M/S i3SPACE KITCHENS PVT. LTD, Nagpur V. A.C.I.T. CIRCLE-1, Nagpur

ITA 412/NAG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3114 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 194C

Judgement Text

1 ITA NO. 412/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO.412/NAG/2014 ASSESSMENT YEAR : 2009 - 10. M/S I3 SPACE KITCHENS PVT. LTD., ASSTT. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. CIRCLE - 1, NAGPUR. PAN AAICS3427N. APPELLANT RESPONDENT APPELLANT BY : DR. JAYANT RANADE. RESPONDENT : SHRI NARENDRA KANE. DATE OF HEARING : 11 - 01 - 2016 DATE OF PRONOUNCEMENT : 25 TH FEB. , 2016. O R D E R PER MUK UL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 13 TH JUNE, 2014. THE SOLITARY GROUND RAISED BY THE ASSESSEE IS REPRODUCED BELOW: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 8,75,101, MADE BY AO U/S 40(A)(IA) OF I.T. ACT, 1961, IGNORING THE FACT THAT SUCH PAYMENT WAS NOT DEBITED TO PROFIT & LOSS ACCOUNT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) DATED 26 - 12 - 2011 WERE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF SELLING OF MODULAR KITCHENS. A QUERY WAS RAISED BY THE AO THAT WHY A SUM OF RS.8,75,101/ - PAID T O INSTALLATION CONTRACTOR SHOULD NOT BE DISALLOWED U/S 194C OF I.T. ACT BECAUSE NO TDS WAS DEDUCTED. THE FACTS IN RESPECT OF THE ABOVE ISSUE WAS STATED BY THE AO AS UNDER : 2 ITA NO. 412/NAG/2014 IT WAS SEEN THAT THE ASSESSEE WAS MAINTAINING ORDER LOGIN FORMS IN RESPECT OF EAC H ORDER RECEIVED FROM THE INDIVIDUAL CUSTOMERS ON WHICH QUOTATION AMOUNT & FINALIZED AMOUNT WAS MENTIONED. QUOTATION AMOUNT WAS PRICE QUOTED BY COMPANY AND IT WAS ALL INCLUSIVE PRICE I.E. INCLUDED TRANSPORTATION CHARGES, INSTALLATION CHARGES, MATERI AL COST, TAXES ETC. FINALIZED AMOUNT WAS ARRIVED AFTER DISCOUNT GIVEN BY COMPANY ON THE QUOTATION AMOUNT. LIKE THE QUOTATION AMOUNT THE FINALIZED AMOUNT IS ALSO INCLUSIVE PRICE. HOWEVER, THERE WAS DIFFERENCE IN BILL AMOUNT AND FINALIZED AMOUNT IN THE RANGE OF 5% I.E. BILL AMOUNT WAS ABOUT 5% LESS THAN FINALIZED AMOUNT. THIS DIFFERENCE WAS BECAUSE OF INSTALLATION AMOUNT CHARGES GIVEN TO INSTALLATION CONTRACTOR WHICH WAS INCLUDED IN FINALIZED AMOUNT. HOWEVER WHILE MAKING PAYMENT TO INSTALLATION CONTRACTORS NO TDS WAS MADE BY COMPANY U/S 194C OF I.T. ACT, 1961. IN A.Y. 2009 - 10 AMOUNT OF RS.8,75,101/ - WAS PAID TO INSTALLATION CONTRACTOR WITHOUT MAKING ANY TDS. 2.1 ASSESSEES REPLY WAS THAT THE AMOUNT WAS COLLECTED ON BEHALF OF INSTALLATION CONTRACTOR. IT WA S FURTHER EXPLAINED THAT THE COMPANY WAS SELLING MODULAR KITCHENS TO THE CUSTOMERS, HOWEVER, INSTALLATION WAS TAKEN CARE BY THE INSTALLATION CONTRACTOR. THEREFORE, THE AMOUNT COLLECTED TOWARDS INSTALLATION FROM THE CUSTOMERS WAS ON BEHALF OF INSTALLATION C ONTRACTOR WHICH WAS FULLY REMITTED. IT WAS ALSO INFORMED THAT THE COMPANY HAD NOT CLAIMED ANY EXPENDITURE ON THIS ACCOUNT. HOWEVER, THE AO WAS NOT CONVINCED AND IN HIS OPINION THE ENTIRE PAYMENT WAS COLLECTED BY THE ASSESSEE AND THEREAFTER PAYMENT WAS MADE TO INSTALLATION CONTRACTOR BY THE ASSESSEE. THE ASSESSEE WAS REQUIRED TO DEDUCT THE TDS ON SUCH PAYMENT. IN THE OPINION OF THE AO THE FACT THAT THE ASSESSEE HAD NOT ACCOUNTED FOR THE INSTALLATION CHARGES COLLECTED FROM THE CUSTOMERS AS ITS REVENUE RECEIPT NOR CLAIMED EXPENDITURE IN ITS BOOKS OF ACCOUNTS AGAINST THE PAYMENTS MADE TO INSTALLATION CONTRACTOR DID NOT CHANGE THE NATURE OF THE TRANSACTION. THE PAYMENT PAID TO INSTALLATION CONTRACTOR WAS ACCORDING TO THE AO WITHIN THE SCOPE OF SECTION 194C OF I.T . ACT, HENCE THE SAME WAS DISALLOWED. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3 ITA NO. 412/NAG/2014 3. LEARNED CIT(APPEALS) HAS AFFIRMED THE ACTION OF THE AO. HOWEVER, DURING THE COURSE OF HEARING BEFORE US, LEARNED A.R. MR. J.M. RANADE HA S VEHEMENTLY OBJECTED ONE OF THE FINDINGS OF LEARNED CIT(APPEALS) THAT THE INSTALLATION PAYMENT WAS DEBITED TO THE PROFIT & LOSS ACCOUNT OF THE COMPANY. LEARNED A.R. HAS OBJECTED THE SAID FINDING WHICH ACCORDING TO HIM WAS INCORRECT AND AGAINST THE FACTS O F THE CASE. IN SUPPORT OF THIS OBJECTION LEARNED A.R. HAS PLACED R ELEVANT INFORMATION ON RECORD. APART FROM THE ABOVE OBJECTION LEARNED A.R. HAS ALSO INFORMED THAT WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2007 - 08, LEARNED CIT(APPEALS) - 16, MUMBAI (CAMP NAGPUR) VIDE ORDER DATED 01 - 02 - 2013 HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE VIDE PARA 2.3, FOR A REFERENCE REPRODUCED BELOW : THE ASSESSING OFFICERS ORDER, THE CONTENTIONS OF THE APPELLANT AS WELL AS MATERIAL ON RECORD HAVE BEEN CONSIDERED. THE APPELLANT HAS SOLD MODULAR KITCHENS TO ITS CUSTOMERS HOWEVER, THE INSTALLATION WAS DONE BY ANOTHER PARTY. THE INSTALLATION COST HAS BEEN COLLECTED BY THE APPELLANT AND ENTIRE AMOUNT OF INSTALLATION CHARGES HAVE BEEN PASSED ON TO THE PARTY CARRYING OUT THE INSTALLATION. THE FACT THAT INSTALLATION WILL BE DONE BY A SEPARATE PARTY HAS ALSO BEEN MENTIONED IN THE QUOTATION ITSELF. HENCE, THE APPELLANT IS IN EFFECT ONLY A ROUTING PARTY I.E. THE INSTALLATION CHARGES ARE BEING COLLECTED AND PASSED ON TO THE THI RD PARTY. IT IS NOT THE CASE THAT THE APPELLANT IS DEDUCTING ITS COMMISSION/PROFIT ON THE AMOUNT WHILE PASSING ON THE INSTALLATION CHARGES. IT IS THUS A CASE OF MERE REIMBURSEMENT OF EXPENSES BY THE PARTY CARRYING OUT INSTALLATION, COLLECTED BY THE APPELLA NT AND REIMBURSED. IN THESE CIRCUMSTANCES IT CANNOT BE SAID THAT THERE IS A CONTRACT BETWEEN THE APPELLANT AN D THE PARTY CARRYING OUT THE INSTALLATION. HENCE NO LIABILITY TO DEDUCT TAX AT SOURCE UNDER SECTION 194C WOULD ARISE AND CONSEQUENTLY ADDITION U/S 40(A)(IA) IS NOT MAINTAINABLE. 