MAHARASHTRA STATE BRANCH OF INDIAN RADIOLOGICAL & DIAMAGING ASSOCIATION, MUMBAI V. ADDL CIT RG 23(2), NAVI MUMBAI

ITA 9050/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84277 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 21-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 27-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Assessee Lawyers: C N VAZE
• Keywords: Business income; Capital receipt
• Section: 143(3); 194C

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S HRI R.C. SHARMA , ACCOUNTANT MEMBER & SHRI VIVEK VARMA , J UDICIAL MEMBER I.T.A. NO. 9050 / MUM/20 1 0 ( ASSESSMENT YEAR : 20 0 7 - 20 0 8 MAHARASHTRA STATE BRANCH OF INDIAN RADIOLOGICAL & IMAGING ASSOCIATION, C/O ARTI SCAN CENTRE, 1 & 2 MANGAL DAS GANGARAM BLDG., N.S. ROAD MARG, MULUND (W), M UMBAI 400 0 8 0 . VS. ADDL. COMMISSIONER OF INCOME TAX RANGE 23(2), MUMBAI . PAN : AAAAM7520J ( APPELLANT ) .. ( RESPONDENT ) I.T.A. NO. 1181 /MUM/2011 ( ASSESSMENT YEAR : 200 7 - 200 8 ADDL. COMMISSIONER OF INCOME TAX RANGE 23(2), C - 10/202, 2 ND FLOOR, PRATYAKSHAKAR BHAVAN, BKC, MUMBAI - 51. VS. MAHARASHTRA STATE BRANCH OF INDIAN RADIOLOGICAL & IMAGING ASSOCIATION, C/O ARTI SCAN CENTRE, 1 & 2 MANGAL DAS GANGARAM BLDG., N.S. ROAD MARG, MULUND (W), MUMBAI 400 080. PAN : AAAAM7520J ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI C.N. VAZE REVENUE BY SHRI PAVAN KUMAR BEERLA DATE OF HEARING : 12 - 11 - 2014 / DATE OF PRONOUNCEMENT : 2 8 - 11 - 2014 [ 2 ITA 9050 / M/ 1 0 & ITA 1181 /M/11 O R D E R PER R.C. SHARMA , A .M . : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAI NST THE ORDER OF LD. CIT(A) - 33 , MUMBAI DATED 2 - 11 - 2010 FOR A.Y. 200 7 - 0 8 IN THE MATTER OF ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 . 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND PERUSED THE RECORD. THE ASSESSEE , IS AN INDIAN RADIOLOGICAL AND IMAGING ASSOC IATION , IS ALL INDIA LEVEL REGISTERED BODY TO PROMOTE THE STUDY, PRACTICE OF RADIO DIAGNOSIS, ULTRASOUND ETC. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE A.O. MADE AN ADDITION OF RS. 1, 17,68,715/ - ON ACCOUNT OF SHORT DEDUCTION OF TDS, ADDITION OF RS. 81 ,15,221/ - ON ACCOUNT OF NON - DEDUCTION OF TDS ON FOOD BILLS OF HOTEL. THE A.O. ALSO ADDED DONATION OF RS. 24,35,243/ - AND CORPUS FUND OF RS. 6,01,023/ - AS CURRENT INCOME. 3. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION OF RS. 1,17,18,715/ - AFTER HAVING THE FOLLOWING OBSERVATION: - I HAVE GONE THROUGH THE DECISION CITED BY APPELLANT WHEREIN APPLICABILITY OF SECTION 194 - C HAS BEEN DISCUSSED FOR AVAILING THE FACILITY OR AMENITIES PROVIDE BY HOTELS. CIRCULAR NO. 681 DATED 8 - 3 - 1994 WAS QUASHE D BY HONBLE BOMBAY HIGH COURT IN THE CASE OF EAST INDIA HOTELS VS. CBDT (223 CTR 123) THE SAID DECISION. THUS AS PER APPELLANTS SUBMISSION THE PAYMENT MADE TO SARAYU PROPERTIES WAS NOT EVEN A RATE CONTRACT AND THE ROOMS WERE BOOKED AS PER DAILY REQUIREM ENT OF SPEAKERS. THUS THE APPELLANT WAS NOT LIABLE FOR TDS UNDER THE PROVISION OF SECTION 194 - 1 AND HENCE NO TDS WAS MADE ON THAT. AS REGARDS GENERATOR HIRE CHARGES THE APPELLANT HAS STATED THAT TOTAL 13 GENERATOR WERE HIRED FOR RS. 24,932/ - AN AMOUNT BE ING LESS THAN RS. 50,000/ - THEY ARE COVERED UNDER SUB SECTION (5) OF 194 - C. I HAVE ALSO GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND I AGREE WITH THE SUBMISSION MADE BY THE APPELLANT THAT THE LODGING AND BOARDING CHARGES PAID TO HOTEL IS NOT IN THE NATURE OF RENT. FURTHER, HIRE CHARGES PAID FOR VEHICLE, GENERATOR, EQUIPMENT AND TENANT ARE COVERED U/S 194 - C AND NOT U/S 194 - 1 AS THEY ARE NOT IN THE NATURE OF RENT. COMING TO THE 3 ITA 9050 / M/ 1 0 & ITA 1181 /M/11 APPLICABILITY OF SECTION 194 - C THE APPELLANT WAS LIABLE TO DEDUCT TDS @ OF 2% AS THEY WERE IN THE NATURE OF CONTRACT GIVEN FOR THE PERIOD TO CARRY OUT THIS SPECIFIC WORK LIKE ERECTING THE TENANT FOR THE CONFERENCE AND FOR VARIOUS EQUIPMENTS TAKEN FOR THE PURPOSE OF CONFERENCE. THIS BEING THE CASE; TO MY UNDERSTANDING IT CA N NOT BE SAID THAT THE AMOUNT PAID TO THESE PARTIES FOR EXECUTING SPECIFIC WORK OR FOR GETTING SERVICES ON CONTRACT BASIS (LIKE EQUIPMENT HIRE CHARGES AND VEHICLE HIRE CHARGES WHERE AMOUNT IS PAID FOR SERVICES ALONG WITH THE EQUIPMENTS AND VEHICLE) ARE IN THE NATURE OF RENT. THEN THERE IS NO REGULARITY AND REPETITIVENESS. IT IS A MATTER OF RECORD THAT CONFERENCE WAS FOR FIVE DAYS AND ALL THESE HIRE SERVICES WERE AVAILED AND FOR THE SAME THESE PARTIES WERE PAID. THUS THE JOBS WERE DONE IN NATURE OF CONTRA CT FOR SERVICES GIVEN THROUGH THESE EQUIPMENT AND VEHICLES AND NOT AS RENT FOR DEDUCTING THE TDS AT THE TIME OF MAKING PAYMENT U/S 194 - C THE APPELLANT WAS RESPONSIBLE TO DEDUCT TDS AND NOT U/S 194 - 1. IN ALL THESE CASES THERE WAS NO CONTRACT OF LEASE OR SU B - LEASE, NEITHER THERE WAS ANY ARRANGEMENT OR AGREEMENT NOR THERE WAS ANY LANDLORD TENANT RELATIONSHIP, THERE WAS NO PERIODICAL REOCCURRENCE AND POSSESSION WAS VERY MUCH WITH THE OWNER. THE APPELLANT WAS NOT LIABLE FOR MAKING TDS AS ON RENT AMOUNT FOR THE EQUIPMENTS HIRE CHARGES PAID. AS REGARDS TENT HIRE CHARGES THERE BEING A CONTRACT FOR THE HIRE CHARGES TDS WAS DEDUCTED BY APPELLANT FROM M/S PAVILLION INTERIORS AND FROM M/S DESIGN INTERIORS FOR TENT HIRE CHARGES AND DESIGNER INTERIORS. THE ASSESSING OFFICER HAS NOT DISPUTED THE FACT THAT TDS HAS BEEN MADE AT THE RATE APPLICABLE AS PER SECTION 194 - C. IN VIEW OF THIS THE ADDITION MADE U/S 40(A)(IA) AN AMOUNT OF RS. 1,17,68,715/ - TREATED AS SHORTFALL IN THE TDS IS DELETED. 4. THE LD. CIT(A) ALSO DELE TED THE ADDITION ON ACCOUNT OF NON - DEDUCTION OF TAX ON FOOD BILLS AFTER HAVING THE FOLLOWING OBSERVATION: - I T IS SEEN THAT IN PARA NO.3.2 ASSESSING OFFICER HAS FURTHER DISALLOWED THIS AMOUNT OF RS.81,16,725/ - PAID TO HOTEL RENAISSANCE FOR CONFERENCE LUNCH. ACCORDING TO HIM THE FOOD BILLS ARE FOR CATERING SERVICES AND HENCE COVERED U/ S. 1940, HON'BLE BOMBAY HIGH COURT IN EAST INDIA (223 CTR 123) CITED ABOVE ALREADY IS DIRECTLY ON THE ISSUE OF APPLICABILITY OF SECTION 194C ON THE PAYMENT MADE BY CUSTO MERS TO HOTEL FOR FACILITIES /AMENITIES MADE AVAILABLE BY THE HOTEL. HENCE, I AM UNABLE TO AGREE WITH THE LINE OF ARGUMENT TAKEN BY THE ASSESSING OFFICER THAT THE FOOD BILLS OF THE HOTEL WILL FALL WITHIN THE PURVIEW OF SECTION 1940(2) EXPLANATION III. THE CBDT CIRCULAR NO. 715 DATED 08.08.1995 CLEARLY DIRECTS THAT TDS IS NOT REQUIRED TO BE MADE WHEN PAYMENT IS MADE FOR SERVING THE FOOD IN THE NORMAL COURSE OF RUNNING OF RESTAURANT/ HOTEL. IT ALSO CLEARLY SAYS THAT PROVISION OF THIS SECTION WILL NOT COVER CO NTRACT OF SALE OF GOODS. FOOD BILLS BEING IN THE NATURE OF SALES OF FOOD THUS ARE NOT 4 ITA 9050 / M/ 1 0 & ITA 1181 /M/11 COVERED BY PROVISION OF SECTION 1940 AND HENCE THERE WAS NO TDS LIABILITY FOR THE SAME. ACCORDINGLY, ADDITION MADE AN AMOUNT OF RS.81,16,725/ - ON THIS COUNT IS DELETED. 5. HOWEVER, THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE A.O. WITH REGARD TO THE ADDITION OF DONATION AMOUNTING TO RS. 24,35,243/ - AND CORPUS FUND OF RS. 60,01,023/ - AS CURRENT INCOME. 6. AGAINST THE ABOVE ORDER OF THE LD. CIT(A), BOTH ASSESSEE AND R EVENUE ARE IN APPEAL BEFORE US. THE GROUNDS TAKEN BY THE ASSESSEE READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED OFFICER WAS NOT JUSTIFIED IN NOT TREATING VOLUNTARY DONATION OF RS. 24,35,243/ - TO BUILDING FUND, AS C APITAL RECEIPT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED OFFICER WAS NOT JUSTIFIED IN ARBITRARILY ADDING RS. 6,01,023/ - AS CORPUS FUND. 7. THE GROUNDS TAKEN BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND CIRCUMST ANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING OF RS. 1,11,62,619/ - OUT OF RS. 1,17,18,715/ - MADE BY THE ASSESSING OFFICER, OUT OF EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT, AS THERE WAS A SHORTFALL IN DEDUCTION OF TDS IN RESPECT OF THE EXPENSES OF RS. 1,11,62,619/ - . 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE EXPENSES WERE IN THE NATURE OF CONTRACT AND NOT RENT PAID TO VARIOUS PARTIES. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE PAYMENTS WERE MADE TO VARIOUS PARTIES AS HIRING CHARGES F OR THE PERIOD FOR WHICH CONFERENCE WAS FILED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 81,15,221/ - MADE BY THE ASSESSING OFFICER, OUT OF EXPENSES ON FOOD BILLS CLAIMED IN THE PROFIT & LO SS ACCOUNT, AS THE ASSESSEE HAD FAILED TO DEDUCT TDS IN RESPECT OF THE EXPENSES ON FOOD BILLS. THE LD. CIT(A) FAILED TO APPRECIATE THAT THERE WAS ARRANGEMENT WITH THE CATERERS AND PAYMENTS WERE MADE ON THE BASIS OF THE ARRANGEMENT FOR THE PERIOD FOR WHICH CONFERENCE WAS HELD. 8. I T WAS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS ARRANGED NATIONAL CONFERENCE WHEREIN AN APPEAL WAS MADE TO THE PARTICIPANTS TO DONATE EXTRA AMOUNT IN ADDITION TO THE NORMAL DELEGATION FEE. THIS APPEAL WAS P UT ON THE WEBSITE ON VARIOUS REGISTRATION FORMS EITHER PRINTED OR DOWNLOADED AND ON VARIOUS PAMPHLETS. AS PER THE LD. A.R., IT WAS A CAPITAL RECEIPT OF RS. 30,36,266/ - WHICH HAS BEEN WRONGLY TAXED BY THE A.O. AS BUSINESS INCOME. 5 ITA 9050 / M/ 1 0 & ITA 1181 /M/11 9. WE HAVE CONSIDERED THE RIVAL CONTENTION AND FOUND THAT MAHARASHTRA STATE BRANCH OF INDIAN RADIOLOGICAL AND IMAGING ASSOCIATION [HEREAFTER REFERRED TO AS MSBIRIA] IS A NON - REGISTERED BODY, FILING RETURN OF INCOME UNDER THE STATUS OF ASSOCIATION OF PERSONS. THE SOURCE OF INCOME O F THE ASSESSE HAS BEEN STRAY SPONSORSHIPS AND SEMINAR, CONFERENCE FEES. BALANCE SURPLUS AFTER MEETING DIRECT EXPENSES AND ADMINISTRATION EXPENSES HAVE BEEN OFFERED TO INCOME TAX AS INCOME OF ASSOCIATION OF PERSONS . ASSESSEE ARRANGED A NATIONAL CONFERENCE FROM 4 - 1 - 2 007 TO 7 - 1 - 2007. THIS EVENT WAS USED BY THE ASSESSEE TO MAKE AN APPEAL TO THE PARTICIPANTS TO DONATE EXTRA AMOUNT TOWARDS BUILDING FUND IN ADDITION TO THE NORMAL DELEGATE FEE. TO BE PRECISE APPEAL WAS MADE FOR CONTRIBUTING 200% OF DELEGATE FEE TOWARDS BU ILDING FUND. THIS APPEAL WAS PUT ON WEBSITE, ON VARIOUS REGISTRATION FORMS EITHER PRINTED OR DOWNLOADED AND ON VARIOUS PAMPHLETS. D ONATION OF RS. 24,27,092/ - WAS RECEIVED FROM THE DELEGATES ON 60 TH ANNUAL CONFERENCE. THE ASSESSEE HAS ALREADY FURNISHED DE TAILED INFORMATION O F BUILDING FUND SO RAISED TO THE LOWER AUTHORITIES ON 4 - 12 - 2009 VIDE LETTER DATED 30 - 11 - 2009. HOWEVER, THE A.O. HAS NOT ACCEPTED THE ASSESSEES CONTENTION. SINCE THE DONATION RECEIVED ON BUILDING FUND WAS INTENDED TO BE UTILIZED FOR CO NSTRUCTION OF BUILDING, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES FOR TREATING SUCH CORPUS FUND AS INCOME OF THE ASSESSEE. SIMILARLY, CORPUS FUND OF RS. 6,01,023/ - IS NOT INCOME. I T IS PERTINENT TO MENTION HERE THA T ONLY REVENUE RECEIPT IS LIABLE TO TAX AS INCOME. I F THERE IS ANY CAPITAL RECEIPT MEANT FOR SPECIFIC PURPOSE, SAME CANNOT BE TREATED AS REVENUE RECEIPT. ACCORDINGLY, WE RESTORE THE MATTER B ACK TO AO FOR DECIDING AFRESH IN TERMS OF OUR ABOVE OBSERVATION S . H OWEVER, THE A.O. IS AT LIBERTY TO VERIFY THE UTILIZATION OF BUILD ING FUND FOR THE PURPOSE FOR WHICH IT WAS RECEIVED AND IF AO FOUND THAT CORPUS FUND IS NOT UTILIZED FOR CONSTRUCTION OF BUILDING WITHIN REASONABLE TIME, SAME MAY BE BROUGHT TO THE TAX NE T. 6 ITA 9050 / M/ 1 0 & ITA 1181 /M/11 1 0 . WITH REGARD TO THE DISALLOWANCE MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 194 - C, WE FOUND THAT THE PAYMENT WAS MADE FOR ROOM BUILDING IN THE HOTEL WAS NOT UNDER A RATE CONTRACT AND THE ROO MS WERE BOOKED AS PER DAILY REQUIREMENT OF THE SPEAKERS ATTENDING THE CONFERENCE . THEREFORE, THE ASSESSEE WAS NOT LIABLE FOR TDS U/S 194 - 1 AND HENCE NO TDS WAS DEDUCTED AT SOURCE. WITH REGARD TO THE PAYMENT MADE FOR HIRING GENERATORS, WE FOUND THAT THIS P AYMENT WAS BELOW RS. 50,000/ - FOR WHICH SPECIFIC FINDING HAS BEEN RECORDED BY THE LD. CIT(A), THEREFORE, THERE WAS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE. 1 1 . FURTHER MORE, LODGING PAID TO HOTEL WAS NOT IN THE NATURE OF RENT. HIRE CHARGES FOR VEHICL E, GENERATOR ETC. ARE COVERED U/S 194 - C OF THE ACT AND NOT U/S 194 - I AS THEY ARE NOT IN THE NATURE OF RENT. THE ASESSEE HAS DEDUCTED TAX AT SOURCE U/S 194 - C. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) FOR DELETING THE ADDITION OF RS. 1,17,68,715/ - WHICH WAS MADE BY THE A.O. U/S 40(A)(IA) OF TH E ACT BEING THE SHORTFALL IN TDS. 1 2 . THE A.O. HAS ALSO DISALLOWED AN AMOUNT OF RS. 81,16,725/ - IN RESPECT OF PAYMENT TO HOTEL FOR LUNCH. AS PER THE A.O., FOUR BILLS WERE FOR CATERING COVERE D U/S 194 - C OF THE ACT. THE LD. CIT(A) BY RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF EAST INDIA , (223 CTR 123) HELD THAT PAYMENT MADE BY CUSTOMERS TO HOTEL FOR FACILITIES/AMENITIES MADE AVAILABLE BY THE HOTEL, ARE NOT LIABLE FOR DEDUCTION U/S 194 - C. THE FOOD BILLS BEING IN THE NATURE OF SALES OF FOOD, THEREFORE, NOT COVERED BY THE PROVISIONS OF SECTION 194 - C OF THE ACT. DETAIL ED FINDING RECORDED BY THE LD. CIT(A) AT PARA 4.5 HAS NOT BEEN CONTROVERTED BY THE LD. D.R., ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS RECORDED BY THE LD. CIT(A) WHICH RESULTED INTO DELETION OF DISALLOWANCE ON ACCOUNT OF PAYMENT MADE TO THE HOTEL FOR ROOM RENT AND FOOD BILLS. 7 ITA 9050 / M/ 1 0 & ITA 1181 /M/11 1 3 . I N THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED WHEREAS APPEAL OF THE ASSESSEE IS ALLOWED IN PART . O RDER PRONOUNCED IN THE OPEN COURT ON 28 TH NOVEMBER , 2014. 28/11/2014 SD/ - SD/ - ( VIVEK VARMA ) ( R.C. SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 28/11/2014 RK , SR. PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 33 , MUMBAI / CIT 2 3 , MUMBAI 5. / DR, ITAT, MUMBA I G BENCH 6. GUARD FILE . / BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) / ITAT, MUMBAI