NIPRA EXPORTS P.LTD ( NOW KNOWN AS VIPRA CLOSURES P. LTD), MUMBAI V. ITO WD 8(2)(4), MUMBAI

ITA 5889/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5083 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 23-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: N JAYENDRAN
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 5889/MUM/2011 ASSESSMENT YEAR: 2007-08 M/S. NIPRA EXPORTS PVT. LTD. (NOW KNOWN AS VIPRA CLOSURES P. LTD.) A-6/171, SNEHDHARA SOCIETY, DADABHAI CROSS RD. NO. 3 VILE PARLE (W), MUMBAI-.400 056 PAN : AAACO 0509 P VS. ITO WD 8(2)(4) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N. JAYENDRAN RESPONDENT BY : SHRI S.S. RANA DATE OF HEARING : 23.10.2013 DATE OF PRONOUNCEMENT : 20.11.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -17, MUMBAI, DATED 06.06.2011 FOR THE ASSESSMENT YEAR 2 007-08. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THIS A PPEAL RELATES TO THE ACTION OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.3,93 ,278/- MADE BY THE AO INVOKING THE PROVISION OF SECTION 40(A)(IA) ON THE GROUND THAT T HE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE U/S 194(C) OF THE ACT. 2.1 BRIEFLY STATED, THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF IMPORT OF JEWELLERY AND RETAIL SELLING THROUGH KIOSKS WHILE D ECLARING A TOTAL INCOME OF RS.14,64,103/- HAD CLAIMED A DEDUCTION OF RS.4,03,278/- ON ACCOUNT OF ADVERTISEMENT EXPENSES WHICH INCLUDED A SUM OF RS.3,93,273/- PAID TO M/S. AKAR L ABELS PVT. LTD TOWARDS THE CHARGES FOR PRINTING OF THE COMPANYS PRODUCT CATALOGUE. HOWEVE R, IN THE ASSESSMENT FRAMED U/S 143(3), THE AO DISALLOWED THE SAID EXPENDITURE OF R S.3,93,273/- AND THEREBY ADDED THE ITA NO. 5889/MUM/2011 M/S. NIPRA EXPORTS PVT. LTD. ASSESSMENT YEAR: 2007-08 2 SAME TO THE TOTAL INCOME OF THE ASSESSEE U/S 40(A)( IA) AS THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE U/S 194 (C) OF THE ACT. ON APP EAL, THE LD.CIT(A), BY RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF BDA LTD. VS . ITO 84 ITD 442, CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY THE IMPUGNED DECISION, THE ASSESSEE HAS RAISED THIS ISSUE IN THE APPEAL BEFORE US. 2.2 BEFORE US, THE LD.AR HAS STATED THAT THE PROVIS IONS OF SECTION 194C IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS THE AMOUN T IN QUESTION PERTAINS TO PURCHASE OF PRINTED MATERIAL AND HENCE IT IS NOT A CONTRACT FOR WORK FOR WHICH THE ASSESSEE IS NOT REQUIRED TO DEDUCT THE TDS U/S 194C OF THE ACT. FUR THER, THE ASSESSEE HAS PLACED RELIANCE ON THE DECISIONS OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. DCAO, MARKFED KHANNA BRANCH 304 ITR 17, DELHI HIGH COURT IN THE CASE OF CIT VS. DABAR INDIA LTD. 283 ITR 197 (DELHI) AND THE BOMBAY HIGH COURT IN THE CASE OF BDA LTD. VS. ITO 281 ITR 99 (BOM) IN SUPPORT OF THE SAID PROPOSITION. ON THE OTHER HAND, THE LD.DR HAS RELIED ON THE ORDERS OF THE LD.CIT(A) AND AO. 2.3 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD ON THIS ISSUE. SECTION 194C PROVIDES THAT ANY PERSON RESPONSIBLE F OR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK HAS AN OBLIGATION TO DEDUCT T AX AT SOURCE ON SUCH PAYMENT. THUS, THE CRUX OF THE ISSUE IS WHETHER THE EXPENDITURE IN CURRED BY THE ASSESSEE ON ACCOUNT OF PRINTING PRODUCT CATALOGUE AND THE TELEPHONE INDEX IS IN FURTHERANCE OF A CONTRACT FOR WORK OR FOR SALE/PURCHASE OF GOODS AS IT IS AN ESTABLISH ED LEGAL POSITION THAT SECTION 194(C) WOULD APPLY IN THE FORMER AND NOT IN THE LATTER CAS E. AS REGARDS THE DECISION OF THE TRIBUNAL IN THE CASE OF BDA LTD. VS. ITO (SUPRA) RE LIED ON BY THE LD.CIT(A), THE SINGLE MEMBER BENCH OF THE TRIBUNAL HAS HELD THAT THE PAYM ENTS MADE BY THE ASSESSEE FOR SUPPLY OF PRINTED LABELS UTILIZED FOR PASTING ON TH E BOTTLES IS IN THE NATURE OF WORKS CONTRACT WITHIN THE MEANING OF SECTION 194C OF THE ACT. IT IS PERTINENT TO MENTION THAT THE SAID DECISION RELIED BY THE LD.CIT FOR HIS IMPUGNED DECISION HAS BEEN REVERSED BY THE HONBLE HIGH COURT OF BOMBAY IN TAX APPEAL NO. 44 O F 2003 REPORTED IN [2006] 153 TAXMAN.COM 386. AS REGARDS THE DECISIONS OF THE HON BLE HIGH COURT OF BOMBAY IN THE CASE OF SARVODAYA PRINTING PRESS VS STATE OF MAHARA SHTRA 93 STC 387, AND THE HONBLE APEX COURT IN THE CASE OF STATE OF TAMIL NADU VS AN ANDAM VISHVANATHAN REFERRED BY THE LD.CIT(A), IT IS RELEVANT TO STATE THAT IN BOTH THE CASES, THE HIGH COURT AND THE SUPREME ITA NO. 5889/MUM/2011 M/S. NIPRA EXPORTS PVT. LTD. ASSESSMENT YEAR: 2007-08 3 COURT HAVE CONCLUDED THAT THE ASSIGNMENT OF PRINTIN G INVOLVES RESPONSIBILITIES OF SENSITIVE NATURE AND THEREFORE ARRIVED AT THE DECISION THAT T HE SAME INVOLVES CONTRACT FOR WORK FALLING WITHIN THE PURVIEW OF SECTION 194C OF THE A CT. HOWEVER, THE CASE OF THE ASSESSEE BEFORE US IS DISTINGUISHABLE IN THE SENSE THAT THE PRINTING OF PRODUCT CATALOGUE AND TELEPHONE INDEX DOES NOT INVOLVE SUCH RESPONSIBILIT IES OF SENSITIVE NATURE. IT IS ALSO RELEVANT TO NOTE THAT THE PUNE BENCH OF THE TRIBUNA L IN WADILAL DIARY INTERNATIONAL LTD. VS. ACIT 81 ITD 238 HAS HELD THAT THE PURCHASES OF PACK ING MATERIALS, MANUFACTURED TO THE SPECIFICATIONS OF THE ASSESSEE PRINTED WITH THE CO MPANYS NAME, MONOGRAM, NATURE OF PRODUCT ETC. DOES NOT ATTRACT THE PROVISIONS OF SEC TION 194C OF THE ACT. IN THE CASE OF CIT VS. DABAR INDIA LTD. 283 ITR 197, THE HIGH COURT OF DELHI HAS HELD THAT SUPPLY OF CORRUGATED BOXES WITH SOME LABEL PRINTED ON SAME TO BE MADE TO ASSESSEE DOES NOT REQUIRE ANY SPECIAL SKILL OR INVOLVE CONFIDENCE OR SECRECY AND THE PREDOMINANT OBJECT UNDERLYING CONTRACT IS ONE FOR SALE OF GOODS WHICH IS OUTSIDE THE PURVIEW OF SECTION 194C OF THE ACT. SIMILARLY, THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. DCAO, MARFED KHANNA BRANCH 304 ITR 17 HAS HELD THAT PAYME NTS TO THE CONTRACTORS FOR THE PURCHASE OF PRINTED PACKING MATERIAL FOR THE PURPOS E OF PACKING OF ITS FINISHED PRODUCTS IS A CONTRACT OF SALE AND NOT WORK CONTRACT. THEREFORE , IT IS VERY CLEAR THAT SUPPLY OF ALL KINDS OF PRINTED MATERIAL WOULD NOT AMOUNT TO WORKS. IN V IEW OF THE FACT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF PRINTIN G PRODUCT CATALOGUE AND TELEPHONE INDEX, IN OUR VIEW, IS IN THE NATURE OF CONTRACT FO R SALE/PURCHASE AND NOT IN THE NATURE OF WORKS CONTRACT. THEREFORE, THE IMPUGNED EXPENDITU RE DOES NOT ATTRACT THE PROVISION OF SECTION 194(C). RESULTANTLY, THE DECISION OF THE LD .CIT(A) CONFIRMING THE IMPUGNED DISALLOWANCE MADE BY THE AO BY INVOKING SECTION 40( A)(IA) IS NOT LEGALLY TENABLE AND HENCE THE SAME IS DELETED. 3. THE SECOND ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 3 RELATES TO THE DECISION OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 2,12,200/- MADE BY THE AO U/S 40(A)(IA) OF THE ACT ON THE GROUND THAT THE ASSESSE E HAS FAILED TO DEDUCT TAX AT SOURCE FOR THE PAYMENT MADE TO HOTEL U/S 194 I OF THE ACT. 3.1 THE RELEVANT FACTS ARE THAT DURING THE COURSE O F THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD PAID A SUM OF RS.2 ,12,200/- ON ACCOUNT OF ROOM RENT CHARGES TO A RESORT AT SILVASA. AS THE ASSESSEE HA D NOT DEDUCTED TAX AT SOURCE, THE AO DISALLOWED THE SAME BY INVOKING SECTION 40(A)(IA). ON APPEAL, THE LD.CIT(A) CONFIRMED ITA NO. 5889/MUM/2011 M/S. NIPRA EXPORTS PVT. LTD. ASSESSMENT YEAR: 2007-08 4 THE ACTION OF THE AO. AGGRIEVED BY THE IMPUGNED DEC ISION, THE ASSESSEE HAS RAISED THIS ISSUE IN THE APPEAL BEFORE US. 3.2 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE LD.CIT(A) WHILE CONFIRMING THE IMP UGNED DISALLOWANCE/ADDITION MADE BY THE AO, HAS RELIED ON THE CBDTS CIRCULAR NO. 715 D ATED 08.08.1995 CLARIFYING THE POSITION AS REGARD THE PAYMENTS MADE TO A HOTEL FOR HIRING R OOMS U/S 194-I OF THE ACT. THE SAID CIRCULAR STATES THAT FOR THE PURPOSES OF SECTION 194-I, RENT MEANS ANY P AYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASEOR ANY OTHE R AGREEMENT OR ARRANGEMENT FOR THE . OF ANY LAND. . FURTHER, ACCORDING TO THE SAID CIRCULAR, FOR THE PURPOSES OF SECTION 194-I, PAYMENT MADE TO HOTELS FOR HOTEL ACC OMMODATION WHETHER IN THE NATURE OF LEASE OR LICENCE AGREEMENTS ARE COVERED SO LONG AS SUCH ACCOMMODATION HAD BEEN TAKEN ON REGULAR BASIS . HOWEVER, IN THE CASE OF THE ASSESSEE, IT IS FOUND THAT THE PAYMENT MADE TO HOTEL FOR BOOKING ROOM IS NOT TAKEN ON REGU LAR BASIS AND ONLY AS PER RATE CONTRACT. IN VIEW OF THAT MATTER, WE ARE OF THE CON SIDERED OPINION THAT THE LD.CIT(A) HAS NOT CORRECTLY RELIED ON THE CIRCULAR IN ITS LETTER AND SPIRIT. THEREFORE, THE ASSESSEE CASE IS NOT ATTRACTED BY THE PROVISIONS OF SECTION 194-I. I N VIEW OF THAT MATTER, SINCE THE ASSESSEE IS NOT REQUIRED TO DEDUCT TDS ON THE SAID EXPENDITU RE, WE DELETE THE IMPUGNED DISALLOWANCE MADE BY THE AO AND THE CONFIRMED BY TH E LD.CIT(A). 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF NOVEMBER, 2013. SD/- SD/- (SANJAY ARORA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 20.11.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.