Appeal details
Counselvise Citation
[2022] 106 COUNSELVISE.COM (IT) 9456 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 3 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-09-2022
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
B
Assessment Year
2013-2014
Appeal Filed On
13-05-2018
Judgement Text
1 ITA No. 3617/Del/2018 Cinepolis India P. Ltd., Gurgaon IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘B’ NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR US, JUDICIAL MEMBER I.T.A. No. 3617/DEL/2018 (A.Y 2013-14) Cinepolis India Pvt. Ltd., 3 rd Floor, Plot No. 58, Sector : 44, Gurgaon, Haryana – 122 003. PAN No. AADCC2076J (APPELLANT) Vs. Deputy Commissioner of Income Tax, TDS Circle, Gurgaon. (RESPONDENT) ORDER PER YOGESH KUMAR US, JM This appeal is filed by the assessee against the order dated 22.02.2018 passed by CIT(A)-1, Gurgaon for Assessment Year 2013-14. 2. The assessee has raised the following ground of appeal:- “1. The Hon’ble CIT(A) has grossly erred in the facts and circumstances of the case and in law in holding that the settlement amount paid by the Appellant to Mr. Milan Saini and Mr. Deepak Marda (hereinafter referred to as the ‘Payees’) was in the nature of Assessee by : Shri Rajan Vohra, C.A.; Ms. Preeti Goel, C.A.; & Shri Shubham Verma, C.A. Department by: Ms. Yagya Saini Kakkar, [CIT] D.R.; Date of Hearing 15.06.2022 Date of Pronouncement 07.09.2022 2 ITA No. 3617/Del/2018 Cinepolis India P. Ltd., Gurgaon salary liable to TDS at the time of payment. 2. The Hon’ble CIT(A) has grossly erred in the facts and circumstances of the case and in law in ignoring the following: (i) the amount was received by the Payees as per Settlement Agreement for relinquishment of right of equity in the appellant company; (ii) the relinquishment of right is a transfer as per Section 2(47) of the Act and not liable to TDS as the Payees were resident in India during FY 2013-14; (iii) There was no formal, binding and legally enforceable signed agreement between the Payees and the appellant on October 6, 2007 as alleged as the appellant was incorporated only in November 2007; (iv) As admitted by the CIT(A) no right to equity accrued to the Payees at the time of signing of alleged agreement dated October 6, 2007; (v) The settlement agreement dated November 2013 governing the payment is un-related to the alleged agreement dated October 6, 2007; (vi) The Settlement agreement mentions that the Payees were founder Directors of the Appellant for setting up the business of the appellant and it has beep, wrongly inferred that they were employees of the appellant; (vii) The exclusive and particular reliance on the email dated October 6, 2007 without taking into consideration the series of facts 3 ITA No. 3617/Del/2018 Cinepolis India P. Ltd., Gurgaon and other evidence is incorrect; (viii) The rate of withholding of tax is not determinative of the character of the income; (ix) The provisions of Proviso to Section 201(1) of the Act and the Supreme Court decision in the case of Hindustan Coca Cola Beverage (P) Ltd v. CIT have to be taken into account to determine the TDS liability of the appellant as the Payees have admittedly fded their returns of income treating the amount received as capital gains and paid due taxes thereon. 3. The Hon’ble CIT(A) has grossly erred in the facts and circumstances of the case and in law in erroneously following the order issued by him in Appeal number 509/16-17 in the case of Milan Saini, without examining and appreciating the full facts and circumstances brought to his notice by the appellant during appeal proceedings for FY 2012-13. “ 3. Brief facts of the case are that, a TDS Survey was conducted at the premises of the assessee, proceedings u/s 201(1)/201(1A) of the Act for Assessment Year 2011-12, 2012-13 & 2013-14 were initiated against the assessee. Based on the documents and details furnished by the assessee, an order has been passed on 31/03/2015 by raising demand of Rs.11,02,78,412/- u/s 201 and remand of Rs. 3,97,00,228/- u/s 201 (1A) of the Act, in total demand of Rs. 14,99,78,649/-. 4. Aggrieved by the order dated 31/03/2015, the assessee has preferred an Appeal before CIT(A). the Ld. CIT(A) has partly allowed the Appeal, found that the amount paid by the assessee to Mr. Milan Saini and Mr. Deepka Marda 4 ITA No. 3617/Del/2018 Cinepolis India P. Ltd., Gurgaon was in the nature of salary and liable to TDS at the time of payment vide order dated 22/02/2018. Since the amount was not actually paid by the assessee but only provision was made in books of accounts, the Ld. CIT(A) has given liberty to the A.O examine the issue of non deduction of TDS in the year in which the said amount is actually paid accordingly, partly allowed the Appeal on 22/02/2018. 5. Aggrieved by the order dated 22/02/2018, the assessee has preferred the present appeal on the grounds mentioned above. 6. The Ld. Counsel for the assessee submitted that, the amount received by Mr. Milan Saini and Mr. Deepak Marda (payees) are as per the settlement agreement for relinquishment of right of equity in the asssessee company, the relinquishment of right is a transfer as per Section 2(47) of the Act and not liable to TDS as the payee were resident of India during Financial Year 2013- 14. The Ld. Counsel for the assessee further submitted that, treating the amount received by the payees as settlement amount, tax has been duly paid at 20%. Therefore, sought for interference from the Tribunal. 7. Per contra, the Ld. DR has submitted that, the agreement entered into between private parties cannot over ride the compulsion of payment of TDS, further submitted that, the payments made by the assessee to the payees are in the nature of salary which is liable for TDS, the Ld.CIT (A) has rightly came to the conclusion that, the amount paid to the payees are in the nature of salary liable to TDS at the time of payment. 8. We have heard the parties, perused the material on record and gave our thoughtful consideration. The contention for the Ld. Counsel for the assessee is that there is a settlement agreement between the assessee and the payees wherein it has been agreed that while making the payment, the assessee need not deduct the TDS, therefore the Assessee is not liable to pay the TDS. The 5 ITA No. 3617/Del/2018 Cinepolis India P. Ltd., Gurgaon said contention of the assessee cannot be agreed. The agreement entered into between two parties will not override the provision of the Income Tax Act and the contract contrary to law is quite contract. Therefore, the contention of the Ld. Counsel that ‘since it is agreed between the parties payment should be made without deducting the TDS, therefore, the assessee is not liable to pay the TDS’ cannot be accepted. 9. The payment made Mr. Milan Saini and Mr. Deepak Marda is as per the settlement agreement for relinquishment of right to equity in the assessee company which is nothing but ex-gratia payment to such persons in recognization of their services. This remuneration could be easily called as “profit in lieu of salary” which has been paid for loss of service or employment of Mr. Milan Saini and Mr. Deepak Marda with the assessee Company. It is admitted fact that the assessee has not deducted TDS on which said amount. The Ld. A.O invoked the provision of Section 201(1) and 201(1A) of the Act. Now, the question before us whether the assessee has claimed the said amount as deduction while computing the income of the assessee? If the assessee claimed it as deduction while computing income of the assessee for Assessment Year 2013-14, then the assessee is liable to deduct the TDS on the said amount. The amount paid to the said persons which is “Profit in lieu of salary” and which being a part of total salary and the same is paid based on settlement agreement, thought the sum is over and above the salary, par takes the character of salary, therefore, the sum is liable for deduction of TDS in the hands of the assessee. Thus, the plea of the counsel for the assessee is that the said amount is not paid but made only a provision, therefore, provisions of Section 201(1) and 201(1A) cannot be invoked. This plea of the assessee is devoid of merit. 10. The Hon'ble Supreme Court in the case of Shri Choudhary Transport Company. Vs.ITO [2020] 426 ITR 289(SC) while dealing with the terms “paid” and “Payable” with reference to Section 40a(ia) wherein the Hon'ble Supreme 6 ITA No. 3617/Del/2018 Cinepolis India P. Ltd., Gurgaon Court has held that “ the terms “payable” has been used in Section 40(a) (ia) of the Act only to indicate the type or nature of the payments by the assessee to the payees referred therein. It is descriptive of the payments which attract the liability for deducting tax at source and has not been used in the provision in question to specify any particular class of default on the basis of whether or not payment has been made. The semantical suggestion that this expression “payable” be read in contradistinction to the expression “Paid” is not sustainable.” By reading the above judgment it is clear that there is no difference between the words ‘paid’ and ‘payable’. 11. The argument of the Ld. AR that the recipient has paid the tax and there cannot be further liability of the assessee to deposit the TDS and only interest paid with reference to delay for any in depositing all the tax amount by the recipient. Further contended that it is the duty of the Assessing Officer to verify regarding payment of the tax by the recipient as and when actual payment is done and to examine whether the proper tax is paid by the recipient or not. Therefore, contended that the authorities below ought to have followed the judgment of the Supreme Court in the case of Hindustan Coca cola Beverages (P) Ltd. Vs. CIT reported in 293 ITR 226. 12. The Ld. Counsel for the assessee to substantiate his contention that the recipient have paid the tax, no material has been brought on record. On the other hand, the assessee is fastening the burden of the same on the A.O to examine that recipient has paid the tax or not. |When an assessee takes a specific plea it is for the assessee to prove the said contention by producing the material in support of the same and assessee cannot fasten the liability to prove the contention on the revenue. Since the assessee has not brought any evidence relating to payment of the tax by the recipient before the Lower Authorities or before us to follow the ratio laid down in the case of Hindustan Coca Cola Beverage (supra). 7 ITA No. 3617/Del/2018 Cinepolis India P. Ltd., Gurgaon 13. Thus, in our opinion, the settlement amount paid by the assessee to Sh. Milan Sahni and Sh. Deepak Marda liable to deduct the TDS at the time of payment. The assessee vide written submission dated 12/02/2018 submitted before the CIT(A) that during FY 2012-13, the amount of Rs. 23,37,93,845/- was not actual paid by the assessee but only provision was made in the books of accounts. The assessee further contended before the CIT(A) that as there was no actual payment during the FY 2012-13, therefore, the CIT(A) held that the assessee was not liable to deduct TDS on the said amount during the year under consideration. Further, the Ld. CIT(A) gave liberty to the Assessing Officer to examine the issue of non deduction of TDS in the year in which this amount is actually paid. We do not find any error or infirmity in the approach of the Ld. CIT(A). 14. In the facts and circumstances of the case we deem it fit to remand the matter to the file of the A.O with a direction to the assessee to provide the material to prove that the recipients have actually paid the tax. If such materials are produced by the assessee, the Ld. A.O is directed to verify the same and decide the issue in accordance with law. The Ld. A.O is also at liberty to examine the issue of non deduction of TDS in the year in winch the said amount is actually paid. Needless to say the assessee may be granted with opportunity of being heard. Accordingly, the Ground No. 1 to 2(i) to (viii) and the Ground No. 3 are dismissed and Ground No. 2 ((ix) is allowed for statistical purpose. 15. In the result, appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the open court on 07 th September, 2022. Sd/- Sd/- (N. K. BILLAIYA ) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER 8 ITA No. 3617/Del/2018 Cinepolis India P. Ltd., Gurgaon Dated : 07/09/2022 *R. N* Sr PS Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT (Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI
Mehul