ACIT, Circle - 3, Asansol, Asansol V. Smt. Sudha Devi Saraf, Kolkata

ITA 686/KOL/2011

• Counselvise Citation: [2013] 119 COUNSELVISE.COM (IT) 3008 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-05-2011
• Court: TRIBUNAL
• Department Lawyers: ASOKE KUMAR DEY LD
• Assessee Lawyers: ARVIND AGARWAL LD
• Keywords: Services rendered outside India
• Section: 194C

Judgement Text

ITA NO. 686/KOL/11 & CO NO.30/KOL/11-PB-A-GM 1 , A , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A CALCUTTA () BEFORE . . , SHRI P . K. BANSAL., ACCOUNTANT MEMBER !'# /AND $%$& 1(, SHRI GEORGE MATHAN, JUDICIAL MEMBER #) / ITA NO. 686/KOL/2011 A.Y 2008-09 ACIT, CIRCLE-3, ASANSOL SMT. SUDHA DEVI SARAF PAN: AIXPS 9773P ((* / APPELLANT ) - ' - - VERSUS -. (,(*/ RESPONDENT ) C.O NO. 30/KOL/2011 [ IN ITA NO. 686/KOL/2011] A.Y 2008-09 SMT. SUDHA DEVI SARAF PAN: AIXPS 9773P ACIT, CIRCLE-3, ASANSOL ((* / APPELLANT ) - ' - - VERSUS -. (,(*/ RESPONDENT ) (* .! /FOR THE APPELLANT /SHRI ASOKE KUMAR DEY, LD. SR. DR ,(* .! / FOR THE RESPONDENT: / SHRI ARVIND AGARWAL, ADVOCATE, LD.AR /'0 1 2 /DATE OF HEARING : 07-02-2013 34 1 2 /DATE OF PRONOUNCEMENT: 14-02-2013 / ORDER 56 / PER BENCH ITA NO. 686/KOL/2011 IS AN APPEAL FILED BY THE R EVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), ASANSOL IN APPEAL NO. 106/CIT(A)/ASL/R-3/ASL/10-11 DATED 24-02-2011 FOR THE ASSESSMENT YEAR 2008-09 AND THE C.O NO. 30/KOL/2011 IS A CROSS OBJECTION FILED BY THE ASSESSEE IN THE REVENUES APPEAL. 2. SHRI ASOKE KUMAR DEY, LEARNED SR. DR REPRESENT ED ON BEHALF OF THE REVENUE AND SHRI ARVIND AGARWAL, ADVOCATE REPRESENTED ON BEHALF OF THE A SSESSEE. ITA NO. 686/KOL/2011 A.Y 2008-09 (BY THE REVENUE) 3. IN THIS APPEAL, THE REVENUE HAS RAISED FOLLOWIN G GROUNDS OF APPEAL:- 1. THAT THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS BY ALLOWING THE RELIEF OF DISALLOWANCE OF RS.80,84,781/- MADE BY AO BY HOLDING THAT PROVISION OF SECTION 172 IS APPLICABLE AND NO DEDUC TION U/S. 194C OR 195 IS REQUIRED TO BE MADE LEADING TO NON APPLICATION OF PROVISION OF SECTION 40(A)(IA). ITA NO. 686/KOL/11 & CO NO.30/KOL/11-PB-A-GM 2 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS BY ALLOWING THE RELIEF OF DISALLOWANCE OF RS.1,31,375/- MADE BY AO UNDER THE HEAD PURCHASE OF LAC AND SHELLAC. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS BY ALLOWING THE RELIEF OF DISALLOWANCE OF RS. 94,776/- MADE BY AO U NDER THE HEAD COMMISSION. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACTS BY ALLOWING THE RELIEF OF DISALLOWANCE OF RS.3,00,000/- MADE BY A O UNDER DIFFERENT HEADS. . 4. IN REGARD TO GROUND NO.1, WHICH WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN ALLOWING THE RELIEF OF THE DISALLOWANCE OF RS..80,84,781/- MADE BY THE AO BY HOLDING THAT PROVISION OF SECTION 17 2 WAS APPLICABLE AND NO DEDUCTION U/S. 194C OR 195 W AS REQUIRED TO BE MADE LEADING TO NON-APPLICATION OF PROVISION OF SECTION 40(A)(IA). 5. IT WAS THE SUBMISSION BY THE LEARNED SR. DR THAT THE ASSESSEE HAS MADE THE PAYMENTS TO SHIPPING AGENTS. IT WAS THE SUBMISSION THAT THE PAY MENTS HAS BEEN MADE TO THE AGENTS OF THE SHIPPING COMPANIES, WHO WERE NON RESIDENTS OF INDIA. IT WAS THE SUBMISSION THAT THE AGENTS WERE RESIDENTS. IT WAS THE FURTHER SUBMISSION THAT NO EVIDENCE HAS BE EN PRODUCED TO SHOW THAT THE SHIP OWNERS HAD FILED THEIR RETURNS IN INDIA. IT WAS SUBMITTED BY HIM T HAT THE AO HAS HELD THAT IN VIEW OF PROVISIONS OF SECTION 194C OR 195 OF THE ACT THE TDS WAS LIABLE T O BE MADE AND AS NO TDS HAS BEEN MADE, THE PROVISIONS OF SECTION 40(A)(IA) HAS BEEN INVOKED TO DISALLOW THE SAID EXPENSES. IT WAS SUBMITTED BY HIM THAT ON APPEAL, THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE BY HOLDING THAT THE ISSUE WAS SQUARELY COVERED BY THE PROVISIONS OF SECTION 172 A ND CONSEQUENTLY, NO TDS WAS LIABLE TO BE DEDUCTED U/S. 194C OR 195 OF THE ACT. IT WAS THE S UBMISSION THAT THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 6. IN REPLY, THE LEARNED AR FOR THE ASSESSEE DREW OUR ATTENTION TO THE PAGES 85-108 OF THE APB [ ASESSEES PAPER BOOK] AND SUBMITTED THAT ALL THE A GENTS HAVE SUBMITTED THE CERTIFICATES, WHEREIN IT HAS BEEN MENTIONED THAT THE RETURNS HAVE BEEN FILED B Y THE AGENTS U/S. 172 OF THE ACT ON BEHALF OF TH E PRINCIPLE. HE FURTHER DREW OUR ATTENTION TO PAGE S 14-23 OF THE APB, WHICH WERE THE DETAILS OF THE SHIPPING COMPANIES AND THEIR AGENTS. HE FURTHER D REW OUR ATTENTION TO THE ORDER OF THE LEARNED CIT(A), WHEREIN THE LEARNED CIT(A) HAS CATEGORICALL Y GIVEN A FINDING THAT THE AO HIMSELF HAS MENTIONED THE NATURE OF WORK CARRIED OUT BY THE SHI PPING COMPANIES AND THEIR AGENTS. IT WAS THE SUBMISSION THAT CIRCULAR NO. 723 DTD. 19-9-1995 ISS UED BY THE CBDT COVERS THE FACTS OF THIS CASE. IT WAS THE SUBMISSION THAT THE ORDER OF THE LEARNED CI T(A) ON THIS ISSUE WAS LIABLE TO BE UPHELD. ITA NO. 686/KOL/11 & CO NO.30/KOL/11-PB-A-GM 3 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE FACTS IN THE PRESENT CASE SHOWS THAT THE ASSESSEE HAS MADE THE PAYMENTS TOWARDS SHIP PING BUSINESS OF THE NON-RESIDENTS THROUGH SHIPPING AGENTS. SPECIAL PROCEDURES ARE PROVIDED U/S. 172 OF THE ACT FOR PAYMENT OF TAXES IN CASE OF ANY SHIPPING OWNERS OR CHARTERS BY NON-RESIDENT, W HICH CARRIES PASSENGERS, LIVE STOCK MATERIAL OR GOODS SHIPPED AT A PORT OF INDIA. THE BOARD CIR CULAR NO. 723 DATED 19-09-1995 (SUPRA) CLARIFIES BOTH THE PROVISIONS OF SECTION 172 AND 194C OF THE ACT. IT HAS BEEN PROVIDED THAT IN SUCH A CASE THE PROVISIONS OF SECTION 172 WOULD APPLY AND NO DEDUC TION OF TAX IS REQUIRED TO BE MADE AS PER PROVISION OF SECTION 194C OF THE ACT. THE AO HAS N OT MADE OUT ANY CASE THAT THE ASSESSEE HAS PAID ANY AMOUNT TO THE RESIDENTS. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOE S NOT CALL FOR ANY INTERFERENCE. THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUES APPEAL IS DISMISS ED. 8. IN REGARD TO GROUND NO. 2, WHICH WAS AGAINST TH E ACTION OF THE LEARNED CIT(A) IN ALLOWING THE RELIEF OF DISALLOWANCE OF RS.1,31,375/- MADE BY THE AO UNDER THE HEAD PURCHASE OF LAC AND SHELLAC, IT WAS SUBMITTED BY THE LEARNED SR.DR THAT THESE WERE LOCAL PURCHASES AND THE AO HAS DISALLOWED 1% OF THE PURCHASES BY HOLDING THAT INF LATION OF THE LOCAL PURCHASES COULD NOT BE RULED OU T. IT WAS THE FURTHER SUBMISSION THAT THE LEARNED CIT( A) HAS DELETED THE DISALLOWANCE BY HOLDING THAT THE AO HAS NOT DONE ANY ENQUIRY ON THE SELLERS IN RES PECT OF THE ESTIMATED DISALLOWANCE. IT WAS THE SUBMISSION THAT THE ORDER OF THE LEARNED CIT(A) WA S LIABLE TO BE REVERSED. 9. IN REPLY, THE LEARNED AR FOR THE ASSESSEE SUB MITTED THAT IN THE ABSENCE OF ANY SPECIFIC DEFECTS NO ESTIMATED DISALLOWANCE WAS LIABLE TO B E MADE. HE HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A) IN DELETING THE SAME. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDERS OF THE AO AND THE LEARNED CIT(A) SHOW THAT EVEN THOUGH THE DETAILS WERE FILE D BEFORE THE AO, NO DEFECTS HAVE BEEN POINTED OUT BY THE AO TO SHOW THAT THERE WAS ANY INFLATION IN THE PURCHASES. IN THE ABSENCE OF ANY SPECIFIC DEFEC T OR ANY SPECIFIC INFLATION OF THE LOCAL PURCHASES POINTED OUT BY THE AO, NO ESTIMATED DISALLOWANCE C AN BE MADE. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW T HAT THE FINDING OF THE LEARNED CIT(APPEALS) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR A NY INTERFERENCE. THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUES APPEAL STANDS DISMISSED. 11. IN REGARD TO GROUND NO.3, WHICH WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.94,776/- MADE BY THE AO UNDER THE HEAD COMMISSION, IT WAS THE SUBMISSION BY THE LEARNED SR. DR THAT IN THE COURSE OF ASSESSMEN T, THE AO HAS DISALLOWED THE AMOUNT OF RS.94,776/- ITA NO. 686/KOL/11 & CO NO.30/KOL/11-PB-A-GM 4 REPRESENTING THE COMMISSION PAYMENT TO THE NON-RE SIDENT, SHRI OMAR CHIRABI., IT WAS THE SUBMISSION THAT THE SAID NON RESIDENT, SHRI OMAR CHIRABI HAS BEEN PAID COMMISSION OF $200 PER M.TON. IT WAS FURTHER SUBMITTED BY HIM THAT SAID NON-RESIDENT HA S EARNED COMMISSION FROM INDIA. THE INCOME OF SHRI OMAR CHIRABI ACCRUES IN INDIA. IT WAS THE SUB MISSION THAT THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE ON THE GROUND THAT THE SAID AMOUNT HA S BEEN PAID OUTSIDE INDIA FOR SERVICES RENDERED OUTSIDE INDIA. IT WAS THE SUBMISSION THAT THE ORD ER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 12. IN REPLY, THE LEARNED AR FOR THE ASSESSEE HAS S UBMITTED THAT THE ISSUE WAS SQUARELY COVERED BY THE CBDT CIRCULAR NO. 786 DATED 07-07-2000 AS ALSO CIRCULAR NO. 23 DATED 23-7- 1969, WHEREIN IT HAS BEEN CLARIFIED THAT WHERE THE NON-RESIDENT AGE NT OPERATES OUTSIDE INDIA, NO PART OF HIS INCOME ARISES IN INDIA. THE PAYMENTS MADE TO SAID NON-RE SIDENT, SHRI OMAR CHIRABI ARE NOT LIABLE TO BE TAX IN INDIA. HE FURTHER PLACED RELIANCE ON THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF G.E INDIA TECHNOLOGY CENTRE PVT. LTD VS. CIT REPORTED I N 234 CTR 153 (SC). HE HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE AO HAS ACCEPTED THAT SHRI OMAR CHIRABI IS A NON RESIDENT, WHO HAS RENDERED HIS SERVICES OUT SIDE INDIA. A PERUSAL OF THE ORDER OF THE LEARNED C IT(A) AS ALSO THE REPLY OF THE ASSESSEE BEFORE TH E AO CLEARLY SHOW THAT THE PAYMENT TO SHRI OMAR CHIRA BI HAS BEEN MADE OUTSIDE INDIA. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE INCOME OF SHRI OMAR CHIRABI IS NOT TAXABLE IN INDIA IN VIE W OF THE SAID CBDT CIRCULARS (REFER TO SUPRA) AS ALS O THE SAID DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF G.E INDIA TECHNOLOGY CENTRE PVT. LTD (R EFER TO SUPRA). IN THE CIRCUMSTANCES, WE ARE OF TH E VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. WE UPHOLD THE SAME. THIS GROUND OF RE VENUES APPEAL IS DISMISSED. 14. IN REGARD TO GROUND NO.4, WHICH WAS AGAINST THE ORDER OF THE LEARNED CIT(A) IN ALLOWING THE RELIEF OF DISALLOWANCE OF RS.3 LAKH MADE BY THE AO UNDER DIFFERENT HEADS, IT WAS THE SUBMISSION BY THE LEARNED SR. DR THAT THE ISSUE WAS IDENTICAL TO GROUND NO.2 OF THE REVENUES APPEAL. IT WAS THE SUBMISSION THAT THE ESTIMATED DISALLOWANCES HAS BE EN MADE BY THE AO, WHICH HAS BEEN DELETED BY THE LEARNED CIT(A). 15. IN REPLY, THE LEARNED AR OF THE ASSESSEE HAS VE HEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(APPEALS). IT WAS THE FURTHER SUBMISSION THAT TH E ESTIMATED DISALLOWANCE WAS NOT CALLED FOR. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDERS OF THE AO AND THE LEARNED CIT(APPEALS) CLEARLY SHOW THAT THE DISALLOWANCE IS ON ACCOUNT OF SUPERVISION CHARGES, EXPORT ITA NO. 686/KOL/11 & CO NO.30/KOL/11-PB-A-GM 5 EXPENSES, PACKING EXPENSES, LORRY HIRE CHARGES AND MOTOR CAR AND TELEPHONE EXPENSES. IT IS NOTICED THAT ALL THE DISALLOWANCE ARE MADE ON ESTIMATE BA SIS AND NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE AO. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DELETION MADE BY THE LEARNED CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CA LL FOR ANY INTERFERENCE. THIS GROUND OF THE REVENU ES APPEAL IS ALSO DISMISSED. 17. THE ABOVE REVENUES APPEAL BEING ITA NO. 686 /KOL/2011 FOR THE ASSESSMENT YEAR 2008-09 IS DISMISSED AS STATED ABOVE. C.O NO. 30/KOL/2011 [IN ITA NO. 686/KOL/11] A.Y 20 08-09 (BY THE ASSESSEE) 18. IN THIS CROSS OBJECTION, THE ASSESSEE HAS RAISE D THE FOLLOWING EFFECTIVE GROUND :- FOR THAT, IN VIEW OF FACTS AND CIRCUMSTANCES OF TH E CASE, LD. CIT(A) ERRED ON FACTS AS WELL AS IN LAW IN CONFIRMING DISALLOWANCE OF RS.2,85,825/- MADE BY LD. AO OUT OF CLAIM EXPENDIT URE UNDER THE HEAD FOREIGN TRAVELLING. 19. IN REGARD TO THIS GROUND, WHICH WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.2,85,825/- MADE BY THE AO OUT OF CLAIM OF EXPENDITURE UNDER THE HEAD FOREIGN TRAVELLING, IT WAS THE SUBMISSION BY THE LEARNED AR FOR THE ASSESSEE THAT THE ASSESSEES HUSBAND, SHRI SUSHIL KUMAR SARAF HAD TRAVELLED TO VARIOUS PL ACES IN JAKARTA, LONDON, HUMBARG & AMSTERDAM FOR THE BUSINESS PURPOSES OF THE ASSESSEE. IT WAS THE SUBMISSION THAT ASSESSEES HUSBAND HOLDS GENER AL POWER OF ATTORNEY EXECUTED IN HIS FAVOUR BY THE A SSESSEE, SMT. SUDHA DEVI SARAF FOR LOOKING AFTER HER BUSINESS. IT WAS THE SUBMISSION THAT ASSESSEE S BUSINESS CONSISTS SOLELY OF EXPORT. IT WAS THE SUBMISSION THAT FOREIGN TRAVEL WAS NECESSARY FOR MAINTAINING AND INCREASING OF BUSINESS. IT WAS T HE SUBMISSION THAT THE AO HAS DISALLOWED 50% OF THE FO REIGN TRAVEL EXPENSES BY HOLDING THAT THE ASSESSEES HUSBAND ALSO HAD BUSINESS IN HIS OWN IND IVIDUAL CAPACITY NAMELY M/S. SARAF INDUSTRIES AND M/S. SARAF INTERNATIONAL LTD. IT WAS THE SUBMISSION THAT THE AO HAS DISALLOWED @50% OF THE FOREIGN TRAVEL EXPENSES HOLDING THAT THE ASSESSEES HUSBAN D TRAVELLED WOULD ALSO HAVING BEEN PARTLY FOR THE BENEFIT OF THE PROMOTING BUSINESS INTEREST IN WHI CH HE WAS ALSO INVOLVED. THE LEARNED AR FOR THE ASSESSEE ALSO SUBMITTED THAT THE LEARNED CIT(APP EALS) HAS NOT GRANTED ANY RELIEF TO THE ASSESSEE . IT WAS THE SUBMISSION THAT DISALLOWANCE OF 50% WAS EXC ESSIVE. 20. IN REPLY, THE LEARNED SR.DR HAS VEHEMENTLY SUPP ORTED THE ORDERS OF THE AO AND THE LEARNED CIT(A). IT WAS THE SUBMISSION THAT ASSESSEES HUSBA ND WAS ALSO PROMOTING HIS OWN BUSINESS AND CONSEQUENTLY, 50% DISALLOWANCE WAS RIGHTLY MADE B Y THE AO. ITA NO. 686/KOL/11 & CO NO.30/KOL/11-PB-A-GM 6 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS TH E ASSESSEE HAS NOT BEEN ABLE TO PLACE ANY EVIDENCE BEFORE US TO SHOW THAT FOREIGN TRAVEL BY SHRI SUSHIL KUMAR SARAF (HUSBAND OF THE ASSESSEE) WAS EXCLUSIVELY FOR THE BUSINESS PURPOSE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF 50% AS MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(A) IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. THE SAME IS HEREBY UPHELD. 22. THE ABOVE CROSS OBJECTION FILED BY THE ASSES SEE IS DISMISSED. 23. IN THE RESULT, THE ABOVE REVENUES APPEAL AND C ROSS OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED AS STATED ABOVE. . 7 / 5 / 8 79 THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT 14-02 -2013 SD/- SD/- *PP/SPS 1 ..: ;:4< / COPY OF THE ORDER FORWARDED TO: 1. . (* / THE APPELLANT : ACIT, CIRCLE-3, ASANSOL, PARMAR BUILDING, 54 G.T RD(W), ASANSOL-713304. 2 ,(* / THE RESPONDENT- SMT. SUDHA DEVI SARAF PAN: AIX PS9773B, SOUTHERN REGENCY, 3 RD FL., 117 SOUTHER AVENUE, KOL-29. 3 4. . . / THE CIT, . ( )/ THE CIT(A) 5 . '=.8 . / DR, KOLKATA BENCH 6 . GUARD FILE . ,: ./ TRUE COPY, // BY ORDER, 7 #$ /ASSTT REGISTRAR ( . . , ) (P. K. BANSAL, ACCOUNTANT MEMBER) ( $%$& 1 ( , ) (GEORGE MATHAN, JUDICIAL MEMBER) ( (( (2 2 2 2) )) ) DATE 14-02-2013