3.1 LEARNED A.R. HAS ALSO INFORMED THAT EVEN THOUGH IN ASSESSMENT YEAR 2008 - 09 CIT(APPEALS) - 16, MUMBAI (CAMP NAGPUR) VIDE ORDER DATED 01 - 02 - 2013 HAS TAKEN THE SAME VIEW AND HELD THAT THE APPELLANT HAD SOLD MODULAR 4 ITA NO. 412/NAG/2014 KITCHENS TO ITS CUSTOMERS, HOWEVER, THE INSTALLATION WAS DONE BY ANOTHER PARTY. ACCORDING TO LEARNED CIT(APPEALS) , THE ENTIRE EXPENDITURE WAS REIMBURSED, HENCE OUT OF THE SCOPE OF THE PROVISIONS OF SECTION 194C THEREFORE, NO ADDITION HELD AS MAINTAINABLE U/S 40(A) (IA). 4. IN THE LIGHT OF THE ABOVE FACTUAL BACKGROUND WE HAVE HEARD BOTH THE SIDES. LEARNED D.R. MR. NARENDRA KANE HAS PLACED RELIANCE ON THE ORDERS OF THE REVENUE AUTHORITIES. ACCORDING TO US , CONSIDERING THE PAST HISTORY OF THE CASE AS NARRATED IN FOREGO ING PARAGRAPHS AS WELL AS THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE , WE ARE OF THE VIEW THAT THE LEARNED CIT(APPEALS) HAS WRONGLY CONFIRMED THE ADDITION ON THE BASIS OF INCORRECT APPRECIATION OF FACTS. WE HAVE ALSO BEEN INFORMED THAT AGAINST THE ABO VE CITED DECISIONS OF THE FIRST APPELLATE AUTHORITY NO APPEAL WAS PREFERRED BY THE REVENUE DEPARTMENT. IN ONE OF THE DECISIONS THE ITAT, KOLKATA BENCH IN THE CASE OF SHARMA KAJARIA & CO. 145 TTJ 01 HAS OPINED THAT PAYMENT MADE TO LAWYERS VIS - A - VIS REIMBURS EMENT BY THE CLIENTS, NO DISALLOWANCE COULD BE MADE U/S 40(A)(IA) BECAUSE A DISALLOWANCE COULD BE MADE ONLY IN RESPECT OF AN AMOUNT WHICH IS SOUGHT TO BE DEDUCTED U/S 30 TO 38 OF I.T. ACT. ACCORDING TO THE RESPECTED COORDINATE BENCH THE QUESTION OF DISALLO WANCE COULD ARISE ONLY WHEN AN AMOUNT IS CLAIMED AS A DEDUCTION IN COMPUTING THE BUSINESS INCOME AND NOT IN THE CASE OF REIMBURSEMENT SIMPLICITOR BEING NOT ROUTED THROUGH P & L ACCOUNT. A SAME VIEW HAS ALSO BEEN TAKEN IN THE CASE OF MITRA LOGISTICS P. LTD. 139 ITD 420 (KOL). AS A RESULT, RESPECTFULLY FOLLOWING THE ABOVE DECISION AND CONSIDERING THE TOTALITY OF THE FACTS AND 5 ITA NO. 412/NAG/2014 CIRCUMSTANCES OF THE CASE, WE HERE BY REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND ALLOW THE GROUND OF THE ASSESSEE. 5. IN THE RE SULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF FEB., 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 25 TH FEB. , 2016. COPY FORWARDED TO : 1. M/S I3 SPACE KITCHENS PVT. LTD., DUTTA NIWAS, ZENDA CHOWK, DHARAMPETH, NAGPUR - 44 - 010. 2. A.C.I.T., CIRCLE - 1, NAGPUR. 3. COMMISSIONER OF INCOME - TAX - ,NAGPUR. 4. CIT(APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE. ASSISTANT REGISTRAR, ITAT, NAGPUR