B S R & ASSOCIATES, MUMBAI V. ADDL CIT CIR 11(2), MUMBAI

ITA 6012/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83508 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 29-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V R PATIL
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO.6012/MUM/2011 (A.Y.2007-08) BSR & ASSOCIATES , LODHA EXCELLUS, 1 ST FLOOR, APOLLO MILLS COMPOUND, N.M.JOSHI MARG, MAHALAXMI, MUMBAI 400 011. PAN:AADFB 6889R ADDL. CIT, CIR.11(2), AAYKAR BHAVAN, MUMBAI 400 020 ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY : S/SHRI PRASHANT MAHESHWARI/ C.S.ANANTHAN ()$% * + * + * + * + /RESPONDENT BY :SHRI V.R.PATIL ' * ,-' / / / / DATE OF HEARING : 14.8.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 14.08.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-3, MUMBAI DATED 9/3/2011 FOR ASSESSME NT YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 OF RS.13,50,208/- OUT OF SUPPO RT SERVICE CHARGES OF RS.60,72,184/- REIMBURSED TO KPMG, AN INDIAN PARTNE RSHIP FIRM. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ADDITION OF RS .3,86,923/- IN RESPECT OF UNDISCLOSED FEES FOR PROFESSIONAL SERVICES. 2. APROPOS GROUND NO.1, IN PURSUANCE TO FACILITIES SHARING AGREEMENT ENTERED INTO BY THE ASSESSEE WITH KPMG A TOTAL PAYMENT OF R S.60,72,184/- WAS MADE. THOUGH THE ASSESSEE HAD DEDUCTED A SUM OF RS.8,95,6 45/- UNDER THE VARIOUS PROVISION OF INCOME TAX ACT, 1961 (THE ACT), FOR A SUM OF RS.47,21,966/- LEAVING ITA NO.6012/MUM/2011 (A.Y.2007-08) 2 BEHIND A SUM OF RS.13,50,218/- ON WHICH NO TAX WAS DEDUCTED BUT ACCORDING TO AO THE ASSESSEE WAS REQUIRED TO DEDUCT TAX UNDER SECTI ON 194C OF THE ACT ON THE ENTIRE PAYMENTS. THEREFORE, FOR NON-DEDUCTION OF TAX AND PAYMENT THEREOF FOR A SUM OF RS.13,50,218/0 THE AO ADDED THE TOTAL AMOUNT TO THE INCOME OF THE ASSESSEE. THE POSITION REGARDING DEDUCTION OF TAX FOR A TOTAL SUM OF RS.60,72,184/- STAND DESCRIBED IN THE CHART WHICH WAS STATED TO BE SUBMI TTED BEFORE THE AO AS WELL AS LD. CIT(A) AND COPY OF WHICH IS PLACED AT PAGE -1 OF TH E PAPER BOOK AND THE SAME IS REPRODUCED BELOW: AMOUNT( RS.) TDS RATE TDS AMOUNT (RS.) DISALLOWAN CE AS PER APPELLANT DISALLOWANC E AS PER AO DECISION IN KIPL ASSESSMEN T DECISION IN KIPL APPEAL OCCUPANCY 3,918,943 1941 879,411 0 1941 ONLY ON RENT FORMING PART OF OCCUPANC Y TAX NOT DEDUCTED AT COMMUNICATI ON 568,944 NIL 0 568,944 SOURCE ON THE NIL 230,317 194C 5,159 ENTIRE PAYMENT HELD THAT TAX NIL TECHNOLOGY 458,894 NIL 0 458,894 OUGHT TO HAVE NIL 175,346 194C 3,928 BEEN DEDUCTED NIL 127,403 194J 7,147 ON THE ENTIRE NIL PAYMENT UNDER CONSUMABLES 322,381 NIL 0 322,381 SECTION 194C NIL 269.956 194C NIL TOTAL 6,072,184 895,645 1,350,219 IF THE PROVISION OF SECTION 194C ARE APPLIED TO TH E ENTIRE PAYMENT OF RS.60,72,184. THE TDS @ 2.24% WORKS OUT TO RS.1,36,017. THE TOTAL TAX DEDUCTED BY THE APPELLANT IS RS.8,94, 645/- WHICH IS MORE THAN RS.1,36,017/- 2.1 LATER ON AO RECTIFIED THE ADDITION AND LIMITED THE ADDITION TO THE EXTENT OF RS.13,50,218/-. THE ASSESSEE IS AGITATING THIS ADD ITION MERELY ON THE GROUND THAT EVEN WITHOUT CONSIDERING THE MERITS OF THE CASE NO ADDITION COULD BE MADE AS THE TAX DEDUCTED BY THE ASSESSEE ITSELF IS MANIFOLD MORE TH AN THE TAX REQUIRED TO BE ITA NO.6012/MUM/2011 (A.Y.2007-08) 3 DEDUCTED UNDER SECTION 194C OF THE ACT. IN THE NOT E MADE BELOW THE CHART IT HAS BEEN MENTIONED THAT THE TOTAL LIABILITY FOR DEDUCTI ON OF TAX U/S.194C OF THE ACT ON ENTIRE AMOUNT OF RS.60,72,184/- WILL BE A SUM OF RS .1,36,017/- AS AGAINST WHICH THE ASSESSEE HAS ALREADY DEDUCTED AND PAID TAX FOR A SUM OF RS.8,95,645/-. 3. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE ASS ESSEE HAS FAILED TO DEDUCT TAX ON THE PAYMENT OF RS.13,50,218/-. LD. DR SUBM ITTED THAT EXCESS PAYMENT OF TDS MADE IN RESPECT OF ANOTHER BALANCE AMOUNT WILL NOT EXONERATE THE ASSESSEE FROM LIABILITY OF DEDUCTION OF TAX ON THE PAYMENT O N WHICH NO TAX HAS BEEN DEDUCTED BY THE ASSESSEE. THUS, HE PLEADED THAT O RDER PASSED BY LD. CIT(A) SHOULD BE UPHELD. 4. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE ENTIRE AMOUNT OF RS.60,72,184/- HA S BEEN PAID BY THE ASSESSEE IN PURSUANCE TO SINGLE CONTRACT. THE ENTIRE AMOUNT H AS BEEN CONSIDERED BY THE AO TO BE ELIGIBLE FOR DEDUCTION OF TAX UNDER SECTION 194C AND THIS FACT IS CLEAR FROM THE FOLLOWING OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER. HOWEVER, IT IS SEEN THAT OUT OF RS.60,72,184/- TDS HAS BEEN DEDUCTED ON RS.47,21,966/- AND NOT DEDUCTED ON RS.13,50,218/-. THE ARS CONTENTION THAT THE TOTAL TDS IS MORE THAN THE RATE SPECIFIED U/S.194C WILL NOT NEGATE THE DISALLOWANCE BECAUSE TDS IS TO BE SPECIFIC TO EACH PAYMENT. IN VIEW OF THE ABOVE, IT IS HELD THAT THE PAYMENTS BEING MADE BY THE ASSESSEE COMPANY TO KPMG IN PURSUANCE OF FACILITY-SHARING AG REEMENT, IS NOTHING BUT IN THE NATURE OF CONTRACTUAL PAYMENTS. ACCORDINGLY, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE U/S. 194C OF THE IT ACT AT THE TIME OF MA KING PAYMENT MADE TO KPMG. THE ASSESSEE HAVING FILED TO DO SO, THE PAYMENT MADE TO KPMG IS DISALLOWABLE U/S.40(A)(IA) OF THE ACT. THEREFORE, THE AMOUNT OF RS.60,72,184/- IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. IN OUR CONSIDERED OPINION THE AO HAS COMMITTED AN E RROR IN MAKING DISALLOWANCE OF RS.13,50,218/- ON THE GROUND THAT ASSESSEE DID NO T DEDUCT TAX UPON THE SAID AMOUNT IGNORING THE FACT THAT ON THE OTHER PART OF THE PAYMENTS THERE WAS EXCESS PAYMENT OF TDS AND THE SAID EXCESS TDS COULD BE APP ROPRIATED TO THE AMOUNT ON WHICH ASSESSEE DID NOT PAID TAX AS THE ENTIRE CONTR ACT WAS SINGLE CONTRACT. THE MATTER WOULD HAVE BEEN DIFFERENT IF AO HAD ACCEPTED THE CONTENTION OF THE ASSESSEE THAT PART OF THE AMOUNT PAID BY THE ASSESSEE WAS AL SO LIABLE FOR DEDUCTION UNDER ITA NO.6012/MUM/2011 (A.Y.2007-08) 4 OTHER VARIOUS SECTIONS VIZ. 194 I,194 J AS THE CLAI MED BY THE ASSESSEE. THE AO DID NOT ACCEPT THE LIABILITY OF THE ASSESSEE UNDER OTHE R PROVISIONS OF THE ACT FOR DEDUCTION OF TAX AND MADE LIABLE TO THE ASSESSEE ON LY FOR DEDUCTION OF TAX UNDER SECTION 194C OF THE ACT. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT LD. CIT(A) WAS NOT JUSTIFIE D IN SUSTAINING THE ADDITION OF RS.13,50,218/- ON ACCOUNT OF APPLICATION OF SECTION 40(A)(IA) OF THE ACT. THE ADDITION UPHELD BY LD. CIT(A) IS DELETED AND GROUND NO.1 IS ALLOWED. 5. APROPOS GROUND NO.2, UPON THE BASIS OF AIR INFOR MATION THE ASSESSEE HAD RECEIVED CERTAIN PAYMENTS AGGREGATING TO RS.87,27,3 29/-. THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SAME. THE SAID DIFFERENC E WAS IN RESPECT OF 56 ENTRIES. 50 ENTRIES WERE RECONCILED AMOUNTING TO RS.78,88,752/ - BEFORE THE AO ITSELF. FURTHER AN AMOUNT OF RS.8,38,577/- WAS RECONCILED BEFORE LD . CIT(A) REMAINING AMOUNT OF RS.3,86,923/- IS ADDED TO THE INCOME OF THE ASSESSE E FOR WHICH THE ADDITION HAS BEEN SUSTAINED BY LD. CIT(A). THE ASSESSEE IS AGG RIEVED, HENCE, HAS FILED GROUND NO.2. 5.1 AFTER NARRATING THE FACTS IT WAS THE CASE OF LD . AR THAT SINCE SUBSTANTIAL PART I.E. 95.57% OF ENTIRE AMOUNT WAS RECONCILED AND THE REMAINING AMOUNT OF RS.3,86,923/- COULD NOT BE RECONCILED AS EITHER THE PARTY WAS NOT AVAILABLE OR THERE WAS NO ENTRY AS SUCH. LD. AR HAS SUBMITTED BEFORE US THE LIST AS WELL AS THE CHART BY WHICH THE ASSESSEE WAS REQUIRED TO EXPLAIN ENTR IES. THE TWO ENTRIES REMAIN TO BE EXPLAINED ARE ENTRIES AT SERIAL NUMBER 23 DATED 31/3/2007 RELATING TO M/S.NEELGIRI MECHANISED BAKERY, 28, MAGRAT ROD, BAN GALORE AMOUNTING TO RS.1,68,360/- AND OTHER ENTRY IS AT SERIAL NUMBER 5 0 DATED 13/12/2006 IN THE NAME OF GENERAL ELECTRIC INTERNATIONAL INC. C/O. GM R ENERGY LTD. MANGALORE, AMOUNTING TO RS.2,18,563/-. THUS, IT WAS PLEADED B Y LD. AR THAT ADDITION CANNOT BE SUSTAINED WITH REGARD TO THESE TWO PARTIES AS NO THING WAS RECEIVED BY THE ASSESSEE FROM THEM. 6. ON THE OTHER HAND, LD. DR SUBMITTED THAT ASSESSE E WAS PROVIDED WITH THE LIST AND WHATEVER ENTRIES THE ASSESSEE COULD RECONCILE RELIEF TO THAT EXTENT WAS GIVEN. IN RESPECT OF ITEMS WHICH HAVE NOT BEEN RECONCILED THE ADDITION HAS RIGHTLY BEEN SUSTAINED BY LD. CIT(A) AND HIS ORDER SHOULD BE UPH ELD. ITA NO.6012/MUM/2011 (A.Y.2007-08) 5 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL PRODUCED BEFORE US, WE ARE OF THE OPINION THAT SINCE ASSESSEE COULD NOT RECONCILE THE AMOUNT OF RS.3,86,923/-, THE ADDITION WAS RIGHTLY SUSTAINED B Y LD. CIT(A). WE DECLINE TO INTERFERE AND THIS GROUND OF THE ASSESSEE IS DISMIS SED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MATTER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH AUG., 2014. 1 * ./0 2'3 14.08.2014 / * 9 SD/- SD/- (RAJENDRA) (I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 14TH AUG. 2014. 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