06. WHILE DECIDING A SIMILAR ISSUE IN ASSESSMENT Y EAR 2005-06, THE TRIBUNAL HELD AS UNDER : 4. WE HAVE HEARD THE LD. DR FOR THE REVENUE AND PE RUSED THE RECORDS. THE BRIEF FACTS, RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD MADE PAYMENTS OF RS.11,58,363/- UN DER THE HEAD CUSTOM DUTY AND OTHER SELLING EXPENSES. THE ASSESSEE HAD DEDUCTED TDS OUT OF PAYMENT OF RS.8,80,338/- MADE TO M/S APPOLO EXPRESS AND THE SA ME WAS DEPOSITED. HOWEVER, IN RESPECT OF PAYMENT OF RS.1,89,710/-, NO TDS WAS DEDUCTED AS THESE WEREOA 3 ACTUAL EXPENSES INCURRED AND OUT OF PURVIEW OF SECT ION 194C OF THE ACT. THE AO REJECTING THE CLAIM OF THE ASSESSEE FOUND THE ASSESSEE TO HAVE DEFAULTED IN DEDUCTING T AX AT SOURCE AND HENCE UNDER THE PROVISIONS OF SECTION 40 A(IA) OF THE ACT, DISALLOWED A SUM OF RS.1,89,710/-. BEFORE THE CIT(A) THE PLEA OF THE ASSESSEE WAS THAT THESE WERE STATUTORY PAYMENTS REIMBURSED TO THE AGENTS AND HEN CE NO TDS WAS DEDUCTED OUT OF THE SAME. THE CIT(A) ON THE APPRAISAL OF FACTS AND LAW AS PER PARA 21 HELD AS U NDER : IN VIEW OF THE ABOVE, THE AO IS DIRECTED TO EXCLUD E THE REIMBURSEMENT OF THE EXPENSES FOR WHICH THERE IS NO ELEMENT OF PROFIT. IN OTHER WORDS THE PAYMENTS MADE BY THE AGENT TO THE 3 RD PARTY AND REIMBURSED BY THE ASSESSEE, TALLY EXACTLY WITH THE BILLS ISSUED BY TH E 3 RD PARTY. THE AO MAY VERIFY AND THEN DETERMINE THE EXA CT AMOUNT. THUS, THESE GROUNDS OF THE ASSESSEE ARE PARTLY ALLOWED. 5. UNDER SECTION 194 OF THE ACT, ANY PERSON MAKING ANY PAYMENT TO A CONTRACTOR, BEING A RESIDENT IN PURSUA NCE TO THE CONTRACT, IS LIABLE TO DEDUCT TAX AT PRESCRIBED RATES, ON CREDIT OF SUCH AMOUNT TO THE ACCOUNT OF THE CONTRAC TOR OR AT THE TIME OF PAYMENT WHICHEVER IS EARLIER. THE TAX I S DEDUCTIBLE PURSUANT TO THE CONTRACT, WHERE CONTRACT OR CARRIES OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK FOR SUCH PERSON. 6. WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) TH AT IN CASE ANY AMOUNT IS PAID TOWARDS REIMBURSEMENT OF EXPENSES, IN WHICH THERE IS NO ELEMENT OF PROFIT, T HERE IS NO REQUIREMENT FOR DEDUCTION OF TDS AND CONSEQUENTLY N O TAX IS REQUIRED TO BE DEDUCTED. THE MATTER HAS BEEN SET A SIDE TO THE FILE OF AO FOR VERIFICATION WHETHER THE AMOUNTS ARE IN FACT PAID AGAINST REIMBURSEMENT OF THE EXPENDITURE. WE UPHOLD THE ORDER OF CIT(A) IN DIRECTING THE AO TO A LLOW THE CLAIM OF THE ASSESSEE AFTER DUE VERIFICATION. THE G ROUND OF APPEAL RAISED BY THE REVENUE IS THUS DISMISSED. 4 7. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA), WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE A FTER DUE VERIFICATION. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JAN.,2012. SD/- SD/- (MEHAR SINGH) (H.L.KA RWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED: 25 TH JAN.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH