ITO TDS (1)1, MUMBAI V. ACE METAL SEAL P. LTD, MUMBAI

ITA 5786/MUM/2010

• Counselvise Citation: 578619914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 16-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHSARTHI NAIK
• Keywords: Non-deduction of tax
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, A, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO.5786 TO 5788/MUM/2010 (ASSESSMENT YEARS : 2005-06 TO 2007-08) INCOME TAX OFFICER, TDS (1)-1, ROOM NO.804, 8 TH FLOOR, SMT.K.G .MITTAL HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400002. M/S ACE METAL SEAL PVT. LTD, BIG THREE BUILDING, 88, ANANDILAL PODDAR MARG, MUMBAI-400002 PAN:AAACA6026D APPELLANT V/S RESPONDENT DATE OF HEARING : 24.10.2011 DATE OF PRONOUNCEMENT : 28.10.2011 APPELLANT BY : SHRI PARTHSARTHI NAIK RESPONDENT BY : NONE O R D E R PER D.K.AGARWAL (JM) THESE THREE APPEALS PREFERRED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 22.4.201 0 PASSED BY THE LD.CIT(A) FOR THE ASSESSMENT YEARS 2005-06 TO 2007- 08. SINCE FACTS ARE IDENTICAL AND ISSUES INVOLVED A RE COMMON, ALL THESE APPEALS ARE DISPOSED OF BY THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN THIS CASE, THE NOTICE OF HEARING WAS SENT TO THE ASSESSEE BY RPAD FIXING THE DATE OF HEARING ON 24.1 0.2011. ON THE DATE OF HEARING I.E. 24.1.2011, AT THE TIME OF HEARING, ITA NO.5786 TO 5788/MUM/2010 (AYS : 2005-06 TO 2007-08) 2 NONE WAS PRESENT ON BEHALF OF THE ASSESSEE NOR FILE D ANY APPLICATION FOR ADJOURNMENT OF THE CASE. IT WAS, TH EREFORE, DECIDED TO DISPOSE OF THE APPEALS EX-PARTE, QUA THE ASSESSEE, ON MERITS AFTER HEARING THE LEARNED D.R . 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROJECT CONSU LTANCY. A SURVEY ACTION U/S 133A OF THE INCOME TAX ACT, 196 1 (IN SHORT THE ACT) WAS CARRIED ON 7.9.2007 AT THE OFFI CE PREMISES OF THE ASSESSEE-COMPANY. ON VERIFICATION OF THE PR OFIT AND LOSS ACCOUNT, THE AO NOTED THAT THE ASSESSEE HAS DE BITED THE FOLLOWING AMOUNTS : AY J.V. COMMISSION RETAINERSHIP CHARGES 2005-06 RS.1,21,51,168/- RS.11,89, LAKHS 2006-07 RS. 10,80,000/- RS.6,31,450/- 2007-08 RS.1,50,64,894/- - THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE AND PU RPOSE OF THE ABOVE EXPENSES, TO PRODUCE THE VOUCHERS OF T HE SAME AND WHETHER THE TDS HAS BEEN DEDUCTED ON THE SAME. IN RESPONSE, IT WAS INTERALIA SUBMITTED BY THE ASSESSE E THAT WITH REGARD TO J.V.COMMISSION THE PAYMENTS RELATED TO THE PROFIT ARISEN OUT OF JOINT VENTURE, THEREFORE THE PROVISIONS OF THE SCHEME OF TAX DEDUCTION AT SOURCE AS DETAILED I N THE SECTION COVERED BY CHAPTER XVII-B AND THE ITEMS OF INCOME ITA NO.5786 TO 5788/MUM/2010 (AYS : 2005-06 TO 2007-08) 3 ENUMERATED THEREIN DO NOT INCLUDE JOINT VENTURE PRO FITS. IN OTHER WORDS, THE JOINT VENTURE PROFIT IS EXACTLY SI MILAR TO THE PROFIT DERIVED BY A FIRM IN WHICH THE TAX ON TOTAL INCOME COMPUTED WILL BE PAID BY WAY OF ADVANCE-TAX ETC BUT NOT BY WAY OF TDS. HENCE NO TAX IS TO BE DEDUCTED ON THE PAYMENT MADE TO M/S KIRIT COMMUNICATION SYSTEM PVT.LTD. WI TH REGARD TO THE PAYMENT OF RETAINER-SHIP CHARGES, IT WAS INTERALIA SUBMITTED THAT THE RETAINER-SHIP CHARGES WERE PAID TO THE PROFESSIONAL WHO ARE MASTERS IN THE JOB AND THEY ARE NOT ON THE PAY ROLL OF THE COMPANY. IT WAS FURTHER SUBMITTED THAT FOR RS.4,00,000/- AND RS.4,50,000/- THE PARTI ES HAVE PROMISED TO GIVE US FORM NO.15 BUT UNFORTUNATELY T HEY WERE NOT RECEIVED AND FOR THAT REASON, THE TDS WAS NOT DEDUCTED ON THE SAID TWO AMOUNTS. SIMILARLY, ON SALARY OF SH RI SEJPAL, IT WAS SUBMITTED THAT WHEREVER, THE TDS IS APPLICA BLE THE SAME WAS DEDUCTED AND PAID TO THE GOVERNMENT TREASU RY. IT WAS, THEREFORE, SUBMITTED THAT THE PROCEEDINGS INIT IATED BE FILED. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSE ES SUBMISSIONS. ACCORDING TO THE AO, THE ASSESSEE HAS DEFAULTED IN THE TRANSACTIONS DONE WITH M/S KIRIT COMMUNICATION SYSTEM PVT.LTD. BY WAY OF PAYMENT OF COMMISSION AND ALSO DEFAULTED IN NOT DEDUCTING TH E TDS ON RETAINER-SHIP CHARGES AND ACCORDINGLY, HE TREATED T HE ASSESSEE-COMPANY IN DEFAULT U/S 201(1) OF THE ACT AND INTEREST THEREON U/S 201(1A) AS UNDER : ITA NO.5786 TO 5788/MUM/2010 (AYS : 2005-06 TO 2007-08) 4 A.YEARS AMOUNT OF COMMISSION T DS DUE TDS DEDUCTED INTEREST 2005-06 2006-07 2007-08 RS.1,21,51,168/- RS. 10,80,000/- RS.1,50,64,894/- RS. 6,35,263/- RS. 60,588/- RS. 8,28,569/- - - - RS.2,66,810/- RS. 18,176/- RS.1,49,142/- TOTAL RS.15,24,424/- RS.4,34,128/- A.YEARS RETAINER-SHIP CHARGES PAID TDS DUE TDS DEDUCTED INTEREST 2005-06 2006-07 RS.11,89,000/- RS. 6,31,450/- RS. 62,161/- RS. 35,424/- - - RS. 26,108/- RS. 10,627/- TOTAL RS.18,20,420/- RS. 97,585/- RS. 36,735/- 4. ON APPEAL, THE LD. CIT(A), WITH REGARD TO THE PA YMENT OF COMMISSION HELD THAT THE APPELLANT HAD ENTERED INTO AN AGREEMENT WITH M/S KIRIT COMMUNICATION SYSTEM PVT. LTD. FOR A JOINT VENTURE AND SHARE OF PROFIT ARISING OUT OF THE JOINT VENTURE WAS PAID TO THE SAID COMPANY AND HENCE, THE AO WAS NOT JUSTIFIED IN TREATING THE PAYMENT I.E. SHA RE OF PROFIT FROM JOINT VENTURE AS COMMISSION AND APPLYING THE PROVISIONS OF TDS AND ACCORDINGLY, HE DELETED THE AMOUNT OF TDS DUE AND INTEREST THEREON ON THE ALLEGED COMMIS SION PAYMENT. WITH REGARD TO THE RETAINER-SHIP CHARGES , THE LD. CIT(A) AFTER EXAMINING THE MATTER FOR THE ASSESSMEN T YEAR 2005-06 DIRECTED THE AO TO RE-CALCULATE THE TDS L IABILITY ITA NO.5786 TO 5788/MUM/2010 (AYS : 2005-06 TO 2007-08) 5 AND INTEREST THEREON ONLY ON AMOUNT OF RS.8,50,000 /- AND FOR THE ASSESSMENT YEAR 2006-07, HE HELD THAT AS P ER THE DETAILS OF PAYMENTS, THE PROVISIONS OF TDS ARE NOT ATTRACTED HENCE HE DELETED THE LEVY OF TDS AND INTEREST THERE ON. 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING COM MON GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT JUSTIFYING THE DECISION OF THE AO IN TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S. 201(1) AND 201(IA) OF THE ACT 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX ON COMMISSION / JOINT VENTURE PROFIT AS APPLICABLE US. 194H OF THE IT. ACT, OF AN AMOUNT OF RS.6,35,263/- FOR A.YR. 2005-06, RS.60,588/- FOR A.YR. 2006-07 AND RS.8,28,569/- FOR AYR.2007-08. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE TO PAY INTEREST U/S. 201(IA ) OF RS.2,66,810/- ON THE TAX OF RS.6,35,263/- FOR A.Y. 2005-06, INTEREST OF RS.18,176/- ON THE TAX OF RS.60,588/- FOR A.YR.2006-07 AND INTEREST OF RS.1,49,142/- ON THE TAX OF RS.8,28,569/- FOR A.Y. 2007-08. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) , MUMBAI ON THE ABOVE GROUND(S) BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 6. AT THE TIME OF HEARING, THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ORDER PASSED BY THE AO, THE LD. ITA NO.5786 TO 5788/MUM/2010 (AYS : 2005-06 TO 2007-08) 6 CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE RELIEF TO THE ASSESSEE. HE, THEREFORE, SUBMITS THAT THE ORDER P ASSED BY THE AO BE RESTORED. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WITH REGARD TO THE DELETION OF TDS LIABILITY AND INTEREST THEREON ON THE PAYMEN T OF AMOUNT OF COMMISSION PAID TO M/S KIRIT COMMUNICATIO N SYSTEM PVT.LTD., THE LD. CIT(A) HAS DELETED THE SAI D LIABILITY VIDE FINDING RECORDED IN PARAGRAPHS 6.2 AND 7 OF H IS ORDER FOR THE ASSESSMENT YEAR 2005-06 WHICH ARE REPRODUC ED AS UNDER : 6.2..I FIND CONSIDERABLE MERIT IN THE SUBMISSION S OF THE APPELLANT AS THE APPELLANT HAD ENTERED INTO AN AGREEMENT WITH M/S.KIRIT COMMUNICATION AND SYSTEM PVT. LTD. FOR A JOINT VENTURE AND SHARE OF PROFIT ARISING OUT OF THE JOINT VENTURE WAS PAID TO THE SAID COMPA NY. THE SHARE OF PROFIT RECEIVED BY THE COMPANY HAS ALR EADY BEEN ASSESSED AS SHARE OF PROFIT FROM THE JOINT VEN TURE. THEREFORE, THE ACTION OF THE ASSESSING OFFICER DOES NOT APPEAR TO BE JUSTIFIED TREATING THE PAYMENT I.E. SH ARE OF PROFIT FROM JOINT VENTURE AS COMMISSION AND APPLYIN G THE PROVISIONS OF T.D.S. AND TREATING THE APPELLANT AS AN ASSESSEE IN DEFAULT U/S 201(1) AND 201 (1A). ACCORDINGLY, THE GROUND OF APPEAL IS DECIDED IN FAV OUR OF THE APPELLANT. 7.. IT IS APPARENT THAT THE LEVY OF INTEREST OF RS. 2, 66,810/- IS ONLY CONSEQUENTIAL TO THE DEMAND OF TDS RAISED F OR AY 2005-06. SINCE THE DEMAND OF RS.6,35,263/- ITSEL F IS DELETED, THE INTEREST LEVIED OF RS.2,66,810/- IS AL SO LIABLE TO BE DELETED. HENCE THE SAME IS DELETED HEREWITH. ITA NO.5786 TO 5788/MUM/2010 (AYS : 2005-06 TO 2007-08) 7 THE LD. CIT(A) FOR THE SAME REASONS DELETED THE LEV Y OF TDS AND INTEREST THEREON FOR THE ASSESSMENT YEARS 2006- 07 AND 2007-08. 8. WITH REGARD TO THE LIABILITY OF TDS AND INTERES T THEREON ON THE RETAINER-SHIP CHARGES, THE LD. CIT(A) VIDE PARAGRAPH 9 OF HIS ORDER FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 HAS HELD AS UNDER : FOR ASSESSMENT YEAR 2005-06 9. I HAVE GONE THROUGH THE ABOVE SUBMISSIONS VERY CAREFULLY AND ALSO PERUSED THE ORDER OF THE ASSESSI NG OFFICER. IT IS CLEAR FROM THE ORDER THAT THE AO HIM SELF HAS STATED THAT FORM NO. 15-G FOR TWO PAYMENTS OF RS.4,00,000/- AND RS.4,50,000/- (TOTAL RS.8,50,000 /-) WERE NOT FILED WITH THE AO IN SPITE OF REPEATED REQ UEST. THE APPELLANT COMPANY WAS VERY FAIR TO ADMIT BEFORE ME THAT IT IS THE FAILURE OF THE APPELLANT COMPANY TO FILE FORM NO.15-G FOR THE ABOVE SUM OF RS.8,50,000/-,SIN CE THE CONCERNED PARTIES HAD NOT FURNISHED THE DETAILS . THE APPELLANT COMPANY IS THEREFORE, WILLING TO ACCEPT THE LIABILITY ON ACCOUNT OF THE SAME HOWEVER, IN RESPEC T OF THE REMAINING AMOUNT OF RS.3,39,000/- OUT OF THE T OTAL RETAINERSHIP CHARGES OF RS.11,89,000, THE APPELLA NT COMPANY HAS STATED THAT THE PAYMENTS (EXCEPT ONE O N WHICH TDS HAS BEEN DEDUCTED AND PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT) WERE ALL BELOW RS.20,000/ - AND THUS NOT LIABLE TO TDS. IN FACT FROM THE ORDE R IT IS VERY CLEAR THAT HE HAD SINGLED OUT AND FOUND FAULT OF NON-DEDUCTION OF TAX ONLY WITH RESPECT TO RS.8,50,0 00/- INVOLVING TWO PARTIES. TO THIS EXTENT, THE ACTION O F THE AO IS CONFIRMED. HOWEVER, WHILE LEVYING THE TDS, HE HA S CONSIDERED THE ENTIRE RETAINERSHIP CHARGES OF RS.11,89,000/- WITHOUT GIVING ANY REASON FOR LEVYI NG TAX ON RS.3,39,000. IN VIEW OF THE FACTS, THE AO IS D IRECTED TO RECALCULATE TDS LIABILITY ONLY ON RS.8,50,000. THE INTEREST LEVIABLE WILL ALSO BE ACCORDINGLY REVISED . ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. ITA NO.5786 TO 5788/MUM/2010 (AYS : 2005-06 TO 2007-08) 8 FOR ASSESSMENT YEAR 2006-07 9. I HAVE GONE THROUGH THE LIST OF PARTIES SUBMIT TED TO THE ASSESSING OFFICER AND FIND THAT THE AMOUNTS AS PER THE SAID LIST WILL NOT ATTRACT THE PROVISIONS OF T DS. HENCE TAX OF RS.35,424/- LEVIED ON ACCOUNT OF TDS LIABILI TY AND THE INTEREST OF RS.10,627/- LEVIED THEREON ARE DELE TED. 9. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED O N RECORD BY THE REVENUE TO SHOW THAT THE PAYMENTS MA DE TO M/S KIRIT COMMUNICATION SYSTEM PVT.LTD. ARE NOT IN THE NATURE OF PROFIT ARISING OUT OF THE JOINT VENTURE B UT AS A COMMISSION AND THE PAYMENTS MADE FOR RETAINER-SHIP CHARGES ARE MORE THAN RS.20,000/-, WE ARE OF THE VI EW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE LEVY OF TDS LIABILITY AND INTEREST THEREON ON THE ALLEGED PAYM ENTS OF COMMISSION AND RETAINER-SHIP CHARGES. ACCORDINGLY, THE ORDERS PASSED BY THE LD.CIT(A) FOR THE ABOVE ASSESS MENT YEARS DO NOT CALL FOR ANY INTERFERENCE. THE COMMON GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 10. IN THE RESULT, REVENUES APPEALS STAND DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH OCT., 2011. SD S D (RAJENDRA SINGH) (D .K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 28TH OCTOBER, 2011 ITA NO.5786 TO 5788/MUM/2010 (AYS : 2005-06 TO 2007-08) 9 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI