ITO 9(1)(4), MUMBAI V. AIRSPEED COURIER P.LTD, MUMBAI

ITA 2954/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0704 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Section: 194C

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI A BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 2954 /MUM/201 1 , / ASSESSMENT YEAR - 200 7 - 08 D CIT - RANGE - 9(1) ROOM NO.223, ASSESSEE YAKAR BHAVAN M.K. ROAD MUMBAI - 20. VS M/S. AIRSPEEED COURIER PRIVATE LTD. C/O., OFFICE LIQUIDATOR B ANK OF INDIA BUILDING, 5 TH FLOOR OPP.HIGH COURT, FORT , MUMBAI - 32. PAN: ASSESSEE FCA 7634 N ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : NONE / REVENUE BY :SHRI ASGHAR ZAIN / DATE OF HEARING : 28 - 05 - 2015 / DATE OF PRONOUNCEMENT : 28 - 05 - 2015 , 1 961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 18.0 1 . 2011 OF THE CIT(A) - 19 , MUMBAI ,THE ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN DELETING THE DISALLOWANCE OF RS.13,66,332/ - MADE BY THE ASSESSING OFFICER U/S. 40(A)(IA) OF THE I.T. ACT, 1961, DISREGARDING THE FACT THAT THE ASSESSEE HAD ENTERED INTO A CONTRACT FOR PRINTING PODS AS PER SPECIFICATIONS OF THE ASSESSEE AND THAT THE PAYMENT WAS ACCORDINGLY LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S. 19C, THOUGH THE ASSESSEE FAILED TO FULFILL HIS OBLIGATION. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE - CO MPANY, ENGAGED IN BUSINESS OF PROVIDING COURIER SERVICES, FILED ITS RETURN OF INCOME ON 31.20.2007, DECLARING A LOSS OF RS.1,11,50,093/ - . THE AO COMPLETED THE ASSESSMENT ON 11. 12. 2009,U/S. 143( 3) OF THE ACT, DETERMINING THE INCOME OF THE ASSESSEE AT RS.86,5 7,320/ - . 2. E FFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE DISALLOWANCE OF RS. 13.66 LACS MADE BY TH E AO U/S. 40(A)(IA) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.13,66,332/ - TOWARDS PRINTING AN D STATIONERY TO THE P&L A/C. AS PER THE AO, THE ASSESSEE DID NOT DEDUCT ANY T AX AT SOURCE , AS REQUIRED U/S. 194C OF THE ACT. HE HELD THAT THE AMOUNT WAS INADMISSIBLE WITHIN THE MEANING OF U/ S.40(A)(IA) OF THE ACT .ACCORDINGLY, HE DISALLOWED THE SAME WHILE COM PUTING THE TOTAL INCOME OF THE ASSESSEE . ITA NO.2954 /MUM/20 11 ,AY. 0 7 - 08 - AIRSPEED.. 2 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(F AA ). BEFORE HER, IT WAS SUBMITTED THAT THE ASSESSEE HAD PURCHASED STATIONERY ITEMS, PAPERS , PRINTED PODS ETC. F ROM PRINTERS, THAT THE SAME AMOUNTED TO PURCHASES AND NOT A CONTRACT, THAT TDS U/S. 194C OF THE ACT HAD TO BE MADE IF THERE WAS A CONTRACT, THAT FOR P URC H ASE OF ITEMS OF STATIONERY NO TDS WAS REQUIRED TO BE MADE, THAT THE SAID ITEMS WERE ONLY PURCHASES, TH AT THERE WAS NO CONTRACTUAL OBLIGATION.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER THE FAA HELD THAT SEC TION 194C WAS APPLICABLE IF THERE WAS A CONTRACT AND THE CONTRACT MUST BE FOR CARRYING OUT ANY WORK .THE F A A FURTHER OBSE RVED THAT ITEM OF STATIONERY AND EXPENSES TOWARDS PRINTING WOULD NOT ATTRACT THE PROVISIONS OF S.194C , THAT THOSE TRANSACTIONS FELL UNDER THE CATEGORY OF PURCHASES AND NOT ANY WORK.THE F A A REFERRED TO THE DECISION OF ANDHRA PRADESH ROAD TRANSPORT CORPN.( 74 TTJ 531) AND HELD THAT THER E WAS NO CONTRACT IN EXISTENCE. FINA LLY, SHE DELETED THE ADDITION MADE BY THE AO U/S. 40(A)(IA) OF THE ACT. 4. DURING THE COURSE OF HEARING B EFORE US, DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE AO.AS STATED EARLIER NONE APPEARED ON BEHALF OF THE ASSESSEE.WE HAVE PERUSED THE MATERIAL.IT IS FOUND THAT ASSESSEE WAS FACING LOTS OF PROBLEMS INCLUDING, LABOUR PROBLEMS,WHEN THE ASSESSMENT PROCEEDINGS WERE GOING ON,THAT THE ASSESSEE HAD FILED SOME DETAILS,THAT AO HAD MADE A DDITIONS AS REQUIRED DETAILS WERE NOT FILED BEFORE HIM,THAT THE FAA HAD PARTLY ALLOWED THE APPEAL OF THE ASSESSEE,THAT WITH REGARD TO THE DEDUCTION OF TAX AS PER THE PROVISIONS OF SECTION 194 C R.W.S.40(A)(IA)OF THE ACT THE AO AND THE FAA HAVE TAKEN OPPOSI TE STANDS.THE F A A HAD HELD THAT FOR PRINTING STATIONERY, PROVISIONS OF THE SECTION 194C WOULD NOT BE APPLICABLE.BUT,THE BASIC FACT WITH REGARD TO DEDUCTIBILITY OF TAX HAS NOT BEEN ADDRESSED TO - AS TO WHETHER THE STATIONERY WAS PRINTED AS PER THE SPECIFICATI ON PROVIDED BY THE ASSESSEE OR NOT.THE ORDERS OF THE AO AND F A A ARE SILENT ABOUT THE SAID FACT.IN OUR OPINION IT IS THE CRUCIAL FACT TO DECIDED THE ISSUE FOR APPLICABILITY OF SECTION 194C.WE FIND THAT IN THE CASE OF GLENMARK PHARMACEUTICALS (324 ITR 199)TH E HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: THE CRUCIAL WORDS IN SECTION 194C ARE CARRYING OUT ANY WORK. THE EXPLANATION TO SECTION 194C INTER ALIA DEFINES THE EXPRESSION WORK. BY THE FINANCE ACT OF 2009, WHICH, SUBSTITUTED T HE PROVISIONS OF SECTION 194C, THE EXPRESSION WORK HAS NOW BEEN DEFINED IN CLAUSE (IV) OF THE SUBSTITUTED EXPLANATION. CLAUSES (A) TO (D) ARE THE SAME AS CLAUSES (A) TO (D) OF THE ERSTWHILE EXPLANATION (III). HOWEVER, EXPLANATION (E) HAS NOW BEEN INSERTED. CLAUSE (E) WAS INTRODU CED TO BRING CLARITY ON THIS ISSUE OR, IN OTHER WORDS, TO REMOVE THE AMBIGUITY ON THE QUESTION. CLAUSE (E) AS INTRODUCED CONTAINS A POSITIVE AFFIRMATION THAT THE EXPRESSION WORK WILL COVER MANUFACTURING OR SUPPLYING A PRODUCT, ACCORDING TO THE REQUIREM ENT OR SPECIFICATION OF A CUSTOMER, BY USING MATERIAL PURCHASED FROM SUCH A CUSTOMER. CLAUSE (E) HAS PLACED THE POSITION BEYOND DOUBT BY INCORPORATING LANGUAGE TO THE EFFECT THAT THE EXPRESSION WORK SHALL NOT INCLUDE MANUFACTURE OR SUPPLY OF A PRODUCT AC CORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL WHICH IS PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER. WHEN THE MATERIAL IS PURCHASED FROM THE CUSTOMER WHO ORDERS THE PRODUCT, IT CONSTITUTES A CONTRACT OF WORK WHILE ON THE O THER HAND, WHERE THE MANUFACTURER HAS SOURCED THE MATERIAL FROM A PERSON OTHER THAN THE CUSTOMER, IT WOULD CONSTITUTE A SALE. WHAT IS SIGNIFICANT IS THAT IN USING THE WORDS WHICH CLAUSE (E) USES IN THE EXPLANATION, PARLIAMENT HAS TAKEN NOTE OF THE POSITION THAT WAS REFLECTED IN THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES SINCE MAY 29, 1972. THE REVENUE ALWAYS UNDERSTOOD SECTION 194C TO MEAN THAT WHERE A PRODUCT OR THING IS MANUFACTURED TO THE SPECIFICATIONS OF A CUSTOMER, THE AGREEMENT WOULD C ONSTITUTE A CONTRACT FOR SALE, IF (I) THE PROPERTY IN THE ARTICLE OR THING PASSES TO THE CUSTOMER UPON DELIVERY ; AND (II) THE MATERIAL THAT WAS REQUIRED WAS NOT SOURCED FROM THE CUSTOMER/PURCHASER, BUT WAS INDEPENDENTLY OBTAINED BY ITA NO.2954 /MUM/20 11 ,AY. 0 7 - 08 - AIRSPEED.. 3 THE MANUFACTURER FROM A PERSON OTHER THAN THE CUSTOMER. THE LEGISLATURE WHICH INTENDS TO BRING CLARITY TO A LEGISLATIVE PROVISION OR TO REMOVE AN AMBIGUITY IS INFERRED TO DO SO AT THE INCEPTION. IN VIEW OF THE ABOVE DISCUSSION,WE ARE OF THE OPINION THAT THE ISSUE NEEDS FURTHER VERIFICATION.SO, IN THE INTEREST OF JUSTICE WE ARE REMITTING BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICA - TION. HE IS DIRECTED TO MAKE THE LIMITED INQUIRY ABOUT THE NATURE OF THE PRINTING I.E. WHETHER IT WAS AS PER THE SPECIFICATION OF THE ASS ESSEE OR NOT AND TO DECIDED THE ISSUE ACCORDINGLY. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE AO,IN PART. AS A RESULT,APPEAL FILED BY THE AO STANDS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH ,MAY,2015. 28 , 2015 SD/ - SD/ - ( /I . P . BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 28.05. 2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.