CINEPOLIS INDIA PVT. LTD., GURGAON V. DCIT, TDS CIRCLE, GURGAON

MA 286/DEL/2022

AI Insights

Cinepolis India Pvt. Ltd. filed a Miscellaneous Application (M.A No. 286/Del/2022) against an order by the Income Tax Appellate Tribunal (ITA No. 3617/Del/2018), which required the company to deduct TDS on payments made under a Settlement Agreement. The company argued that the payments were capital in nature and not subject to TDS, as they were made in exchange for relinquished rights to equity shares by erstwhile directors, not as salary. The Tribunal, however, found that the payments were profit in lieu of salary and thus taxable. The Tribunal dismissed the M.A, stating that the issues raised were on merits and beyond the scope of rectification under section 254(2) of the Income Tax Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112927 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 10-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-12-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 25-09-2022
• Other Referred Cases: Hindustan Coca Cola Beverages Ltd v. CIT (293 ITR 226) (SC), Commissioner of Income Tax (IT-4), Mumbai v M/s Reliance Telecom Limited
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: TDS
• Section: 201; 254(2); 13

Judgement Text

1 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘B’ NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER M. A NO. 286/Del/2022 (A.Y 2013-14) in I.T.A .No.3617/Del/2018 Cinepolis India Pvt. Ltd. 3 rd Floor, Plot No. 58, Sector- 44, Gurgoan, Haryana PAN: AADCC2076J (APPLICANT) vs DCIT TDS Circle Gurgaon (RESPONDENT) Applicant by Sh. Rajan Vohra, CA & Ms. Preeti Goel, CA Respondent by Sh. Nitin Kumar Jaiman, Sr. DR ORDER PER YOGESH KUMAR U.S., JUDICIAL MEMBER: The present M.A has been filed by the assessee against the order dated 07/09/2022 passed by the Tribunal. The assessee has pleaded that there are following ‘mistake occurred while passing the order by the Tribunal which are reproduced hereunder:- “1. Non-consideration of the Settlement Agreement and concluding that the payments made are in nature of profit in lieu of salary (Para 9) 6. At para 9 of the order, it has been held that the payments made by the assessee are “profit in lieu of salary’’ and accordingly, TDS provisions were applicable and the assessee ought to have deducted TDS. Date of Hearing 16.12.2022 Date of Pronouncement 11.01.2023 2 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. 10. In this regard, it is submitted that at para 9 of the order, your Honours have referred to the Settlement Agreement (Refer Page 2 to 39 of factual paper book) and thereby not given any rationale for concluding the said payments to be in nature of salary. It is submitted that the said payments were as per the settlement agreement wherein the erstwhile directors had relinquished their rights to equity shares which they were entitled to in assessee company and therefore the said payments were in the nature of capital payments and therefore TDS provisions were not applicable. 11. In view of the above, we request your Honours to kindly consider the nature of payments made and the Settlement Agreement and accordingly, rectify/ correct the finding that the said payments are in the nature of salary as the payees are not employees of the assessee and the said payments are capital in nature and therefore no TDS provisions are applicable on the same. ii. Incorrectly held that TDS provisions are applicable as the assessee has claimed the payments made as deduction (Para 9) 12. At para 9 of the order of Hon’ble Tribunal, it has been mentioned as under:- “9 “Now, the question before us whether the assessee has claimed the said amount as deduction while computing the income of the assessee? If the assessee claimed it as deduction while computing income of the assessee for Assessment Year 2013-14, then the assessee is liable to deduct the TDS on the said amount. ” 13. It is humbly submitted that the assessee has not claimed deduction for the said payments made and therefore the aforesaid finding is incorrect. It is humbly submitted that it was specifically pointed out during the hearing that no deduction was claimed by the assessee. Further, reference was also made to the financial statements (Refer Pages 45 and 53 of the factual paper book) and ROI filed (Refer Page 1 of factual paper book), to substantiate that the Assessee has not claimed the amount as deduction while computing income in the Returns for AY 2013-14 and AY 2014-15. 14. In view of above it is humbly submitted that the above finding is incorrect/inadvertent on account of ignoring/ not considering the fact that no deduction of the said amount was claimed while computing the 3 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. income of the Applicant. Accordingly, we request your Honours to kindly rectify the said finding. iii. Incorrectly held that TDS provisions under section 201 (T) and 201(1 A) is applicable even on provisions made by assessee (Para 9) 15. The Hon’ble Tribunal at para 9 of the order has held as under: - “9 Thus, the plea of the counsel for the assessee is that the said amount is not paid but made only a provision, therefore, provisions of Section 201(1) and 201(1 A) cannot be invoked. This plea of the assessee is devoid of merit.’’ However, the Hon’ble Tribunal at para 13 of the order has held as under: “13 . The assessee further contended before the CIT(A) that as there was no actual payment during the FY 2012-13, therefore, the CIT(A) held that the assessee was no liable to deduct TDS on the said amount during the year under consideration. Further, CIT(A) gave liberty to the Assessing Officer to examine the issue of non deduction of TDS in the year in which this amount is actually paid. We do not find any error or infirmity in the approach of the Ld. C!T(A).” 16. Therefore, at para 9 of the order, Hon’ble Tribunal has not accepted the contention of assessee that TDS provisions are not applicable on the provision made by the assessee,. On the other hand, in para 13 as mentioned above, Hon’ble Tribunal has upheld the findings of CIT(A) that no TDS is applicable on provisions made in the present year. Therefore, findings at para 9 is contrary to finding at para 13 of the order. 17. In view of the above, it is humbly submitted that findings at para 9 of the order is incorrect and ought to be rectified in lines with finding at para 13 of the order wherein it has been held that TDS provisions are not applicable on the provision made during the present year. Accordingly, we humbly request your Honours to kindly rectify the finding in para 9 of the order. IV. Ratio laid down by Hon’ble SC in Hindustan Coca Cola Beverage not followed as assessee not proved that recipients have paid taxes on the payments received CPara 121 4 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. 18. At para 12 of the order, Hon’ble Tribunal has held that assessee has not brought any material on record to prove that the payment of taxes has been made by recipients and therefore, rationale laid down by Hon’ble Supreme Court in case of Hindustan Coca Cola Beverages Ltd v. CIT (293 ITR 226) (SC), wherein it has been held that if recipient has paid the taxes, then payer cannot be held to be in default is not accepted by the Hon’ble Tribunal. 19. It is further submitted that para 12 of the order which reads as under, needs correction:- “12.... Since the assessee has not brought any evidence relating to payment of the tax by the recipient before the Lower Authorities or before us to follow the ration laid down in the case of Hindustan Coca Cola Beverage (supra).” 20. It is respectfully submitted that there appears to be some typo/clerical error as the said conclusion appears to be incomplete. 21. In addition to the above, it is submitted that during the course of hearing. Form 26A (Refer Page 124 to 131 of factual paper book), which is an Accountant’s certificate certifying that the recipient has complied with all conditions of section 201(11 and accordingly the payment is made by the payer without deduction of TDS, was specifically brought to the notice of the Hon’ble bench evidencing that the recipients have duly paid the taxes on the payments received bv them. Accordingly, it is respectfully submitted that since the recipients (i.e. Mr. Milan Saini and Mr. Deepak Marda) have paid taxes on receipt of payments (in AY 2014-15), then the payer cannot be held to be in default as per the rationale laid down by the Hon’ble Supreme Court. 22. In view of the above, it is humbly submitted that the assessee had duly established that the recipients have paid the taxes and it appears that the Hon’ble Tribunal has missed the evidences/documents submitted by the assessee as mentioned above. Accordingly, we humbly request your Honour to kindly rectify the findings at para 12 of the order in light of the above submissions of the assessee. V. Matter remitted to the AO with direction to assessee to prove that recipients have actually paid taxes and AO to examine the payments in the year of actual payment (Para 141 23. At para 14 of the order, the Hon’ble Tribunal has remanded the matter to the file of the AO with a direction to the assessee to provide material evidencing that the recipients have actually paid taxes and 5 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. accordingly decide the issue after verification of the same. Further, the Hon’ble Tribunal has directed the AO to examine the issue of non deduction of TDS in the year in which the said payments are actually made. 24. In view of the above findings at para 14, assessee has the following two-fold submissions with regards to infirmity in the said para:- i. Non-consideration of the fact that assessee has already proved that recipients have paid taxes 25. The Hon’ble Tribunal at para 14 has erred in remanding the matter back to the AO with direction to the assessee to prove that the recipients have paid taxes. It is to be noted that CIT(A) has already decided that no TDS is required to be deducted in the year under consideration i.e. AY 2013-14 and assessee was directed to show to AO that taxes have been paid by recipients. The relevant finding of Tribunal is reproduced as under:- “14.... In the facts and circumstances of the case, we deem it fit to remand the matter to the file of the AO with a direction to the assessee to provide the material to prove that the recipients have actually paid the tax.” 26. As submitted above, the assessee has already furnished Form 26A evidencing that the taxes are already paid by the recipients and therefore, assessee cannot be held to be in default in light of the Hon’ble Supreme Court ruling in case of Hindustan Coca Cola Beverages Ltd (supra). Accordingly, it is respectfully submitted that Hon’ble Tribunal has erred in remanding the matter back to the AO and directing the assessee to furnish evidence of payment of taxes by recipients. This is more so as there is no question of any TDS to be deducted by assessee in the year under consideration as there was no payment during the year. Hence there was no necessity to refer the matter back to the AO. 27. Further, it is submitted that the said fact that the payment of taxes has been made by recipients has nowhere been challenged or disputed by the AO or the CIT(A). Therefore, the Hon’ble Tribunal has erred in remanding the matter back to the file of the AO on an issue which has neither been disputed by the AO nor the CIT(A) and as mentioned, not relevant for the year under consideration. 6 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. 28. In view of the above, it is humbly submitted that the said finding of restoring the matter back to the AO needs to be rectified as the assessee has already submitted evidence to prove that recipients have paid taxes and more so assessee cannot be held to be in default for nondeduction of tax on provision. ii. Direction to AO to examine the issue in the year in which payments are actually made 29. The Hon’ble Tribunal has directed the AO at para 14 to examine the taxability of the payments in the year in which the payments are actually made i.e. in AY 2014-15. The relevant finding of Tribunal is reproduced as under: - “14.... the Learned AO is also at liberty to examine the issue of non deduction of tax in the year in which the amount is actually paid." 30. In this regard, it is humbly submitted that the Hon’ble Tribunal has erred in giving such direction to the AO as even if it is held to be salary, TDS provisions cannot apply in the year of provision and also in light of the fact specifically pointed during the course of hearing that the appeal in subsequent year i.e. AY 2014-15 is already pending for disposal before the CIT(A) and the assessee has also submitted the submissions made before CIT(A) in AY 2014- 15 in the paper book (Refer Page 71 to 131 of the factual paper book). 2. Based on the above pleadings, the assessee has made following prayers in the present M.A. “32. In view of the above, it is humbly requested your Honour to kindly rectify the above mentioned inadvertent errors in the order dated 7 September 2022 which are summarized as under:- i. Settlement Agreement with the payees not considered and inadvertently held the payments to be in the nature of salary/profits in lieu of salary, without appreciating that the recipients were not the employees of the assessee company and they have received the payments for giving up their rights in shares which were promised to be given to them by the assessee company. ii. Incorrectly held that the TDS provisions are applicable as the payments made by assessee have been claimed as deduction by the assessee 7 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. whereas assessee has not claimed any deduction with respect to the same. iii. Incorrectly held that the TDS provisions are applicable even on provision made during the year under consideration, for the amounts paid in the subsequent year. iv. The documents submitted by the assessee evidencing payment of taxes by recipients not considered and therefore assessee cannot be held to be in default if taxes are paid by the recipients. v. Directions given to the AO to examine the payments in the year in which actually paid without appreciating that the appeal against the same is already pending before CIT(A).” 3. The Ld. AR vehemently contended that the above mentioned mistakes have been occurred while passing the order by the Tribunal in ITA No. 3617/Del/2018 which requires to be rectified by allowing the present M.A . 4. Per contra, the Ld. DR submitted that the Tribunal cannot give such relief prayed in the present Miscellaneous Application and scope u/s 254(2) of the Act is very limited, since the Appeal is disposed off on merit the M.A cannot be entertained. 5. We have heard the parties, verified the material on record and gave our thoughtful consideration. 6. On going through the pleadings of the M.A and on hearing the Ld. A.R of the assessee, we find that the entire pleadings on which the M.A is sought to be allowed are on merit of the case. Further, the order dated 07/01/2022 in ITA No. 3617/Del/2018 has been passed on merit after considering the facts and circumstances. Therefore, in our opinion, there is no rectifiable error apparent from record. 7. In exercise of powers under section 254(2) of the Act, the Tribunal may amend any order passed by it only to rectify any mistake apparent from the 8 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. record. The Tribunal cannot revisit its earlier order and go into detail on merit, which is beyond the scope and ambit of the power conferred under Section 254(2) of the Act. The Hon’ble Supreme Court in the case of Commissioner of Income Tax (IT-4), Mumbai v M/s Reliance Telecom Limited in CIVIL APPEAL NO. 7110 OF 2021 vide judgment dated 03/12/2021 held that the power of the Income Tax Appellate Tribunal (ITAT) under Section 254(2) of the Income Tax Act is limited to rectifying or amending an order in view of an error apparent from the record, and the said power cannot be used to recall an order. The relevant observation of the Hon’ble supreme Court in the case of Commissioner of Income Tax (IT-4), Mumbai v M/s Reliance Telecom Limited (supra) is as under:- “6. None of the aforesaid grounds are tenable in law. Merely because the Revenue might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors Section 254(2) of the Act. As observed hereinabove, the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court, which in fact was filed by the Assessee before the High Court, but later on the Assessee withdrew the same in the instant case. 9 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. 7. In view of the above and for the reasons stated above, the impugned common judgment and order passed by the High Court as well as the common order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 deserve to be quashed and set aside and are accordingly quashed and set aside. The original orders passed by the ITAT dated 06.09.2013 passed in the respective appeals preferred by the Revenue are hereby restored.” 8. The issue involved in the ITA No. 3617/Del/2018 has been decided on merit and passed final order on 07/09/2022. There are specific findings given on the issues involved in the Appeal after going through the material on record and the final order has been passed. In our opinion, there is no mistake apparent on record, therefore, by respectfully following the judgment of Hon’ble Supreme Court Commissioner of Income Tax (IT-4), Mumbai v M/s Reliance Telecom Limited (supra), we find no merit in the present Miscellaneous Application. Accordingly, MA filed by the assessee is dismissed. 9. In the result, the miscellaneous application filed by the assessee is dismissed. Order pronounced in the open court on 11 th January, 2023 Sd/- Sd/- (N. K. BILLAIYA ) (YOGESH KUMAR U.S.,) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 11 th January, 2023. R.N, Sr. PS 10 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 11 M. A No. 286/Del/2022 in (ITA No. 3617/Del/2018) Cinepolis India Pvt. Ltd.