DCIT CIR 3(1), MUMBAI V. COBRA INDIAN BEER P. LTD, MUMBAI

ITA 5476/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6213 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 05-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SINHA
• Assessee Lawyers: MRS NILPA SHAH; PORUS KAKA MANISH K KANT

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI VIJAY PAL RAO, JM ITA NO.5476/MUM/2009 : ASST.YEAR 2006-2007 THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 3(1) MUMBAI. VS. M/S.COBRA INDIA BEER PRIVATE LIMITED 302-303 MANISH COMMERCIAL CENTRE 216-A, DR.A.B.ROAD, WORLI MUMBAI 400 025. PA NO.AABCC7215K. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJIT KUMAR SINHA (CIT-DR) RESPONDENT BY : S/SHRI PORUS KAKA, MANISH K.KANT & MRS.NILPA SHAH O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 27.07.2009 IN RELATION TO THE ASSESSMENT YEAR 2006-2007. 2. THE ONLY GROUND IS AGAINST THE DELETION OF ADDIT ION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.2,39,71,543 U/S.40(A)(IA) W ITHOUT APPRECIATING THE TRUE NATURE OF ARRANGEMENT / AGREEMENT BETWEEN THE ASSES SEE-COMPANY AND M/S.MOUNT SHIVALIK INDUSTRIES LIMITED. BRIEFLY STATED THE FAC TS OF THE CASE ARE THAT THE ASSESSEE-COMPANY WAS ENGAGED IN THE BUSINESS OF MAR KETING AND SUPPORT SERVICES, TRADING IN IMPORTED BEER AND WINE AND ALSO PROVIDIN G TECHNICAL KNOW-HOW FOR MANUFACTURES OF BEER. IT ENTERED INTO AGREEMENT WIT H M/S.MOUNT SHIVALIK INDUSTRIES LIMITED (MSIL FOR SHORT) FOR MANUFACTURING OF THE PRODUCT. IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE COLLECTED A SUM OF RS.2.94 CRORES AND AFTER DEDUCTING AN AMOUNT OF RS. 5.52 CRORES, PAID A SUM OF RS.2.397 CRORES TO MSIL. DURING THE COURSE OF ASSES SMENT PROCEEDINGS THE ASSESSEE WAS CALLED UPON TO EXPLAIN WHY THE TAX WAS NOT DEDU CTED AT SOURCE IN RESPECT OF PAYMENTS MADE TO MSIL. THE ASSESSEE EXPLAINED THAT NO TAX WAS LIABLE TO BE ITA NO.5476/MUM/2009 M/S.COBRA INDIAN BEER PRIVATE LIMITED. 2 DEDUCTED AT SOURCE IN RESPECT OF PAYMENT MADE TO MS IL FOR THE REASON THAT IT ENTERED INTO AGREEMENT WITH MSIL AS PER WHICH MSIL WAS RESPONSIBLE FOR THE MANUFACTURE AND BOTTLING OF THE PRODUCTS AT THE MAN UFACTURING UNIT OWNED BY THEM. IT WAS ALSO EXPLAINED THAT MSIL WAS REQUIRED TO PRO CURE THE BREWING INGREDIENTS OR ANY OR EACH OF THEM AT ITS OWN COST AND EXPENSES FR OM SUPPLIERS APPROVED BY THE ASSESSEE. BY REFERRING TO THE TERMS OF AGREEMENT, IT WAS EXPLAINED THAT MSIL, IN ACCORDANCE WITH THE DIRECTION OF THE ASSESSEE, WAS AUTHORIZED TO SELL DIRECTLY TO THE THIRD PARTIES RAISING THEIR OWN INVOICES OF SUCH TH IRD PARTIES AT THE RATE APPROVED BY THE ASSESSEE. IT WAS ALSO POINTED OUT THAT MSIL WAS REQUIRED TO ENDORSE ON EACH SUCH INVOICE THE FACT THAT THE PAYMENT WAS REQUIRED TO BE DIRECTLY MADE TO THE ASSESSEE. FURTHER DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER IN SUPPORT OF THE CONTENTION THAT NO TAX WAS REQUIRED TO BE DEDUC TED U/S.194C OF THE ACT. NOT CONVINCED WITH THE ASSESSEES CONTENTION, THE ASSES SING OFFICER HELD THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE ON THE PAYM ENTS MADE TO MSIL AND HENCE AS PER THE PROVISIONS OF SECTION 40(A)(IA) THE AMOUNT OF RS.2.39 CRORES WAS NOT DEDUCTIBLE. HE, THEREFORE, MADE ADDITION FOR THE SA ID SUM. THE LEARNED CIT(A) HOWEVER DELETED THE ADDITION, RELYING ON CERTAIN DE CISIONS INCLUDING THAT OF THE JURISDICTIONAL HIGH COURT IN BDA LTD. VS. ITO (2006 ) 281 ITR 99 (BOM). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. FROM THE FACTS NOTED ABOVE IT IS APPAREN T THAT THE ASSESSEE ENTERED INTO AGREEMENT WITH MSIL FOR THE MANUFACTURING AND BOTTL ING OF ITS PRODUCTS. SUCH MANUFACTURING WAS TO BE DONE BY MSIL AT ITS OWN UNI T FOR WHICH MSIL WAS TO PROCURE RAW MATERIAL AT ITS OWN COST AND INCUR EXPE NSES AT THEIR OWN. THE ENTIRE LIABILITY WAS THAT OF MSIL. THEY WERE ALSO AUTHORIZ ED BY THE ASSESSEE TO SELL THE PRODUCTS DIRECTLY TO THIRD PARTIES RAISING THEIR OW N INVOICES AT THE RATES APPROVED BY THE ASSESSEE. THESE FACTS AMPLY DEMONSTRATE THAT TH E WORK DONE BY MSIL DID NOT FALL IN THE DEFINITION OF WORK IN EXPLANATION TO SECTION 194C. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. GLENMARK PHARMACEUTICALS LTD. [(2010) 324 ITA NO.5476/MUM/2009 M/S.COBRA INDIAN BEER PRIVATE LIMITED. 3 ITR 199 (BOM.) HAS HELD THAT `WORK WILL NOT INCLUDE MANUFACTURE OR SUPPLY OF PRODUCT ACCORDING TO THE SPECIFICATION OF CUSTOMER BY USING MATERIAL PURCHASED FROM THIRD PERSONS. IT HAS BEEN HELD UNDER ALMOST S IMILAR CIRCUMSTANCES THAT THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE U/S.194C. THE LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY CONCEDED THAT THE FACTS AND C IRCUMSTANCES OF THE INSTANT CASE ARE SIMILAR TO THOSE CONSIDERED BY THE HONBLE BOMB AY HIGH COURT IN THE AFORE- NOTED CASE OF GLENMARK PHARMACEUTICALS LTD. (SUPRA) . RESECTFULLY FOLLOWING THE PRECEDENT WE UPHOLD THE IMPUGNED ORDER ON THIS ISSU E. 4. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF NOVEMBER, 2010. SD/- SD/- ( VIJAY PAL RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI : 30 TH NOVEMBER, 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XXVII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.