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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri P.M. Jagtap & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
The captioned appeal has been filed at the instance of the assessee against the order of the ld. Commissioner of Income Tax (Appeals-1)- Vododara, dated 21/06/2019 relevant to assessment year 2016-17.
The appellant has raised following grounds of appeal:-
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“Your appellant being dissatisfied by the order passed by Hon'ble Commissioner of Income Tax-1 Baroda u/s 143(1) of the Act dated 21.06.2019, presents this appeal against the order on the following amongst other grounds:
The order passed by the Hon'ble CIT(A)-1 is bad in law, contrary to legal pronouncement and same be quashed. The addition confirmed by the Hon'ble CIT{A) are unwarranted and unjustified. It be held so now and addition made to be deleted.
The Hon'ble CIT(A), has wrongly concluded that the appellant has failed to avail an opportunity as per notice u/s 250(4) / 251(1A) of the act. The appellant has submitted detailed explanation to the notice submitted with the office of the Hon'ble CIT(A)-1, Baroda on 13.06.2019. In fact as per the notice the opportunity of filing the reply was given and no opportunity for personal hearing was given which was awaited by the appellant. Thus the order passed by Hon'ble CIT(A)-1, Baroda is bad in law and be quashed.
The Hon'ble CIT(A), has wrongly concluded that charging of interest u/s 234B/C is consequential, mandatory and parasitic in nature relying on the decision of Hon'ble Supreme Court in the case of CIT v/s M. H. Ghaswala. However he has failed to consider the provisions of section 207 of the act. It be held so now and order passed by the Hon'ble CIT(A)-1 Baroda be quashed.
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The Hon'ble CIT(A), has erred in holding that the appellant was not an employee(Managing Director) of the company. In turn he has wrongly treated the remuneration received by the Managing Director as Professional Fees. Your Appellant submits that the relationship of the appellant as Managing Director with the company is that of an employee and cannot be considered professional services. It be held so now, and the addition made to be deleted.
The Hon'ble CIT(A)-1, Baroda has wrongly confirmed the charging of interest u/s 234B/C of the act by rejecting all the arguments placed before him by the A.R without any cogent reason. Your appellant submits that A.O be directed to delete the addition made on account of interest charged u/s 234B/C of the act.
Your appellant craves for leave to alter/amend/withdraw/modify any of the above grounds before hearing.”
Briefly stated, the facts of the case are that the assessee is a senior citizen deriving income from salary, income from other sources and income from share from partnership firm. The assessee filed return of income on 28- 07-2016 declaring total income at Rs. 3,54,86,370/-. In the return of income filed, he did not have income chargeable under the “head profit or gains from business and profession”, for the captioned year. The assessee was served with intimation u/s. 143(1) of the Act passed by CPC, Bangalore with interest u/s. 234B and 234C of the Act resulting into a demand of Rs. 5,64,130/- against which the assessee filed a appeal with CIT(Appeals).
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During the course of appellate proceedings, ld. CIT(A) noted that the assessee is getting salary from three companies i.e. M/s. Elmex Control Pvt. Ltd., M/s Elmex Electrical and Electronics Pvt. Ltd. and M/s. Elecon Electro Pvt. Ltd. The assessee was also a partner in six firms namely (i) ACE Industries, (ii) Agrim Industrial Plastics, (iii) Ancel Industries, (iv) Anurag Industries, (v) Elmex Industries (vi) Enten Plastics and the assessee received share of profit from the above six firms. During the course of appellate proceedings, the assessee was asked to produce copy of terms and conditions of employment held in these three companies. The ld. CIT(A) noted that the reply filed by the assessee in response to this requisition was evasive and appellant failed to submit copy of terms of service with the three employers. The ld. CIT(A) observed that assessee is a 85 year individual and is simultaneously working as an employee in three companies and managing business affairs of six firms. However, in absence of copy of terms of service, the appellant has failed to prove employer-employee relationship. Mere deduction of TDS u/s. 192 of the Act does not confer right to the appellant to claim employer-employee relationship especially when appellant himself is a managing director of the company and the entire control is in his hand. Accordingly, the ld. CIT(A) held that assessee is earning business and professional income and the benefit of section 207(2) is not available to him and accordingly interest u/s. 234B and 234C being consequential and mandatory has been correctly charged by CPC for non- compliance of advance tax provisions. The ld. CIT(A) placed reliance on the decision of the Supreme Court in CIT vs. M.M. Ghaswala which is to the effect that charging of interest is mandatory in order to compensate loss of revenue. Accordingly, the appeal of the assessee was dismissed.
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Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. The assessee before us submitted that it is an undisputed fact that the assessee is a senior citizen of over 60 year of age. The assessee took us through page 1 of the paper book filed on 06-10-2021 wherein he pointed out that the assessee has filed return of income declaring “income from salary” and “income from other sources”. The assessee submitted that as per section 207(2) of the Act an individual resident who does not have any income chargeable under head “profit and gains from business or profession” and who is of the age of 60 years or more is not required to pay advance tax. In the instant set of facts, both the above conditions have been satisfied i.e. the assessee is above sixty years of age and perusal of the return of income would show that the assessee does not have any income chargeable under the head “profits and gains of business or profession”. Further, the assessee submitted that the Ld. CIT (A) has not brought any cogent material to demonstrate that the assessee is earning business/ professional income. The conclusions of the Ld. CIT(A) are based purely on the rationale that since the assessee is a managing director of the firm, in which he has control, that he is deemed to be earning professional /business income and is not entitled to earn salary from the said concerns. The assessee submitted that the ld. CIT(A) has failed to appreciate that the assessee is a qualified professional having degree in B.E. (Electrical) Engineering and having experience more than 60 years in this line. Further, since tax has been deducted from his salary u/s. 192 of the Act and this practice has been followed from year and year, the ld. CIT (A) erred in concluding that the assessee has earned income from business and profession and has not earned salary income.
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The ld. Departmental Representative relied upon the observations made by the ld. CIT (A) in the appellate order.
We have heard the rival contentions and perused the material available on record. It is the claim of the assessee that in the year under consideration, the assessee did not have any income chargeable under the head “ profits and gains of business and profession” and further he is a senior citizen of more than 60 years old and hence squarely covered by the provisions of section 207 of the Act. Section 207 of the Act is reproduced below for ready reference.
“207. (1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income". (2) The provisions of sub-section (1) shall not apply to an individual resident in India, who— (a) does not have any income chargeable under the head "Profits and gains of business or profession"; and (b) is of the age of sixty years or more at any time during the previous year.”
On a reading of section 207 of the Act, it is seen that it speaks of liability to pay advance tax. As per sub section (1), advance tax has to be paid on the total income of the current year in accordance with the provisions of section 208 to 219 of the Act. However, sub section (2) of section 207 which has
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been inserted by Finance Act, 2012 w.e.f. 01.04.2012 carves out an exception by stating that sub section (1) would not be applicable to a resident individual assessee who does not have any income chargeable under the head profits and gains of business and profession and if he has attained the age of 60 years or more at any time during the relevant previous year. As per copy of income tax return submitted before us, the date of birth of the assessee is 30/06/1934 and thus, during the previous year relevant to the assessment year under dispute, the assessee is clearly above the age of 60 years. Further, a perusal of the income tax return submitted before us during the year under consideration shows the assessee had no income which is chargeable under the head “profits and gains” of business and profession. On a perusal of the order of the ld. CIT(A), we see that he has not brought on record any cogent material to demonstrate that the assessee is earning income from business or profession and is not drawing salary from these concerns on which TDS has been deducted u/s. 192 of the Act. The ld. CIT(A) has primarily relied on the understanding that since the assessee himself is a managing director of the company in which he is having control, he is not entitled to earn salary from the said company and the income so earned from the company bears the character “ business and professional income”. However, in view of the fact that the assessee is a senior citizen above 60 years of age, has been consistently filing return declaring income earned as Salary income from these concerns, tax has been deducted at source u/s 192 of the Act on the payments made to the assessee and that the Ld. CIT(Appeals) has not brought any material on record to exhibit that the assessee has not earned salary income, we are of the view that the assessee has satisfied conditions of section 207 of the Act and is not
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liable to pay advance tax. In the result, we hold that ld. CIT(A) has erred in confirming the charging of interest u/s. 234B and section 234C for non- compliance of advance tax provisions.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 28-02-2022
Sd/- Sd/- (P.M. JAGTAP) (SIDDHARTHA NAUTIYAL) (VICE PRESIDENT) JUDICIAL MEMBER Ahmedabad : Dated 28/02/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद