DCIT, New Delhi V. M/s. K.S. Hotels Pvt. Ltd., New Delhi

ITA 278/DEL/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5215 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Section: 194C

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO.:-278/DEL/2013 ASSESSMENT YEAR: 2007-08 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 26.10.2012, PASSED BY LD. CIT(APPEALS)-VIII, NEW DELHI FOR THE ASSESSMENT YEAR 2007-08. THE REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAD ERRED IN DELETING THE ADDITION OF RS. 1,34,08,792/- FOR NON DEDUCTION OF TDS MADE BY THE AO U/S D CIT CIRCLE-5(1), ROOM NO. 409A, C.R. BUILDING NEW DELHI. 110 002. VS. K.S. HOTELS PVT. LTD. B-25, CONNAUGHT PLACE, NEW DELHI 110 001 PAN AAACK4557B (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI AMIT JAIN , SR. DR ASSESSEE BY : SHRI SHAILESH GUPTA, CA DATE OF HEARING 13 /08 /201 8 DAT E OF PRONOUNCEMENT 17 /10 /2018 2 40(A)(IA) READ WITH SECTION 194C INSPITE OF THERE BEING RELATION OF CONTRACTOR AND CONTRACTEE BETWEEN THE OWNER AND THE SUPPLIER AS PER TERMS OF AGREEMENT DATED 13.7.2005, IN THE NAME AND STYLE OF FOOD SUPPLY ARRANGEMENT. 2. AT THE OUTSET LD. COUNSEL FOR THE ASSESSE SUBMITTED THAT EXACTLY SIMILAR ISSUE WAS INVOLVED IN THE ASSESSMENT YEAR 2006-07 AND MATTER HAS BEEN HEARD BY THE TRIBUNAL ON 31 ST JULY, 2018. ON THE OTHER HAND LD. DR ALSO ACCEPTED THAT THE ISSUE INVOLVED IS EXACTLY THE SAME AS WAS THERE IN THE ASSESSMENT YEAR 2006-07. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSE COMPANY IS ENGAGED IN THE BUSINESS OF RUNNING A RESTAURANT WITH THE NAME OF ZEN RESTAURANT. THE AO OBSERVED THAT ASSESSSEE HAD MADE PURCHASES OF FOOD ITEMS FROM M/S. ZEN CHINESE FOODS FOR AMOUNT OF RS. 1,34,08,792/- ON WHICH NO TDS DEDUCTED ON THE PAYMENTS. ACCORDINGLY, HE HAS DISALLOWED THE SAID PAYMENT U/S 40(A)(IA). HE HELD THAT SINCE PAYMENT MADE BY THE ASSESSEE TO M/S.ZEN CHINESE FOODS FOR SUPPLY OF CHINESE GOOD WAS AS PER THE TERMS OF CONTRACT, THEREFORE, TDS SHOULD HAVE BEEN DEDUCTED AT THE PROVISION OF SECTION271(1)(C). LD. CIT(A) FOLLOWING THE FIRST APPELLATE ORDER FOR THE ASSESSMENT YEAR 2006-07 HAS DELETED THE SAID DISALLOWANCE HOLDING THAT PURCHASES MADE BY THE ASSESSEE FROM M/S ZEN CHINESE FOODS I.E FOOD WAS BASED ON SAME FOOD SUPPLY ARRANGEMENT AGREEMENT DATED 13.7.2005 AND SINCE FACTS AND CIRCUMSTANCES ARE THE SAME THEREFORE HE HAS NO REASON TO DEFER FROM HIS PREDECESSORS ORDER, 3. AFTER CONSIDERING THE RELEVANT MATERIAL PLACED ON RECORD AND THE FINDINGS GIVEN IN THE IMPUGNED ORDER WE FIND THAT PRECISELY THE SAME ISSUE IS INVOLVED IN THE ASSESSMENT YEAR 2006-07 WHICH HAS GIVEN FOR CONSIDERATION BEFORE THE TRIBUNAL IN ITA NO. 4466/DEL/2015 VIDE 3 ORDER DATE 13.8.2018 THE RELEVANT FACTS AND THE FINDINGS GIVEN BY THE TRIBUNAL READS AS UNDER :- 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING A RESTAURANT WITH THE NAME OF ZEN RESTAURANT WHICH MOSTLY SERVES CHINESE FOODS, SNACKS, ETC. LEARNED ASSESSING OFFICER NOTED THAT FROM 13.07.2005, THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S. ZEN CHINESE FOOD FOR FOOD SUPPLY ARRANGEMENT, WHEREIN THE ASSESSEE COMPANY IS THE OWNER AND M/S. ZEN CHINESE FOOD IS A SUPPLIER. AS PER THE AGREEMENT ASSESSEE WAS TO MAKE AVAILABLE KITCHEN SPACE TO COOK CHINESE FOOD WITH FREE ELECTRICITY AND WATER AND THE SUPPLIER HAS TO ARRANGE FOR ALL KITCHEN EQUIPMENT, TRAINED COOKS, HELPERS AND OTHER STAFF AND ALSO PURCHASE THE MATERIAL. PRIOR TO THIS AGREEMENT, THE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND THE M/S. ZEN CHINESE FOOD WAS THAT THE ASSESSEE WAS SELLING THE CHINESE FOOD PREPARED BY M/S. ZEN CHINESE FOOD AND COMMISSION @45% OF THE SALE WAS PAID TO IT. AFTER THIS PERIOD, THE ARRANGEMENT WAS ONLY FOR SUPPLY ARRANGEMENT WHICH IS EVIDENT FROM THE RELEVANT CLAUSES AS NOTED BY THE ASSESSING OFFICER:- AS MENTIONED SUPRA, THE ASSESSEE COMPANY AND M/S ZEN CHINESE FOOD HAVE ENTERED INTO A NEW FOOD SUPPLY ARRANGEMENT , WHEREIN THE ASSESSEE COMPANY IS NOW THE OWNER AND M/S ZEN CHINESE FOOD IS THE SUPPLIER. THE RELEVANT PORTIONS OF THIS ARRANGEMENT DOCUMENT TO BE DISCUSSED IN THE FOLLOWING PARAGRAPHS ARE REPRODUCED AS FOLLOWS: 4 '...WHEREAS FOR PURPOSE OF RUNNING A RESTAURANT AT B-25 CONNAUGHT PLACE, NEW DELHI- 110001 THE OWNERS' HAVE AVAILABLE AN AIR- CONDITIONED HALL WITH KITCHEN SPACE. AND WHEREAS THE SUPPLIERS HAVE OFFERED TO ENTER INTO A FOOD SUPPLYING ARRANGEMENT WITH THE OWNERS BY SUPPLYING CHINESE FOOD ON THE TERMS AND CONDITIONS HEREAFTER MENTIONED. 4. THAT THE SUPPLIERS' SHALL USE THE PREMISE FOR PURPOSE OF BUSINESS OF SUPPLYING 'CHINESE FOOD TO OWNERS ONLY AND FOR NO OTHER PURPOSE WHATSOEVER. 5. THE SUPPLIERS SHALL PROVIDE AND MAINTAIN THROUGHOUT THE TERM OF THE CONTRACT, IN SUFFICIENT QUANTITIES, COOKING UTENSILS, CONTAINERS, COOKING RANGES, FRIDGE AND GAS, WITH SUFFICIENT COOKS AND MASALCHIES AND SHALL KEEP THE RAW MATERIAL READY FOR PROVIDING WHOLESOME CHINESE FOOD. 6. THE BENEFITS UNDER THIS AGREEMENT SHALL NOT BE ASSIGNED , SUBLET TRANSFERRED OR OTHERWISE PARTED BY THE SUPPLIERS WITHOUT THE PREVIOUS CONSENT IN WRITING OF THE OWNERS, INCLUDING CHANGE IN PARTNERSHIP. 10. IN CASE THE SUPPLIERS WANT TO TERMINATE THE FOOD SUPPLY ARRANGEMENT EARLIER THEY CAN DO SO BY GIVING THREE MONTHS PRIOR NOTICE IN WRITING TO THE OWNERS'. IN CASE OF ANY MISMANAGEMENT OR BREACH OF THE TERMS OF THIS AGREEMENT THE OWNERS MAY ALSO TERMINATE THE SUPPLIER ARRANGEMENT BY GIVING ONE MONTH PRIOR NOTICE IN WRITING INFORMING THE SUPPLIERS OF SUCH BREACH. 3. THE ASSESSING OFFICER RECORDED THE STATEMENT OF DIRECTOR OF THE ASSESSEE-COMPANY FROM WHERE HE GATHERED THAT THE ASSESSEE EARLIER USED TO GET COMMISSION ON SALE OF CHINESE FOOD AND HE HAD MADE THE CONTRACT AGREEMENT IN THE YEAR 1992 AND WAS WORKING SUCCESSFULLY AS CONTRACT FOR LAST 16 YEARS. FROM THIS STATEMENT, ASSESSING OFFICER INTERPRETED THAT THERE IS A CONTRACT AGREEMENT BETWEEN THE ASSESSEE AND M/S. 5 ZEN CHINESE FOOD WHICH HAS BEEN TERMED AS FOOD SUPPLY ARRANGEMENT. SINCE ASSESSEE WAS MAKING THE PAYMENT TO THE M/S. ZEN CHINESE FOOD WHICH IS NOTHING BUT WORKS CONTRACT AND THEREFORE, TDS SHOULD HAVE BEEN DEDUCTED U/S.194C. ACCORDINGLY, HE DISALLOWED SUM OF RS.73,98,662/- U/S. 40(A)(IA). 4. LD. CIT (A) DELETED THE SAID DISALLOWANCE ON THE GROUND THAT IT WAS NOT WORKS CONTRACT BUT PAYMENT WAS FOR PURCHASE OF FOOD MATERIAL FROM ANOTHER ENTITY ON WHICH SALES/VAT HAS BEEN CHARGED AND AFTER REFERRING TO VARIOUS JUDGMENTS, HE HELD THAT THERE IS NO REQUIREMENT FOR DEDUCTION OF TAX ON SUPPLY OF MATERIALS, AND THUS, HE HELD THAT PROVISION OF SECTION 40(A)(IA) CANNOT BE INVOKED. 5. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT FROM 13.07.2008 THE ASSESSEE HAD ENTERED INTO AN AGREEMENT VIZ., FOOD SUPPLY ARRANGEMENT WITH M/S. ZEN CHINESE FOOD, WHEREAS ASSESSEE WAS THE OWNER OF THE RESTAURANT AND M/S. ZEN CHINESE FOOD WAS A SUPPLIER. THE RELEVANT TERMS OF THE CONTRACT HAS ALREADY BEEN INCORPORATED ABOVE FROM WHICH IT CAN BE SEEN THAT IT IS PURELY A SUPPLY ARRANGEMENT AND THERE IS NOTHING TO INTERFERE THAT THERE IS ANY KIND OF WORKS CONTRACT. HERE IT IS NOT DISPUTED BY THE DEPARTMENT THAT THE SUPPLIER WAS PROCURING THE EQUIPMENTS AS WELL AS RAW MATERIALS AND SUPPLYING CHINESE FOOD TO THE ASSESSEE. ONCE THAT IS SO, THEN SUCH A SUPPLY AGREEMENT OSTENSIBLY WILL FALL 6 IN THE CATEGORY OF WORKS CONTRACT SO AS TO INVOKE TDS PROVISION U/S. 194C. THUS, THE ORDER OF THE LD. CIT(A) HOLDING THAT IT IS A GOODS OF SUPPLY AND PURCHASE OF MATERIAL ON WHICH VAT HAS BEEN CHARGED THEN SUCH A PAYMENT FOR SUPPLY WILL NOT ENTAIL TDS PROVISION U/S.194C AND ACCORDINGLY, NO DISALLOWANCE U/S.40(A)(IA) CAN BE MADE. 4. THUS FOLLOWING THE AFORESAID ORDER WHICH IS APPLICABLE MUTATIS MUTANDIS IN THIS YEAR ALSO WE HOLD THAT NO DISALLOWANCE U/S 40(A)(IA) CAN BE MADE BECAUSE NO TDS PROVISION IS APPLICABLE U/S 194C ON A PAYMENT FOR SUPPLY AND PURCHASE OF MATERIAL ON WHICH VAT HAS BEEN CHARGED. 5. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER, 2018. SD/- SD/- (L.P. SAHU) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 /10 /2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI