The DCIT, Circle-8, Ahmedabad V. Sunset Drive-in Cinema Pvt. Ltd., Ahmedabad

ITA 2926/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6019 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT JHAVERI
• Keywords: Rule of consistency; Question of law
• Section: 143(3); 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 8, AHMEDABAD (APPELLANT) VS SUNSET DRIVE - IN CINEMA PVT. LTD, DRIVE - IN ROAD, THALTEJ, AHMEDABAD - 380059 PAN: AADCS0468A (RESPONDENT) REVENUE BY : DR. JAYANT JHAVERI , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 31 - 03 - 2 017 DATE OF PRONOUNCEMENT : 05 - 05 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2010 - 11 , AR ISES FROM ORDER OF THE CIT(A) - XIV, AHMEDABAD DATED 04 - 09 - 2013 IN APPEAL NO. CIT(A) - XIV/DCIT/CIR. - 8 / 160/12 - 13 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2926 / A HD/20 13 A SSESSMEN T YEAR 2010 - 11 I.T.A NO. 2926 /AHD/20 13 A.Y. 2010 - 11 PAGE NO DCIT VS. SUNSET DRIVE - IN CINEMA PVT. LTD. 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,1 9,63,570/ - MADE U/S.40(A)(IA) OF THE ACT IN RESPECT OF PAYMENTS MADE BY ASSESSEE TO THE DISTRIBUTORS WHICH IS SQUARELY COVERED UNDER THE DEFINITION OF 'WORK' AS PER THE NEWLY INSERTED EXPLANATION (IV)(E) TO SECTION 194C OF THE ACT BY FINANCE ACT, 2008 W.E.F. 01/06/2008. 2. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOW ANCE OF RS.2,794/ - MADE ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND U/S.36(1)(VA) OF THE ACT. 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 29,99,740/ - WAS FILED ON 27/09/2010. SUBSEQUENTLY, THE CASE WAS SELECTED U NDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 24/08/2011. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSING OFFICER HAS CALLED DETAILS PERTAINING TO THE TAX DEDUCTION ON THE PAYMENT MADE TO DISTRIBUTORS . ON EXAMINATION OF THE DETAI LS HE ASKED THE ASSESSEE WHY NOT THE PAYMENT TO DISTRIBUTORS SHOULD BE DISALLOWED AS PER THE PROVISION OF SECTION 40(A)(IA) OF THE ACT FOR NOT DEDUCTING TAX ON THESE PAYMENT . THE ASSESSEE HA D SUBMITTED THAT THERE WAS NO CONTRACT FOR CARRYING OUT ANY WORK AND THE WORK OF EXHIBITOR AND DISTRIBUTOR WAS ON PRINCIPAL TO PRINCIPAL. THE ASSESSING OFFICER HAS STATED THAT THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTABLE IN VIEW OF THE PROVISION OF SECTION 1 94C WHICH STIPULATE S THAT TAX SHA LL BE DEDUCTED AT A SOURCE A T THE TIME OF PAYMENT MADE FOR CARRYING OUT ANY WORK IN PURSUANCE OF THE CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON. THE ASSESSING OFFICER HAS I.T.A NO. 2926 /AHD/20 13 A.Y. 2010 - 11 PAGE NO DCIT VS. SUNSET DRIVE - IN CINEMA PVT. LTD. 3 ELABORATED AT PARA 3.5 TO 3.6 OF HIS ORDER THAT ACTIVITY OF SUPPLYING PRINT OF THE FILM T O THE EXHIBITOR I S WORK WITHIN THE MEANI NG OF SECTION 194C OF THE ACT. HE HAS ALSO REFERRED TO THE AMENDMENT MADE TO SECTION 194 OF THE ACT BY THE FINANCE ACT, 2009 PERTAINING TO THE EXPLANATION RELATING TO THE DEFINITION OF WORK. THE ASSESSING OFFICER H AS NOT ACCEPTED THE SUBMISSION OF THE ASSESSEE AND HELD THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE ON PAYMENT M A DE DURING THE YEAR TO THE DISTRIBUT ORS AMOUNTING TO R S. 11963570/ - AS P E R THE PROVISION T O SE C TION 194C OF THE ACT, THEREFORE, THE PROVISI ONS OF SECTION 40(A)(IA) WERE ATTRACTED. CONSEQUENTLY, THE ASSESSING OFFICER ADDED RS . 1,11963,57/ - TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED AGAINST THE DECISION OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 5.2 IN GROUND NO. 2, THE APPELLANT RAISED OBJECTION OF DISALLOWANCE MADE BY A.O. U/S 40(A)(IA) OF THE ACT AND ADDITION OF RS. 1,19,63,570/ - ON ACCOUNT OF INFRING EMENT / INCOMPLIANCE OF SECTION 194C OF THE ACT. THE APPELLANT'S SUBMISSION AND A.O.'S CONTENTIONS HAD ALREADY BEEN ELABORATED IN EARLIER PARA OF MY THIS ORDER. (A) BRIEFLY THE APPELLANT CONTENDED THAT - (I) THERE IS A REVENUE SHARING BETWEEN DISTRIBUTOR AND THE FILM EXHIBITOR OUT OF TOTAL TICKET/ BOX OFFICE COLLECTION AS PER THE TREND AND PRACTICE EXISTING IN THIS TRADE/ INDUSTRY. THIS SHARING IS ON DIFFERENT DIFFERENT RATIO WITH DIFFERENT DIFFERENT DISTRIBUTOR AND NO WRITTEN AGREEMENT IS CARRIED OUT. EV EN THE SHARING RATIO CHANGES WITH PASSAGE OF WEEK FOR THE SAME FILM AND SAME DISTRIBUTOR. THE APPELLANT REFLECT THE TOTAL BOX OFFICE COLLECTION FOR TRUE & FULL I.T.A NO. 2926 /AHD/20 13 A.Y. 2010 - 11 PAGE NO DCIT VS. SUNSET DRIVE - IN CINEMA PVT. LTD. 4 DISCLOSURE OF THE FACT AND DOES NOT CLAIM THE SHARED BOX OFFICE COLLECTION AS EXPENDITURE. (II ) THE HON'BLE ITAT AHMEDABAD 'A' BENCH HAS FULLY CONCURRED WITH THE FINDING OF THE FACT IN RESPECT OF SHARING OF REVENUE AND NON APPLICABILITY OF PROVISIONS OF SECTION 194C OF THE ACT IN THE CASE OF APPELLANT ITSELF IN ITA NO. 2978,2979 AND 2980/AHD/2004 F OR THE A.Y. 02 - 03, 03 - 04 AND 04 - 05. DEPART. APPEAL AGAINST THIS ORDER BEFORE THE HON'BLE GUJARAT HIGH COURT WAS ADMITTED AND STILL PENDING. (III) HON'BLE ITAT, AHMEDABAD HAD ALREADY IN THE CASE OF APPELLANT - '' CONSIDERED THE APPLICABILITY OF PROVISION S OF SECTION 194C OF THE ACT, AMENDMENT IN THE FORM OF EXPLANATION III AFTER THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF ASSOCIATED CEMENT LTD. AND THE SCOPE OF 'BROADCASTING AND TELECASTING'. (IV) HON'BLE ITAT, AHMEDABAD 'C' BENCH IN THE CASE OF CITY GOLD ENTERTAINMENT P. LTD. FOLLOWING THE HON'BLE GUJARAT HIGH COURT JUDGEMENT IN THE CASE OF ALL GUJARAT FEDERATION OF TAX COMMUTATES & OTHERS V. CBDT WHERE AFTER CONSIDERATION OF HON'BLE SUPREME COURT JUDGEMENT IN THE CASE OF ACC LTD. BOARD CIRCUL AR NO. 681 WAS QUASHED, HELD THAT DEFINITION OF WORK AS INCLUDED IN EXPL. ILL INSERTED BY THE FINANCE ACT. 1994 W.E.F. 01/07/95 DOES NOT INCLUDED 'EXHIBITION OF FILM IN THEATRE' AS WORK. (V) HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INC OME TAX TD VS. M/S. SHINGAR CINEMAS PVT. LTD;, INCOME TAX APPEAL NO. 991 OF 2008 DEALT IN DETAILS ALL THE ISSUES RELATED TO EXHIBITION OF FILM AND PROVISIONS OF IDS AND HELD IN FAVOUR OF ASSESSEE. (VI) THE RELATIONSHIP BETWEEN ASSESSEE AND DISTRIBUTOR IS ON PRINCIPAL TO PRINCIPAL BASIS AND NOT OF CONTRACTOR OR AGENT. THE CONCEPT OF 'WORKS CONTRACT' IS THEREFORE NOT APPLICABLE BECAUSE IF ANY CONTRACT IS CONTEMPLATED BETWEEN ASSESSEE AND DISTRIBUTOR THE SAME IS 'CONTRACT OF SALE'. NEITHER ASSESSEE NOR DISTRI BUTOR HAD AN INTENTION TO PROVIDE SERVICE TO THE OTHER OR TO THE COMMON POOL. (B) THE A.O. CONSIDERING THE ABOVE ISSUE CONTENDED (IN SUMMARY MANNER) AS FOLLOWS: I.T.A NO. 2926 /AHD/20 13 A.Y. 2010 - 11 PAGE NO DCIT VS. SUNSET DRIVE - IN CINEMA PVT. LTD. 5 (I) THE DEFINITION OF 'WORK' AS PER EXPLANATION (III) TO SECTION 194C DOES NOT ALLOW T O CONSIDER THE RELATIONSHIP BETWEEN THE FILM EXHIBITOR AND DISTRIBUTOR BUT EMPHASIZES WHETHER ANY SERVICE IS RENDERED OR NOT. THE APPELLANT HAD ALREADY BEEN HELD TO BE IN DEFAULT U/S 201(1) OF THE ACT IN A.Y. 2002 - 03, 03 - 04, 04 - 05 AND DEPT. IS BEFORE HON'B LE GUJARAT HIGH COURT THEREFORE THOUGH HON'BLE ITAT VIDE ORDER DT 11/08/05 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THE ISSUE IS STILL NOT CONCLUDED BECAUSE HON'BLE HIGH COURT HAS ADMITTED THE ISSUE AS SUBSTANTIAL QUESTION OF LAW. (II) HON'BLE ITAT DE CIDED ISSUE IN FAVOUR OF ASSESSEE BY NOT CONSIDERING THE DEFINITION OF 'WORK' AS AMENDED BY THE FINANCE ACT 2009 W.E.F. 01/10/09 IN EXPLANATION TO SECTION 194C OF THE ACT. IT IS THE CLAUSE (E) OF CLAUSE(IV) OF EXPLANATION TO SECTION 194C OF THE ACT WHERE ' WORK' IS DEFINED AS IT INCLUDES MANUFACTURING AND SUPPLYING OF PRODUCTS ACCORDING TO THE REQUIREMENT OR PRODUCTS ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER. THE A.O. COMPARED THE TRANSACTIONS BETWEEN ASSESSEE AND DISTRIBUTOR AS SUPPLY OF A PRODUCT AS PER REQUIREMENT / SPECIFICATION TO ASSESSEE AND NO MATERIAL INVOLVED AND NO MANUFACTURING ACTIVITY INVOLVED. THE A O. EMPHASIZED THE INCLUSIVE DEFINITION AT CL. (IV) OF EXPLANATION TO : SECTION 194 C OF THE ACT FOR 'WORK' AND CONTENDED THAT SUPPLY OF PRINT OF THE FILM FALLS WITHIN THE DEFINITION OF 'WORK'. THE A.O. QUESTIONED THE RELATIONSHIP BETWEEN DISTRIBUTOR AND ASSESSEE AS THAT OF PRINCIPAL TO PRINCIPAL SINCE DISTRIBUTOR ACQUIRED ON HIS OWN DECI SION THE RIGHTS FOR A FILM AND SUPPLY THE SAME TO ASSESSEE WHICH IS NOT A PURCHASE & SALE ACTIVITY. (III) HON'BLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF SHRINGAR CINEMAS PVT. LTD. WAS ON THE FACTS AS EXISTED BEFORE SUCH AMENDMENT, HENCE RATIO IS NO T APPLICABLE. (IV) THE CONTENTION OF REVENUE SHARING AND NO CLAIM OF EXPENDITURE IS NOT RELEVANT BECAUSE AS PER SETTLED POSITION OF LAW, REPRESENTATION GIVEN IN THE BOOKS OF ACCOUNT IS NOT THE FINAL WORD AS FAR AS DETERMINATION OF INCOME. (V) AMEND MENTS IN SECTION 40(A)(IA) BY THE FINANCE ACT 2012 AS RELIED ON BY APPELLANT ARE NOT APPLICABLE FOR IMPUNGED PREVIOUS YEAR. I.T.A NO. 2926 /AHD/20 13 A.Y. 2010 - 11 PAGE NO DCIT VS. SUNSET DRIVE - IN CINEMA PVT. LTD. 6 (C) I AM NOT INCLINED WITH THE CONTENTION OF A.O. SETTING ASIDE A DETAILED AND REASONED ORDER OF HON'BLE ITAT AHMEDABAD IN THE CASE OF APPELLANT ITSELF ON ONE HAND AND A MISCONSTRUED INTERPRETATION DRAWN FOR CL. (E) OF CL. (IV) OF THE EXPLANATION TO SECTION 194C OF THE ACT, THE A.O. ALSO DISCARDED THE PRINCIPLE OF CONTINUITY AND ESTABLISHED ACCOUNTANCY POLICES OF THE APPELLANT. THOUGH PRINCIPLE OF RESJUDICATA IS NOT APPLICABLE TO INCOME TAX PROCEEDINGS BUT PRINCIPLE OF CONSISTENCY HAS TO BE CONSIDERED AND IN THIS REGARD, THERE IS NO CHANGE OF FACTS FOR THE BUSINESS ACTIVITY OF THE APPELLANT OVER THE YEARS AND DEPARTMENT ACCEPTED ALL TH ESE TRANSACTION FROM A.Y. 05 - 06 TO A.Y. 09 - 10. EVEN DURING A.Y. 05 - 06 THE APPELLANT'S CASE WAS FINALISED UNDER SCRUTINY BUT NO SUCH DISALLOWANCES WERE MADE. HON'BLE ITAT AHMEDABAD ORDER IN THE CASE OF APPELLANT (OPERATIVE PART HAD ALREADY BEEN DISCUSSED IN EARLIER PARA) IS BINDING TILL HON'BLE GUJARAT HIGH COURT REVERSE IT OR SET ASIDE. THE RATIO OF HON'BLE ITAT MUMBAI 'K' BENCH IN THE CASE OF M/S SHRINAGAR CINEMAS (P) LTD. ALSO DISCUSSED IN EARLIER PARA OF THIS ORDER AND AS EVIDENT IS SQUARELY APPLICABLE I N THE CASE OF APPELLANT - I AM NOT INCLINED WITH A.O. THAT SINCE BOTH THESE ORDERS WERE MADE BEFORE THE AMENDMENT TO SECTION 194C OF THE ACT, THE RATIO IS NOT APPLICABLE. ALL THE ISSUE AND FACT WERE DELIBERATED IN BOTH THESE ORDER AND SUCH AMENDMENT WILL NO T AFFECT IN ANY WAY TO THE RATIO SO PRONOUNCED. THE AMENDMENT TO INCLUDE THE WORK OF SUPPLYING THE PRODUCT AS PER SPECIFIED NORM AND PARAMETER IS IN RELATION TO JOB WORK UNDER TAKEN BY AN ASSESSEE, UNDER A CLOSE SUPERVISION WITH PREDETERMINED PARAMETER I.E . A WORKS CONTRACT. IN THE CASE OF APPELLANT, NO SUCH ORDER FOR A FILM IS GIVEN TO DISTRIBUTOR. EVEN THE DISTRIBUTOR HAS NO SAY ABOUT THE NATURE AND QUALITY OF ANY FILM FOR WHICH IT HAS DISTRIBUTION RIGHTS. THE MAKING OF A FILM IS A PHILANTHROPIC ACTIVITY WHERE PRODUCER, DIRECTOR, SCRIPT WRITER WILL DECIDE THE NATURE7 TYPE OF FILM WITH THE HELP OF FILM CAST, TECHNICIANS. THE DISTRIBUTOR AND EXHIBITOR HAS NO SAY TO SUCH ACTIVITY. IT IS ONLY WHEN ANY FILM IS READY D AVAILABLE FOR EXHIBITION, DISTRIBUTOR PUT T HE VALUE TO ACQUIRE DISTRIBUTION RIGHT FOR EXHIBITION FOR AN AREA AND SUCH RIGHT IS LIMITED TO THAT FILM AND THAT AREA. IT IS THEREFORE THE PRODUCT IS AVAILABLE IN MARKET. AS DISTINGUISHED FROM EARLIER PERIOD PRACTICE OF TAKING THE CINEMA THEATRE ON RENT F OR EXHIBITION, IN LAST 10 YEARS THE MODEL HAS CHANGED TO REVENUE SHARING. IN EARLIER PERIOD ONE CAN ALWAYS SAYS THAT SINCE EXHIBITOR WAS IN RECEIPT OF RENT, SUCH PAYMENT MADE BY DISTRIBUTOR WAS WITHIN DEDUCTION COVERAGE OF TDS BUT NOW NO SUCH ARRANGEMENTS ARE THERE. I.T.A NO. 2926 /AHD/20 13 A.Y. 2010 - 11 PAGE NO DCIT VS. SUNSET DRIVE - IN CINEMA PVT. LTD. 7 IT IS THEREFORE RESPECTFULLY FOLLOWING THE RATIO OF HON BLE ITAT AHMEDABAD IN APPELLANT'S CASE, HON'BLE ITAT MUMBAI IN SHRINAGAR CINEMA DULY UPHELD BY HON'BLE BOMBAY HIGH COURT AND REASONING AS DISCUSSED IN RESPECT OF NON APPLICABILITY OF AMEND ED PROVISION AS RELIED ON BY A.O, THE DISALLOWANCES SO MADE U/S 40(A)(IA) OF THE ACT FOR REVENUE SHARED (NOT DEBITED AND CLAIMED AS EXPENDITURE BY APPELLANT) IS OUT OF THE PREVIEW OF TDS PROVISIONS AS CONTEMPLATED U/S 194C OF THE ACT. THE ADDITION SO MADE IS THEREFORE UNJUSTIFIED AND NOT SUSTAINABLE. THE A.O. IS DIRECTED TO ALLOW SUCH ACCOUNTING OF REVENUE SHARING AND DELETE THE ADDITION OF RS. 1,19,63,570/ - SO MADE. THE APPELLANT GETS RELIEF ACCORDINGLY. THIS GROUND IS THEREFORE ALLOWED 5. WE HAVE HEARD T HE RIVAL CONTENTIONS. WE HAVE ALSO CONSIDERED THAT THE CO - ORDINATE BENCH OF THE ITAT AHMEDABAD IN ITA NO. 2978, 2979 AND 2980/AHD/2004 FOR ASSESSMENT YEAR 2002 - 03 TO 2004 - 05 HAD DECIDED THAT PROVISIONS OF SECTION 194C OF THE ACT WAS NOT APPLICABLE TO THE CAS E OF THE ASSESSEE. WE FIND EVE N THE DEFINITION OF WORK AS AMENDED BY THE FINANCE ACT, 2009 W .E.F. 01/10/2009 IN EXPLANATION TO SECTION 194C OF THE ACT NOT APPLICABLE TO THE CASE OF THE ASSESSEE BECAUSE THE CLAUSE (E) OF CLAUSE (IV) OF EXPLANATION TO SE CTION 194C OF THE ACT DEFINE THE WORK AS IT INCLUDES MANUFACTURING AND SUPPLYING A PRODUCTS ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FRO M SUCH CUSTOMER. WE HAVE NOTICED THAT THE DISTRIBUTOR HAS NO S AY ABOUT T H E NATURE AND QUALITY OF ANY FILM FOR WHICH IT HAS DISTRIBU TION RIGHTS . IN THIS CONNECTION , WE FIND THA T T H E LD. CIT(A) H A S GIVEN ELABORATE D FINDING S AND ALSO FOLLOWED THE RATIO OF THE DECISION OF H ON BLE ITAT AHMEDABAD IN TH E CAS E OF THE ASSESSEE AND TH E DECISION OF HON BLE ITAT MUMBAI IN SHRINAGAR CINEMA. AFTER CONSIDERING THE ABOVE FACTS I.T.A NO. 2926 /AHD/20 13 A.Y. 2010 - 11 PAGE NO DCIT VS. SUNSET DRIVE - IN CINEMA PVT. LTD. 8 AND FINDINGS OF THE LD. CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE IN THE DECISION OF THE LD. CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 05 - 05 - 201 7 SD/ - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 05 /05 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,