DCIT, Pondicherry v. Premier Distilleries P. Ltd., Pondicherry

ITA 2182/CHNY/2014 | 2010-2011
Pronouncement Date: 07-10-2016 | Result: Allowed

Appeal Details

RSA Number 218221714 RSA 2014
Assessee PAN AACCP0818A
Bench Chennai
Appeal Number ITA 2182/CHNY/2014
Duration Of Justice 2 year(s) 1 month(s) 11 day(s)
Appellant DCIT, Pondicherry
Respondent Premier Distilleries P. Ltd., Pondicherry
Appeal Type Income Tax Appeal
Pronouncement Date 07-10-2016
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Date Of Final Hearing 14-07-2016
Next Hearing Date 14-07-2016
Assessment Year 2010-2011
Appeal Filed On 26-08-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B B ENCH CHENNAI . ' # . $ & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY JUDICI AL MEMBER ./ I.T.A.NO.2182/MDS/2014 ( / ASSESSMENT YEAR: 2010-11) THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-I D.P.THOTTAM MUTHIALPET PUDUCHERRY-605 003. VS M/S. PREMIER DISTILLERIES P.LTD. 337 ANNA SALAI PONDICHERRY. PAN: AACCP0818A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SUPRIYO PAL JCIT /RESPONDENT BY : MR.S.SRIDHAR ADVOCATE /DATE OF HEARING : 14 TH JULY 2016 /DATE OF PRONOUNCEMENT : 7 TH OCTOBER 2016 / O R D E R PER A. MOHAN ALANKAMONY AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- VI CHENNAI DATED 25.03.2014 IN ITA NO.679/13-14 PA SSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE ACT. 2. THE APPEAL FILED BY THE REVENUE IS BARRED BY LIM ITATION OF 78 DAYS. THE REVENUE FILED AN AFFIDAVIT EXPLAINI NG THE REASON FOR THE DELAY IN FILING THE APPEAL STATING T HAT THE RECORDS OF THE ASSESSEE WAS MISPLACED AND THE SAME COULD NOT BE LOCATED WITHIN THE TIME LIMIT PRESCRIBED UND ER THE ACT DUE TO WHICH THE DELAY OCCURRED AND THEREFORE PRAYE D FOR 2 ITA NO.2182/MDS/2014 CONDONATION OF DELAY. CONSIDERING THE SUBMISSIONS O F THE REVENUE WE ARE SATISFIED THAT THERE WAS REASONABLE CAUSE FOR THE DELAY IN FILING THE APPEAL. HENCE IN THE IN TEREST OF JUSTICE WE HEREBY CONDONE THE DELAY IN FILING THE APPEAL AND ADMIT THE SAME FOR ADJUDICATION. 3. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL HOWEVER THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER AMOUNTING TO ` 59 39 900/- FOR NON-DEDUCTION OF TDS ON THE EXPENDITURE INCURRED UNDER THE HEAD DISTRIBUTABLE SURPLUS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DISTILLE RIES FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-1 1 ON 15.10.2010 ADMITTING INCOME OF ` 93 21 030/- CLAIMING DEDUCTION OF ` 38 48 387/- UNDER SECTION 80IB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SEC TION 143(2) WAS ISSUED TO THE ASSESSEE ON 29.08.2011. TH EREAFTER THE LEARNED ASSESSING OFFICER COMPLETED THE ASSESS MENT 3 ITA NO.2182/MDS/2014 UNDER SECTION 143(3) OF THE ACT ON 31.12.2012 WHERE IN HE HAD MADE CERTAIN DISALLOWANCES AMONGST WHICH ONE OF THE DISALLOWANCES WAS BY INVOKING THE PROVISIONS OF SEC TION 40(A)(IA) OF THE ACT WITH RESPECT TO PAYMENTS MADE TO CERTAIN PARTIES TERMED AS DISTRIBUTION OF PROFITS. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAD MADE PAYMENT TO THE FOLLOWING PARTIES TERMED AS DISTRIBUTION OF PROFITS:- S. NO. NAME OF CONCERN AMT OF PAYMENT 1. M/S.SARAYA DISTILLERIES LTD. RS.35 75 200 2. M/S.MARMA GOA INC RS.20 13 500 3. M/S. SUBHAV BEVERAGE LTD. RS.1 36 300 4. M/S.THIRUMAL AGENCIES RS.2 14 900 TOTAL RS.59 39 900 IT WAS EXPLAINED BY THE LEARNED AUTHORIZED REPRESEN TATIVE BEFORE THE LEARNED ASSESSING OFFICER THAT THE ABOVE PAYMENTS WERE MADE TO MANUFACTURING TIE-UP COMPANIE S AFTER MAINTAINING SEPARATE BANK ACCOUNTS WITH THOSE PARTIES TOWARDS TIE-UP ARRANGEMENTS. IT WAS FURTHER EXPLAIN ED THAT THOSE PAYMENTS RELATE TO DISTRIBUTION OF PROFIT WIT H RESPECT TO 4 ITA NO.2182/MDS/2014 JOINT VENTURE ARRANGEMENTS AND THEREFORE THE PROVIS IONS OF SECTION 194C OF THE ACT WOULD NOT BE APPLICABLE. 6. ON APPEAL THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) HELD THE ISSUE IN FAVOUR OF THE ASSESSEE BY RELYING IN THE PROVISIONS OF THE ACT WHICH IS EXTRACTED H EREIN BELOW FOR REFERENCE:- THE TERMS & CONDITIONS OF THE OTHER AGREEMENTS AND THE MANNER OF SHARING OF THE PROFITS BETWEEN THE APPELL ANT AND OTHER 3 PARTIES ARE EXACTLY SAME. ALL THE AGREEMENT S DO NOT PROVIDE FOR PAYMENT OF ANY ROYALTY. WHEN THIS ISSUE WAS DECIDED BY THE CIT(A) IN THE APPELLANTS CASE IN TH E EARLIER YEARS ON THE ISSUE OF TREATING THE SAME AS ROYALTY THE DEPARTMENT DID NOT FILE FURTHER APPEAL. IT IS EVIDE NT FROM THE CONTENTS OF THE AGREEMENTS THAT THE TRANSACTIONS AR ISING IN THE BUSINESS DO NOT COME EXACTLY IN THE DEFINITION OF W ORKS CONTRACTS AS PROVIDED IN SECTION. 194C EXPLANATION (IV)(E) OF THE I.T. ACT. IN THIS CASE THE MATERIAL FOR MANUFA CTURE WAS PURCHASED BY THE APPELLANT FROM THIRD PARTIES AND N OT FROM THE TIE UP COMPANIES. THE DEFINITION OF THE WORK AS PER SECTION 194C(IV)(E) IS AS UNDER:- WORK SHALL INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATI ON OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT O R SPECIFICATION OF THE CUSTOMER BY USING THE MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER. IN THE INSTANT CASE THE ENTIRE MATERIAL FOR THE MA NUFACTURE OF PRODUCTS WAS PURCHASED FROM THIRD PERSONS AND NOT F ROM THE TIE UP COMPANIES. THE APPELLANT IS ENTITLED FOR ONL Y SHARING OF THE PROFITS. HENCE THE TRANSACTIONS ENTERED BY THE APPELLANT WITH THE TIE UP COMPANIES ARE ALSO NOT IN THE NATUR E OF WORK DEFINED U/S.194C(IV)(E) OF THE I.T.ACT. UNDER THE F ACTS AND CIRCUMSTANCES OF THE CASE I AM OF THE CONSIDERED V IEW THAT PAYMENTS MADE TO TIE UP COMPANIES DO NOT COME UNDER ANY OF THE TDS PROVISIONS OF THE I.T.ACT. HENCE THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER U/S.40(A)(IA) REQUIRE S TO BE 5 ITA NO.2182/MDS/2014 DELETED. THE GROUNDS OF APPEAL FILED BY THE APPELLA NT ON THIS ISSUE ARE ALLOWED. 7. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE ASSESSEE WAS INDULGING IN JOB WO RK WITH THOSE PARTIES RECEIVING FIXED PIECEMEAL RATE FOR TH E SERVICE RENDERED AND THEREFORE THE PROVISIONS OF SECTION 19 4C OF THE ACT WOULD BE APPLICABLE IN THE CASE OF THE ASSESSEE . 8. THE AUTHORIZED REPRESENTATIVE ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) AND REQUESTED THAT THE SAME MAY BE CONFIRMED. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) T HOUGH WE FIND THAT HE HAS EXAMINED THE JOINT VENTURE AGRE EMENT BETWEEN THE ASSESSEE AND ITS TIE-UP PARTIES HE HAS NOT EXAMINED THE NATURE OF ACTIVITIES ACTUALLY PERFORME D BY THE ASSESSEE WHICH WILL BE EVIDENT FROM THE FINANCIAL E NTRIES 6 ITA NO.2182/MDS/2014 PASSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. UN LESS THE NATURE OF SERVICE RENDERED BY THE ASSESSEE IS EXAMI NED THE TRUE NATURE OF THE TRANSACTION CANNOT BE DETERMINED ONLY ON THE BASIS OF THE WRITTEN AGREEMENT. FURTHER IT IS APPARENT THAT THOUGH THE ASSESSEE HAS MENTIONED THAT THE PAYMENT MADE IS DISTRIBUTION OF PROFIT IT APPEARS THAT THE ASSES SEE HAS RETAINED A FIXED RATE FOR THE SERVICE RENDERED AND THE BALANCE REVENUE GENERATED IS PAID BACK TO THE TIE-UP AGENTS . IN SUCH CASE THE PROVISIONS OF SECTION 194C WILL NOT BE ATT RACTED BECAUSE THE ASSESSEE HAS ONLY RETAINED THE REVENUE COLLECTED FROM THE TRANSACTION AND PAID THE BALANCE TO THE TIE- UP AGENTS AFTER RETAINING ITS SERVICE CHARGES. PRE CISELY THE ASSESSEE HAS NOT PAID ANY AMOUNT TO ITS TIE-UP AGEN TS FOR THE SERVICES RENDERED BY THE TIE-UP AGENTS TO THE ASSES SEE. IF ON THE OTHER HAND THE AGREEMENT AND THE CONDUCT OF THE ASSESSEE SHOW THAT THE TRANSACTION BETWEEN THE ASSE SSEE AND THE TIE-UP AGENTS IS JOINT VENTURE THEN THE PR OFIT DERIVING FROM EACH OF SUCH JOINT VENTURE TRANSACTION WITH A PARTICULAR TIE-UP PARTY HAS TO BE ASSESSED INDEPENDENTLY TO TA X AS AOP OR PARTNERSHIP AS THE CASE MAY BE. SINCE NEITHER TH E LEARNED 7 ITA NO.2182/MDS/2014 COMMISSIONER OF INCOME TAX (APPEALS) NOR THE LEARNE D ASSESSING OFFICER HAS ANALYZED THE TIE-UP AGREEMENT S ALONG WITH THE ACTUAL ACTIVITIES CONDUCTED BY BOTH THE AS SESSEE AND ITS TIE-UP PARTIES FOR DISTRIBUTION OF PROFIT AND T HE LEGALITY OF THE TRANSACTION WITH RESPECT TO THE LOCAL RELEVANT LAWS WE ARE OF THE CONSIDERED VIEW THAT THE MATTER SHOULD BE REMIT TED BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR DE NOVO CONSIDERATION. ACCORDINGLY WE REMIT THE MATTER BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH CONSIDER ATION. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 7 TH OCTOBER 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI ( /DATED 7 TH OCTOBER 2016 SOMU *+ + /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF