T.T.Kuruvilla, Alappuzha v. DCIT(TDS), Kottayam

ITA 254/COCH/2013 | 2008-2009
Pronouncement Date: 25-10-2013 | Result: Allowed

Appeal Details

RSA Number 25421914 RSA 2013
Assessee PAN ABDPT4582E
Bench Cochin
Appeal Number ITA 254/COCH/2013
Duration Of Justice 5 month(s) 19 day(s)
Appellant T.T.Kuruvilla, Alappuzha
Respondent DCIT(TDS), Kottayam
Appeal Type Income Tax Appeal
Pronouncement Date 25-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 25-10-2013
Date Of Final Hearing 01-08-2013
Next Hearing Date 01-08-2013
Assessment Year 2008-2009
Appeal Filed On 06-05-2013
Judgment Text
ITA NO S . 278/COCH/2012 & 253 & 254/ COCH/ 2013 1 IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH COCHIN BEFORE S/SH RI N.R.S. GANESAN JM & B. R. BASKARAN AM ITA NO. 278 /COCH/ 2011 (ASST YEAR 2006 - 07 ) & 253 & 254/COCH/2013 (ASST YEAR 2007 - 08 & 08 - 09) SHRI T T KURUVILLA ALLEPPEY PARCEL SERVICE VAZHICHE RRY JUNCTION ALLEPPEY VS THE DY COMMR OF INCOME TAX(TDS) KOTTAYAM ( APPELLANT) (RESPONDENT) PAN NO. ABDPT4582E ASSESSEE BY NONE REVENUE BY SMT S VIJAYAPRABHA JR DR DATE OF HEARING 1 ST AUG 2013 DATE OF PRONOUNCEMENT 25 TH OCT 2013 OR D ER PER B.R. BASKARAN AM: ALL THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A) - III KOCHI AND THEY RELATE TO THE ASSESSMENT YEARS 2006 - 07 TO 2008 - 09. THE DEMAND RAISED U/S 201(1) AND INTEREST CHARGED U/S 201(1A) BY THE ASSESSING OFFICER FOR FAILURE TO DEDUCT TAX AT SOURCE ON CERTAIN PAYMENTS MADE IN THESE THREE YEARS HAVING BEEN CONFIRMED BY LD CIT(A) THE ASSESSEE HAS FILED THESE APPEALS BEFORE US. ALL THESE APPEALS WERE HEARD TOGETHER AND HENCE THEY ARE BEING DIS POSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO S . 278/COCH/2012 & 253 & 254/ COCH/ 2013 2 2. THE FACTS RELATING TO THE ISSUES UNDER CONSIDERATION ARE STATED IN BRIEF. THE ASSESSEE IS RUNNING A PROPRIETARY CONCERN BY NAME ALLEPPEY PARCEL SERVICE WHEREIN HE IS CARRYING ON THE BUS INESS OF TRANSPORTATION OF GOODS ON BEHALF OF HIS CLIENTS. THE ASSESSEE IS HAVING FRANCHISEES IN VARIOUS PLACES. THE AO NOTICED THAT THE ASSESSEE HAS PAID COMMISSION IN ALL THE THREE YEARS TO THE FRANCHISEES BUT DID NOT DEDUCT TAX AT SOURCE FROM THE SA ID PAYMENTS AS REQUIRED BY THE PROVISIONS OF SEC. 194H OF THE ACT. IT WAS ALSO NOTICED THAT THE ASSESSEE HAS TAKEN GODOWNS ON RENT IN ALL THE THREE YEARS BUT FAILED TO DEDUCT TAX AT SOURCE IN CASES WHERE THE RENT PAYMENTS EXCEEDED THE MONETARY LIMITS PR ESCRIBED U/S 194I OF THE ACT. IN ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 THE ASSESSEE HAD CONSTRUCTED BUILDING AND THE ACCORDING TO AO THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO THE CONTRACTOR U/S 194C OF THE ACT. HENCE THE AO TREA TED THE ASSESSEE AS ASSESSEE IN DEFAULT IN ALL THE THREE YEARS IN RESPECT OF HIS FAILURE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS STATED ABOVE. ACCORDINGLY THE AO RAISED DEMAND U/S 201(1) OF THE ACT AND ALSO CHARGED INTEREST U/S 201(1A) OF THE ACT IN ALL THE THREE YEARS. THE ASSESSEE CHALLENGED THE ORDERS PASSED BY THE AO BY FILING APPEALS BEFORE LD CIT(A) BUT COULD NOT SUCCEED. HENCE THE ASSESSEE HAS FILED THESE APPEALS BEFORE US. 3. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TAX AUTHO RITIES HAVE TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT IN RESPECT OF COMMISSION PAYMENT WITHOUT APPRECIATING THE MODUS OPERANDI OF THE ASSESSEE. HE SUBMITTED THAT THE WHENEVER GOODS ARE BOOKED BY THE CUSTOMER THE PAYMENT FOR TRANSPORTATION OF THE SAME SHALL BE ITA NO S . 278/COCH/2012 & 253 & 254/ COCH/ 2013 3 MADE AT THE TIME OF MAKING DELIVERY. THE FRANCHISEES COLLECT THE PAYMENT AND THEN DEDUCT THEIR CHARGES EXPENSES ETC. AND PAY ONLY NET AMOUNT TO THE ASSESSEE. HENCE THE ASSESSEE WOULD NOT BE IN A POSITION TO DEDUCT TAX AT SOURCE SINCE THE ASS ESSEE RECEIVES ONLY NET PAYMENT. THE LD A.R SUBMITTED THAT THE TAX AUTHORITIES HAVE NOT APPRECIATED THE IMPOSSIBILITY OF PERFORMANCE BY THE APPELLANT SINCE IT WOULD NOT BE POSSIBLE FOR HIM TO DEDUCT TAX AT SOURCE. HE FURTHER SUBMITTED THAT THE RELATIO NSHIP BETWEEN HIM AND THE FRANCHISEES IS ON PRINCIPAL TO PRINCIPAL BASIS AND THERE IS NO PRINCIPAL - AGENT RELATIONSHIP BETWEEN THEM. THE ASSESSEE HAS BEEN ACCOUNTING THE CHARGES EXPENSES ETC. DEDUCTED BY THE ASSESSEE UNDER THE HEAD COMMISSION PAYMENTS BUT THAT DOES NOT MEAN THAT THERE EXISTS PRINCIPAL - AGENT RELATIONSHIP BETWEEN THEM. FURTHER THE ASSESSEE HAS BEEN ACCOUNTING ALL THE PAYMENTS I.E. CHARGES DEDUCTED BY THEM EXPENSES INCURRED BY THEM ON BEHALF OF THE ASSESSEE ETC. UNDER THE HEAD CO MMISSION PAYMENTS FOR THE SAKE OF CONVENIENCE. IF AT ALL THE TAX IS REQUIRED TO BE DEDUCTED IT CAN BE DEDUCTED ONLY ON CHARGES COLLECTED BY THE FRANCHISEES AND NOT ON REIMBURSEMENT OF EXPENSES. HE FURTHER SUBMITTED THAT THE ASSESSEE IS HAVING ABOUT 14 0 TO 150 FRANCHISEES AND THE PAYMENTS MADE TO EACH OF THEM WOULD NOT WARRANT TAX DEDUCTION AT SOURCE. THE LD COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS PAID RENT TO ONE PERSON ON BEHALF OF VARIOUS CO - OWNERS AND EACH CO - OWNERS SHARE IS BELOW THE MONE TARY LIMITS PRESCRIBED U/S 194I OF THE ACT. THE AO HAS PRESUMED THAT THE ASSESSEE IS CONSTRUCTING BUILDING BY GIVING IT ON CONTRACT WHERE AS THE FACT REMAINS THAT THE ASSESSEE HIMSELF IS CONSTRUCTING THE BUILDING. HENCE THE AO WAS NOT RIGHT IN PRESUMING THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE U/S ITA NO S . 278/COCH/2012 & 253 & 254/ COCH/ 2013 4 194C OF THE ACT IN RESPECT OF CONSTRUCTION EXPENSES. HE FURTHER SUBMITTED THAT THE FINANCE ACT 2012 HAS INSERTED A PROVISO BELOW SEC. 40(A)(IA) OF THE ACT WHEREBY THE DISALLOWANCE U/S 40(A)(IA) I S NOT REQUIRED TO BE MADE IF THE ASSESSEE IS NOT TREATED AS ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. THE LD A.R SUBMITTED THAT THE ABOVE SAID AMENDMENT IS REMEDIAL AND CURATIVE IN NATURE AND HENCE THE BENEFITS OF THE SAID PROVISO SHOULD BE GIVEN TO THE ASSESSEE FOR THE YEARS UNDER CONSIDERATION ALSO. IN THIS REGARD HE PLACED RELIANCE ON THE DECISION RENDERED BY THE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF BANSAL PARIVAHAN (INDIA) PVT LTD VS. ITO (9 ITR (TRIB) 565). 4. THE LD D.R SUBMITTED THAT THE A MENDMENT MADE BY FINANCE ACT 2012 IN SEC. 40(A)(IA) OF THE ACT SHALL NOT APPLY TO THE PROVISIONS OF SEC. 201 OF THE ACT. THE LD D.R FURTHER SUBMITTED THAT THE CONTENTIONS RAISED BY LD A.R HAVE NOT BEEN SUBSTANTIATED WITH EVIDENCES EITHER BEFORE THE AO OR BEFORE LD CIT(A) OR BEFORE AO IN REMAND PROCEEDINGS. SHE FURTHER SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH ANY MATERIALS BEFORE TRIBUNAL ALSO. THE LD D.R SUBMITTED THAT THE AUDITOR OF THE ASSESSEE IN HIS AUDIT REPORT HAS REPORTED THAT THE ASSESS EE HAS NOT DEDUCTED TAX AT SOURCE FROM COMMISSION PAYMENTS. ACCORDINGLY SHE SUBMITTED THAT THE ORDERS PASSED BY LD CIT(A) SHOULD BE SUSTAINED. 5. IN THE REJOINDER THE LD A.R SUBMITTED THAT THE ASSESSEE WOULD BE IN A POSITION TO COLLECT THE INCOME TA X DETAILS OF FRANCHISEES IF ONE MORE OPPORTUNITY IS GIVEN TO HIM. ITA NO S . 278/COCH/2012 & 253 & 254/ COCH/ 2013 5 HE SUBMITTED THAT THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES LTD VS. CIT (293 ITR 226) THAT THE DEMAND U/S 201(1) IS NOT TO BE LEVIED IF THE PAYEE HAS PAID THE TAX ON THE PAYMENTS MADE BY THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE COULD ALSO FURNISH THE DETAILS OF RENT PAYMENTS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ADMITTED FACT IS THAT THE ASSESSEE HAS ACCOUNTED FO R THE PAYMENTS MADE TO THE FRANCHISEES AS COMMISSION PAYMENTS. HOWEVER THE ASSESSEE CLAIMS BEFORE US THAT THE RELATIONSHIP BETWEEN HIM AND THE FRANCHISEES IS ON PRINCIPAL TO PRINCIPAL BASIS. WHEN IT WAS ASKED WHETHER THERE IS ANY WRITTEN AGREEMENT B ETWEEN THE ASSESSEE AND THE FRANCHISEES THE LD A.R COULD NOT CLARIFY THE SAID QUERY. EVEN IF THERE IS NO WRITTEN AGREEMENT IT SEEMS THAT THE ASSESSEE AND THE FRANCHISEES WORK ON SOME UNDERSTANDING. ACCORDING TO THE SAID UNDERSTANDING THE GOODS BOOKED B Y THE ASSESSEE/FRANCHISEES ARE TRANSPORTED TO THE DESTINATION POINT AND THE FRANCHISEE THERE UNDERTAKES THE RESPONSIBILITY TO DELIVER THE GOODS AND COLLECT PAYMENT. THE RESPONSIBILITY IS SO UNDERTAKEN ON BEHALF OF THE ASSESSEE ONLY AND HENCE IT MAY NOT BE CORRECT TO CONTEND THAT THERE IS NO PRINCIPAL - AGENT RELATIONSHIP. ACCORDINGLY IN OUR VIEW THERE EXISTS ONLY PRINCIPAL - AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND THE FRANCHISEE. 7. ACCORDING TO THE ASSESSEE THE COMMISSION EXPENSES INCLUDE REIMB URSEMENT MADE TO THE FRANCHISEES. ACCORDING TO THE TAX AUTHORITIES THE ASSESSEE COULD NOT FURNISH ITA NO S . 278/COCH/2012 & 253 & 254/ COCH/ 2013 6 EXACT BREAK - UP DETAILS OF THE EXPENSES AND FURTHER THOSE EXPENSES WERE SUPPORTED BY SELF MADE VOUCHERS. WE NOTICE THAT THE TAX AUTHORITIES HAVE REJECTED TH E CLAIM OF THE ASSESSEE FOR THE REASON THAT THE EXPENSES ARE SUPPORTED BY SELF MADE VOUCHERS. IN OUR VIEW IT MAY NOT BE CORRECT ON THE PART OF THE TAX AUTHORITIES TO DO SO SINCE THE VERACITY OF EXPENSES IS A MATTER THAT IS REQUIRED TO BE LOOKED INTO AT THE TIME OF ASSESSMENT OF INCOME. UNDER TDS PROCEEDINGS IT IS NECESSARY TO IDENTIFY THE PAYMENTS ON WHICH THERE IS A LIABILITY TO DEDUCT TAX AT SOURCE. IN OUR VIEW THE QUESTION WHETHER THE TAX IS REQUIRED TO BE DEDUCTED AT SOURCE ONLY ON THE COMMISSION AMOUNT OR ON COMMISSION PLUS EXPENSES WOULD DEPEND UPON THE NATURE OF AGREEMENT BETWEEN THE ASSESSEE AND HIS FRANCHISEES. IF THE FRANCHISEE IS ENTITLED TO COMMISSION ALONE AND THE EXPENSES ARE INCURRED ON THE INSTRUCTIONS OF THE ASSESSEE THEN IN OUR VIE W THE TAX IS REQUIRED TO BE DEDUCTED AT SOURCE ON COMMISSION AMOUNT ALONE. HOWEVER IF THE FRANCHISEE IS ENTITLED TO COMMISSION PLUS EXPENSES AND HE HIMSELF INCURS EXPENSES THEN THE TAX IS REQUIRED TO BE DEDUCTED AT SOURCE ON THE AGGREGATE PAYMENTS MA DE. WE NOTICE THE TAX AUTHORITIES HAVE NOT EXAMINED THESE ASPECTS AND THE ASSESSEE HAS ALSO FAILED TO FURNISH THE RELEVANT DETAILS TO THEM. 8. IN RESPECT OF RENT PAYMENTS THE CONTENTION OF THE ASSESSEE IS THAT THE PAYMENTS ATTRIBUTABLE TO EACH CO - OW NER DO NOT EXCEED THE MONETARY LIMITS PRESCRIBED U/S 194I OF THE ACT. HOWEVER BEFORE US ALSO THE ASSESSEE HAS FAILED TO FURNISH RELEVANT DETAILS. ITA NO S . 278/COCH/2012 & 253 & 254/ COCH/ 2013 7 9. WITH REGARD TO THE ISSUE RELATING TO CONSTRUCTION OF BUILDING WE NOTICE THAT THE AO HAS REPORTED A S UNDER IN HIS REMAND REPORT: - 4) IN ADDITION TO THIS HE HAS CONSTRUCTED BUILDINGS INVESTING TO RS.49 94 750/ - AND RS.27 36 867/ - DURING ASSESSMENT YEAR 2007 - 08 AND ASSESSMENT YEAR 2008 - 09 RESPECTIVELY. IN VIEW OF THE MAGNITUDE OF THE BUSINESS THE THE N ASSESSING OFFICER HAS PRESUMED THAT HE MAY HAVE ENGAGED CONTRACTORS FOR THE WORK. HENCE THE ASSESSEE IS LIABLE FOR TDS. IT CAN BE NOTICED THAT THE ASSESSING OFFICER HAS ONLY PRESUMED THAT THE ASSESSEE MIGHT BE LIABLE TO DEDUCT TAX AT SOURCE U/S 194C O F THE ACT IN RESPECT OF BUILDING CONSTRUCTION. THUS THE AO EITHER IN THE ORIGINAL PROCEEDINGS OR IN THE REMAND PROCEEDINGS DID NOT EXAMINE WHETHER THE ASSESSEE HAS CONSTRUCTED THE BUILDING BY GIVING IT ON CONTRACT TO SOMEBODY OR NOT. ON THE CONTRARY WE NOTICE THAT THE ASSESSEE HAS SUBMITTED RIGHT FROM THE BEGINNING THAT THE BUILDING WAS CONSTRUCTED BY THE ASSESSEE HIMSELF AND HE DID NOT ENGAGE ANY CONTRACTOR. WE NOTICE THAT THE TAX AUTHORITIES DID NOT MAKE ANY ATTEMPT TO CONTROVERT THE SAID CONTENTIONS OF THE ASSESSEE. WE ALSO NOTICE THAT THE LD CIT(A) HAS ALSO FAILED TO ADDRESS THE ABOVE SAID CONTENTION OF THE ASSESSEE. ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS FAILED TO BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE IS L IABLE TO DEDUCT TAX AT SOURCE U/S 194C OF THE ACT IN RESPECT OF BUILDING CONSTRUCTION. UNDER THESE CIRCUMSTANCES IN OUR VIEW THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DEMAND RAISED U/S 201(1) AND INTEREST CHARGED U/S 201(1A) OF THE ACT IN RESPEC T OF BUILDING CONSTRUCTION. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT(A) IN RESPECT OF THIS ISSUE AND DIRECT THE AO TO DELETE THE DEMAND RAISED THEREON. ITA NO S . 278/COCH/2012 & 253 & 254/ COCH/ 2013 8 9.1 . THE LD COUNSEL CONTENDED THAT THE BENEFICIAL AMENDMENT MADE BY FINANCE ACT 2012 TO SEC. 4 0(A)(IA) OF THE ACT SHOULD BE EXTENDED TO THE PROVISIONS OF SEC. 201 ALSO. HOWEVER IN OUR VIEW THE PROVISIONS OF SEC. 40(A)(IA) AND SEC. 201 OPERATE IN DIFFERENT FIELD. FURTHER THE BENEFIT EXTENDED BY THE PROVISO TO SEC. 40(A)(IA) OF THE ACT IS ALREADY AVAILABLE TO THE DEMAND LEVIABLE U/S 201(1) OF THE ACT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES LTD (SUPRA). 10. FOREGOING DISCUSSIONS SHOW THAT THE MATTER RELATING TO DEDUCTION OF TAX AT SOURCE FR OM COMMISSION PAYMENTS REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. THE LD A.R ALSO SOUGHT AN OPPORTUNITY TO FURNISH NECESSARY DETAILS BEFORE THE AO. WITH REGARD TO THE RENT PAYMENTS ALSO THE LD A.R SOUGHT AN OPPORTUNITY. SINCE THE M ATTER RELATING TO THE COMMISSION PAYMENTS REQUIRES FRESH EXAMINATION IN THE INTEREST OF SUBSTANTIAL JUSTICE THE ASSESSEE MAY BE GIVEN ONE MORE OPPORTUNITY TO FURNISH THE DETAILS OF RENT PAYMENTS ALSO. ACCORDINGLY WE SET ASIDE THE ORDERS PASSED BY LD CI T(A) IN ALL THE THREE YEARS IN RESPECT OF THE ABOVE SAID TWO PAYMENTS AND RESTORE THEM TO THE FILE OF THE ASSESSING OFFICER FOR MAKING FRESH EXAMINATION. THE ASSESSEE IS ALSO DIRECTED TO FURNISH ALL THE DETAILS THAT MAY BE CALLED FOR BY THE ASSESSING OFFI CER FAILING WHICH THE AO IS FREE TO TAKE DECISION ON THE BASIS OF AVAILABLE FACTS. ITA NO S . 278/COCH/2012 & 253 & 254/ COCH/ 2013 9 11. IN THE RESULT ALL THE APPEALS FILED BY THE ASSESSEE ARE TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF OCT 2013. SD/ - S D/ - ( N.R.S. GANESA N ) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 25 TH OCT 2013 RAJ* COPY TO: 1. APPELLANT SHRI T T KURUVILLA ALLEPPEY PARCEL SERVICE VAZHICHERRY JUNCTION ALLEPPEY 2. RESPONDENT DR COMR OF INCOME TAX (TDS) KOTTAYAM 3. CIT(A) 4. CIT KOTTA YAM 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT COCHIN