ACIT 11(2), MUMBAI v. CHANDABHOY & JASSOBHOY, MUMBAI

ITA 20/MUM/2010 | 2006-2007
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 2019914 RSA 2010
Assessee PAN AAAFC5274C
Bench Mumbai
Appeal Number ITA 20/MUM/2010
Duration Of Justice 1 year(s) 6 month(s) 7 day(s)
Appellant ACIT 11(2), MUMBAI
Respondent CHANDABHOY & JASSOBHOY, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 08-07-2011
Date Of Final Hearing 30-06-2011
Next Hearing Date 30-06-2011
Assessment Year 2006-2007
Appeal Filed On 01-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 20/MUM/2010 (ASSESSMENT YEAR: 2006-07) DCIT - 11(2) M/S. CHANDABHOY & JASSOBHOY ROOM NO. 479 4TH FLOOR 208 PHONEX HOUSE 'A' WING M.K. ROAD AAYAKAR BHAVAN VS. 2ND FLOOR 462 SENAPATI BAPAT MUMBAI 400020 MARG LOWER PAREL MUMBAI 400013 PAN - AAAFC 5274 C APPELLANT RESPONDENT APPELLANT BY: SHRI JITENDRA YADAV RESPONDENT BY: SHRI PERCY J. PARDIWALLA O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A)-III MUMBAI DATED 20.10.2009. 2. ASSESSEE IS A PARTNERSHIP FIRM OF CHARTERED ACCOUNT ANTS AND IN THE SCRUTINY ASSESSMENT THE A.O. CONSIDERED THAT PAYME NT MADE TO CERTAIN CONSULTANTS ENGAGED BY THE CHARTERED ACCOUNTANTS F IRM ARE IN THE NATURE OF FEES FOR PROFESSIONAL SERVICES AND ACCORDINGLY PROV ISIONS OF SECTION 194J WOULD ATTRACT. IT WAS THE CONTENTION OF THE ASSESSE E THAT THE CONSULTANTS FUNCTIONED AS EMPLOYEES OF THE FIRM AND WERE ENGAGE D ON FULL TIME BASIS. THEY COULD NOT UNDERTAKE ANY OTHER JOB OR ASSIGNMEN TS PRIVATELY AND THEY WERE PROVIDED WITH ANNUAL LEAVE AND OTHER BENEFITS EXCEPT BONUS GRATUITY AND P.F. IT WAS FURTHER SUBMITTED THAT THEY WERE EM PLOYEES OF THE FIRM AND TAX WAS DEDUCTED UNDER SECTION 192 OF THE I.T ACT A ND THESE PERSONS FILED THEIR RETURNS BASED ON FORM 16 ISSUED BY THE ASSESS EE FIRM AND SO THEIR SALARY CAN NOT BE UNDER THE PROVISIONS OF SECTION 1 94J. THE A.O. ANALYZING THE AGREEMENTS ENTERED BY THE ASSESSEE FIRM WITH TH E SAID CONSULTANTS CAME TO A CONCLUSION THAT THERE IS NO EMPLOYEE-EMPLOYER RELATIONSHIP AND ASSESSEE SHOULD HAVE DEDUCTED TAX UNDER SECTION 194 J AND SINCE ASSESSEE ITA NO. 20/MUM/2010 M/S. CHANDABHOY & JASSOBHOY 2 HAS NOT DEDUCTED THE TAX THE AMOUNTS CLAIMED OF ` 26 75 535/- WAS TO BE DISALLOWED UNDER SECTION 40(A)(IA). THE MATTER WAS CARRIED TO THE CIT(A) WHO AFTER EXAMINING THE ISSUE AND SUBMISSIONS OF THE AS SESSEE DELETED THE ADDITION BY STATING AS UNDER: - 3.7.1. THERE IS MERIT IN THIS SUBMISSION OF APPEL LANT. THE DEDUCTION OF TAX MADE BY APPELLANT THOUGH MADE U/S. 192 HAS N OT BEEN DISPUTED BY AO NEITHER HAS THE TDS DEPOSIT IN GOVE RNMENT ACCOUNT BEEN CHALLENGED NOR HAS THE GENUINENESS OF PAYMENT OF MONIES TO IHC BEEN DOUBTED BY AO. AS SUCH THE PAYMENTS BECOM E ALLOWABLE EXPENSE UNDER THE ACT. THESE HAVE BEEN DISALLOWED D UE TO AN INTERPRETATION OF THE SECTION UNDER WHICH THE PAYME NT MADE IS TO BE CONSIDERED I.E. WHETHER SECTION 192 OR SECTION 194J . WITHOUT PREJUDICE TO THE DECISION IN PARA 3.6 AND 3.6.1 SUP RA IN THE BACKGROUND OF APPELLANTS SUBMISSION AND PRECEDENCE OF MANY YEARS IN HIS OWN CASE IT IS FELT THAT EVEN IF PAYMENTS W ERE CONSIDERED TO BE U/S. 194J BY A.O. THE TAX ALREADY DEDUCTED BY APPE LLANT COULD HAVE BEEN CONSIDERED AGAINST THAT DUE U/S 194J AND SHORT AGE OF TDS IF ANY COULD HAVE BEEN ARRIVED AT. THE CONSEQUENT SHO RTAGE OF TDS WITH INTEREST IF ANY COULD HAVE BEEN CONSIDERED A S LIABILITY UNDER THE I.T. ACT AND AS DUE FROM THE APPELLANT. DISALLO WANCE OF THE ENTIRE EXPENDITURE OF RS.26 75 535/- WHOSE GENUINENESS HAS NOT BEEN DOUBTED BY THE AO IS NOT JUSTIFIABLE. 3. WE HAVE HEARD THE RIVAL ARGUMENTS AND EXAMINED THE RECORD. ASSESSEE HAS EMPLOYED ABOUT 18 CONSULTANTS WITH WHOM IT ENTE RED INTO AGREEMENTS FOR A PERIOD OF TWO YEARS RENEWABLE FURTHER AT THE OPTION OF EITHER PARTIES AND THEY WERE PAID FIXED AMOUNTS WITHOUT ANY SHARE IN T HE PROFIT. THESE CONSULTANTS ARE PROHIBITED FROM TAKING ANY PRIVATE ASSIGNMENTS AND WORKED FULL TIME WITH THE ASSESSEE FIRM. THERE IS NO DISPU TE WITH REFERENCE TO THE DEDUCTION OF TAX UNDER SECTION 192 AND ALSO THE FAC T THAT IN THEIR INDIVIDUAL ASSESSMENTS THESE PAYMENTS WERE ACCEPTED AS SALARY PAYMENTS. IT IS ALSO NOT DISPUTED THAT THE ENTIRE AMOUNT PAID FOR 18 CON SULTANTS IS ONLY AN AMOUNT OF ` 26 75 535/- WHICH INDICATES THAT THEY ARE IN EMPLO YMENT AND NOT PROFESSIONAL CONSULTANTS. IT IS ALSO NOT THE CA SE THAT ASSESSEE HAS NOT DEDUCTED ANY AMOUNT. ASSESSEE HAS INDEED DEDUCTED T AX UNDER SECTION 192 AND SO WE ARE OF THE OPINION THAT PROVISIONS OF SEC TION 40(A)(IA) ALSO DO NOT APPLY AS THE SAID PROVISION CAN BE INVOKED ONLY IN THE EVENT OF NON DEDUCTION OF TAX BUT NOT FOR LESSER DEDUCTION OF TA X. IN VIEW OF THIS WE ARE OF THE OPINION THAT THERE IS NO MERIT IN REVENUES CON TENTION THAT THE AMOUNT ITA NO. 20/MUM/2010 M/S. CHANDABHOY & JASSOBHOY 3 PAID TO THE EMPLOYEES SHOULD BE DISALLOWED AS PROVI SIONS OF SECTION 194J WOULD ATTRACT. ON THE FACTS OF THE CASE THERE IS N O MERIT IN REVENUES APPEAL. ACCORDINGLY THE ORDER OF THE CIT(A) IS CONF IRMED. 4. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JULY 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 8 TH JULY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) III MUMBAI 4. THE CIT II MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.