M/s Reebok India Company, New Delhi V. Addl. CIT, New Delhi

ITA 5356/DEL/2013

• Counselvise Citation: 535620114 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 04-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 01-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: RUPESH J AIN
• Keywords: Difference of opinion
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI R.S. SYAL , ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 5356 /DEL / 2013 ASSESSMENT YEAR: 2006 - 07 REEBOK INDIA COMPANY VS. ADDL. COMMISSIONER OF 530/1, 3 & 4, VILLAGE BIJWASAN , INCOME - TAX, RANGE - 15, NEW DELHI 110061 NEW DELHI (PAN: AAACR3007L ) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RUPESH JAIN, ADV. RESPONDEN T BY: SH. VIKRAM SAHAY, SR. DR ORDER PER R.S. SYAL, A M : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 29.08.2013 IN RELATION TO THE ASSESSMENT YEAR 2006 - 07 . 2. THE ONLY ISSUE RAISED THROUGH VARIOUS GROUNDS IS AGAINST THE CONFIRMATION OF DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER ALSO CALLED AS THE ACT ) . 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF FOOTWEAR, APPARELS, ACCESSORIES, SPORTS EQUIPMENT ETC. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFI CER THAT A SUM OF RS. 53.00 LAC, BEING THE PAYMENT MADE TO M/S OM INTERIORS , WAS CLAIMED AS DEDUCTION ON WHICH DEDUCTION OF TAX AT SOURCE WAS MADE UNDER SECTION 194C OF THE ACT. ON THE PERUSAL OF T HE I NVOICE BILLS/FINAL 2 ITA NO. 5356/DEL /2013 AY: 2006 - 07 BILLS OF M/S OM INTERIOR, THE ASSESSING OFFICER OBS ERVED THAT THE WORK DONE BY THIS PARTY WAS NOT IN THE NATURE OF WORK AS PROVIDED UNDER 194C OF THE ACT. THIS WORK WAS HELD TO BE AKIN TO THE FEES FOR TECHNICAL SERVICES , DEDUCTION OF TAX AT SOURCE ON WHICH WAS REQUIRED TO BE MADE UNDER SECTION 194J OF THE ACT. PROPORTIONATE EXPENDITURE A MOUNTING TO RS. 31.83 LAC WAS DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. ON FURTHER PERU SAL OF THE DETAILS, IT WAS SEEN THAT THE ASSESSEE INCURRED A SUM OR RS. 79.66 LAC ON ACCOUNT OF EVENTS/FITNESS ACTIVITY/TRADE SHOWS. TAX AT SOURCE WAS DEDUCTED UNDER SECTION 194C ON THE PAYMENTS AMOUNTING TO RS. 40.77 LAC . ON PERUSAL OF THE DETAILS OF SUCH AMOUNT ON WHICH THE ASSESSEE HAD DEDUCTED AT SOUR CE UNDER SECTION 194C OF THE ACT, THE ASSESSING OFFICER OPINED THAT THE TAX OUGHT TO HAVE BEEN DEDUCTED UNDER SECTION 194J OF THE ACT. THIS ALSO LED TO THE MAKING OF DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT AMOUNTING TO RS. 24.49 L AC. SIMILARLY, REG ARDING EXPENSES OF RS. 1.26 CROR E INCURRED BY THE ASSESSEE ON ADV ERTISEMENT/ PRODUCTION/ PHOTOSHOOT ETC. , THE ASSESSEE HAD DEDUCTED TAX AT SOURCE UNDER SECTION 194C OF THE ACT. THE ASSESSING OFFICER HELD SUCH AMOUNT TO BE QUALIFYING FOR TAX WITHHOLDING UND ER SECTION 194J OF THE ACT. PROPORTIONATE DISALLOWANCES OF RS. 72.50 LAC WAS MADE UNDER SECTION 40(A)(IA) OF THE ACT. SIMILARLY, OUT OF SPONSORSHIP EXPENSES OF RS. 2.16 CRORE ON WHICH THE ASSESSEE DEDUCTED TAX AT SOURCE UNDER SECTION 194C OF THE ACT, THE AO MADE DISALLOWANCES FOR PROPORTIONATE EXPEN SES AMOUNTING TO RS. 1.28 CRORE BY HOLDING THAT THE TAX 3 ITA NO. 5356/DEL /2013 AY: 2006 - 07 OUGHT TO HAVE BEEN DEDUCTED AT SOURCE ON THESE PAYMENTS UNDER SECTION 194J OF THE ACT. THAT IS HOW THE ASSESSING OFFICER MADE DISALLOWANCES UNDER SECTION 4 0(A)(IA) OF THE ACT ON THE ABOVE PAYMENTS. THE LEARNED CIT(A) UPHELD THE VIEW TAKEN BY THE ASSESSING OFFICER O N THIS POINT. 4. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE FACTS NARRATED ABOVE, IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE MADE PAYMENT TO CERTAIN PARTIES ON WHICH THE DEDUCTION TAX AT SOURCE WAS MADE UNDER SECTION 194C OF THE ACT. AS AGAINST THAT, THE ASSESSING OFFICER HELD THAT THESE PAYMENTS REQUIRED DEDUCTION TAX AT SOURCE UNDER SECTION 1 94J OF THE ACT . T HAT IS HOW , THE PROPORTIONATE EXPENSES WERE DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE DID DEDUCT TAX AT SOURCE ON THE PAYMENT MENTIONED IN THE ASSESSMENT ORDER UNDER SECTION 194 C OF TH E ACT AND DULY DEPOSITED THE SAME TO THE EXCHEQUER. UNDER SUCH CIRCUMSTANCES, A QUESTION ARISES AS TO WHETHER ANY DISALLOWANCE CAN BE MADE UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF SHORT DEDUCTION TAX AT SOURCE. IN OUR CONSIDERED OPINION, THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE DIRECT JUDGMENT OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE CIT VS. S.K. TEKRIWAL, (2014 ) 3 61 ITR 432 (CAL.) IN WHICH IT HAS BEEN HELD THAT IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXAB ILITY OF ANY ITEM OR THE NATURE OF PAYMENT S FALLING UNDER VARIOUS TDS P ROVISIONS, THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201 OF THE ACT , BUT NO DISALLOWANCE CAN 4 ITA NO. 5356/DEL /2013 AY: 2006 - 07 BE MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN BY VARIOUS BENCHES OF THE TRIBUNAL ACROSS THE COUNTRY INCLUDING THE CASE OF HIGHLIGHT PICTURES (I) P. LTD. VS. ACIT, (2014) 49 TAXMANN.COM 187 (MUM.)(TRIB.). NO CONTRARY DECISION ON THIS ISSUE HAS BEEN BROUGHT TO OUR NOTIC E BY THE DEPARTMENTAL REPRESENTATIVE. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE OVERTURN THE IMPUGNED ORDER ON THIS SCORE AND ORDER FOR THE DELETION OF DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THE DECISION IS PRONOU NCED IN THE OPEN COURT ON 5 TH FEBRUARY , 2015. SD/ - SD/ - ( H.S. SIDHU ) ( R.S. SYAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 5 TH FEBRUARY , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI *