ITO, Hyderabad V. M/s Liluram &Sons, Hyderabad

ITA 703/HYD/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3230 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-04-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 25-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H PHANI RAJU
• Assessee Lawyers: K VASANT KUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI N.R.S. GANSAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA-703/HYD/2009 A.Y. 2006-07 THE INCOME TAX OFFICER, WARD 8(1), HYDERABAD VS M/S LILURAM & SONS, CHARKAMAN HYDERABAD (PAN AABFL 3657 R) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H. PHANI RAJU, DR RESPONDENT BY : SHRI K. VASANT KUMAR O R D E R PER: CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER PASSED BY THE CIT(A)-III HYDERABAD DATED 25.3.20 09 AND PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE RAISED THE GROUND AS FOLLOWS: THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE M ADE U/S 40(A)(IA) SINCE NO TDS WAS MADE ON THE EXPENSES INCURRED UNDE R THE HEAD COMMISSION TO LEPAKSHI HANDLOOM EMPORIUM. FURTHER, THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS DULY AUDITED U/S 44AB O F THE IT ACT, 1961 AND AS SEEN FROM THE AUDIT REPORT IT IS CLEAR THAT THE EXPENDITURE UNDER THE HEAD COMMISSIONS WAS RIGHTLY INCURRED. IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ALSO THE ASSESSEE HAS OPENED LEDGER AC COUNT UNDER THE NAME COMMISSION PAID ACCOUNT. ITA NO.703/HYD/2009 M/S LILURAM & SONS, HYDERABAD 2 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS A RETAIL DEALER IN JEWELLERY OF GOLD, SILVER AND PEARLS. DUR ING THE YEAR, IT SOLD CERTAIN GOODS WORTH RS.47,55,091/- TO M/S LEPAKSHI HANDLO OM EMPORIUM, AN ANDHRA PRADESH STATE GOVERNMENT UNDERT AKING. IN THE P&L ACCOUNT AN AMOUNT OF RS.19,67,852/- WAS DEBITED AS CO MMISSION PAID TO LEPAKSHI HANDLOOM EMPORIUM. IT WAS EXPLAINED BY THE ASSESSEE THAT NO COMMISSION WAS PAID TO LEPAKSHI. DUE TO OVERSIGH T, THE GROSS SALE AMOUNT INCLUDING THE LEPAKSHIS PROFIT MARGIN, WAS SHOWN AS SALE CONSIDERATION AND THE LEPAKSHIS PROFIT MARGIN WAS DEBIT ED AS COMMISSION PAID TO LEPAKSHI. IT WAS CLAIMED THAT THE TRA NSACTIONS BETWEEN THE ASSESSEE AND LEPAKSHI WERE ON PRINCIPLE TO PR INCIPLE BASIS AND NOT OF PRINCIPLE TO AGENT. NO COMMISSION WAS PAID T O LEPAKSHI ON THE SALES MADE BY THE ASSESSEE. HOWEVER, THIS EXPLANATION WAS NOT ACCEPTED BY THE ASSESSING OFFICER. IT WAS HELD THAT THE SAL ES MADE BY THE ASSESSEE TO LEPAKSHI WAS IN THE NATURE OF CONSIGNMENT SA LES ON WHICH COMMISSION WAS PAID BY THE ASSESSEE TO LEPAKSHI. IN VIEW OF PROVISIONS OF SEC. 194H, THE ASSESSEE WAS LIABLE TO DEDUCT T AX ON SUCH COMMISSION PAYMENT. SINCE THE SAME WAS NOT MADE, THE EXP ENSES ARE NOT ALLOWABLE U/S 40(A)(IA) OF THE ACT. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION OF THE DEPA RTMENT IS THAT THIS ITA NO.703/HYD/2009 M/S LILURAM & SONS, HYDERABAD 3 3 IS A CONSIGNMENT SALE HENCE SECTION 194H IS DIRECTLY APPLI CABLE. AS PER THE EXPLANATION TO SEC.194H, THE ASSESSEE IS LIABLE TO DEP OSIT TDS SINCE THE ASSESSEE IS NOT DEPOSITED THE TDS SEC. 40A (IA) IS APP LICABLE. 5. ON THE OTHER HAND, THE AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT T DS SINCE THE PERSON RESPONSIBLE FOR MAKING PAYMENT IS NOT THE A SSESSEE, ON THE OTHER HAND, IT IS M/S LEPAKSHI HANDLOOM EMPORIUM, ANDHR A PRADESH STATE GOVT. UNDERTAKING, WHICH HAS MADE SALES ON BEHAL F OF THE ASSESSEE AND DEDUCTED THEIR PROFIT MARGIN AND SENT THE BA LANCE TO THE ASSESSEE AND AS SUCH, ASSESSEE IS NOT MADE ANY PAYMENT OF COMMISSI ON AS ENUMERATED IN THE PROVISIONS OF SEC. 194H. THE ASSESSEE I S NOT LIABLE TO DEDUCT TDS. HE RELIED ON THE ORDER OF THE TRIBUNA L DATED 20.9.2007 IN ITA NOS. 744 & 755/HYD/2002, IN THE CASE OF A.K. DIA GNOSTICS LTD. (NOW QUALITY CARE INDIA LTD.) AND ALSO RELIED ON THE ORDER OF THIS TRIBUNAL DATE 8.10.2009 IN ITA NO.923/HYD/2009 IN TH E CASE OF GOODWILL FINANCE HOLDINGS (P) LTD., HYDERABAD. WE HAVE CAREFULLY GONE THROUGH BOTH THE JUDGEMENTS. WE FIND FORCE IN THE ARGUMENT O F THE ASSESSEES COUNSEL. ADMITTEDLY, IN THIS CASE, THE ASSESSEE IS NOT MAKIN G ANY PAYMENT TO M/S LEPAKSHI HANDLOOM EMPORIUM, HYDERABAD IN STEAD OF M/S LEPAKSHI HANDLOOM EMPORIUM IS MAKING PAYMENT TO TH E ASSESSEE. THE ASSESSEE HAS ONLY SUPPLIED MATERIAL TO THIS CONSIGNEE. AS PER ITA NO.703/HYD/2009 M/S LILURAM & SONS, HYDERABAD 4 4 SEC.194H OF THE INCOME TAX ACT, ANY PERSON RESPONSIBLE FOR PAYMENT IS TO DEDUCT TDS. IN THE PRESENT CASE, THE ASSESSEE IS NOT RESP ONSIBLE TO MAKE PAYMENT. AS SUCH IN OUR HUMBLE OPINION, S.194H IS NOT APPLICABLE IN THIS CIRCUMSTANCE. ACCORDINGLY, THE CIT(A) HAS TAKEN T HE CORRECT VIEW. WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT(A). HENCE THE VIEW TAKEN BY THE CIT(A) IS CONFIRMED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 14. 5. 2010 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 14 TH MAY, 2010 COPY FORWARDED TO: 1. INCOME TAX WARD 8 (1), HYDERABAD 2. M/S LILURAM & SONS, 21-2-227, CHARKAMAN, HYDERABAD 3. CIT(A)-III, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP