M/s. NOVARTIS INDIA LTD., MUMBAI v. ITO TDS-II, MUMBAI

ITA 476/MUM/2009 | 2007-2008
Pronouncement Date: 22-07-2011 | Result: Allowed

Appeal Details

RSA Number 47619914 RSA 2009
Assessee PAN AAACH2914F
Bench Mumbai
Appeal Number ITA 476/MUM/2009
Duration Of Justice 2 year(s) 6 month(s)
Appellant M/s. NOVARTIS INDIA LTD., MUMBAI
Respondent ITO TDS-II, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 22-07-2011
Date Of Final Hearing 06-07-2011
Next Hearing Date 06-07-2011
Assessment Year 2007-2008
Appeal Filed On 21-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S. SYAL A.M. AND SHRI V. DURGA RAO J.M. ITA NO. 476/MUM/2010 ASSESSMENT YEAR: 2007-08 NOVARTIS INDIA LTD. . APPELLANT SANDOZ HOUSE DR. ANNIE BESANT ROAD MUMBAI 400 018 (PAN AAACH2914F) VS. INCOME TAX OFFICER TDS-II RESPONDENT ROOM NO. 105 QUERSHI MANSION THANE (W). APPELLANT BY : MR. NITESH JOSHI REVENUE BY : MR. T.T. JACOB. ORDER PER V. DURGA RAO J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-II MUMBAI PASSED ON 08/10/2008 FOR THE ASSESSMENT YEAR 2007-08. 2. GROUND NO. 1 RAISED BY THE ASSESSEE READS AS UND ER:- THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ITO OF INVOKING THE PROVISIONS OF SECTION 201(1) AND SECTION 201(1A ) READ WITH SECTION 194C OF THE ACT AND CALLING UPON THE APPELL ANTS TO PAY A SUM OF RS. 36 17 828/- ON ACCOUNT OF ALLEGED SHORT DEDUCTION OF TAX AT SOURCE BY TREATING THE APPELLANTS TO BE AN A SSESSEE DEEMED TO BE IN DEFAULT AND A SUM OF RS. 7 03 861/- BY WAY OF INTEREST. 3. GROUND NOS. 2 & 3 ARE ARGUMENTATIVE IN NATURE AN D THEY ARE IN SUPPORT OF GROUND NO. 1. 4. GROUND NOS. 4 5 & 6 ARE GENERAL IN NATURE. 5. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E AO NOTICED THAT THE ASSESSEE HAD ENTERED IN TWO SEPARATE AGREEMENTS NAMELY ITA NO. 476/M/2009 NOVARTIS INDIA LTD. 2 TECHNOLOGY AND MANUFACTURING AGREEMENT AND SUPPLY A GREEMENT. BY THE FIRST AGREEMENT THE ASSESSEE COMPANY HAD GIVEN ENTIRE TECHNOLOGY TO THE THIRD PARTIES AND BY THE SECOND AGREEMENT PU RCHASES THE GOODS FROM THEM. THEREFORE HE WAS OF THE VIEW THAT IT IS NOTHING BUT THE WORK CONTRACT AS PER REQUIREMENT AND THE PROVISIONS OF SECTION 194C CLEARLY ATTRACTS IN THIS CASE THE ASSESSEE HAD ALS O DEDUCTED TDS AS PER SECTION 194C FOR FY 2006-07 AND 2007-08. HOWEVE R THE ASSESSEE FAILED TO DEDUCT TDS U/S 194C FOR FY 2006-07 ON SOM E PAYMENTS FOR THE PERIOD APRIL 2006 TO MARCH 2007. AS SUCH THERE IS SHORT DEDUCTION OF TDS IN RESPECT OF THIS PAYMENT AND INTEREST U/S 201 IS LEVIABE ON DEFAULT. THE AO THEREFORE CAME TO THE CONCLUSION THAT THE ASSESSEE IS DEEMED TO BE AN ASSESSEE IN DEFAULT IN TERMS OF SECTION 201(1) AND HENCE THERE IS SHORT DEDUCTION OF TAX WHILE MAKING PAYMENT. THE AO WORKED OUT THE SHORT DEDUCTION AT RS. 36 38 296/- A ND INTEREST THEREON WORKED OUT TO RS. 7 06 316/-. ON APPEAL TH E CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CANVASS ED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY TH E DECISION OF THE ITAT IN ASSESSEES OWN CASE(APPEAL FILED BY THE REV ENUE) AY 2005-06 IN ITA NO. 3169/MUM/10 VIDE ORDER DATED 29/04/2011 A COPY OF WHICH IS AVAILABLE ON RECORD. THE LEARNED DR ON TH E OTHER HAND DID NOT CONTROVERT THE SUBMISSIONS MADE BY THE LEARNED COUNSEL. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AU THORITIES BELOW. WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF T RIBUNAL IN ASESSSEES OWN CASE FOR AY 2005-06 (SUPRA) WHEREIN THE TRIBUNAL HELD AS UNDER:- 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE PARTIES PERUSED THE ORDERS OF THE AO AND THE LEARN ED CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE DECISION OF THE TRIBUNAL IN THE CASE OF SISTER CONCERN OF THE ASSESSEE AND THE DECISION OF THE JUR ISDICTIONAL ITA NO. 476/M/2009 NOVARTIS INDIA LTD. 3 HIGH COURT DISMISSING THE APPEAL FILED BY THE REVE NUE AGAINST THE ORDER OF THE TRIBUNAL. SINCE THE FACTS OF THE I MPUGNED CASE ARE IDENTICAL TO THAT OF THE FACTS IN THE CASE OF S ISTER CONCERN OF THE ASSESSEE NAMELY NOVARTIS HEALTH CARE (P.) LTD. (SUPRA) AND SINCE THE COORDINATE BENCH OF THE TRIBUNAL HAS ALRE ADY DECIDED THE ISSUE BY ALLOWING THE APPEAL OF THE ASSESSEE A ND SINCE THE APPEAL AGAINST THE ORDER OF THE TRIBUNAL BY THE REV ENUE HAS BEEN DISMISSED BY THE JURISDICTIONAL HIGH COURT THEREFO RE RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT WE HOLD THAT THE PAYMENT MADE TOWARDS PROCESSING CH ARGES AMOUNTING TO RS. 17 48 44 484/- IS FOR PURCHASE OF GOODS THE RELATION BETWEEN THE ASSESSEE COMPANY AND THE THIRD PARTIES MANUFACTURERS IS THAT OF PRINCIPAL TO PRINCIPAL AND THAT THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE ON TH E SAID PAYMENT. THE GROUNDS RAISED BY THE REVENUE ARE ACCO RDINGLY DISMISSED. 8. IN THE CASE OF SISTER CONCERN NAMELY NOVARTIS H EALTH CARE (P.) LTD. VS. ITO [2009] 20 SOT 425(MUM) THE TRIBUNAL HELD THAT THE AGREEMENTS OF THE ASSESSEE WITH THE MANUFACTURERS C OULD NOT BE TERMED AS WORKS CONTRACT. THE IMPUGNED ORDER WAS THEREF ORE SET ASIDE AND THE APPLICABILITY OF SECTION 194C WAS RULED OUT. TH AT BEING THE POSITION THERE COULD NOT BE ANY QUESTION OF TREATING THE ASS ESSEE AS IN DEFAULT UNDER SECTION 201(1) OR CHARGING ANY INTEREST U/S 2 01(1A). IN VIEW OF THE DECISION OF THE ITAT WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION OF RS. 36 17 828/- AND RS. 7 0 3 861/- TOWARDS SHORT DEDUCTION AND RS. INTEREST THEREON RESPECTIVE LY. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JULY 2011. SD/- SD/- (R.S. SYAL) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 22 ND JULY 2011 KV ITA NO. 476/M/2009 NOVARTIS INDIA LTD. 4 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE B BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI.