Indian Kanoon - Search engine for Indian Law

Income Tax Appellate Tribunal - Jaipur

Jitendra Kumar Gupta, Bharatpur vs Jcit, Bharatpur on 10 April, 2018

             vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR

       Jh fot; iky jko] U;kf;d lnL; ,oa Jh Hkkxpan] ys[kk lnL; ds le{k
     BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM

                           M/A. No. 24/JP/2018
                    (Arising out ITA No. 214/JP/2016)
            fu/kZkj.k o"kZ@Assessment Year : 2011-12

Shri Jitendra Kumar Gupta cuke The JCIT.
Prop. M/s J.K. Enterprises        Vs. Range-
Choburja Bazar, Bharatpur              Bharatpur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHBPG 8155 G
vihykFkhZ@Appellant                  izR;FkhZ@Respondent

    fu/kZkfjrh dh vksj l@
                        s Assessee by : Shri Rajendra Agarwal (C.A.)
    jktLo dh vksj ls@ Revenue by : Shri J.C. Kulhari (JCIT)

      lquokbZ dh rkjh[k@ Date of Hearing         : 06/04/2018
      mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 10/04/2018

                              vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M. By ways of this miscellaneous application the assessee seeking rectification of mistake in the order dated 10.01.2018 of this Tribunal whereby the appeal of the assessee was disposed off. The assessee has alleged the following mistake in the impugned order in paras 1 to 3 of the miscellaneous application as under:-

Shri Jitendra Kumar Gupta vs. JCIT "1. In terms of section 194H of the I.T. Act, 1961 " any persons, not being an individual or a HUF, who is responsible for paying, on or after 1.6.2001, to a resident, any income by way of commission (not being insurance commission refereed in to section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 10%."

While in case of the assessee no commission was paid by the assessee to the dealers but the commission was paid directly by Vodafone company. The assessee was never responsible for paying any commission to the dealers.

2 During the course of hearing it was alternatively argued by the AR and that credit of TDS deducted by Vodafone company on the amount of Rs. 9,61,610/- may not be allowed if the disallowance of Rs. 9,61,610/- is not made, but the Hon'ble Bench has not decided the same.

3. After substitution by the Finance (No. 2) Act, 2014 only 30% of the sum on which tax has not been deducted shall be disallowed but the Hon'ble Bench has confirmed the disallowance of the 100% of the sum."

2. First mistake sought to be rectified by the assessee is regarding the applicability of provisions of Section 194H of the Act in respect of the commission paid to the additional dealers. The ld. AR of the assessee has submitted that since the commission was directly paid by the Vodafone company and has not been paid by the assessee therefore, the provisions of Section 194H of the Act would not apply to 2 M.A. No.24/JP/2018 Shri Jitendra Kumar Gupta vs. JCIT the assessee and consequential disallowance u/s 40a(ia) of the Act is not called for. The ld. AR has further contended that the tribunal has not specifically dealt with this issue therefore, there is a mistake in the impugned order of this Tribunal.

3. On the other hand, ld. DR has submitted that the Tribunal has decided the issue on merits by considering relevant facts as well as the contention of the assessee raised during the hearing of the appeal and therefore, there is no mistake apparent on record to be rectified U/s 254(2) of the Act.

4. We have considered the rival submissions as well as careful perusal on record. We note that the Tribunal has decided this issue of applicability of the provisions of Section 194H of the Act and consequential disallowance made by the AO U/s 40a(ia) of the Act in paras 5 and 6 as under:-

"5. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee has shown income of Rs. 28,31,494/- in profit and loss account towards commission received from Vodafone Essar Digilink Limited. The assessee has also claimed expenditure of Rs. 9,61,610/- towards commission paid to additional dealers. The Vodafone Essar Digilink Limited deducted TDS u/s 194H of the Act for which certificate is issued in the name of the assessee and therefore, the entire amount of TDS deducted by the Vodafone 3 M.A. No.24/JP/2018 Shri Jitendra Kumar Gupta vs. JCIT Essar Digilink Limited is available for credit of the assessee. Once the entire amount shown as income in the P&L account and corresponding TDS is also shown in the account of the assessee for which the assessee has claimed credit then assessee can be take a plea that the said commission was directly paid by the Vodafone Essar Digilink Limited to the additional dealers and the assessee has only carried out the books entries. As per the agreement between the parties the additional dealers are entitled for receiving the commission from the assessee. Though they may be sharing commission which is the only income of the assessee as well as the additional dealers received from Vodafone Essar Digilink Limited however once the chain of distributorship is flowing from top to bottom and the share of the commission of the additional dealers is passing through the assessee as a distributor will be regarded as commission paid on behalf of the assessee. Therefore, the TDS deducted by the Vodafone Essar Digilink Limited from the total amount of the commission will not absolve the obligation of the assessee to deduct TDS u/s 194H of the Act in respect of the amount which was paid to the additional dealers may be directly transferred by the parent company. Therefore, in the commercial sense the entire amount of commission will be treated as income of the assessee. The entire amount is shown by the assessee in the P&L account and corresponding TDS deducted is also available for credit of the assessee and consequently the payment of commission to the additional dealers as an expenditure against the said income is liable for deduction of tax at source. Hence, the provisions of section 194H of the Act are applicable in the case of the assessee.

6. As regards the decision relied upon the ld. AR we find that the decision of the Hon'ble Allahabad High Court in case of CIT vs. M/s Vector Shipping Services Pvt. Ltd. 356 ITR 642 has been overruled by the Hon'ble Supreme Court in case of M/s Palam Gas Service vs. CIT (supra) in paras 15 to 18 as under:-

Shri Jitendra Kumar Gupta vs. JCIT "15. We approve the aforesaid view as well. As a fortiorari, it follows that Section 40(a)(ia) covers not only those cases where the amount is payable but also when it is paid. In this behalf, one has to keep in mind the purpose with which Section 40 was enacted and that has already been noted above. We have also to keep in mind the provisions of Sections 194C and 200. Once it is found that the aforesaid Sections mandate a person to deduct tax at source not only on the amounts payable but also when the sums are actually paid to the contractor, any person who does not adhere to this statutory obligation has to suffer the consequences which are stipulated in the Act itself. Certain consequences of failure to deduct tax at source from the payments made, where tax was to be deducted at source or failure to pay the same to the credit of the Central Government, are stipulated in Section 201 of the Act. This Section provides that in that contingency, such a person would be deemed to be an assessee in default in respect of such tax. While stipulating this consequence, Section 201 categorically states that the aforesaid Sections would be without prejudice to any other consequences which that defaulter may incur. Other consequences are provided under Section 40(a)(ia) of the Act, namely, payments made by such a person to a contractor shall not be treated as deductible expenditure. When read in this context, it is clear that Section 40(a)(ia) deals with the nature of default and the consequences thereof. Default is relatable to Chapter XVIIB (in the instant case Sections 194C and 200, which provisions are in the aforesaid Chapter). When the entire scheme of obligation to deduct the tax at source and paying it over to the Central Government is read holistically, it cannot be held that the word 'payable' occurring in Section 40(a)(ia) refers to only those cases where the amount is yet to be paid and does not cover the cases where the amount is actually paid. If the provision is interpreted in the manner suggested by the appellant herein, then even when it is found that a person, like the appellant, has violated the provisions of Chapter XVIIB (or specifically Sections 5 M.A. No.24/JP/2018 Shri Jitendra Kumar Gupta vs. JCIT 194C and 200 in the instant case), he would still go scot free, without suffering the consequences of such monetary default in spite of specific provisions laying down these consequences. The Punjab & Haryana High Court has exhaustively interpreted Section 40(a(ia) keeping in mind different aspects. We would again quote the following paragraphs from the said judgment, with our complete approval thereto:

"26. Further, the mere incurring of a liability does not require an assessee to deduct the tax at source even if such payments, if made, would require an assessee to deduct the tax at source. The liability to deduct tax at source under Chapter XVII-B arises only upon payments being made or where so specified under the sections in Chapter XVII, the amount is credited to the account of the payee. In other words, the liability to deduct tax at source arises not on account of the assessee being liable to the payee but only upon the liability being discharged in the case of an assessee following the cash system and upon credit being given by an assessee following the mercantile system. This is clear from every section in Chapter XVII.

27. Take for instance, the case of an assessee, who follows the cash system of accounting and where the assessee who though liable to pay the contractor, fails to do so for any reason. The assessee is not then liable to deduct tax at source. Take also the case of an assessee, who follows the mercantile system. Such an assessee may have incurred the liability to pay amounts to a party. Such an assessee is also not bound to deduct tax at source unless he credits such sums to the account of the party/payee, such as, a contractor. This is clear from Section 194C set out earlier. The liability to deduct tax at source, in the case of an assessee following the cash system, arises only when the payment is made and in the case of an assessee following the mercantile system, when he credits such sum to the account of the party entitled to receive the payment.

Shri Jitendra Kumar Gupta vs. JCIT

28. The government has nothing to do with the dispute between the assessee and the payee such as a contractor. The provisions of the Act including Section 40 and the provisions of Chapter XVII do not entitle the tax authorities to adjudicate the liability of an assessee to make payment to the payee/other contracting party. The appellant's submission, if accepted, would require an adjudication by the tax authorities as to the liability of the assessee to make payment. They would then be required to investigate all the records of an assessee to ascertain its liability to third parties. This could in many cases be an extremely complicated task especially in the absence of the third party. The third party may not press the claim. The parties may settle the dispute, if any. This is an exercise not even remotely required or even contemplated by the section."

16. As mentioned above, the Punjab & Haryana High Court found support from the judgments of the Madras and Calcutta High Courts taking identical view and by extensively quoting from the said judgments.

17. Insofar as judgment of the Allahabad High Court is concerned, reading thereof would reflect that the High Court, after noticing the fact that since the amounts had already been paid, it straightaway concluded, without any discussion, that Section 40(a)(ia) would apply only when the amount is 'payable' and dismissed the appeal of the Department stating that the question of law framed did not arise for consideration. No doubt, the Special Leave Petition thereagainst was dismissed by this Court in limine. However, that would not amount to confirming the view of the Allahabad High Court (See V.M. Salgaocar & Bros. (P.) Ltd. v. CIT [2000] 243 ITR 383/110 Taxman 67 (SC) and Supreme Court Employees Welfare Association v. Union of India [1989] 4 SCC 187 .

18. In view of the aforesaid discussion, we hold that the view taken by the High Courts of Punjab & Haryana, Madras and Calcutta is the correct view and the judgment of the Allahabad High Court 7 M.A. No.24/JP/2018 Shri Jitendra Kumar Gupta vs. JCIT in Vector Shipping Services (P) Ltd. (supra) did not decide the question of law correctly. Thus, insofar as the judgment of the Allahabad High Court is concerned, we overrule the same. Consequences of the aforesaid discussion will be to answer the question against the appellant/assessee thereby approving the view taken by the High Court."

Accordingly, in the facts and circumstances of the case as well as in view of the decision of Hon'ble Supreme Court in case of M/s Palam Gas Service vs. CIT (supra), we do not find any error or illegality in the orders of the authorities below."

Thus, the contentions of the assessee regarding the commission was directly paid by the Vodafone company has been duly considered by the Tribunal while passing the impugned order and hence, the decision on the merits of the case cannot be reviewed or amended in the proceedings U/s 254(2) of the Act. Accordingly, we do not find any merits or substance in the alleged mistake as raised in the miscellaneous application.

5. Secondly mistake has been alleged as alternative plea that the TDS deducted and credit available with the assessee may be disallowed.

6. We have heard the ld. AR as well as the DR and considered the relevant material on record. It is pertinent to note that the alternative plea as raised by the assessee in para 2 of the miscellaneous application can be considered only when the main issue of applicability of 8 M.A. No.24/JP/2018 Shri Jitendra Kumar Gupta vs. JCIT provisions of Section 194H of the Act is decided in favour of the assessee. Thus, the question of accepting the alternative plea does not arise once, the issue of applicability of Section 194H is decided against the assessee. Hence, this contention of the assessee is misconceived and liable to be rejected.

7. Third mistake has been alleged in para 3 of the application is regarding disallowance to be restricted to 30% as per the amended provisions of Section 40a(ia) of the Act.

8. We have heard the ld AR as well as the ld. DR and considered the relevant material on record. This amendment was brought by Finance Act 2014 w.e.f. 01.04.2015 therefore, prima facie the amended provisions are not applicable for the year under consideration. Moreover this plea was neither raised before the authorities below nor during the hearing of the appeal of the assessee and the assessee has raised this plea for the first time in the miscellaneous application. Accordingly, a new plea for the first time in the miscellaneous application on a debitable issue cannot be entertained in the proceedings u/s 254(2) of the Act hence, the same is rejected.

In the result, the miscellaneous application is dismissed.

Shri Jitendra Kumar Gupta vs. JCIT Order pronounced in the open court on 10/04/2018 Sd/- Sd/-

            ¼Hkkxpan ½                              ¼fot; iky jko½
          (Bhagchand)                              (Vijay Pal Rao)
ys[kk lnL;@Accountant Member                 U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur
fnukad@Dated:- 10/04/2018.
*Santosh.

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Jitendra Kumar Gupta, Bharatpur.

2. izR;FkhZ@ The Respondent- JCIT, Range- Bharatpur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr@ CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.

6. xkMZ QkbZy@ Guard File {M.A. No. 24/JP/2018} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 10