Income Tax Appellate Tribunal - Amritsar
Kishan Mal Oil Cotton & Ginning Factory , vs Assessee on 18 July, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER
AND SH. B.P. JAIN, ACCOUNTANT MEMBER
I.T.A. No.267(Asr)/ 2010
Assessment year: 2007-08
PAN: AADFK4906E
Income Tax Officer Vs. M/s Kishan Mal Oil Cotton
Ward - 1(3), Bathinda & Ginning Factory, Ajit Mill
Road, Ramura Phul
(Appellant) (Respondent)
And
I.T.A. No. 268(Asr)/ 2010
Assessment year: 2007-08
PAN: AADFK4906E
M/s Kishan Mal Oil Cotton Vs. Income Tax Officer
& Ginning Factory, Ajit Mill Ward - 1(3), Bathinda
Road, Ramura Phul
(Appellant) (Respondent)
And
I.T.A. No. 346(Asr)/ 2012
Assessment year: 2008-09
PAN: AADFK4906E
M/s Kishan Mal Oil Cotton Vs. Income Tax Officer
& Ginning Factory, Ajit Mill Ward - 1(3), Bathinda
Road, Ramura Phul
(Appellant) (Respondent)
2
I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010
346(Asr)/ 2012; 352(Asr)/ 2012
And
I.T.A. No. 352(Asr)/ 2012
Assessment year: 2008-09
PAN: AADFK4906E
Income Tax Officer Vs. M/s Kishan Mal Oil Cotton
Ward - 1(3), Bathinda & Ginning Factory, Ajit Mill
Road, Ramura Phul
(Appellant) (Respondent)
Assessee by: Sh. P.N. Arora, Advocate
Department by: Sh. Tarsem Lal, DR
Date of hearing: 18.07.2013
Date of pronouncement: 23.07.2013
ORDER
PER BENCH
1) These are the cross appeals filed by the assessee as well as by the Revenue against the different orders passed by learned CIT(Appeals), Bathinda, for the assessment years 2007-08 & 2008-09. As the issues involved in the present cross appeals are common, therefore, we proceed to decide the same by one consolidate order for the sake of convenience.
2) The grounds of appeal raised by the Revenue in I.T.A. No. 267(Asr)/2010 for the assessment year 2007-08, are reproduced as under:
i. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 69,74,551/- made by the A.O. u/s 3 I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012 40(a)(ia) of the Income Tax Act, 1961 with the observation that section 40(a)(ia) is applicable on expenditure "payable" and it is not applicable on the expenditure "paid".
ii. That Ld. CIT(A) has erred in interpreting the meaning of word "payable", as in Section 40(a)(ia), it has nowhere been mentioned that the amount which remains payable at the end of the financial year on which no tax has been deducted, will be disallowed. It is very much clear that the word "payable" denotes the amounts which become payable to the assessee as soon as it get right to receive the payment on raising bills for the work done and if the assessee fails to deduct tax out of that as per the provisions of Income Tax Act, 1961, whole of the amount is to be disallowed u/s 40(a)(ia). iii. That Ld. CIT(A) has erred in not calling for the remand report on the grounds of appeal taken by the assessee and also erred in not calling for the comments of the A.O. on the additional ground taken by the assessee.
iv. That it is prayed that the order of Ld. CIT(A) be set aside and that of the Assessing Officer be restored.
v. That the appellant craves leave to add or amend any grounds of appeal, before the appeal is heard or disposed off.
3) The grounds of appeal taken by the assessee in I.T.A. No. 268(Asr)/2010 for the assessment year 2007-08 are reproduced as under:
i. On the facts & circumstances of the case and in law, Ld. CIT(A) was not correct in holding that there exists two different firms. Therefore, there was an agreement though oral between both the firms and provisions of Section 194C are applicable in the appellant case. ii. On the facts & circumstances of the case and in law, Ld. CIT(A) was not correct in holding that the provisions of Section 194C are applicable to the assessee appellant firm whereas as per explanation and other material on record the assessee was not held defaulter by the department till the addition has been made on account of violation of provisions of Section 194C and also by the Chartered Accountant who audited the accounts under Section 44AB of the Act. iii. On the facts & circumstances of the case and in law the Ld. CIT(A) has erred in holding that the assessee appellant has not paid the TDS 4 I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012 before the due date of filing of return whereas as per settled law if the due tax has been paid by the payee as per the return, no TDS is required to be paid by the payer.
iv. On the facts & circumstances of the case and in law the Ld. CIT(A) is not correct in rejecting the submissions of the assessee appellant in the summary way on account of payment made to the labour directly employed by the assessee appellant, through one person out of them for convenience, and not through any contractor. v. On the facts & circumstances of the case and in law the Ld. CIT(A) has erred in holding that the assessee appellant is required to deduct TDS on account of cost of Hassian Patti & Cloth whereas the same is not liable to TDS.
vi. That the appellant craves to add or amend the grounds of appeal.
4) At the time of hearing learned D.R. stated that the issues involved in the present appeals have already been decided in favour of the Revenue and against the assessee by this Bench in some cases i.e. SOMA TRG Joint Venture Vs. Income Tax Officer, Ward I(3), Jammu, passed in I.T.A. No. 116(Asr)/2013, dated 27.06.2013; Manzoor Ahmad Walvir Vs Deputy CIT, Circle-3, Srinagar, passed in I.T.A. No. 358(Asr)/2012, dated 31.05.2013; Income Tax Officer, Ward-2(1), Bathinda Vs. Mahabir Cotton Traders passed in I.T.A. No. 326(Asr)/2010, dated 30.05.2013. Therefore, he requested that the appeals filed by the Revenue may be allowed and the appeals filed by the assessee may be dismissed.5
I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012
5) Learned counsel for the assessee relied upon the orders passed by learned CIT(A), Bathinda, in the appeals filed by the Revenue, but as regards to the appeals filed by the assessee, he has relied upon the contentions raised by the assessee in the grounds of appeal.
6) The facts narrated by the Revenue Authorities are not disputed by both the parties; therefore, there is no need to repeat the same.
7) We have heard both the parties and perused the relevant records available with us especially the orders of this Bench referred by learned D.R. i.e. SOMA TRG Joint Venture Vs. Income Tax Officer, Ward I(3), Jammu, passed in I.T.A. No. 116(Asr)/2013, dated 27.06.2013; Manzoor Ahmad Walvir Vs Deputy CIT, Circle-3, Srinagar, passed in I.T.A. No. 358(Asr)/2012, dated 31.05.2013; Income Tax Officer, Ward-2(1), Bathinda Vs. Mahabir Cotton Traders passed in I.T.A. No. 326(Asr)/2010, dated 30.05.2013. We are of the view that the issues involved in the present appeals have already been decided by this Bench in so many cases and as to maintain the rule of consistency, we have to follow the same and pass appropriate order on the appeals filed by the assessee as well as by the Revenue.
6
I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012
8) As regards to the appeal filed by the Revenue i.e. I.T.A. No. 267(Asr)/2010 for assessment year 2007-08 and I.T.A. No. 352(Asr)/2012 for assessment year 2008-09, the Revenue has challenged the order of learned First Appellant Authority on the deletion of addition made by the Assessing Officer under Section 40(a)(ia) of the Income-tax Act, 1961 (in short "the Act") with observation that Section 40(a)(ia) of the Act is applicable on the expenditure "payable" and it is not applicable on the expenditure "paid".
9) Learned First Appellate Authority has given partly relief to the assessee on the basis of judgment of I.T.A.T., Hyderabad "A" Bench in the case of Teja Constructions Vs. Assistant Commissioner of Income Tax passed in I.T.A. No. 308/Hyd/2009 for assessment year 2005-06, reported in (2010) 36 DTR (Hyd.) (Trib.) 220.
10) The issues in dispute came up for hearing before this Bench in many cases and we have decided the same in favour of the Revenue on the basis of judgments of Hon'ble High Courts which includes the judgment of Hon'ble Allahabad High Court in the case of Dey's Medical (U.P.) P. Ltd. Vs. Union of India and Others, reported in [2009] 316 ITR 445 (All) as well as Hon'ble Madras High Court in the case of Tube 7 I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012 Investments of India Ltd. and Another Vs. Assistant Commissioner of Income Tax (TDS) and Others, reported in [2010] 325 ITR 610 (Mad). Both the Hon'ble High Courts have upheld the constitutional validity of Section 40(a)(ia) of the Act and held that payment made by the assessee was liable to deduction of tax at source under section 194C of the Act, failing which Section 40(a)(ia) of the Act provided that such payment should not be allowed to be deducted from computation of the total income and should be treated to be the income of the assessee. Hon'ble Calcutta High Court in the case of Commissioner of Income Tax, Kolkata-IV Vs. Crescent Export Syndicate, in I.T.A. No. 20 of 2013 GA 190 2013, decided on 3rd April, 2013, has held that 'the majority views expressed in the case of Merilyn Shipping & Transports Vs. ACIT, Range-I, Vishakhapatnam (order of the Hon'ble I.T.A.T., Special Bench, Vishakhapatnam in I.T.A. No. 477/Viz/2008) are not acceptable and decided the issue in favour of the Revenue. Hon'ble Karnataka High Court in the case of Smt. J. Rama Vs. Commissioner of Income Tax & Another, reported in (2010) 194 TAXMAN 37 as well as Hon'ble Gujarat High Court in the case of CIT-IV Vs. Sikandar Khan N. Tunvar in Tax Appeal No. 905 of 2012 dt. 02.05.2013, have taken the similar view while 8 I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012 deciding the same issue in favour of the Revenue and against the assessee.
11) Keeping in view the facts and circumstances explained above as well as the aforesaid judgments of Hon'ble High Courts, we are of the view that the orders passed by the learned First Appellant Authority are not sustainable and therefore, are cancelled on the issues involved in the appeals filed by the Revenue and the appeals of the Revenue are allowed.
12) As regards to the appeals filed by the assessee i.e. I.T.A. No. 268(Asr)/2010 for assessment year 2007-08 and I.T.A. No. 346(Asr)/2012 for assessment year 2008-09, the assessee has challenged the impugned order passed by learned First Appellant Authority on the grounds that learned First Appellate Authority has wrongly applied the provisions of Section 194C of the Act in the case of the assessee by holding that there exists an agreement, though oral, between both the firms and both the firms are different entities, therefore, the provisions of Section 194(C) are duly applicable in the case of the assessee.
13) We have heard both the parties on the issues involved in the appeals filed by the assessee and have perused the impugned orders passed by learned First Appellate Authority.
9
I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012
14) Learned First Appellate Authority has passed a detailed order on the issues in dispute after giving full opportunity to the assessee. He has given the findings on the basis of the objections raised by the assessee in the proceeding under Section 144A of the Act which the learned First Appellate Authority has reproduced at pages 9, 10 &11 and given his findings at pages 11 & 12. For the sake of convenience, relevant findings given by the learned First Appellate Authority at pages 11 and 12 (a to c) are reproduced as under:
a) There are two separate partnership deeds one each for M/s Lakshmi Cotton Mills and M/s Kishan Mal Oil, Cotton & Ginning Factory which were constituted on different dates.
b) M/s Lakshmi Cotton Mills and M/s Kishan Mal Oil, Cotton & Ginning Factory have been filing their returns of income separately. They are maintaining their books of accounts separately. The application for allotment of PAN were filed separately in their own names and the PANs were also allotted by the Department to them which are being used by them separately.
c) During the course of proceedings u/s 144A, M/s Kishan Mal Oil, Cotton & Ginning Factory filed a copy of the agreement (i.e. lease deed) stated to have been entered into between the two entities. This fact also counters the stand now taken by the assessee that no agreement can be made between the two entities.
(xii) The assessee has not furnished any case law in support of his contention that if two firms are constituted by the common partners with identical shares having same nature of business 10 I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012 in the same premises interconnected with each other, no agreement can be executed between them.
Therefore, the above contention is as such without any basis. It is, however, seen that the nature of business of the two concerns cannot be said to the same. M/s Lakshmi Cotton Mills is engaged in the business of running of oil, cotton and ginning factory and sale and purchases of items like Narma, Cotton, Cotton Seed, Rice Bran, Bardana, Khal Binola etc. M/s Lakshmi Cotton Mills was engaged in the business of doing job work of ginning and pressing of cotton only. Further the businesses are not run from same premises. M/s Lakshmi Cotton Mills is having separate cotton factory at Rampuraphul. The businesses are also not interconnected with each other. The cotton factory of M/s Lakshmi Cotton Mills as mentioned above is entirely separate from that of assessee. The bank accounts, other parties with whom transactions were made by two concerns are different, therefore, the businesses of these concerns are not interconnected.
(xiii) As held by Hon'ble Courts and mentioned above, under the income Tax Law a firm is an independent and distinct juristic person having its own entity and personality. Therefore, any agreement made between two such firms irrespective of fact whether the partners are common or not, is recognizable under at-lease Income Tax Law.
(xiv) The assessee has also argued that there was no agreement between M/s Lakshmi Cotton Mills and M/s Kishan Mal Oil, Cotton & Ginning Factory regarding ginning and pressing of cotton and, therefore, provisions of Section 194C are not applicable. This contention of the assessee is not correct. If there is no written agreement, an oral agreement can be said to have been entered into when the Narma was accepted by M/s Lakshmi Cotton Mills for ginning and pressing and deemed to have been completed when the products were received back and accepted by the M/s Kishan Mal Oil, Cotton & Ginning Factory. The work was done on rate per bale basis which also 11 I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012 shows existence of work contract. Even though the facts of the case clearly show that all the work done by M/s Lakshmi Cotton Mills can be said to have been done under a single contract, even if the work done as per each bill is taken as one contract, the bill amount in each case is more that the limit of Rs. 20,000/-. Further the total amount of work done during the year is for more than the limit of Rs. 50,000/-. Therefore, in any case the assessee is covered under the provisions of Section 194C." On due consideration, I fully agree with the findings given by the Income Tax Officer and the Additional Commissioner of Income Tax and I hold that there exists an agreement, though oral, between both the firms and both the firms are different entities, therefore, the provisions of Section 194C are duly applicable in this case.
15) Keeping in view the facts and circumstances of the present case as well as the findings given by the learned First Appellate Authority, we are of the view that no interference is called for in the well reasoned order, on the issues in dispute, passed by the learned First Appellate Authority in which the learned First Appellate Authority has rightly held that there exists an agreement, though oral, between both the firms and both the firms are different entities, therefore, the provisions of Section 194(C) are duly applicable in the case of the assessee. We uphold the findings given by the learned First Appellate Authority on the issues involved in the grounds raised by the assessee in these appeals, and 12 I.T.A. Nos. 267(Asr)/ 2010; 268(Asr)/ 2010 346(Asr)/ 2012; 352(Asr)/ 2012 uphold the impugned order by dismissing the appeals filed by the assessee.
16) In the result, the appeals filed by the Revenue i.e. I.T.A. No. 267(Asr)/2010 and I.T.A. No. 352(Asr)/2012 are allowed and the appeals filed by the assessee i.e. I.T.A. No. 268(Asr)/2010 and I.T.A. No. 346(Asr)/2012 are dismissed.
Order pronounced in the open court on 23rd July, 2013 Sd/./- Sd/./-
(B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23rd July, 2013 /RK/ Copy of the order forwarded to:
1. The Assessees: M/s Kishan Mal Oil Cotton & Ginning Factory, Ajit Mill Road, Ramura Phul.
2. Income Tax Officer, Ward - 1(3), Bathinda
3. The CIT(A), Bathinda
4. The CIT, Bathinda
5. The SR DR, I.T.A.T., Amritsar True copy By order (Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.