Income Tax Appellate Tribunal - Mumbai
Ace Metal Seal P. Ltd, Mumbai vs Department Of Income Tax on 24 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES, 'A', MUMBAI
BEFORE S/SHRI D.K. AGARWAL (JM) AND RAJENDR A SINGH(A.M )
ITA No.5786 to 5788/M um/2010
(Assessment Years : 2005-06 to 2007-08)
Incom e Tax Officer, M/s Ace Metal Seal Pvt.
TDS (1)-1, Ltd,
Room No.804, Big Three Building,
8 t h Floor, V/s 88,
Smt.K.G.Mittal Hospital Anandilal Poddar Marg,
Building, Mumbai-400002
Charni Road, P AN:AAAC A6026D
Mumbai-400002.
APPELLAN T RESPONDENT
Date of Hearing : 24.10.2011
Date of Pronouncem ent : 28.10.2011
Appellant by : Shri Parthsarthi Naik
Respondent by : None
O R D E R
PER D.K. AGAR WAL (JM) These three appeals preferred by the Revenue are directed against the separate orders dated 22.4.2010 passed by the ld.CIT(A) for the assessm ent years 2005-06 to 2007-
08. Since facts are identical and issues involved are comm on, all these appeals are disposed of by this com mon order for the sake of convenience.
2. In this case, the notice of hearing was sent to the assessee by RPAD fixing the date of hearing on 24.10.2011. On the date of hearing i.e. 24.1.2011, at the time of hearing, IT A No.5 78 6 to 5 788/M u m/ 2010 2 (AYs : 20 0 5-06 to 20 07 -08 ) none was present on behalf of the assessee nor filed an y application for adj ournm ent of the case. It was, therefore, decided to dispose of the appeals ex-parte, qua the assessee, on merits after hearing the learned D.R.
3. Briefly stated facts of the case are that the assessee company is engaged in the business of project consultanc y. A survey action u/s 133A of the Incom e Tax Act, 1961 (in short the Act) was carried on 7.9.2007 at the office premises of the assessee-company. On verification of the profit and loss account, the AO noted that the assessee has debited the following am ounts :
"AY J.V. Commission Retainership charges 2005-06 Rs.1,21,51,168/- Rs.11,89, Lakhs 2006-07 Rs. 10,80,000/- Rs.6,31,450/-
2007-08 Rs.1,50,64,894/- - "
The assessee was asked to explain the nature and purpose of the above expenses, to produce the vouchers of the sam e and whether the TDS has been deducted on the sam e. In response, it was interalia submitted by the assessee that with regard to J.V.Commission the paym ents related to the profit arisen out of Joint Venture, therefore the provisi ons of the scheme of tax deduction at source as detailed in the section covered by Chapter XVII-B and the items of incom e IT A No.5 78 6 to 5 788/M u m/ 2010 3 (AYs : 20 0 5-06 to 20 07 -08 ) enumerated therein do not include Joint Venture prof its. In other words, the Joint Venture profit is exactly similar to the profit derived by a firm in which the tax on total incom e computed will be paid by way of advance-tax etc but not b y way of TDS. Hence no tax is to be deducted on the payment made to M/s Kirit Communication System Pvt.Ltd. W ith regard to the paym ent of Retainer-ship charges, it was interalia submitted that the Retainer-ship charges were paid to the professional who are masters in the job and they are not on the pay roll of the compan y. It was further submitted that f or Rs.4,00,000/- and Rs.4,50,000/- the parti es have promised to give us Form No.15 but unfortunately they were not received and for that reason, the TDS was not deducted on the said two amounts. Similarly, on salary of Shri Sejpal, it was submitted that wherever, the TDS is applicable the same was deducted and paid to the Government treasury. It was, therefore, submitted that the proceedings initiated be filed. However, the AO did not accept the assessee's submissions. According to the AO, the assessee has defaulted in the transactions done with M/s Kirit Communication System Pvt.Ltd. by way of paym ent of commission and also defaulted in not deducting the TDS on Retainer-ship charges and accordingl y, he treated the assessee-company in default u/s 201(1) of the Act and interest thereon u/s 201(1A) as under :
IT A No.5 78 6 to 5 788/M u m/ 2010
4 (AYs : 20 0 5-06 to 20 07 -08 ) A. Y e a r s Amount of T DS TDS Interest Commission Due deducted 2005-06 Rs . 1 , 2 1 , 5 1, 1 6 8 / - Rs . 6, 3 5, 26 3/ - - Rs.2,66,810/- 2006-07 Rs . 1 0, 80 , 0 0 0 / - Rs . 6 0, 5 88 / - - Rs. 18,176/- 2007-08 Rs . 1 , 5 0 , 6 4, 8 9 4 / - Rs . 8, 2 8, 56 9/ - - Rs.1,49,142/- Total Rs . 1 5, 24 , 4 2 4/ - Rs.4,34,128/-
A. Y e a r s Retainer-ship TDS Due TDS Interest
charges paid deducted
2005-06 Rs . 1 1, 89 , 0 0 0/ - R s. 62 , 16 1 / - - Rs. 26,108/-
2006-07 Rs . 6, 3 1, 45 0/ - Rs. 35,424/- - Rs. 10,627/-
Total Rs . 1 8, 20 , 4 2 0/ - R s. 97 , 58 5 / - Rs. 36,735/-
4. On appeal, the ld. CIT(A), with regard to the payment of commission held that the appellant had entered into an agreem ent with M/s Kirit Communication System Pvt.Ltd. for a Joint Venture and share of profit arising out of the Joint Venture was paid to the said com pany and hence, the AO was not justified in treating the paym ent i.e. share of profit from Joint Venture as commission and applying the provisions of TDS and accordingl y, he deleted the amount of TDS due and interest thereon on the alleged commission paym ent. W ith regard to the Retainer-ship charges, the ld. CIT(A) after examining the matter for the assessment year 2005-06 directed the AO to re-calculate the TDS liabilit y IT A No.5 78 6 to 5 788/M u m/ 2010 5 (AYs : 20 0 5-06 to 20 07 -08 ) and interest thereon only on am ount of Rs.8,50,000/- an d for the assessm ent year 2006-07, he held that as per the details of paym ents, the provisions of TDS are not attracted hence he deleted the levy of TDS and interest thereon.
5. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us taking following common grounds of appeal:
"1. On the f acts and circumstances of the case and in law, the Ld. CIT(A) has erred in not justif ying the decision of the AO i n treating the assessee as an assessee in default u/s. 201(1) and 201(IA) of the Act
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in hol ding that the assessee was not liable to deduct tax on commission / Joint Venture profit as applicable us. 194H of the IT. Act, of an amount of Rs.6,35, 263/- for A.Yr. 2005-06, Rs.60,588/- for A.Yr. 2006-07 and Rs.8,28,569/- for AYr.2007-08.
3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the assessee was not liable to pay interest u/s. 201(IA) of Rs.2,66,810/- on the tax of Rs.6,35,263/- for A.Y. 2005-06, interest of Rs.18,176/- on the tax of Rs.60,588/- for A.Yr.2006-07 and interest of Rs.1,49,142/- on the tax of Rs.8,28,569/- for A.Y. 2007-08.
4. The appellant prays that the order of the CIT(A), Mumbai on the above ground(s) be set aside and the order of the assessing officer be restored."
6. At the time of hearing, the ld. DR submits that f or the reasons as mentioned in the order passed by the AO, the l d.
IT A No.5 78 6 to 5 788/M u m/ 2010 6 (AYs : 20 0 5-06 to 20 07 -08 ) CIT(A) was not justified in allowing the relief to the assessee. He, therefore, submits that the order passed by the AO be restored.
7. W e have carefully considered the submissions of the ld. DR and perused the material available on record. W e find that the facts are not in dispute. W ith regard to the deletion of TDS liability and interest thereon on the payment of am ount of commission paid to M/s Kirit Communication System Pvt.Ltd., the ld. CIT(A) has deleted the said liabilit y vide finding recorded in paragraphs 6.2 and 7 of his order for the assessment year 2005-06 which are reproduced as under :
"6.2.....I find considerabl e merit in the submissions of the appellant as the appellant had entered into an Agreement with M/s.Kirit Communication and System Pvt. Ltd. for a Joint Venture and share of profit arising out of the Joint Venture was paid to the said Compan y. The share of profit received by the Company has already been assessed as share of profit from the Joi nt Venture. Therefore, the action of the assessing officer does not appear to be justified treating the payment i.e. share of profit from Joi nt Venture as commission and applying the provisions of T.D.S. and treating the appellant as an assessee in def ault u/s 201(1) and 201 (1A). Accordingly, the ground of appeal is decided in favour of the appellant.
7.....
It is apparent that the levy of interest of Rs. 2,66,810/- is only consequential to the demand of TDS raised for AY 2005-06. Since the dem and of Rs.6,35,263/- itself is deleted, the i nterest levied of Rs.2,66,810/- is also liable to be deleted. Hence the same is deleted herewith."
IT A No.5 78 6 to 5 788/M u m/ 2010 7 (AYs : 20 0 5-06 to 20 07 -08 ) The ld. CIT(A) f or the sam e reasons deleted the lev y of TDS and interest thereon for the assessment years 2006-07 an d 2007-08.
8. W ith regard to the liability of TDS and interest thereon on the Retainer-ship charges, the ld. CIT(A) vide paragraph 9 of his order for the assessment years 2005-06 and 2006-07 has held as under :
For assessment year 2005-06 "9. I have gone through the above submissions very carefully and also perused the order of the assessing off icer. It is clear from the order that the AO himself has stated that Form No. 15-G for two payments of Rs.4,00,000/- and Rs.4,50,000/- (total Rs.8,50,000/-) were not filed with the AO in spite of repeated request.
The Appellant Company was very fair to admit bef ore me that it is t he failure of the Appellant Company to file Form No.15-G for the above sum of Rs.8,50,000/-,since the concerned parties had not furnished the details. The Appellant Company is therefore, willing t o accept the liability on account of the sam e However, in respect of the remai ning amount of Rs.3,39,000/- out of the total Retainership charges of Rs.11,89,000, the Appellant Company has stated that the payments (except one on which TDS has been deducted and paid to the credit of the Central Government) were all below Rs.20,000/- and thus not liable to TDS. In fact from the order it is very clear that he had singled out and found fault of non-deduction of tax only with respect to Rs.8,50,000/- involving two parti es. To this extent, the action of the AO is confirmed. However, whil e levying the TDS, he has considered the entire Retainership charges of Rs.11,89,000/- without giving any reason for levying tax on Rs.3,39,000. In view of the facts, the AO is directed to recalculate TDS liability only on Rs.8,50,000. The interest leviable will also be accordingly revised. Accordingly, this ground is partly allowed."
IT A No.5 78 6 to 5 788/M u m/ 2010 8 (AYs : 20 0 5-06 to 20 07 -08 ) For assessment year 2006-07 "9. I have gone through the list of parties submitted to the Assessing Officer and find that the amounts as per the said list will not attract the provisions of TDS. Hence tax of Rs.35,424/- levied on account of TDS liability and the interest of Rs.10,627/- levied thereon are deleted."
9. In the absence of any contrary m aterial placed on record by the Revenue to show that the paym ents made to M/s Kirit Communication S ystem Pvt.Ltd. are not in the nature of profit arising out of the Joint Venture but as a commission and the payments made for Retainer-ship charges are more than Rs.20,000/-, we are of the view that the ld. CIT(A) was full y justified i n deleting the lev y of TDS liability and interest thereon on the alleged payments of commission and Retainer-ship charges. Accordingly, the orders passed by the ld.CIT(A) for the above assessment years do not call for any interference. The common grounds taken by the Revenue are, therefore, rejected.
10. In the result, Revenue's appeals stand dismissed. Order pronounced in the open court on 28th Oct.,2011.
Sd sd
(R AJENDR A SINGH) (D.K. AGAR WAL)
ACCOUNTAN T M EMBER JUDICI AL MEMBER
Mumbai, Dated 28th October, 2011
IT A No.5 78 6 to 5 788/M u m/ 2010
9 (AYs : 20 0 5-06 to 20 07 -08 )
SRL:
Cop y to:
1. Appellant
2. Respondent
3. CIT Concerned
4. CIT(A) concerned
5. DR concerned Bench
6. Guard file.
BY ORDER
True copy
ASSTT. REGISTRAR,
ITAT, MUMBAI