ACIT 1(2)(1), MUMBAI V. ITL TOURS & TRAVELS P.LTD, MUMBAI

ITA 5789/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9861 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 27-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AARJ U GARODIA LD
• Section: 143(3)

Judgement Text

ITA.NO. 5 78 9 /MUM/201 6 ITL TOURS & TRAVELS PRIVATE LIMITED ASSESSMENT YEAR - 2013 - 14 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5 789/MUM/2016 ( / ASSESSMENT YEAR: 2013 - 14 ) ASSISTANT COMMISSIONER OF INCOME TAX - 1(2)(1) ROOM NO. 535 5 TH FLOOR, AAYKAR BHAWAN M.K.ROAD MUMBAI - 400 0 20 / VS. ITL TOURS & TRAVELS PRIVATE LTD. 10, NAZMI BUILDING D.N.ROAD FORT , MUMBAI 400 001 ./ ./ PAN/GIR NO. AA BCJ - 4396 - C ( / APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : AARJ U GARODIA , LD. DR / DATE OF HEARING : 01/03 /2018 / DATE OF PRONOUNCEMENT : /03 /2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 20 13 - 14 CONTEST THE ORDER OF LD. COMMISSI ONER OF INCOME - TAX (APPEALS) - 2 [CIT (A)], MUMBAI, APPEAL NO .CIT(A) - 2 / IT/286 /2015 - 16 DATED 08/06/2016 QUA CERTAIN RELIEF PROVIDED TO THE ASSESSEE. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT COMMISSIONER OF INCOME ITA.NO.5789/MUM/2016 ITL TOURS & TRAVELS PRIVATE LIMITED ASSESSMENT YEAR - 2013 - 14 2 TAX - 1 (2) (1) MUMBAI [AO] U/S 1 43(3) OF THE INCOME TAX ACT, 1961 ON 17/03/2016 WHEREIN TH E INCOME OF THE ASSESSEE WAS DETERMINED AT RS.2,12,38,567 / - AFTER CERTAIN ADDITIONS / DISALLOWANCES AS AGAINST RETURNED INCOME OF RS. 32,28,590 / - FILED BY THE ASSESSEE ON 17/10/2013 . NONE HAS APPEARED FOR ASSESSEE AND NO ADJOURNMENT APPLICATION IS ON RECORD . LEFT WITH NO OPTION, WE PROCEED TO DISPOSE - OFF THE SAME ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING LD. DEPARTMENTAL REPRESENTATIVE [DR]. 2. BRIEFLY STATED THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED AS AIR TICKETING & TRAVE L AGENT HAS BEEN SADDLED WITH FOLLOWING ADDITIONS IN AN ASSESSMENT U/S 143(3) WHICH ARE THE SUBJECT MATTER OF THIS APPEAL: - THE DIRECTORS REMUNERATION WAS DISALLOWED SINCE, UPON PERUSAL, IT WAS NOTED THAT THE PAYEE DIRECTOR DID NOT REFLECT THE SAME IN HIS RETURN OF INCOME AND THE ASSESSEE FAILED TO DEDUCT TAX AT SOURC E AGAINST THE SAME. THE SECOND ADDITION PERTAINS TO NON DEDUCTION OF TAX AT SOURCE ON CERTAIN DISCOUNT / HANDLING CHARGES DEBITED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE CONTENDED THAT THE SAID PAYMENT WAS NOT COVERED WITHIN THE AMBIT OF SECTION 194 H SINCE THE RELATION BETWEEN THE ASSESSEE AND THE PAYEES WERE NOT THAT OF PRINCIPAL & AGENT. RELIANCE WAS PLACED ON THE DECISION OF TRIBUNAL & LD. CIT(A) IN ASSESSEES OWN CASE FOR EARLIER YEARS. HOWEVER, NOT CONVINCED, LD. AO OPINED THAT TDS NO. HEAD AMOUNT (RS.) 1. DIRECTORS REMUNERATION 12,00,000/ - 2. ADDITION U/S 40(A)(IA) FOR NON - DEDUCTION OF TAX AT SOURCE ON CO MMISSION PAYMENT 1,66,92,928/ - TOTAL 1,78,92,928/ - ITA.NO.5789/MUM/2016 ITL TOURS & TRAVELS PRIVATE LIMITED ASSESSMENT YEAR - 2013 - 14 3 W AS DEDUCTED ON FEW PAYMENTS AS PER THE CONVENIENCE OF THE ASSESSEE AND FURTHER, THE INTERMEDIARIES WERE ACTING ON BEHALF OF THE ASSESSEE AND THE NATURE OF PAYMENT WAS NOTHING BUT COMMISSION WHICH WAS COVERED BY THE PROVISIONS OF SECTION 194H. FINALLY, THE IMPUGNED ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE U/S 40(A)(IA) FOR WANT OF DEDUCTION OF TAX AT SOURCE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 08/06/2016 WHERE LD. CIT(A) PLACING RELIAN CE ON THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2006 - 07 CONCLUDED THAT THE PROVISIONS OF SECTION 194H WERE NOT APPLICABLE TO THE SAID TRANSACTIONS. THE SECOND ADDITION PERTAINING TO DIRECTORS REMUNERATION WAS DELETED BY MAKING THE FOLLOWING O BSERVATIONS: - 6.2 I HAVE GONE THROUGH THE FACT OF THE CASE AND THE SUBMISSIONS GIVEN BY THE APPELLANT. IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THE REMUNERATION ACTUALLY PAID BY THE APPELLANT IS BY ADJUSTING THE REMUNERATION DUE TO THE DIRECTOR AGAINST THE ADVANCES GIVEN TO HIM EARLIER. THE DIRECTOR HAD INITIALLY FAILED TO REFLECT THE REMUNERATION IN HIS RETURN OF INCOME. BUT AFTER REALIZING HIS MISTAKE HE IMMEDIATELY PAID DIFFERENTIAL TAX DUES OF RS.3,57,477/ - . THE AR OF THE APPELLANT ALSO ARGUES THAT T HE MONTHLY REMUNERATION OF RS.1,00,000/ - TO AN EXECUTIVE DIRECTOR CANNOT BE CONSIDERED AS EXCESSIVE. THE AR OF THE APPELLANT FURTHER ARGUES THAT SECTION 40(A)(IA) DID NOT CONTEMPLATE THE DISALLOWANCE OF DIRECTORS REMUNERATION. THE ABOVE SUBMISSION OF THE AR OF THE APPELLANT HAS BEEN CONSIDERED. THE MONTHLY REMUNERATION OF RS.1,00,000/ - PAID TO THE EXECUTIVE DIRECTOR NOT AN EXCESSIVE ONE MAY BE AN ACCEPTABLE ONE. HOWEVER, ON READING OF THE ASSESSMENT ORDER DATED 17.03.2016 VIDE PARA NO. 4 IT IS FOUND THAT THE AO IS OF THE OPINION THAT THE APPELLANT COMPANY HAS NOT DEDUCTED TDS FOR THE REMUNERATION PAID OF RS.12,00,000/ - BUT LATER ON THE DIRECTOR HIMSELF FILED THE RETURN AND PAID THE TAX THEREON BUT STILL THE DEFAULT OF THE APPELLANT COMPANY IS THAT NOT DEDU CTING THE TDS IN THE RIGHT TIME IS A MISTAKE, AND THEREFORE, I AM OF THE OPINION THAT FOR THE DELAY IN PAYMENT OF TDS AMOUNT THE APPELLANT COMPANY IS SUPPOSED TO PAY AN INTEREST U/S 201(IA). ACCORDINGLY AO MAY INTIMATE THE FACT TO THE CONCERNED TDS OFFICER FOR COLLECTING THE DEFAULT INTEREST OTHERWISE THE APPEAL IS ALLOWED IN RESPECT OF ADDITION OF RS.12,00,000/ - TOWARDS REMUNERATION PAID TO THE DIRECTOR AS THE AMENDMENT OF 40(A)(IA) CAME INTO EFFECT ONLY FROM 01.04.2015 ONLY. ITA.NO.5789/MUM/2016 ITL TOURS & TRAVELS PRIVATE LIMITED ASSESSMENT YEAR - 2013 - 14 4 AGGRIEVED THE REVENUE IS IN FURTHER APPEAL BEFORE US. THE LD. DR, AARJU GARODIA, WHILE PLACING RELIANCE ON THE STAND OF LD.AO FAIRLY CONCEDED THAT THE ISSUE OF DISCOUNT / HANDLING CHARGES STOOD COVERED IN ASSESSEES FAVOUR BY EARLIER ORDERS OF THE TRIBUNAL. 4. WE HAVE CAREFULLY HEARD THE CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010 - 11 . UPON DUE CONSIDERATION, WE FIND THAT LD. CIT(A) HAS RELIED ON THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2006 - 07 WHERE I T WAS HELD THAT THE IMPUGNED TRANSACTIONS WERE ON PRINCIPAL TO PRINCIPAL BASIS AND THEREFORE NOT COVERED BY THE PROVISIONS OF SECTION 194H. THE DECISION OF THIS TRIBUNAL FOR AY 2006 - 07 HAS BEEN FOLLOWED IN SUBSEQUENT YEARS ALSO WHICH IS EVIDENT FROM PERUSA L OF TRIBUNALS ORDER ITA NO. 4983/MUM/2014 DATED 16/02/2016 AS PLACED ON RECORD WHERE THE MATTER HAS BEEN DECIDED IN ASSESSEES FAVOR BY THE TRIBUNAL WITH FOLLOWING OBSERVATIONS: - 5. IN THIS BACKGROUND, REVENUE IS IN APPEAL BEFORE US. AT THE TIME OF HEARI NG, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE SUBJECT MATTER OF DISPUTE IS COVERED BY THE ORDERS OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2006 - 07, 2008 - 09 AND 2009 - 10. THE LEAR NED REPRESENTATIVE FOR THE ASSESSEE EXPLAINED T HAT THE DISPUTE AROSE, FOR THE FIRST TIME, IN ASSESSMENT YEAR 2006 - 07 IN ITA NO. 5746/MUM/2009 WHEREIN THE TRIBUNAL VIDE ITS ORDER DT. 9.9.2010 SET ASIDE THE DISALLOWANCE IN THE FOLLOWING WORDS : 9. FROM THE ABOVE FINDINGS OF THE AO IT IS CLEAR THAT THE INTERMEDIARIES ARE BOOKING THE TICKETS FROM THE ASSESSEE. THEREFORE, THE INTERMEDIARIES ARE NOT WORKING AS AGENT OF THE ASSESSEE FOR DOING ASSESSEE'S BUSINESS RATHER THE INTERMEDIARIES ARE BRINGING THE BUSINESS TO THE ASSESSEE AS RECORDED BY THE AO AND THE ASSESSEE IS PASSING OUT SOME HANDLING CHARGES. THUS, THE ASSESSEE, IN FACT, GIVING SOME DISCOUNT TO THE INTERMEDIARIES FOR GETTING BUSINESS. IT IS NOT A TRANSACTION BETWEEN THE PRINCIPAL AND THE AGENT BUT IT IS A TRANSACTION BETWEEN THE PRINCIPAL AND PRIN CIPAL. IN ORDER TO BRING THE SERVICES OR TRANSACTION WITHIN THE EXPRESSION COMMISSION AND BROKERAGE UNDER SECTION 194 - H, THE ELEMENT OF AGENCY MUST BE PRESENT. WHEN THERE IS NO CONTRACT OF AGENCY AT ANY POINT OF TIME BETWEEN THE ASSESSEE AND THE INTERMEDIA RIES AND ITA.NO.5789/MUM/2016 ITL TOURS & TRAVELS PRIVATE LIMITED ASSESSMENT YEAR - 2013 - 14 5 THE DISCOUNT MADE AVAILABLE TO THE INTERMEDIARIES DOES NOT FALL WITHIN THE TERM COMMISSION OR BROKERAGE, THEN, SUCH DISCOUNT ALLOWED BY THE ASSESSEE IS NOT LIABLE FOR DEDUCTION UNDER SECTION 194 - H. THOUGH THE ASSESSEE HAS DEDUCTED THE TDS, BUT MER E DEDUCTION OF TDS DOES NOT ALTER THE NATURE OF TRANSACTION AND RELATION BETWEEN THE ASSESSEE AND THE INTERMEDIARIES WHICH IS OTHERWISE APPARENT AND NOT DISPUTED. IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION V/S UNION OF INDIA REPORTED IN 257 ITR 202 (GUJ), THE HON.GUJARAT HIGH COURT AT PAGE 215 OF THE REPORT HAS HELD AS UNDER : APPLYING THE AFORESAID DEFINITIONS AND THE JUDICIAL PRONOUNCEMENTS TO THE FACT OF THE PRESENT CASE AND IN BACKDROP OF THE AFORESAID RULES, IT IS CLEAR THAT ALTHOUGH THE GOVE RNMENT HAS IMPOSED A NUMBER OF RESTRICTIONS ON THE LICENSED STAMP VENDORS REGARDING THE MANNER OF CARRYING ON THE BUSINESS, THE STAMP VENDORS ARE REQUIRE TO PURCHASE THE STAMP PAPERS ON PAYMENT OF PRICELESS THE DISCOUNT ON THE PRINCIPAL TO PRINCIPAL BASIS AND THERE IS NO CONTRACT OF AGENCY AT ANY POINT OF TIME. IT IS ALSO NOT POSSIBLE TO ACCEPT THE CONTENTION OF MR. NAIK FOR THE REVENUE THAT THE DEFINITION OF 'COMMISSION OR BROKERAGE' AS CONTAINED IN THE EXPLANATION TO SECTION 194H IS SO WIDE THAT IT WOULD INCLUDE ANY PAYMENT RECEIVABLE, DIRECTLY OR INDIRECTLY, FOR SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS AND THAT, THEREFORE, THE DISCOUNT AVAILED OF BY THE STAMP VENDORS CONSTITUTES COMMISSION OR BROKERAGE WITHIN THE MEANING OF SECTION 194H. IF TH IS CONTENTION WERE TO BE ACCEPTED, ALL TRANSACTIONS OF SALE FROM A MANUFACTURER TO A WHOLESALER OR FROM A WHOLESALER TO A SEMI WHOLESALER OR FROM A SEMI - WHOLESALER TO A RETAILER WOULD BE COVERED BY SECTION 194H. TO FALL WITHIN THE AFORESAID EXPLANATION, TH E PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, IS BY A PERSON ACTING ON BEHALF OF ANOTHER PERSONS (I) FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES), OR (II) FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS, OR (III) IN RELA TION TO ANY TRANSACTION RELATING TO ANY ASSETS, VALUABLE ARTICLE OR THING. THE ELEMENT OF AGENCY IS TO BE THERE IN CASE OF ALL SERVICES OR TRANSACTIONS CONTEMPLATED BY EXPLANATION (I) TO SECTION 194H. IF A CAR DEALER PURCHASE CARS FROM THE MANUFACTURER BY PAYING PRICES LESS DISCOUNT, HE WOULD BE THE PURCHASER AND NOT THE AGENT OF THE COMPANY, BUT IN THE COURSE OF SELLING CARS, HE MAY ENTER INTO A CONTRACT OF MAINTENANCE DURING THE WARRANTY PERIOD, WITH THE CUSTOMERS (PURCHASER OF THE CAR) ON BEHALF OF THE C OMPANY. HOWEVER, SUCH SERVICES RENDERED BY THE DEALER IN THE COURSE OF SELLING CARS DOES NOT MAKE THE ACTIVITY OF SELLING CARS ITSELF AN ACT OF AGENT OF THE MANUFACTURER WHEN THE DEALINGS BETWEEN THE COMPANY AND THE DEALER IN THE MATTER OF SALE OF CARS ARE ON 'PRINCIPAL TO PRINCIPAL' BASIS. THIS IS JUST AN ILLUSTRATION TO CLARIFY THAT A SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS HAS TO BE SOMETHING MORE THAN THE ACT OF BUYING OR SELLING OF GOODS. WHEN THE LICENSED STAMP VENDORS TAKE DELIVERY OF ST AMP PAPERS ON PAYMENT OF FULL PRICES LESS DISCOUNT AND THEY SELL SUCH STAMP PAPERS TO RETAIL CUSTOMERS, NEITHER OF THE TWO ACTIVITIES OF BUYING FROM THE GOVERNMENT AND SELLING TO THE CUSTOMERS) CAN BE TERMED AS THE SERVICE IN THE COURSE OF BUYING OR SELLIN G OF GOODS' ITA.NO.5789/MUM/2016 ITL TOURS & TRAVELS PRIVATE LIMITED ASSESSMENT YEAR - 2013 - 14 6 10. EVEN OTHERWISE AS PER THE EXPLANATION TO SECTION 194H THE COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE DIRE CTLY OR INDIRECTLY FOR ACTING ON BEHALF OF THE ANOTHER PERSON FOR SERVICES RENDERED. WHEN THE INTERMEDIARIES ARE NOT ACTING ON BEHALF OF THE ASSESSEE BUT ONLY ACTING TO BOOK THE TICKERS FROM THE ASSESSEE ON BEHALF OF THE PASSENGERS THEN THE TRANSACTIONS BETWEEN THE ASSESSEE AND INTERMEDIARIES ARE NOT AS PRINCIPAL TO AGENT TRANSACTIONS. MOREOVER WHEN THE DISCOUNT ALLOWED/GIVEN BY THE ASSESSEE TO THE INTERMEDIARIES IS ALSO ALLOWED TO THE PASSENGER DIRECTLY TO BOOK THE TICKETS TO THE ASSESSEE AND THE ASSESSEE IS RECORDING THE TRANSACTION IN ITS BOOKS OF ACCOUNT ON NET AMOUNT OF THE INVOICE THEN IT IS NOT A CASE OF CO MMISSION OR BROKERAGE PAID OR PAYABLE BY THE ASSESSEE TO THE INTERMEDIARIES. ACCORDINGLY, THE PROVISIONS OF SECTION 194H ARE NOT APPLICABLE TO THE TRANSACTION IN THE PRESENT CASE. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) IS DELETED. 6. IT WAS ALSO A COMMON POINT BETWEEN THE PARTIES THAT THE AFORESAID DECISION OF THE TRIBUNAL CONTINUES TO HOLD THE FIELD AS IT HAS NOT BEEN ALTERED BY ANY HIGHER AUTHORITY. FOLLOWING THE AFORESAID P RECEDENT, WHICH HAS BEEN RELIED UPON BY THE CIT(A), WE FIND NO REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE CIT(A), WHICH IS HEREBY AFFIRMED. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. THEREFORE, FACT BEING BROADLY THE SAME, RESPECTFULLY F OLLOWING BINDING JUDICIAL PRECEDENT, WE CONFIRM THE STAND OF LD. CIT(A) AND DISMISS THIS GROUND OF REVENUES APPEAL. 5. SO FAR AS THE ADDITION ON ACCOUNT OF DIRECTORS REMUNERATION IS CONCERNED, WE FIND THAT LD. FIRST APPELLATE AUTHORITY HAS CLINCHED THE I SSUE IN THE R IGHT PERSPECTIVE SINCE THE PAYEE DIRECTOR HAD OFFERED THE INCOME IN HIS RETURN OF INCOME AND PAID DUE TAXES THEREUPON. IN SUCH A SCENARIO, THE PRIMARY BASIS ON WHICH ADDITION WAS MADE BY LD. AO DID NOT SURVIVE AND THEREFORE, THE CONCLUSION OF LD. CIT(A) WAS QUITE FAIR AND REASONABLE IN THE CIRCUMSTANCES. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE SAME. 6. RESULTANTLY, THE REVENUES APPEAL STANDS DISMISSED. ITA.NO.5789/MUM/2016 ITL TOURS & TRAVELS PRIVATE LIMITED ASSESSMENT YEAR - 2013 - 14 7 ORDER PR ONOUNCED IN THE OPEN COURT ON 07 TH MARCH , 2018 . SD/ SD/ ( SAKTIJIT DEY ) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 07 . 03 .2018 SR.PS: - THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, IT AT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT , MUMBAI