ITO, Chandigarh V. M/s Swami Auto Sales, Chandigarh

ITA 333/CHANDI/2015

• Counselvise Citation: [2005] 113 COUNSELVISE.COM (IT) 4766 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2005
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 08-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: TDS
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.333/CHD/2015 (ASSESSMENT YEAR : 2010-11) THE INCOME TAX OFFICER, VS. M/S SWAMI AUTO SALES, WARD 2(1), PLOT NO.26, INDUSTRIAL AREA, CHANDIGARH. PHASE I, CHANDIGARH. PAN: AAQFS8273H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. MITTAL, DR RESPONDENT BY : SHRI PARIKSHIT AGGARWAL DATE OF HEARING : 27.10.2015 DATE OF PRONOUNCEMENT : 02.12.2015 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, CHANDIGARH DATED 27.1.2015 FOR ASSESSMENT YEAR 2010-11. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE HAS CLAIMED TDS OF RS.64, 243/-, WHICH INCLUDED TDS BY RELIANCE GENERAL INSURANCE CO . LTD. THE TOTAL PAYMENT MADE BY RELIANCE GENERAL 2 INSURANCE CO. LTD. AS PER TDS DETAILS WAS RS.16,32, 454/- AND A SIMILAR SUM OF RS.1,42,682/- WAS RECEIVED FRO M ROYAL SUNDARAM ALLIANCE INSURANCE CO. LTD. THE ASSESSING OFFICER ASKED THE ASSESSEE WHY THESE AMOU NTS WERE NOT INCLUDED IN ITS INCOME. THE REPLY OF THE ASSESSEE WAS THAT THE ASSESSEE FIRM PROMOTES THE INSURANCE BUSINESS OF THESE COMPANIES. THE TDS ON COMPENSAT ION RECEIVED WERE DULY DEDUCTED UNDER THE PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND NOT UNDER SECTION 194H OF THE ACT. THE ASSESSEE ITSELF WAS NOT IN THE BUSINESS OF INSURANC E. FURTHER, IT WAS EXPLAINED THAT THE AMOUNT OF RS.16,32,454/- AND RS.1.42.682/- FROM RELIANCE GENE RAL INSURANCE CO. LTD. AND ROYAL SUNDARAM ALLIANCE INSURANCE CO. LTD. WERE ACTUALLY CONTRACTUAL RECEIP TS, WHICH WERE ACCOUNTED FOR BY THE ASSESSEE IN LEDGER ACCOUNT-LABOUR CHARGES. THE FACT REMAINS THAT THE ASSESSEE RAISES BILL TO THE CUSTOMERS SHARE AND RE MAINING AMOUNT PAID BY INSURANCE COMPANY. AT THE TIME OF MAKING PAYMENT THE INSURANCE COMPANY DEDUCTS TDS UNDER SECTION 194C OF THE ACT. THE ASSESSING OFFI CER REJECTED THE CONTENTION OF THE ASSESSEE AND MADE AN ADDITION OF RS.17,75,136/-. 3. BEFORE THE LEARNED CIT (APPEALS), AGAIN THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER WER E REITERATED. FURTHER, THE TRANSACTIONS WERE EXPLAIN ED TO LEARNED CIT (APPEALS) AT GREAT LENGTH WITH TH E HELP OF 3 LEDGER ACCOUNTS AND COPIES OF FORM 26 AS. THE LEA RNED CIT (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ALLOWED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED, THE DEPARTMENT HAS COME IN APPEAL BEFORE US RAISING AS MAY AS FIVE GROUNDS, ALL RELAT ING TO DELETION OF DISALLOWANCE OF RS.17,75,136/- MADE BY THE LEARNED CIT (APPEALS). THE LEARNED D.R. RELIED UPO N THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT A TOTAL RECEIPT OF RS.17,75,136/- WAS MADE BY THE INSURANCE COMPANIES ON WHICH TAX HAS BEEN DEDUCTED BUT NO SUC H INCOME IS SHOWN BY THE ASSESSEE. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CORRE CT. 5. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPO N THE ORDER OF THE LEARNED CIT (APPEALS) AND WITH THE HELP OF PAPER BOOK FILED BY THE ASSESSEE EXPLAINED THAT THE INSURANCE COMPANIES HAVE DEDUCTED TDS ON PAYMENT MA DE TO THE ASSESSEE. THE ASSESSEE HAD ACCOUNTED FOR TH IS RECEIPT AS ITS INCOME AND THE SAME WAS POSTED IN TH E LEDGER HEAD OF LABOUR CHARGES INCOME. THE LABOUR CHARGES HEAD WAS PART OF SCHEDULE VIII AS OTHER IN COME FORMING PART OF BALANCE SHEET. IN THIS VIEW, IT WA S PRAYED TO CONFIRM THE ACTION OF THE LEARNED CIT (APPEALS) IN DELETING THE DISALLOWANCE. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES 4 BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. AFTER CONSIDERING THE RELEVANT FACTS, WE SEE THAT T HE ASSESSING OFFICER HAS NOT COMPREHENDED THE MODUS OPERANDI OF THE BUSINESS OF THE ASSESSEE AND HAS WR ONGLY MADE THE ADDITION. IN THIS REGARD, WE FIND THE CON CLUSION ARRIVED AT BY THE LEARNED CIT (APPEALS) IS ON THE B ASIS OF TRUE FACTS AND EVIDENCES. THE LEARNED CIT (APPEAL S) IN HIS ORDER AT PARA 5.3 AND 5.31 STATES AS FOLLOWS : 5.3 I HAVE CONSIDERED FACTS OF THE ISSUE. THE AP PELLANT IS AN AUTHORIZED DEALER OF VEHICLES OF M/S MAHINDRA & MA HINDRA LTD AND IS ALSO CARRYING ON THE BUSINESS OF REPAIR OF ACCIDENTAL VEHICLES OF THIS COMPANY. IN CASE OF REPAIR O F AN ACCIDENTAL VEHICLE, THE APPELLANT RAISES BILL ON THE CU STOMER, RECEIVES CUSTOMER'S SHARE AND BALANCE IS PAID BY THE INSURANCE COMPANY OF THE CUSTOMER. AT THE TIME OF M AKING PAYMENT TO THE APPELLANT, THE INSURANCE COMPANY DED UCTS TAX AT SOURCE U/S 194C OF THE ACT AND THESE ARE THE TYPE OF PAYMENTS WHICH WERE RECEIVED BY THE APPELLANT FIRM F ROM RELIANCE GENERAL INSURANCE CO LTD AND ROYAL SUNDRAM ALLIANCE INSURANCE CO LTD, WHICH HAVE BEEN DISALLOWE D BY THE ASSESSING OFFICER. THE APPELLANT HAS CONTENDED THAT IT HAD ACCOUNTED FOR THESE RECEIPTS AS ITS INCOME IN T HE LEDGER HEAD OF 'REPAIR AND LABOUR CHARGES', WHICH WAS PART OF 'OTHER INCOME'. 5.3.1 AS PER THE LEDGER ACCOUNTS OF THE CUSTOMERS, PAYMENT ON BEHALF OF CUSTOMERS WAS MADE BY RELIANCE GENERAL INSURANCE CO LTD AND ROYAL SUNDRAM ALLIANCE INSURANCE CO LTD AND TAX HAD BEEN DEDUCTED AT SOURC E U/S 194C BY THESE INSURANCE COMPANIES. COPY OF FORM NO. 26AS IN RESPECT OF THESE TWO INSURANCE CONCERNS HAS BEEN FILED BY THE APPELLANT. THE APPELLANT HAD SUBMITTED 26AS BEFORE THE ASSESSING OFFICER ALSO, BUT THE ASSESSING OFFICER INSISTED THAT SEPARATE INCOME ACCOUNT SHOULD BE SHO WN. 5 A PERUSAL OF THE LEDGER ACCOUNTS REVEALS THAT THE EXPLANATION OF THE APPELLANT THAT SOME PART OF THE BILL AMOUNT IS PAID BY CUSTOMER AND REST BY THE INSURANC E COMPANY IS CORRECT. THE INSURANCE COMPANIES HAVE DU LY DEDUCTED TAX AT SOURCE @ 2% OF THE AMOUNT PAID. THE AMOUNT RECEIVED WAS DIRECTLY TAKEN BY THE APPELLANT T O THE LABOUR CHARGES INCOME AND THAT IS WHY IT WAS NO T POSSIBLE FOR THE APPELLANT TO GET THE TRANSA CTIONS VERIFIED UNDER THE LEDGER HEAD 'SERVICE CH ARGES'. THE OBSERVATION OF THE ASSESSING OFFICER THAT THE APPELLANT HAD EARNED COMMISSION INCOME FROM THESE TWO INSURANCE COMPANIES, BUT FACT AS PER LEDGER ACCOUNTS IS THAT T HE AMOUNTS WERE PART OF CUSTOMERS' BILL ON WHICH TAX HAD BEEN DEDUCTED AT SOURCE @ 2%. IF IT WAS COMMISSION INCOM E, THE INSURANCE COMPANY WOULD HAVE DEDUCTED TAX @ 10% U/S 194D OF THE ACT, 7. FROM THE PERUSAL OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPE ALS). SINCE FROM THE PERUSAL OF PAPER BOOK WHERE LEDGER ACCOUNTS OF VARIOUS PARTIES ARE ENCLOSED, WE SEE T HAT AT THE TIME OF ANY ACCIDENT OR NEED FOR ACCIDENTAL INS URANCE ARISING, THE ASSESSEE RAISES THE AMOUNT OF TOTAL BI LL TO ITS CLIENTS, WHO IN TURN PAY HIM HIS SHARE AND THE BALA NCE PART IS PAID BY THE INSURANCE COMPANY OF THE CLIENT . THE ASSESSING OFFICER, IN OUR VIEW, HAS WRONGLY UNDERST OOD THE FACTS. THE ASSESSEE IS ONLY A FACILITATOR PROVIDIN G REPAIR SERVICES TO THE CUSTOMER AND PART OF THE PAYMENT IS MADE BY THE INSURANCE COMPANY DIRECTLY TO THE ASSESSEE A ND THE TDS HAS BEEN DULY DEDUCTED BY THESE COMPANIES ON TH E PAYMENTS MADE BY THEM. 6 8. IN VIEW OF THIS, WE CONFIRM THE ORDER OF THE LEARNED CIT (APPEALS). THE GROUNDS OF APPEAL RAIS ED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF DECEMBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 2 ND DECEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH