ACIT 11(1), MUMBAI V. QUALITY CINE LABS P. LTD, MUMBAI

ITA 6109/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8200 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Non-deduction of tax
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, AM & SHRI AMIT SHUKLA, JM I.T.A. NO.6109/MUM/2011 . (ASSESSMENT YEAR: 2008-2009 ) ACIT 11(1), MUMBAI-400 020. M/S QUALITY CINE LABS PVT. LTD., QLAB BUILDING, PLOT A-17, VEERA DESAI INDL. AREA, ANDHERI (WEST), MUMBAI-400 053. PAN NO.AAACQ 0233 A APPELLANT VS. RESPONDENT APPELLANT BY : MR. RITESH MISRA RESPONDENT BY : DR. K.SHIVARAM DATE OF HEARING : 25 TH JULY 2012 DATE OF PRONOUNCEMENT : 1 ST AUGUST, 2012 O R D E R PER AMIT SHUKLA (J.M.) : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST ORDER DATED 03-06-2011 PASSED BY THE CIT(A )-3, MUMBAI, IN RELATION TO QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2008-2009 ON THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-3, MUMBAI HAS ERRED IN DELETING THE DISALLOWANCE TO THE REMUNERATION PAID TO THE DIRECTORS OF THE COMPANY AND ERRED IN IGNOR ING THE PROVISION OF THE COMPANYS ACT, 1956 U/S. 198 WHICH HAS WIDE IMPLICATION OVER CORPORATE FUNCTIONING. THE SAID SECTION 198 IS A COMPARABLE ADOPTED BY THE AO TO DISALLOW THE EXCESS PAYMENTS MADE TO DIRECTORS U/S. 40A(2B) WHICH IS REASONABLE PARAMETER FOR COMPARISON. ITA NO. :6109/11 2 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2 . AT THE OUTSET, BOTH THE PARTIES AGREED THAT THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2007-2008, PASSED IN ITA NO.6248/MUM/2010 , VIDE ORDER DATED 29.3.2012 . 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, WHICH IS A PRIVATE LIMITED COMPANY, HAS CLAIMED ` .78,19,797/- AS DIRECTORS REMUNERATION PAID TO ITS DIRECTORS OF THE COMPANY. ALL THE DIRECTORS ARE HAVING MORE THAN 25 YEARS OF EXPERIENCE. THE REMUNERATION PAID TO THE DIRECTORS WERE COMMENSURATE WITH THE EX PERIENCE AND SERVICE RENDERED BY THEM AND ALSO THE SIMILAR PAYMENTS MADE IN THE EARLIER YEARSHAVE BEEN ALLOWED. THE ASSESSING OFFICER, HOWEVER, HAS DISALLOWED THE CLAIM AFTER INVOKING THE PROVISIONS OF SECTION 40A(2) FOLLOWING THE EARLIER YEARS DECISION. 4. THE CIT(A) HAS ALSO DELETED THE ADDITION AFTER FOLLOWING THE PREDECESSORS ORDER DATED 21-10-2007. T HE EARLIER ORDER OF THE CIT(A) NOW STANDS CONFIRMED BY THE ITAT. 5. AFTER CAREFULLY CONSIDERING THE FACTS AND THE FINDINGS OF THE ITAT, WE FIND THAT THIS ISSUE STANDS SQUAR ELY COVERED BY THE DECISION OF THE ITAT, WHEREIN IT HAS BEEN OB SERVED AND HELD AS UNDER :- ITA NO. :6109/11 3 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CIT(A) GAVE A CATEGORICAL FI NDING THAT THE AO HAD NOT BROUGHT ANY OTHER FACT, EVI DENCE OR ARGUMENT WHILE QUESTIONING THE QUANTUM OF REMUNERATION AND COMMISSION PAID TO DIRECTORS. HE FURTHER GAVE A FINDING THAT THE PROVISIONS OF SECTION 198 HAVE NO APPLICATION TO THE ASSESSEE, WHO IS A PRIVATE LIMITED COMPANY AND NOT A PRIVATE COM PANY WHICH IS SUBSIDIARY OF A PUBLIC COMPANY. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DELET ING THE DISALLOWANCE MADE BY THE AO U/S 40A(2) OF THE ACT. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. GROUND NO. 2 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN DIRECTING THE AO TO REST RICT DISALLOWANCE U/S 40(A)(IA). 8. THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS BREAK UP OF SUB-CONTRACTUAL SERVICES RENDERED BY VARIOUS PERSONS TO THE ASSESSEE. FROM THE DETAILS FILED BY THE ASSESSEE, THE AO OBSERVED THAT VARIOUS SERVICES WERE PROFESSIONAL OR TECHNICAL IN NATURE AND HENCE LI ABLE FOR DEDUCTION U/S 194J, WHEREAS, THE ASSESSEE HAD DEDUCTED THE SAME U/S 194C. THE AO, ACCORDINGLY, WORKED OUT THE DISALLOWANCE U/S 194J. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS AND NATURE OF SERVICES/WORK RENDERED IN RESPECT OF THE PAYMENTS MADE. AFTER FURNISHING THE DETAILS BY THE ASSESSEE, THE CIT(A) REMANDED THEM TO AO TO EXAMINE AND PRESENT HIS VIEWS IN THE MATTER. HOWEVER, NO REPORT CA ME FROM AO. AFTER CONSIDERING THE FACTS OF THE CASE, THE CIT(A) HELD THAT DEDUCTION OF TAX U/S 194C BY THE ASSESSEE WAS RIGHTLY DONE, THEREFORE, THE DISALLOWANCE OF AMOUNT U/S 40(A)(IA) TO BE LIMITED TO PAYMENTS MADE AT SR. NO. 3,10,12 & 13 OF THE TABLE GIVEN IN THE ASSESSMENT ORDER AT PAGE 4. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. ITA NO. :6109/11 4 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE INVOLVED IN THIS GROUND IS WHETHER TDS HAS TO BE MADE U/S 194C OR 194J. THE ASSESS EE HAD MADE TDS U/S 194C AND THE CASE OF THE REVENUE IS THAT TDS COULD HAVE BEEN MADE BY THE ASSESSEE U/S 194J. THE CASE OF THE ASSESSEE IS THAT ONCE TDS IS DEDUCTED WHETHER U/S 194C OR UNDER 194J, NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT. FOR THIS PROPOSITION, HE RELIED UPON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF DCIT VS. CHANDABHOY & JASSOBHOY, [2012] 49 SOT 448(MUM.) WHEREIN IT WAS HELD THAT PROVISIONS OF SECTION 40(A)(IA) CAN BE INVOKED IN EVENT OF NON-DEDUCTION OF TAX AT SOURCE BUT NOT FOR LESSER DEDUCTION OF TAX AT SOURCE. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE DEDUCTED TAX AT SOURCE, THEREFORE, THE PROVIS IONS OF SECTION 40(A(IA) DO NOT APPLY TO THE CASE OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS COUNT AND ACCORDINGLY, THE SAME IS HEREBY UPHELD DISMISSING THE GROUND RAISED BY THE REVENUE. 6 . THUS, RESPECTFULLY FOLLOWING THE AFORESAID DECISION, THE GROUNDS RAISED BY THE DEPARTMENT STANDS DI SMISSED AND THE ASSESSEES CLAIM IS ALLOWED. 7 . IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST AUGUST, 2012 . SD/- SD/- ( B. RAMAKOTAIAH) ( AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 1 ST / AUGUST/2012 PKM. ITA NO. :6109/11 5 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI