DCIT, Kollam V. Smt. R.Vimalakumari, Kollam

ITA 553/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61494 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: R KRISHNAN
• Section: 194C

Judgement Text

1 ITA NO.495/COCH/2010 ITA NO.553/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.TA NO. 495/COCH/2010 (ASSESSMENT YEAR 2007-08) SHRI R VIMALAKUMARI VS THE DY.CIT, CIR.1 M/S KRISHNA HERBAL PRODUCTS KOLLAM CONVENT ROAD, KOLLAM PAN : AAOPR9295G (APPELLANT) (RESPONDENT) I.TA NO. 553/COCH/2010 (ASSESSMENT YEAR 2007-08) DY.CIT, CIR.1 VS SMT. R VIMALAKUMARI KOLLAM KRISHNA HERBAL PRODUCTS KOLLAM (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R KRISHNAN REVENUE BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 31-05-2012 DATE OF PRONOUNCEMENT : 08-06-2012 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEAL OF THE ASSESSEE AND REVENUE ARE DI RECTED AGAINST THE VERY SAME ORDER OF COMMISSIONER OF INCOME-TAX(A)-I, TRIVANDRU M DATED 28-07-2010 AND PERTAINS TO ASSESSMENT YEAR 2007-08. THEREFORE, WE HEARD TH EM TOGETHER AND DISPOSE OF THE SAME BY THIS COMMON ORDER. 2 ITA NO.495/COCH/2010 ITA NO.553/COCH/2010 2. LET US FIRST TAKE UP THE ASSESEES APPEAL IN ITA NO.495/COCH/2010. 3. THE FIRST ISSUE IS DISALLOWANCE OF RS.,4,21,984 U/S 40(A)(IA). 4. WE HEARD THE LD.REPRESENTATIVES FOR THE ASSESSEE AND THE REVENUE. WE FIND THAT THE VERY SAME ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF MADHU R BALAKRISHNAN VS DY.CIT ITA NO.496/COCH/2010 FOR THE ASSESSMENT Y EAR 2007-08 ORDER DATED 03-04- 2012 AND THIS TRIBUNAL FOUND THAT THE CIRCULAR ISSU ED BY THE CBDT 12-01-1977 WAS NOT CONSIDERED BY THE LOWER AUTHORITY. SINCE THE LOWER AUTHORITY HAS NOT EXAMINED CIRCULAR, THE MATTER WAS REMITTED BACK TO THE FILE OF THE ASS ESSING OFFICER. BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE CASE OF MADHU R BALAKRISHNA N (SUPRA) AND FOR THE REASONS STATED THEREIN THE ORDER OF THE LOWER AUTHORITY IS SET ASI DE AND THE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFF ICER SHALL RE-CONSIDER THE ISSUE IN THE LIGHT OF THE CIRCULAR ISSUED BY THE CBDT IN SO 17(E) DATE D 12-01-1977 AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING OPPORT UNITY TO THE ASSESSEE. 5. THE NEXT GROUND OF APPEAL IS WITH REGARD TO THE ADDITION OF RS. 3,53,644 U/S 40(A)(IA) IN RESPECT OF EXPENDITURE INCURRED ON PRI NTING AND PUBLISHING. 6. SHRI R KRISHNAN, THE LD.REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE PURCHASED CALENDARS FOR DISTRIBUTION AMONG ST THE AGENTS AND CLIENTS AND PAID RS.3,53,644 TO M/S TIGER PACKAGING. ACCORDING TO T HE LD.REPRESENTATIVE, IT IS AN OUTRIGHT PURCHASE OF CALENDARS AND THE PROPERTY IN GOODS PAS SED ON TO THE ASSESSEE. ACCORDING TO THE LD.REPRESENTATIVE, IT IS PURE SALE OF GOODS UNDER THE SALE OF GOODS ACT. HOWEVER, THE ASSESSING OFFICER MISCONSTRUED THE TRANSACTION AS WORKS CONTRACT AND DISALLOWED THE PAYMENT U/S 40(A)(IA). PLACING RELIANCE ON THE JUD GMENT OF THE BOMBAY HIGH COURT COMMISSIONER OF INCOME-TAX VS GLENMARK PHARMACEUTIC ALS LTD (2010) 324 ITR 199 (BOM), THE LD.REPRESENTATIVE SUBMITTED THAT WHEN TH E MANUFACTURER MANUFACTURED THE PRODUCT AFTER OBTAINING THE ARTICLE OR THINGS FROM A PERSON OTHER THAN THE ASSESSEE AND 3 ITA NO.495/COCH/2010 ITA NO.553/COCH/2010 DELIVERED THE MANUFACTURED GOODS TO THE ASSESSEE, U NTIL SUCH DELIVERY THE ASSESSEE HAD NO TITLE TO THE GOODS. THEREFORE, THE ARRANGEMENT OF THE ASSESSEE TO PURCHASE THE CALENDAR WAS NOT FOR CARRYING ON ANY WORKS CONTRACT . IT IS A PURE SALE OF GOODS. IN VIEW OF THE JUDGMENT OF THE BOMBAY HIGH COURT, ACCORDING TO THE LD.REPRESENTATIVE, THERE IS NO QUESTION OF ANY DISALLOWANCE. 7. ON THE CONTRARY, SMT. VIJAYAPRABHA, THE LD.DR SU BMITTED THAT IT IS A CASE OF WORKS CONTRACT. THEREFORE, THE ASSESSEE IS LIABLE TO DED UCT TAX U/S 194C OF THE ACT. REFERRING TO THE JUDGMENT OF THE BOMBAY HIGH COURT IN GLENMAR K PHARMACEUTICALS LTD (SUPRA), THE LD.DR SUBMITTED THAT IN THE CASE DECIDED BY THE BOM BAY HIGH COURT THE PAYMENTS WERE MADE TO LABOURERS; THEREFORE, THE JUDGMENT OF THE B OMBAY HIGH COURT MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. NO MATERIAL IS ON RE CORD TO SUGGEST THAT THE ASSESSEE SUPPLIED THE GOODS FOR MANUFACTURING CALENDAR. IN THE ABSENCE OF ANY MATERIAL TO SUGGEST THAT THE ASSESSEE SUPPLIED THE GOODS OR ART ICLE FOR MANUFACTURE OF CALENDAR THE TRANSACTION CANNOT BE CONSIDERED AS WORKS CONTRACT. THE MANUFACTURER PURCHASED THE ARTICLES FROM THE OPEN MARKET AND MANUFACTURED THE CALENDAR. THE CALENDAR SO MANUFACTURED WAS SOLD TO THE ASSESSEE. THEREFORE, IT IS A PURE CASE OF SALE OF CALENDAR UNDER THE SALE OF GOODS ACT. THEREFORE, THERE IS N O QUESTION OF DISALLOWANCE U/S 194C R.W.S. 40(A)(IA) OF THE ACT. THEREFORE, WE ARE UNA BLE TO UPHOLD THE ORDER OF THE LOWER AUTHORITY. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE BOMBAY HIGH COURT IN GLENMARK PHARMACEUTICALS LTD (SUPRA) THE ORDER OF T HE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. 9. NOW COMING TO THE DEPARTMENTAL APPEAL, THE ONLY ISSUE ARISES FOR CONSIDERATION IS ADDITION OF RS. 11,59,979 BEING THE COST OF UNSO LD COPIES. 4 ITA NO.495/COCH/2010 ITA NO.553/COCH/2010 10. WE HAVE HEARD THE LD.DR AND THE LD REPRESENTATI VE FOR THE ASSESSEE. THIS ISSUE HAS ALSO CONSIDERED BY THIS TRIBUNAL IN THE CASE OF DY.CIT VS MADHU R BALAKRISHNAN (SUPRA) IN ITA NO.552/COCH/2010 FOR THE ASSESSMENT YEAR 2007-08 ORDER DATED 03-04- 2012. THIS TRIBUNAL, AFTER PLACING RELIANCE ON ITS EARLIER ORDER IN THE CASE OF DR B.A. RAJAKRISHNAN VS DY.CIT IN ITA NO.349(COCH)/2006 ORD ER DATED 20-08-2007 FOUND THAT THE COST OF THE UNSOLD MAGAZINES HAS TO BE ALLOWED AS D EDUCTION WHILE COMPUTING THE TAXABLE INCOME. SINCE THE FACTS ARE IDENTICAL, THI S TRIBUNAL IS OF THE OPINION THAT THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF MADHU R BALAKRISHNAN (SUPRA) IS EQUALLY APPLICABLE TO THE PRESENT ASSESS EE ALSO. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND FOR THE REASONS STATED THEREIN WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME-TAX( A). 11. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.495/ COCH/2010 IS ALLOWED FOR STATISTICAL PURPOSE AND THE REVENUES APPEAL IN ITA NO.553/COCH /2010 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08 TH DAY OF JUNE, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 08 TH JUNE, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH