DCIT, Jaipur V. KANHAIYALAL KALYANMAL, Jaipur

ITA 56/JPR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5468 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 19-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA SINGH JCIT DHK
• Assessee Lawyers: DAKSHAYANI PANDEY
• Section: 43B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 56/JP/ 15 CO. NO.11/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 THE DCIT, CIRCLE-6, JAIPUR CUKE VS. M/S KANHAIYALAL KALYANMAL , K.K. HOUSE, BHARAT MATA PATH JAMNALAL BAJAJ MARG, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACFK 9796 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : DAKSHAYANI PANDEY, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJENDRA SINGH (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22.12.2015 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 12 /02/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OB JECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-II, JAIPUR DATED 18.11.2014 WHEREIN THE FOLLOWING GROUNDS HAVE BEEN TAKEN. (1) WHETHER ON THE ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) ERRED IN DELETING THE ADDITION OF RS. 56,67,989/- MADE BY DISALLOWING THE COMMISSION EXPENSES AS THE ASSESSEE FAILED TO COMPLY WITH THE PROVISIONS OF TDS AS PER CHAPTER XVII-B OF THE INCOME TAX ACT, 1961. ITA NO. 56/JP/15 7 CO NO.11/JP/15 M/S KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE- 6, JAIPUR 2 (2) (A) WHETHER ON THE ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) ERRED IN DELETING THE ADDITION OF RS.5,47,582/- MADE FOR DEPOSITING THE EMPLOYEES CONTRIBUTION TO PF & ESI B EYOND THE PRESCRIBED TIME LIMIT [PROVIDED IN THE RESPECTIVE ACTS. (B) WHETHER ON THE ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) ERRED IN HOLDING THAT EMPLOYEES CONTRIBUTION TO PF & ESI ARE GOVERNED BY THE PROVISION OF SECTION 43B AN NOT BY SECTION 36(1)(VA) R.W.S. 2(24)(X) OF THE IT ACT. CO NO.11/JP/15 GROUND OF APPEAL TAKEN BY THE ASSESS EE (1) THE RESPONDENTS SUBMITS THAT THE DELETION BY CIT(A) ARE CORRECT AND AS PER LAW NAMELY: (I) IN RESTRICTING THE DELETION OF COMMISSION TO RS. 5 6,67,989/- AND IN NOT ALLOWING PAYMENT OF BALANCE COMMISSION OF RS. 1,49,975/- WHEN THE FACTS AND CIRCUMSTANCES W ERE SIMILAR. (II) IN DELETING THE DISALLOWANCE OUT OF ESI & PF TOTA LING TO RS.5,47,582/- WHICH WERE PAID BEFORE FILING RETURN OF INCOME. 2. REGARDING GROUND NO. 1 TAKEN BY THE REVENUE AND CO. NO. 1 TAKEN BY THE ASSESSEE, THE FACTS IN BRIEF AS APPARENT FROM THE R ECORDS ARE THAT THE ASSESSEE FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACT URING AND EXPORT OF READYMADE GARMENTS TO JAPAN HAS INCURRED AN EXPENDITURE ON A CCOUNT OF PAYMENT TO M/S ARJOO J. LTD. OF RS. 56,67,989/- AND M. ISHIKAWA A MOUNTING RS. 1,44,975/- TOTALING TO RS. 58,36,492/-. THE AO HAS TREATED THIS EXPEN DITURE IN THE NATURE OF ICE FOR TECHNICAL SERVICES AND OBSERVED THAT SINCE THE ASS ESSEE HAS NOT DEDUCTED TDS ON THE SAID PAYMENT , THE EXPENDITURE IS DISALLOWED U/ S 40(A)(I) OF THE ACT. ITA NO. 56/JP/15 7 CO NO.11/JP/15 M/S KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE- 6, JAIPUR 3 2.1 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE CIT(A) WHO HAS HELD THAT THE SERVICE IS RENDERED AND CONSEQUENT EXPENDITURE IN THE NATURE OF COMMISSION AND THEREFORE, NOT LIABLE FOR TDS U/S 195 OF THE ACT. THE RELEVANT FINDINGS OF THE CIT(A) IS REPRODUCED A S UNDER: IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT T HE SERVICES RENDERED AND EXPENDITURE INCURRED IS CLEARLY IN THE NATURE OF CO MMISSION, S IS EVIDENT FROM THE AGENCY AGREEMENT., THE NATURE OF SERVICES RENDERED AND THE COMPUTATION OF THE QUANTUM OF COMMISSION EXPENDITURE, AS DISCUSSED ABO VE. ALSO THESE SERVICES HAVE BEEN RENDERED IN THE ORDINARY COURSE OF BUSINESS. THEREFORE, IT IS HELD THAT THE ABOVE BUSINESS ACTIVITY CARRIED OUT THROUGH THE AGE NT M/S ARJOO J. LTD. HAVING AN INDEPENDENT STATUS, IN THE ORDINARY COURSE OF BUSIN ESS IS COVERED BY THE FIRST PROVISO TO SECTION 9(1). THEREFORE THIS BUSINESS A CTIVITY DOES NOT LEAD TO ANY BUSINESS CONNECTION IN INDIA. CONSEQUENTLY, THERE IS NO SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT ON ACCOUNT OF THE ABOVE TRANS ACTION. HENCE, THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE ON THE COMMISSION U/S 195 OR CHAPTER XVII-B OF THE I.T. ACT, 1961 AND THE PROVISIONS OF SECTION 40(A) (I) ARE NOT APPLICABLE IN THIS CASE. THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO DE LETE THE DISALLOWANCE OF COMMISSION OF RS. 56,67,989/- TO THE ABOVE CONCERN M/S ARJOO J. LTD. 2.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE FIR M IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF READYMADE GARMENTS AND IN CONNECTION WITH THE EXPORTS, THE ASSESSEE HAS INCURRED AN AMOUNT OF RS . 58,36,492/-. ON PERUSAL OF THE AGREEMENT WITH M/S ARJOO J. LTD. THE CIT(A) HAS GIVEN A CLEAR FINDING THAT THE SERVICES RENDERED AND EXPENDITURE INCURRED IS IN TH E NATURE OF COMMISSION. GIVEN THE FACT THAT THE COMMISSION HAS BEEN PAID IN RELAT ION TO EXPORT OF GARMENTS ITA NO. 56/JP/15 7 CO NO.11/JP/15 M/S KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE- 6, JAIPUR 4 OUTSIDE INDIA AND THE FACT THAT THE NO SERVICES HAV E BEEN RENDERED IN INDIA WE ARE UNABLE TO ACCEDE TO THE ARGUMENTS OF THE LD. DR THA T THE SUBJECT PAYMENTS ARE TAXABLE IN INDIA. SIMILAR IS THE POSITION IN RESPECT OF PAYMENT OF R S. 144,975/- TO M. ISHIKAWA WHO HAS BEEN PAID COMMISSION IN RELATION TO EXPORT OF GARMENTS AS APPARENT FROM THE AGREEMENT AS WELL AS WORKING OF THE COMMIS SION PAYMENTS. ACCORDINGLY, PROVISIONS OF SECTION 195 ARE NOT ATT RACTED IN THE INSTANT CASE, HENCE THE DISALLOWANCE OF EXPENDITURE OF RS. 58,36,492/- U/S 40(A)(I) IS HEREBY DELETED. IN VIEW OF THE ABOVE, THE GROUND TAKEN BY THE REV ENUE IS DISMISSED AND CO OF THE ASSESSEE IS ALLOWED. 3. REGARDING GROUND NO.2 WHERE THE REVENUE HAS CH ALLENGED THE DELETION OF RS. 5,47,582/- TOWARDS EMPLOYEES CONTRIBUTION TO PF AND ESI, THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE EMPLOYEES CON TRIBUTION TO ESI AND PF HAS BEEN PAID BEFORE FILING OF THE RETURN OF INCOME U/S 139(1) OF THE ACT. IN VIEW OF THE CONSISTENT STAND TAKEN BY THIS BENCH AND RESPE CTFULLY FOLLOWING THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF S TATE BANK OF BIKANER & JAIPUR (99 DTR 129) AND OTHERS, THE GROUND TAKEN BY THE RE VENUE IS DISMISSED . ITA NO. 56/JP/15 7 CO NO.11/JP/15 M/S KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE- 6, JAIPUR 5 IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSE D AND. CO OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 /02/2016 SD/- SD/- - VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 12 / 02 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE DCIT,M CIRCLE-6, JAIPUR 2. THE RESPONDENT- M/S KANHAIYALAL KALYANMAL, JAIPU R 3. THE CIT(A)-III, JAIPUR 4. THE CIT-III JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO 56/JP/15 & CO NO. 11/JP/15) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRARS ITA NO. 56/JP/15 7 CO NO.11/JP/15 M/S KANHAIYALAL KALYANMAL, JAIPUR VS. DCIT, CIRCLE- 6, JAIPUR 6 SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9 DATE OF DISPATCH OF THE ORDER