ITO (TDS) 3(1), MUMBAI V. RIYA TRAVELS & TOURS (I) P. LTD, MUMBAI

ITA 5387/MUM/2009

• Counselvise Citation: 538719914 RSA 2009
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 24-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS. 5384 TO 5387/MUM/2009 (ASSESSMENT YEARS: 2003-04 TO 2006-07) INCOME TAX OFFICER (TDS) 3(1) M/S. RIYA TRAVELS & T OURS (I) P. LTD. 10TH FLOOR, SMT. K.G. MITTAL NEAR GPO, 237, P.D. M ELLO ROAD AYURVEDIC HOSPITAL BUILDING VS. MUMBAI CHARNI ROAD (W), MUMBAI 400002 PAN - AAACR 3178 B APPELLANT RESPONDENT APPELLANT BY: SHRI JITENDRA YADAV RESPONDENT BY: NONE O R D E R PER B. RAMAKOTAIAH, A.M. THESE FOUR APPEALS ARE BY REVENUE IN WHICH COMMON I SSUES AND COMMON GROUNDS ARE RAISED BY REVENUE AGAINST THE OR DERS OF THE CIT(A) XXX, MUMBAI DATED 15.07.2009 FOR THE RESPECTIVE ASS ESSMENT YEARS. THIS CASE WAS POSTED NUMBER OF TIMES AND THE LEARNED COU NSEL FROM M/S KAILASH CHAND JAIN & CO SOUGHT ADJOURNMENT FROM 26.05.2010 FIVE TIMES ON THE REASON THAT THE CHARTERED ACCOUNTANT WHO IS LOOKING AFTER THE MATTER WAS NOT WELL OR WAS OUT OF STATION. THEREFORE, THE ADJO URNMENT SOUGHT AGAIN ON THE REASON THAT THE CA WAS OUT OF STATION WHEN THE CASE WAS TAKEN UP ON 21.04.2011 WAS REFUSED AND THE CASE WAS HEARD EXPAR TE. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PRIVA TE LIMITED COMPANY AND IS AN APPROVED IATA TRAVEL AGENT ENGAGED IN THE BUSINESS OF AIR TICKETING FROM INTERNATIONAL AND DOMESTIC AIR LINES. IT WAS N OTICED BY THE A.O. THAT THE ASSESSEE HAS TRANSFERRED TDS AMOUNTS COLLECTED FROM ITS CLIENTS AND HAS NOT DEPOSITED AFTER COLLECTION. THE A.O. ISSUED A SHOW CAUSE NOTICE AS TO WHY THE ASSESSEE SHOULD NOT BE TREATED AS ASSESSEE IN DEFAU LT UNDER SECTION 201(1). IT WAS ASSESSEES SUBMISSION THAT ASSESSEE DEDUCTS TDS AT THE TIME OF CREDITING COMMISSION ON THE TICKETS PURCHASED BY VA RIOUS AGENTS/SUB- ITA NOS. 5384 TO 5387/MUM/2009 M/S. RIYA TRAVELS & TOURS (I) P. LTD. 2 AGENTS AND THERE AFTER THIS AMOUNT WAS CREDITED TO SEPARATE TDS ACCOUNT. AS AND WHEN THERE ARE CANCELLATION OF TICKETS, THE SAID COMMISSION NO LONGER PAYABLE WAS REVERSED AND SO THE TDS AS WELL. THERE WILL BE A DEBIT TO THE TDS PAYABLE ACCOUNT ACCORDINGLY, WITHDRAWING TDS DE DUCTED EARLIER ON THE SO CALLED COMMISSION PAYABLE. IT WAS ASSESSEES CON TENTION THAT SINCE THE COMMISSION WAS NOT PAYABLE, THE TDS THEREON WAS ALS O NOT PAYABLE. THE AMOUNTS WERE REFUNDED TO THE AGENTS/CLIENTS ACCOUNT S AND ONLY THE TDS PERTAINING TO COMMISSION PAID OR PAYABLE ON THE BAL ANCE TICKETS HAS BEEN DEDUCTED AND PAID TO THE REVENUE. THE A.O. DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE ON THE PRETEXT THAT: (A ) ASSESSEE HAS BEEN DEDUCTING TDS PAYABLE ON DAY-TO-DAY BASIS WHEREAS T HE REVERSAL OF ENTRIES OF TDS WERE DONE AT THE END OF THE YEAR; (B) THE TD S BECOMES PAYABLE THE MOMENT ANY COMMISSION IS CREDITED TO THE AGENTS/CLI ENTS ACCOUNT; AND (C) CANCELLATION OF TICKETS DOES NOT PERMIT REVERSAL OF ENTRIES OF TDS AS THERE IS NO CORRESPONDING PROVISION IN 194H LIKE SUB-SECTION (IV) OF SECTION 194(A) FOR ADJUSTMENT OF TDS. FOR THESE REASONS, THE A.O. RAIS ED DEMANDS UNDER SECTION 201(1). FOR A.Y. 2003-04 THE A.O. DETERMINE D THE DEMAND PAYABLE UNDER SECTION 201(1) AT ` 16,56,477/-. SIMILARLY HE RAISED DEMANDS OF ` 60,72,196/-, ` 85,40,959/- AND ` 1,07,89,956/- FOR ASSESSMENT YEARS 2004- 05, 2005-06 AND 2006-07 RESPECTIVELY. 3. THE CIT(A), AFTER CONSIDERING ASSESSEES SUBMISSION AND EXAMINING THE RECORD, DELETED THE DEMANDS RAISED UNDER SECTION 20 1(1) BY OBSERVING AS UNDER: - 11. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE APPELLANT AND PERUSED THE ORDER PASSED U/S. 201(1) OF THE I.T. ACT, 1961. THE CONTROVERSY TO BE RESOLVED IS THAT WHETHE R THE APPELLANT WAS LIABLE TO MAKE PAYMENT OF THE TRDS DEDUCTED ON THE AMOUNT WHICH WAS INITIALLY PAYABLE TO THE AGENTS AND SUB-A GENTS BUT SUBSEQUENTLY FOUND TO BE NOT PAYABLE AS THE TICKETS BOOKED WERE CANCELLED. IT IS AN ADMITTED POSITION THAT THE AMOU NT WAS PAYABLE TO THE AGENTS AND SUB-AGENTS FOR THE TICKETS BOOKED BY THEM THOUGH IT IS A DIFFERENT MATTER WHETHER IT IS TO BE CONSIDERED A S DISCOUNT OR IN THE NATURE OF COMMISSION. IT IS ALSO ADMITTED POSITION THAT ONCE THE TICKETS BOOKED BY THE AGENTS AND SUB-AGENTS GET CANCELLED T HEN NO AMOUNT IS PAYABLE TO THESE AGENTS. AFTER ALL THE ORIGIN OF TH E AMOUNT PAYABLE TO THESE AGENTS IS THE BOOKING OF THE TICKETS. IT IS B ORNE OUT FROM THE RECORDS THAT THE APPELLANT AFTER MAKING THE DEDUCTI ON OF TAX MADE ITA NOS. 5384 TO 5387/MUM/2009 M/S. RIYA TRAVELS & TOURS (I) P. LTD. 3 PAYMENT OF THE TDS IN RESPECT OF THE AMOUNT PAYABLE TO THE AGENTS ON THE BOOKING OF THE TICKETS WHERE NO CANCELLATION WA S MADE. THE ONLY AMOUNT OF TDS NOT PAID WAS IN RESPECT OF THE TDS DE DUCTED ON THE AMOUNT PAYABLE TO THE AGENTS FOR THE TICKETS BOOKED BY THEM BUT SUBSEQUENTLY THESE TICKETS GOT CANCELLED. THE APPEL LANT WHILE DEDUCTING THE TDS, CREDITED THE AMOUNT OF TDS TO TH E TDS ACCOUNT AND WHEN PAYMENT WAS MADE THIS ACCOUNT WAS DEBITED TO THE TDS ACCOUNT AND WHEN PAYMENT WAS MADE THIS ACCOUNT WAS DEBITED. HOWEVER, FOR THE TDS PERTAINING TO THE AMOUNT IN RE SPECT OF CANCELLED TICKETS, ADMITTEDLY NO PAYMENT WAS MADE, THE REVERS AL ENTRIES WERE NOT MADE AT THE TIME OF CANCELLATION OF THE TICKETS BUT WERE MADE AT THE END OF THE YEAR AT THE TIME OF FINALIZATION OF THE ACCOUNTS. FOR THIS REASON THE AMOUNT CONTINUED TO APPEAR IN THE TDS AC COUNT AS PAYABLE. THE ASSESSING OFFICER TOOK THE VIEW THAT O NCE TDS IS DEDUCTED THEN IT HAS TO BE PAID IRRESPECTIVE OF THE FACT THAT THE AMOUNT OF INCOME IS NOT PAYABLE WHICH WAS THE VERY SOURCE AND SUBJECT MATTER OF THE DEDUCTION OF TAX. I FIND FORC E IN THE ARGUMENT OF THE APPELLANT THAT IF THE TICKET GETS CANCELLED THE N THE SAID TICKET STANDS NOT USED AND QUESTION OF PAYMENT OF ANY COMM ISSION ON THE SAID TICKET DOES NOT ARISE. IF THE COMMISSION ITSEL F IS NOT PAYABLE, IN MY CONSIDERED VIEW, THE LIABILITY FOR ANY TAX DEDUC TION CANNOT EXIST AND THEREFORE THE PAYMENT OF TDS ON THE SAID AMOUNT WILL ALSO NOT BE REQUIRED. THE DEMAND RAISED U/S. 201(1) PERTAINS TO THE TDS ON THE AMOUNT PERTAINING TO THE CANCELLED TICKETS AND THER EFORE CANNOT SURVIVE IN VIEW OF THE FACT THAT AMOUNT OF COMMISSI ON WAS NOT PAYABLE. I FIND MERIT IN THE APPELLANTS CONTENTION THAT IT HAS WRONGLY TREATED THE AMOUNT OF DISCOUNT AS COMMISSION AND TH EREFORE WRONG ACCOUNTING ENTRIES WERE MADE SHOWING THE TDS WHICH OTHERWISE WAS NOT REQUI8RED. I AM OF THE VIEW THAT THIS CONTENTIO N OF THE APPELLANT DESERVES TO BE CONSIDERED AND CANNOT SIMPLY BE IGNO RED. I FIND NO MERIT IN THE ARGUMENT OF THE AO THAT ONCE DEDUCTED THE TDS NEEDS TO BE PAID IRRESPECTIVE OF THE FACT THAT THE SUBJECT I NCOME IS FOUND TO BE NOT PAYABLE. IF ACCEPTED IT WOULD LEAD TO A SITUATI ON THAT TDS IS PAID AND THE AMOUNT ON WHICH TDS WAS DEDUCTED IS NOT PAI D AND WHICH IS NOT AT ALL ASSESSABLE WHICH OBVIOUSLY CANNOT BE THE CASE. IN THE SCHEME OF THE INCOME TAX ACT, THE CREDIT OF TDS IS GIVEN TO A PERSON IN THE YEAR IN WHICH INCOME IS OFFERED FOR TAXATION. I N THE SITUATION AS DISCUSSED HEREINABOVE NO ONE WOULD OFFER THE INCOME AS THE SAME IS NEITHER PAYABLE NOR PAID AND THEREFORE IT WILL LEAD TO A SITUATION WHERE CREDIT FOR THE TDS WOULD NOT BE GRANTED (IF T DS IS PAID) WHICH OBVIOUSLY CANNOT FIT IN THE SCHEME OF COLLECTION AN D RECOVERY OF THE TAX. THE APPELLANTS ARGUMENT THAT THERE IS NO LOSS OF REVENUE ALSO CARRIES FORCE IN IT BECAUSE THE INCOME I.E. COMMISS ION WHICH GAVE RISE TO THE DEDUCTION OF TAX IS NOT TAXABLE BECAUSE NEIT HER MATERIALIZED NOR ACCRUED OR PAID. IN THE CASE IN HAND I AM IN FULL A GREEMENT WITH THE APPELLANT THAT NO LOSS HAS BEEN CAUSED TO THE REVEN UE CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , I AM OF THE CONSIDERED OPINION THAT THE DEMAND RAISED U/S. 201( 1) WAS NOT WARRANTED AS THE APPELLANT WAS NOT AN ASSESSEE DEEM ED TO BE IN ITA NOS. 5384 TO 5387/MUM/2009 M/S. RIYA TRAVELS & TOURS (I) P. LTD. 4 DEFAULT FOR NON-PAYMENT OF TDS AND THEREFORE, THE A SSESSING OFFICER IS DIRECTED TO DELETE THE DEMAND RAISED IN THE ORDE R PASSED U/S. 201(1) OF THE I.T. ACT, 1961. SIMILARLY ORDERS WERE PASSED FOR ALL THE YEARS UNDE R CONSIDERATION. 4. THE LEARNED D.R. SUBMITTED THAT THE CIT(A) WAS NOT CORRECT IN OBSERVING THAT ASSESSEE NEED NOT PAY TDS ON THE PRE TEXT THAT WHAT WAS ALLOWED WAS AN AMOUNT OF DISCOUNT AND NOT AS COMMIS SION AS ASSESSEE ITSELF WAS DEDUCTING TAX TREATING IT AS COMMISSION AND THE RE IS NO OBJECTION IN INVOKING THE PROVISIONS OF SECTION 194H BY THE ASSE SSEE. IT WAS HIS CONTENTION THAT THE ASSESSEE CANNOT MAKE ADJUSTMENT EITHER UPWARD OR DOWNWARD OF TDS AMOUNTS AS NO CORRESPONDING PROVISI ON WAS MADE UNDER SECTION 194H LIKE THAT OF 194A(4). IN VIEW OF THIS IT WAS HIS SUBMISSION THAT ASSESSEE CANNOT REFUND THE TDS ONCE IT WAS COLLECTE D AND CREDITED TO THE TDS PAYABLE ACCOUNT IN ASSESSEES BOOKS OF ACCOUNT. THE MAIN OBJECTION WAS WITH REFERENCE TO THE FINDING OF THE CIT(A) WHI LE GIVING RELIEF, WHICH ACCORDING TO HIM IS NOT CORRECT. 5. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE ORDE R OF THE CIT(A) IT IS APPARENT THAT ASSESSEE IS FOLLOWING CONSISTENT M ETHOD OF CREDITING COMMISSION PAYABLE ACCOUNT AT THE TIME OF PURCHASE OF TICKET AND AS PER THE PROVISIONS DEDUCTS TDS WHICH IS ALSO CREDITED TO TH E TDS PAYABLE ACCOUNT. IN THE CASE OF CANCELLATION OF TICKETS, ASSESSEE IS REVERSING THE COMMISSION PAYABLE TO THAT EXTENT AND AUTOMATICALLY THE TDS PA YABLE ALSO BEEN REVERSED AS NO COMMISSION WAS PAYABLE AND THEREFORE THERE W AS NO LIABILITY TO TDS. THE METHOD OF ACCOUNTING CONSISTENTLY BEING FOLLOWE D DOES INDICATE THAT ASSESSEE IS COMPLYING WITH THE PROVISIONS OF SECTIO N 194H TO THE EXTENT COMMISSION IS PAYABLE AND REMITTING THE TDS ACCORDI NGLY. A.O. OBJECTS THAT ONCE THE TDS AMOUNT IS PAYABLE NO SUCH POWERS WERE GIVEN TO THE ASSESSEE TO ADJUST OR REFUND THE TDS. WHEN THERE IS NO NECES SITY FOR PAYMENT OF ANY COMMISSION TO ANY PARTY, THE QUESTION OF DEDUCTING TAX AND REMITTANCE TO GOVERNMENT DOES NOT ARISE AT ALL. GIVEN THE FACTS O F THE CASE, WE DO NOT FIND ANY REASON TO DIFFER FROM THE FINDINGS OF THE CIT(A ). 6. THE LEARNED D.R.S ARGUMENT WAS BASED ON AN APPREHE NSION THAT THE FACTUAL FINDINGS OF THE CIT(A) THAT THE AMOUNT PAID IS NOT COMMISSION BUT ITA NOS. 5384 TO 5387/MUM/2009 M/S. RIYA TRAVELS & TOURS (I) P. LTD. 5 DISCOUNT ON WHICH TDS IS NOT TO BE PAID MAY LEAD TO A SITUATION THAT ASSESSEE MAY NOT DEDUCT ANY TAX SUBSEQUENTLY. WE AR E OF THE VIEW THAT IT DOES NOT MATTER WHETHER IT IS TREATED AS DISCOUNT O R COMMISSION, AS ASSESSEE IS COMPLYING WITH THE PROVISIONS OF SECTIO N 194H. IN CASE ASSESSEE IS NOT COMPLYING WITH THE PROVISIONS, THE A.O. IS F REE TO INVOKE THE PROVISIONS OF SECTION 40(A)(IA) WITH REFERENCE TO THE COMMISSI ON OR BROKERAGE OR ANY SUCH AMOUNT WHICH WAS PAID ON WHICH TAX IS DEDUCTAB LE AT SOURCE. SINCE THE ASSESSEE IS COMPLYING WITH THE PROVISIONS OF SE CTION 194H ON ITS OWN, WE DO NOT FEEL ANY NECESSITY TO ADJUDICATE WHETHER THE AMOUNT IS TO BE TREATED AS DISCOUNT OR COMMISSION. BE THAT AS IT MAY, WE AR E OF THE OPINION THAT THERE IS NO NEED TO MODIFY THE ORDERS OF THE CIT(A) AS THE ASSESSEE IS FOLLOWING THE PROVISIONS OF SECTION 194H AND TDS ON THE COMMISSION PAYABLE WAS RIGHTLY DEDUCTED AND PAID ON WHICH A.O . HAS NO ISSUE AT ALL. IN VIEW OF THIS REVENUES GROUNDS ARE REJECTED. 7. IN THE RESULT, ALL APPEALS OF THE REVENUE ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 29 TH APRIL 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXX, MUMBAI 4. THE CIT (TDS), MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.