JCIT (OSD) CIR 2(2), MUMBAI V. MARITIME SERVICES P.LTD, MUMBAI

ITA 714/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8683 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: T RAVINDRA
• Keywords: Tax effect
• Section: 142(1); 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I .T.A. NO. 7034/MUM/2011 ( / ASSESSMENT YEAR : 2008 - 09 ) M/S MARITIM E SERVICES PVT LTD, 301/203 EMCA HOUSE, 289, SBS ROAD, MUMBAI - 400001 / VS. DY.COMMISSIONER OF INCOME TAX - CIRCLE 2(2), ROOM NO.545, 5 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ( / APP LICANT ) : ( / RESPONDENT ) ./ I .T.A. NO. 714/MUM/2013 ( / ASSESSMENT YEAR : 2009 - 10 ) DY.COMMISSIONER OF INCOME TAX - CIRCLE 2(2), ROOM NO.545, 5 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. M/S MARITIME SERVICES PVT LTD, 301/203 EMCA HOUSE, 289, S BS ROAD, MUMBAI - 400001 . ( / APP LICANT ) : ( / RESPONDENT ) : AAACM2987E / ASSESSEE BY : SHRI T RAVINDRA /RE VENUE BY : SHRI SUMAN KUMAR / DATE OF HEARING : 1 6 .1.2 017 / DATE OF PRONOUNCEMENT : 27 .1.2017 2 ITA NO. 7034/M/11 AND 714/M/2013 / O R D E R PER RAJESH KUMAR, A. M: THESE ARE THE TWO APPEALS FILED BY THE RESPECTIVE PARTIES. APPEAL FOR THE ASSESSMENT YEAR 2008 - 09 IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) DATED 1.8.2012 AND THE APPEAL FOR THE ASSESSMENT YEAR 2009 - 10 IS FILED BY THE REVENUE AGAINST THE ORDER DATED 5.10.2012. SINCE THESE APPEALS PERTAIN TO THE SAME ASSESSEE, HENCE, THERE ARE CLUBBED TOGETHER, HEARD TOGETHER AND ARE BEING DECIDED BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 . FIRST WE SHALL TAKE UP THE APPEAL BY THE REVENUE BEARING ITA NO.714/MUM 2013. AT THE OUTSET, WE HAVE NOTICED THAT THE TAX EFFECT IN THE APPEAL OF THE REVENUE IS BELOW RS.10 LAKHS, THEREFORE, THE SAME IS NOT M AINTAINABLE AS PER THE CBDT CIRCULAR NO.21/2015, DATED 10TH DECEMBER, 2015. WE FOUND THAT AS PER THE RECENT CIRCULAR NO.21/2015, DATED 10TH DECEMBER, 2015, ISSUED BY THE CBDT, THE MONETARY LIMIT HAS BEEN REVISED FOR FILING OF APPEAL BEFORE ITAT BY THE REVE NUE FIXING THE TAX EFFECT LIMIT OF RS.10 LAKHS. IN THE INSTANT CASE, THE TAX EFFECT IS BELOW RS.10 LAKHS, THEREFORE THE SAME IS NOT MAINTAINABLE AND LIABLE TO BE DISMISSED IN LIMINE. THIS CIRCULAR IS RETROSPECTIVE AND APPLICABLE TO THE PENDING APPEALS ALSO . 3 . CONSIDERING THE ABOVE CBDT CIRCULAR, WE DISMISS THE APPEAL OF THE REVENUE. 3 ITA NO. 7034/M/11 AND 714/M/2013 4 . NOW WE WILL TAKE UP THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 09. 5 . THE ONLY ISSUE RAISED IN THE GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.3,69,514 / - BY THE LD. CIT(A) AS MADE BY THE AO UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 FOR NON DEDUCTION OF TDS. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.9.2008 DECLARING TOTAL INCOME OF RS.3,58,34 ,200 / - WHICH WAS DULY PROCESSED UNDER SECTION 143(1) OF THE ACT. THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE STATUTORY NOTICES UNDER SECTION 143 (2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASS ESSMENT PROCEEDING, THE AO FOUND THAT THE ASSESSEE HAS CLAIMED MAINTENANCE AND OFFICE EXPENSES AMOUNTING TO RS.21,77,976/ - UNDER SCHEDUYLE C (ADMINISTRATIVE EXPENSES) ANNEXED TO PROFIT AND LOSS ACCOUNT WHICH WAS FOUND TO BE PAID TO M/S CAXTON HOUS E PROPERTIES PVT LTD AS DETAILED BELOW : S.NO. PARTICULARS AMOUNT(RS.) 1 TO CAXTON HOUSE PROPERTIES PVT. LTD BEING AMOUNT PAYABLE TO CAXTON HOUSE PROPERTIES PVT. LTD. AQUARIST INV. NO. 351, 352, 360, 365 TOWARDS MISCELLANEOUS EXPENSES AS .PER CIR. D ATED 22.3.2007 AGAINST ROOM NO. 405, 303, 309, 308, 301, 302. 76,864 2 TO HONKONG BANK - BOMBAY CHEQUE. NO. 600386 CAXTON HOUSE PROPERTIES PVT. LTD. AMT PAID AGAINST CIRCULAR DATED 25.4.07' TOWARDS ADHOC PAYMENT ON ACCOUNT OF BPT DUES 301,302, 309, 309,308,405. 144120 3 TO CAXTON HOUSE PROPERTIES PVT. LTD.. AMOUNT PAYABLE TO CAXTON HOUSE PROPERTIES PVT. LTD. AMT. PAID TOWARDS INV. NO; 38,39, 52,47 ' 75731 4 4 TO CAXTON HOUSE PROPERTIES PVT. LTD AMOUNT PAYAB LE TO CAXTON HOUSE PROPERTIES PVT. LTD. AMOUNT PAID AGAINST INV.47,52,39,38 72799 3 , 69,514 4 ITA NO. 7034/M/11 AND 714/M/2013 VIDE ORDER SHEET ENTRY DATED 22.11.2010, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE AMOUNT OF RS.3,69,514/ - SHOULD NOT BE DISALLOWED ON ACCOUNT OF NON DEDUCTION OF TDS UNDER THE PROVISION OF SECTION 40(A)(IA) OF THE ACT WHICH WAS REPLIED AND RESPONDED BY THE ASSESSEE VIDE LETTER DATED 29.11.2010 BY SUBMITTING THAT THE COMPANY TO WHOM THE PAYMENT WAS MADE WAS RENDERING SERVICES OF BUILDING MAIN TENANCE WHICH WERE SIMILAR TO THAT PAYMENTS IN THE NATURE OF MUTUALITY PAID TO THE TO MEET THE EXPENSES ON BEHALF OF ITS SHAREHOLDERS AND THEREFORE THE PROVISIONS OF TDS WERE NOT APPLICABLE. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE A SSESSEE AND CAME TO THE CONCLUSION THAT THE PROVISIONS OF SECTION 194C W ERE CLEARLY APPLICABLE TO THE CASE OF THE ASSESSEE AS THE PAYMENT WAS MADE TO M/S CAXTON HOUSE PROPERTIES PVT LTD FOR CARRYING OUT WORK, REPAIR AND MAINTENANCE OF THE BUILDING OCCUPIED BY THE ASSESSEE AND ALSO THAT THE SAID COMPANY WAS A PRIVATE LIMITED COMPANY UNDER THE PROVISIONS OF COMPANIES ACT , 1956 AND HAVING IT IS A SEPARATE ENTITY . A CCORDING DISALLOWED AND ADDED THE AMOUNT OF RS.3,69,514 / - TO THE TOTAL INCOME OF THE ASSESSEE BY MAKING VARIOUS ADDITIONS INTERALIA RS.3,69,514/ - FOR NON DEDUCTION OF TAX AT SOURCE. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) WHO ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : 5 ITA NO. 7034/M/11 AND 714/M/2013 5. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS AND FIND NO MERIT IN THE CONTENTIONS OF THE APPELLANT. THE APPELLANT HAS ADMITTED THAT CONSIDERING TH E NATURE OF WORK DONE, PROVISIONS OF SECTION 194C WERE APPLICABLE. THE FACT THAT THE RECIPIENTS INCOME WAS TAXABLE OR NOT IS IRRELEVANT IN SO FAR AS THE LIABILITY OF THE APPELLANT TO MAKE TDS IS CONCERNED. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE SAID CONCERN REQUESTED FOR NO DEDUCTION CERTIFICATE IN TERMS OF SECTION 197 OF THE ACT. IN SU CH SITUATI ON , THE LIABILITY OF THE APPELLANT TO MAKE TDS WAS VERY MUCH THERE AND COULD NOT BE AVOIDED. THE FACT THAT NO SUCH DISALLOWANCE - WAS MA DE PREVIOUSLY IS ALSO NOT RELEVANT IN VIEW OF THE APPLICABILITY OF THE PROVISIONS TO THE FACTS OF THE CASE. MOREOV ER, PR INCIPLES OF RESJUDICATA ARE NOT APPLICABLE TO INCOME TAX PROCEEDINGS. SINCE NO TDS WAS MADE, THE DISALLOWANCE MADE BY THE AO IS UPHELD 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE MATERIAL PLACED BEFORE US DURING THE COURSE OF HEARI NG INCLUDING THE DECISION OF AUTHORITIES BELOW. THE LD. AR SUBMITTED BEFORE US THAT THE PAYMENT WAS MADE TO M/S CAXTON HOUSE PROPERTIES PVT LTD WHICH WERE OF THE NATURE OF MUNICIPAL TAXES, MAINTENANCE CHARGES, BMC WATER CHARGES ON ACCOUNT OF BPT CHARGES A ND OTHERS. THE LD. AR DREW OUR ATTENTION TO THE BILLS ISSUED BY M/S CAXTON HOUSE PROPERTIES PVT LTD COPIES OF WHICH ARE FILED AT PAPER BOOK AT PAGES 22 TO 27 . WE ALSO FIND THAT THERE WAS NO E LEMENT OF PROFIT IN THE SAID BILLS AS THE COMPANY WAS RENDERING SERVICES OF MAINTENANCE OF BUILDING TO THE MEMBERS/SHAREHOLDERS OF THE COMPANY. THE LD.AR ALSO BROUGHT TO OUR NOTICE THAT DIRECTORS REPORT OF THE COMPANY IN WHICH UNDER THE HEAD ACTIVITY , I T HAS BEEN STATED THAT THE COMPANY WAS NOT CARRYING ON ANY COMME RCIAL ACTIVITIES BUT WAS PROVIDING THE SERVICES ITS SHAREHOLDERS ONLY. THE RELEVANT PART OF THE DIRECTORS REPORT HAS BEEN INCORPORATED IN PAPER BOOK AT PAGE 31 WHICH IS REPRODUCED BELOW: 6 ITA NO. 7034/M/11 AND 714/M/2013 ACTIVITY: THE COMPANY DOES NOT CARRY ON ANY COMMERCIAL ACTIVITY. I N TERMS OF THE MEMORANDUM OF ASSOCIATION THE SHAREHOLDERS OF T HE COMPANY HAVE BEEN CONFERRED THE RI G H T OF OCCUPATION BY THE COMPANY IN THE EMCA HOUSE IN PROPORTION TO THEIR SHAREHOLDING. THE SHAREHOLDERS PAY PERIODICAL AMOUNT TO THE COMPANY ON ACCOUNT OF MUNICIPAL TAXES, BPT RENT AND OTHER MAINTENANCE CHARGES AND THE COMPANY IN TURN DEFRAYS VARIOUS EXPENSES THE LD. AR ALSO ARGUED BEFORE US THAT THE STAND OF THE ASSESSEE THAT NO TAXES AT SOURCES WERE DEDUCTIBLE FROM THE MAINTENANCE SERVICES CHARGES PAI D TO THE M/S CAXTON HOUSE PROPERTIES PVT LTD WHICH WERE IN THE NATURE OF REIMBURSEMENT AND HAS BEEN ACCEP T ED BY THE REVENUE IN THE ASSESSMENT YEAR 2013 - 14 AND 2014 - 15 BY PLACING A COPIES OF THE ASSESSMENT ORDER S BEFORE THE BENCH DURING THE HEARING . ON THE OTHER HAND, THE LD.DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. WE FIND FROM THE ABOVE THAT THE ASSESSEE WAS ONLY PAYING THE MAINTENANCE CHARGES TO THE COMPANY WHICH WAS NOT ENGAGED IN THE COMMERCIAL ACTIVITIES BUT WAS PROVIDING MAINTENANCE SERVICES TO I TS SHAREHOLDERS FOR WHICH THE PROPER BILLS WERE ISSUED WHICH DO NOT CONTAIN ANY ELEMENT OF PROFIT WHICH WAS JUST RE - IMBURSEMENT OF THE EXPENSES ON WHICH NO TDS IS REQUIRED TO BE DEDUCED IN TERMS OF PROVISIONS OF SECTION 194 C OF THE ACT. MOREOVER, THE REC IPIENT OF T HE PAYMENT FROM THE ASSESSEE HAS RECEIVED THE MONEY TO MAINTAIN THE BUILDING IN A PROPER AND HABITABLE FORM ON BEHALF ITS SHAREHOLDERS. W E ARE NOT IN AGREEMENT WITH THE FINDINGS OF THE LD.CIT(A) ON THE ISSUE OF APPLICABILITY OF TDS ON SUCH PAY MENTS AND THEREFORE, SET 7 ITA NO. 7034/M/11 AND 714/M/2013 ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION AS THE PROVISIONS OF SECTION 40(A)(I A ) IS NOT APPLICABLE TO THE SAID PAYMENTS. 9 . I N THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF T HE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 .1.2017 . S D S D ( MAHAVIR SINGH ) ( RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 27 . 1. 201 7 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPOND ENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI