NANDKISHORE CHOUDHARY, MUMBAI v. ITO 22(2)3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B : MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER ITA. NO. 935/MUM/2010 ASSESSMENT YEAR 2006-2007 MR. NANDKISHORE CHOUDHARY MUMBAI 400 071 PAN AAFPC6249N VS. ITO 22 (2) (3) MUMBAI. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI ANIL THAKRAR FOR RESPONDENT : SHRI HARI GOVIND SINGH (DR) ORDER PER D. MANMOHAN V.P. 1. DISALLOWANCE OF RS.4 44 000/- UNDER SECTION 40 (A)(IA) OF THE INCOME TAX ACT 1961 IS THE SUBJECT MATTER OF D ISPUTE BEFORE US. 2. WE HAVE HEARD THE LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE AS WELL AS THE LEARNED DR AND CAREF ULLY PERUSED THE RECORD. 3. FACTS OF THE CASE ARE THAT THE ASSESSEE A PROP RIETOR OF THE CONCERN KNOWN AS M/S. NAND & CO. WAS ENGAGED IN TH E BUSINESS OF SUPPLYING OF JUNIOR ARTISTS FOR FILM INDUSTRY AND S ERIALS. IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER CONSIDERATION ASSESSEE DECLARED A TOTAL INCOME OF RS.1 92 330/-. ASSESSING OFFICER SELECTED THE CASE FOR SCRUTINY. DURING THE COURSE O F ASSESSMENT PROCEEDINGS ASSESSEE WAS CALLED UPON TO EXPLAIN TH E FOLLOWING PAYMENTS : I. MR. DHEERAJ SAREEN RS. 1 74 000 (PROFESSIONAL MANAGEMENT FEES) II. ARTIST PAYMENT TO K.M. SONAR RS. 1 70 000 III. DO- TO VENI CHOUDHARY RS. 1 00 000 -------------------- RS. 4 44 000 -------------------- 2 3. ACCORDING TO THE DEPARTMENT PAYMENTS MADE BY T HE ASSESSEE DESERVES TO BE CONSIDERED AS PAYMENTS MADE TO CONTRACTORS WITHIN THE MEANING OF SECTION 194C OF THE I.T. ACT. IN THIS REGARD THE ASSESSING OFFICER OBSERVED THAT PROFESSIONAL FEES P AID TO MR. DHEERAJ SAREEN IS HIT BY THE PROVISIONS OF SECTION 194 OF T HE ACT SINCE THE ASSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE. ON THE OTHER HAND THE CASE OF THE ASSESSEE WAS THAT MR. DHEERAJ HAD NO TA XABLE INCOME AND BASED ON HIS REQUEST TAX WAS NOT DEDUCTED AT SOURCE . ASSESSING OFFICER AS WELL AS CIT(A) REJECTED THE CONTENTION O F THE ASSESSEE ON THE GROUND THAT FORM 15H WAS NOT FILED AS PER RULES AND HENCE THE SAID PAYMENT ATTRACTS THE PROVISIONS OF SECTION 194 OF T HE ACT. ASSESSEE CHALLENGED THE SAME BEFORE US. HOWEVER AT THE TIME OF HEARING LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSE E DID NOT PRESS THIS GROUND SINCE IT WAS ADMITTEDLY A PAYMENT MADE TO MR. DHEERAJ SAREEN WITHOUT DEDUCTION OF TAX AT SOURCE AND WITHO UT OBTAINING A CERTIFICATE IN FORM NO. 15H FROM MR. DHEERAJ SAREEN . THEREFORE WE SUSTAIN THE ORDER OF THE LEARNED CIT(A) ON THIS ISS UE. 4. IT MAY BE NOTICED THAT THE ASSESSEE HAS ALSO PA ID A SUM OF RS.1 70 000/- TO MR. K.M. SONAR AND RS.1 00 000/- T O MRS. VENU CHOUDHARY. IT WAS CONTENDED BEFORE THE TAX AUTHORIT IES THAT THEY WERE MERE REPAYMENTS TO THE AFOREMENTIONED PARTIES SINCE THEY INTURN HAVE PAID TO NUMBER OF JUNIOR ARTISTS ON BEHALF OF THE A SSESSEE. PLACING RELIANCE ON THE DECISION OF THE ITAT BOMBAY BENCH IN THE CASE OF M/S. UTILITY POWERTECH LIMITED 2010 TAX INDIA ONLIN E 545 IT WAS CONTENDED THAT REIMBURSEMENT OF EXPENSES CANNOT BE REGARDED AS PAYMENTS MADE TO CONTRACTORS AND HENCE DISALLOWANC E UNDER SECTION 40(A)(IA)IS NOT PERMISSIBLE. 5. ON THE OTHER HAND LEARNED DR SUBMITTED THAT THE ASSESSEE HAS NOT PROVED THAT THE PAYMENTS WERE IN T HE NATURE OF REIMBURSEMENT AND HENCE IT IS IN THE NATURE OF PAYM ENTS MADE TO THE AFOREMENTIONED PARTIES IN THEIR CAPACITY AS CONTRAC TOR. IT WAS ALSO SUBMITTED THAT FORM 15H WAS NOT SUBMITTED BY THE AS SESSEE. 3 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. AS COULD BE NOTICED FROM THE WR ITTEN SUBMISSIONS FILED BEFORE THE CIT(A) THE CASE OF THE ASSESSEE I S THAT PAYMENTS MADE TO MR. K.M. SONAR AND VENU CHOUDHARY WERE IN THE NA TURE OF REIMBURSEMENT OF EXPENSES REFERABLE TO PAYMENTS MAD E BY THEM ON ASSESSEES BEHALF TO THE JUNIOR ARTISTS AND EACH PA YMENT IS LESS THAN RS.20 000/-. IT WAS CONTENDED THAT ASSESSEE HAD SUB MITTED FULL LIST OF JUNIOR ARTISTS PAYMENTS BEFORE THE ASSESSING OFFIC ER. THOUGH THE ASSESSING OFFICER AS WELL AS THE CIT(A) DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THEIR SERVICES WERE IN THE NATURE OF SUB- CONTRACTORS IT IS NOT DISPUTED THAT THE PAYMENTS M ADE TO THE SO-CALLED SUB-CONTRACTORS WAS IN THE FORM OF REIMBURSEMENT OF EXPENSES INCURRED BY THEM AND EACH PAYMENT MADE BY THEM WAS LESS THAN RS.20 000/-. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF DECISION OF THE ITAT CITED (SUPRA) WE ARE OF THE VIEW THAT DISALLOWANCE UNDER SECTION 40(A)(IA)OF THE ACT WITH REGARD TO PAYMENTS MADE TO MR. K.M. SONAR AND VENI CHOUDHARY IS NOT IN ACCORDANCE WITH LAW. WE THEREFORE SET ASIDE THE DISALLOWANCE . 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON THIS THE 15 TH DAY OF FEBRUARY 2011. SD/- SD/- (PRAMOD KUMAR) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI DATE 15 TH FEBRUARY 2011. VBP/- 4 COPY TO 1. MR. NANDKISHORE CHOUDHARY FLAT NO.09 BLDG. NO. 6 BORLA COOP. HSG. SOCIETY CHEMBUR MUMBAI 400 071. PAN AA FPC6249N 2. I.T.O. 22(2)(3) MUMBAI. 3. CIT(A)-33 MUMBAI. 4. CIT-22 MUMBAI 5. DR B BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI.