THE PR. COMMISSIONER OF INCOME TAX, ROHTAK vs. KAVITA

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ITA/154/2017HC Punjab & HaryanaPHHC01117341201711 December 2017Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE RAJ MOHAN SINGH5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose from the ITAT's order. The Court noted that the CIT(A) had categorically recorded that ₹10,65,345 was reimbursement of salary paid to field staff, which was evident from details obtained from Vodafone and the assessee's ledger. The CIT(A) also found that the incentive of ₹48,77,440 was paid directly to retailers by Vodafone and not routed through the assessee, thus not being due or received by the assessee. The addition of ₹13,09,267 on account of discount was deleted as it was reimbursement to Assistant Distributors. The Tribunal concurred with these findings. The Court also noted that the Revenue's counsel candidly admitted that no appeal was filed against a similar order by a coordinate bench, despite the tax effect being significant. Consequently, the High Court found no illegality or perversity in the ITAT's order and dismissed the appeal.

What were the facts?

The Revenue (Pr. Commissioner of Income Tax, Rohtak) appealed against an order of the Income Tax Appellate Tribunal (ITAT) for assessment year 2009-10. The assessee, Smt. Kavita, a distributor for Vodafone, had declared a total income of ₹2,92,360. The Assessing Officer (AO) noted from Form 26AS that the assessee received ₹72,52,052 from Vodafone, with TDS deducted under Sections 194C/194H, which was not reflected in the profit and loss account. The AO added this amount to the assessee's income. The CIT(A) deleted the addition, holding that a portion was reimbursement of salary and discounts paid to sub-dealers, and another portion was directly paid by Vodafone to retailers and not received by the assessee. The ITAT confirmed the CIT(A)'s order, relying on a coordinate bench decision. The Revenue filed the present appeal before the High Court.

What were the issues?

1. Whether the ITAT erred in law and fact by holding that the receipt of ₹72,52,052 from Vodafone, after TDS deduction, was a contract receipt/commission income that the assessee could not justify as reimbursement of expenses to sub-dealers/retailers? 2. Whether, as per the contract terms, payments were due to the assessee, especially since reimbursement to sub-dealers was not explicitly envisaged in clause 17, making the ITAT's decision legally flawed? 3. Whether the receipt of ₹72,52,052, admittedly a contractual receipt on which TDS was deducted, should have been included in the assessee's P&L account, and if its omission constituted a violation of the Income Tax Act, rendering the ITAT's decision bad in law? 4. Whether the ITAT's order was perverse to the facts, considering the assessee's explanations did not correlate with Form 26AS figures and lacked information about recipients, PANs, or receipt confirmations? 5. Whether the assessee was liable to deduct TDS on claimed payments, and if non-deduction made the assessee liable under Section 40(a)(ia), which the ITAT failed to consider? Assessee's Contentions: The assessee argued that the amounts received were for reimbursement of expenses (salary, payments to assistant distributors) and discounts, and a significant portion was directly paid by Vodafone to retailers and not received by the assessee. The assessee also presented a re-casted profit and loss account. The assessee relied on the CIT(A)'s findings and the ITAT's decision in a similar case. Revenue's Contentions: The Revenue contended that the ITAT erred in ignoring that the payment was a contractual receipt/commission income which the assessee failed to justify as reimbursement. The Revenue argued that the payments were due to the assessee as per the contract, and the omission of these receipts from the P&L account was a violation of the Act. The Revenue also argued that the ITAT's order was perverse due to lack of correlation with figures and missing information, and that the assessee was liable under Section 40(a)(ia) for non-deduction of TDS.

Which sections of the Income-tax Act were involved?

Section 260A,Section 194C,Section 194H,Section 40(a)(ia),Section 234B

AI-generated summary — verify with the full judgment below

ITA No. 154 of 2017 (O&M) 1

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No. 154 of 2017(O&M)

Date of decision: 11.12.2017 The Pr. Commissioner of Income Tax, Rohtak

……Appellant

Vs. Smt. Kavita 8, State Bank Colony, Rohtak

…..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL

HON’BLE MR. JUSTICE RAJ MOHAN SINGH Present: Mr. Inderpreet Singh, Senior Standing Counsel

for the appellant-assessee.

Ajay Kumar Mittal,J.

1.

The appellant-assessee has filed the present appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 19.05.2016, Annexure A.III, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’ New Delhi (in short, “the Tribunal”) in ITA No. 5106/Del/2012, for the assessment year 2009-10, claiming following substantial questions of law:- (i) “Whether the ITAT is correct in fact and law while ignoring that the payment of ` 72,52,052/- received by assessee from M/s Vodafone Essar Digilink Limited under contractual obligation after deduction of TDS under Section 194C/194H is a contract receipt/commission income in the hands of assessee which the assessee subsequently cannot justify as reimbursement of expenses to the sub dealers/retailers?

(ii) Whether as per the terms and conditions of the contract, the payments were made or were due to the assessee, especially since the reimbursement to the sub-dealers Gurbax Singh 2017.12.20 10:28

ITA No. 154 of 2017 (O&M) 2

made by the assessee is not envisaged explicitly in caluse-17 and therefore, the decision of ITAT is bad inlaw?

(iii) Whether the receipt of ` 72,52,052/- in the hand of the assessee is admittedly a contractual receipt on which TDS under Section 194C/194H has been deducted from it and the assessee has violated the provisions of the Income Tax Act, 1961 by not including these receipts in the P & L account and therefore, the decision of ITAT is bad in law?

(iv) Whether the order of the ITAT is perverse to the facts of case as the fact that the explanations of the assessee did not co-relate to the figure in the Forms AS26 and the fact that the lack of information about the recipients, their PAN numbers or receipt confirmation?

(v) Whether the assessee was liable to deduct TDS before making the claimed payments and non-deduction of TDS makes the assessee liable under Section 40(a)(ia) of the Act and the order of the ITAT is erroneous for not considering the same?”

2.

A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The respondent- assessee, the main distributors of M/s Vodafone for Rohtak district under the name and style of M/s VM Teleconnect, filed return of income declaring total income of ` 2,92,360/-. During the course of assessment proceedings, the Assessing Officer noted from Form 26AS downloaded from ITD database that the appellant received income in the nature of contracts and commission amounting to ` 72,52,052/- from M/s Vodafone on which TDS amounting to ` 2,36,281/- had been deducted under ITA No. 154 of 2017 (O&M) 3

Sections 194C and 194H of the Act. The Assessing Officer noted that these receipts had not been reflected in the profit and loss account. Vide order dated 28.12.2011, Annexure A.I, the Assessing Officer made an addition of ` 72,52,052/-. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 24.07.2012, Annexure A.II, the CIT(A) deleted the whole addition of ` 72,52,052/- with the observation that receipt of ` 10,65,345/- from Vodafone was on account of reimbursement of salary, which had been clarified by the assessee in re-casted profit and loss account. It was further recorded that receipt of discount of ` 13,09,267/- from Vodafone was on account of reimbursement of amount paid to Assistant Distributors. Apart from this, the assessee had incurred ` 62,000/- on account of short claims etc which had been booked under the head ‘discount’ and, therefore, only ` 62,000/- was debited to the profit and loss account. It was also noticed that incentive of ` 48,77,440/- was paid directly to retailer, by Vodafone and not routed through the account of the assessee. It was concluded that since the amount was neither due nor received by the assessee, question of adding the same as suppressed receipt did not arise and, therefore, was deleted. Not satisfied with the order, the department filed an appeal before the Tribunal. Vide order dated 19.05.2016, Annexure A.III, the Tribunal confirmed the order passed by the CIT(A) on the basis of the order dated 31.03.2017 passed by the coordinate Bench of Tribunal under identical facts in ITA No. 4679/Del/2012 (ITO Vs. Basant Kumar ), for the assessment year 2009-10. The issue was decided in favour of the assessee. Hence the instant appeal by the revenue.

3.

We have heard the learned counsel for the appellant-revenue.

ITA No. 154 of 2017 (O&M) 4

4.

It has been categorically recorded by the CIT(A) that the receipt of ` 10,65,345/- from M/s Vodafone was on account of reimbursement of salary, paid to field staff as was evident from the details obtained by the assessee from M/s Vodafone and her own ledger account which had been filed before the Assessing Officer. As the entire salary paid had been reimbursed, the assessee had not shown any item in this regard in the profit and loss account. However, this had been clarified by the assessee in the re-casted profit and loss account. Thus, it was rightly concluded by the CIT(A) that there was no justification for adding the said amount as suppressed receipts and, therefore, deleted the same. It was further recorded that the incentive of ` 48,77,440/- by M/s Vodafone had been made directly to the retailers. Since the said amount was neither due nor received by the assessee, the question of adding the same as suppressed receipts did not arise and, therefore, the same was deleted. As the amount of ` 48,77,440/- did not form part of the receipts of the assessee, credit for corresponding TDS of ` 1,10,767/- could not be given to the assessee and the Assessing Officer was directed not to give credit for this TDS amount. The addition of ` 13,09,267/- on account of receipt of discount was deleted by holding it to be on account of reimbursement of amount paid to Assistant Distributors. Thus, the addition made by the Assessing Officer of ` 72,52,052/- was deleted. With regard to the charging of interest under Section 234B of the Act, the appeal of the assessee was dismissed. Aggrieved by the order passed by the CIT(A), the department went in appeal before the Tribunal. After examining the entire matter in detail, the Tribunal concurred with the findings recorded by the CIT(A). The issue was decided in favour of assessee by the Tribunal relying upon the decision of the coordinate Bench in Sh. Basant Kumar’s case (supra) for the assessment year 2009-10. ITA No. 154 of 2017 (O&M) 5

Learned counsel for the revenue has candidly admitted that no appeal has been filed against the said order and has been accepted by the revenue though the tax effect was more than the limit prescribed by the CBDT circular.

5.

Learned counsel for the appellant-revenue has not been able to point out any illegality or perversity in the impugned order passed by the Tribunal dated 19.05.2016, Annexure A.III.

6.

As a result, we do not find any ground to interfere with the impugned order passed by the Tribunal dated 19.05.2016, Annexure A.III. No substantial question of law arises. The appeal stands dismissed. In view of the dismissal of the appeal on merits, the application under Section 5 of the Limitation Act, 1963 for condonation of delay in filing the appeal is left open.

(Ajay Kumar Mittal)

Judge

December 11, 2017

(Raj Mohan Singh)

‘gs’

Judge Whether speaking/reasoned

Yes Whether reportable

Yes

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