Income Tax Officer, Ward-14(2), Hyderabad V. Dakshin Shelters Pvt Ltd., Hyderabad

ITA 481/HYD/2014

• Counselvise Citation: 48122514 RSA 2014
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 20-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Non-deduction of tax
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.481/HYD/2014 ASSESSMENT YEAR 2006 - 2007 THE INCOME TAX OFFICER, WARD 14(2) HYDERABAD. VS. DAKSHIN SHELTERS PVT. LTD., HYDERABAD. PAN AACCD 2682C (APPELLANT) (RESPONDENT) FOR REVENUE : MR. RAMAKRISHNA BANDI FOR ASSESSEE : MR. A.V. RAGHURAM DATE OF HEARING : 26 .03.2015 DATE OF PRONOUNCEMENT : 08 .04 .2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), VIJAYAWADA DATED 02.12.2013 ON THE FOLLOWING GROUNDS : 1 . THE HONBLE CIT( A) HAS ERRED IN GIVING DIRECTION TO THE A.O. FOR NOT INVOKING THE PROVISIONS OF SECTION 194H ON THE ADVANCE FOR LAND AS COMMISSION. A ) SECTION 194H TALKS ABOUT THE PAYMENT TO A RECIPIENT WHICH IS THE INCOME BY WAY AT COMMISSION OR BROKERAGE AND DOES NOT TAL K ABOUT THE RELATIONSHIP BETWEEN THE PAYER AND THE PAYEE NECESSARILY BE OF A PRINCIPAL AND AGENT. THE EXPLANATION TO THE SECTION 194 ELABORATES THE TERMS OF COMMISSION OR BROKERAGE BY INCLUDING ANY PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF AT ANOTHER PERSON, THUS IT IS CLEAR THAT THE PROVISION OF SECTION 194H DO NOT REQUIRE ANY FORMAL CONTRACT OF AGENCY. 2 ITA.NO.481/HYD/2014 DAKSHIN SHELTERS P. LTD., HYDERABAD. B ) THE RELATIONSHIP BETWEEN THE PARTIES DEPENDS ON THE ACT PERFORMED BY THE PARTIES, AND FACTS AND SITUATION IN WHIC H PARTIES ARE WORKING. C ) IN THIS CASE OF ASSESSEE, THIS IS EXPENDITURE WHERE CERTAIN SUMS PAID AND GOES OUT OF THE BUSINESS OF THE ASSESSEE. IT IS A CONTRACT FOR WORK AND NOT CONTRACT FOR SALE. 2 . ANY OTHER GROUND ARISEN DURING THE COURSE OF PROCEEDINGS WIT H THE PERMISSION OF THE HONBLE BENCH. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY. DURING THE YEAR UNDER CONSIDERATION , A SUM OF RS.1 CRORE WAS PAID BY IT TO SMT. ANJANA SHAH AND MR. SUDHIR KUMAR SHAH IN CONNECTION WITH LAND TRANSACTION. ACCORDING TO THE A SSESSING O FFICER, THE SAID AMOUNT PAID BY THE ASSESSEE WAS IN THE NATURE OF COMMISSION AND TAX AT SOURCE, THEREFORE, WAS LIABLE TO BE DEDUCTED FROM THE PAYMENT OF THE SAID AMOUNT AS PER SECTION 194H. SINCE NO SUCH DEDUCTION OF TAX AT SOURCE WAS MA DE BY THE ASSESSEE COMPANY, IT WAS CALLED UP BY THE A.O. TO EXPLAIN AS TO WHY IT SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT UNDER SECTION 201(1) FOR ITS FAILURE TO DEDUCT TAX AT SOURCE. IN REPLY, A WRITTEN EXPLANATION WAS FILED BY THE ASSESSEE VIDE LETTE R DATED 20.12.2011. THE RELEVANT PORTION OF WHICH IS REPRODUCED IS BELOW : IN VIEW OF FA CT THAT MRS. ANJANA SUDHIR SHAH AND MR. SUDHIR KUMAR SHAH WERE NOT ABLE TO FULFILL THEIR OBLIGATIONS UNDER THE SAID AGREEMENT, NO INCOME ACCRUES TO THEM. ANY AMOUNT PAID TO IS ONLY A LIABILITY WHICH THEY HAVE ALSO CONFIRMED THE COMPANY ASSESSEE HAS ALSO NOT DEBITED THIS TO ITS PROFIT AND LOSS ACCOUNT BUT SHOWN IT AS A RECOVERABLE ADVANCE IN ITS BOOKS OF ACCOUNT. THE HONBLE A.O. WILL THEREFORE APPRECIATE THAT LIABILITY TO DEDUCT TAX AT SOURCE U/S. 194H OF THE INCOME TAX ACT, 1961, WILL ARISE ONLY IF THE 3 ITA.NO.481/HYD/2014 DAKSHIN SHELTERS P. LTD., HYDERABAD. INCOME ACCRUES TO THE RECIPIENT ACTING ON BEHALF OF THE OTHER PERSON. IN THIS CASE, AS NO INCOME HAS ACCRUED, TH E QUESTION OF TREATING IT AS A COMMISSION AND THEREBY INVOKING OF PROVISIONS OF SECTION 194H DOES NOT ARISE. THE ASSESSEES OBJECTIONS INCLUDING AFORESAID MENTIONED HAVE BEEN EXAMINED IN VIEW OF THE COPY OF AGREEMENT FURNISHED BEFORE ME. THE RELEVANT PAR AGRAPH FROM THE AGREEMENT IS REPRODUCED AS UNDER IN VIEW OF THE SERVICES RENDERED BY MRS. ANJANA SHAH AND MR. SUDHIR SHAH, WE HAVE AGREED TO COMPENSATE BOTH OF THEM IN THE FORM OF LUMP SUM FES OF RS.7 CRORE (SEVEN CRORE ONLY) PAYABLE ON DEFERRED PAYMENT BASIS IN THE FOLLOWING MANNER. AND IT IS FOUND FROM THE BANK ACCOUNT COPY OF THE ASSESSEE DEDUCTOR THAT AN AMOUNT OF RS.50 LAKH WAS PAID ON 5.08.2005 AND RS.50,00,000/ - (25,00,000 & 25,00,000) WAS PAID ON 30.11.2005. AS PER THE INFORMATION FURNISHED, OUT OF RS. 1 CRORE PAID, AN AMOUNT OF RS.75 LAKH WAS PAID TO MR. SUDHIR KUMAR SHAH AND RS.25,00,000/ - WAS PAID TO ANJANA SHAH. 2.1. THE ABOVE EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCORDING TO HIM , THE AMOUNT OF RS.1 CRORE WAS PAID BY THE ASSESSEE TO THE CONCERNED PERSONS FOR PROCUR ING CERTAIN LAND AND ALTHOUGH THE SAME WAS TREATED BY THE ASSESSEE AS ADVANCE AGAINST THE LAND IN ITS BOOKS OF ACCOUNTS, THE NATURE OF THE SAID AMOUNT WAS COMMISSION. HE HELD THAT SINCE S UCH COMMISSION WAS ACTUALLY PAID BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION , TAX AT SOURCE WAS LIABLE TO BE DEDUCTED UNDER SECTION 194H . S INCE NO SUCH DEDUCTION WAS MADE BY THE ASSESSEE COMPANY, A.O. TREATED IT AS ASSESSEE IN DEFAULT FOR THE TAX DEDUC TIBLE AMOUNTING TO RS.5,61,000 UNDER SECTION 201(1) AND ALSO LEVIED INTEREST OF RS.4,75,000 UNDER SECTION 201(1A) VIDE ORDER DATED 6 TH JUNE, 2012. 2.2. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 201(1)/201(1A) , AN APPEAL WAS PREFERRED BY THE CIT(A) BEFORE 4 ITA.NO.481/HYD/2014 DAKSHIN SHELTERS P. LTD., HYDERABAD. THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) SET ASIDE THE ORDER PASSED BY THE A.O. UNDER SECTION 201/201(1A) AND CANCELL ED THE DEMAND RAISED BY THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAS 5 AND 5.1 OF HIS IMPUGNED ORDER. 5. I HAVE CAREFULLY GONE THROUGH THE ORDER OF THE ASSESSING OFFICER, GROUNDS OF APPEAL AND THE SUBMISSIONS MADE BY THE APPELLANT. 5.1. THE FA CT IS THAT AN AMOUNT OF RS.1 CRORE WAS PAID TO MR. SUDHIR KUMAR SHAH AND ANJANA SHAH. IT IS WITH REGARD TO THE NATURE OF PAYMENT THAT IS IN DISPUTE. THE A.O. HELD THAT THE PAYMENT IS IN THE NATURE OF COMMISSION, WHEREAS THE APPELLANT IS CONTENDING THAT T HE PAYMENT IS MADE TOWARDS ADVANCE FOR LAND. ON VERIFICATION OF THE FINANCIAL STATEMENTS ON RECORD, IT IS FOUND THAT THE APPELLANT HAS SHOWN THE SAID PAYMENT AS ADVANCE FOR LAND IN THE BALANCE SHEET. THE APPELLANT HAS NOT CLAIMED ANY EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. FURTHER, IT IS NOTICED THAT IN THE APPELLANTS CASE, A SEARCH ACTION WAS CONDUCTED AND REGULAR ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER, WHEREIN THE A.O. HAS NOT MADE ANY QUANTUM ADDITION BY TREATING THE ADVANCE FOR LAND AS COMMISSION PAYMENT. IN THE LIGHT OF THE ABOVE FACTS, I AM OF THE OPINION THAT THE A.O. OF TDS CHARGE HAS NO MATERIAL ON RECORD TO PROVE THAT THE SAID AMOUNT REPRESENTS COMMISSION PAYMENT ONLY SO AS TO INVOKE THE PROVISIONS OF SECTION 194H OF THE ACT. IT MAY ALSO BE PERTINENT TO MENTION THAT THE APPELLANT HAS SHOWN THE SAID PAYMENT AS RECOVERABLE ADVANCE WHICH BEARS THE CHARACTER OF PAYMENT BETWEEN PRINCIPAL TO PRINCIPAL AND IT IS NOT FOR RENDERING OF ANY SERVICES. IN VIEW OF THE ABOVE, THE A.O. IS NOT JU STIFIED IN INVOKING THE PROVISIONS OF SECTION 194H OF THE ACT BY TREATING THE PAYMENT OF ADVANCE FOR LAND AS COMMISSION. ACCORDINGLY, HE IS DIRECTED TO REDUCE THE IMPUGNED DEMAND RAISED U/S.201(1) AND 201(1A) OF THE ACT IN THIS REGARD. AGGRIEVED BY T HE ORDER OF THE LD. CIT(A), REVENUE HA S PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5 ITA.NO.481/HYD/2014 DAKSHIN SHELTERS P. LTD., HYDERABAD. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH, THE LEARNED D.R. HAS CONTENDED BY RELYING ON THE PROVISIONS OF SECTION 194H THAT THE AMOUNT OF RS. 1 CRORE IN QUESTION HAVING BEEN PAID BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION ON ACCOUNT OF COMMISSION IN ADVANCE, TAX WAS LIABLE TO BE DEDUCTED BY THE ASSESSEE, IT IS OBSERVED THAT WHAT SECTION 194H PROVIDES IS THAT ANY PERSON NOT BEING AN INDIVIDUAL OR HUF, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF COMMISSION, IS REQUIRED TO DEDUCT INCOME TAX THEREON AT THE PRESCRIBED RATE. THE FIRST AND FOREMOST REQUIREMENT TO APPLY SECTION 194H THUS IS T HAT THE PAYMENT SHOULD BE TOWARDS ANY INCOME BY WAY OF COMMISSION. IN THE PRESENT CASE, THE AMOUNT IN QUESTION WAS PAID BY THE ASSESSEE AS ADVANCE TO THE CONCERNED TWO PERSONS AND SINCE THE SAME WAS NOT IN THE NATURE OF ANY INCOME BY WAY OF COMMISSION CHAR GEABLE IN THE HANDS OF THE SAID PARTIES FOR THE YEAR UNDER CONSIDERATION, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 194H ARE NOT APPLICABLE. MOREOVER, AS OBSERVED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER, THE AMOUNT IN QUESTION WAS ACTUALLY PAID BY THE ASSESSEE TOWARDS ADVANCE FOR LAND AND THERE BEING NOTHING BROUGHT ON RECORD BY THE A.O. TO SHOW THAT THE SAME REPRESENTED COMMISSION PAID BY THE ASSESSEE WHICH WAS CHARGEABLE TO TAX AS INCOME IN THE HANDS OF THE RECIPIENT, WE FIND OURSELVES IN AGREEMEN T WITH THE LD. CIT(A) THAT THERE WAS NO REQUIREMENT FOR THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE AMOUNT OF RS.1 CRORE IN QUESTION PAID BY THE ASSESSEE WHICH CLEARLY REPRESENTED ADVANCE PAYMENT. THE IMPUGNED ORDER OF THE LD. CIT(A) SETTING ASIDE THE ORDER PASSED BY THE A.O. UNDER SECTION 201(1) AND 201(1A) AND CANCELLING THE 6 ITA.NO.481/HYD/2014 DAKSHIN SHELTERS P. LTD., HYDERABAD. DEMAND RAISED BY THE A.O. IS ACCORDINGLY UPHELD AND THIS APPEAL OF THE REVENUE IS DISMISSED. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 8 .04 .2015. SD/ - SD/ - (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 0 8 APRIL , 2015 VBP/ - COPY TO 1. THE INCOME TAX OFFICER, WARD 14(2) (TDS), RANGE - 14, I.T. TOWERS, 4 TH FLOOR, B BLOCK, HYDERABAD. 2. DAKSHIN SHELTERS P. LTD., INRHYTHM BUILDING, 1 ST FLOOR, PLOT NO.1023, GURUKUL SOCIETY, KHANAMET VILLAGE, NEAR MERIDIAN SCHOOL, MADHAPUR, HYDERABAD. 3. CIT(A ) , VIJAYWADA 4. CIT (TDS), HYDERABAD 5. D.R. I.T.A.T. A BENCH, HYDERABAD. 6. GUARD FILE