Short Overview : Where basic evidence to prove the contention of assessee was contract between assessee and organizers, which assessee failed to produce before AO and contentions as raised by assessee have not been substantiated through any evidence or material on record, therefore, space was allotted to assessee for carrying out its business activities and assessee was liable to deduct TDS under section 194-I.

Assessee was engaged in business of manufacturing of gold and diamond jewellery ornaments. AO passed order under section 201(1)/201(1A) and accordingly, demand was raised on the issue of payment of rent. It was noted that assessee paid the amount for giving stall for exhibition and had paid to Jewellery Market Exhibition for giving stall for exhibition. It deducted TDS @ 2% under section 194C. AO held that tax was deductible under section 194-I @ 10%, as the amount paid was in the nature of rent paid for stall. Assessee filed an evidence claimed to be a contract agreement with the organizers. It was seen to be copy of a printed application form signed by assessee addressed to organizers in the format prescribed by organizers and not a contract agreement. Hence, additional evidence filed by assessee was not found admissible under rule 46A of Income Tax Rules.

It is held that : The basic evidence to prove the contention of assessee was contract between assessee and organizers, which assessee failed to produce before AO. CIT(A) rejected the request for admission of additional evidences. Whatever contentions as raised by assessee have not been substantiated through any evidence or material on record. Therefore, stand proved that assessee paid the amount to the Jewellery Market Exhibition for giving stall for exhibition. Thus, space was allotted to assessee for carrying out its business activities and assessee was liable to deduct TDS under section 194-I. In absence of any evidence on record, no interference was called for in the matter.

Decision: In assessee’s favour.

Referred: Japan Airlines Co. Ltd. & Singapore Airlines Ltd. v. CIT [Civil Appeal No.9875 of 2013 dt. 4-8-2015] : 2015 TaxPub(DT) 2960 (SC).

IN THE ITAT, DELHI BENCH

BHAVNESH SAINI, J.M. AND O.P. KANT, A.M.

OTM Jewellery (P) Ltd. v. ITO

ITA. No. 1095/Del/2017

24 September, 2019

Assessee by: Vijay Kumar Gupta, Director.

Revenue by: Atiq Ahmad, Senior Departmental Representative

Bhavnesh Saini, J.M.

This appeal by Assessee has been directed against the order of learned Commissioner(Appeals)-41, New Delhi, Dated 29-12-2016, for the assessment year  2013-2014, challenging the Order under section  201(1)/201(1A) of the Income Tax Act, 1961.

2. We have heard the learned representative of both the parties and perused the findings of the authorities below.

3. Ground No.1 is general and need no adjudication.

4. On Ground No.2, assessee challenged the order of the learned Commissioner(Appeals) in holding the expenses on Advertising and Exhibition of Rs. 4,04,496 covered under section 194C instead of under section 194-I of the Income Tax Act, 1961.

The authorities below noted that assessee is engaged in the business of manufacturing of gold and diamond jewellery ornaments. A survey operation was carried-out at the premises of the assessee on 5-3-2013 to examine the compliance of the TDS provisions. The assessing officer passed the Order under section  201(1)/201(1A) of the Income Tax Act, 1961 on dt. 27-3-2015. Accordingly, demand was raised on the above issue of payment of rent. It is noted by the authorities below that assessee paid the amount for giving stall for exhibition. The assessee had paid Rs. 4,04,496 to Jewellery Market Exhibition for giving stall for exhibition. It deducted TDS @ 2% under section  194C. The assessing officer held that tax was deductible under section  194-I @ 10%, as the amount paid was in the nature of rent paid for stall. During the course of the appellate proceeding, the assessee filed an evidence claimed to be a contract agreement with the organizers. It was seen to be copy of a printed application form signed by the assessee addressed to the organisers in the format prescribed by the organizers and not a contract agreement. It is not clear as to why this paper had not been filed before the assessing officer The claim that the said document was not available at the time of proceeding before the assessing officer was not accepted. Moreover, it was not a contract agreement.

Hence, the additional evidence filed by the assessee was not found admissible under Rule 46A of the Income Tax Rules.

The learned Commissioner(Appeals) further noted that even otherwise, there is nothing mentioned in the application which could show that the organizers provided any special service to the assessee, except for providing the stall. The learned Commissioner(Appeals), therefore, agreed with the findings of assessing officer that payment was in the nature of rent and covered under section  194-1 of the Income Tax Act. This ground of appeal of assessee were rejected. However, the assessee had also stated that the payment to the Event Management Company was Rs. 3,60,000 + Service Tax i.e., Rs. 44,496 and TDS is not deductible on the service tax component. This plea was accepted and assessing officer was directed to revise the demand under section  201(1)/201(1A) of the Income Tax Act, 1961.

5. Director for the assessee reiterated the submissions made before the authorities below and submitted that for the promotion of its sale and to contract new customers, it organized business to business and business to customers sales through various exhibitions, organized by Event Companies/Jewellery Exhibition Organisers. After taking the raw space, they put-up stalls for exhibition to showcase their jewellery for three days. The assessee deducted TDS under section  194C @ 2%. The Exhibition Organisers is not selling space only. They had made all the space to bring the jewelers (visitors) at stalls of the exhibitors, for which, they start working many months for the exhibition. It is their responsibility to reach-out to various jewellers across the country to enroll them for the exhibition as visitors. They issue passes and follow them up on very regular basis asking them to visit the exhibition.

The organisers provide certain other services also at the exhibition like food, water, air-conditioning, parking facilities etc. Therefore, the rates charged by the organisers are not for rental of the space they are allotting to the exhibitors, they are charging the amount for rental as well as for other services provided. The assessee, therefore, correctly deducted TDS under section  194C of the Income Tax Act, 1961.

6. The learned Departmental Representative on the other hand relied upon the Orders of the authorities below.

7. After considering the rival submissions, we do not find any merit in this ground of appeal of assessee. The basic evidence to prove the contention of assessee was contract between assessee and the organisers, which assessee failed to produce before assessing officer The learned Commissioner(Appeals) rejected the request for admission of the additional evidences. Whatever contention have been raised by the assessee, have not been substantiated through any evidence or material on record. It, therefore, stand proved that assessee paid the amount in question to the Jewellery Market Exhibition for giving stall for exhibition. Thus, space is allotted to the assessee for carrying-out its business activities. Thus, a property for a limited time have been rented out to the assessee. Thus, the assessee were liable to deduct TDS under section  194-I of the Income Tax Act. In the absence of any evidence on record, no interference is called for in the matter. The assessee, lastly relied upon Judgment of Hon’ble Supreme Court in the case of Japan Airlines Company Ltd. v. CIT, New Delhi in [Civil Appeal No.9875 of 2013 dt. 4-8-2015] : 2015 TaxPub(DT) 2960 (SC). In this case, Airports Authority of India charging the amount for landing and take-off services as well as parking of air-crafts as well as for other services and facilities offered in connection with the air-craft operations at Air Port. Thus, the composite services have been provided in this case. Therefore, this decision would not support the case of the assessee. In view of the above, we dismiss Ground No.2 of appeal of assessee.

8. On Ground No.3, assessee challenged the Order of the learned Commissioner(Appeals) in confirming the addition of Rs. 2,00,193 under the Head “Printing and Stationery”. The assessee has made payment of Rs. 2,00,193 to M/s. Allshreshtha and M/s. Balaji for advertising boards etc., The assessing officer held that tax was deductible under section  194C of the Income Tax Act, 1961.

The assessee, on the other hand, has claimed that the payment was actually reimbursement of the expenditure incurred by the customers of the assessee on its behalf. The assessee was of the view that the liability to deduct tax was on its customers who are making the payment to the job worker and not that of the assessee. However, the assessee has contended that this being only the reimbursement of expenses, tax was not deductible at all. The learned Commissioner(Appeals) noted that assessee has claimed the expenditure in its books. The payment is shown in the name of M/s. Balaji and M/s. Allshreshtha who have provided services and not in the name of customers. Hence, the responsibility to deduct tax also lies with the assessee. If it would have been only reimbursement of expenses, then the payment would have been made to the customers through whom job work was undertaken. The assessing officer has rightly held that tax were deductible under section  194C of the Income Tax Act, 1961. This ground of assessee was accordingly dismissed.

9. The assessee reiterated the submissions made before the authorities below and submitted that assessee had reimbursed to its distributor M/s. OM Diamond Jewellers the aforesaid sum which was spent by M/s. OM Diamond Jewellers on purchasing of signboards etc., to be put-up on the shop of retailers serviced by him. This payment was made by the assessee vide credit note dt. 15-2-2013. These are bills of purchase and are not works, so, no tax is deductible. All the payments are made to the distributor M/s. OM Diamond Jewellers. It was a mere reimbursement of the expenses only.

10. The learned Departmental Representative on the other hand relied upon the Orders of the authorities below.

11. We have considered the rival submissions. The learned Commissioner(Appeals) specifically found that assessee has claimed these expenditure in its books of account. It was further found that the payment is shown in the name of M/s. Balaji and M/s. Allshreshtha who have provided the services to the assessee and not in the name of the customers. The finding of fact recorded by the learned Commissioner(Appeals) have not been rebutted by the assessee in any manner. Therefore, contention of assessee that it was reimbursement of expenses is without any basis. The assessee was, thus, liable to deduct TDS under section  194C of the Income Tax Act, 1961 on such payments.

Ground No.3 of appeal of assessee is dismissed.

12. In the result, appeal of assessee dismissed.