Dr B.A.Rajakrishnan, Kollam V. DCIT, Kollam

ITA 497/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61354 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R SIVAKUMAR
• Assessee Lawyers: R KRISHNAN
• Keywords: Tax effect

Judgement Text

1 ITA NO.497 & 555/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 497/COCH/2010 (ASSESSMENT YEAR 2007-08) DR. B.A. RAJAKRISHNAN VS DY.CIT, CIR.1 KERALASABDAM WEEKLY KOLLAM RANGE, KOLLAM LAXMINADA, KOLLAM PAN : ACYPA3789L (APPELLANT) (RESPONDENT) I.T.A NO. 555/COCH/2010 (ASSESSMENT YEAR 2007-08) DY.CIT, CIR.1 VS DR. B.A. RAJAKRISHNAN KOLLAM KERALASABDAM, KOLLAM (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. KRISHNAN RESPONDENT BY : SHRI R SIVAKUMAR DATE OF HEARING : 08-03-2012 DATE OF PRONOUNCEMENT : 03-04-2012 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEAL OF THE ASSESSEE AND THE REVENUE AR E DIRECTED AGAINST THE VERY SAME ORDER OF THE COMMISSIONER OF INCOME-TAX(A) , TRIVANDRUM DATED 28-07- 2010 AND PERTAIN TO ASSESSMENT YEAR 2007-08. THERE FORE, WE HEARD BOTH THE 2 ITA NO.497 & 555/COCH/2010 APPEALS TOGETHER AND ARE DISPOSING OF THE APPEALS B Y THIS COMMON ORDER, FOR CONVENIENCE. 2. LET US TAKE THE ASSESSEES APPEAL FIRST. THE ONL Y GROUND OF APPEAL IS DISALLOWANCE OF RS.2,23,100 U/S 40A(IA) OF THE ACT. 3. SHRI R KRISHNAN, THE LD.REPRESENTATIVE FOR THE AS SESSEE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THE TDS WAS NOT MADE. ACCORDING TO THE LD.REPRESENTATIVE, WHAT WAS PAID WAS A ROYALTY; THEREFORE, TDS WAS NOT DEDUCTIBLE U/S 194J OF THE A CT. REFERRING TO SECTION 44AA OF THE ACT, THE LD.REPRESENTATIVE SUBMITTED THAT WR ITER IS NOT A PROFESSION AS NOTIFIED BY THE CBDT. THEREFORE, IT CANNOT BE CONS IDERED AS PROFESSIONAL FEES HENCE THE DISALLOWANCE SUSTAINED BY THE COMMISSIONE R OF INCOME-TAX(A) ON THE GROUND THAT THE TDS WAS NOT MADE IS NOT JUSTIFIED. 4. ON THE CONTRARY, THE LD.DR SUBMITTED THAT WHAT W AS PAID TO THE ASSESSEE IS ONLY A PROFESSIONAL FEE, THEREFORE, TDS HAS TO BE M ADE. EVEN OTHERWISE, ACCORDING TO THE LD.REPRESENTATIVE, IT HAS TO BE TR EATED AS SALARY. ON ANY ACCOUNT, NON DEDUCTION OF TAX AT SOURCE AT THE TIME OF PAYME NT HAS TO BE CONSTRUED AS VIOLATION OF PROVISIONS OF SECTION 194J OF THE ACT. THEREFORE, THE ASSESSEE IS NOT ENTITLED TO CLAIM THE SAME AS DEDUCTION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAR EFULLY GONE THROUGH THE PROVISIONS OF SECTION 44AA OF THE ACT. SECTION 44A A CLEARLY SAYS THAT EVERY PERSON CARRYING ON LEGAL, MEDICAL ENGINEERING OR AR CHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ANY 3 ITA NO.497 & 555/COCH/2010 OTHER PROFESSION AS IS NOTIFIED BY THE BOARD IN THE OFFICIAL GAZETTE SHALL KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS A S MAY ENABLE THE ASSESSING OFFICER TO COMPUTE HIS TOTAL INCOME IN AC CORDANCE WITH THE PROVISIONS OF THIS ACT. SUB SECTION (2) OF SECTION 44AA PROVI DES FOR MAINTENANCE OF BOOKS OF ACCOUNT BY PROFESSIONALS OTHER THAN THE PROFESSION WHICH ARE REFERRED TO IN SUB SECTION (1) OF SECTION 44AA OF THE ACT WHERE THE TO TAL SALES / TURNOVER EXCEEDS RS.10 LAKHS IN ANY ONE OF THE THREE YEARS IMMEDIATEL Y PRECEDING THE PREVIOUS YEAR. WE FIND THAT THE CBDT BY NOTIFICATION NO.SO 17(E) DATED 12-01-1977 NOTIFIED THE PROFESSION OF STORY WRITER AS A PROFES SION WITHIN THE MEANING OF SECTION 44AA OF THE ACT. THIS NOTIFICATION ISSUED BY CBDT WAS NOT TAKEN INTO CONSIDERATION EITHER BY THE A.O. OR COMMISSIONER OF INCOME-TAX(A). THEREFORE, THE ASSESSEE HAD NO OCCASION TO EXPLAIN THE CIRCULA R BEFORE THE LOWER AUTHORITIES. EVEN BEFORE THIS TRIBUNAL NO ONE BROUGHT TO THE NOT ICE OF THE BENCH ABOUT THE CIRCULAR ISSUED BY THE CBDT DATED 12-01-1977. AS PER THIS CIRCULAR, PRIMA FACIE IT APPEARS THAT STORY WRITER IS A PROFESSIONAL. HOWEV ER, THE NOTIFICATION IMPLIEDLY SUGGESTS THAT STORY WRITER WOULD FALL WITHIN THE PR OFESSION OF FILM ARTIST. THEREFORE, IT IS TO BE EXAMINED AFTER GIVING OPPORT UNITY TO THE ASSESSEE WHETHER THE ASSESSEE WOULD FALL WITHIN THE MEANING OF STORY WRITER AS NOTIFIED BY THE CBDT IN CIRCULAR DATED 12-01-1977. SINCE THIS WAS NOT EX AMINED BY THE LOWER AUTHORITIES AND THE ASSESSEE ALSO HAD NO OCCASION T HIS TRIBUNAL IS OF THE OPINION THAT THE ASSESSING OFFICER SHALL EXAMINE THE ISSUE IN THE LIGHT OF ABOVE CBDT CIRCULAR. ACCORDINGLY THE ORDER OF THE LOWER AUTHO RITIES ARE SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE IN THE LIGHT OF CIRCULAR NO.SO 17(E) DATED 12-01-1977 AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GI VING REASONABLE OPPORTUNITY TO THE ASSESSEE. 4 ITA NO.497 & 555/COCH/2010 6. NOW COMING TO THE REVENUES APPEAL IN ITA NO.555 /COCH/2010, THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF R S. 21,61,219 TOWARDS THE COST OF UNSOLD COPIES. 7. SHRI R SIVAKUMAR, THE LD.DR SUBMITTED THAT THE EX PENDITURE ON PRINTING THE UNSOLD COPIES WAS ALREADY ALLOWED AS A DEDUCTION. THE COST OF THE UNSOLD COPIES, IF ALLOWED AGAIN, WOULD AMOUNT TO DOUBLE DEDUCTION. ACCORDING TO THE LD.DR, AT THE BEST, THE COPIES CAN BE CONSIDERED AS SALES RET URNS. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE COST OF UNSOLD COPIES WAS INCLUDED IN THE SALES, IT CANNOT BE ALLOWED AS SALES RETURN ALSO. THEREFORE, ACCORDING TO THE LD.DR, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. REFERRING TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.349(COCH)/2006 ORDER DATED 20-08-2007 FOR THE ASSESSMENT YEAR 2003-04 WHERE IN A SIMILAR CLAIM OF THE ASSESSEE WAS ALLOWED, THE LD.DR SUBMITTED THAT THE REVENUE HAS NOT FILED ANY APPEAL BEFORE THE HIGH COURT BECAUSE OF LAW TAX EFF ECT. ACCORDING TO THE LD.DR, MERELY BECAUSE NO APPEAL WAS FILED AGAINST THE ORDE R OF THE TRIBUNAL DATED 20- 08-2007 IT DOES NOT PRECLUDE THE DEPARTMENT FROM CON TESTING THE MATTER ON MERIT. 8. ON THE CONTRARY, SHRI R KRISHNAN, THE LD.REPRESEN TATIVE FOR THE ASSESSEE SUBMITTED THAT THE AGENTS WOULD RETURN ONLY THE WRA PPERS OF THE UNSOLD COPIES OF THE MAGAZINES. THE AGENTS DO NOT MAKE THE PAYMENTS FOR THE UNSOLD COPIES. THEREFORE, THE COST OF UNSOLD COPIES SHOULD BE ALLO WED AS DEDUCTION WHILE COMPUTING THE TOTAL INCOME. HE FURTHER SUBMITTED T HAT THIS TRIBUNAL ALLOWED AN IDENTICAL CLAIM IN RESPECT OF UNSOLD PERIODICALS FO R THE ASSESSMENT YEAR 2003-04 IN ASSESSEES OWN CASE. THEREFORE, ACCORDING TO THE L D.REPRESENTATIVE, THE 5 ITA NO.497 & 555/COCH/2010 COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY FOLLOWED T HE ORDER OF THIS TRIBUNAL WHILE ALLOWING THE CLAIM OF THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL ON RECORD. ON IDENTICAL CIRCUMSTANCES , THIS TRIBUNAL IN ASSESEES OWN CASE FOUND THAT THE COST OF UNSOLD COPIES OF MA GAZINES HAS TO BE ALLOWED AS DEDUCTION. THOUGH THE REVENUE HAS CLAIMED THAT DUE TO LOW TAX EFFECT NO APPEAL WAS PREFERRED BEFORE THE HIGH COURT AGAINST THE ORD ER OF THIS TRIBUNAL, THE FACT REMAINS IS THAT ON THE IDENTICAL SET OF FACTS, THE CO-ORDINATE BENCH OF THIS TRIBUNAL FOUND THAT THE COST OF UNSOLD MAGAZINES HAS TO BE A LLOWED AS DEDUCTION WHILE COMPUTING THE TAXABLE INCOME OF THE ASSESSEE. SINC E THE FACTS ARE IDENTICAL AND THE REVENUE COULD NOT BRING ON RECORD ANY CHANGE IN THE CIRCUMSTANCES, BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE, WE HOLD THAT THE COST OF UNSOLD MAGAZINES HAS TO BE ALLOWED AS DEDUCTION. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITY. ACC ORDINGLY, THE SAME IS CONFIRMED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.497/COCH/2010 IS ALLOWED FOR STATISTICAL PURPOSE AND THAT OF THE DEP ARTMENT IN ITA NO.555/COCH/2010 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 03 RD DAY OF APRIL, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 03RD APRIL, 2012 PK/- 6 ITA NO.497 & 555/COCH/2010 COPY TO: 1. JT.C.I.T., CIR.1, KOLLAM 2. DR B.A.RAJAKRISHNAN, KERALASABDAM WEEKLY, LAXMINADA, KOLLAM 3. THE COMMISSIONER OF INCOME-TAX(A), TRIVANDRUM 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH