ITO,Ward-08(1), Kolkata, Kolkata V. M/s MPR Marketings Pvt. Ltd., Kolkata

ITA 929/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75016 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 14-06-2012
• Court: TRIBUNAL
• Department Lawyers: K NATH
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Section: 143(3); 28

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 929/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2008-09 INCOME-TAX OFFICER, WD-8(1), KOLKATA. VS. M/S. MP R MARKETINGS (P) LTD. (PAN:AADCM4377Q) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 27.01.2014 DATE OF PRONOUNCEMENT: 27.01.2014 FOR THE APPELLANT: SHRI K. NATH, SR. DR FOR THE RESPONDENT: SHRI SOUMITRA CHOWDHURY, ADV OCATE $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-VIII, KOLKATA IN APPEAL NO.201/CIT(A)-VIII/KOL/10-11 DATED 07.03.2012. ASS ESSMENT WAS FRAMED BY ITO, WARD-8(1), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 27.12. 2010. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON- PAYMENT OF TDS ON PAYMENTS OF FRANCHISEE. FOR THIS , REVENUE HAS RAISED FOLLOWING TWO GROUNDS: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(APPEALS) HAS ERRED IN LAW IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE FOR DISALLOWANCE U/S. 40(A)(IA) OF THE ACT, ON THE AMOUNT OF RS.27,18,000/-, DISREGARDING THE F ACT THAT THIS AMOUNT OF FRANCHISEE FEE WAS CLAIMED AS A DEDUCTION WITHOUT SUBJECTING TO TA X DEDUCTION AT SOURCE. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(APPEALS) ERRED IN HOLDING THAT THE AMOUNT WAS NOT DISALLOWABLE U/S. 4 0(A)(IA) OF THE INCOME TAX ACT, 1961, WHICH IS IN CONTRAVENTION OF THE LEGAL PROVISIONS O F THE INCOME TAX ACT IN THIS REGARD. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE IS ENGAGED IN MAINTAINING AND OPERATING TRAINING CENTRE AT KOLKATA 2 ITA NO. 929/K/2012 MPR MARKETING (P) LTD. , AY:2008-09 AND LUCKNOW UNDER A FRANCHISEE AGREEMENT WITH NIFD INSTITUTE OF FASHION DESIGN LTD. FOR CONDUCTING TRAINING UNDER VARIOUS COURSES LIKE FACH ION DESIGNING, TEXTILE DESIGNING, INTERIOR DECORATION, MBA, MASS COMMUNICATION AND PR & ADVERT ISING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSES SEE COLLECTS FEE AS PER SCHEDULE SHOWN IN THE PROSPECTUS OF THE INSTITUTE WHICH HAS TWO COMPO NENTS I.E. REGISTRATION FEE PAYABLE TO NIFD AND COURSE FEE PAYABLE TO FRANCHISEE. ACCORDING TO AO, THESE PAYMENTS ARE CLAIMED AS EXPENSES BY THE ASSESSEE AND ONCE THIS IS THE POSIT ION, THE ASSESSEE IS LIABLE TO TDS U/S. 194J OF THE ACT AND THE ASSESSEE HAS NOT DEDUCTED ANY TDS O N THE SAME. ACCORDINGLY, HE INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR MAKI NG THIS DISALLOWANCE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE DIS ALLOWANCE BY OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS, THE MATERIA L BROUGHT ON RECORD AS ALSO THE SUBMISSIONS ON BEHALF OF THE APPELLANT COMPANY. THE CRUX OF THE MATTER IS WHETHER TAX IS TO BE DEDUCTED AT SOURCE FROM THE AMOUNT REMITTED T O THE PRINCIPAL, NIFD CHANDIGARH BEING PRESCRIBED PORTION OF FEE COLLECTED FROM THE STUDENTS DURING THE YEAR UNDER CONSIDERATION, BEING ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES. THE APPELLANTS SUBMISSION IS THAT THE STUDENTS WER E SUPPOSED TO DEPOSIT THE REGISTRATION FEE WITH THE NIFD DIRECTLY, BUT IT WAS ONLY TO SOLV E THE PROBLEM FACED BY THE STUDENTS THAT THE APPELLANT COMPANY AGREED TO COLLECTS FEES ON BEHALF OF NIFD AND REMIT THE SAME TO THEM. I HAVE GONE THROUGH THE FRANCHISEE AGREEME NT DATED 15.4.2006. I AM CONVINCED THAT THE APPELLANT HAS MADE REMITTANCES TO THE NIFD ON ACCOUNT OF REGISTRATION FEE COLLECTED FROM THE STUDENTS. THE PAYMENTS ARE NEITH ER ROYALTY, NOR FEES FOR TECHNICAL SERVICES AS DEFINED IN EXPLANATION UNDER SEC. 9(1)( VI) AND EXPLANATION 2 UNDER SEC. 9(1)(VII) OF THE IT ACT. NEITHER IS IT FEES FOR PRO FESSIONAL SERVICES. IN FACT, THE APPELLANT COMPANY IS RUNNING A STUDY CENTRE FOR THE CONCERNED NIFD OR UNIVERSITY, AS THE CASE MAY BE. THE APPELLANT OUGHT TO HAVE OFFERED SOME SE CURITY FOR OBTAINING THE FRANCHISEE, BUT THAT IS NOT THE ISSUE IN QUESTION HERE. IT IS T HE NATURE OF REMITTANCE, WHICH IS TO BE QUALIFIED FOR DEDUCTION OF TAX AT SOURCE WHIN THE MEANING OF SECTION 194J READ WITH SECTION 40(A)(IA) OF THE ACT. IN MY OPINION, THE RE MITTANCE OF REGISTRATION FEES OF STUDENTS THROUGH THE APPELLANT COMPANY TO THE NIFD DID NOT C ALL FOR DEDUCTION OF TAX AT SOURCE AND SO DID NOT ATTRACT THE RIGOUR OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THEREFORE, IT IS HELD THAT THE ADDITION MADE BY THE AO BY WAY OF DISALLOWANCE OF RS 27,18,000/- IS NOT CALLED FOR. THE SAME IS HEREBY DELETED. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 4. WE FIND THAT FEES PAYMENTS ARE IN TERM OF ARTICL E NO. VII OF THE FRANCHISEE AGREEMENT DATED 15.04.2006 ENTERED BETWEEN NIFD INSTITUTE OF FASHION DESIGNING LTD., CHANDIGARH AND THE FRANCHISEE I.E. THE ASSESSEE. THE ASSESSEE COL LECTS THIS ANNUAL FEE IN TERM OF THESE TWO COMPONENTS I.E. REGISTRATION FEE PAYABLE TO NIFD AN D COURSE FEE PAYABLE TO THE FRANCHISEE. THE REGISTRATION FEE PAYABLE TO PRINCIPAL I.E. NIFD INS TITUTE OF FASHION DESIGNING LTD. AT RS.27,18,000/- AS PER THE STATEMENT AND AS DEBITED TO P&L ACCOUNT WAS TREATED AS WRONGLY AS THE FRANCHISEE FEE INSTEAD OF REGISTRATION FEE COLL ECTED. ACCORDING TO ASSESSEE, THIS AMOUNT 3 ITA NO. 929/K/2012 MPR MARKETING (P) LTD. , AY:2008-09 COLLECTED ON BEHALF OF PRINCIPAL AS PER THE TERMS O F PROSPECTUS OF FRANCHISEE AGREEMENT FROM THE STUDENTS INTENDING TO ENROLL IN THE COURSE OF NIFD, NO TDS IS LIABLE TO BE DEDUCTED AS THIS PAYMENT DOES NOT FALL U/S. 194J OF THE ACT. WE FIN D THAT THIS PAYMENT OF REGISTRATION FEE IS JUST FOR FACILITATING OF COLLECTION BY THE ASSESSEE ON B EHALF OF HIS PRINCIPAL. THIS REGISTRATION FEE COLLECTED FROM THE STUDENTS ON BEHALF OF NIFD, CHAN DIGARH WAS REMITTED BY WAY OF ADJUSTMENT FROM COURSE FEE INCLUDING REGISTRATION FEE AS COLLE CTED BY DEMAND DRAFTS FOR VARIOUS DEGREE/DIPLOMA COURSES CONDUCTED BY ANNAMALAI UNIVE RSITY. THIS REGISTRATION FEE IS NEITHER FEE FOR PROFESSIONAL OR TECHNICAL SERVICES OR ROYALTY O R REMUNERATION OR FEE OR COMMISSION BY WHATEVER NAME CALLED OR ANY SUM REFERRED TO IN CLAU SE (VA) OF SECTION 28 OF THE ACT. ONCE THIS PAYMENT OF REGISTRATION FEE DOES NOT FALL UNDER THE PROVISIONS OF SECTION 194J OF THE ACT, REIMBURSEMENT OF REGISTRATION FEE COLLECTED ON THEI R BEHALF DOES NOT ATTRACT TDS AND ONCE NO TDS IS LIABLE TO BE DEDUCTED, THE SAME CANNOT BE DI SALLOWED INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE CONFIRM THE ORDER OF CIT( A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.01.2 014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH JANUARY, 2013 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT ITO, WD-8(1), KOLKATA 2 ./,- / RESPONDENT M/S. MPR MARKETING (P) LTD., 20A, LI NDSAY STREET, HUMAYUN COURT, KOLKATA-700 087. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .