DCIT, Cir-51 Kolkata, Kolkata v. Smt. Runa Paul (Naha), Kolkata

ITA 1749/KOL/2009 | 2005-2006
Pronouncement Date: 09-04-2010

Appeal Details

RSA Number 174923514 RSA 2009
Assessee PAN AHUPP2925L
Bench Kolkata
Appeal Number ITA 1749/KOL/2009
Duration Of Justice 5 month(s) 26 day(s)
Appellant DCIT, Cir-51 Kolkata, Kolkata
Respondent Smt. Runa Paul (Naha), Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 09-04-2010
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 09-04-2010
Date Of Final Hearing 05-04-2010
Next Hearing Date 05-04-2010
Assessment Year 2005-2006
Appeal Filed On 14-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI D. K. TYAGI JM & HONBLE SRI B . C. MEENA AM] I.T.A. NO. 1749/KOL/2009 ASSESSMENT YEAR :2005-06 DEPUTY COMMISSIONER OF INCOME-TAX -VS- SMT. RUNA PAUL (NAHA) CIRCLE-51 KOLKATA. (PA NO.AHUPP 2925 L) (APPELLANT) (RESPONDENT) APPELLANT BY : SRI A. K. PRAMANICK RESPONDENT BY : SRI M. P. THARD O R D E R PER D. K. TYAGI JM : THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE LD. CIT(A) KOLKATA DATED 29.05.2009 FOR ASSESSMENT YEA R 2005-06 IN DELETING THE DISALLOWANCE U/S. 40(A)(IA) TREATING THE PAYMENT AS SALARY. 2. BRIEFLY STATED FACTS OF THE CASE AS REVEALED FR OM THE ASSESSMENT ORDER ARE THAT THE ASSESSEE CARRIES ON A BUSINESS UNDER SOLE PROPRIETO RSHIP AND UNDER NAME AND STYLE OF M/S. QUANTUM NETWORKING SERVICES AS COLLECTION AGEN T OF HSBC BANK & ICICI BANK LTD. THE ASSESSEE FILED HER RETURN OF INCOME DECLA RING TOTAL INCOME AT RS.4 13 084/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE CLAIMED THE EXPENSES ON ACCOUNT OF COLLECTION CHARGES PAID APART FROM THE TRAVELING CHARGES PAID FOR SUCH COLLECTION. THE ASSESEE FILED THE DETAILS WHICH WERE TEST CHECKED BY THE AO WITH REFERENCE TO THE EVIDENCE PRODUCED. THE ASSE SSEE ALSO FILED COPY OF THE AGREEMENT ENTERED INTO BY HER WITH THE BANKS FOR COLLECTION O F THE DUES. AFTER VERIFYING ALL THE DOCUMENTS THE AO OBSERVED THAT THE COLLECTION CHARG ES PAID TO THE STAFF NUMBERING 125 WAS NOTHING BUT COMMISSION PAID ON WHICH THE ASSESS EE SHOULD HAVE DEDUCTED TAX AT SOURCE U/S. 194H. THE AO THEREFORE CONCLUDED THA T SINCE THE ASSESSEE DID NOT DEDUCT THE TAX ON THE AMOUNT OF COLLECTION CHARGES WHICH A CCORDING TO HIM WAS THE COMMISSION PAID TO HER STAFF THE PROVISIONS OF SECTION 40(A)(I A) WERE APPLICABLE. HE THEREFORE DISALLOWED THE ENTIRE AMOUNT PAID TO THE STAFF. IN APPEAL THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING THAT THE PAYMENT MADE AS COL LECTION CHARGES WAS IN FACT SALARY PAYMENT MADE TO THE EMPLOYEES. THE PROVISIONS OF S ECTION 40(A)(IA) ARE NOT APPLICABLE IN CASE OF PAYMENT OF SALARY. AGGRIEVED BY THE SAI D ORDER THE REVENUE IS IN APPEAL BEFORE US. 2 3. AT THE TIME OF HEARING BEFORE US THE LD. DR REL IED ON THE ORDER OF THE AO AND SUBMITTED THAT THE LD. CIT(A) WAS UNJUSTIFIED IN T REATING THE PAYMENT AS SALARY THOUGH DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE PAY MENTS WERE CLAIMED AS PROFESSIONAL FEES AND NO EVIDENCE OF APPOINTMENT AS EMPLOYEES WE RE SHOWN OR CLAIMED. HE THEREFORE HEAVILY RELIED ON THE ORDER OF THE AO AN D URGED BEFORE THE BENCH TO CONFIRM THE SAME. 4. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFORE THE LOWER AUTHORITI ES RELIED ON THE ORDER OF THE LD. CIT(A). HE ALSO SUBMITTED THAT THE PAYMENTS MADE T O THE COLLECTION EMPLOYEES WAS NOTHING BUT SALARY AND THE COMMISSION PAID TO THEM ON THE BASIS OF THEIR PERFORMANCE WAS THE INCENTIVE. THE COMMISSION OR THE PERFORMAN CE INCENTIVE BY WHATEVER NAME CALLED FORMS PART OF THE SALARY PAID TO AN EMPLOYE E. SEC. 17(1) OF THE I. T. ACT PROVIDES THAT SALARY INCLUDES ANY FEES COMMISSION PERQUISI TE OR PROFIT IN LIEU OF OR IN ADDITION TO THE SALARY OR WAGES. IN THE FACTS IT IS CLEAR THAT THE AMOUNT DEBITED AS COLLECTION CHARGES IN THE P&L ACCOUNT WAS NOT COMMISSION TO ANY COMMIS SION AGENT FOR ANY BUSINESS BUT REPRESENTED SALARY AND BONUS PAID TO THE COLLECTIO N STAFF EMPLOYED BY THE ASSESSEE. THE PAYMENTS MADE TO THEM WERE NOT HIT BY THE PROVISION S OF SEC. 194H AS CONTEMPLATED BY THE AO. HE THEREFORE URGED BEFORE THE BENCH TO CO NFIRM THE ACTION OF THE LD. CIT(A). 5. AFTER HEARING BOTH THE PARTIES PERUSING THE MAT ERIAL AVAILABLE ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES WE FIND THAT THE O NLY ISSUE IN THIS APPEAL IS WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE BY WAY OF SALA RY AND PERFORMANCE INCENTIVE TO ITS EMPLOYEES AND DEBITED IN THE P&L ACCOUNT AS COLLE CTION CHARGES WAS HIT BY THE PROVISIONS OF SECTION 40(A)(IA) OF THE I.T. ACT. T HE AO FOUND THAT THE ASSESSEE IS THE COLLECTION AGENT APPOINTED BY THE HSBC BANK AND ICI CI BANK FOR COLLECTION OF BANK DUES FROM THEIR CUSTOMERS. AFTER VERIFYING ALL THE DOCUMENTS THE AO OBSERVED THAT THE COLLECTION CHARGES PAID TO THE STAFF NUMBERING 125 WAS NOTHING BUT COMMISSION PAID ON WHICH THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOUR CE U/S. 194H. THE AO THEREFORE CONCLUDED THAT SINCE THE ASSESSEE DID NOT DEDUCT TH E TAX ON THE AMOUNT OF COLLECTION CHARGES WHICH ACCORDING TO HIM WAS THE COMMISSION P AID TO HER STAFF THE PROVISIONS OF SECTION 40(A)(IA) WERE APPLICABLE. ON THE OTHER HA ND THE LD. CIT(A) DELETED THE ADDITION SO MADE BY THE AO BY OBSERVING THAT THE P AYMENT MADE AS COLLECTION CHARGES WAS IN FACT SALARY PAYMENT MADE TO THE EMPLOYEES. THE PROVISIONS OF SECTION 40(A)(IA) 3 ARE NOT APPLICABLE IN CASE OF PAYMENT OF SALARY. W HILE COMING TO THIS CONCLUSION THE LD. CIT(A) HAS HELD AS UNDER : I HAVE CONSIDERED THE FINDINGS OF THE AO IN THE AS SESSMENT ORDER THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT THE REMAND REPO RT FORWARDED BY THE AO AND THE REJOINDER TO THE REMAND REPORT FILED BY THE APPELLA NT. IT IS FOUND THAT THE APPELLANT WAS APPOINTED AS COLLECTION AGENT BY THE BANKS FOR COLL ECTION OF THEIR DUES. IT IS ALSO FOUND FROM THE AGREEMENT BETWEEN THE APPELLANT AND THE BA NKS THAT THE APPELLANT WAS NOT ENTITLED TO ASSIGN OR THE TRANSFER THE OBLIGATIONS TO BE FULFILLED UNDER THE AGREEMENT TO ANY SUB-CONTRACTOR VIDE ARTICLE 14 OF THE AGREEMENT ON THE ICICI BANK. I ALSO FOUND FROM THE ASSESSMENT RECORDS THAT THE APPELLANT VIDE HER LETTER DATED 7.9.2007 ALSO SUBMITTED TO THE AO THAT THE COLLECTION CHARGES CLA IMED IN THE P& L ACCOUNT WERE IN FACT PAYMENT OF THE FIXED AMOUNT OF SALARY AND THE ACTUAL CONVEYANCE CHARGES INCURRED BY THE STAFF FOR COLLECTION OF THE DUES. THE APPOIN TMENT LETTER ISSUED BY THE ASSESSEE TO THE STAFF THE SALARY SHEET SHOWING THE ABOVE PAYME NT AND THE AFFIDAVITS OF THE EMPLOYEES WERE FILED BEFORE ME WHICH ALSO SUGGESTED THAT THE PERSONS TO WHOM THE PAYMENTS WERE MADE WERE EMPLOYEES OF THE APPELLANT. THEY WERE PAID FIXED SALARY AND THE CONVEYANCE. IT IS ALSO FOUND FROM THE PAYMENT R OLL THAT NO COMMISSION AT ALL WAS PAID TO ANY OF THE EMPLOYEES. THE AO IN THE REMAND REPORT HAS MENTIONED ABOUT THE ENQUIRY MADE BY HIM THROUGH HIS INSPECTOR FOR THE P AYMENT ON ACCOUNT OF COLLECTION CHARGES. THE SAID REPORT DATED 16.11.2007 WAS FOUND ON RECORD AND IT WAS FOUND THAT THE ITI HAS MADE ENQUIRY FROM ONE SRI SOMNATH BHATT ACHERJEE. THE SAID REPORT IS AS UNDER:- AS DIRECTED BY THE ITO WARD 51(3) KOL I HAD BEEN TO SHRI SOMNATH BHATTACHERJEE SON OF LATE TARUN BHATTACHERJEE AT 6 2 OLD CALCUTTA ROAD BARRACKPORE ON 14.11.2007 TO ENQUIRE AND COLLECT IN FORMATION REGARDING THE TERMS AND CONDITION WITH HIS EMPLOYER M/S. QUANTUM NETWORK SERVICE IN CONNECTION WITH THE SALARY AND OTHER EMOLUMENTS OR ALLOWANCES DRAWN BY HIM AND OTHER EMPLOYEES. SHRI BHATTACHERJEE IS AN YOUNG PERSON AND AGED ABOU T 32 WHO RESIDES AT THE ABOVE STATED ADDRESS WITH HIS WIDOW MOTHER IN THEI R OWN ONE STORIED RESIDENTIAL HOUSE. ON QUESTIONED HE TOLD THAT HE IS ENGAGED W ITH THE SAID CONCERN M/S. QUANTUM NET WORK SERVICE FOR THE LAST FOUR YEARS AP PROXIMATELY AND HE USES TO DRAW SALARY AND COMMISSION FROM HIS EMPLOYER AND NO OTHER ALLOWANCES ARE DRAWN SINCE FROM HIS EMPLOYMENT ON BEING ASKED HE T OLD THAT HIS EMPLOYER IS AN AGENT OF BANK FOR COLLECTION AND RECOVERY OF LOANS AND DEBTS AND SHRI BHATTACHERJEE IS ENGAGED IN THE SAID JOB TO COLLECT OR RECOVERY OF SUCH LOANS ON BEHALF OF HIS EMPLOYER FOR WHICH HE HIMSELF AND OT HER EMPLOYEES WHO ARE ENGAGED WITH SUCH JOB ON BEHALF OF HIS EMPLOYER US E TO DRAW A FIXED SALARY AND COMMISSION ON THE BASIS OF RECOVERY MADE OR COLLECT ED BY THEM AND NO OTHER ALLOWANCES ARE DRAWN . FROM THE AFORESAID REPORT IT IS EVIDENT THAT SRI BH ATTACHERJEE ALSO MENTIONED TO THE ITI THAT HE WAS EMPLOYED WITH QUANTUM NET WORK SERVICE WHOSE PROPRIETOR WAS THE ASSESEE THAT HE USED TO DRAW SALARY AND COMMISSION FROM HIS EMPLOYER AND NO OTHER ALLOWANCE ARE DRAWN. HE ALSO STATED THAT HE HIMSELF AND OTHER EMPLOYEES USED TO DRAW FIXED SALARY AND COMMISSION ON THE BASIS OF RECOVER Y MADE. FROM THE PERUSAL OF THE AFORESAID REPORT IT IS EVID ENT THAT THE STAFF DRAWING THE COLLECTION CHARGES WERE THE EMPLOYEES ONLY DRAWING FIXED SALARY. THERE IS NO PAYMENT OF COMMISSION DURING THE ASSESSMENT YEAR IN QUESTIO N AS IS EVIDENT FROM THE PAYMENT ROLL A COPY OF WHICH WAS FILED BEFORE ME AND ALSO B EFORE THE AO AND NO ADVERSE COMMENT HAVE BEEN MADE IN THE REMAND REPORT. THE AO HAS ALSO NOT ADVERSELY 4 COMMENTED ON THE APPOINTMENT LETTERS OR AFFIDAVIT O F THE EMPLOYEES FOR WHICH OPPORTUNITY WAS GRANTED TO THE AO AND SUFFICIENT TI ME WAS ALLOWED. EVEN THOUGH NO COMMISSION WAS AT ALL PAID DURING THE YEAR BUT OTHE RWISE ALSO IF COMMISSION IS PAID TO EMPLOYEES OVER AND ABOVE HIS SALARY THE SAME ALSO FALLS UNDER THE HEAD SALARY INCOME AS PER THE PROVISIONS OF SECTION 17(L)(IV) WHICH IS AS UNDER: 17. SALARY INCLUDES (I)(IV) ANY FEES COMMISSIONS PERQUISITES OR PROF IT IN LIEU OF OR IN ADDITION TO ANY SALARY OR WAGES IN VIEW OF THE ABOVE I AM OF THE CONSIDERED OPINION THAT THE PAYMENT MADE AS COLLECTION CHARGES WAS IN FACT SALARY PAYMENT MADE TO THE EMPL OYEES. THE PROVISIONS OF SECTION 40(A)(AI) ARE NOT APP1ICAB1E IN CASE OF PAYMNT OF SALARY. THE ADDITION IS MADE BY THE AO THEREFORE BY TREATING THE PAYMENT MADE TO THE EMPLOYEES AS COMMISSION IS DEVOID OF ANY MERITS. THE ADDITION IS THEREFORE DIRECTED TO BE DELETED. IN THIS VIEW OF THE MATTER AND ALSO IN ABSENCE OF A NY COGENT MATERIAL/EVIDENCE BROUGHT ON RECORD TO CONTROVERT THE ABOVE FINDING OF THE LD . CIT(A) WE DO NOT FIND ANY INFIRMITY IN HIS ORDER AND THE SAME IS HEREBY UPHEL D. THEREFORE THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 9.4.201 0 SD/- SD/- (B. C. MEENA) ( D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9TH APRIL 2010 COPY FORWARDED TO THE :- 1) DCIT CIRCLE-51 KOLKATA. 2) SMT. RUNA PAUL (NAHA) TARAPUKUR WEST AGARPARA KOLKATA-800 109. 3) CIT(A) KOLKATA 4) CIT KOLKATA. 5) D. R. ITAT KOLKATA. (TRUE COPY) BY ORDER DEPUTY REGISTRAR JD. (SR. P.S.) I.T.A.T. KOLKATA