Income Tax Appellate Tribunal - Delhi
Ashish Sharma, New Delhi vs Department Of Income Tax on 5 June, 2015
DELHI BENCH "A": NEW DELHI
BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER
AND
SHRI A. T. VARKEY, JUDICIAL MEMBER
ITA No. 1803/Del/2013
Asst. Year 2009-2010
ACIT Ashish Sharma,
Circle-26(1), R-1/21, Vijay Vihar,
New Delhi Vs. Mangal bazaar Road,
Uttam Nagar New Delhi
Pan No- BDIPS7521J
(Appellant) (Respondent)
Appellant by : Sh. T. Vasantan Sr. DR
Respondent by : Sh Hamant Bajaj CA
Date of Hearing 23.04.2015
Date of pronouncement 05.06.2015
ORDER
PER A. T. VARKEY, JUDICIAL MEMBER
This appeal filed by the Revenue is directed against the order dated 31.1.2013 passed by the Ld. CIT(A)-XXIV, New Delhi pertaining to assessment year 2009-10.
2. The Revenue has raised the following grounds in its Appeal:-
"On the facts and circumstances of the case in law, the CIT(A) has erred in -
1. Deleting the addition made on payments of Salary, Commission payment, Consultancy charges and Audit Fee without deducting of TDS totaling to Rs. 65,12,896/-.
2. Deleting the addition made on Auto Loan and Personal Loan as per provisions of sub clause (iii) of sub-section 1 of section 36 of the I.T. Act totaling to Rs. 81,015/-.
3. Deleting the addition made on vehicle maintenance, depreciation and travelling totaling to Rs. 6,28,400/-.
4. The appellant craves the right to add, alter or amend any ground of appeal."
ITA NO.1803/Del/2013
3. Ground No.1 relates to deletion of addition made on payments of Salary, Commission payment, Consultancy charges and Audit Fee without deducting of TDS totaling to Rs. 65,12,896/-.
4. The brief facts of the case are that the assessee filed its return of income on 31.10.2009 declaring taxable income of Rs. 30,88,110/-. The case was selected for scrutiny through CASS. The assessee is a franchisee of M/s India INfoline Ltd. He is engaged in the business of share trading and earns commission for the business provided to the company. The assessee has declared income from business and profession at Rs. 31,21,607/- and interest income of Rs. 1506/- under the head Income from Other Sources. The Assessing Officer completed the assessment u/s. 143(3) vide his order dated 21.12.2011 on total income of Rs. 1,03,45,420/- by making various additions.
5. Against the aforesaid order of the Assessing Officer assessee appealed before the Ld. CIT(A), who vide his order dated 31.1.2013 has allowed the appeal of the assessee.
6. Aggrieved by the order of the Ld. CIT(A), now the Revenue is in appeal before the Tribunal.
7. Ld. DR relied upon the order of the AO and reiterated the contention raised in the grounds of appeal raised by the Revenue and stated that the assessee is having gross receipts from business and profession at Rs. 1,10,12,706/-which is more than the monetary limits laid down in Sec- 44AB and hence liable to get his accounts audited. As the assessee is covered under the provisions of section 44AB, the assessee is liable to deduct tax at source u/s 192, 194H and 194J in the respect of payments made on account of commission amounting to Rs. 34,00,000/-on account of consultancy charge amounting to Rs. 277,411/- Audit Fees of Rs. 11,030/- and Staff Salary of Rs. 28,24,455/- but he failed to abide by the provisions of above sections. Ld. DR further stated that as per the provisions of section 44AB, 192, 194H, 194J and section 40(a) (ia), the amount of Rs. 34,00,000/-Rs.2,77,411/- Rs. 11,030/- and Rs. 28,24,455/- being the expenditures debited in the P& L account under the head "Commission Paid" "Consultancy Charges" "Audit 2 ITA NO.1803/Del/2013 Fees" and " Staff Salary" were therefore rightly disallowed by the AO and added back to the total Income of the assessee under section 40(a) (ia). However the ld CIT(A), has erred in deleting the said addition, so the ld DR wants us to reverse the decision .
8. On the contrary, Ld. Counsel of the assessee has relied upon the order of the Ld. CIT(A) and defended the same by contending that the AO has not at all contested the genuineness of transaction but disallowed the expense on account of non-deduction of tax at source. Further it was the contention of the Ld. AR that the AO has failed to appreciate the fact that the assessee has got his accounts audited u/s. 44AB for the first time during the year under consideration and accordingly the provisions of Chapter XVII- B and section 194H are not applicable in his case since this is the first year of audit and the total turnover of the assessee did not exceed the limits specified u/s . 44AB of the Act during the preceding financial year, noticing these facts and law the ld CIT(A) has rightly deleted the addition, so he does not want us to interfere in the same.
9. We have heard both the parties and perused the records. With regard to ground no. 1 regarding deletion of addition made on payments of Salary, Commission Payment, Consultancy Charges and Audit Fee without deduction of TDS totaling to Rs. 65,12,896/- is concerned, first we will take up the Commission/ Consultancy Charge paid of Rs.34,00,000/-which was disallowed by AO. We find that assessee is a proprietary concern and is a franchise (acting as sub-broker) of M/s India Infoline Ltd. engaged in the business of share trading and earns commission income for the business provided to it by franchiser i.e. M/s India Infoline Ltd. His income is based on the percentage of the quantum/ amount of transactions undertaken by him on behalf of his clients. The assessee gives commission to his staff or any personnel through whose recommendation the assessee receives clients (and in turn business); this is a general working strategy adopted by him to expand his business. For non deduction of TDS, the AO has disallowed the payments incurred by the assessee.
3ITA NO.1803/Del/2013 9.1 We take note that the AO has not at all contested the genuineness of transaction but disallowed the expense on account of non-deduction of tax at source. Further it was the contention of the Ld. AR that the AO has failed to appreciate the fact that the assessee has got his accounts audited u/s. 44AB for the first time during the year under consideration and accordingly the provisions of Chapter XVII-B and section 194H are not applicable in his case since this is the first year of audit and the total turnover of the assessee did not exceed the limits specified u/s 44AB of the Act during the preceding financial year.
9.2 The TDS provisions in respect to Commission, Consultancy Fees are governed by & Audit Fees are governed by Sec. 194H & 194J. We take note that the AO has based the disallowances quoting proviso to Sec. 194H & 194. The said proviso reads as below:-
"Provided that an individual or a Hindu Undivided Family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income tax under this section....."
9.3 A bare reading of the aforesaid proviso states that the liability to deduct tax arises only in case the turnover or gross receipts of the individual exceeds the monetary limits specified u/s 44AB during the preceding financial year.
9.4 A perusal of the copy of ITR Acknowledgement and Profit & Loss Account for the preceding year from wherein we note that the total credits in the preceding year are not surpassing even Rs 15 lacs. We find that the AO has failed to appreciate the fact that the assessee has got his accounts audited u/s. 44AB of the Act for the first time during the year under consideration and accordingly the provisions of Chapter XVII B are not applicable in his case in respect to section 194H, since this is the first year of audit and the total turnover of the assessee did not exceed the limits specified u/s. 44AB of the Act, during the preceding financial year. We find 4 ITA NO.1803/Del/2013 that the Ld. CIT(A) has rightly held that in the case of an individual or an HUF, whose total sales, gross receipts or turnover from the business or profession carried on by him exceeds the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall not be liable to deduct Income Tax under this section. Both section 194H and 194J have similar wordings. It is therefore, clear that an individual is obliged to deduct tax at source only in case his turnover or receipts exceed the specified limit u/s. 44AB during the financial year immediately preceding the year under consideration. We concur with the Ld. CIT(A)'s observation that since, this is the first year in which the turnover of the assessee has exceeded the prescribed limits u/s.44AB, it is clear that he was not obliged to deduct TDS on commissions paid or consultancy charges paid. Therefore, he rightly deleted the addition of Rs.34 lacs on this account.
10. As regards the addition of Rs. 2,77,411/- being consultancy charges paid by the assessee without deducting TDS. On the same reasoning as state above, we find that the provisions of section 194H are not applicable to the assessee in this year, since, his total turnover in the preceding year had not exceeded the prescribed limits u/s. 44AB. Therefore, the Ld. CIT(A) has rightly deleted the addition of Rs. 2,77,411/- on this account.
11. As regards the addition of Rs. 11,030/- being audit fees, on the grounds that the provisions and monetary limits prescribed u/s. 194J are not applicable in this case for the current year under consideration. We find that this amount is below the monetary limit Specified u/s 194J so the Ld CIT(A) has rightly deleted and so we confirm the same.
12. As regards addition of Rs. 28,24,455/- being salary paid without deduction of TDS, we take note of the submissions of the AR of the assessee, before the Ld. CIT(A) that the nature of the business activity of the assessee was such that he was required to hire low salaried field staff and, therefore, none of the employees crossed the monetary limits specified U/S 192 of the Act. The learned AR further submitted that the provisions of section 40(a)(ia) 5 ITA NO.1803/Del/2013 were not applicable to the assessee as the disallowances mentioned therein were restricted for non deduction or late deposit. of tax with reference to payments of interest, commission, rent, professional fees and payment of contractors only. According to Ld AR, salary is not covered u/s 40(a)(ia). We find that Ld. CIT(A) has observed that it is not the case of the AO that the payment of salaries to various employees made by the assessee are hit by the provisions of section 192, because the payments have been made beyond the prescribed limits mentioned therein and the AO failed to bring any evidence in the assessment order, about any breach of monetary limit prescribed under section 192 without which the order of the AO cannot be sustained and ld CIT(A) has deleted the addition of Rs. 28,24,455/- since the payment of salary is not hit by the provisions of section 40(a)(ia). We do not find any infirmity in the order of the Ld CIT(A) and so we confirm the order of the Ld CIT(A).
13. In the background of the aforesaid discussions, we do not find any infirmity in the impugned order of the Ld. CIT(A) to delete the aforesaid additions, amounting to Rs. 65,12,896/- which does not need any interference on our part, hence, we uphold the same. Therefore, the issue involved in ground no. 1 filed by revenue is dismissed,
14. With regard to ground no. 2 regarding deletion of addition made on auto loan and personal loan as per the provisions of sub clause (III) of sub- section 1 of section 36 of the Act totaling to Rs. 81,015/- and ground no. 3 regarding deletion of addition made on vehicle maintenance, depreciation and travelling totaling to Rs. 6,28,400/- are concerned, we find that the Ld. CIT(A) has observed that no business is possible without expenditure incurred on travelling and even a trader of local market needs to incur travelling expense. We find force in the submission of the AR, that the assessee, being a franchisee of M/s India Infoline Ltd., had to meet the Regional heads of the franchiser, for reporting purpose as well as for various business meetings, his being the first year of business. The assessee had to seek guidance and help in matters related to smooth functioning of their centralized software, along 6 ITA NO.1803/Del/2013 with the training of various modules, apart from administrative reporting. Therefore, in view of the provisions of section 37, these expenses incurred for the purpose of business activity are fully allowable. We find that the additions made by the AO is purely on assumption that the assessee would be carrying out his business from his residence through online computer transactions, and therefore, there was no requirement of any travelling etc. On the basis of suspicion, conjecture and guess work the AO cannot make disallowance of the expenses claimed by the assessee for which is incurred for business purpose and so it has been rightly deleted by the Ld CIT(A). In the background of the aforesaid discussions, we do not find any infirmity in the impugned order of the Ld. CIT(A) which does not need any interference on our part, hence, we uphold the same. Therefore, the issue involved in ground no. 2 & 3 raised by the Revenue are dismissed.
15. In the result, the appeal of the Revenue stands dismissed.
Order pronounced in the Open Court on 05/06/2015.
-Sd/- -Sd/-
(N.K.SAINI) (A. T. VARKEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:05/06/2015
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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