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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI PAWAN SINGH
05/08/2019 सुनवाई क" तार"ख / Date of Hearing घोषणा क" तार"ख /Date of Pronouncement 01 /11 /2019 आदेश / O R D E R PER SHRI SHAMIM YAHYA- AM:
These are cross appeals by the Revenue as well as assessee arising out of learned Commissioner of Income Tax (Appeals) order for Assessment Years 2007-08 and 2008-09 respectively.
Since the issues are common and connected and the appeals were heard to that these are being consolidated and disposed of by this common order.
One common issue raised in assessee’s appeals relate to the order of the authorities below that the payment made to Matrix India on behalf of Ms. R.K. Kaif required withholding under section 194J.
Upon hearing both the counsel and perusing the records, it transpires that this issue stands covered in favour of the assessee by the decision of this Tribunal in assessee’s own case for Assessment Year 2009–10, vide order dated 20/2/2013. The Tribunal by an elaborate order has concluded that the TDS officer was incorrect in holding that tax was required to be deducted at 11.33%. The Tribunal concluded that the impugned payments made by the assessee to Matrix India on behalf of Ms. Katarina Kaif do not attract the provisions of section 19 4J. Accordingly the ground raised was allowed. We may refer to the concluding portion in the said order as under:-
“18. In the light of the above legal scope we need to examine, if the services, the modeling, rendered by Ms. Katrina Kaif in this case constitutes professional service and the fee paid to her for modeling with the purpose of marketing of the camera products of the assessee constitutes FPS, notwithstanding the (act that she is otherwise an actor engaged in the production of a cinematographic film. The answer for this enquiry is found partly from the decision of this Tribunal given in the case of EMS (supra), Undisputedly, Ms. Katrina Kaif has received the said fee not in connection with production of a cinematographic film and the same received admittedly for modeling. She has not received the sum for acting in a autographic Film. Receipts for all modeling and acting skills of an individual do not attract the said section 194-J, unless, they are part of the production of a cinematographic film. It is the case of revenue that modeling is also 'acting' and Ms. Katrina Kaif is an actor and therefore covered by the said Rule. But the facts is that all actors are not covered by the said Rule and arose actors who services in production of a cinematographic film along are only covered.
19. In this regard we have examined the meaning of modeling and ft has multiple meaning and one nearer to the one under consideration reads as per www.freedictionarv.com 'A person employed to display its merchandise, such or cosmetics.' In this case, Ms Katrina Kaif is employed by the assessee to display its merchandise such as camera. In the original sense of the modeling, the same may be a profession and the receipts earned by such models may be professional receipts. But the fact is that modeling Is not a defined or notified profession either in the Income tax Act, 1961 or in the Notifications, In fact, there are many such unnotified professions and such ones cannot be brought under the provisions of section 194J of the Act. In the instant, admittedly, the services rendered have nothing to do with the production of a cinematographic film. Further, before parting with the order, it is pertinent to mention that a person can have many skills i.e acting skills in Films, modeling skills for display of merchandise, singing skills etc. and such person can make earning out of such skills. It is not that total earning of that person in lieu of services rendered must attract the provisions of section 194J of the Act. The expressions ‘services rendered’ used in the said Explanation assume significance and therefore, the taxable receipts u/s 1943 of the Act are services-specific and not person specific. In the instant case, the payments are payable for the 'services of" modeling .and it is unconnected .with the production of cinematographic film. While 'modeling' is aimed at display of merchandise, the 'acting' is defined as ‘to act in play or film’ www.freedictionaty.com) i.e. to portray a role authored by a story-writer with different purposes and objects and certainly not to displace the merchandize to boost the sales of a manufacturer or a trader of the product or services. Therefore, the impugned payments made by the assessee to Matrix India on behalf of Ms Katrina Kaif do not attract the provisions of section 194J of the Act. Accordingly, the grounds raised are allowed.”
Respectfully following the aforesaid decision, we decide this issue in favour of the assessee.
One common issue raised in Revenue’s appeal is that learned CIT(A) erred in giving relief to the assessee by holding that TDS is not deductible from payments made to custom house agents on account of reimbursement of clearing and forwarding.
Brief facts of the case are that during the previous years relevant to assessment years under consideration, the appellant had made payments to Custom House Agents (CHAs). The appellant is making two types of payments to CHAs i.e. i) clearing charges and ii) reimbursement of the expenditure incurred by CHAs on behalf of the appellant on account of Transportation charges. Crane/Forklift hire charges, Stamp Duty/Admin charges. Freight charges and Handling/storage charges. The appellant had deducted tax at source under section 194H of the Act in respect of payments to CHAs towards clearing charges treating the same to be in the nature of commission. However, the appellant did not deduct any tax at source in respect of reimbursement of expenditure incurred by the CHAs on behalf of the appellant. The AO held that the appellant should have deducted tax under section 194C in respect of reimbursement of expenditure as well. Furthermore, in Assessment Year 2008-09, the AO noted that the tax deducted in respect of clearing charges was also short. Therefore, the AO the appellant to be an assessee in default and computed short deduction of tax and interest as under:-
Short Liability of Interest Total deduction deduction in under in respect respect of section of clearing reimbursem 201(1A) charges ents to CHAs AY 2007-08 36,22,548 61,02,000 57,37,483 1,54,62,031 AY 2007-08 ---- 29,03,255 13,64,530 42,67,785
Upon assessee’s appeal, learned CIT(A) referred to the order of learned CIT a in earlier year and held as under:-
6.4 ''From the above, it can be seen that my Ld. Predecessor has held that no deduction of tax at source is required in respect of reimbursement of expenditure to CHAs. I agree with the same and demand of tax of Rs.61 ,Q2,OGGA- (in AY 2007-08) and Rs.2S,03,2 55/- (in AY 2008-09) along with the corresponding interest under section 2Q1(1A) is hereby deleted. 6.5 The AO has also raised demand of tax and interest in respect of clearing charges paid by the appellant on account of short deduction in AY 2007-08. Such demand has been raised by the AO, by applying the provisions of section 194C of the Act. The appellant has submitted a chart as above clarifying the figures of tax deduction at source in this regard and has claimed that the AO has not taken the correct figures. However, it is seen that there are four parties who have worked as CHAs of the appellant and in AY 2008-09, the appellant has deducted tax at source at a uniform rate of 5.66% under the provisions of section 194H. However, in AY 2007-08, the tax has been deducted in respect of the first two parties under section 194H, whereas the Lax has been deducted under section 194C of the Act in respect of the later two parties This aspect has not been explained by the appellant as to why in respect of the later two parties i.e. DHL Express (I) Pvt. Ltd and International Clearing & Shipping, two different sections and two different rates have been applied for tax deduction at source in AY 2007-08 and AY 2008^09. Therefore no further relief can be granted to the appellant at this stage: However, the AO shall be free to look into this aspect and re-compute the demand of tax and interest, if any in view of the decision of my Ld. Predecessor in AY 2009-10.
Against this order revenue is in appeal before us.
Assessee for AY 07-08 has raised a cross appeal on this issue that Ld CIT (A) should have deleted the entire disallowance.
We have heard both the counsel and perused the records. We find that ITAT assessee’s own case in for assessment year 2009 – 10 vide order dated 21/1/15 has dealt with the issue as under:– “24. We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee paid this amount to the agent for making the payment to third parties for various services availed by the assessee. It is also not disputed that if the payment is directly made by the assessee to the third party in respect of the services provided to the assessee, the same attracts the TDS under the provisions of chapter XVII of the Income Tax Act. The Assessing Officer has recorded that the payment was made in respect of transportation charges, crane hiring charges, administration charges, handling charges to the Airport Authority of India etc. The Assessing Officer has also observed that each of these individual payments attracts the TDS under the different provisions of chapter XVII. Therefore, it is pertinent to note that the agent has made the payment to the third party for and on behalf of the assessee, therefore, it makes no difference if the payment is directly made by the assessee to the third party or it is made through the "went of the assessee if the payment otherwise attracts the TDS as per provisions of chapter XVII of Income Tax Act. It is not the reimbursement of cost of cost of agent for rendering services to the assessee but it is the payment made to the third party through the agent for the services provided by the third party to the assessee. Once the payment is made through the agent to the third party against the services provided by the third party, the assessee is liable to deduct tax on such payment or to ensure the TDS through the agent. There is no denial of the fact that these payments were not subjected to TDS either by the assessee or by the agent. Failure to deduct tax for such payment at any stage either by die agent or by the assessee would attract the provisions of section 201(l) and 201(1A). If this modus operandi is allowed then in each and every payment which otherwise attracts the TDS can be given a colour of reimbursement of making the payment through intermediatory and consequently circumvent the provisions of TDS. The real fact is that the payment is made for and on behalf of the assessee by the agent and, therefore, the same would he considered as payment made by the assessee to the third party for the purpose of TDS provisions under chapter XVII of the Act. The decision relied upon by the Ld. Authorised Representative in case of CIT v/s Siemens Aktiongesellschaft (supra) as well as S.s. & Co. Octroi Contractors Vs. State of Punjab & Ors. (supra) do not apply to the facts of the present case when it is not a real reimbursement of the expenses to the agent but is a payment to the third party through the agent. Accordingly in view of the above discussion and facts and circumstances of the case, we set aside the order of CIT(A) and restore the order of Assessing Officer on this issue.”
In this regard it is the submission of the learned counsel of the assessee that the said order is erroneous. Without prejudice it has been contended that assessee cannot be considered to be in default with regard to those clearing house agents who are assessee’s on record, and have filed return of income under section 139 and who have taken into account the sum paid by Kodak and have also paid the tax on the income declared by it. It has been submitted that the proviso below section 201 (1) inserted as an amendment by the finance act 2012 with effect from 1st July 2 012 is retrospective in nature. Reliance in this regard is placed on ACIT v/s Bharti Airtel, 42 ITR trib 469, Mahindra Navistar Automatics Ltd v/s DCIT, 159 ITD 123, Gujarat Pipavav port Ltd versus DCIT 149 ITD 23. It has been submitted that this issue was not before ITAT in assessment year 2009–10. Hence it is claimed that to this extent ITATs earlier order cannot be said to have covered this issue upon careful consideration, we find that the aforesaid co– ordinate bench order in assessee’s own case on the same issue on similar facts has to be followed on the doctrine of stare decisis. However, the without prejudice submission of the assessee is cogent. However this aspect requires factual verification. Accordingly we direct the assessing officer to examine this aspect of the assessee submission and decide as per law, after factual verification.
10. One common issue raised in Revenue’s appeal is that learned Commissioner of Income Tax (Appeals) has erred in giving relief to the assessee by holding that TDS is not deductible on supply of Cameras manufactured by Hical Magnetic Private Limited by treating the same as contract for sale without properly appreciating the factual and legal matrix of the case as clearly brought out by the Assessing Officer treating the same as works contract.
It transpires that this issue is covered against the assessee by the decision of ITAT in assessee’s own case for Assessment Year 2009–10 in where in the Tribunal has decided the issue against the assessee. The Tribunal in the said order had elaborately dealt with the issue and has concluded that order of learned Commissioner of Income Tax (Appeals) on that issue was set aside and the order of the assessing officer was restored. We may refer to the said order as under:-
“18. The recital of the tripartite agreement reads as under:- a) Kodak has supplied certain tools & moulds more particularly described in annexure A hereto (hereinafter Ëquipments”) to the Supplier for carrying out job work for camera as per the requirements of the Kodak. b) Kodak and Hical have entered into an Agreement whereby Hical will supply to Kodak KB-10 Cameras as per the specifications of Kodak. c) Hical has undertaken to supply to Kodak KB10 Cameras as per requirements of Kodak. d) Supplier has agreed to use the tools and moulds owned by Kodak for the purpose of supply of camera parts to Hical.
Thus, as per the arrangement between the parties, the assessee supplied tool/moulds to the supplier for carrying out job work for camera parts as per requirements of the assessee. These Camera Paris were supplied to the Hical Magnetic Pvt. Ltd. for assembling of Camera. It is clear that the job work for camera parts used as a raw material for assembling of the camera by Hical Magnetic Pvt. Ltd. is arranged by the assessee under the tripartite agreement. Further the assessee is providing the working capital fund to the Hical Magnetic Pvt. Ltd, for the purpose of all cost including labor and raw material which is supplied under the tripartite agreement. Therefore, the nomenclature of the agreement becomes irrelevant when the intention of the parties presents a different picture as per the various terms and conditions of the agreement. The CJT(A] has assumed a wrong fact by recording the tripartite agreement as- an agreement for tools and moulds but it was actually an agreement for job work of Camera parts by supplier for use of assembling the camera by Hical Magnetic Pvt. Ltd. Therefore, it was not an agreement for tools and moulds but is an agreement for supply of Camera parts by various suppliers to Hical Magnetic JM. Ltd. The Camera parts are manufactured as per the tools and moulds provided by the assesses thus the raw material is supplied to the Hical Magnetic Pvt Ltd. by the assessee through the suppliers under the tripartite agreement. The assessee has provided the working capital to Hical Magnetic Pvt. Ltd. for purchase of raw material /camera parts from suppliers and also for labour cost. This arrangement shows that the raw material is provided by the assesses to Hical Magnetic Pvt. Ltd. through these suppliers and the payment is made by providing working capital by the assessee to Hical Magnetic Pvt. Ltd, without any charge of interest. Hical Magnetic Pvt. Ltd., is doing only the assembling of the Cameras as per the specifications provided by the assessee by using the raw material provided under the tripartite agreement.
This arrangement under the two agreements is nothing but a contract under which the activity of Hical Magnetic Pvt. Ltd. do not have financial risk and working capital risk as it was all provided by the assessee. Even the procurement of the raw material is also arranged by the assessee as per the tripartite agreement Thus, it is nothing but a job work contract under these two agreements. Further the assessee is paying the entire cost in advance being working capital and compensation with the margin on cost of raw material and labor at the rate of Rs. 8.04 per Camera to Hical which is nothing hut the job work charges. The price arrangement as agreed between the parties clearly shows that it is a job work of assembling of cameras by Hical Magnetic Pvt. Ltd The Hical Magnetic Pvt. Ltd. in fact, receiving only the Iabor charges and mark up of Rs. 8.04 per camera which is subjected to TDS being job work charges paid by assesses. Therefore, it is not the entire payment to the Hical Magnetic Pvt. Ltd. but only the labor charges of Rs. 20.84 and margin of Rs. 5.04 total amounting to Rs. 20.8H per camera towards the assembling job is subjected to TDS. Accordingly, we set aside the impugned order of CJT[A) on this issue and restore the order of Assessing Officer to the extent of applicability of section 194C only on the payment of Rs. 2Q.88 per camera. The decision relied upon by the CIT(A) in the case of CJT Vs Glenmark Pharmaccuticals (supra) is not relevant on the facts of this issue when the arrangement is found to be work contract.”
In this regard learned counsel of the assessee has vehemently argued that the said decision of the ITAT was rendered on an erroneous recording of facts and erroneous inferences drawn from such facts.
However we note that the said order of the ITAT has already been challenged by the assessee before the Hon’ble jurisdictional High Court. The jurisdictional High Court has not reversed the said decision of the ITAT. When it was pointed out by the Bench that if the learned counsel of the assessee is urging us to take a contrary view than that expressed by the ITAT in assessee’s own case the matter would need to be referred to a Special Bench, the learned counsel of the assessee submitted that he would not be requesting for a Special Bench reference. Accordingly, respectfully following the decision of ITAT in assessee’s own case, we set aside the order of learned commission of income tax appeals and restore the order of assessing officer.
Another issue raised in Revenue’s appeal is that learned Commissioner of Income Tax (Appeals) has erred in giving relief to the assessee by holding that TDS is not deductible on supply of batteries manufactured by power cell batteries India Ltd. by treating the same as contract for sale.
It transpires that this issue stands covered in favour of the assessee by the aforesaid Tribunal order for Assessment Year 2009–10, wherein the Tribunal has decided the issue in favour of the assessee by dealing with the same at paragraphs 7 and 8 of the said order. The Tribunal agreed with the learned CIT(A) that the agreement in this regard was not job work agreement but it was simply an agreement for purchase of a specific battery with the name of the assessee printed on the cell. The Tribunal had followed the decision of Hon’ble jurisdictional High Court in the case of CIT vs. Glenmark Pharmaceuticals Ltd. 324 ITR 199. Respectfully following the precedent as above, we uphold the order of learned Commissioner of Income Tax (Appeals) in this regard and decide the issue against the Revenue.