Income Tax Appellate Tribunal - Cochin
Mini Muthoot Nidhi (Kerala) Ltd, ... vs Assessee on 24 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
BEFORE S/SHRI N.R.S.GANESAN, JM and CHANDRA POOJARI, AM
I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011
Assessment Years : 2005-06, 2006-07 & 2007-08
Mini Muthoot Nidhi (Kerala) Ltd., Vs. 1. The Deputy Commissioner of
Muthoottu Buildings, Income-tax,Circle-1, Thiruvalla.
Kozhencherry,
Pathanamthitta-689 641. 2. The Assistant Commissioner of
[PAN: AABCM 5932D] Income-tax, Circle-1, Thiruvalla
(Assessee-Appellant) (Revenue-Respondent)
I.T.A. Nos.363/Coch/2009, 10/Coch/2010 & 291/Coch/2011
Assessment Years : 2005-06, 2006-07 & 2007-08
1. The Deputy Commissioner of Vs. Mini Muthoot Nidhi (Kerala) Ltd.,
Income-tax,Circle-1, Thiruvalla. Muthoottu Buildings,
Kozhencherry,
2. The Assistant Commissioner Pathanamthitta-689 641.
of Income-tax, Circle-1, [PAN: AABCM 5932D]
Thiruvalla
(Revenue-Appellant) (Assessee-Respondent)
Assessee by Shri Kuriyan Thomas, Adv.
Revenue by Shri K.K. John, Sr. DR
Date of hearing 03/12/2014
Date of pronouncement 24/12/2014
ORDER
Per CHANDRA POOJARI, Accountant Member:
These cross appeals filed by the assessee and the Revenue are directed against different orders passed by the CIT(A)-IV, Kochi and order dated 2 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 28/12/2009 passed by the CIT(A)-I, Trivandrum for the assessment years 2005-06,2006-07 & 2007-08.
2. There was a delay of 08 days in filing the Revenue appeal in I.T.A. No. 291/Coch/2011 before the Tribunal. The Revenue has filed a petition seeking condonation of delay explaining the reasons for delay in filing the appeal before the Tribunal within the due date. The Ld. DR submitted that the order of the CIT(A) in this case was received at the Office of the Commissioner of Income- tax, Kottayam on 18/02/2011. As per section 253 of the Income Tax Act, the due date for filing the appeal before the Income Tax Appellate Tribunal was 19/04/201. An appeal could not be filed within the due date on account of the following factors:
2.1 There was no regular Commissioner posted at Kottayam at the time of the receipt of the order. The Commissioner of Income-tax, Ernakulam was holding the additional charge granted approval for filing the appeal. Immediately, thereafter, Commissioner of Income-tax, Ernakulam handed over the additional charge of Kottayam to the Commissioner of Income-tax, Trivandrum. Since then the Assessing officer and the other official concerned were on Election duty.
Following the elections, there were continuous holidays. Based on these grounds and considering the fact that the delay in filing appeal is only 7 days, the Ld. DR 3 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 requested that the delay in filing the appeal may be condoned and appeal accepted.
3. The Ld. AR has not raised any serious objection for condonation of delay in filing the appeal by the Revenue.
4. We have heard both the parties and perused the record. We find that there exists reasonable cause for not filing the appeal in time and the reasons advanced by the Revenue for the delay are bona fide. Being so, we condone the delay in filing the appeal by the Revenue and admit the appeal for adjudication.
5. Since the issues in all these appeals are identical in nature, they were clubbed together, heard together and are being disposed of by this common order for the sake of convenience.
6. The first common ground in in I.T.A. No.296 & 542/Coch/2009 and 241/Coch/2011, and revenue appeals in I.T.A. No. 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 is with regard to determination of agricultural income.
7. We are inclined to consider the facts as narrated in the assessee appeal in I.T.A. No. 296/Coch/2009. The main grievance of the assessee in this appeal is 4 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 with regard to sustaining of addition of Rs.10,69,887/- out of Rs.23,07,737/-. It was noticed that as per the Profit and Loss account an amount of Rs.24,30,000/- was credited as agricultural income under the head "Other Income" and the corresponding agricultural expenses debited to the Profit and Loss account was Rs.1,22,262/-, the net agricultural income being Rs.23,07,737/-. The assessee contended that it owned 250 acres of agricultural land at Valparai wherein coffee, an cash crops such as potato, carrot, cabbage, cauliflower, plantain and tomato were cultivated. The assessee claimed that the said cash crops were planted in 50 acres and balance area was under coffee cultivation. During the assessment proceedings, the assessee stated that the agricultural products were sold in advance before harvesting to an agent Shri V. Murali from whom a statement was recorded before the Assessing officer that he was an agent for various estate owners at Valparai including the assessee. However, the Assessing officer did not accept the statement of Shri V. Murali for the reason that he does not maintain any accounts and the entire transactions were in cash. Further, no bills and vouchers were produced by the assessee evidencing purchase or sale of the agricultural products. The Assessing officer also rejected the contention of the assessee that apart from 150 acres, it had 100 acres of excess land planted with coffee for the reason that the permission from the Forest Department for registration of excess land in favour of the assessee was still pending. In view of this, the Assessing officer estimated the income from coffee at Rs.4000 per acre based on the report of Coffee Board resulting in estimation of income of Rs.6 5 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 lakhs from 150 acres, bringing to tax the balance of Rs.17,07,737/- as income from 'Other Sources'.
7.1 Before the CIT(A), the assessee submitted that the estate was located in remote area and therefore the only mode of settlement was by cash and in such a situation, the commission agent was produced before the Assessing officer who confirmed that he purchased coffee and other cash crops from assessee on cash basis. It was also submitted that the plantation of the assessee is located in the traditional area and the average production per hectare is 0.88 MT and the gross production for the area of 150 acres is 44 MT whereas the Assessing officer estimated the production at 0.116 MT per hectare which is without basis. 7.2. In the remand report, the Assessing officer found that the assessee's estate was located in an area which has the least yield and therefore the estimation of 5.94% is reasonable.
7.3 After going through the remand report and the submissions of the assessee, the CIT(A) observed that the estate owned by the assessee was within the Annamalai region and the extent of the estate was 150 acres. According to the CIT(A), the Assessing officer estimated income from the said estate at Rs.4000/- per acre which was disputed by the assessee. The CIT(A) observed that as per the statistics released by the Coffee Board, the actual production of 6 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 coffee in that area was 0.64 MT/hectare and the area taken to be under cultivation was 150 acres. In the remand report, it was found that the assessee's area in the estate was rocky and barren and hence the area under cultivation was considered to be only 70% of 150 acres though the assessee contended that 90% of the area was cultivated. The CIT(A) found from the remand report that the yield from this area was only 0.38 MT/hectare and as per the report of Coffee Board the price of Arabica parchment for the year 2005 was Rs.3878 for 50 Kgs. Hence, the CIT(A) estimated the income from the estate as under:
Area under cultivation 70% of 60 Hectares 42 Hectares Average yield taken as 60% of 0.64MT 0.38 MT Production estimated in quantity - 42x0.38 15.96 MT average price of parchment as per Coffee Board Rs.12,37,850/- for Tamil Nadu - Rs.3878 for 50 kgs.
Being so, the CIT(A) estimated the income from 150 acres of estate owned by the assessee at Annamalai area at Rs.12,37,850/- as against Rs.23,07,737/- treated as agricultural income by the assessee and the balance of Rs.10,69,887/- was brought to tax as income under "Other Sources".
9. The Ld. AR submitted that yield per hectare of coffee considered by the CIT(A) is very low and he has determined 0.38 MT as yield per acre instead of 0.64 MT which is supported by the statement issued by the Coffee Board. He further submitted that it is not possible to maintain regular bills/vouchers for 7 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 purchase and sale of agricultural products. Therefore, the assessee, to the extent possible, has maintained required bills/vouchers. It was the contention of the assessee that it owned 250 acres of agricultural land wherein coffee and cash crops such as potato, carrot, cabbage, cauliflower, plantain and tomato were cultivated. Out of this, the assessee planted coffee in 150 acres and in balance 50 acres, cash crops were planted. Therefore, the estimation of the CIT(A) was on a very low side.
10. On the other hand, the Ld. DR submitted that during the course of remand proceedings, the Assessing officer visited the estate of the assessee and personally ascertained the factual position regarding the extent of agricultural income earned by the assessee. As per the remand report, the extent of coffee planted area is much less than what was claimed by the assessee and also the yield of coffee is very low in that area. Being so, the Ld. DR submitted that the order of the Assessing officer is to be confirmed. In support of his contention, the Ld. DR relied on the following case law:
i) Sumati Dayal vs. CIT (1995 AIR 2109) (SC).
ii) CIT vs.Durga Prasad More (82 ITR 540) (SC).
iii) Vazhakala Estate vs. State of Kerala (1994) 210 ITR 451) (Ker.)
