ITO (TDS) 3(4), MUMBAI vs. UNICHEM LABORATORIES LTD, MUMBAI

Per Ramit Kochar Accountant Member:

These are two Appeals by the Revenue directed against the common Order by the Commissioner of Income Tax (Appeals)-13, Mumbai (‘CIT(A)’ for short) dated 11/04/2014 , for the assessment year’s 2009-10 and 2010-11. The identical issues are involved in both these appeals and both these appeals are disposed of by this common order for the sake of convenience and brevity. We would first take the appeal in ITA No. 4592/Mum/2014 for assessment year 2009-10 as the lead appeal and our decision in ITA no. 4592/Mum/2014 for the assessment year 2009-10 shall apply mutatis mutandis to the appeal in ITA No 4593/Mum/2014 for the assessment year 2010-11.

“(i). On the facts and circumstances of the case and in law, the Id. CIT (A) has erred in holding that the relationship between the assessee and distributors is in the nature of principal to principal and not that of principal to agent and held that the assessee company was not liable to deduct TDS u/s. 194H of the I.T. Act and thereby erred in deleting the non deduction/short deduction u/s. 201(1) and interest u/s. 201(1A). (ii). On the facts and circumstances of the case and in law, the Id. CIT (A) erred by holding that the assessee company was not liable to deduct TDS u/s. 194H of the I.T. Act and thereby erred in deleting the non deduction/short deduction u/s. 201 (1) and interest u/s. 201 (1A) without appreciating that the pricing structure between the assessee company and distributors is nothing but "a payment received or receivable directly or indirectly by a person acting on behalf of another person for services rendered or for any services in the course of buying or selling of goods within the meaning of section 194H of the Act.

(iii). On the facts and circumstances of the case and in law, the Id. CIT (A) erred in holding that the assessee cannot be held as an 'assessee-in-default' for

3 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. not deducting tax on sitting fees paid to directors and thereby erred in deleting the short deduction u/s. 201 (1) and interest u/s. 201 (1A) without appreciating that the payment was made as honorarium for the managerial services rendered by the directors and was clearly in the nature of professional fees paid for the services rendered by them.

(iv). On the facts and circumstances of the case and in law, the Id. CIT (A) erred in holding that no TDS is required to be deducted on directors' sitting fees as the amendment to the provisions of section 194J(ba) were made w.e.f. 01.07.2012 and it is not applicable to the relevant A.Y. without appreciating that any amendment made to the provisions of Income Tax Act, 1961, should be taken as curative in nature and should be given retrospective effect.

4 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. are dispatched from manufacturing locations Roha & Pithampur to various customers based on Orders received from Marketing and communicated to plants for direct dispatch to concerned customers. Collections are received from Distributors, Consignment agents and Stockiest in assessee company’s bank accounts. During the course of survey action u/s 133A(1) of the Act it was found by the learned assessing officer(Hereinafter called “the AO”) that the assessee company is selling the products through its distributors, stockiest and consignment agent. The assessee company is also exporting products, it was observed by the AO that the assessee company has fixed the MRP for its products beyond which the same cannot be sold to the end user. The assessee company is accounting its sales through distributor after deducting the margin earned by the distributor/stockiest from the MRP as per the following examples:- If MRP of product is Rs. 100 then:

DPCO NON DPCO MRP 100.00 100.00 ED 3.35 3.35 VAT 4.76 4.76

Ass Val 91.89 91.89 Ret Margin 14.70 18.38 Stk Margin 6.44 7.69 Dist Mar 3.62 3.46

Price to Dist 75.23 70.48 Price to Stks 78.85 73.94 Price to Retailer 85.30 81.62 Price to Customer 100.00 100.00

5 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. Since the assessee company is showing in its books of accounts only the sale price it has earned minus the margin, it was not deducting any tax at source on the margin earned by the distributors/stockiest and sale through distributors was estimated for the period April 2011 to 30th Sept. 2011 to be to the tune of Rs.130 crores. It was observed by the AO that assessee company is paying commission to its Consignment Agents and deducting tax at source thereon at the rate applicable u/s. 194H of the Act. It was also observed by the AO that assessee company has given discounts/schemes to distributors and stockiest and no tax is deducted at source thereon.

The statement on oath was recorded by the Revenue of the General Manager Finance of the assessee company on 14/10/2011 who stated on oath that the formulation products are sold by the assessee company to distributors on principal to principal basis and to Stockiest through Consignment agents. Consignment agents are selling the finished formulations to various stockiest. It was stated that the bulk drugs and intermediaries are dispatched from manufacturing locations Roha and Pithampur to various customers based on orders received from Marketing and communicated to plants for direct dispatch to the concerned customers. It was stated that collections are received from distributors, consignment agents and stockiest in the assessee’s bank account. Similarly for procurement it was stated that raw material , packing material etc are procured after receipt of approved requisition from manufacturing locations. The orders are placed based on requisition and forecast. On receipt of order, the vendor supplied the material on the basis of terms and conditions contained in the purchase order. After receipt of material, the payments are processed by accounts department at respective locations based on terms agreed in order.Similarly it was stated that for the import purchases, indent /offers are asked from the overseas vendor. The terms of payments are LC, advance payment and documents at sight. The supplier inform the details of documents like Airway bill/Bill of lading, packing list, invoice and test reports etc.. The goods are cleared by the assessee company from the

6 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. port/airport after payment of custom duty by the assessee company and sent to respective locations from port. The payments in foreign currency are paid to vendors on due date by the assessee company. Similarly for exports made by the assessee company, the GM Finance of the assessee company stated during recording of statement on oath on 14.10.2011 that the assessee company is exporting formulations and bulk drugs to various countries. Finished goods are directly dispatched from manufacturing locations to customs ports. Export documentation is carried out by the commercial and logistic department who ensures all legal compliances and requisite documents with respect to pre and post shipment. Collections from overseas customers are being received directly in company’s bank account.

It was observed by the AO that there are three methods for the sale of the drugs- medicine by the assessee company. First through the consignment agents which are located in various parts of the country, secondly through distributors and thirdly through export of drugs. With respect to the commission agents, the assessee company is paying commission to the commission agents after deduction of tax at source u/s.194H of the Act . With regard to distributors, it was observed by the AO that the contention of the assessee company was that the drugs-medicine were sold to the distributors who then further sell them to the stockiest/retailers and finally they are sold to the ultimate customers. The contention of the assessee company is that the distributors are independent traders and are not agents of the assessee company. It was observed by the AO during the course of the survey that the MRP is fixed by the assessee company and the margins to be charged by the distributors/retailers is also fixed by the assessee company. This margin differs with regard to the controlled drugs and uncontrolled drugs. It was found that in case of expiry of the medicines the same are returned by the distributors to the assessee company who in turn refund the monies paid by them in first instance. Thus the distributors per se has no risk and all the risk is borne by the assessee company. Furthermore, it is the assessee company who

7 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. decide the margins to be charged by the distributors. This factors leads to an inference that the nature of the relationship may be one of principal and agent. The AO held that to establish this beyond doubt, enquiries are required to be made with respective distributors with regard to their function and duties to see whether they are in fact traders or simple agents of the manufacturing company. So the AO observed that the sale through distributors stood at Rs. 130 crores from April, 2011 to 30.09.2011. Estimated margin @ 3.46% to the distributors works out to Rs. 4.5 crores on which it needs to be seen whether this amount is actually in the nature of commission on which tax was required to be deducted at source u/s 194H of the Act . The AO further observed that the discount/incentives to the distributors were being given by the assessee company to the extent of Rs. 10.59 crores on which no tax was deducted at source which are likely to be in the nature of commission paid to the distributors in addition to the margin on which TDS should have been deducted u/s. 194H of the Act. The assessee company in reply submitted in respect thereof as under:-

“A) Non Deduction of TDS in case of Distributors,

i) On sale of goods by Unichem to its Distributor, ownership over goods pass to the distributor and thereafter Unichem does have any control over goods.

ii) Distributor after purchasing goods form Unichem sell goods to the end customer's on its own and Unichem does not come in picture.

8 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. iii) Distributors purchase goods from Unichem against advance or on payment against deliver or as per normal credit policy of the Unichem. The payment terms of the end customers is independently controlled by Distributors as per their trade policy.

iv) Distributor issues sale invoice directly to the end customers and shows the sales so effected in its sales tax returns and assessed to sales tax. We understand that 'you have already verified this by issuing summons to few distributors. We request you to kindly give assessee copy of statement recorded, if any, of the distributors.

v) Distributors hold all relevant registration in its name which is required in normal course of its distribution business of pharmaceutical products. vi) The stock of goods lying with distributors is not shown as stock of assessee. Insurance on these products is taken out by distributors and not assessee (copy of insurance policy taken by one of the distributor is encloses). This also shows that title to the goods vests with the distributors once sale is made to them. vii) The distributor has maintained requisite infrastructure and manpower for its business. viii) In case of any breakage, leakage, etc, distributor is responsible and liable for the loss and not Unichem. However, in case of expired product, Unichem takes back the expired products as per industry norms, since; pharmaceutical products are consumed by the general public and any expired product can cause serious health hazards. Therefore, as per the stockiest and retailers association manufacturer is supposed to take back the Expired goods from the stockiest and retailers and manufacturer need to reimburse the cost of the expired goods to the stockiest and receiving the expired goods from the retailers and stockiest at distributor's end and distributors after due verifications on quantity, quality and reasons for expiry of the products send back the goods to assessee's Ghaziabad Depot for destruction. On verification of expired goods at assessee's depot at Ghaziabad assessee destroy the expired goods under supervision of Quality Assurance person. In view of the above your good self will appreciate that assessee and the distributors are functioning on principal to principal basis and not on principal to agent basis. Taking into consideration the principal to principal basis the assessee is not required to deduct TDS u/ s 194H as the margin earned by the distributors does not constitute commission income.”

9 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd.

3,301,895,785 3.46% 10,84,06,660 1,22,82,475 58,95,588 Total 18178062

10 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd.

11 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. FEFO in accordance with the draft guidelines on good distribution practices for pharmaceuticals products issued by the CDSCO (Central Drugs Standard Control Organization) and as per which pharmaceutical products are stored/distributed (first expiry/first out, FEFO) .The assessee company submitted that if the distributor is maintaining FEFO method and there are expiry of drugs, same are taken back and money refunded. The assessee company relied upon the decisions in the case of the Mother Diary 249 CTR 559 and Jai Drinks Private Limited 336 ITR 363 by Hon’ble Delhi High Court and in the case of Fosters India Private Ltd. 29 SOT 32 and Government Milk Scheme 39 ITD 306 by Pune Tribunal . The assessee company also relied upon the decision of Hon’ble Supreme Court in the case of Ahmadabad Stamp Vendors Association, 25 Taxman.com 201 (SC) (292).

The CIT(A) after considering the submissions of the assessee company held that the assessee company is manufacturing and selling bulk drugs and formulations in their plants at Goa, Ghaziabad, Sikkim, Baddi etc. The assessee company have their own warehouses wherein they store manufactured products. When survey action u/s 133A of the Act was conducted , it was found that the assessee company is selling the products through these distributors/stockiest and the consignment agents in different assigned areas and the sales/revenue is credited only for the net amount received/ receivable from the distributors after deducting discount as the assessee company is giving discounts/schemes to the distributors and stockiest. The AO held that no tax has been deducted on the said discount; same is in the nature of commission and thus was liable for tax u/s. 194H of the Act and as per the AO the assessee having not deducted tax at source on the said amount given to their distributors , hence were liable for the consequences in the form of levy of tax u/s. 201 and interest u/s. 201A of the Act. The CIT(A) held that the sale by the assessee company with the distributors being that of a product that are pharmaceutical drugs is a contract of sale . That in a contract of sale when the manufacturer sells the goods to their distributors

12 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. with all the risk and liabilities passed on to them, though putting some limitations/restrictions regarding maintenance and storage etc. as regard to the quality and fair prices for the market to ensure their reputation, the relationship is that of principal to principal and not of principal and agent.

The CIT(A) observed that he has gone through the decisions relied upon by the AO and found that these decisions are dealing with the sale of services and not product per se. while in the instant case the sale is that of a product i.e. medicines and not of any service which assessee company is doing through their distributors. The assessee company has given the discount to the distributors on the MRP of these medicines, the restrictions as brought in the agreement are only as per the guidelines of operations in the field of medicines and thus are the operating procedures. The CIT(A) held that the case of the assessee company is covered by the decision of the Mumbai Tribunal in the case of Glenmark Pharmaceutical Limited 30 SOT 19(Mum.) and Hon’ble Delhi High Court in case of Reebok India Company 306 ITR 124(Del.) in favour of the assessee company. The CIT (A) held that the action of the AO to hold the assessee company in default for not deducting tax on the commission paid and consequently levy of tax and interest amounting to Rs.1,81,78,062/-, being not sustainable was ordered to be deleted vide orders dated 11.04.2014.

13 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. the orders of the AO while on the other hand, the ld. Counsel of the assessee company submitted that the dealing between the assessee company and the distributors is based on principal to principal basis. The Ld. Counsel of the assessee company reiterated the submissions as made before the authorities below and relied upon the orders of the CIT(A), that there is sale of the products by the assessee to the distributors on principal to principal basis. The ld. Counsel drew our attention to the distribution agreement dated 01.07.2001 entered into by the assessee company with Rudra Pharma Distributors Ltd., the ld. Counsel of the assessee company submitted that the terms and conditions of the agreement clearly stipulate dealing between the assessee company and the distributor is on principal to principal basis, whereby the assessee company is selling the drugs to the distributor and all the risks and rewards of the ownership of the drugs-medicine are transferred to the distributor on sale of the products i.e. medicine . The assessee company relied upon the decisions of the Hon’ble Bombay High Court in the case of CIT v. Intervet India Pvt Ltd. 364 ITR 238 in ITA No. 1616 of 2011 . The assessee company also submitted that the discount is given on the MRP to the distributors which is in the nature of discount and not commission and no tax is required to be deducted at source under the provisions of the Act. The assessee company submitted as under the scheme of discount offered by the assessee company:

If MRP of product is Rs. 100 then: DPCO NON DPCO MRP 100.00 100.00 ED 3.35 3.35 VAT 4.76 4.76

Ass Val 91.89 91.89 Ret Margin 14.70 18.38 Stk Margin 6.44 7.69

14 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. Dist Mar 3.62 3.46 Price to Dist 75.23 70.48 Price to Stks 78.85 73.94 Price to Retailer 85.30 81.62 Price to Customer 100.00 100.00

The assessee relied upon the decision of Hon’ble Delhi High Court in the case of Mother Diary in 358 ITR 218 to contend that discount to MRP is not commission and hence not liable for deduction of tax at source.

15 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. products shall be borne by the distributor. The drugs being medicines contains certain restriction on the sale w.r.t. good governance and conduct by the distributors to follow first expiry and first out basis as the medicines having expiry could not be sold after the stipulated date of expiry , otherwise it will be health hazard to the consumers , the assessee company as normal market practice takes back the said expired drug- medicines from distributors which has expired and pay back the distributors but that does not in our humble opinion is decisive or change the character of dealing between the assessee company and the distributor which primarily continues to be on principal to principal basis . Such exception of taking back the expired products has its genesis to the sensitivity of the product being drugs-medicine handled by the assessee company otherwise it could have severe health hazard impacts on the consumer which is a normal market practice in the industry but the same is not decisive to conclude that the property in the goods with all risks and rewards have not passed to the distributor on sale of products by the assessee company to the distributor at the time of delivery by the carrier to the distributor as per stipulated terms of distribution agreement. We have also observed that the assessee company is raising sale invoice’s on the distributor M/s Rudra Pharma Distributors Limited which are placed on the paper book filed by the assessee company at page 35 while the ledger account showing invoices raised and payments received from distributor M/s Rudra Pharma Distributors Limited by the assessee company is also placed in the paper book filed by the assessee company at page 36 to 51. We have also observed that the said distributor M/s Rudra Pharma Distributors Limited is registered with VAT authorities and is raising its invoices (including VAT) to their customers , whereby all the above facts clearly reflects that the distributors is buying the products from the assessee company and then selling the same in its own right with all risks and rewards of ownership got vested in the said distributors on the delivery of goods by carrier to the said distributor which is also supported by the clause 5 of the distribution agreement dated 01-07-2001. Thus, we, therefore, hold that the assessee company has paid

16 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. discount to MRP to the distributors at the time of sale of the said goods/products i.e. drugs-medicine which in our considered view is not covered u/s 194H of the Act and no tax was required to be deducted at source on these discount to MRP given by the assessee company to the distributors at the time of sale of drugs-medicine to the distributors. We hold accordingly.

“B) Non deduction of TDS in case of Directors-fees. 1. The obligation to deduct TDS under section 194J arises when the payment is made for any professional or technical services rendered by the person.

only Memorandum Explaining the Bill provides as under;

Under the existing provisions of the Income-tax Act, a company, being an employer, is required to deduct tax at the time of payment of salary to its employees including managing director/whole time director. However, there is no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary. It is proposed to amend section 194J to provide that tax is required to be deducted on the remuneration paid to

17 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. a director, which is not in the nature of salary, at the rate of 10% of such remuneration. This amendment will take effect from 1st July, 2012.

In view of the above no TDS u/ s 194J of the Act is to be deducted on payment of directors sitting fees for the F. Y. 2008-09 to 2010-11 and period ended 30th September 2011.” The AO after considering the replies of the assessee company held that the assessee company ought to have deducted tax at source on Directors sitting fees which is nothing but fees for managerial services within the meaning assigned u/s. 194J of the Act. Hence, the AO vide orders dated 30-03-2012 held that the assessee company has defaulted on account of the non deduction of tax at source on payment of Directors fee of Rs.70,40,000/- u/s 194J of the Act and is treated as an assessee in default in terms of Section 201(1) & 201(1A) for non deduction of tax at source on payment of Director fees and non-payment of interest thereon. The default is worked out by the AO vide orders dated 30.03.2012 as under:

Directors TDS U/s. 194J @ 11.33% Interest u/s. 201(1A) Remuneration 70,40,000/- 7,97,632 3,82,863 Total 1180495

18 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. HC) whereby it was observed that the payment made to taxpayer is neither salary nor wages and can only be taxed as income from other sources. Thus fees paid to Director cannot be considered as profit or gain of business or profession or salary. The CIT(A) observed that amendments to Section 194J(1) (ba) of the Act are w.e.f. 1-7-2012 and as the assessment year involved in the instant appeal is 2009-10, the CIT(A) vide orders dated 11.04.2014 held that the assessee company cannot be held as ‘assessee in default’ for not deducting tax on sitting fee paid to its Directors and hence levy of tax and interest for the said default being not sustainable was ordered to be deleted .

11.Aggrieved by the orders dated 11.04.2014 passed by the CIT(A) , the Revenue is in appeal before the Tribunal.

12.The Ld. DR relied upon the orders of the AO while ld. Counsel of the assessee company submitted that amendment made in section 194J of the Act by insertion of sub–section (ba) to Section 194J(1) is prospective as the said Section is amended w.e.f. 1-7-2012 and the instant appeal is for assessment year 2009-10. The ld. Counsel of the assessee company relied upon the decision of Pune Tribunal in the case of Bharat Forge Limited v. Addl. CIT reported in (2013) 154 TTJ 649(Pune) whereby Pune Tribunal held as under:

“8. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by the learned counsel for the assessee. The only dispute in this ground is regarding deduction of tax at source from the sitting fees paid to the directors. According to the learned counsel for the assessee the provision of s. 194J is not applicable to such sitting fees since fees do not fall in any of

19 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. the categories of professional service as per Explanation to s. 194J. Further, no such objection was taken in the past by the Department for such non- deduction and in view of insertion of sub-s. (ba) to s. 194J(1) TDS is required to be made out of such director sitting fees w.e.f. 1st July, 2012. Therefore, for non-deduction of tax at source from the sitting fees for the impugned assessment year, there is no default on the part of the assessee. According to the Revenue the director is also a manager under the provisions of the Companies Act and therefore, a technical personnel and therefore the company is liable to deduct tax at source under the provisions of s. 194J.

8.1 As per the Explanation to provisions of s. 194J, professional services mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board. We, therefore, find force in the submission of the learned counsel for the assessee that sitting fees paid to the directors do not amount to fees paid for any professional services as has been mentioned in the Explanation to s. 194J(1). We further find from the Memorandum Explaining the Provisions of the Finance Bill, 2012 that as per cl. No. 71, it was specifically mentioned that there was no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary. We find the provisions of s. 194J(1)(ba) speak of any remuneration or fees or commission by whatever name called other than those on which tax is deductible under s. 192 to a director of a company on which tax has to be deducted at the applicable rate and the above provision has been inserted by the Finance Act, 2012 w.e.f., 1st July,

20 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. 2012. We, therefore, find force in the submission of the learned counsel for the assessee that no tax is required to be deducted under s. 194J out of such director's sitting fees for the asst. yr. 2007-08. In this view of the matter, the order of the CIT(A) is set aside and the ground raised by the assessee on the issue of TDS on sitting fees paid to directors is allowed.”

Thus, the ld Counsel of the assessee company contended that the assessee company cannot be held as assessee in default for non deduction of tax at source on payment of Directors fee as Section 194J was amended wef 1-7- 2012 and such amendment is prospective in nature and Pune Tribunal in Bharat Forge case has already held that no tax was required to be deducted at source u/s 194J of the Act on payment of Directors sitting fee prior to the amendment carried to Section 194J of the Act w.e.f. 01-07-2012.

13.We have heard the rival parties and perused the material on record and we are in respectful agreement with the decision of the Pune Tribunal in the case of Bharat Forge Limited(supra) that no tax is to be deducted at source on Director sitting fee payable to Director u/s 194J of the Act prior to the amendment w.e.f. 01-07-2012 in Section 194J by insertion of sub-section (ba) to Section 194J(1) of the Act . The insertion of sub-section (ba) to Section 194J of the Act has clearly stipulated that tax is to be deducted at source on any remuneration or fees or commission by whatever name called to a director of a company, other than those on which tax is deductible at source u/s 192 of the Act . The said amendment is brought in by the Finance Act, 2012 w.e.f. 01-07-2012 . The Memorandum to the Finance Bill 2012 has stipulated that there is no specific provisions in the Act providing for deduction of tax at source on remuneration paid to directors which is not in the nature of salary whereby tax is deductible covered u/s 192 of the Act, which clearly indicates that there was no provision for deduction of tax at source prior to the amendment by Finance Act,2012

21 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. w.e.f. 01-07-2012 on payment of remuneration or fee or commission by whatever name called to Directors other than those on which tax is deductible at source u/s 192 of the Act. The amendment to the Section 194J(1) of the Act by insertion of sub- section (ba) to Section 194J(1) of the Act has caste an additional burden on the tax- payer with respect to deduction of tax at source on remuneration,fee or commission to Director other than salary which as per memorandum to Finance Bill 2012 was not existing as per specific provisions of the Act prior to the aforesaid amendments and the amendments to Section 194J(1) of the Act by insertion of sub-section (ba) to Section 194J(1) of the Act were made effective from 01-07-2012, which in our considered view is prospective in nature to be applicable only from 01-07-2012 as it has caste an additional burden on the tax-payer by way of deduction of tax at source on remuneration , fees or commission to directors other than the salary for which tax is to be deducted at source under Section 192 of the Act. Since the instant appeal is for the assessment year 2009-10 which is prior to the assessment year 2013-14, we hold that no tax was deductible at source on payment of Directors sitting fee paid by the assessee company to its Directors u/s 194J of the Act and the assessee company could not be held as ‘assessee in default’ u/s 201(1) and 201(1A) of the Act. We order accordingly.

22 ITA No.4592 /Mum/2014 & 4593/Mum/2014 ITO v. Unichem Laboratories Ltd. 17. In the result, both the Revenue’s appeal in ITA No.4592/Mum/2014 and ITA no. 4593/Mum/2014 are dismissed. Order pronounced in the open court on January 29, 2016

Sd/- sd/- (Saktijit Dey) (Ramit Kochar) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 29 .01.2016 PS:- Pooja K. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A) 4. आयकर आयु�त / CIT – concerned 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai