Sands Advertising Communications Pvt. Ltd.,, Bangalore v. DCIT, Bangalore

ITA 792/BANG/2009 | 2007-2008
Pronouncement Date: 22-01-2010 | Result: Allowed

Appeal Details

RSA Number 79221114 RSA 2009
Bench Bangalore
Appeal Number ITA 792/BANG/2009
Duration Of Justice 5 month(s) 15 day(s)
Appellant Sands Advertising Communications Pvt. Ltd.,, Bangalore
Respondent DCIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 22-01-2010
Date Of Final Hearing 10-11-2009
Next Hearing Date 10-11-2009
Assessment Year 2007-2008
Appeal Filed On 06-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER M/S. SANDS ADVERTISING COMMUNICATIONS PVT. LTD. NO.29 NANJAPPA ROAD (BEHIND VIJAYA BANK) K.H. ROAD BANGALORE 560 027. : APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX (TDS) CIRCLE 18(2) BANGALORE. : RESPONDENT APPELLANT BY : SHRI PADAMCHAND KHINCHA RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI & SHRI JASON P. BOAZ O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THESE SIX APPEALS PREFERRED BY THE ASSESSEE COMPAN Y ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE LD.CIT(A)-V BANGALORE FOR THE ITA NOS. ASSESSMENT YEARS 790/BANG/2009 2005-06 791/BANG/2009 2006-07 792/BANG/2009 2007-08 793/BANG/2009 2005-06 794/BANG/2009 2006-07 795/BANG/2009 2007-08 ITA NO.7905/BANG/09 PAGE 2 OF 31 ASSESSMENT YEARS 2005-06 2006-07 AND 2007-08 U/S 2 01(1) AND U/S 201(1A) OF THE ACT. ITA NOS: 790 791 & 792/09 AYS 05-06 06-07 & 07- 08 U/S 201(1) OF THE ACT : 2. IN THESE APPEALS THE ASSESSEE COMPANY [THE ASSE SSEE IN SHORT] HAS RAISED SIX IDENTICAL GROUNDS. GROUND NOS: 1 AN D 6 ARE BEING GENERAL AND NO SPECIFIC ISSUES INVOLVED WHICH IN OUR CONSI DERED VIEW DO NOT SURVIVE FOR ADJUDICATION. IN THE REMAINING GROUNDS THE CRUX OF THE ISSUE IS THAT THE AO WITHOUT GIVING PROPER OPPORTUNITY HAS PAS SED THE ORDERS U/S 201(1) OF THE ACT WHICH HAVE BEEN CONFIRMED BY THE CIT(A) INSTEAD OF QUASHING THE SAID ORDERS. ITA NOS: 793 794 & 795/09 AYS 05-06 06-07 & 07- 08 U/S 201(1A) OF THE ACT : 3. LIKEWISE IN THESE APPEALS TOO THE ASSESSEE HAS RAISED FOUR IDENTICAL GROUNDS. GROUND NOS: 1 AND 4 BEING GENER AL IN NATURE THEY ARE DISMISSED AS NON-CONSEQUENTIAL. IN THE REMAINING T WO GROUNDS THE GIST OF THE GRIEVANCE OF THE ASSESSEE IS LARGELY CONFINED T O THE AO WITHOUT GIVING PROPER OPPORTUNITY HAS PAS SED THE ORDERS AND THAT HE HAD ERRED IN LEVYING INTEREST U/S 201(1 A) OF THE ACT WHICH HAVE BEEN CONFIRMED BY THE CIT (A) INSTEAD OF QUASHING THE SAID ORDERS. 4. IN THESE APPEALS THE ISSUES RAISED ARE IDENTICA L AND INTER-LINKED PERTAIN TO THE SAME ASSESSEE FOR THE SAKE OF CONVE NIENCE THEY ARE CONSIDERED TOGETHER AND DISPOSED OFF IN THIS COMMON ORDER. ITA NO.7905/BANG/09 PAGE 3 OF 31 5. THE HISTORY OF THE CASE IN BRIEF IS THAT THE A SSESSEE IS AN ADVERTISING AGENCY INVOLVED IN ADVERTISING ACTIVIT Y EXCLUSIVELY IN THE PRINT MEDIA. TRISHUL COMMUNICATIONS [TRISHUL IN SHORT] ALSO LOCATED IN THE SAME PREMISES WAS DOING SIMILAR LINE OF BUSINESS IN WHIC H THE MANAGING DIRECTOR OF THE ASSESSEE HOLDING 50% SHARES. THE ASSESSEES PREMISE WAS SUBJECTED TO ACTION U/S 133A OF THE ACT ON 30.1.08 WITH A VIEW TO VERIFY THE DETAILS OF TDS PROVISIONS UNDER SECTIONS 192 TO 194 LA OF THE ACT. ON VERIFICATION IT WAS FOUND THAT THERE WERE A NUMBER OF CREDIT ENTRIES FROM THE ASSESSEE TO TRISHUL WITHOUT EFFECTING TDS PROVISION S. ON A QUERY IT WAS STATED THAT IN RESPECT OF THE CLIENTS OF THE ASSES SEE ADVERTISEMENT FOR VARIOUS PURPOSES DEVELOPED BY THE ASSESSEE WERE REL EASED TO THE PRINT MEDIA THROUGH TRISHUL TO AVAIL THE CREDIT FACILITY AVAILABLE WITH TRISHUL AS IT WAS AN ACCREDITED AGENCY. IN THE CASE OF CLIENTS O F TRISHUL ADVERTISEMENTS WERE CREATED AND RELEASED TO PRINT MEDIA DIRECTLY. THE ASSESSEE AS WELL AS TRISHUL BILLS THEIR RESPECTIVE CLIENTS SEPARATELY I N THEIR NAMES AND COLLECT THE ADVERTISEMENT CHARGES IN THEIR RESPECTIVE NAMES AFT ER DEDUCTION OF TDS. TRISHUL PAYS PUBLICATIONS AT 85% BUT COLLECT FROM THE ASSESSEE 3% EXTRA FOR ALLOWING THE ASSESSEE TO AVAIL THE CREDIT FACIL ITY. IT WAS FURTHER STATED THAT TRISHUL WAS ONLY A ROUTING AGENCY AND NOT A SU B-CONTRACTOR AND THUS NO TDS WAS EFFECTED WITH A PRESUMPTION THAT THE AM OUNTS HAVE ALREADY BEEN SUBJECTED TO TDS IN THE HANDS OF THE CLIENTS O F THE ASSESSEE. 5.1. ON A QUERY FROM THE REVENUE AS TO WHY ORDERS U /S 201(1) AND U/S 201(1A) OF THE ACT SHOULD NOT BE PASSED TREATING T HE PAYMENTS MADE BY THE ASSESSEE TO TRISHUL AS SUB-CONTRACTUAL PAYMENT IT WAS CONTENDED BY THE ASSESSEE WHICH IS SUMMARIZED THAT ITA NO.7905/BANG/09 PAGE 4 OF 31 (I) THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF ADVERTI SING AND PUBLIC RELATIONS. IT WAS NOT AN ACCREDITED ADVERTI SING AGENCY RECOGNIZED BY THE INDIAN NEWSPAPER SOCIETY [INS]. T HEREFORE THE ASSESSEE CANNOT AVAIL THE CREDIT FACILITY OFFERED B Y PUBLICATIONS AS SUCH FACILITY BEING AVAILABLE ONLY TO ACCREDITED AD VERTISING AGENCIES. TO OVERCOME THIS THE ASSESSEE HAD AN ARR ANGEMENT WITH TRISHUL A DULY ACCREDITED ADVERTISING AGENCY - SIS TER CONCERN OF THE ASSESSEE. THE CUSTOMERS OF THE ASSESSEE MAKE P AYMENTS AFTER DEDUCTING TAX AT SOURCE. SINCE ALL RECEIPTS FROM I NS MEMBER PUBLICATIONS WERE ROUTED BY THE ASSESSEE THROUGH TR ISHUL THE RECEIPTS WERE PAID/CREDITED TO TRISHUL WITHOUT MAKI NG TDS. THE AMOUNTS SO PAID TO TRISHUL WOULD NOT BE LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT BECAUSE TRISHUL W AS ONLY A ROUTING AGENCY. THE AMOUNTS PAID BY THE CLIENTS TO THE ASSESSEE HAVE ALREADY BEEN SUBJECTED TO TAX TDS. SINCE TR ISHUL WAS ONLY A ROUTING AGENCY AND NOT A PUBLISHER OF THE ADVERTI SEMENTS IT CANNOT BE REGARDED AS SUB-CONTRACTOR ALSO. THUS T HE PROVISIONS OF S.194C (2) OF THE ACT WOULD NOT BE APPLICABLE TO THE INSTANT CASE. (II) TAKING CUE FROM THE BOARDS CIRCULAR NO.715 DATED: 8.8.95 IT WAS CONTENDED THAT THE ASSESSEE WAS NOT A CLIENT B UT AN ADVERTISING AGENCY. THUS THE PAYMENT BY THE ASSES SEE TO ANOTHER AGENCY WOULD NOT FALL WITHIN THE SCOPE OF S.194C. RELIANCE WAS PLACED ON THE DECISIONS OF HONBLE HIGH COURT OF GU JARAT [253 ITR 310] AND HONBLE SUPREME COURT [293 ITR 226]W HEREIN REFERRING TO THE BOARDS CIRCULAR THE APEX COURT H ELD THAT DEMAND U/S 201(1) CANNOT BE ENFORCED FROM THE DEDUC TEE ASSESSEE ONCE THE TAXES HAVE BEEN PAID BY THE DEDUCTEE-ASSES SEE. 5.2. AFTER CONSIDERING THE FORCEFUL CONTENTIONS OF THE ASSESSEE THE AO WAS OF THE VIEW THAT THE PAYMENT WAS NOT MADE BY A CLIENT TO THE ADVERTISING AGENCY BUT BY A COMPANY TO AN ADVERTISI NG AGENCY AND APPLYING THE CBDTS CIRCULAR WAS NOT VIABLE AS THE PAYMENT WAS MADE FROM A CLIENT COMPANY TO AN ADVERTISING AGENCY AN D NOT TO A PRINT MEDIA AS MENTIONED IN THE BOARDS CIRCULAR. HE HAD ALSO BRUSHED ASIDE THE ASSESSEES ASSERTION THAT THE ASSESSEE COMPANY RECE IVED FROM ITS CLIENTS AFTER DEDUCTION OF TAXES AND HENCE PAYMENT TO TRI SHUL DOES NOT ATTRACT ITA NO.7905/BANG/09 PAGE 5 OF 31 TDS ETC. THUS THE AO HAD WORKED OUT THE TDS LIABIL ITY U/S 201(1) AND INTEREST U/S 201(1A) OF THE ACT FOR THE ASSESSMENT YEARS AS UNDER: ASSESSMENT YEAR TOTAL DEMAND 2005-06 RS.416409 2006-07 RS.352182 2007-08 RS.360562 6. AGGRIEVED THE ASSESSEE TOOK UP THE ISSUES BEFOR E THE LD. CIT(A) FOR RELIEF. AFTER DUE CONSIDERATION OF THE LENGTHY AND FORCEFUL SUBMISSIONS OF THE LD. A.R AND ALSO THE REMAND REPORT OF THE AO IN TO ACCOUNT THE LD. CIT(A) HAD ANALYZED THE ISSUE AT LENGTH AND OBSERVE D THUS 8.1. THE ARGUMENT THAT SANDS RECEIVED FROM ITS CLIE NTS AFTER DEDUCTION OF TAXES AND HENCE PAYMENT TO TRISHUL DOE S NOT ATTRACT TDS IS NOT CORRECT AND WITHOUT ANY EVIDENCE OR BASI S. THE FUNDAMENTAL RULE OF LAW THAT TAX CANNOT BE RECOVERE D TWICE OF THE SAME INCOME IS ACCEPTABLE. EVEN IF TRISHUL DISCHAR GED ITS LIABILITY SANDS WOULD CLAIM EXPENSES ON THESE PAYMENTS. SECT ION 194C(1) MANDATES DEDUCTION OF TAX AT SOURCE FROM THE AMOUNT S PAID OR PAYABLE TO ANY RESIDENT FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK). EXPLANATION III TO SECTION 194C (2) ENLISTS CERTAIN ACTIVITIES WHICH ARE CONSI DERED AS WORK FOR THE PURPOSES OF SECTION 194C. THE SAID EXPLANA TION READS AS FOLLOWS: .. 8.2. I HAVE PERUSED THE SUBMISSION MADE BY THE AP PELLANT AND DO NOT AGREE WITH THE VIEW OF THE APPELLANT THAT SINCE ALL THE RECEIPTS FROM INS MEMBER PUBLICATIONS ARE ROUTED BY THE COMP ANY THROUGH TRISHUL AMOUNTS PAID/CREDITED TO TRISHUL WOULD NOT BE LIABLE FOR TDS U/S 194C BECAUSE TRISHUL IS ONLY A ROUTING AGEN CY. SINCE TRISHUL IS ONLY A ROUTING AGENCY AND NOT THE PUBLIS HER OF THE ADVERTISEMENTS IT CANNOT BE REGARDED AS SUB-CONTRA CTORS. THE COMPANY IS NOT A CLIENT AS PER CBDT CIRCULAR. IT I S AN ADVERTISING AGENCY. THE PAYMENT MADE BY THE COMPANY TO ANOTHER AGENCY WOULD NOT FALL WITHIN THE SCOPE OF S.194C. IN THE PRESENT CASE ALL THE WORK IN RELATION TO THE ADVERTISING CONTRACTS W AS UNDERTAKEN BY THE APPELLANT ITSELF. NO PART OF THE SAID WORK WAS CARRIED OUT BY TC. TC WAS ONLY A ROUTER OR CONDUIT THROUGH WHICH PAYME NT WAS MADE TO THE MEDIA. TC WAS ROPED IN WITH A VIEW TO AVAIL ING THE CREDIT ITA NO.7905/BANG/09 PAGE 6 OF 31 FACILITY. TC HAD NO ROLE TO PLAY AND HAD NO INTERE ST IN THE ADVERTISING CONTRACTS EXCEPT TO THE ABOVE AND EXTEN T. THERE WAS NO PRODUCT OR WORK ACHIEVED AS A RESULT OF THE ARRANGE MENT BETWEEN THE APPELLANT AND TC. HAD THE PAYMENTS NOT BEEN MA DE TO THE MEDIA THROUGH TC THE ONLY EFFECT WAS THAT THE APPE LLANT WOULD NOT HAVE BEEN ELIGIBLE FOR THE CREDIT FACILITY. IT WAS NOT A SITUATION WHERE WITHOUT MAKING PAYMENT TO TC THE ADVERTISEME NTS COULD NOT HAVE BEEN PLACED IN THE MEDIA AT ALL. THE EXISTENC E OF TC IN THE WHOLE TRANSACTION WAS ONLY FOR A LIMITED PURPOSE. IT DID NOT ALTER THE ADVERTISEMENT WORK CARRIED OUT BY THE APPELLANT . THUS TC CANNOT BE CONSIDERED AS A CONTRACTOR AND THE PAYM ENTS MADE TO IT FOR ONWARD PAYMENT TO MEDIA CANNOT BE CONSIDERED AS WORK OR ADVERTISEMENT SO AS TO FALL WITHIN THE SCOPE OF SEC TION 194C (1). 8.3. IN VIEW OF ALL THIS I AM OF THE OPINION THAT CLARIFICATION OF THE FINANCE MINISTER ON THE FLOOR OF THE HOUSE IS NOT A PPLICABLE IN THE PRESENT CASE BECAUSE THE PAYMENT MADE BY THE APPELL ANT IS TO ITS SISTER CONCERN AND NOT TO MEDIA. IN ORDER TO PROVI DE CREDIT FACILITY TO ITS CLIENTS THE APPELLANT ENTERED INTO AN AGREEM ENT WITH TRISHUL COMMUNICATIONS (TC) A SISTER CONCERN OF THE APPELL ANT FOR PLACING THE ADVERTISEMENT IN THE NEWSPAPER THE ACCREDITED AGENCY IS BE ENTITLED FOR A COMMISSION OF 15% FROM THE NEWSPAPER PUBLICATIONS. THUS IF THE ADVERTISEMENT CHARGES ARE RS.100/- AF TER REDUCING A SUM OF RS.15/- TOWARDS THE COMMISSION AN AMOUNT OF RS.85/- WOULD BE PAID BY TC TO THE NEWSPAPER PUBLICATIONS. TC IN TURN RAISES: (I) A DEBIT NOTE ON THE APPELLANT FOR THE ENTIRE SUM OF RS.100/- AND (II) A CREDIT NOTE FOR RS.12/- ON THE APPELLANT. THUS OU T OF THE TOTAL COMMISSION OF RS.15/- A COMMISSION OF RS.3/- IS RE TAINED BY TC AND THE APPELLANT WOULD BE ENTITLED FOR A COMMISSION OF RS.12/-. WHEN THE APPELLANT ADMITTED THAT RS.15/- IS COMMISSION THEN WHY SHOULD IT PAID RS.85/- TO TRISHUL AS EXPENSES ON ADVERTISE MENT. THIS BEING THE FACT OF THE CASE THE APPELLANT IS LIABLE TO DE DUCT TAX AT SOURCE ON THE PAYMENTS MADE TO TRISHUL AS PER LAW. THE CASE LAW CITED BY THE APPELLANT ALSO HELPS THE DEPARTMENT AS SECTION 194C COVERS A PERSON CARRYING OUT WORK FOR ANOTHER PERSON AS A CO NTRACTOR IN THE ORDINARY SENSE. IT DOES NOT COVER A PERSON CARRYIN G ON ACTIVITIES OF HIS OWN BUSINESS IN THE ORDINARY COURSE OF CHARGING FEES REMUNERATION ETC. [ALL GUJARAT FEDERATION V. CBDT 214 ITR 276]. THE APPELLANT MADE PAYMENT TO TRISHUL FOR TH E WORKS DONE FOR THE APPELLANT AND IT CANNOT BE SAID TO BE PAID FOR CARRYING ON HIS OWN BUSINESS ACTIVITIES. I THEREFORE CONSIDER TH E ORDERS PASSED BY THE DCIT (TDS) U/S 201(1) AND 201(1A) ARE JUSTIFIED AND AS PER LAW. THE ORDERS NEED NO INTERFERENCE AND THE SAME ARE HE REBY CONFIRMED. ITA NO.7905/BANG/09 PAGE 7 OF 31 7. NOT SATISFIED WITH THE FINDING OF THE LD. CIT (A ) THE ASSESSEE HAS COME UP WITH THE PRESENT APPEALS BEFORE US. THE LD . ARS FORCEFUL ARGUMENTS MOSTLY REVOLVED AROUND WHAT WAS CONTENDED BEFORE THE FIRST APPELLATE AUTHORITY. THE SUBMISSION OF THE LD. COU NSEL FOR THE SAKE OF CLARITY IS SUMMARIZED AS UNDER: (I) THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF ADVERTI SING AND PUBLIC RELATIONS. IT WAS NOT AN ACCREDITED ADVERTI SING AGENCY AS RECOGNIZED BY INS. AS THE ASSESSEE CANNOT AVAIL TH E CREDIT FACILITY OFFERED BY PUBLICATIONS THE ASSESSEE HAD AN ARRANG EMENT WITH TRISHUL A SISTER CONCERN; (II) THE ASSESSEES CUSTOMERS MAKE PAYMENT AFTER DEDUCTI ON OF TAX AT SOURCE. SINCE ALL THE RECEIPTS FROM INS MEMBER PUB LICATIONS WERE ROUTED BY THE ASSESSEE THROUGH TRISHUL AMOUNTS WER E PAID/CREDITED TO TRISHUL WITHOUT TDS; - THE AMOUNTS PAID TO TRISHUL WOULD NOT BE LIABLE FOR TDS U/S 194C BECAUSE TRISHUL WAS ONLY A ROUTING AGENCY; - THE AMOUNTS PAID BY THE CLIENTS TO THE ASSESSEE HAV E ALREADY BEEN SUBJECTED TO TDS; - SINCE TRISHUL WAS ONLY A ROUTING AGENCY AND NOT THE PUBLISHER OF THE ADVERTISEMENTS IT CANNOT BE REGARDED AS SUB-CONTRA CTOR [SOURCE: CBDT CIRCULAR NO.715 DT:8.8.95] - AS PER BOARDS CIRCULAR THE ASSESSEE WAS NOT A CLI ENT BUT AN ADVERTISING AGENCY. THE PAYMENT MADE BY THE ASSESS EE TO ANOTHER AGENCY WOULD NOT FALL WITHIN THE SCOPE OF S.194C. - RELIES ON (A) CIT V. RISHIKESH APARTMENTS CO-OP. HOUSING SOCIETY LTD. 253 ITR 310 (GUJ) (B) HINDUSTAN COCA COLA BEVERAGE (P) LTD. 293 ITR 226 ( SC) (III) TRISHUL HAD FILED ITS ROI AND PAID THE TAXES. THUS THE ASSESSEE CANNOT BE HELD AS AN ASSESSEE IN DEFAULT AND TAX CA NNOT BE RECOVERED; J.B.BODA AND CO.(P) LTD. 223 ITR 271 (SC) ITA NO.7905/BANG/09 PAGE 8 OF 31 (IV) IF AN ADVERTISING AGENCY WAS NOT ACCREDITED PAYMEN TS HAVE TO BE MADE IMMEDIATELY TO THE NEWSPAPER PUBLICATIONS. THE CLIENTS WHILE PLACING ADVERTISEMENTS WITH THE ASSESSEE INSI ST ON CREDIT FACILITY BEING EXTENDED TO THEM OR DISCHARGING THEI R DUES. SINCE THE ASSESSEE WAS NOT AN ACCREDITED ADVERTISING AGEN CY THE ASSESSEE TIED UP WITH AN ARRANGEMENT WITH TRISHUL A SISTER CONCERN ACCORDING TO WHICH - THE CLIENT PLACES ALL THE ORDERS WITH THE ASSESSEE FOR PLACING THE ADVERTISEMENT IN THE MEDIA; ALL THE WORK IN CONNEC TION WITH THE SAID ORDER WOULD BE PERFORMED BY THE ASSESSEE AND NO PAR T OF THE WORK WOULD BE UNDERTAKEN BY TRISHUL; - THE ADVERTISEMENT WOULD BE PLACED BY THE ASSESSEE I N THE MEDIA NOT DIRECTLY BUT THROUGH TRISHUL SO AS TO AVAIL THE C REDIT FACILITY AND TO PASS ON SIMILAR BENEFIT TO THE CLIENTS; - THE BUSINESS APPARATUS OR DESIGN OR LOGO OR TRADE M ARK OF TRISHUL WAS USED TO SECURE THE CREDIT FACILITY. THIS IS A FAIRLY PREVALENT PRACTICE IN THE ADVERTISING AGENCY WHEREIN THE NAME OF AN ACCREDITED ADVERTISING AGENCY WAS USED FOR SECURING CERTAIN FA CILITIES; (V) FOR PLACING THE ADVERTISEMENT IN THE NEWSPAPERS TH E ACCREDITED AGENCY WAS TO BE ENTITLED FOR A COMMISSION OF 15% F ROM THE NEWSPAPER PUBLICATIONS. THUS IF THE ADVERTISEMENT CHARGES WERE RS.100/- AFTER REDUCING A SUM OF RS.15/- TOWARDS T HE COMMISSION RS.85/- WOULD BE PAID BY TRISHUL TO THE NEWSPAPER P UBLICATIONS. TRISHUL IN TURN RAISES (I) A DEBIT NOTE ON THE ASSE SSEE FOR RS.100/- AND (II) A CREDIT NOTE FOR RS.12 ON THE ASSESSEE . THUS OUT OF COMMISSION OF RS.15/- RS.3/- IS RETAINED BY THE TR ISHUL AND THE ASSESSEE IS ENTITLED RS.12/- AS COMMISSION; (VI) THE ASSESSEE DOESNT FALL WITHIN THE AMBIT OF S.194 C AND THEREFORE NO DISALLOWANCE COULD BE MADE U/S 40(A)(IA) FOR NON DEDUCTING OF TDS FOR THE FOLLOWING REASONS: - S.194C(1) MANDATES DEDUCTION OF TAX AT SOURCE FROM THE AMOUNTS PAID OR PAYABLE TO ANY RESIDENT (CONTRACTOR) FOR CARRYIN G OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK). EXPLANATION III BELOW S.194C (2) ENLISTS CERTAIN ACTIVITIES WHI CH ARE CONSIDERED AS WORK FOR THE PURPOSES OF S.194C. - EXTENSIVELY QUOTING FROM THE HONBLE FINANCE MINIST ERS BUDGET SPEECH FOR THE YEAR 1995 AND ALSO BOARDS CIRCULARS NO.714 DT.3.8.95 AND NO.715 DT: 8.8.95 IT WAS CONTENDED THAT IT IS MANIFEST THAT S.194C WOULD BE APPLICABLE ONLY WHEN A CLIENT MAKES A PAYM ENT TO AN ITA NO.7905/BANG/09 PAGE 9 OF 31 ADVERTISING AGENCY. IT WOULD NOT APPLY WHEN THE AD VERTISING AGENCY MAKES PAYMENT TO THE MEDIA. THE ASSESSEE IS AN ADV ERTISING AGENCY AND NOT A CLIENT AND THUS THE PAYMENT BY ONE ADVE RTISING AGENCY TO ANOTHER ADVERTISING AGENCY FOR ONWARD REMITTANCE TO THE MEDIA CANNOT BE CONSIDERED AS AMOUNTS PAID FOR CARRYING OUT ANY WORK IN RELATION TO ADVERTISING. THUS THE PAYMENT MADE T O TRISHUL WOULD NOT FALL WITHIN THE SCOPE OF S.194C AS THE PAYMENT WAS MADE IN CONNECTION WITH THE ADVERTISEMENTS PUBLISHED IN THE MEDIA. - THE INVOICE FOR THE ADVERTISING CHARGES WAS RAISED BY THE MEDIA AND IN VIEW OF THE ARRANGEMENTS THE ASSESSEE PAID THE SUMS TO TRISHUL FOR THE PURPOSE OF MAKING PAYMENT TO THE MEDIA AND THE PAYMENT REACHED THE MEDIA THROUGH TRISHUL. - THUS THE PAYMENT MADE TO THE MEDIA THROUGH TRISHUL SHOULD BE CONSIDERED AS A DIRECT PAYMENT MADE TO THE MEDIA BY THE ASSESSEE AS A RESULT S.194C WOULD HAVE NO APPLICATION; (VII) THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF ADVERTI SING AND PUBLIC RELATIONS AND THAT ALL THE WORK IN CONNECTIO N WITH THE ADVERTISEMENTS PLACED IN THE MEDIA WAS PERFORMED BY THE ASSESSEE AND NO PART OF THE SAID WORK WAS BEING UNDERTAKEN B Y TRISHUL. THERE WAS IN FACT NO PRIVITY OF CONTRACT BETWEEN THE CLIENTS AND TRISHUL. THUS THE WORK IN RELATION TO ADVERTIS ING AS ENVISAGED IN S.194C HAVING BEEN UNDERTAKEN BY THE ASSESSEE T RISHUL CANNOT BE REGARDED AS A CONTRACTOR IN RESPECT OF THE SAI D ADVERTISING WORK. - THE AO HAD WRONGLY TREATED THE ASSESSEE AS A CLIEN T BY NOT CORRECTLY APPRECIATING THE RELATIONSHIP BETWEEN THE ASSESSEE AND TRISHUL. THE ASSESSEE DID NOT PLACE ANY ADVERTISEMENT IN THE MED IA ON ITS OWN ACCOUNT BUT IT UNDERTOOK AND EXECUTES THE ORDERS OF PERSONS WHO WISHED TO PLACE THE ADVERTISEMENTS IN THE MEDIA. - RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (A) SETHI TRANSPORT V. CBDT (1997) 226 ITR 274 (ORI) (B) V.M.SALGAOCAR AND BROS. LTD. ITO (1999) 237 ITR 630 (KAR) (C) ALL GUJARAT FEDERATION V. CBDT 214 ITR 276 (D) CALCUTTA GOODS TRANSPORT ASSOCIATION V. UNION O IND IA (1996) 219 ITR 486 (CAL); (E) MADRAS BAR ASSOCIATION V. CBDT (1995) 216 ITR 240 ( MAD) (F) SRF FINANCE LTD. V. CBDT (1995) 211 ITR 861 (DEL) (VIII) ALL THE WORK IN RELATION TO THE ADVERTISING CONTRAC TS WERE UNDERTAKEN BY THE ASSESSEE ITSELF AND NO PART OF TH E WORK WAS CARRIED OUT BY THE TRISHUL WHO WAS ONLY A CONDUIT T HROUGH WHICH PAYMENT WAS MADE TO THE MEDIA. TRISHUL HAD NO ROLE TO PLAY AND ITA NO.7905/BANG/09 PAGE 10 OF 31 HAD NO INTEREST IN THE ADVERTISING CONTRACTS EXCEPT TO THE ABOVE EXTENT; - THERE WAS NO PRODUCT OR WORK ACHIEVED AS A RESULT O F THIS ARRANGEMENT - HAD THE PAYMENTS NOT BEEN MADE TO THE MEDIA THROUGH TRISHUL THE ASSESSEE WOULD NOT HAVE BEEN ELIGIBLE FOR THE CREDI T FACILITY. IT WAS NOT A SITUATION WHERE WITHOUT MAKING PAYMENT TO TRI SHUL THE ADVERTISEMENTS COULD NOT HAVE BEEN PLACED IN THE ME DIA AT ALL. THE EXISTENCE OF TRISHUL IN THE WHOLE TRANSACTION WAS F OR A LIMITED PURPOSE WHICH DID NOT ALTER THE ADVERTISEMENT WORK CARRIED ON BY THE ASSESSEE. THUS TRISHUL CANNOT BE CONSIDERED AS A CONTRACTOR AND THE PAYMENTS MADE TO IT FOR ONWARD PAYMENT TO MEDIA CANNOT BE CONSIDERED AS WORK OR ADVERTISEMENT SO AS TO FALL WITHIN THE SCOPE OF S.194C (1). - THE NAME AND RECOGNITION OF TRISHUL BEING AN ACCRED ITED AGENCY WAS UTILIZED IN ORDER TO SECURE THE CREDIT FACILITY. O UT OF THE INCOME EARNED FROM PLACING THE ADVERTISEMENT CONTRACTS 3% WAS RETAINED BY TRISHUL IN CONSIDERATION OF UTILIZING ITS NAME AND RECOGNITION. THE SAID PAYMENT COULD AT THE BEST BE DESCRIBED AS ROY ALTY. (IX) FOR THE SAID REASONS S.194C HAS NO APPLICATION AN D THUS THERE WAS NO LIABILITY TO WITHHOLD TAX AT SOURCE UNDER CH .VIIB FROM THE PAYMENTS MADE TO TRISHUL 7.1. TO BUTTRESS HIS ARGUMENTS; THE LD. A R HAD PLA CED STRONG RELIANCE ON THE VARIOUS JUDICIAL PRONOUNCEMENTS TO DRIVE HOM E HIS POINT. DURING THE COURSE OF HEARING HE HAD FURNISHED THREE PAPER BOO KS CONTAINING [1- 58 PAGES 1 127 PAGES & 1 28 PAGES RESPECTIVELY ] WHICH CONSIST OF INTER ALIA COPIES OF (I) SHOW-CAUSE NOTICE (II) JUDGMEN TS OF VARIOUS COURTS (III) MEMORANDUM OF UNDERSTANDING BETWEEN SANDS AND TRISH UL ETC. 7.2. ON HER PART THE LD. D R WAS VERY VEHEMENT IN HER RESOLVES THAT THE ASSESSEE AND TRISHUL WERE SISTER CONCERNS. THE ASS ESSEE HAD NO ACCESS FOR RELEASING THE ADVERTISEMENTS IN THE MEDIA AND T RISHUL WAS AN ACCREDITED AGENCY FOR RELEASING ADVERTISEMENTS IN T HE PRINT MEDIA. AS PER THE RELEVANT PROVISIONS OF THE ACT DEDUCTIONS OF T DS WERE TO BE EFFECTED ITA NO.7905/BANG/09 PAGE 11 OF 31 ON PAYMENTS FROM ONE ENTITY TO ANOTHER WAS A POINT FOR DEDUCTION OF TDS. THE ASSESSEE HAD ENTRUSTED THE WORK OF RELEASING AD VERTISEMENTS TO MEDIA TO TRISHUL. THUS THE TDS PAYMENTS HAS TO BE SEEN ONLY BETWEEN THE ASSESSEE AND TRISHUL AND NO OTHER ENTITY. AS THE ASSESSEE HAD FAILED IN ITS OBLIGATION TO DEDUCT TDS ON THE PAYMENTS MADE TO TR ISHUL THE ASSESSEE WAS IN DEFAULT AND THUS THE PROVISIONS OF S.201(1 ) AND S.201(1A) OF THE ACT WERE SQUARELY APPLICABLE TO THE FACTS OF THE CASE O N HAND. SINCE THE AO HAD TAKEN A STAND IN A JUDICIOUS MANNER WHICH HAS B EEN UPHELD BY THE LD. CIT(A) IN TOTO IT WAS PLEADED THAT THE STAND OF TH E AUTHORITIES BELOW BE SUSTAINED. 8. WE HAVE CAREFULLY CONSIDERED THE FORCEFUL SUBMIS SIONS OF EITHER PARTY. WE HAVE ALSO DULY PERUSED THE RELEVANT RECO RDS VOLUMINOUS PAPER BOOKS FURNISHED AND ALSO STRONG RELIANCE PLACED ON THE VARIOUS JUDICIAL PRECEDENTS BY THE LD. A.R. WE HAVE ALSO GONE THROU GH THE DOCUMENTARY EVIDENCE PRODUCED BY THE LD. D.R. 8.1. THE VEXED ISSUE FOR CONSIDERATION IS WHETHER THE ASSESSEE WAS IN DEFAULT IN NOT DEDUCTING THE TAX AT SOURCE WHILE M AKING PAYMENTS TO PRINT MEDIA THROUGH ITS SISTER CONCERN? 8.1.1. THE ASSESSEE BEING AN ADVERTISING AGENCY I NVOLVED IN ADVERTISING ACTIVITY EXCLUSIVELY IN THE PRINT MEDIA. ITS SISTE R CONCERN TRISHUL ALSO IN THE SAME LINE OF BUSINESS. TRISHUL WAS AN ACCREDI TED ADVERTISING AGENCY AS RECOGNIZED BY INDIAN NEWSPAPER SOCIETY (INS). S INCE THE ASSESSEE WAS NOT AN ACCREDITED ADVERTISING AGENCY IT HAD EN TERED INTO A MEMORANDUM OF UNDERSTANDING ON 1-7-2002 ACCORDING TO WHICH ALL ITA NO.7905/BANG/09 PAGE 12 OF 31 ADVERTISEMENTS CREATED/DEVELOPED BY THE ASSESSEE FO R ITS CLIENTS WILL BE RELEASED TO THE PRINT MEDIA THROUGH TRISHUL BY AVA ILING THE CREDIT FACILITY BEING ENJOYED BY TRISHUL. THE BONE OF CONTENTION O F THE ASSESSEE IS THAT TRISHUL WAS ONLY A ROUTING AGENCY AND NOT A SUB-CON TRACTOR AND AS SUCH S.194C OF THE ACT IS NOT APPLICABLE. TO ILLUSTRATE THE ARRANGEMENTS BETWEEN THE ASSESSEE AND TRISHUL WE WOULD LIKE TO ENLIGHTE N FURTHER THAT FOR PLACING THE ADVERTISEMENT IN THE PRINT MEDIA (S AY NEWSPAPERS) THE ACCREDITED AGENCY (TRISHUL COMMUNICATIONS) IS ENTIT LED FOR A COMMISSION OF 15% FROM THE NEWSPAPER PUBLICATIONS. FOR EXAMPLE IF THE ADVERTISEMENT CHARGES WERE TO BE RS.100/- AFTER REDUCING AN AMOU NT OF RS.15/- BEING COMMISSION RS.85/- ONLY WILL BE PAID BY TRISHUL TO THE NEWSPAPER PUBLISHERS. TRISHUL WILL IN TURN RAISE: (I) A DEBIT NOTE ON THE ASSESSEE FOR THE ENTIRE ADVERTI SEMENT CHARGE OF RS.100/- (II) A CREDIT NOTE FOR RS.12/- ON THE ASSESSEE. THUS OU T OF TOTAL COMMISSION OF RS.15/- THANKS TO ACCREDITED RECOGNI TION RS.3/- WILL BE RETAINED BY TRISHUL AND THE ASSESSEE STANDS TO GAIN RS.12/-. 8.1.2. LET US HAVE A GLIMPSE OF S.194C (1): (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO A NY RESIDENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND --. (2)ANY PERSON . EXPLANATION III-FOR THE PURPOSES OF THIS SECTION T HE EXPRESSION WORK SHALL ALSO INCLUDE- (A) ADVERTISING (B) [EXPLANATION WAS BROUGHT ON THE STATUTE BOOK BY THE FINANCE ACT 1995 W.E.F. 1.7.1995] 8.1.3. THE ARGUMENT OF THE ASSESSEE WAS THAT THE SPADEWORK WITH REGARD TO ADVERTISEMENTS SUCH AS SKETCH MATERIAL GETTING APPROVAL OF THE CLIENTS OF ADVERTISEMENT SUBSTANCE DEVISED AND DESIGNED W ERE BEING PRECISELY ITA NO.7905/BANG/09 PAGE 13 OF 31 DONE BY THE ASSESSEE AND THAT THE FINISHED MATERIAL S (THE CONTENTS OF ADVERTISEMENTS) WERE ROUTED THROUGH TRISHUL TO THE MEDIA TO AVAIL ACCREDITED FACILITY BEING ENJOYED BY TRISHUL. IN F ACT TRISHUL ROLE WAS CONFINED ONLY TO FORWARD THE ADVERTISEMENT MATERIAL S DEVISED BY THE ASSESSEE TO THE MEDIA. TO PUT IT IN A NUTSHELL TH E ASSESSEE HAD MADE USE OF TRISHUL ONLY FOR ROUTING THROUGH ITS ADVERTISEME NTS TO THE MEDIA. THE COLLECTION OF PAYMENTS FROM THE CLIENTS (THE ADVERTISERS) WAS THE JOB OF THE ASSESSEE. WHILE MAKING THE PAYMENT TO THE ASSESSEE BEING THE ADVERTISEMENT CHARGES THE CLIENT (THE ADVERTISER) SHALL EFFECT THE TDS. THUS THE ADVERTISEMENT CHARGES HAVE SINCE BEEN SUF FERED TDS WHEN THE CLIENTS MADE PAYMENTS TO THE ASSESSEE. TRISHUL HAD INDEED ACTED AS A LIAISON BETWEEN THE ASSESSEE AND THE MEDIA FOR WHIC H IT HAD RETAINED 3% DISCOUNT EXTENDED BY THE MEDIA BECAUSE IT WAS ACCRE DITED ADVERTISING AGENCY. 8.1.4. IT MAY NOT BE OUT OF CONTEXT TO MENTION HER E THAT THE LD.CIT(A) HAD OBSERVED THAT THE ASSESSEE RECEIVED P AYMENTS FROM ITS CLIENTS AFTER TDS AND HENCE PAYMENT TO TRISHUL DO ES NOT ATTRACT TDS WAS NOT CORRECT AND WITHOUT ANY EVIDENCE AND BASIS. HO WEVER THE ASSESSEE HAD ASSERTED THAT ITS CLIENTS HAVE ALREADY EFFECTED TDS WHILE MAKING THE PAYMENTS AND THE SAME REFLECTED IN ITS ACCOUNTS HAS BEEN CONVENIENTLY OVERLOOKED BY THE CIT(A) BUT AT THE SAME BREATH HE CONCEDED THAT THE FUNDAMENTAL RULE OF LAW THAT TAX CANNOT BE RECOVER ED TWICE OF THE SAME INCOME IS ACCEPTABLE.[SOURCE: PARA 8.1 OF THE IMPUGNED ORDE R]. ON THE ONE HAND THE CIT(A) DISAGREES WITH THE ASSESSEES CLAIM BUT ON THE OTHER HAND HE VOUCHES THAT TAXES CANNOT BE IMPOSED TWICE ON THE S AME INCOME WHICH IN ITA NO.7905/BANG/09 PAGE 14 OF 31 OUR VIEW IS LACKING CONVICTION. THIS OBSERVATION OF THE CIT(A) DRIVES US TO SAFELY CONCLUDE THAT THE COMPLEXITY OF THE ISSUE HA S NEITHER BEEN PROPERLY UNDERSTOOD NOR DEALT WITH IN THE PERSPECTIVE MANNER IT WAS DESERVED TO. 8.1.5. LET US NOW ANALYZE THE LEGAL PRONOUNCEMENT S OF THE VARIOUS HONBLE COURTS: (I) S.R. FINANCE LIMITED V. C.B.D.T. REPORTED IN 211 IT R 861 (DEL) : THE HONBLE COURT HAD AFTER DELIBERATING THE ISSUE WHETHER THE CIRCULAR EXPLAIN PROVISIONS FOR DEDUCTION OF TDS FROM THE PA YMENTS TO CONTRACTORS AND SUB-CONTRACTORS IN ITS WISDOM PROCLAIMED THAT THE BOARD HAS NO POWER TO ENLARGE THE SCOPE OF STATUTORY PROVISIONS. ITS POWERS ARE CONFINED TO ISSUE ADMINISTRATIVE INSTRUCTIONS. THE IMPUGNED CI RCULARS TRAVEL BEYOND THE PROVISIONS OF S.194C AND HAVE NO LEGAL FORCE AND AR E LIABLE TO BE QUASHED. THE AUTHORITIES FUNCTIONED UNDER THE INCOME-TAX ACT ARE NOT BOUND BY THEM. (II) CALCUTTA GOODS TRANSPORT ASSOCIATION & ANOTHER V. U OI (ORS) - 219 ITR 486 (CAL): THE HONBLE COURT HAD OBSERVED THAT THE WORD 'WORK' DOES NOT HAVE THE WIDEST POSSIBLE CONNOTATION IS ALSO CLEAR FROM THE FACT THAT PARLIAMENT HAD SOUGHT TO BRING PROFESSIONAL SERVICES AND OTHER SUC H 'WORKS' IN THE WIDER SENSE WITHIN THE NET OF TAX DEDUCTION AT SOURCE. IF SUCH 'WORK' WERE ALREADY COVERED BY SECTION 194C IT WAS WHOLLY UNNECESSARY TO INTRODUCE SEPARATE STATUTORY PROVISIONS IN THIS REGARD. THE ONLY CONCL USION THAT FOLLOWS FROM THIS IS THAT THE WORD 'WORK' IS TO BE UNDERSTOOD IN THE LIMITED SENSE AS PRODUCT OR RESULT. THE CARRYING OUT OF WORK INDICAT ES DOING SOMETHING TO CONDUCT THE WORK TO COMPLETION OR AN OPERATION WHIC H PRODUCES SUCH RESULT. THE PETITIONERS HAVE CORRECTLY SUBMITTED THAT THE W ORD 'WORK' AS USED IN SECTION 194C HAS BEEN USED IN THIS SENSE. THAT IS A LSO WHY THE SPECIFIC EXTENSION TO SUPPLY OF LABOUR WAS NECESSARY. THAT B EING SO THE MERE TRANSPORTATION OF GOODS BY A COMMON CARRIER DOES NO T AFFECT OR RESULT IN THE ITA NO.7905/BANG/09 PAGE 15 OF 31 GOODS CARRIED OR ARE THE GOODS AFFECTED THEREBY AND AS SUCH CANNOT BE BROUGHT WITHIN THE SCOPE OF SECTION 194C... (III) SETHI TRANSPORT & OTHERS V. C.B.D.T. - 226 ITR 274 (ORI): THE HONBLE COURT WHILE DELIBERATING THE CASE HAS OBSERVED THAT - IN ASSOCIATED CEMENT CO. LTD. V. CIT [1993] 201 ITR 435 THE SUPREME COURT RULED THAT NO AMBIGUITY IS FOUND IN THE LANGU AGE EMPLOYED IN THE SUB- SECTION. WHAT IS CONTAINED IN THE SUB-SECTION AS A PPEARS FROM ITS PLAIN READING AND ANALYSIS ADMITS OF THE FOLLOWING FORMU LATIONS: (1) A CONTRACT MAY BE ENTERED INTO BETWEEN THE CONT RACTOR AND ANY OF THE ORGANIZATIONS SPECIFIED IN THE SUB-SECTION. (2) CONTRACT IN FORMULATION-1 COULD NOT ONLY BE FOR CARRYING OUT ANY WORK BUT ALSO FOR SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK. (3) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO CO NTRACTOR IN PURSUANCE OF THE CONTRACT IN FORMULATIONS-1 AND 2 COULD CREDIT T HAT SUM TO HIS ACCOUNT OR MAKE ITS PAYMENT TO HIM IN ANY OTHER MANNER. (4) BUT WHEN THE PERSON REFERRED TO IN FORMULATION -3 EITHER CREDITS THE SUM REFERRED TO THEREIN TO THE ACCOUNT OF OR PAYS IT TO THE CONTRACTOR HE SHALL DEDUCT OUT OF THAT SUM AN AMOUNT EQUAL TO TWO PER C ENT. AS INCOME-TAX ON INCOME COMPRISED THEREIN. THE COURT HELD THAT THERE IS NOTHING IN THE SUB-SEC TION FROM WHICH THE BOARD HELD THAT THE CONTRACT TO CARRY OUT A WORK OR THE C ONTRACT TO SUPPLY LABOUR TO CARRY OUT A WORK SHOULD BE CONFINED TO WORKS CONTRACT AS WAS ARGUED ON BEHALF OF THE APPELLANT. THE COURT SAW NO REASON TO CURTAIL OR TO CUT DOWN THE MEANING OF THE PLAIN WORDS USED IN THE SECTION. ANY WORK MEANS ANY WORK AND NOT A WORKS CONTRACT ' WHICH HAS A SPECI AL CONNOTATION IN THE TAX LAW. THE COURT FURTHER OBSERVED THAT IN THE SUB-SEC TION THE TERM ' WORK ' EXPRESSLY INCLUDES SUPPLY OF LABOUR TO CARRY OUT A WORK WHICH IS A CLEAR INDICATION OF THE LEGISLATURE THAT ' WORK ' IN THE SUB-SECTION IS NOT INTENDED TO BE CONFINED TO OR RESTRICTED TO ' WORKS CONTRACT '. THE COURT LAID DOWN THE PRINCIPLE IN THE FOLLOWING WORDS: ' ' WORK ' ENVISAGED IN THE SUB-SECTION THEREFORE HAS A WIDE IMPORT AND COVERS ' ANY WORK ' WHICH ONE OR THE OTHER OF THE O RGANIZATIONS SPECIFIED IN THE SUB-SECTION CAN GET CARRIED OUT THROUGH A CONTR ACTOR UNDER A CONTRACT AND FURTHER IT INCLUDES OBTAINING BY ANY OF SUCH OR GANIZATIONS SUPPLY OF LABOUR UNDER A CONTRACT WITH A CONTRACTOR FOR CARRY ING OUT ITS WORK WHICH ITA NO.7905/BANG/09 PAGE 16 OF 31 WOULD HAVE FALLEN OUTSIDE THE ' WORK ' BUT FOR ITS SPECIFIC INCLUSION IN THE SUB-SECTION. IN THE SAID DECISION THE SUPREME COURT ALSO DECIDE D THE CONTROVERSY RELATING TO THE EXACT AMOUNT TO BE DEDUCTED FROM TH E DUES OF THE CONTRACTOR. THAT QUESTION HOWEVER IS NOT RELEVANT FOR THE PUR POSE OF THE PRESENT CASE. THE BOMBAY HIGH COURT IN THE CASE OF BOMBAY GOODS T RANSPORT ASSOCIATION V. CBDT [1994] 210 ITR 136 SPECIFICALLY CONSIDERED THE QUESTION OF VALIDITY OF THE CIRCULAR OF THE BOARD B EARING NO. 681 DATED MARCH 8 1994 REQUIRING DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C IN THE CASE OF CONTRACTS FOR CARRIAGE OF GOODS. THE CO URT HELD THAT SUCH CIRCULAR IS ILLEGAL AND WITHOUT JURISDICTION IN SO FAR AS IT REQUIRES DEDUCTION OF TAX AT SOURCE UNDER THE SECTION IN THE CASE OF CONTRACTS F OR MERE CARRIAGE OF GOODS WHICH DO NOT INCLUDE ANY OTHER SERVICES LIKE LOADIN G AND UNLOADING AND ARE NOT CONNECTED WITH ANY WORK TO BE PERFORMED BY THE CARRIER. REFERRING TO THE DECISION OF THE SUPREME COURT IN ASSOCIATED CEMENT CO. LTD. V. CIT [1993] 201 ITR 435 IT WAS OBSERVED: .... THE CONTROVERSY BEFORE THE SUPREME COURT WAS LIMITED TO THE APPLICABILITY OF SECTION 194C TO LABOUR CONTRACTS. THE VARIOUS CIRCULARS OF THE CENTRAL BOARD OF DIRECT TAXES WERE NOT BEFORE T HE SUPREME COURT. THE SUPREME COURT INTERPRETED SECTION 194C DE HORS THOS E CIRCULARS. IT DID NOT APPROVE THE NARROW CONSTRUCTION OF THE EXPRESSION ' ANY WORK ' TO INCLUDE ONLY ' WORKS CONTRACTS '. THE BENCH TOOK THE VIEW THAT THE EXPRESSION ANY WO RK USED IN SECTION 194C DOES NOT INCLUDE TRANSPORT CONTRACTS. IN THE CASE OF ADVERTISING AGENCY ASSOCIATION OF INDIA V. CBDT [19 94] 210 ITR 152 THE BOMBAY HIGH COURT ALSO CONSIDERED THE EFFECT OF THE DECISION OF THE SUPREME COURT IN ASSOCIATED CEMENT CO.'S CAS E [1993] 201 ITR 435 AND HELD THAT THE SUPREME COURT HAS IN NO WAY EXTEN DED OR AMPLIFIED THE SCOPE OF SECTION 194C OF THE INCOME-TAX ACT 1961. IT MERELY HELD THAT THE SAID SECTION IS NOT CONFINED TO WORKS CONTRACTS BUT ALSO APPLIES TO LABOUR CONTRACTS. THE SUPREME COURT IN THAT CASE WAS REQUI RED TO CONSIDER THE QUESTION OF APPLICABILITY OF SECTION 194C TO LABOUR CONTRACTS BECAUSE THE CONTENTION OF THE ASSESSEE WAS THAT THE SAID SECTIO N WAS APPLICABLE ONLY TO WORKS CONTRACTS. IT WAS THIS CONTENTION THAT WAS RE PELLED BY THE SUPREME COURT. THE COURT HELD THAT CIRCULAR NO. 681 IS ILLE GAL AND WITHOUT JURISDICTION IN SO FAR AS IT REQUIRES DEDUCTION OF TAX AT SOURCE FROM PAYMENTS TO ADVERTISING AGENCIES FOR PROFESSIONAL SERVICES R ENDERED BY THEM. THE MADHYA PRADESH HIGH COURT IN THE CASE OF M. P. STATE BAR COUNCIL V. UNION OF INDIA (WRIT PETITION NO. 2259 OF 1994 DISPOSED OF ON AU GUST 24 1995) REFERRING TO THE DECISIONS OF THE SUPREME CO URT IN THE CASE OF ASSOCIATED CEMENT CO. [1993] 201 ITR 435 THE BOMBAY HIGH COURT IN ITA NO.7905/BANG/09 PAGE 17 OF 31 CHAMBER OF INCOME-TAX CONSULTANTS V. CBDT [1994] 20 9 ITR 660 ; THE DELHI HIGH COURT IN S. R. F. FINANCE LTD. V. CBDT [ 1995] 211 ITR 861 AND THE GUJARAT HIGH COURT IN ALL GUJARAT FEDERATION OF TAX CONSULTANTS V. CBDT [1994] 76 TAXMAN 307 HELD THAT SECTION 194C D OES NOT COVER THE PROFESSIONALS. WE HAVE CAREFULLY PERUSED THE JUDGMENTS IN THE AFOR EMENTIONED DECIDED CASES. WE ARE IN RESPECTFUL AGREEMENT WITH THE DECI SION OF THE BOMBAY HIGH COURT THAT IN ASSOCIATED CEMENT CO.'S CASE [1993] 2 01 ITR 435 THE SUPREME COURT ONLY CONSIDERED THE POINT WHETHER THE EXPRESSION ' ANY WORK ' USED IN SECTION 194C IS CONFINED TO ' WORKS CONTR ACTS ' OR NOT. THE COURT DID NOT SPECIFICALLY CONSIDER THE QUESTION WHETHER ANY OTHER TYPE OF CONTRACT LIKES CARRIAGE CONTRACT ADVERTISEMENT CONTRACT ET C. COMES WITHIN THE PURVIEW OF SECTION 194C. WE ARE ALSO IN AGREEMENT W ITH THE VIEW TAKEN BY THE BOMBAY HIGH COURT THAT SECTION 194C DOES NOT EX TEND TO CONTRACTS FOR MERE CARRIAGE OF GOODS. THEREFORE THE CIRCULAR OF THE BOARD EXTENDING SECTION 194C TO CONTRACTS FOR MERE CARRIAGE OF GOOD S IS BASED ON A MISREADING AND MISCONSTRUCTION OF THE JUDGMENT OF T HE SUPREME COURT. FURTHER WHILE PURPORTING TO CLARIFY THE LEGAL POSI TION AS LAY DOWN BY THE SUPREME COURT THE BOARD HAS INTRODUCED A DEFINITIO N OF THE TERM TRANSPORT CONTRACTS WHICH WAS NOT CONSIDERED BY THE SUPREME COURT. THE BOARD HAS ALSO NOT GIVEN ANY OTHER REASON FOR REVERSING ITS P REVIOUS CIRCULARS. WE MAY ADD HERE THAT WHETHER A PARTICULAR CASE WOULD COME WITHIN THE PURVIEW OF SECTION 194C OF THE INCOME-TAX ACT OR NOT DEPENDS U PON THE FACTS AND CIRCUMSTANCES OF THE CASE THE STIPULATIONS IN THE AGREEMENT BETWEEN THE PARTIES AND OTHER RELEVANT FACTORS. THE BOARD'S CI RCULAR TO THE EFFECT THAT TRANSPORT CONTRACTS IN GENERAL COME WITHIN THE PURV IEW OF SECTION 194C IS ERRONEOUS AND ILLEGAL. (IV) V.M.SALGAOCAR & BROS LTD. V. ITO - 237 ITR 630 (KAR ): THE JURISDICTIONAL HONBLE HIGH COURT WHILE DECIDI NG THE ABOVE CASE HAS ANALYZED THE ISSUE IN A COMPREHENSIVE MANNER AND RU LED THAT ANOTHER CIRCULAR DATED MARCH 8 1994 IN DISPUTE IS ON THE BASIS OF THE JUDGMENT GIVEN IN THE CASE OF ASSOCIATED CEMENT CO. LTD. [1993] 201 ITR 435 (SC) WAS ISSUED BY THE CBDT WHERE IT WAS POINT ED OUT THAT 'ANY WORK' IS NOT RESTRICTED TO 'WORKS CONTRACT' AND IS WIDE E NOUGH TO COVER ANY WORK WHICH IS CARRIED OUT THROUGH A CONTRACTOR IN A CONT RACT. THE CIRCULAR DATED MARCH 8 1994 PROVIDED THAT THE TERM 'TRANSPORT CO NTRACTS' WOULD IN ADDITION TO CONTRACTS FOR TRANSPORTATION AND LOADIN G/UNLOADING OF GOODS ALSO COVER CONTRACTS FOR PLYING OF BUSES FERRIES ETC. ALONG WITH STAFF (E. G. DRIVER CONDUCTOR CLEANER ETC.) CIRCULAR NO. 86 DATED MAY 29 1972 WAS WITHDRAWN BESIDE THE CIRCULARS NOS. 93 AND 108 WHIC H WERE ISSUED ON SEPTEMBER 26 1972 AND MARCH 20 1973. IN THE CIRC ULAR DATED MARCH 8 1994 IT WAS CLARIFIED THAT THE PROVISIONS OF SECTI ON 194C WILL APPLY FROM ITA NO.7905/BANG/09 PAGE 18 OF 31 APRIL 1 1994. THUS THE DISPUTE NOW REMAINS ONLY FO R THE PERIOD FROM APRIL 1 1994 TO JUNE 30 1995. THE BOMBAY HIGH COURT IN THE CASE OF BOMBAY GOODS T RANSPORT ASSOCIATION V. CBDT [1994] 210 ITR 136 HAS HELD THA T IN THE JUDGMENT OF ASSOCIATED CEMENT CO. LTD.'S CASE [1993] 201 ITR 43 5 (SC) THE PROVISIONS OF SECTION 194C WERE NOT INTERPRETED IN THE MANNER AS INTERPRETED BY THE CENTRAL BOARD OF DIRECT TAXES SO AS TO APPLY THE SA ID JUDGMENT TO ALL TYPES OF CONTRACT INCLUDING TRANSPORT CONTRACTS SERVICE CONTRACTS ETC. IT WAS ALSO POINTED OUT THAT VARIOUS CIRCULARS ISSUED BY THE CE NTRAL BOARD OF DIRECT TAXES WERE NOT BEFORE THE SUPREME COURT AND THE WOR DS 'ANY WORK' COULD NOT BE RESTRICTED TO INCLUDE WORKS CONTRACT ONLY AN D THE OBSERVATIONS MADE WERE THAT THE WORD 'WORKS CONTRACT' AND LABOUR CONT RACTS WOULD BE INCLUDED IN 'ANY WORK'. IT WAS FURTHER MADE CLEAR THAT LABOU R CONTRACT WOULD HAVE FALLEN OUTSIDE THE 'WORK' ENVISAGED BY SECTION 194C BUT FOR ITS SPECIFIC INCLUSION IN SUB-SECTION (1). THE BOMBAY HIGH COURT HELD THAT THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE TO CO NTRACTS FOR MERE CARRIAGE OF GOODS WHICH DO NOT INCLUDE ANY OTHER SERVICES LI KE LOADING OR UNLOADING. THE CIRCULAR WAS ACCORDINGLY QUASHED. THE ORISSA HIGH COURT IN THE CASE OF SETHI TRANSPOR T V. CBDT [1997] 226 ITR 274 HAD ALSO THE OCCASION TO CONSIDER THE CIRC ULAR DATED MARCH 8 1994 AND AGREEING WITH THE DECISION GIVEN BY THE B OMBAY HIGH COURT OBSERVED THAT SECTION 194C DOES NOT EXTEND TO THE C ONTRACT FOR MERE CARRIAGE OF GOODS TO THAT EXTENT THE CIRCULAR ISSUED WAS H ELD ILLEGAL. THE CALCUTTA HIGH COURT IN THE CASE OF CALCUTTA GOO DS TRANSPORT ASSOCIATION V. UNION OF INDIA [1996] 219 ITR 486 HA S TAKEN INTO CONSIDERATION THE DEFINITION OF THE WORD 'WORK' AS DEFINED IN NEW SHORTER OXFORD ENGLISH DICTIONARY AND STROUD'S JUDICIAL DI CTIONARY AND CAME TO THE CONCLUSION THAT THE WORD 'WORK' IS TO BE UNDERS TOOD IN THE LIMITED SENSE AS PRODUCT OR RESULT. THE CARRYING OUT OF WORK INDI CATES DOING SOMETHING TO CONDUCT THE WORK TO COMPLETION OR AN OPERATION WHIC H PRODUCES THE RESULT. THAT BEING SO THE MERE TRANSPORTATION OF GOODS BY A COMMON CARRIER DOES NOT AFFECT OR RESULT IN THE GOODS BEING CARRIED NOR ARE THE GOODS AFFECTED THEREBY AND AS SUCH CANNOT BE BROUGHT WITHIN THE SC OPE OF SECTION 194C OF THE ACT. IT WAS DECLARED THAT COMMON CARRIERS OF GO ODS BY ROAD ARE NOT LIABLE TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT. THE DELHI HIGH COURT IN THE CASE OF DELHI GOODS TRA NSPORT ASSOCIATION V. CBDT [1995] 80 TAXMAN 525 HAS HELD THAT ON THE BASI S OF THE CIRCULAR DATED MARCH 8 1994 TAX ON CARRIAGE OF GOODS CANNOT BE LEVIED. I HAVE CONSIDERED OVER THE MATTER. ITA NO.7905/BANG/09 PAGE 19 OF 31 THE JUDGMENT GIVEN BY THE APEX COURT IN THE CASE OF ASSOCIATED CEMENT CO. LTD. [1993] 201 ITR 435 WAS IN RESPECT OF LOADI NG OF CEMENT BAGS INTO WAGONS/TRUCKS. IT WAS IN THIS CONTEXT THAT THE WORD 'ANY WORK' WAS HELD NOT RESTRICTED TO PAYMENT IN RELATION TO WORKS CONTRACT . EVEN THE CIRCULAR DATED MAY 29 1972 INTERPRETED THE PROVISIONS OF THE SEC TION 194C AND CLARIFIED THAT THE TAX IS NOT TO BE DEDUCTED UNDER SECTION 19 4C BY TRANSPORT CONTRACTORS. IT WAS ONLY BECAUSE OF THE JUDGMENT GI VEN IN THE CASE OF ASSOCIATED CEMENT CO. LTD. [1993] 201 ITR 435 (SC) ANOTHER CIRCULAR DATED MARCH 8 1994 WAS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES AND SECTION 194C WAS HELD APPLICABLE ONLY FROM APRIL 1 1994 AND FOR SUCH A LONG TIME I.E. MORE THAN TWENTY YEARS THE INTERP RETATION WHICH WAS TAKEN BY THE DEPARTMENT AND ACTED UPON WAS THAT THE TRANS PORT CONTRACTORS ARE NOT LIABLE FOR DEDUCTION OF TAX UNDER SECTION 194C. IN THE JUDGMENT OF ASSOCIATED CEMENT CO. LTD.'S CASE [1993] 201 ITR 43 5 (SC) THE CONTROVERSY WAS NOT OF THE TRANSPORT CONTRACTORS BU T WAS RELATED TO LOADING AND UNLOADING OF GOODS. IN ASSOCIATED CEMENT CO. LT D.'S CASE [1993] 201 ITR 435 (SC) IT WAS OBSERVED: '... THERE IS NOTHING IN THE SUB-SECTION WHICH COUL D MAKE US TO HOLD THAT THE CONTRACT TO CARRY OUT A WORK OR THE CONTRACT TO SUP PLY 'LABOUR TO CARRY OUT A WORK SHOULD BE CONFINED TO 'WORKS CONTRACT' AS WAS ARGUED ON BEHALF OF THE APPELLANT. WE SEE NO REASON TO CURTAIL OR TO CUT DO WN THE MEANING OF THE PLAIN WORDS USED IN THE SECTION. 'ANY WORK' MEANS A NY WORK AND NOT A 'WORKS CONTRACT' WHICH HAS A SPECIAL CONNOTATION IN THE T AX LAW. INDEED IN THE SUB- SECTION THE 'WORK' REFERRED TO THEREIN EXPRESSLY I NCLUDES SUPPLY OF LABOUR TO CARRY OUT A WORK. IT IS A CLEAR INDICATION OF THE L EGISLATURE THAT THE 'WORK' IN THE SUB-SECTION IS NOT INTENDED TO BE CONFINED TO O R RESTRICTED TO 'WORKS CONTRACT'. 'WORK' ENVISAGED IN THE SUB-SECTION THE REFORE HAS A WIDE IMPORT AND COVERS 'ANY WORK' WHICH ONE OR THE OTHER OF THE ORGANIZATIONS SPECIFIED IN THE SUB-SECTION CAN GET CARRIED OUT THROUGH A CO NTRACTOR UNDER A CONTRACT AND FURTHER IT INCLUDES OBTAINING BY ANY OF SUCH OR GANIZATIONS SUPPLY OF LABOUR UNDER A CONTRACT WITH A CONTRACTOR FOR CARRY ING OUT ITS WORK WHICH ITA NO.7905/BANG/09 PAGE 20 OF 31 WOULD HAVE FALLEN OUTSIDE THE 'WORK' BUT FOR ITS SP ECIFIC INCLUSION IN THE SUB- SECTION.' ACCORDING TO THE INTERPRETATION OF THE DEPARTMENT W HICH WAS PREVALENT TILL APRIL 1 1994 THE TRANSPORT CONTRACTORS WERE NOT C ONSIDERED TO BE FALLING WITHIN THE AMBIT OF SECTION 194C. MERE TRANSPORTATI ON OF GOODS BY A COMMON CARRIER DOES NOT AFFECT OR RESULT IN THE GOO DS NEITHER CARRIED NOR ARE THE GOODS AFFECTED. THE LEGISLATIVE INTENT COUL D ALSO BE SEEN FROM THE SUBSEQUENT AMENDMENTS. EXPLANATION III WAS INSERTED BY THE FINANCE ACT 19 95 BY WHICH ADVERTISING AND TRAVELLING AGENCIES ETC. WERE INCLUDED THEREU NDER. WHETHER THE EXPLANATION COULD BE CONSIDERED TO BE EXPLANATORY S O AS TO APPLY FOR THE TRANSACTION BETWEEN APRIL 1 1994 TO JUNE 30 1995 ? AN INTERPRETATION WHICH HAD CONTINUED AND ACTED UPON FOR MORE THAN A DECADE IS NOT TO BE EASILY DEVIATED. CIRCULAR NO. 108 DATED MARCH 20 1 973 HAS DEALT WITH THE SERVICE CONTRACTS NOT INVOLVING CARRYING OUT OF ANY WORK AND HAS SPECIFICALLY SAID THAT THE TRANSPORT CONTRACT WOULD NOT BE INCLU DED IN THE PURVIEW OF SECTION 194C AS TRANSPORT CONTRACT CANNOT BE REGARD ED AS CONTRACT FOR CARRYING OUT ANY 'WORK'. HOWEVER THE PUNJAB AND HARYANA HIGH COURT IN THE C ASE OF EKONKAR DASHMESH TRANSPORT CO. V. CBDT [1996] 219 ITR 511 H AS DISSENTED WITH THE JUDGMENT GIVEN BY THE BOMBAY HIGH COURT AND THE CALCUTTA HIGH COURT REFERRED TO ABOVE AND TAKING INTO CONSIDERATION THE JUDGMENT IN THE CASE OF ASSOCIATED CEMENT CO. LTD. [1993] 201 ITR 435 (SC) HELD THAT THE END- PRODUCT MAY BE THE WORK BUT THE INCOME DERIVED BY T HE CONTRACTOR FOR 'CARRYING OUT THE WORK' IS CERTAINLY COVERED BY THE PROVISIONS OF SECTION ITA NO.7905/BANG/09 PAGE 21 OF 31 194C. IN THE CASE OF ASSOCIATED CEMENT CO. LTD. [19 93] 201 ITR 435 (SC) THE CONTRACT WAS FOR LOADING/UNLOADING OF GOODS AND NOTHING WAS DONE TO THE GOODS. IT WAS A PURE AND SIMPLE HIRE OF LABOUR FOR LOADING AND UNLOADING OF GOODS WHICH WAS THE SUBJECT-MATTER OF THE DECISI ON IN ASSOCIATED CEMENT CO. LTD.'S CASE [1993] 201 ITR 435 (SC). THE DEFINITION OF THE WORD 'WORK' IN VARIOUS DICTIO NARIES IS AS UNDER : 'IN WEBSTER'S NEW DICTIONARY 'WORK' HAS BEEN DEFIN ED AS 'WORK' WORK N. (O>E> WEORE =D. AND G. WORK = ICE]. VERK WORK; AKI N TO GOTH. WAURKIAN TO WORK ALSO TO GR. ERGON WORK ORGANON. INSTRUM ENT E. ORGAN] EXERTION DIRECTED TO PRODUCE OR ACCOMPLISH SOMETHING ; LABOR TOIL ; PRODUCTIVE OR OPERATIVE ACTIVITY; AS TO MAKE A MACHINE DO WORK A CTIVITY UNDERTAKEN IN RETURN FOR PAYMENT AS IN WAGES ; THAT ON WHICH EXE RTION OR LABOR IS EXPENDED A PRODUCT OF ACTIVITY OR LABOR ; AS A LIT ERARY WORK ; NEEDLEWORK OR EMBROIDERY ; AN ENGINEERING STRUCTURE AS A BRIDGE OR DOCK; WORKMANSHIP : AS TO DO GOOD WORK; A TASK OR UNDERTAKING ; AS ON E'S LIFE'S WORK ; A DEED OR ACT. IN ENCYCLOPEDIA BRITANNICA THE WORD 'WORK' HAS BEEN DEFINED AS WORK IN PHYSICS MEASURE OF ENERGY TRANSFER THAT OCCURS WHE N AN OBJECT IS MOVED OVER A DISTANCE BY AN EXTERNAL FORCE AT LEAST PART OF WHICH APPLIED IN THE DIRECTION OF THE DISPLACEMENT. IF THE FORCE IS CONS TANT WORK MAY BE COMPUTED BY MULTIPLYING THE LENGTH OF THE PATH BY THE COMPON ENT OF THE FORCE ACTING ALONG THE PATH. WORK DONE ON A BODY IS ACCOMPLISHED NOT ONLY BY A DISPLACEMENT OF THE BODY AS A WHOLE FROM ONE PLACE TO ANOTHER BUT ALSO FOR EXAMPLE BY COMPRESSING A GAS BY ROTATING A SHAFT AND EVEN BY CAUSING INVISIBLE MOTIONS OF THE PARTICLES WITHIN A BODY BY AN EXTERNAL MAGNETIC FORCE. IN OXFORD ENGLISH DICTIONARY THE WORD 'WORK' HAS BE EN DEFINED AS SOMETHING TO BE DONE OR SOMETHING TO DO ; WHAT A PERSON (OR THING) HAS OR HAD TO DO ; OCCUPATION EMPLOYMENT BUSINESS TASK FUNCTION.' FROM A PERUSAL OF THE ABOVE DEFINITION IT IS EVIDEN T THAT THE WORD 'WORK' HAS RELATION WITH THE WORD 'LABOUR' WHICH HAS TO BE PUT BY A PERSON FOR OCCUPATION EMPLOYMENT BUSINESS TASK OR FUNCTION . ITA NO.7905/BANG/09 PAGE 22 OF 31 THE WORD 'WORK' REFERS AND COMPREHENDS THE ACTIVITI ES OF THE WORKMEN AND NOT THE OPERATION IN THE FACTORY OR ON MACHINES. IT IS THE PHYSICAL FORCE WHICH HAS BEEN COMPREHENDED IN THE WORD 'WORK'. SEC TION 194C(1) REFERS TO CARRYING OUT OF ANY WORK. IF THE SUB-SECTION (1) IS READ AS A WHOLE THEN IT COULD BE INTERPRETED THAT IT IS THE WORK OF LABOUR WHICH IS DONE BY THE CONTRACTOR OR HE MAY SUPPLY THE LABOUR TO DO THE WO RK AS A SUB-CONTRACTOR. SUB-SECTION (2) OF SECTION 194C ALSO REFERS TO THE CONTRACT FOR CARRYING OUT THE WORK UNDERTAKEN BY THE CONTRACTOR OR FOR SUPPLY ING WHOLLY OR PARTLY ANY LABOUR WHICH THE CONTRACTOR HAS UNDERTAKEN TO SUPPL Y. 8.1.6. WE HAVE A GLIMPSE OF BOARDS CIRCULAR NO.71 5 DATED: 8.8.1995 AND THE RELEVANT PORTIONS OF WHICH FOR RE ADY REFERENCE ARE EXTRACTED HEREUNDER: THE FINANCE ACT 1995 HAS ENLARGED THE SCOPE OF I NCOME-TAX DEDUCTION AT SOURCE BY MAKING VARIOUS AMENDMENTS. IN REGARD TO T HE CHANGES INTRODUCED THROUGH THE FINANCE ACT 1995 A NUMBER OF QUERIES HAVE BEEN RECEIVED FROM THE VARIOUS ASSOCIATIONS AND PROFESSIONAL BODIES ON THE SCOPE OF TAX DEDUCTION AT SOURCE. IT WOULD BE DESIRABLE TO CLARI FY THE DOUBTS BY ISSUING A PUBLIC CIRCULAR IN THE FORM OF QUESTION ANSWER AS U NDER:-- Q 1 : WHAT WOULD BE THE SCOPE OF AN ADVERTISING CON TRACT FOR THE PURPOSE OF SECTION 194C OF THE ACT ? A : THE TERM ' ADVERTISING ' HAS NOT BEEN DEFINED IN THE ACT. DURING THE COURSE OF THE CONSIDERATION OF THE FINANCE BILL 19 95 THE FINANCE MINISTER CLARIFIED ON THE FLOOR OF THE HOUSE THAT THE AMENDE D PROVISIONS OF TAX DEDUCTION AT SOURCE WOULD APPLY WHEN A CLIENT MAKES PAYMENT TO AN ADVERTISING AGENCY AND NOT WHEN AN ADVERTISING AGENCY MAKES PAYMENT TO THE MEDIA WHICH INCLUDES BOTH PRINT AND ELECTRONIC MEDIA. T HE DEDUCTION IS REQUIRED TO BE MADE AT THE RATE OF 1 PER CENT. Q 2 : WHETHER THE ADVERTISING AGENCY WOULD DEDUCT T AX AT SOURCE OUT OF PAYMENTS MADE TO THE MEDIA ? A : NO . THE POSITION HAS BEEN CLARIFIED IN THE ANSWER TO QUESTION NO. 1 ABOVE. ITA NO.7905/BANG/09 PAGE 23 OF 31 Q 4: WHETHER TAX IS REQUIRED TO BE DEDUCTED AT SOUR CE ON PAYMENTS MADE DIRECTLY TO THE PRINT MEDIA FOR RELEASE OF ADVERTIS EMENTS? A : THE PAYMENTS MADE DIRECTLY TO PRINT AND ELECT RONIC MEDIA WOULD BE COVERED UNDER SECTION 194C AS THESE ARE IN THE NATU RE OF PAYMENTS FOR PURPOSES OF ADVERTISING. DEDUCTION WILL HAVE TO BE MADE AT THE RATE OF 1 PER CENT. Q 6: WHETHER PAYMENT UNDER A CONTRACT FOR CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT WOULD INCLUDE PAYMENT MADE TO A TRAVEL AGENT FOR PURCHASE OF A TICKET OR PAYMENT MADE TO A CLEARING AND FORWARDING AGENT FOR CARRIAGE OF GOODS? A : THE PAYMENTS MADE TO A TRAVEL AGENT OR AN AIRL INE FOR PURCHASE OF A TICKET FOR TRAVEL WOULD NOT BE SUBJECTED TO TAX DED UCTION AT SOURCE AS THE PRIVITY OF THE CONTRACT IS BETWEEN THE INDIVIDUAL P ASSENGER AND THE AIRLINE/TRAVEL AGENT NOTWITHSTANDING THE FACT THAT THE PAYMENT IS MADE BY AN ENTITY MENTIONED IN SECTION 194C(1). THE PROVISIONS OF SECTION 194C SHALL HOWEVER APPLY WHEN A PLANE OR A BUS OR ANY OTHER M ODE OF TRANSPORT IS CHARTERED BY ONE OF THE ENTITIES MENTIONED IN SECTI ON 194C OF THE ACT. AS REGARDS PAYMENTS MADE TO CLEARING AND FORWARDING AG ENTS FOR CARRIAGE OF GOODS THE SAME SHALL BE SUBJECTED TO TAX DEDUCTION AT SOURCE UNDER SECTION 194C OF THE ACT. Q 16: WHETHER TAX IS REQUIRED TO BE DEDUCTED AT SOU RCE UNDER SECTION 194C OR 194J ON PAYMENT OF COMMISSION TO EXTERNAL PARTIE S FOR PROCURING ORDERS FOR THE COMPANY'S PRODUCT ? A : RENDERING OF SERVICES FOR PROCUREMENT OF ORD ERS IS NOT COVERED UNDER THE PROVISIONS OF SECTION 194C. HOWEVER RENDERING OF SUCH SERVICES MAY INVOLVE PAYMENT OF FEES FOR PROFESSIONAL OR TECHNIC AL SERVICES IN WHICH CASE TAX MAY BE DEDUCTIBLE UNDER THE PROVISIONS OF SECTI ON 194J. Q 30: WHETHER THE DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C AND 194J HAS TO BE MADE OUT OF THE GROSS AMOUNT OF THE BILL INCLUDING REIMBURSEMENTS OR EXCLUDING REIMBURSEMENT FOR ACTUAL EXPENSES? A : SECTIONS 194C AND 194J REFER TO ANY SUM PAI D. OBVIOUSLY REIMBURSEMENTS CANNOT BE DEDUCTED OUT OF THE BILL A MOUNT FOR THE PURPOSE OF TAX DEDUCTION AT SOURCE. 8.1.7. EVEN ON A CLOSE READING OF THE CIRCULAR MAK ES IT VERY CLEAR THAT THE TERM ' ADVERTISING ' HAS NOT BEEN DEFINED IN THE ACT. DURING THE COURSE OF THE CONSIDERATION OF THE FINAN CE BILL 1995 THE ITA NO.7905/BANG/09 PAGE 24 OF 31 FINANCE MINISTER CLARIFIED ON THE FLOOR OF THE HOUS E THAT THE AMENDED PROVISIONS OF TAX DEDUCTION AT SOURCE WOULD APPLY W HEN A CLIENT MAKES PAYMENT TO AN ADVERTISING AGENCY AND NOT WHEN AN ADVERTISING AGENCY MAKES PAYMENT TO THE MEDIA WHICH INCLUDES BOTH PRINT AND ELECTRONIC MEDIA. THE PRESENT ASSE SSEE WAS NOT A CLIENT BUT AN ADVERTISING AGENCY . CONSIDERING TRISHUL AS A MEDIA FOR AN ARGUMENT-SAKE WHATEVER PAYMENTS MADE BY THE ASSESSEE TO TRISHUL NO TAX NEED TO BE DEDUCTED AT SOURCE ACCORDING TO THE SAID CIRCULAR SINCE NEITHER THE ASSESSEE (SANDS) WAS A CLIENT NOR TRISHUL A MEDIA. THE WORD WORK HAS NOT BEEN DEFINED IN THE ACT. THE BOARD IN ITS CIRCULARS HAD REPEATEDLY STRESSED THAT WHEN A CLIENT MAKES PAYMENT TO AN ADVERTISEMENT AGENCY THE CLIENT WAS OBLIGED TO EFFECT THE TDS. IN THE CASE ON HAND WHEN A CLIENT (THE ADVERTISER) MADE THE PAYMENT TO THE ADVERTISING AGENCY (THE ASSESSEE) IT HAD EFFECTED THE TDS WHEREAS THE ASSESSEE BEING AN ADVERTISING AGENCY REIMBURSED THE ADVERTISING CHARGES TO TRISHUL WHICH WERE NEITHER A CLIENT NOR A MEDIA AND THUS THE PROVISIONS OF S.194C HAVE NO ROLE TO PLAY. 8.1.8. WITH DUE RESPECTS WE HAVE CAREFULLY PERUSED THE RU LING OF THE HIGHEST JUDICIARY OF THE LAND IN THE CASE OF ASSOCIATED CEMENT COMPANY LIMITED V. CIT AND ANOTHER REPORTED IN (199 3) 201 ITR 435 ON WHICH RIVAL PARTIES HAVE PLACED THEIR FAITH. I N CONSONANCE WITH ITA NO.7905/BANG/09 PAGE 25 OF 31 THE FINDING OF THE HONBLE APEX COURT THE BOARD IN ITS CIRCULAR NO.681 DATED 8.3.1994 HAD INDICATED THAT 5. THE SUPREME COURT HAS HELD THAT .THERE IS NOT HING IN THE SUB- SECTION WHICH COULD MAKE US HOLD THAT THE CONTRACT TO CARRY OUT A WORK OR THE CONTRACT TO SUPPLY LABOUR TO CARRY OUT A WORK SHOULD BE CONFINED TO WORKS CONTRACT.... THEIR LORDSHIPS HAVE FURTHER HELD THAT ANY WORK MEANS ANY WORK AND NOT A WORK CONT RACT WHICH HAS A SPECIAL CONNOTATION IN THE TAX LAW.WORK EN VISAGED IN THE SUB-SECTION THEREFORE HAS A WIDE IMPORT AND COVER S ANY WORK WHICH ONE OR THE OTHER OF THE ORGANIZATIONS SPECIFI ED IN THE SUB- SECTION CAN GET CARRIED OUT THROUGH A CONTRACTOR UN DER A CONTRACT AND FURTHER IT INCLUDES OBTAINING BY ANY OF SUCH OR GANIZATIONS SUPPLY OF LABOUR UNDER A CONTRACT WITH A CONTRACTOR FOR CARRYING OUT ITS WORK WHICH WOULD HAVE FALLEN OUTSIDE THE WORK BUT FOR ITS SPECIFIC INCLUSION IN THE SUB-SECTION. 7THE FOLLOWING GUIDELINES IN REGARD TO THE AP PLICABILITY OF THE PROVISIONS OF SECTION 194C: (I) THE PROVISIONS OF SECTION 194C SHALL APPLY TO ALL T YPES OF CONTRACTS FOR CARRYING OUT ANY WORK INCLUDING TRANS PORT CONTRACTS SERVICE CONTRACT ADVERTISEMENT CONTRACTS BROADCASTING CONTRACTS TELECASTING CONTRACTS LABO UR CONTRACTS MATERIAL CONTRACTS AND WORKS CONTRACTS. .... (V) SERVICE CONTRACTS WOULD BE COVERED BY THE PROVISION S OF THIS SECTION SINCE SERVICE MEANS DOING ANY WORK AS EXPLAINED ABOVE. (VIII) THE PROVISIONS ARE WIDE ENOUGH TO COVER NOT ONLY WR ITTEN CONTRACTS BUT ALSO ORAL CONTRACTS. ITA NO.7905/BANG/09 PAGE 26 OF 31 8.1.9. EVEN THE BOARD VIDE ITS SUBS EQUENT CIRCULAR NO.715 DATED: 8.8.1995 HAD MADE IT AMPLY CLEAR THAT WHEN A N ADVERTISING AGENCY MAKES PAYMENT TO THE MEDIA THE AMENDED PROV ISIONS OF TAX DEDUCTION AT SOURCE WOULD NOT APPLY. IN THE PRESEN T CASE THE ASSESSEE BEING AN ADVERTISING AGENCY HAD NOT MADE THE PAYMENTS TO THE MEDIA DIRECTLY BUT THE ADVERTISEMENT MATERIALS WERE ROUTED THROUGH TRISHUL FOR THE PUBLICATION OF ITS ADVERTIS EMENTS IN THE NEWSPAPERS SINCE TRISHUL WAS AN ACCREDITED AGENCY T HROUGH WHICH THE ADVERTISEMENTS OF THE ASSESSEE WERE BEING RELEA SED TO THE MEDIA. THE ROLE OF TRISHUL WAS ONLY CONFINED TO CHA NNELIZING THE ADVERTISEMENT MATERIALS DEVISED AND DESIGNED BY THE ASSESSEE TO THE MEDIA. 8.1.10. TO COUNTER THE STAND OF THE LD. CIT (A) T HAT 8.3.I AM OF THE OPINION THAT CLARIFICATION OF THE FINANCE MINIS TER ON THE FLOOR OF THE HOUSE IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE PAYMENT MADE BY THE APPELLANT IS TO ITS CONCERN AND NOT TO MEDIA THE LD. COUNSEL CAME UP WITH A QUESTION WHETHER RELIANCE ON FINANCE MINISTERS SPEECH CAN B E PLACED DIFFERENTLY WHILE INTERPRETING A STATUTORY P ROVISION? AND ANSWERED THAT AT THE INTRODUCTION OF THE FINANCE BILL KNOWN AS PLACING THE BUDGET ON THE FLOOR OF THE PARLIAMENT THE HONBLE FINANCE MINISTERS BUDGET SPEECH AMONG OTHERS CONTAINS A BROADER OUTLI NE OF THE PROPOSED AMENDMENTS IN DIRECT TAX REGIME. IN OTHER WORDS THE FINANCE MINISTER OUTLINES THE UNDERLYING OBJECT OR INTENT OF THE PROPOSED AMENDMENT. THIS WAS THE REASON DUE TO WHI CH THE JUDICIARY IN INDIA HAD RECOGNIZED THE BUDGETARY SPE ECH OF THE FINANCE MINISTER AS AN EXTERNAL AID TO INTERPRETATION OF TA XING STATUTE. ITA NO.7905/BANG/09 PAGE 27 OF 31 8.1.11. THE JUDICIARY HAD OCCASIONS TO DELIBERATE THE ISSUE AT LENGTH NOTABLY: (I) THE HONBLE APEX COURT IN THE CASE OF LOK SH IKSHANA TRUST V. CIT REPORTED IN (1975) 101 ITR 234 HAD HELD THA T THE SPEECH MADE BY THE MINISTER OR THE MOVER OF A BILL CAN BE TAKEN INTO CONSIDERATION FOR ASCERTAINING THE OBJEC T OR PURPOSE UNDERLYING THE LEGISLATION; (II) YET ANOTHER RULING THE HIGHEST JUDICIARY OF THE LA ND HAD REITERATED THE ABOVE VIEW IN K.P.VERGESE V. ITO (19 81) 131 ITR 597 STRESSING THE FINANCE MINISTERS SPEECH AS COMPARED TO THE WORDING IN THE STATUTE. IT WAS HEL D THAT IF THE PLAIN AND LITERAL CONSTRUCTION OF A PROVISION L EADS TO MANIFESTLY UNREASONABLE AND ABSURD CONSEQUENCES THE N THE OBJECT FORTHCOMING FROM THE SPEECH OF THE FINANCE M INSTER HAS TO BE RESORTED TO AND APPLIED TO ASCERTAIN THE TRUE IM PORT OF THE PROVISION (III) IN THE CASE OF R & B FALCON (A) PTY LTD V. CI T (2008) 301 ITR 309 THE HONBLE SUPREME COURT WAS VERY EMPHATI C IN ITS WISDOM THAT 22. THE INTERPRETATION OF THE CBDT BEING IN THE REALM OF EXECUTIVE CONSTRUCTION SHOULD ORDINARILY BE HELD T O BE BINDING SAVE AND EXCEPT WHERE IT VIOLATES ANY PROVISIONS OF LAW OR IS CONTRARY TO ANY JUDGMENT RENDERED BY THE COURTS. T HE REASON FOR GIVING EFFECT TO SUCH EXECUTIVE CONSTRUCTION IS NOT ONLY SAME AS CONTEMPORANEOUS WHICH WOULD COME WITHIN THE PURVIEW OF THE MAXIM TEMPORANIA CASTE PESTO EVEN IN CERTAIN SITUA TION A REPRESENTATION MADE BY AN AUTHORITY LIKE MINISTER P RESENTING THE BILL BEFORE THE PARLIAMENT MAY ALSO BE FOUND BOUND THEREBY. 23. WHERE A REPRESENTATION IS MADE BY THE MAKER O F LEGISLATION AT THE TIME OF INTRODUCTION OF THE BILL OR CONSTRUC TION THEREUPON IS ITA NO.7905/BANG/09 PAGE 28 OF 31 PUT BY THE EXECUTIVE UPON ITS COMING INTO FORCE TH E SAME CARRIES A GREAT WEIGHT. (IV) THE HONBLE BOMBAY HIGH COURT IN ITS RULING I N THE CASE OF CIT V. AJANTA PHARMA LTD. (2009) 318 ITR 252 RELYIN G THE APEX COURTS VERDICT IN K.P.VERGESE V. ITO REFERRED SUPRA HAD OBSERVED THUS WHETHER SPEECHES MADE ON THE FLOOR OF THE HOUSE WE RE ADMISSIBLE IN INTERPRETING THE PROVISIONS. SPEECHE S MADE BY THE MEMBERS OF THE LEGISLATURE ON THE FLOOR OF THE HOUS E WHEN A BILL FOR ENACTING A STATUTORY PROVISION IS BEING DEBATED ARE INADMISSIBLE FOR THE PURPOSE OF INTERPRETING THE ST ATUTORY PROVISION BUT THE SPEECH MADE BY THE MOVER OF THE B ILL EXPLAINING THE REASON FOR THE INTRODUCTION OF THE BILL CAN CE RTAINLY BE REFERRED TO FOR THE PURPOSE OF ASCERTAINING THE MIS CHIEF SOUGHT TO BE REMEDIED BY THE LEGISLATION AND THE OBJECT AND P URPOSE FOR WHICH THE LEGISLATION WAS ENACTED. THE SUPREME COU RT IN K.P.VARGHESES CASE (SUPRA) SAID THAT THIS IS IN AC CORD WITH THE RECENT TREND IN JURISTIC THOUGHT NOT ONLY IN WESTER N COUNTRIES BUT ALSO IN INDIA THAT INTERPRETATION OF A STATUTE BEIN G AN EXERCISE IN THE ASCERTAINMENT OF MEANING EVERYTHING WHICH IS LO GICALLY RELEVANT SHOULD BE ADMISSIBLE. THE FINANCE MINISTE RS SPEECH THEREFORE CAN BE RELIED UPON BY THE COURT FOR THE PURPOSE OF ASCERTAINING WHAT WAS THE REASON FOR INTRODUCING TH AT CLAUSE. 8.1.12. IN VIEW OF THE VARIOUS JUDICIAL PRONOUNCEME NTS REFERRED SUPRA WE ARE OF THE FIRM VIEW THAT THE CLARIFICATI ONS MADE BY THE HONBLE FINANCE MINISTER ON THE FLOOR OF THE PARLIA MENT CANNOT BRUSHED ASIDE ON THE PLEA THAT THE PAYMENT MADE BY THE PRESENT ASSESSEE WAS TO ITS SISTER CONCERN AND NOT TO MEDIA . 8.1.13. THE ADVERTISEMENT MATERIALS DEVISED AND DEF INED BY THE ASSESSEE WERE BEING CHANNELLED THROUGH TRISHUL TH ANKS TO ITS ACCREDITED AGENCY STATUS TO THE MEDIA AND THAT NO SPECIFIC WORK ITA NO.7905/BANG/09 PAGE 29 OF 31 WAS ASSIGNED TO TRISHUL TO CARRY OUT ON BEHALF OF T HE ASSESSEE AND THUS IN OUR CONSIDERED VIEW THE ISSUE DOESNT FAL L WITHIN THE AMBIT OF S.194C OF THE ACT. 8.1.14. IN AN OVERALL CONSIDERATION OF THE FACTS AN D CIRCUMSTANCES OF THE ISSUE AS DELIBERATED IN THE FO REGOING PARAGRAPHS WE ARE OF THE UNANIMOUS VIEW THAT THE A SSESSEES CASE DOESNT FALL WITHIN THE AMBIT OF S. 194C (1) OF THE ACT AND THAT THE AUTHORITIES BELLOW WERE NOT JUSTIFIED IN INVOKING THE PROVISIONS OF THE S.201 (1) AND S.201 (1A) OF THE ACT FOR THE ASS ESSMENT YEARS UNDER DISPUTE FOR THE REASONS THAT (I) BY VIRTUE OF NOT AN ACCREDITED ADVERTISING A GENCY (AAA) THE ASSESSEE WAS DEPRIVED OF AVAILING THE CREDIT FACILI TY BEING OFFERED BY THE PUBLICATIONS (PRINT MEDIA); - TRISHUL BEING AN AAA; THE ASSESSEE HAD TIED UP WITH TRISHUL TO CHANNELIZE ITS ADVERTISING MATERIALS THROUGH IT TO THE PRINT MEDIA; - NO SPECIFIC WORK WAS ASSIGNED TO TRISHUL ON BEHALF OF THE ASSESSEE. TRISHUL HAD MERELY ROUTED THE ADVERTISING MATERIAL S DEVISED AND DESIGNED BY THE ASSESSEE ON BEHALF OF ITS CLIENTS; (II) TRISHUL WAS NEITHER A CLIENT NOR A MEDIA BUT A ROUTING AGENCY AND MOREOVER THE PAYMENT(S) MADE BY THE CLIENT(S ) TO THE ADVERTISING AGENCY (THE ASSESSEE) TAX HAS ALREADY BEEN DEDUCTED AT SOURCE BY THE CLIENT(S) AS CONCEDED BY THE FIRS T APPELLATE AUTHORITY THE FUNDAMENTAL RULE OF LAW THAT TAX CANNOT BE DEDUCTED TWICE OF THE SAME INCOME. (III) PRESUMABLY TRISHUL WAS ROPED IN BY THE ASSES SEE WITH A SOLE PURPOSE OF AVAILING THE CREDIT FACILITY BEING ENJOY ED BY TRISHUL AND NOTHING ELSE; (IV) THE ROLE OF TRISHUL IN THE TRANSACTION WAS CONFINED ONLY TO TRANSIT THE ADVERTISEMENT MATERIALS DEVISED BY THE ASSESSEE TO THE MEDIA WHICH DOES NOT VISUALIZE ANY PRODUCT OR RESULT. ME RE ROUTING ITA NO.7905/BANG/09 PAGE 30 OF 31 THROUGH THE ADVERTISING MATERIALS INVENTED BY THE A SSESSEE DOESNT PRODUCE ANY RESULT AND AS SUCH IT CANNOT BE BROUGHT WITHIN THE AMBIT OF S.194C OF THE ACT AS RULED BY THE HONBLE HIGH COURT OF CALCUTTA REFERRED SUPRA (219 ITR 486); (V) IN FACT 15% OF DISCOUNT ROYALTY COMMIS SION AS THE CASE MAY BE AAA STATUS ENJOYED BY TRISHUL RECEIVED FROM THE M EDIA WAS BEING SHARED IN THE RATIO OF 12: 3 BY THE ASSESSEE AND TRISHUL WHICH IN EFFECT THE ASSESSEE WAS NOT PAYING EVEN A PENNY FROM ITS COFFER TO TRISHUL. EVEN 85% OF AMOUNTS PAID BY THE ASSESSEE TO TRISHUL WERE REIMBURSEMENT OF THE ADVERTISING CHARG ES PAID BY TRISHUL TO MEDIA; (VI) THE ADVERTISING CHARGES PAID BY THE ASSE SSEE TO THE MEDIA THRO TRISHUL HAD IN FACT LANDED IN THE HANDS OF THE PR INT MEDIA AND IN THE PROCESS TRISHUL STANDS TO GAIN A PALTRY DISCOUN T OF 3% BEING AAA AND NOTHING-ELSE; - IN EFFECT THE BOARDS CIRCULAR NO.715 REFERRED S UPRA COMES TO THE RESCUE OF THE ASSESSEE. AT THE COST OF REPETITIO N THE RELEVANT PORTION OF WHICH ARE REPRODUCED AS UNDER: Q 1: WHAT WOULD BE THE SCOPE OF AN ADVERTIS ING CONTRACT FOR THE PURPOSE OF SECTION 194C OF THE ACT? A: THE TERM ' ADVERTISING ' HAS NOT BEEN DEFINED IN THE ACT. DURING THE COURSE OF THE CONSIDERATION OF THE FINANCE BILL 1 995 THE FINANCE MINISTER CLARIFIED ON THE FLOOR OF THE HOUSE THAT T HE AMENDED PROVISIONS OF TAX DEDUCTION AT SOURCE WOULD APPLY WHEN A CLIENT MAKES PAYMENT TO AN ADVERTISING AGENCY AND NOT WHEN AN ADVERTISING AGENCY MAKES PAYMENT TO THE MEDIA WHICH INCLUDES BOTH PRINT AND ELECTRONIC MEDIA. THE DEDUCTION IS REQUIRED TO BE MADE AT THE RATE OF 1 PER CENT. Q 2: WHETHER THE ADVERTISING AGENCY WOULD DEDU CT TAX AT SOURCE OUT OF PAYMENTS MADE TO THE MEDIA? A : NO . THE POSITION HAS BEEN CLARIFIED IN THE ANSWER TO QUESTION NO. 1 ABOVE. 9. IN THE RESULT THE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 2005-06 2006-07 AND 2007-08 [IN ITA NOS: 790 TO 795/09] ARE ALLOWED. ITA NO.7905/BANG/09 PAGE 31 OF 31 PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JANUARY 2010. SD/- SD/- (GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 22 ND JANUARY 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.