DCIT 2(2), MUMBAI V. J.K. HELENE CURTIS LTD, MUMBAI

ITA 954/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100931 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Department
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 10-02-2014
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO 954 /MUM/201 4 ASSESSMENT YEAR: - 2009 - 10) DCIT - 2(2). R. NO. 545, AAYKAR BHVAN, MUMBAI. VS.` M/S J.K. HELENCE CURTIS LTD. NEW HIND HOUSE, NAROTTAM MORARJEE MARG, BALLARD ESTATE, MUMBAI 400038. APPELLANT RESPONDENT ORDER PER G.S. PANNU, AM THE CAPTIONED APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER REFERRED TO AS THE CIT(A)) DATED 15.11 .2013, WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER U/S. 143 (3 ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 19 .12.2011, PERTAINING TO ASSESSMENT YEAR 2009 - 10 . REVENUE BY SHRI ABANI KANTA NAYAK ASSESSEE BY SHRI Y.P. TRIVEDI & MRS. USHA DALAL DATE OF HEARING 22.07.2015 DATE OF PRONOUNCEMENT 31 .08.2015 2 ITA NO 954/MUM/2014 ASSESSMENT YEAR: - 2009 - 10) PAGE 2 OF 6 2. THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 71,83,663/ - MADE BY THE AO U/S 40(A)(IA) OF THE IT ACT WITHOUT APPRECIATING THAT THE PAYMENT MADE BY THE ASSESSEE AS WAREHOUSING CHARGES PAID TO AGENTS FALLS UNDER THE CATEGORY OF RENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OR RS. 71,83,663/ - MADE BY THE AO U/S 40(A)(IA) OF THE IT ACT WITHOUT APPRECIATING THE ASSESSEE FAILED TO DEDUCT TAX AT PRESCRIBED AS PER THE P ROVISIONS OF SECTION 194J OF THE IT ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 71,83,663/ - MADE BY THE AO U/S. 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THE DEPARTMENT HA S NOT ACCEPTED THE DECISION OF THE HONBLE ITAT AND APPEAL OF THE HONBLE BOMBAY HIGH COURT HAS BEEN FILED IN THE CASE OF HINDUSTAN THOMSON ASSOCIATES (I) LTD. FOR A.Y. 2005 - 06 & 2006 - 07. 3 . BRIEFLY PUT , THE RELEVANT FACTS ARE THAT ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, AND IS ENGAGED IN THE BUSINESS OF TRADING IN COSMETICS AND TOILETRIES, WHICH ARE GOT MANUFACTURED FROM VENDORS UNDER ASSESSE E S OWN BRAND NAM E. THE PRODUCTS ARE SOLD AND DISTRIBUTED BY THE ASS ESSEE THROUGH ITS OWN DEPOTS, C&F AGENTS AND SALES AGENTS. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD DEBITED AN AMOUNT OF RS. 71,38,663/ - AS WAREHOUSING CHARGES UNDER THE HEAD ADMINISTRATIVE & SELLING EXPENSES. THE RESPONDENT - ASSESSEE EXPLAINED THAT THE WAREHOUSING CHARGES REPRESENT 3 ITA NO 954/MUM/2014 ASSESSMENT YEAR: - 2009 - 10) PAGE 3 OF 6 COMMISSION PAID TO THE C&F AGENTS ON WHICH TAX WAS DEDUCTED AT SOURCE @ 10% U/S 194H OF THE ACT. HOWEVER , AS PER THE ASSESSING OFFICER THE NATURE OF WAREHOUSING CHARGES ARE IN THE NATURE OF RE N T O N WHICH TAX WAS LIABLE TO BE DEDUCTED AT SOURCE @ 20% U / S 194I OF THE ACT. BECAUSE OF THE SHORTFALL IN DEDUCTION OF TAX AT SOURCE, THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE OF RS. 71,38,663/ - BY INVOKING SECTION 40(A)(IA) OF THE ACT. 4 . THE CIT(A) UPHELD THE STAND OF THE ASSESSEE BY HOLDING THAT THE WAREHOUSING CHARGES PAID TO C&F AGENTS WERE IN THE NATURE OF COMMISSION, LIABLE FOR DEDUCTION OF TAX @ 10% U/S 194H OF THE ACT, AND NOT AS RENT LIABLE FOR DEDUCTION OF TAX @ 20% U/S 194I OF THE ACT. TH E CIT(A) EXAMINED THE TERMS AND CONDITIONS OF THE AGREEMENT WITH C&F AGENTS. THE FOLLOWING DISCUSSION IN THE ORDER OF CIT(A) IS RELEVANT: - FROM THE SAMPLE COPY OF AGREEMENT, IS NOTED THAT THE PAYMENTS WERE INDEED MADE ON THE SERVICES GIVEN BY THOSE AGENT S FOR CLEARING AND FORWARDING OF THE ASSESSEES GOODS AND THAT EVEN THE SALE BILLS WERE CREATED BY THOSE AGENTS ON BEHALF OF THE ASSESSEE WHEREON THE ADDRESS OF THE ASSESSEE COMPANY I.E. J K HELENCE CURTIS LTD IS GIVEN AS CARE OF THOSE AGENTS. FOR EG . ONE OF ITS AGENTS IS VIHIRA TRADERS IN AHMEDABAD. THE ASSESSEES GOODS WERE FIRST TRANSPORTED FROM ITS PREMISES IN THANE TO THE GODOWNS OF VIHIRA TRADERS AT AHMEDABAD AND THEN FROM THERE THE SAME WERE DISPATCHED TO ITS VARIOUS CLIENTS. THE RELVANT INVO ICES IN THE LETTER PAD OF J K HELENCE CURTIS LTD WERE PREPARED BY THAT AGENT ON BEHALF OF THE ASSESSEE COMPANY. THE ADDRESS OF THE ASSESSEE COMPANY GIVEN THEREON WAS THAT OF VIHIRA TRADERS [ MENTIONED AS C/O VIHIRA TADERS, 4, KESHAVIAL ESTATE, BYPASS HI GHWAY ASLALI 380013]. THUS IT IS VERY CLEAR THAT THE SERVICES RENDERED BY M/S VIHIRA TRADERS WAS THAT OF C&F AGENT AND THEREFORE THE PAYMENT MADE TO HIM HAS TO BE TREATED IN THE NATURE OF COMMISSION AND NOT RENT. THIS IS WHAT BROADLY HAS BEEN ACCEPTED BY THE AO IN HIS REMAND REPORT. 4 ITA NO 954/MUM/2014 ASSESSMENT YEAR: - 2009 - 10) PAGE 4 OF 6 IN VIEW THEREOF, IT IS HELD THAT TDS WAS TO BE MADE IN ACCORDANCE WITH THE PROVISION OF SEC. 194H @ 10% ONLY AND NOT @20% U/S 194I AS HELD BY THE AO. THE DISALLOWANCE U/S 40 (A)(IA) COULD EVEN BE MADE IF THE ASSESSEE FAILS TO MAKE TDS @ 10% U/S 194H. BEFORE ME IT IS PLEADED THAT THE ASSESSEE HAS INDEED DEDUCTED TAX @ 10% AND PAID THE SAME TO THE GOVT. ACCOUNT. THE AO IS REQUIRED TO VERIFY THE SAME AND IF THAT IS CORRECT THEN THE ADDITION STANDS DELETED. THE AO IS DIRECTED TO GIVE APPEAL EFFECT ACCORDINGLY. 5 . AS PER THE AFORESAID DISCUSSION, IT IS QUITE EVIDENT THAT THE CIT(A) CONCLUDED THAT THE SERVICES RENDERED BY A C&F AGENT ARE IN THE NATURE OF COMMISSION AND NOT RENT O F PREMISES . AGAINST SUCH A DECISION OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6 . BEFORE US, THE LD. DR HAS CONTENDED THAT THE PAYMENT TO C&F AGENTS IS FOR GODOWN RENTS AND THEREFORE SECTION 194I OF THE ACT HAS BEEN RIGHTLY INVOKED TO DISALLOW THE EXPENDITURE U/S 40(A)(IA) OF THE ACT. 7 . ON THE OTHER HAND, THE LD. REPRESENTATIVE FOR THE RESPONDENT - ASSESSEEE DEFENDED THE ORDER OF CIT(A) ON THE BASIS OF THE FINDINGS RECORDED THEREIN. THE ASSESSEE FURTHER ARGUED THAT THE CIT(A) HAS RIGHTLY OBSERVED THAT SERVICES RENDERED BY THE AGENTS WERE IN THE NATURE OF COMMISSION AS UNDERSTOOD FOR SECTION 194H OF THE ACT AND NOT RENT AS UNDERSTOOD FOR SECTION 194I OF THE ACT. 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS . I N THE PRESENT CASE , THE STAND OF THE ASSESSING OFFICER IS THAT TAX WAS LIABLE TO BE DEDUCTED ON THE IMPUGNED PAYMENTS AT THE RATE OF 20% UNDER SECTION 5 ITA NO 954/MUM/2014 ASSESSMENT YEAR: - 2009 - 10) PAGE 5 OF 6 194I OF THE ACT, AND NOT @ 10% DEDUCTED BY THE ASSESSEE AS PER SECTION 194H OF THE ACT. FOR THIS REASON, AS PER THE ASSESSING OFFICER, THE CORRESPONDING EXPENDITURE IS DISALLOWABLE U/S 40(A)(IA) OF THE ACT. 9 . IN THIS REGARD, WE FIND THAT THE CIT(A) HAS APPROPRIATELY CO NSIDERED THE ISSUE AND HELD THAT THE PAYMENTS MADE TO THE C&F AGENTS ARE IN THE NATURE OF COMMISSION , WHICH FALL FOR CONSIDERATION UNDER SECTION 194H OF THE ACT, THOUGH IN THE A CCOUNT B OOKS, THE TERMINOLOGY USED IS WAREHOUSING CHARGES . THE CASE OF TH E ASSESSING OFFICER IS PRIMARILY BASED ON THE NOMENCLATURE OF WAREHOUSING CHARGES USED BY THE ASSESSEE TO DESCRIBE THE PAYMENTS MADE TO C&F AGENTS. THE CIT(A) HAS NOTED THE TERMS AND CONDITIONS OF THE AGREEMENT WITH C&F AGENTS AS ALSO THE MECHANICS OF THE BUSINESS OF ASSESSEE. ASSESSEE HAD EXPLAINED THAT FOR THE PURPOSE OF MARKETING ITS PRODUCTS, IT APPOINTS C&F AGENTS AT DIFFERENT PLACES FOR CLEARING AND FORWARDING OF ASSESSEES GOODS . AS PER THE ASSESSEE, THE AGREEMENT WITH C&F AGENTS, SHOWS THAT TH ERE IS A PRINCIP AL AND AGENT RELATIONSHIP AND IT WAS NOT AN AGREEMENT FOR TAKING THE WAREHOUS E ON RENT. THE FACTUAL FINDING S ARRIVED AT BY THE CIT(A) , WHICH WE HAVE EXTRACTED ABOVE , CLEARLY ESTABLISHES THAT THE SERVICES RENDERED BY C&F AGENT ARE COMPENSATE D BY WAY OF COMMISSION WHICH IS RELATED TO THE SALES MADE AND, THEREFORE, THE PAYMENTS HAVE BEEN RIGHTLY HELD TO BE SUBJECT TO DEDUCTION OF TAX AT SOURCE U/S 194H OF THE ACT AT THE RATE OF 10%. THE R EVENUE HAS NOT L EAD ANY MATERIAL/EVIDENCE 6 ITA NO 954/MUM/2014 ASSESSMENT YEAR: - 2009 - 10) PAGE 6 OF 6 BEFORE US TO ESTABLISH ANY ERROR IN THE FINDING OF THE CIT(A), WHICH WE HEREBY AFFIRM. THUS , WE FIND NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS HEREBY DISMISSED. 10 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N THIS 31 ST DAY OF AUGUST 2015. SD/ - SD/ - ( SANJAY GARG ) (G.S. PANNU) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER ) MUMBAI DATED 31 - 08 - 2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI