Pr. Commissioner Of Income Tax-10 v. Indofil Industries Limited

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2027 OF 2017 Pr. Commissioner of Income Tax-10 ...Appellant vs. Indofil Industries Limited ...Respondent ----- Mr. Akhileshwar Sharma for Appellant.Mr. Harsh M. Kapadia i/b Mr. Balasaheb G. Yewale for Respondent. ----- CORAM : K. R. SHRIRAM AND AMIT B. BORKAR, JJ. DATE : 16 DECEMBER 2021. P. C. : The following questions of law are proposed in this appeal: 1.Whether the payment in the nature of commission madeto directors of the assessee company is liable for tax deductionunder Section 194H of the Income Tax Act, 1961 (the said Act)being in the nature of commission ? 2.Whether on the facts and circumstances of the case andin law, the Hon'ble ITAT erred in holding that non-deduction of TDS under Section 194H by the Assessee company oncommission payment to the directors is not liable fordisallowance under Section 40(a)(ia) of the said Act ? 3.Whether on the facts and circumstances of the case andin Law, the order of the Hon'ble ITAT is perverse in law as it isbased on wrong findings of facts ignoring that the assesseecompany has itself treated the payment as commission expensesin its audited books of accounts and not as part of salary paid todirectors ?" 2.The issue herein is regarding disallowance under Section 40(a)(ia) of the said Act for amount of Rs.1,08,00,000/-. The Assessing Officerhad noted that Respondent had made a provision for commission for theChairman and the Managing Director (CMD) of the Company forRs.1,08,00,000/- at the year end but not deducted TDS under Section194H of the said Act. The commission was paid to the CMD in thesubsequent year, i.e., during the Assessment Year 2010-2011 afterdeducting TDS. According to Shri Sharma commission provision calls fordisallowance under Section 40(a)(ia) in the impugned Assessment Year. 3.Before Commissioner of Income Tax (Appeals) (CIT (A)),respondent had contended that CMD was full time employee of thecompany and hence this payment was nothing but salary covered by TDSprovision under Section 192 and under Section 194H of the said Act whichdeals with TDS on commission payments. As per Section 192 of the saidAct, TDS is deductible from salary payment only at the time of paymentand not at the time of making provision and therefore no disallowance iscalled for in the given circumstances. CIT (A) accepted the contentions ofRespondent and allowed this ground of appeal. 4.Shri Sharma has contended that this payment beingcommission in nature is covered by Section 194H of the said Act and henceTDS was deductible at the time of making provision at the year end and asRespondent had failed to do so, the same called for disallowance underSection 40(A)(ia) of the said Act. 5.Shri Kapadia tendered copy of Form-16 of CMD which is taken on record and pointed out that Form-16 of the CMD for the AssessmentYear 2010-2011 showed that commission was part of overallcompensation/salary of the CMD and hence TDS in respect thereof iscovered under Section 192 of the said Act. 6.Having considered the memo of appeal and the ordersannexed thereto and after hearing Shri Sharma and Shri Kapadia, we findthat the commission paid to the CMD has been shown as part of salary inForm-16 for Assessment Year 2010-2011. Total salary paid for the FinancialYear 2009-2010 as it appears from the impugned order is Rs.1,72,15,959/-which includes commission for Rs.1,08,00,000/- paid by assessee in theAssessment Year in question. 7.Section 192 of the said Act, unlike other TDS provisionsrequire deduction of tax at source under the head “Salary only at the timeof payment and not otherwise." We also find that the quantum of accrual ofexpenses is not disputed by Revenue and Shri Sharma also stated the same.Since Shri Sharma had in fairness stated that the quantum or accrual ofexpenses is not disputed, there cannot be any perversity in the order passedby CIT(A) or by ITAT in concurring with the findings of CIT (A). 7.Section 192 of the said Act, unlike other TDS provisionsrequire deduction of tax at source under the head “Salary only at the timeof payment and not otherwise." We also find that the quantum of accrual ofexpenses is not disputed by Revenue and Shri Sharma also stated the same.Since Shri Sharma had in fairness stated that the quantum or accrual ofexpenses is not disputed, there cannot be any perversity in the order passedby CIT(A) or by ITAT in concurring with the findings of CIT (A). 8.Commissioner of Income tax, Delhi, Ajmer, Rajasthan and1Madhya Bharat vs. Nagri Mills Co. Ltd., this Court has observed as under: "We have often wondered why the Income-tax authorities, in amatter such as this where the deduction is obviously apermissible deduction under the Income-tax Act, raise disputes 133 ITR 681 as to the year in which the deduction should be allowed. Thequestion as to the year in which a deduction is allowable maybe material when the rate of tax chargeable on the assessee intwo different years is different; but in the case of income of acompany, tax is attracted at a uniform rate, and whether thededuction in respect of bonus was granted in the assessmentyear 1952-53 or in the assessment year corresponding to theaccounting year 1952, that is in the assessment year 1953-54,should be a matter of no consequence to the Department; andone should have thought that the Department would not fritteraway its energies in fighting matters of this kind. But, obviously,judging from the references that come up to us every now andthen, the Department appears to delight in raising points of thischaracter which do not affect the taxability of the assessee orthe tax that the Department is likely to collect from himwhether in one year or the other." 9.In our view, the Tribunal has not committed any perversity orapplied incorrect principles to the given facts and when the facts andcircumstances are properly analysed and correct test is applied to decidethe issue at hand, then, we do not think that questions as pressed raises any substantial question of law. 10.The appeal is devoid of merits and it is dismissed with noorder as to costs. (AMIT B. BORKAR, J) (K. R. SHRIRAM, J.) Digitally signedbyRAJESHWARIRAJESHWARISUBODHSUBODHKARVEKARVEDate:2021.12.1811:00:35+0530