11. We have heard both the parties and perused the record. There is no doubt that the assessee is cultivating coffee plantation in 150 acres. The 8 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 Assessing officer estimated the agricultural income at Rs.4000/- per acre which worked out Rs.6 lakhs as against the estimation of income by the assessee at Rs.23,07,737/-. Against this, the CIT(A) considered the agricultural income at Rs.8252/- per acre working out at Rs.12,37,850/-. In our opinion, when the assessee has not maintained proper books of accounts regarding actual income generated from the coffee plantation, it is inevitable that the estimation of income is to be done. The CIT(A), after considering the report of the Coffee Board observed that the actual production of coffee in the Annamalai area was 0.64 MT/hectare. Since the assessee's area is rocky and barren area in the estate, the CIT(A) considered 70% of 150 acres, i.e. 105 acres of area wherein coffee plantation was carried on by the assessee and since the yield in this area is less, he considered the yield from this area as only 0.38 MT/hectare. Hence, the CIT(A) estimated the income from the estate as under:
Area under cultivation 70% of 60 Hectares 42 Hectares Average yield taken as 60% of 0.64MT 0.38 MT Production estimated in quantity - 42x0.38 15.96 MT average price of parchment as per Coffee Board Rs.12,37,850/- for Tamil Nadu - Rs.3878 for 50 kgs.
12. In our opinion, the estimation made by the CIT(A) is very reasonable based on the report from Coffee Board. The assessee has not produced contrary material to controvert his findings. In the absence of positive evidence by the assessee to support the assessee's argument, we are not in a position to reverse 9 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 the findings of the CIT(A). Accordingly, the estimation of agricultural income made by the CIT(A) is confirmed for all the assessment years. Accordingly this ground in the assessee appeals in I.T.A. Nos. 296 &542/Coch/2009 & 241/Coch/2011 as well as the Revenue appeal in I.T.A. No. 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 is dismissed.
13. The next ground in assessee appeal in I.T.A. No. 296/Coch/2014 is with regard to disallowance of expenses claimed by the assessee and telescoping the same against the agricultural income of the assessee under the head "Other Sources".
14. The brief facts of the case are that the Assessing officer noticed that there was an increase in the operating expenses in the year under consideration by Rs.42,37,095/- but at the same time the Assessing officer allowed expenditure to the extent of Rs.12,94,459/- and the balance increase was Rs.29,42,636/- . The Assessing officer allowed only 20% of the increase for the reason that the assessee has not produced any bills/vouchers to substantiate the expenses and they were only internal vouchers, thus, disallowing Rs.23,54,109/- as not proved.
The Assessing officer telescoped the disallowance against the agricultural income of the assessee and treated as income from undisclosed sources, making addition of Rs.6,46,372/-.
10 I.T.A. Nos. 296/Coch/2009,
542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011
15. On appeal, the CIT(A) did not find any reason to interfere with the finding of the Assessing officer. According to the CIT(A), the Assessing officer had noticed disproportionate increase in expenditure when compared to the earlier year and he has allowed a part of the said increase as genuine. According to the CIT(A), the disallowance was made on account of lack of proper evidence/documents to vouch for the expenses especially in the face of a disproportionate increase. Accordingly, the CIT(A) confirmed the action of the Assessing officer in allowing only 20% of the increase and telescoping the same against the agricultural income treating the same as income from "Other Sources".
16. We have heard both the parties and perused the record. The disallowance was made by the Revenue authorities on account of lack of proper evidence like vouchers/bills produced by the assessee in support of the expenditure. When the assessee claims any expenses, it is the duty of the assessee to prove that the expenses were actually incurred for the purpose of earning income. In this case, there is every chance of inflating expenses incurred for agricultural purposes to business purposes. If the assessee has placed necessary evidence to show that it was incurred for the purpose of business, then the Revenue would be in a position to pinpoint the discrepancies if any. As discussed by the lower authorities in their orders, most of the expenses are unvouched for and are supported by self-vouchers. When the 11 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 assessee makes self-vouchers, there is every chance of inflating the same. Being so, in the absence of necessary evidence to show that it was actually incurred for business purposes, we are not in a position to reverse the findings of the lower authorities. Accordingly, we are inclined to confirm the order of the CIT(A) on this issue. The assessee relied on the judgment of Delhi High Court in the case of CIT vs. Dalmia Cement (B.) Ltd. (254 ITR 377) which cannot be applied to the fact of this case. Accordingly, the appeal of the assessee in I.T.A. No. 296/Coch/2009 is dismissed.
17. The second ground in assessee appeal in I.T.A. No. 542/Coch/2009 is with regard to disallowance of 50% of the increase in traveling expenses of Rs.1,54,464/-. The Revenue appeal in I.T.A. No. 10/Coch/2010 is against giving relief to the assessee.
18. The brief facts of the case are that the Assessing officer found that there was substantive increase in expenses as compared to last year. After finding that vouchers were available only for small part of expenses, the Assessing officer disallowed 80% of the increase in expenses. The Assessing officer noticed that whereas receipts/turnover had increased from the base assessment year 2004- 05 at 16.97%, the corresponding expenses had also increased by almost identical figure at 15.6% there being no justification for such increase in expenses. Disallowances were made in the last year's assessment at 20% of the 12 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 increase in expenses, i.e., 80% of the increase in expenses were allowed and balance 20% were disallowed. This year, it was found that although increase in turnover was only 13.75% of the base year 2004-05, corresponding increase in expenses had gone up to 34% which was disproportionately high. Therefore, the Assessing officer found it reasonable to allow increase in expenses over the base year 2004-05 at 20% considering that last year increase in expenses were allowed at 12.48% only as against increase claimed in the year at 15.6% which works out to Rs.54,15,404/- and the balance of Rs.37,88,43/- was disallowed (Rs. 92,03,835 - Rs. 54,15,404/-).
19. Before the CIT(A), the assessee submitted that operative result for the year ended 31/03/2006 was very positive and net income has increased by Rs.71.77 lakhs. According to the Ld. AR, the fixed deposits from members has increased by Rs.51.61 crores but interest on deposit has come down by Rs.1.95 crores compared to previous year as there was decrease in the rate of interest when compared to previous year. The Ld. AR also submitted that there were variations in the expenditure based on the increased business volume and operation of the company. The salaries and disallowances registered almost Rs. 40 lakhs increases compared to previous year. This was mainly due to increase in staff strength consequent to new regional offices and additional vigilant and internal audit department as this was required for high value security of gold 13 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 ornaments. The Ld. AR submitted that the above facts were not considered by the Assessing officer and made the disallowance.
19.1 Thus, the assessee submitted that the Assessing officer's disallowance of apportion of the expenditure and telescoping the same with the agricultural income may be deleted.
20. The CIT(A) found that all expenses were duly vouched and the accounts have been duly audited. The CIT(A) also found that payment on the basis of self made vouchers are made only for traveling expenses and on examination, it was found that there was increase in the expenses compared to earlier year only in the following expenses:
1) Salary
2) Rent
3) Printing and Stationery
4) Electricity charges
5) Rates and Taxes
6) Repairs and Maintenance
7) Bank Charges and Commission
8) Legal Expenses
9) Internal audit expenses
10)Audit fee
11)Telephone Charges
12)Cash Transfer Tax
13)Traveling Expenses
14) Labour Welfare Funds
15) Donation According to the CIT(A), no disallowance of salary, rent, electricity charges, rates and taxes, repairs and maintenance, bank charges and commission, legal 14 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 expenses, labour welfare fund internal audit fee, tax audit fee, telephone charges, cash transfer tax, printing and stationery etc can be made for the reason that they are duly vouched. The CIT(A) found that payments against the self made vouchers are made only for traveling expenses of staff and Directors.
According to the CIT(A), donation is disallowed in the computation of income itself. However, the CIT(A) was of the opinion that disallowance of agricultural expenses was not justifiable since agricultural expenses are not claimed as business expenditure. In view of these facts, the CIT(A) disallowed only 50% increase in traveling expenses at Rs.1,54,464/- and the disallowance of business expenses was reduced from Rs. 37,88,431/- to Rs.1,54,464/-. Against this, both the assessee and the Revenue are in appeal before us.
21. We have heard both the parties and perused the record. In this case, the CIT(A) has very reasonably considered that no disallowance of salary, rent, electricity charges, rates and taxes, repairs and maintenance, bank charges and commission, legal expenses, labour welfare fund internal audit fee, tax audit fee, telephone charges, cash transfer tax, printing and stationery etc can be made for the reason that they are duly vouched. The CIT(A) found that self made vouchers were made only for traveling expenses of staff and Directors and hence she disallowed 50% increase in traveling expenses at Rs.1,54,464/-. The CIT(A) has taken a reasonable view and the same is confirmed. Accordingly, the 15 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 assessee appeal in I.T.A. No. 542/Coch/2009 is dismissed and the Revenue appeal in I.T.A. No. 10/Coch/2010 is also dismissed.
22. The second ground in assessee appeal in I.T.A. No. 241/Coch/2011 is with regard to disallowance of foreign travel expenses.
23. The brief facts of the case are that the assessee has incurred Rs.7,57,749/- towards traveling expenses of the directors. The details of this were called for during scrutiny. The assessee informed that Rs.3,99,910/- was incurred towards Business Development Tour of the Directors to USA. However, it was found that the assessee has not produced any document to show that the trip was for purposes of business and no details about the placed visited, people met and their relationship to the business have been produced. The assessee's business is confined to Kerala and therefore the trip to USA could not have been for purposes of business. Accordingly, the Assessing officer disallowed the expenses claimed by the assessee.
24. Before the CIT(A), the assessee submitted that that the assessee's business originated from Kozhencherry in Pathanamthitta district and a considerable amount of fixed deposit is generated from local people who are all non-residents and settled in USA. According to the assessee, in order to have a close interaction with such depositors or their relatives in USA, the directors of 16 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 the company conducted a business trip to USA and incurred an expenditure of Rs.3,99,910/- towards airfare, boarding and lodging expenses there. It was submitted that this trip helped to control the unusual trend of withdrawal of fixed deposits to a large extent and the fixed deposit outstanding in A.Y. 31.3.2006 was Rs.210.88 crores which has come down to Rs.193.83 as on 31.3.2007. Therefore, it was submitted that this timely visit has averted a severe business crisis. Being so, the assessee submitted that the disallowance of expenditure is not justifiable.
25. The CIT(A) observed that nothing has been produced in the form of any documents to show that the trip was for the purpose of business. The assessee's business is confined to Kerala and there was no justification for the foreign trip in connection with the business of the assessee. Accordingly, the CIT(A) confirmed the disallowance made by the Assessing officer on this issue. Against this, the assessee is in appeal before us.
26. We have heard both the parties and perused the record. The assessee has not produced any evidence to prove that the above expenses were incurred for the purpose of business. As observed by the lower authorities, the assessee's business is confined to Kerala. However, the ld. AR submitted that the Directors went abroad to mobilize deposits for the purpose of assessee's business. However, what are the activities done by the assessee's Directors with regard to 17 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 the business of the assessee are not brought on record. In the absence of the details of the activities carried out by the assessee's Directors with regard to the business at abroad, we are not in a position to uphold the argument of the assessee's Counsel. Accordingly, this ground of the assessee in I.T.A. No. 241/Coch/2011 is dismissed.
27. The third ground is with regard to disallowance of depreciation on vehicles at Rs.1,06,554/-.
28. The brief facts of the case are that the Assessing officer has disallowed depreciation on vehicles for personal use. The assessee contended that the assessee company is doing business through its various branches and different layers of executives ranging from CEO to business associates are working and using the company vehicle and as per part of performance of the official duty, the vehicles owned by the Company are used by the employees and therefore, there was no justification in disallowing the depreciation on an assumption that vehicles were used for personal purpose.
29. On appeal, the CIT(A) confirmed the finding of the Assessing officer that personal elements cannot be ruled out on the use of motor cars and has disallowed only 1/4th of the total expenses. Against this, the assessee is in appeal before us.
18 I.T.A. Nos. 296/Coch/2009,
542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011
30. We have heard both the parties and perused the record. The assessee is a limited company. The lower authorities have disallowed 1/4th of the total expenses on vehicles. The assessee is a limited company and the vehicles are used by the Company for frequent visits to its 78 branches in Kerala for business purpose. Being so, disallowance is not warranted towards depreciation on vehicles for personal use. More so, the running expense of vehicle was allowed by the Assessing officer and it was held that the expenses were incurred solely for the purpose of business. Accordingly, this ground of the assessee in I.T.A. No. 241/Coch/2011 is allowed. The appeal of the assessee in I.T.A. No. 241/Coch/2011 is partly allowed.
31. The first ground in Revenue appeal in I.T.A.No.291/Coch/2011 is with regard to deletion of addition of Rs.1,06,000/- paid towards consultation charges without deduction of TDS.
32. The brief facts of the case are that the assessee has debited Rs.1,06,000/- towards consultation charges. When the assessee was asked to clarify whether tax was deducted from this payment, the assessee submitted that the expense was incurred for keeping statutory records and filing etc. for P.F. Department and this honorarium was paid to a retired person of the P.F. Department and TDS was not applicable. The Assessing officer did not accept the argument of 19 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011 the assessee and held that the payment in question partakes the character of fee for professional services and the assessee was under liability to deduct tax u/s. 194J of the Income Tax Act and in view of the assessee's non-compliance, the expenses claimed was disallowed u/s. 40(a)(ia) of the Act.
33. On appeal, the CIT(A) observed that the assessee is doing business through its 78 branches and the payments towards repairs and maintenance of computers comes within the scope of contract fees even if there is no written contract. Since the assessee has failed to deduct tax u/s. 194C, the CIT(A) upheld the disallowance of expenses u/s. 40(a)(ia) of the Act. However, for the amount of Rs.1,06,000/- deducted towards consultation charges, the CIT(A) found that this payment was actually not in the nature of consultation fees as appearing in the accounts but this is a payment for the part-time service of a retired person from P.F. Department who has no professional qualifications and the payment was not made against any professional services. Hence according to the CIT(A), the provisions of section 194J would not be attracted and the non deduction of tax under the said section does not attract disallowance u/s. 40(a)(ia) of the Act. Against this, the Revenue is in appeal before us. 20 I.T.A. Nos. 296/Coch/2009,
542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011
34. We have heard both the parties and perused the record. The reason for deleting the disallowance of Rs.1,06,000/- was that the payment was made to the person who has retired from PF Department who has no professional qualification and it was not paid for rendering professional services and hence, provisions of sec. 194J was not attracted so as to apply the provisions of sec. 40(a)(ia) of the I.T. Act. If the payment has been made to the person in excess of the prescribed limit for which sec. 194J is applicable, relief cannot be given on the reason that the person who has rendered services is not a professional person. There is no necessity of professional qualification for rendering services and receiving payment. Hence, in our opinion, provisions of sec. 194J is directly applicable and the assessee is duty bound to deduct tax. In the present case, the assessee failed to deduct tax and hence the payment would attract the provisions of sec. 194J and non deduction of tax under the said section would attract the provisions of section 40(a)(ia). Accordingly, we reverse the findings of the CIT(A). The ground taken by the Revenue is allowed. The Revenue appeal in I.T.A. No. 291/Coch/2011 is partly allowed. 21 I.T.A. Nos. 296/Coch/2009,
542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011
35. In the result, the assessee appeals in I.T.A. No. 296/Coch/2009 and 542/Coch/2009 are dismissed and the Revenue appeals in I.T.A. Nos. 363/Coch/2009 and 10/Coch/2010 are dismissed. The assessee appeal in I.T. A. No. 241/Coch/2011 and the Revenue appeal in 291/Coch/2011 are partly allowed.
Pronounced in the open court on 24-12-2014
sd/- sd/-
(N.R.S.GANESAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi
Dated: 24th December, 2014
GJ
Copy to:
1. Mini Muthoot Nidhi (Kerala) Ltd., Muthoottu Buildings, Kozhencherry, Pathanamthitta-689 641.
2. The Assistant Commissioner of Income-tax, Circle-1, Thiruvalla.
3. The Deputy Commissioner of Income-tax, Circle-1,Thiruvalla.
4. The Commissioner of Income-tax(Appeals)-IV, Kochi.
5. The Commissioner of Income-tax(Appeals)-I, Tivandrum.
6. The Commissioner of Income-tax, Kottayam.
7. The Commissioner of Income-tax, Trivandrum.
8. D.R., I.T.A.T., Cochin Bench, Cochin.
9. Guard File.
By Order (ASSISTANT REGISTRAR) I.T.A.T., Cochin 22 I.T.A. Nos. 296/Coch/2009, 542/Coch/2009 & 241/Coch/2011 & 363/Coch/2009, 10/Coch/2010 & 291/Coch/2011