VAISHALI KRISHI KENDRA vs. DCIT,

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA BEFORE SHRI N.K SAINI (Accountant Member) & SHRI AMIT SHUKLA (Judicial Member) ITA No.15 /Pat/2015 Assessment year: 2010-11 Vaishali Krishi Kendra, Vaishali, PAN GIR No.AAGFV7138L (Appellant) Vs. DCIT, Circle-1 , Patna: Respondent) Department by: Shri Abhay. Kumar, DR Assessee by: Shri K. N. Prasad, Adv_ Date of hearing: Date of Pronouncement: 08/03/2018 08/03/2018 ORDER PER AMIT SHUKLA_JM: The aforesaid appeal has been filed by the appellant- assessee against impugned order dated 18.02.2015, passed by Ld_ CIT (Appeals)-1 , Patna for the quantum of assessment passed u/s 143(3) of the Income Tax Act, for the assessment year 2010-11_ 2 The assessee is into business of sale of tractors_ In various grounds of appeal, the assessee is mainly challenged the disallowance of a sum of Rs.32,86,250 / - made by the AO by 2 ITA No.-15/Pat/2015 invoking the provisions of section4O(a)(ia) on account of non- deduction of TDS in respect of expenses debited under the head Brokerage and Commission for which TDS provision were applicable. The AO disallow the expenditure on the ground that the assesse was under obligation to deduct the TDS u/s194J on the payment amounting to Rs.38,86,250 / - which were paid to various persons. 3_ Before the Ld. CIT(A), assesse has submitted that it had duly produced the vouchers towards expenditure incurred, which were in the nature of professional charges for the procurement of business and other activities like sanction of loan etc. for the parties buying tractors, however they have been depicted under the head brokerage and commission, but same cannot be disallowed by invoking the provision 40 (a) (ia), because deduction of TDS at all, would be u/s 194J for which the aggregate limit prescribed is Rs.30,000 / - and not Rs.2,500 /= Various decisions of the High Court were also referred and relied upon, which have been incorporated in the appellate order in page 11. However, the Ld_ CIT(A) has confirmed the action of the AO on the ground that AO by 3 ITA No.-15/Pat/2015 mistake has mentioned the deduction of TDS to be made u/s 194J instead of correct section 194H which is for commission and brokerage wherein the prescribed limit is Rs.2,500 / -. On the sample copies of the vouchers submitted by the assesse to show that the payment has been made on account of service rendered towards activities in respect of sanction of loan to the purchaser from financer and other activities like procurement of business etc , Ld. CIT(A) held that sane cannot be accepted, because the payments have been made to mechanics and brokers to procure the business and, therefore, they are outside the category of processional or technical services. 4 Before uS, the Ld Counsel Shri K N. Prasad submitted that though the nomenclature of expense mentioned in the vouchers have been given as Brokerage and Commission but same cannot be the basis to ascertain to exact nature of payment to the persons concerned. The assesse had duly produced the vouchers which clearly show that the payments are in the nature of remuneration / professional charges. Once the payment is in the nature of professional charges, then TDS should be deducted u/s 194J; and in such case the payments made to the persons are ITA No.-15/Pat/2015 much below the aggregate prescribed limit to Rs.30,000/-, then no disallowance can be made for non-deduction of tax: Hence, assesse was not liable to deduct TDS and consequently no disallowance u/s 40(a) (ia) can be made. 5_ On the other hand, Ld. DR strongly relied upon on the orders of the Ld. CIT (A) and submitted that the nature of expenditure incurred as well as the payment needs to be examined and verified SO as to come to the conclusion that the payments made by the assessee falls in the category of professional charges within the scope of section 194J. Thus, the matter can be restored back to the file of the AO for the purpose of verification and fresh examination 6 We have heard the rival contentions and also perused the relevant findings given in the impugned order. The disallowance u/s 40(a) (ia) have been made for sums aggregating to Rs.32,86,250 / - on the ground that the expenditure debited under the head 'Brokerage and Commission have not been subjected to withholding of taxes under Chapter XVII. The contention of the assessee has been that the payments made under this head were in 5 ITA No.-15/Pat/2015 fact in the nature of remuneration / professional charges for procurement of business and other activities like facilitating sanction of loan etc , to the parties. Since, these are in the nature of professional charges, therefore, TDS u/s 194J alone could have been deducted for which aggregate prescribed limit is Rs.30,000 / - and here in this case the payments have been made much below the said prescribed limit. In support of such contention sample copies of vouchers have been placed before us to show that the payments were in the nature of professional charges, even though, they have been classified under the head Brokerage and Commission It is also been contended that nomenclature of the document or head cannot be the basis to ascertain the exact nature of transaction and cannot be the deciding factor and in support of which certain decisions of Hon ble Madras High Court has been relied upon like: - Order dated 30.09.2011 in the case of S.A. Kovil Nadar VS Inspector General of Registration and Others; Order dated 28.07.2011 in the case of Manickam VS. Chinnasamy and others. ITA No.-15/Pat/2015 7 Since, the exact nature of payments have not been examined by the AO or by the Ld: CIT (A), therefore, in the interest of justice, we feel that the matter should be restored back to the file of the AO, who shall examine the nature of payments and if such nature of payments falls within the scope and meaning of section 194J . In case, if the nature of payments falls in the category of professional charges Or fees for professional services, then it needs to be further seen, whether the payment made to each individual exceeds prescribed aggregate limit of Rs.30,000 / - or not which limit has been brought in the statute We.f. 01.07.2010_ If payments do not exceeds the said limit, ostensibly then, no disallowance should be made in terms of section 40(a)(ia). The onus would be on the assessee to substantiate the claim that the payment made to the persons falls in the nature of the professional services With this direction, the appeal of the assesse is remitted back to the file of the AO_ ITA No.-15/Pat/2015 8 In the result, the appeal filed by the assessee is allowed for statistical purposes: Order is pronounced in the open court on 8thMarch, 2018_ / - / (N.E K. Saini) Accountant Member (Amit Shukla) Judicial Member Date of order: 8th March, 2018_ S.Sinha Copy of_the Order forwarded to: 1_ 2 3 4 5 _ 6 The Appellant: The Respondent: The CIT(A)-Patna CIT Patna Income Tax Appellate Tribunal,Patna Guard file I // / BY ORDER PRIVATE SECRETARY