ACIT, Vellore V. Kramski Stamping and Molding India Pvt Ltd., Vellore

ITA 305/CHNY/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4027 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 07-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Rectification of order; Non-deduction of tax; TDS
• Section: 194C; 139(1); 40a(ia)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI , . , & BEFORE SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.305/CHNY/2020 ( / ASSESSMENT YEAR: 2012-13) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1, VELLORE. VS M/S. KRAMSKI STAMPING & MOLDING INDIA PVT.LTD ERAIYANKADU VILLAGE, ANAICUT BLOCK,VIA VRINCHIPURAM, VELLORE-632 104. PAN:AADCK3119L ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. AR.V.SREENIVASAN , ADDL.CIT /RESPONDENT BY : MR. B.RAMAKRISHNAN, FCA /DATE OF HEARING : 27.10.2020 /DATE OF PRONOUNCEMENT : 27.10.2020 / O R D E R PER G.MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-13, CHENNAI DATED 05.11.2019 AND IT PERTAINS TO ASSESS MENT YEAR 2012-13. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO FACTS AND CIRCUMSTANCES O F THE CASE. 2. THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE DISALLOWANCE U/S.40A(IA) FOR THE A.Y 2012-13 AS TH E ASSESSEE DID NOT SUBMIT ANY CONFIRMATION FROM THE PAYEE T O THE EFFECT THAT RETURNS OF INCOME INCLUDING RECEIPTS FROM THE ASSESSEE WAS FILED U/S.139(1) OF THE ACT BY THE PAYEE. 3. THE LEARNED CIT(A) ERRED IN ALLOWING THE APPEAL FOR THE 2 ITA NO.305/CHNY/2020 A.Y 2012-13 OF THE ASSESSEE BY RELYING ON CERTIFI CATE ISSUED BY THE PAYEE FOR THE A.Y 2013-14. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TR ADING IN STAMPING AND MOLDING COMPONENTS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 30.09.2012 DECLARING L OSS OF ` 4,42,45,209/-. THE CASE WAS TAKEN UP FOR SCRUTINY ASSESSMENT AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS PAID AN AMOUNT O F ` 2,76,67,052/- TO M/S.SPECTRONIC PLATING PVT. LTD., HOWEVER, NOT DEDUCTED TDS U/S.194C OF THE INCOME TAX ACT (HEREINAFTER REFERRE D TO AS THE ACT) AND HENCE, CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY EXPENDITURE INCURRED TOWARDS PAYMENT MADE TO M/S .SPECTRONIC PLATING PVT. LTD., CANNOT BE DISALLOWED U/S.40A( IA) OF THE ACT FOR NON-DEDUCTION OF TDS U/S.194C OF THE ACT. IN RESPO NSE, THE ASSESSEE SUBMITTED THAT AMOUNT PAID TO M/S.SPECTR ONIC PLATING PVT. LTD., DOES NOT COME UNDER THE PROVISIONS OF SECTION 194C OF THE ACT, BECAUSE THE PAYMENT MADE TO THE PARTY IS NOT IN THE NATURE OF JOB WORK CHARGES BUT IT IS IN THE NATURE OF SALES WHICH ATTRACTS CST @ 2%, THEREFORE NO TDS IS APPLICABLE ON SAID PA YMENT. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPL ANATION OF THE ASSESSEE AND ACCORDING TO HIM, THE AMOUNT PAID TO M /S.SPECTRONIC 3 ITA NO.305/CHNY/2020 PLATING PVT. LTD., IS NOTHING BUT JOB WORK CHARG ES PAID FOR GOLD PLATING DONE ON THE MATERIALS SUPPLIED BY THE ASSE SSEE. ALTHOUGH THE INVOICES RAISED BY THE ASSESSEE INCLUDES CST AT 2%, BUT THE NATURE OF PAYMENT IS VERY MUCH WITHIN THE DEFINIT ION OF JOB WORK CHARGES AS DEFINED U/S.194C. ACCORDINGLY, THE ASS ESSEE OUGHT TO HAVE DEDUCTED TDS AS PER SECTION 194C OF THE ACT. S INCE THE ASSESSEE HAS FAILED TO DEDUCT TDS, HE HAS DISALLOWE D THE TOTAL PAYMENT MADE M/S.SPECTRONIC PLATING PVT. LTD., U/S.40A(IA) OF THE ACT FOR NON-DEDUCTION OF TDS AS PER PROVISIONS OF SECTION 194C OF THE ACT. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT(A). BEFO RE THE CIT(A), THE ASSESSEE HAS CHALLENGED THE FINDINGS OF THE AS SESSING OFFICER IN COMING TO THE CONCLUSION THAT AMOUNT PAID TO M/S .SPECTRONIC PLATING PVT. LTD IS JOB WORK WHICH COMES UNDER TH E DEFINITION OF JOB WORK AS DEFINED UNDER SECTION 194C OF THE ACT IN T HE LIGHT OF COPIES OF INVOICES ISSUED BY THE SUPPLIER AND ARGUED THA T M/S.SPECTRONIC PLATING PVT. LTD. PURCHASES GOLD PLATES DIRECTLY FROM SUPPLIER AND MAKES VALUE ADDITION AND THEN SELL GOODS TO THE ASSESSEE CHARGING CENTRAL SALES TAX AND THUS, AMOUNTS PAID FOR PURCHASE 4 ITA NO.305/CHNY/2020 CANNOT BE TREATED AS CONTRACT PAYMENT WHICH IS SU BJECTED TO PROVISIONS OF TDS U/S. 194C OF THE ACT. FURTHER, TH E ASSESSEE HAS ALSO MADE ALTERNATIVE SUBMISSION THAT CERTIFICATE FURNISHED BY THE CHARTERED ACCOUNTANT OF THE SUPPLIER PROVES THAT PAYEE HAS INCLUDED THE AMOUNT RECEIVED FROM THE ASSESSEE AND PAID NECESSARY TAXES AND HENCE, ONCE PAYEE HAS PAID T AX ON THE AMOUNT RECEIVED FROM THE ASSESSEE, THE REQUIREMENT OF DISALLOWANCE U/S.40A(IA) OF THE ACT DOES NOT ARISE . IN THIS REGARD, HE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGE VS. CIT (293 ITR 226 ) AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP P.LTD. VIDE ITS ORDER DATED 26.0 8.2015. 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMI SSIONS OF ASSESSEE AND ALSO TAKEN SUPPORT FROM THE DECISION S OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGE VS. CIT(SUPRA) AND THE DECISION OF HONBLE DELHI HIG H COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP P.LTD.(S UPRA) HAS DELETED THE ADDITIONS MADE TOWARDS DISALLOWANCE OF AMOUNT PAID TO M/S.SPECTRONIC PLATING PVT. LTD. UNDER SECTION 40A(IA) OF THE ACT, FOR NON-DEDUCTION OF TDS UNDER SECTION 194C OF TH E ACT, BY HOLDING 5 ITA NO.305/CHNY/2020 THAT IMPUGNED PAYMENT DOES NOT COME UNDER THE P URVIEW OF THE PROVISIONS OF SECTION 194C OF THE ACT AND CONSEQUE NTLY, THE ASSESSEE NEED NOT TO DEDUCT TDS. FURTHER, WHEN TH E IMPUGNED PAYMENT DOES NOT COME UNDER THE PURVIEW OF T DS PROVISIONS, THEN NO DISALLOWANCE COULD BE MADE U/S.40A(IA) OF T HE ACT. THE LEARNED CIT(A) FURTHER NOTED THAT THE ASSESSEE HAS ALSO PROVED THE FACT THAT PAYEE HAS INCLUDED THE IMPUGNED A MOUNTS IN THEIR INCOME TAX RETURNS AND PAID NECESSARY TAXES AND H ENCE, ONCE PARTICULAR RECEIPT IS TAXED IN THE HANDS OF PAYE E, THEN DISALLOWANCE U/S. 40A(IA) CANNOT BE MADE FOR NON-DEDUCTION OF TDS U/S.194C OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 6. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A ) OUGHT TO HAVE UPHELD THE DISALLOWANCES MADE BY THE ASSESSIN G OFFICER U/S.40A(IA) OF THE ACT, AS THE ASSESSEE DID NOT S UBMIT ANY CONFIRMATION FROM THE PAYEE TO THE EFFECT THAT RETU RN OF INCOME INCLUDED RECEIPTS FROM THE ASSESSEE WAS FILED U/S. 139(1) OF THE ACT. THE LEARNED DR FURTHER SUBMITTED THAT THE CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE BASIS O F CERTIFICATE ISSUED BY THE PAYEE FOR THE ASSESSMENT YEAR 2013-14 WITHOUT 6 ITA NO.305/CHNY/2020 APPRECIATING THE FACT THAT PAYMENT RELATES TO ASSE SSMENT YEAR 2012-13, WHEREAS THE CERTIFICATE ISSUED BY THE ASS ESSEE PERTAINS TO ASSESSMENT YEAR 2013-14. 7. THE LEARNED A.R., ON THE OTHER HAND, STRONGLY SUPPORTING THE ORDER THE LEARNED CIT(A) SUBMITTED THAT THERE IS NO ERROR IN THE FINDINGS RECORDED BY THE LEARNED CIT(A) IN THE LI GHT OF VARIOUS EVIDENCES FILED BY THE ASSESSEE INCLUDING BILLS FOR SUPPLY OF MATERIALS, CERTIFICATE OF CHARTERED ACCOUNTANT OF ASSESSEE CERTIFYING THE CREDIT OF AMOUNT RECEIVED FROM T HE ASSESSEE IN THE HANDS OF PAYEE AND CONSEQUENT PAYMENT OF TAX, HAS RIGHTLY DELETED THE ADDITIONS MADE TOWARDS DISALLOWANCE OF PAYME NT MADE TO M/S.SPECTRONIC PLATING PVT. LTD. ON THE GROUND THA T THE SAID PAYMENT DOES NOT COME UNDER THE DEFINITION OF JOB W ORK AS DEFINED UNDER SECTION 194C OF THE ACT, CONSEQUENTLY, NO DI SALLOWANCE COULD BE MADE U/S.40A(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE. THE LEARNED AR FOR THE ASSESSEE FURTHER REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN CO CO COLA BEVERAGE AND THE DECISION OF HONBLE DELHI HIGH C OURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP P.LTD.(SUPRA) SUBMITTED THAT ONCE PAYEE INCLUDED THE AMOUNT RECEIVED FROM PAYE R AND PAID 7 ITA NO.305/CHNY/2020 CONSEQUENT TAXES, THEN NO DISALLOWANCE COULD BE MA DE U/S.40A(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE ON SAID PAYMENT. 8. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MATER IALS ON RECORD ALONG WITH THE CASE LAWS CITED BY THE ASSESS EE. WE FIND THAT THE CIT(A) HAS RECORDED CATEGORICAL FINDING TO TH E EFFECT THAT GOLD PLATING DONE BY THE SUPPLIER M/S.SPECTRONIC PLATING PVT. LTD., WOULD NOT COME WITHIN THE MISCHIEF OF SECTION 194C OF THE ACT, BECAUSE THE PAYMENT WAS IN THE NATURE OF PURCHASE OF MAT ERIALS WHICH ATTRACTS CENTRAL SALES TAX. WE FURTHER NOTED THAT LEARNED CIT(A) HAS ALSO RECORDED CATEGORICAL FINDINGS IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. HINDUST AN COCO COLA BEVERAGE (SUPRA) THAT WHEN THE PAYEE HAS INCLUDED T HE AMOUNT RECEIVED FROM THE ASSESSEE IN ITS RETURN OF INCOME AND ALSO PAID TAXES ON THE SAID RECEIPTS, THEN THERE WAS NO QUE STION OF MAKING ANY ADDITION U/S. 40A(IA) OF THE ACT FOR FAILURE T O DEDUCT TDS U/S.194C OF THE ACT. THE LEARNED CIT(A) HAS ALSO TAKEN SUPPORT FROM THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF M/S.ANSAL LAND MARK TOWNSHIP P.LTD. (SUPRA) THAT AS LONG AS THE PAYEE FILED RETURN OF INCOME DISCLOSING PAYMENT RECEIVED FROM THE PAYER AND IN WHICH THE INCOME EARNED BY IT I S EMBEDDED AND 8 ITA NO.305/CHNY/2020 ALSO PAID TAX ON SUCH INCOME, THE ASSESSEE WOULD NOT BE ATTRACTED AS PERSON IN DEFAULT, CONSEQUENTLY NO DISALLOWANCE CAN BE MADE U/S.40A(IA) OF THE ACT FOR NON-DEDUCTION OF TDS U NDER SECTION 194C OF THE ACT. 9. AS REGARDS, THE ARGUMENT OF THE REVENUE IN GRO UND NO.3, WE FIND THAT PAYMENTS RELATED TO ASSESSMENT YEAR 20 12-13 AND THE LEARNED CIT(A) HAS PASSED RECTIFICATION ORDER R ECTIFYING THE MISTAKES IN THE ORDER DATED 05.11.2019, INSOFAR AS ASSESSMENT YEAR IS CONCERNED STATED THAT IN THE APPELLATE OR DER INADVERTENTLY ASSESSMENT YEAR 2013-14 HAS BEEN MENTIONED INSTEAD OF ASSESSMENT YEAR 2012-13. FROM THE ABOVE, IT IS VER Y CLEAR THAT THE LEARNED CIT(A) HAS EXAMINED THE CASE IN THE LIGHT O F THE CERTIFICATE ISSUED BY THE CHARTERED ACCOUNTANT OF THE ASSESSEE CERTIFYING THE PAYMENTS INCLUDED IN THE INCOME-TAX RETURN FILED BY RECIPIENT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THER E IS NO ERROR IN THE FINDINGS RECORDED BY THE LEARNED CIT(A) TO DE LETE THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS DISALLOWANCE OF EXPENDITURE U/S.40A(IA) OF THE ACT FOR THE FAILURE TO DEDUCT TD S U/S.194C OF THE ACT. HENCE, WE UPHOLD THE FINDINGS OF THE LEARNED C IT(A) AND DISMISSED THE APPEAL FILED BY THE REVENUE. 9 ITA NO.305/CHNY/2020 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH OCTOBER, 2020 SD/- SD/- ( ) ( . ) (MAHAVIR SINGH) (G. M ANJUNATHA ) / VICE-PRESIDENT $ / ACCOUNTANT MEMBER & /CHENNAI, ' /DATED 27 TH OCTOBER, 2020 DS )* +* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. , () /CIT(A) 4. , /CIT 5. * 1 /DR 6. /GF .