DR FRANCIS P. CARDES, V. ITO 11(2)(3),

MA 488/MUM/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8199 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2007-2008
• Appeal Filed On: 26-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Keywords: Diversion of income
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, J , BENCH BEFORE SHRI D.K. AGARWAL,J.M. AND SHRI RAJENDRA S INGH, A.M. MA NO: 488/MUM/2011 AND MA NO:138/MUM/2012 ARISING OUT OF : ITA NO.5945/M/2010 ASSESSMENT YEAR : 2007-08 DR. FRANCIS P. CANDES LEO VILLA, POINSUR IC COLONY BORIVALI (W) MUMBAI-400 103. PAN NO.: AAAPC 4684 J VS. INCOME TAX OFFICER WARD-11(2)(3) AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI BHUPENDRA SHAH RESPONDENT BY : SHRI SUMEET KUMAR DATE OF HEARING : 20.4.2012 DATE OF PRONOUNCEMENT : 16.5.2012 ORDER PER RAJENDRA SINGH (AM). THESE MISCELLANEOUS APPLICATIONS HAVE BEEN FILED BY THE ASSESSEE REQUESTING FOR AMENDMENT OF THE ORDER DATED 24. 4.2011 OF THE TRIBUNAL IN ITA NO.5945/M/2010 POINTING OUT SOME APPARENT MISTAKES. THE LD. AR FOR THE ASSESSEE AT THE TIME OF HEA RING SUBMITTED THAT THE MISTAKES POINTED OUT IN BOTH THE APPLICATIONS WERE THE SAME AND THE APPLICATION IN M.A. NO.138/M/2012 BEING THE LATEST MAY ONLY BE CONSIDERED. THE M.A. NO.488/M/2011 IS, THEREFORE, DISMISSED AS NOT PRESSED. MA NO.488/11 & 138/12 ARISING OUT OF ITA NO. 5945/M/10 A.Y:07-08 2 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO WAS A CONSU LTANT PATHOLOGIST HAD CONSTITUTED A PARTNERSHIP FIRM WITH DR. KALPANA D. VELASKAR NAMED AS HI-TECH BLOOD TRANSFUSION. SUBSEQUENTLY, THERE WAS A DISPUTE BETWEEN THE TWO PARTNERS AND ARBITRATION PETITION WAS FILED BEFORE HIGH COURT WHO HAD APPOINTED A RECEIVER TO TAKE OVER THE BUSINESS OF THE ASSESSEE. SUBSEQUENTLY, THE HIGH COURT DIR ECTED THAT THE RECEIVER WOULD INVITE BIDS FROM THE PARTNERS AND T HE HIGHEST BIDDER WOULD BE ALLOWED TO CARRY ON THE BUSINESS ON PA YMENT OF ROYALTY OF RS.3.5 LACS PER MONTH. ASSESSEE BEING THE HIG HEST BIDDER, WAS CARRYING ON THE BUSINESS AND, IN THE RELEVANT YEAR, HAD CLAIMED DEDUCTION OF RS.42.00 LACS ON ACCOUNT OF ROYALTY. THE CLAI M HAD BEEN DISALLOWED BY THE AO ON THE GROUND THAT NO TAX HAD B EEN DEDUCTED UNDER SECTION 194J OF THE IT ACT. THE ORDER OF THE AO WAS CONFIRMED BY CIT(A) AND ALSO BY THE TRIBUNAL. THE MISCELLANEOUS APPLICATION HAS BEEN FILED BY THE ASSESSEE AGAINST THE SAID ORDER OF THE TRIBUNAL POINTING OUT APPARENT MISTAKES. 3. THE LD. AR FOR THE ASSESSEE ARGUED BEFORE US THAT THE PROVISIONS OF SECTION 194J COVER PAYMENT BY WAY OF (A) FEES FOR P ROFESSIONAL SERVICES; (B) FEES FOR TECHNICAL SERVICES; (C) ROYALTY AND ( D) ANY SUM REFERRED TO IN CLAUSE(VA) OF SECTION 28 AND WERE NOT A PPLICABLE TO ANY PERSON OTHER THAN INDIVIDUAL OR HUF. IT WAS ALSO SUBMIT TED THAT THE MA NO.488/11 & 138/12 ARISING OUT OF ITA NO. 5945/M/10 A.Y:07-08 3 SECOND PROVISO TO SECTION 194J INSERTED FROM 1.6.2002 AS PER WHICH PROVISIONS WERE MADE APPLICABLE IN CASE OF HUF AND INDIV IDUAL, COVERED ONLY PAYMENTS FOR FEES FOR PROFESSIONAL SERVICES OR FEES TE CHNICAL SERVICES PROVIDED, AND NOT ROYALTY PAYMENT. THEREFORE, ASSESSEE, BEING AN INDIVIDUAL, PROVISIONS OF SECTION 194J WERE NO T APPLICABLE AND THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE AND A CCORDINGLY NO DISALLOWANCE WAS REQUIRED TO BE MADE UNDER SECTION 40 (A)(IA). THE LD. AR FURTHER ARGUED THAT EVEN THOUGH THIS ARGUMENT WAS NOT RAISED AT THE TIME OF HEARING BEFORE THE TRIBUNAL, THE TRI BUNAL HAD APPLIED PROVISIONS OF SECTION 194 J AND ANY APPARENT MISTAKE IN THE APPLICATION OF THE SAID SECTION COULD BE THE BASIS FOR RECTIFICATION OF THE ORDER UNDER SECTION 254(2). THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF KERALA CHEMICALS AND PROTEINS LTD. VS CIT (235 ITR 467) AND ON THE JUDGME NT OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. RAMNATH GO ENKA (DECD.) (252 ITR 653). 3.1 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND ARGUED THAT THE TRIBUNAL HAD PASSED A REASONED AND SPEAKING OR DER AND THERE WAS NO APPARENT MISTAKE IN APPLICATION OF SECTION 194J W HICH WAS APPLICABLE TO ROYALTY PAYMENT ALSO. MA NO.488/11 & 138/12 ARISING OUT OF ITA NO. 5945/M/10 A.Y:07-08 4 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED BY THE ASSESSEE I N APPEAL WAS REGARDING DISALLOWANCE OF ROYALTY PAYMENT OF RS.42. 00 LACS ON THE GROUND OF NO DEDUCTION OF TAX AT SOURCE. THE ASSESSEE I N THE MISCELLANEOUS APPLICATION HAS SUBMITTED THAT NO TAX WAS RE QUIRED TO BE DEDUCTED IN CASE OF ROYALTY PAYMENT UNDER SECTION 194J A ND THEREFORE, THERE IS AN APPARENT MISTAKE IN THE ORDER OF THE TRI BUNAL IN CONFIRMING THE DISALLOWANCE. THE SAID PROVISIONS OF SECTION 194J AR E REPRODUCED BELOW FOR READY REFERENCE. 194J. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY SUM BY WAY OF-- (A) FEES FOR PROFESSIONAL SERVICES, OR (B) FEES FOR TECHNICAL SERVICES, OR (C) ROYALTY, OR (D) ANY SUM REFERRED TO IN CLAUSE (VA) OF SECTION 28, SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO TEN PER CENT. OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN: PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION-- (A) FROM ANY SUMS AS AFORESAID CREDITED OR PAID BEFORE THE 1ST DAY OF JULY, 1995 ; OR (B) WHERE THE AMOUNT OF SUCH SUM OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH SUMS MA NO.488/11 & 138/12 ARISING OUT OF ITA NO. 5945/M/10 A.Y:07-08 5 CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID D URING THE FINANCIAL YEAR BY THE AFORESAID PERSON TO THE ACCOU NT OF, OR TO THE PAYEE, DOES NOT EXCEED-- (I) THIRTY THOUSAND RUPEES , IN THE CASE OF FEES FO R PROFESSIONAL SERVICES REFERRED TO IN CLAUSE (A), OR (II) THIRTY THOUSAND RUPEES , IN THE CASE OF FEES F OR TECHNICAL SERVICES REFERRED TO IN CLAUSE (B), OR (III) THIRTY THOUSAND RUPEES , IN THE CASE OF ROYAL TY REFERRED TO IN CLAUSE (C), OR (IV) THIRTY THOUSAND RUPEES , IN THE CASE OF SUM R EFERRED TO IN CLAUSE (D) : PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEEDS THE MONETARY LIMITS SPECIFIED UNDER CLA USE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANC IAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH S UCH SUM BY WAY OF FEES FOR PROFESSIONAL SERVICES OR TEC HNICAL SERVICES IS CREDITED OR PAID, SHALL BE LIABLE TO DE DUCT INCOME-TAX UNDER THIS SECTION : PROVIDED ALSO THAT NO INDIVIDUAL OR A HINDU UNDIVIDED FAMILY REFERRED TO IN THE SECOND PROVISO SHALL BE LIABLE TO DEDUCT INCOME-TAX ON THE SUM BY WAY OF FE ES FOR PROFESSIONAL SERVICES IN CASE SUCH SUM IS CREDITED OR PAID EXCLUSIVELY FOR PERSONAL PURPOSES OF SUCH INDIVIDUA L OR ANY MEMBER OF HINDU UNDIVIDED FAMILY. 4.1 WE FIND FROM PERUSAL OF RECORDS THAT THE ASSESSEE AT T HE TIME OF HEARING THE APPEAL HAD NOT DISPUTED THE APPLICABILIT Y OF PROVISIONS OF SECTION 194J. THE ARGUMENT RAISED WAS THAT DUE TO PEN DING ARBITRATION PROCEEDINGS, IT WAS NOT CLEAR AS TO WHOM THE INCOME BEL ONGED AND THEREFORE, THE TAX COULD NOT BE DEDUCTED. IT HAD AL SO BEEN ARGUED THAT THE PAYMENT OF ROYALTY WAS DIVERSION OF INCOME BY OVER RIDING TITLE AND THEREFORE, NO TAX WAS REQUIRED TO BE DEDUCTED. THESE ARGUMENTS WERE DULY CONSIDERED BY THE TRIBUNAL AND WERE REJECTED BY WAY OF A MA NO.488/11 & 138/12 ARISING OUT OF ITA NO. 5945/M/10 A.Y:07-08 6 REASONED ORDER OF THE TRIBUNAL. THE TRIBUNAL HOWEVE R ACCEPTED THE ALTERNATE PLEA OF THE ASSESSEE THAT PROVISIONS OF SECTION 1 94J WERE APPLICABLE ONLY FROM 13-07-06 AND THEREFORE, HELD TH AT ONLY PAYMENTS MADE FOR THE PERIOD 13-07-2006 ONWARDS WOULD BE DISA LLOWED UNDER SECTION 40(A)(IA) OF THE ACT. 4.2 THE ASSESSEE IN THE MISCELLANEOUS APPLICATION HAS NOW RA ISED A FRESH PLEA THAT PROVISIONS OF SECTION 194J WERE NOT APPL ICABLE. SUCH FRESH PLEA CANNOT BE ENTERTAINED IN THE MISCELLANEOUS AP PLICATION PARTICULARLY WHEN NO DISPUTES HAD BEEN RAISED REGARDING APPLICABILITY OF PROVISIONS OF SECTION 194J. MOREOVER, WE ALSO FIND THAT APPLICABILITY OF PROVISIONS OF SECTION 194J IN CASE OF THE ASSESSEE IS ALSO A DE BATABLE ISSUE. THE SAID PROVISION WAS INITIALLY NOT APPLICABLE T O INDIVIDUAL AND HUF. FROM 1-06-02 THE SECOND PROVISO WAS INSERTED WHICH MADE PROVISION APPLICABLE ALSO TO INDIVIDUAL AND HUF COVERED BY SECTION 44AB AT THAT POINT OF TIME, SECTION 194J WAS APPLICA BLE ONLY IN RESPECT OF PAYMENT OF FEE FOR PROFESSIONAL SERVICES OR FE E FOR TECHNICAL SERVICES AND THEREFORE, PROVISO REFERRED TO ONLY THESE PAYMENTS. SUBSEQUENTLY, FROM 13-06-06 THE SECTION WAS ALSO MADE A PPLICABLE IN CASE OF ROYALTY AND SUMS REFERRED TO CLAUSE (VA) TO SECTIO N 28. THUS FROM 1-07-06, THE SECTION ALSO APPLIED TO ROYALTY PAYM ENTS BY INDIVIDUAL AND HUF HAVING TURNOVER EXCEEDING MONETARY LIMITS PRESCRIBED IN SECTION 44AB. AS INTENTION OF THE PARLIAME NT WAS TO APPLY MA NO.488/11 & 138/12 ARISING OUT OF ITA NO. 5945/M/10 A.Y:07-08 7 THE PROVISIONS OF SECTION 194J IN CASE OF INDIVIDUAL AND HUF COVERED BY SECTION 44AB. IN ANY CASE, THE ISSUE IS DEBATABLE. CONSID ERING THIS AND ALSO THE FACT THAT THE ASSESSEE HAD NOT RAISED ANY DISP UTE REGARDING APPLICABILITY OF PROVISIONS OF SECTION 194J A T THE TIME OF HEARING OF APPEAL, WE DO NOT SEE ANY APPARENT MISTAK E IN THE ORDER OF TRIBUNAL. THE MISCELLANEOUS APPLICATION FILED BY THE ASSE SSEE IS DEVOID OF ANY MERIT AND IS ACCORDINGLY REJECTED. 5. IN THE RESULT, MISCELLANEOUS APPLICATIONS FILED BY TH E ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.05.2012 SD/- SD/- (D.K. AGARWAL) ( RAJENDRA SINGH ) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI, DATED: 16.05.2012. JV. COPY TO: THE APPLICANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.