FUTURA POLYSTERS LTD, MUMBAI V. ITO TDS 1(5), MUMBAI

ITA 312/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2117 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 26-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 312/MUM/2015 (ASSESSMENT YEAR: 2007-08) M/S. FUTURA POLYESTERS LTD. VS. INCOME TAX OFFICER (TDS) - 1(5) PARAGON CONDOMINIUM 3 RD FLOOR, PANDURANG BUDHKAR MARG, MUMBAI 400013 CHARNI ROAD MUMBAI 400002 PAN AAACI3404K APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SHRI RAVINDER SINDHU DATE OF HEARING: 26.10.2016 DATE OF PRONOUNCEMENT: 04.11.2016 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 5, MUMBAI DATED 30.10.2014 FOR A.Y. 2007-08. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 SURVEY ACTION UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (IN SHORT, 'THE ACT') WAS CARRIED OUT AT THE ASSESSEES PREMISES ON 13.03.2008 FOR VERIFICATION OF DEDUCTION OF TAX AT SOURCE ON V ARIOUS PAYMENTS MADE BY THE ASSESSEE. IT WAS FOUND THAT ON THE STRENGTH OF SALE BILLS, FOR WHICH SALE CONSIDERATION WAS TO BE RECEIVED AFTER A CERTAIN PE RIOD, THE ASSESSEE GOT THESE BILLS DISCOUNTED THROUGH FINANCIERS FOR WHICH FINANCIERS WOULD DEDUCT DISCOUNTING CHARGES. THE ASSESSEE TOOK THE PLEA THAT TDS WAS NOT ATTRACTED ON SUCH DISCOUNTING CHARGES. THE ASSESSIN G OFFICER (AO) WAS OF THE VIEW THAT SUCH DISCOUNTING CHARGES ARE TO BE TR EATED IN THE NATURE OF INTEREST LIABLE FOR TDS THEREON. THE AO PROCEEDED T O HOLD THE ASSESSEE AS AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) OF THE ACT FOR NON DEDUCTION OF TAX UNDER SECTION 194A OF THE ACT AND CHARGED INTER EST UNDER SECTION ITA NO. 312/MUM/2015 M/S. FUTURA POLYESTERS LTD. 2 201(1A) OF THE ACT IN HIS ORDER DATED 04.03.2011. O N APPEAL BY THE ASSESSEE, THE CIT(A)-5, MUMBAI DISMISSED THE SAME V IDE THE IMPUGNED ORDER DATED 30.10.2014. 3. AGGRIEVED BY THE ORDER OF THE CIT(A)-5, MUMBAI DATE D 30.10.2014, THE ASSESSEE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS: - 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF HOLDING THAT THE BILL DISCOUNTING CHARGES WERE LIABLE TO TDS UNDER SECTION 194A OF TH E ACT. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N REJECTING THE APPELLANTS CONTENTION THAT IT CANNOT BE CALLED UPO N TO PAY THE TDS LIABILITY, IF THE RECIPIENT OF THE BILL DISCOUN TING CHARGES HAVE ALREADY PAID TAX ON THE BILL DISCOUNTING CHARGES. 4. THE CASE WAS FIXED FOR HEARING ON NUMBER OF DATES, BUT ON EACH OF THESE DATES WHEN THE CASE WAS CALLED, NONE WAS PRES ENT FOR THE ASSESSEE. EVEN ISSUE OF NOTICES BY RPAD DID NOT ELICIT ANY RE SPONSE FROM THE ASSESSEE. ON 26.10.2016 ALSO WHEN THIS CASE WAS CAL LED FOR HEARING, NONE WAS PRESENT FOR THE ASSESSEE BUT THE LEARNED D.R. F OR REVENUE WAS PRESENT AND READY TO PRESENT REVENUES SIDE OF THE CASE. IN THE CIRCUMSTANCES AS ENUMERATED ABOVE WE ARE OF THE OPINION THAT THE ASS ESSEE IS NOT INTERESTED IN PURSUING THIS APPEAL SERIOUSLY AND THEREFORE PRO CEED TO DISPOSE OFF THIS APPEAL WITH THE ASSISTANCE OF THE LEARNED D.R. FOR REVENUE AND THE MATERIAL ON RECORD. 5. WE HAVE HEARD THE LEARNED D.R. FOR REVENUE AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE AS SESSEE IN THE GROUNDS RAISED CONTENDS THAT THE LEARNED CIT(A) ERRED IN UP HOLDING THE AOS VIEW THAT BILL DISCOUNTING CHARGES WERE LIABLE FOR TDS U NDER SECTION 194A OF THE ACT. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS NO T LIABLE IF THE RECIPIENT OF BILL DISCOUNTING CHARGES HAD PAID TAXES THEREON. AC CORDING TO THE LEARNED D.R. THE ASSESSEES APPEAL OUGHT TO BE DISMISSED AS IT HAS FAILED TO CONTROVERT THE FINDINGS OF THE AO THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX UNDER SECTION 194A OF THE ACT ON BILL DISCOUNTING C HARGES PAID TO FINANCIERS FOR DISCOUNTING THE SALE CONSIDERATION ON SALE BILL S. IT WOULD BE RELEVANT HERE TO EXTRACT THE LEARNED CIT(A)S OBSERVATIONS AND FI NDING IN THE MATTER: - ITA NO. 312/MUM/2015 M/S. FUTURA POLYESTERS LTD. 3 2. THE VARIOUS GROUNDS RAISED BY ASSESSEE HAS CHAL LENGED THE AOS DECISION IN HOLDING THAT THE BILL DISCOUNTING CHARG ES WERE LIABLE TO TDS U/S 194A AND THEREBY THE DEMAND RAISED U/S 201(1) O N ACCOUNT OF SHORT DEDUCTION OF TDS, TAX DEDUCTED BUT NOT PAID A ND INTEREST U/S 201(1A) THEREON. 2.1 THE FACTS OF THE CASE ARE THAT ON THE STRENGTH OF SALE BILLS [WHERE SALE CONSIDERATION WAS TO BE RECEIVED AFTER A CERTAIN PE RIOD], THE ASSESSEE RAISED FUND BY WAY OF DISCOUNTING THOSE BILLS WITH FINANCERS. IN THE PROCESS, THE FINANCER DEDUCTS CHARGES WHICH IS GENE RAL KNOWN AS DISCOUNTING CHARGES BUT THAT WOULD HAVE BEARING O NTO THE PERIOD AFTER WHICH THOSE SALE BILLS WILL BE DUE FOR PAYMENT [BY THE CLIENTS]. THE AO HAS TREATED SUCH DISCOUNTING CHARGES IN THE NATURE OF I NTEREST LIABLE FOR TDS, WHEREAS, THE ASSESSEE HAS TAKEN THE PLEA THAT THE D ISCOUNTING CHARGES WERE NOT CHARGEABLE TO TDS. THE ISSUE IS CONSIDERED . THE POINT TO BE NOTED IS THAT IN THIS PRACTICE OF DISCOUNTING OF BI LLS, THE ASSESSEE STILL REMAINS RESPONSIBLE FOR PAYMENT TO THE FINANCERS, I N CASE THE CLIENT DOES NOT HONOUR THOSE SALES BILLS ON THE DUE DATE. THUS, FOR ALL PRACTICAL PURPOSES, THE FUND RAISED THROUGH DISCOUNTING ACQUI RES THE NATURE OF LOAN ONTO WHICH DISCOUNTING CHARGES IN THE NATURE OF INT EREST HAS BEEN PAID IN ADVANCE. IN VIEW THEREOF, THE AOS DECISION FOR HOL DING THAT BILL DISCOUNTING CHARGES ARE LIABLE TO TDS IS CORRECT AN D IS, THEREFORE, UPHELD. 6. ON AN APPRECIATION OF THE ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE, EXCE PT FOR RAISING GROUNDS, WAS NOT ABLE TO BRING ON RECORD ANY MATERIAL EVIDEN CE TO CONTROVERT THE FINDINGS OF THE AUTHORITIES BELOW THAT IT WAS LIABL E TO DEDUCT TAX AT SOURCE UNDER SECTION 194A OF THE ACT ON PAYMENTS MADE BY I T AS BILL DISCOUNTING CHARGES, WHICH ARE IN THE NATURE OF INTEREST, FOR G ETTING SALE BILLS DISCOUNTED. WE, THEREFORE, UPHOLD THE ORDERS OF THE AUTHORITIES BELOW IN CONSEQUENTLY HOLDING THE ASSESSEE AS AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) OF THE ACT AND CHARGE INTEREST THEREON UNDER SECTION 201(1A) OF THE ACT. CONSEQUENTLY, THE GROUNDS RAISED BY THE ASSESS EE AT S.NO. 1 & 2 ARE DISMISSED. 7. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2007- 08 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH NOVEMBER, 2016. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 4 TH NOVEMBER, 2016 ITA NO. 312/MUM/2015 M/S. FUTURA POLYESTERS LTD. 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -5, MUMBAI 4. THE CIT (TDS), MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.