JCIT, BANGALORE vs. M/S HEWLETT PACKARD INDIA SALES PVT. LTD., BANGALORE

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ITA 1065/BANG/2015Status: DisposedITAT Bangalore30 November 2015AY 2007-086 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, stating that since the Section 263 order was quashed, the subsequent assessment order based on it could not subsist. Therefore, the assessee's appeal was allowed.

What were the facts?

The assessee company's assessment order was set aside by the CIT under Section 263, holding that TDS was applicable on advertisement charges. Subsequently, the ITAT quashed the CIT's order, finding no error prejudicial to the revenue. The CIT(A) then allowed the assessee's appeal as the original Section 263 order no longer existed.

What were the issues?

Whether an assessment order passed pursuant to a Section 263 order, which is subsequently quashed, can subsist. The applicability of TDS provisions on advertisement charges.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 40(a)(ia),Section 194C,Section 194H

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’

Before: SMT. ASHA VIJAYARAGHAVAN & SHRI INTURI RAMA RAO

For Appellant: Smt. Neera Malhotra, CIT
For Respondent: Shri Sharath Rao, CA

PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER

1.

This appeal is directed against the order of Commissioner of Income-tax (Appeals) – 14 (LTU), Bangalore dated 27.4.2015 for the assessment year 2007-08.

2.

The assessee company is engaged in the manufacture and trading of computer systems and components. Return of income for AY 2007-08 was filed on 31.10.2007 declaring a total income of Rs.292,70,55,585/- which was assessed u/s 143(3) through order dt. 28/12/2010 at Rs.293,91,65,911/-. Subsequently, the CIT, LTU passed an order u/s 263 dt. 26.3.2013 holding that the expenditure incurred for the payment of advertisement charges to M/s TLG India attracted TDS on the entire amount by virtue of Board’s Circular No.715 dt. 8.8.1995. The assessment order was, accordingly, set aside. After giving opportunity of hearing to the assessee, the AO completed the set aside assessment through order dt. 13.3.2014 which has been contested in this appeal.

3.

During the course of appellant proceedings before CIT(A), the AR filed a copy of the Hon’ble ITAT, Bangalore’s order dt. 30.12.2014 in for AY 2007-08 by which the CIT’s order u/s 263 was quashed on the ground that the ingredients necessary for invoking such powers u/s 263 i.e that there should be an error in the order and such error should be prejudicial to the interest of revenue, were absent in the assessee’s case.

4.

The CIT(A) held that since the original order u/s 263 no longer exists, the AO’s order passed to give effect to the directions of the CIT u/s 263 cannot subsist. The appeal was, therefore, allowed.

5.

Aggrieved the Department has raised the following grounds:-

“(1)Expenditure incurred for payment of advertisement charges attracted TDS on the entire amount by virtue of Board’s Circular No.715 dated 8/8/1995. (2) The ITAT vide its order dated 30/12/2014 in has quashed the CIT’s order u/s 263 on the ground that there should be an error in the order and such error should be prejudicial to the interest of revenue, were absent in this case. (3) The CIT, LTU, Bangalore vide letter dated 12/6/2015 has directed the AO to file further appeal before the Hon’ble High Court of Karnataka on the above issue in the case in ITA No.737/Bang/2013 for AY 2007-08). (4) The ITAT’s order on 263 order is not accepted and appeal to High Court is filed vide authorization dated 12/6/2015. Further appeal filed to maintain consistency.”

6.

We have heard both parties. We find that the Tribunal in for the same asst. year 2007-08 by order dated 30.12.2014 quashed the order u/s. 263 of the Act dated 26.3.2013 passed by CIT(LTU), Bangalore. The relevant portion of the Tribunal’s order dated 30.12.2014 is extracted below:-

“4. In reply to the above notice, assessee submitted that it had an agreement with M/s TLG India Pvt. Ltd., for buying media space from print media, electronic media etc., As per the assessee media buying cost were billed by the concerned media to M/s TLG India. Pvt. Ltd. Latter concern had claimed such amount as reimbursement from the assessee. As per the assessee, invoices raised by M/s TLG Ind. Pvt. Ltd. comprised of two components. One was reimbursement for media space and the second was commission payable by the assessee to M/s TLG Ind. Pvt. Ltd., As per the assessee on such commission Sec.194H stood attracted and accordingly, it had deducted tax at source on such commission. Argument of the assessee was that on reimbursement for media space buying cost, there was no necessity for deducting tax at source. There was no income component therein. The auditors had made a qualification in their report mainly relying on the CBDT Circular No.715 dated 08-08-1995. As per the assessee, the CBDT Circular covered only payments coming within the ambit of Section 194C where there were consolidated payments based on advertising contract. However, the CIT was not impressed by the above argument. According to him, the Circular mentioned supra, clearly covered the type of payments effected by the assessee to M/s TLG India Pvt. Ltd. Assessee having not deducted tax at source as required u/s 194C of the Act, learned CIT held Section 40a(ia) ought to have been invoked by the AO. Since the AO has not done that CIT held the assessment done to be erroneous and prejudicial to the interest of revenue. …………………

10.

That CBDT Circulars cannot give interpretation beyond the provisions of the Act and overriding the rulings of appellate authorities, is trite law. Hon’ble Apex Court has time and again considered this position and affirmed it as done in Hindustan Aeronautics Ltd case(supra). Assessee had deducted tax at source u/s 194H on the commission amounts comprised in the billings raised on it

by M/s TLG India Pvt. Ltd. The AO was satisfied with regard to the treatment given by the assessee and deduction of tax at source by it. In our opinion, the CIT was only substituting his view with a lawful view taken by the AO. Revisionary powers u/s 263 cannot be invoked for this purpose. The ingredients necessary for invoking such powers are that there should be an error in the order and such error should prejudicial to the interest of revenue. These, in our opinion are absent here. We therefore, quash the order u/s 263 passed by the CIT.”

7.

We confirm the order of CIT(Appeals) in holding that the order u/s 263 no longer exists and, therefore, AO’s order giving effect to the directions of CIT, u/s 263, cannot subsist. Hence the CIT(A) allowed the appeal of the assessee. We are of the opinion that the reasoning given by the CIT(A) in allowing the assessee’s appeal is correct. Hence, we dismiss the appeal of the Revenue.

8.

In the result, the appeal of the Revenue is dismissed.

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