ASST CIT RG 13(1), MUMBAI v. STERLING EXPORTS, MUMBAI

ITA 4038/MUM/2012 | 2008-2009
Pronouncement Date: 10-07-2013 | Result: Dismissed

Appeal Details

RSA Number 403819914 RSA 2012
Assessee PAN AAYFS5668Q
Bench Mumbai
Appeal Number ITA 4038/MUM/2012
Duration Of Justice 1 year(s) 1 month(s) 1 day(s)
Appellant ASST CIT RG 13(1), MUMBAI
Respondent STERLING EXPORTS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 10-07-2013
Assessment Year 2008-2009
Appeal Filed On 08-06-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI . . !'# $ % BEFORE SHRI I.P. BANSAL JM AND SHRI N.K. BILLA IYA AM ./I.T.A. NO.4038/MUM/2012 ( & & & & / ASSESSMENT YEAR : 2008-09 THE ACIT RANGE 13(1) AAYAKAR BHAVAN MUMBAI-400 020 M/S. STERLING EXPORTS 1 ST FLOOR RANGOONWALA BLDG. 91 MOHAMEDALI ROAD MUMBAI-400 003 ' $ ./ () ./PAN/GIR NO. : AAYFS 5668Q ( '* /APPELLANT ) .. ( + '* / RESPONDENT ) '* - / APPELLANT BY : ` SHRI RAJENDRA KUMAR + '* . - /RESPONDENT BY : SHRI PHADKAR . /0$ / DATE OF HEARING :08.07.2013 12& . /0$ / DATE OF PRONOUNCEMENT : 10.7.2013 3 / O R D E R PER N.K. BILLAIYA AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-24 MUMBAI DT.7.3.2012 PERTAINING TO A.Y. 2 008-09. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE RE VENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 40.95 241/- MADE BY THE AO U/S. 40(A)(IA) OF THE ACT. 3. THE ISSUE RELATES TO THE NON DEDUCTION OF TAX AT SOURCE OF SAMPLING/SWATCHING CHARGES PAID BY THE ASSESSEE TO ARTISANS/EMBROIDERS. WHILE SCRUTINIZING THE RETURN OF INCOME FOR THE YEA R UNDER CONSIDERATION THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED ITA NO.4038/M/2012 2 SAMPLING/SWATCHING CHARGES OF RS. 40 95 241/- WHICH ACCORDING TO THE AO WERE IN THE NATURE OF WORK CONTRACT. THE AO SOU GHT EXPLANATION FROM THE ASSESSEE VIDE ORDER SHEET ENTRY DT. 13.8.2 010 WHETHER ANY TDS HAS BEEN DEDUCTED ON THE CHARGES PAID AS PER PROVIS IONS OF LAW AND IF NOT WHY THE SAME SHOULD NOT BE DISALLOWED U/S. 40(A)(IA ) OF THE ACT. THE ASSESSEE FILED A DETAILED REPLY DT. 26.8.2010 EXPLA INING THE NATURE OF TRANSACTION AND WHY TDS HAS NOT BEEN MADE. IT WAS EXPLAINED THAT INITIALLY THE ASSESSEE CALLS FOR SAMPLES FROM VARIO US SUPPLIERS. AFTER RECEIVING THE SAMPLES THE SAME ARE FORWARDED TO T HE FOREIGN PARTIES TO SELECT THEM FOR CONFIRMATION ORDER. THEREFORE THE SAMPLES ARE ACTUALLY PURCHASED BY THE ASSESSEE AND SOLD TO THE FOREIGN P ARTIES. THE TRANSACTIONS BEING IN THE NATURE OF PURCHASE AND SA LE THERE IS NO QUESTION OF DEDUCTING TAX AT SOURCE. THE EXPLANATI ON OF THE ASSESSEE WAS REJECTED BY THE AO. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE DEBITS THE LABOUR CHARGES IN RESPECT OF EMBROIDERY DONE AFTER DEDUCTING TDS AS PER THE PROVISIONS OF SECTION 194C OF THE AC T. THEREFORE PAYMENT TO THE PARTIES WHO DESIGN THE SAMPLES AND W HO ARE INVOLVED IN THE ACTIVITY OF DESIGNING FOR REPEAT ORDERS ARE SAM E AND THE NATURE OF THE ACTIVITY ALSO IS THE SAME I.E. MAKING EMBROIDERY ON THE GARMENT. AS THE ASSESSEE IS DEDUCTING TDS ON THE LABOUR CHARGES DEB ITED TO THE TRADING ACCOUNT FOR THIS ACTIVITY THEREFORE THE ASSESSEE O UGHT TO HAVE DEDUCTED TDS FOR THE SIMILAR ACTIVITY OF EMBROIDERY WITH REF ERENCE TO SAMPLES/SWATCHES AND AS THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE IN THE LIGHT OF THE PROVISIONS OF SEC. 194C R.W. SECTI ON 40A(IA) OF THE ACT. THE AO WENT ON TO DISALLOW THE PAYMENT OF RS. 40 95 241/-. 4. THE ASSESSEE AGITATED THIS MATTER BEFORE THE LD. CIT(A) AND REITERATED THE NATURE OF TRANSACTION. IT WAS ONCE AGAIN EXPLAINED THAT THE SUPPLY OF SAMPLES AND SWATCHES BY THE ARTISTS IS I N THE NATURE OF DIRECT ITA NO.4038/M/2012 3 PURCHASES AND THEREFORE NO TDS IS REQUIRED TO BE D ONE. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF THE ASSESS EE AND ALSO THE NATURE OF TRANSACTION THE LD. CIT(A) AT PAGE-6 PARA 2.3. 1 HAS CONSIDERED THE NATURE OF TRANSACTION AT LENGTH AND AT PAGE-7 GAVE A CATEGORICAL FINDING THAT THE AO APPEARS TO HAVE MIXED UP THE TWO INDEP ENDENT ACTIVITIES AND DIRECTED THE AO TO DELETE THE ADDITION OF RS. 4 0 95.241/-. 5. AGGRIEVED BY THIS FINDING OF LD. CIT(A) REVENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE AO. IT IS THE SAY OF THE LD. DR THAT THE TRANSACTI ON IS NOTHING BUT A CONTRACTUAL PAYMENT AND THEREFORE LIABLE FOR TDS AS PER PROVISIONS OF SEC. 194C OF THE ACT. THE AO HAS RIGHTLY INVOKED THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. 7. PER CONTRA THE LD. COUNSEL FOR THE ASSESSEE REI TERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. THE LD. COUNSEL FOR THE ASSESSEE FURTHER DREW OUR ATTENTION TO PAGE-41 OF T HE PAPER BOOK AND POINTED OUT THAT IN THE IMMEDIATELY PRECEDING YEAR ENDING 31.3.2007 THE ASSESSEE HAS DEBITED SAMPLING/SWATCHING CHARGES TO THE TUNE OF RS. 34 64 480/- AND NO ADVERSE INFERENCE HAS BEEN DRAWN ON SUCH PAYMENT BY THE AO. THE LD. COUNSEL FOR THE ASSESSEE FURTHE R DREW OUR ATTENTION TO PAGE-94 OF THE PAPER BOOK AND POINTED OUT THAT FOR THE YEAR ENDING 31.3.2006 SAMPLING/SWATCHING CHARGES DEBITED TO THE PROFIT AND LOSS ACCOUNT AT RS. 66 42 526/- AND ONCE AGAIN NO ADVERS E INFERENCE HAS BEEN DRAWN IN THE ASSESSMENT PROCEEDINGS. IT IS THE SAY OF THE COUNSEL THAT FOR SIMILAR TRANSACTION NO ADVERSE INFERENCE SHOULD BE DRAWN FOR THE YEAR UNDER CONSIDERATION ALSO. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCES PL ACED ON RECORD IN THE ITA NO.4038/M/2012 4 FORM OF PAPER BOOK. THE ASSESSEE IS DEALING IN TEX TILES AND VARIOUS EMBROIDERING ITEMS SUCH AS HANDMADE EMBROIDERY FABR ICS PANELS LACES ETC. WHICH ARE EXPORTED. FOR THE PURPOSE OF GETTI NG EXPORT ORDER THE ASSESSEE SENDS REGULARLY SAMPLES AND SWATCHES TO FO REIGN BUYERS. THESE ITEMS ARE THEREFORE PURCHASED FROM THE ARTISTS. TH US IN THE FIRST CASE THE EMBROIDER SELLS ITS DESIGN IN THE FORM OF SAMPLES/S WATCHES TO THE MANUFACTURERS. THIS REPRESENTS SALE OF GOODS AND N OT A WORKS CONTRACT HENCE NO TDS IS REQUIRED TO BE MADE ON SUCH PURCHAS E OF SAMPLES/SWATCHES FROM THE EMBROIDERS. HOWEVER WHE N THE WORK ORDER IS PLACED WITH SUCH EMBROIDERS FOR IMPLEMENTING THE OR DERS RECEIVED BY THE MANUFACTURERS FROM ITS BUYER; IT IS IN THE NATURE O F WORKS CONTRACT. THUS BOTH THE ACTIVITIES ARE DIFFERENT AND INDEPENDENT F ROM EACH OTHER. THE ASSESSEE HAS DEDUCTED TAX AT SOURCE FROM THE SECOND ACTIVITY. THE LD. CIT(A) HAS CORRECTLY OBSERVED THAT THE AO HAS MIXED UP THESE TWO INDEPENDENT ACTIVITIES. AS THE LD. CIT(A) HAS CORRE CTLY APPRECIATED THE FACTS WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY 2013 . 3 . 2& $ 4 56 10.7.2013 2 . 7 SD/- SD/- (I.P. BANSAL ) (N. K. BILLAIYA ) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 5 DATED 10/07 /2013 . . ./ RJ SR. PS ITA NO.4038/M/2012 5 3 3 3 3 . .. . +/ +/ +/ +/ 8 &/ 8 &/ 8 &/ 8 &/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. + '* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ / DR ITAT MUMBAI 6. 7; < / GUARD FILE. 3 3 3 3 / BY ORDER / +/ //TRUE COPY// = == = / > > > > ( ( ( ( (DY./ASSTT. REGISTRAR) / ITAT MUMBAI