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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: SHRI CHANDRA MOHAN GARG
This is an appeal filed by the assessee against the order of
the Commissioner of Income Tax(Appeals)-2, Bhubaneswar dated
30.11.2018 for the assessment year 2009-2010.
Ground Nos.1 & 2 are not pressed, therefore same are
dismissed as not pressed.
Ground Nos.4,5 & 6 are general in nature and hence
requires no separate adjudication by me.
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The only ground agitated by the assessee is as under:
“For that both the assessing authority as well as first appellate authority had failed to apply their judicial mind and to apply an inapplicable law to create the demand to this individual tax payer. They had not considered lawful claim of deduction on account of payment made to locally engage printing personnel, expenses incurred towards advertisement and commission expenses on the ground of non-deduction of taxes on such transactions.” 5. I have heard the rival submissions and perused the relevant
materials placed on record of the Tribunal. From the first para
page 3, it is discernible that the Assessing Officer has made
disallowance by observing that no TDS has been deducted at
source while making the payment to the parties as required under
the provisions of section 194C of the Act, and since the assessee
has failed to deduct tax at source on payment of Rs.1,44,000/-,
then same is disallowed u/s.40(a)(ia) of the Act. First of all, I
may point out from the relevant part of the assessment order at
pages 3 & 4, I observe that in the first limb of observation, the
Assessing Officer observed that the assessee has debited a sum of
Rs.3,02,022/- under the head “publicity expenses” whereas in the
second limb of observation at page 4, the Assessing Officer further
observed that since the assessee has failed to deduct tax on
payment of commission of Rs.1,44,000/-. Therefore, the same is
disallowed u/s.40(a)(ia) of the Act. These contradictory
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observations of the Assessing Officer in the assessment order
shows that the Assessing Officer proceeded to make the impugned
disallowance without application of mind.
So far as the first appellate order is concerned, I clearly
observe that there is no adjudication and findings by the CIT(A)
on this issue, especially while dismissing the appeal of the
assessee.
When I carefully considered the facts of the case, I observe
that it is an explanation of the assessee that the impugned
payment of Rs.1,44,000/- has been made to The Samaj News
Paper and Eastern Media Services for publicity expenses and the
same was not a work contract but the entire liability of procuring
material and printing thereon was given to the recipients. As I
have noted that the authorities below have not brought any
material on record to establish that the provisions of section 194C
of the Act are applicable to the present case on the impugned
payments made by the assessee to the said two parties. I may
point out that as per Explanation to clause (iv) sub-clause(e) of
section 194C of the Act, the work shall include manufacturing or
supplying a product according to the requirement or specification
of a customer by using material purchased from such customer
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but does not include manufacturing or supplying a product
according to the requirement or specification of a customer by
using materials purchased from a person, other than such
customer. In the present case, the Assessing Officer as well as
the CIT(A) has not brought on record any positive material to
show that the publicity expenses claimed by the assessee to the
said two parties does not include the cost of material and same
was supplied by the assessee. Even from the observations made
by the Assessing Officer in the relevant part of the assessment
order at page 3, the Assessing Officer himself observed that the
assessee has debited the impugned amount under the head
“publicity expenses” and he is not claiming under job work
expenses. Therefore, I am satisfied that the second limb of sub-
clause(e) of clause (iv) of Explanation to Section 194C of the Act
absolves the assessee from the liability of deduction of Tax at
source u/s.194C of the Act. Therefore, the disallowance made by
the Assessing Officer u/s.40(a)(ia) cannot be held as sustainable
and thus, I delete the same.
My findings further gets strong support from the decision of
Kolkata Benches in the case of DCIT vs Shalimar Chemicals
Works Ltd., in ITA No.892/Kol/2011 for A.Y. 2008-09 order dated
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28.9.2015 and CBDT circular No.05/2016 dated 29.2.2016.
Accordingly, the sole ground of the assessee is allowed.
In the result, appeal of the assessee is partly allowed.
Order pronounced on 16/05/2019.
Sd/- (Chandra Mohan Garg) JUDICIALMEMBER Cuttack; Dated 16/05/209 B.K.Parida, SPS
Copy of the Order forwarded to : 1. The Appellant : Bikash Swain, HIG Duplex, 36, Sailashree Vihar, Chandrasekharpur, Bhubaneswar.
The Respondent. ITO, Ward 2(1), Bhubaneswar 3. The CIT(A)-2, Bhubaneswar 4. Pr.CIT- 2, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//
By order
Sr. Pvt. Secretary, ITAT, Cuttack
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