Addl CIT, Rajahmundry v. Chandana Brothers (BO Chilkadapalle ,Hyd), Rajahmundry

ITA 122/VIZ/2009 | 2006-2007
Pronouncement Date: 21-12-2010 | Result: Dismissed

Appeal Details

RSA Number 12225314 RSA 2009
Assessee PAN AABFC4642H
Bench Visakhapatnam
Appeal Number ITA 122/VIZ/2009
Duration Of Justice 1 year(s) 9 month(s) 16 day(s)
Appellant Addl CIT, Rajahmundry
Respondent Chandana Brothers (BO Chilkadapalle ,Hyd), Rajahmundry
Appeal Type Income Tax Appeal
Pronouncement Date 21-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted Not Allotted
Tribunal Order Date 21-12-2010
Date Of Final Hearing 08-12-2010
Next Hearing Date 08-12-2010
Assessment Year 2006-2007
Appeal Filed On 06-03-2009
Judgment Text
ITA NOS 59-61 81 122-124 OF CHANDANA BROTHERS RAJAHM UNDRY PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.59/VIZAG/2009 ASSESSMENT YEAR: 2006 - 07 ADD CIT RAJAHMUNDRY VS. CHANDANA BROTHERS B.O PATNI CENTRE SECUNDERABAD (APPELLANT) PAN NO: AABFC 4642 H ITA NO.60/VIZAG/2009 ASSESSMENT YEAR: 2006-07 ADD CIT RAJAHMUNDRY VS. CHANDANA BROTHERS B.O VIJAYAWADA & VIZIANAGARAM (APPELLANT) PAN NO: AABFC 4638 D ITA NO.61/VIZAG/2009 ASSESSMENT YEAR: 2006-07 ADD CIT RAJAHMUNDRY VS. CHANDANA BROTHERS B.O GUNTUR & KURNOOL (APPELLANT) PAN NO: AABFC 4440 R ITA NO.81/VIZAG/2009 ASSESSMENT YEAR: 2006-07 ADD CIT RAJAHMUNDRY VS. CHANDANA BROTHERS B.O AMEERPET HYDERABAD (APPELLANT) PAN NO: AADFC 6522 G ITA NO.122/VIZAG/2009 ASSESSMENT YEAR: 2006-07 ADD CIT RAJAHMUNDRY VS. CHANDANA BROTHERS B.O CHIKKADAPALLI HYDERABAD (APPELLANT) PAN NO: AADFC 3501 H ITA NOS 59-61 81 122-124 OF CHANDANA BROTHERS RAJAHM UNDRY PAGE 2 OF 5 ITA NO.123/VIZAG/2009 ASSESSMENT YEAR: 2006-07 ADD CIT RAJAHMUNDRY VS. CHANDANA BROTHERS B.O ELURU (APPELLANT) PAN NO: AADFC 6741 P ITA NO.124/VIZAG/2009 ASSESSMENT YEAR: 2006 - 07 ADD CIT RAJAHMUNDRY VS. CHANDANA BROTHERS B.O GENERAL BAZAR SECUNDERABAD (APPELLANT) PAN NO: AABFC 4966 G APPELLANT BY: SHRI T.L. PETER DR RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER BENCH: ALL THESE APPEALS FILED AT THE INSTANCE OF THE RE VENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY LEARNED CIT(A) RAJAHMU NDRY AND THEY RELATE TO THE ASSESSMENT YEAR 2006-07. IN SIX APPEALS THE SOLITARY ISSUE URGED IS IDENTICAL IN NATURE AND IN THE REMAINING APPEAL BE SIDES THE COMMON ISSUE STATED ABOVE ONE MORE ISSUE IS URGED. HENCE ALL T HESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. THE ISSUE WHICH IS IDENTICAL IN NATURE IN ALL TH ESE APPEALS IS WITH REGARD TO THE APPLICABILITY OF SECTION 194C OF THE ACT ON THE EXPENDITURE INCURRED ON PACKING MATERIAL SALES PROMOTION GIFT ARTICLES ETC. IN THE APPEAL NUMBERED AS ITA 81/VIZAG/2009 THE REVENUE HA S RAISED ONE MORE GROUND RELATING TO THE DELETION OF NOTIONAL INTERES T ASSESSED ON THE DEBIT BALANCE OF THE PARTNERS CAPITAL. ITA NOS 59-61 81 122-124 OF CHANDANA BROTHERS RAJAHM UNDRY PAGE 3 OF 5 3. WITH REGARD TO THE COMMON ISSUE THE LEARNED COU NSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ORDERS PASSED BY THIS BENCH IN THE CASE OF M/S DEVI FISHERIES LIMITED IN ITA NO.420/VIZAG/2 006 AND ALSO IN THE CASE OF BOMMANA RAMACHANDRA RAO IN ITA NO.120/VIZAG/2009 AND STATED THAT THE INSTANT ISSUE IS SQUARELY COVERED BY THE SAID O RDER. 4. THE FACTS RELATING TO THE COMMON ISSUE ARE STATE D IN BRIEF. ALL THESE ASSESSEES HAVE CLAIMED EXPENDITURE ON PACKING MATER IAL/SALES PROMOTION/ GIFT ARTICLES. THE ASSESSING OFFICER WAS OF THE VIE W THAT TAX IS REQUIRED TO BE DEDUCTED UNDER SECTION 194C OF THE ACT ON THESE PAY MENTS. SINCE THESE ASSESSEES HAD NOT DEDUCTED THE TAX AT SOURCE THE A SSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEES UNDER SECTION 40(A)(IA) OF THE ACT. THE LEARNED CIT (A) DELETED THE ADDITION BY HOLDING THAT THE PACKING MATERIAL ETC. FALLS IN THE CATEGORY OF CONTRACT F OR SALES AND NOT UNDER WORK CONTRACT AND ACCORDINGLY HELD THAT THE SAID PAYMENTS FALL OUTSIDE PURVIEW OF SECTION 194C OF THE ACT. ACCORDINGLY HE DELETED THE IMPUGNED ADDITION MADE IN ALL THESE CASES. THE LEARNED CIT ( A) RELIED ON THE DECISIONS OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF BDA LTD . VS. ITO (TDS) (2006) 281 ITR 99 AND THE HON'BLE DELHI HIGH COURT DECISIO N ON THE CASE OF CIT VS. DABUR INDIA LTD. (2006) 283 ITR 197. 5. AS POINTED OUT BY THE LEARNED AUTHORISED REPRESE NTATIVE THIS TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE C ASE OF M/S DEVI FISHERIES LTD. AND ALSO IN THE CASE OF SHRI BOMMANA RAMACHAN DRA RAO WHEREIN THIS TRIBUNAL HAS CATEGORICALLY HELD THAT THE MAIN PURPO SE IN BUYING THE PACKING MATERIAL WAS TO OBTAIN GOODS FOR THE PURPOSE OF PAC KING AND THE FACT THAT INCIDENTALLY SOME PRINTING WAS REQUIRED TO BE DONE BY THE SUPPLIER WAS OF NO CONSEQUENCE; THEREFORE THE PROVISIONS OF SEC. 1 94C ARE NOT ATTRACTED. WHILE ARRIVING AT THE SAID DECISION THE TRIBUNAL H AS FOLLOWED THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF M/S DABUR IN DIA LTD (SUPRA). WE ITA NOS 59-61 81 122-124 OF CHANDANA BROTHERS RAJAHM UNDRY PAGE 4 OF 5 NOTICE THAT THE LEARNED CIT (A) ALSO HAS DECIDED TH E IMPUGNED ISSUE ON SIMILAR LINES AND HENCE WE DO NOT FIND ANY REASON T O INTERFERE WITH HIS DECISION. 6. IN THE APPEAL NUMBERED AS ITA 81/VIZAG/2009 THE R EVENUE IS ASSAILING THE DECISION OF THE LEARNED CIT (A) IN DE LETING THE NOTIONAL INTEREST ASSESSED ON THE DEBIT BALANCE OF THE PARTNERS CAPI TAL ACCOUNT. THE ASSESSING OFFICER IN THAT CASE NOTICED THAT ONE PAR TNER NAMED SMT. J. NAGAMANI HAD DEBIT BALANCE OF RS.30 66 043/-. THE A SSESSING OFFICER PROPOSED FOR ADDITION OF NOTIONAL INTEREST AT 15.25 % BEING THE RATE OF INTEREST PAID BY THE ASSESSEE TO THE BANKS ON THE ABOVE SAID DEBIT BALANCE. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATIO N OF THE ASSESSEE THAT THE OTHER PARTNER HAD SUFFICIENT CREDIT BALANCES AN D AFTER SETTING OFF OF THE ABOVE SAID DEBIT BALANCE AGAINST THE OTHER CREDIT B ALANCES OF PARTNERS THERE WOULD STILL BE A CREDIT BALANCE OF RS.54 35 619/- I N RESPECT OF CAPITAL ACCOUNT OF ALL PARTNERS PUT TOGETHER. ACCORDINGLY THE ASSESSING OFFICER WORKED OUT THE NOTIONAL INCOME AT RS.4 67 572/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE LEARNED CIT ( A) DELETED THE SAID ADDITION BY ACCEPTING THE EXPLANATION OF THE ASSESS EE. HENCE THE REVENUE IS IN APPEAL BEFORE US ON THIS ISSUE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS POIN T. THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THE PA RTNERSHIP FIRM IS NOT PAYING ANY INTEREST ON THE CREDIT BALANCE OF THE PA RTNERS. COUPLED WITH THE ABOVE FACT IT IS NOTICED THAT THE NET CAPITAL BALA NCE OF ALL PARTNERS PUT TOGETHER SHOWS A CREDIT BALANCE ONLY. THE ASSESSIN G OFFICER HAS ALSO NOT ESTABLISHED THAT ANY OF THE BORROWED FUNDS HAS BEEN DIVERTED. IN THESE CIRCUMSTANCES WE AGREE WITH THE DECISION OF THE LE ARNED CIT (A) IN HOLDING THAT THERE IS NO QUESTION OF PRESUMING THAT THE FUN DS OF THE ASSESSEE FIRM HAS BEEN DIVERTED FOR PERSONAL PURPOSES SO LONG AS THERE EXISTS AN OVERALL ITA NOS 59-61 81 122-124 OF CHANDANA BROTHERS RAJAHM UNDRY PAGE 5 OF 5 CREDIT BALANCE. ACCORDINGLY WE UPHOLD THE VIEW OF T HE LEARNED CIT (A) ON THIS ISSUE. 8. IN THE RESULT ALL THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 21-12-2010 COPY TO 1 THE ADDITIONAL COMMISSIONER OF INCOME TAX RAJAHM UNDRY RANGE AAYAKAR BHAVAN VEERABHADRAPURAM RAJAHMUNDRY EAST GODAVARI DIST 2 M/S CHANDANA BROTHERS BO PATNY CENTRE HO TADITH OTA RAJAHMUNDRY 3 4. THE CIT RAJAHMUNDRY THE CIT(A) RAJAHMUNDRY 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM