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TMI Blog2016 (7) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s. 40(a)(ia) - non-deduction of tax at sourceon ‘service coupon commission’ - Held that:- we only consider it fit and proper that the matter is restored back to the file of the AO for allowing an opportunity to the assessee to satisfy him of being not in default under the amended section 201. That is, in respect of the tax deductible on the payment against service coupons, which it was liable to deduct u/s. 194C and has admittedly failed to deduct in whole. The burden of proof is clearly on the assessee, even as the AO shall decide the matter by issuing definite findings of fact and, further, separately for each dealer, whose cases could well be different in-as-much as the date of furnishing of return of income (for the relevant year) could be different, and may have perhaps also accounted for the income (on services) for different years. We decide accordingly. - I.T.A. Nos. 3324 & 4645/Mum/2013 - - - Dated:- 13-5-2016 - SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARORA, AM For The Appellant by : Shri H. P. Mahajani For The Respondent : Shri N. P. Singh ORDER Per Sanjay Arora, A. M.: These are a set of two Appeals by the Assessee agitating its assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallapalli Sugars Ltd. vs. CIT [1975] 98 ITR 167 (SC)). Accounting Standard (AS) 10 issued by ICAI, titled Accounting for Fixed Assets , clearly states that Main Principles 20. The cost of a fixed asset should comprise its purchase price and any attributable cost of bringing the asset to its working condition for its intended use. 21. The cost of a self-constructed fixed asset should comprise those costs that relate directly to the specific asset and those that are attributable to the construction activity in general and can be allocated to the specific asset. Further, as depreciation is being already allowed on the said development expenditure from year to year, no separate direction to the Assessing Officer (A.O.) is called for. We decide accordingly, and the Revenue succeeds. The foregoing shall also dispose, in like manner, the claim for deduction u/s. 35(1) of the Act in respect of expenditure on R D activity, on which depreciation stands nevertheless allowed by the Revenue. No separate arguments were in fact advanced before us in respect of this issue, constituting the second limb of the assessee s Ground 1 for A.Y. 2007-08. We decide accordingly. 4. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.w.s. 194C, the facts as stated by the appellant are as under :- (i) Service coupon amount is fixed class of vehicle-wise. During 2006-07, only LCVs were sold for which the amount of service coupon per vehicle was ₹ 2500, as already stated in our earlier communications. (ii) For HCVs, the sale of which started in subsequent years, the amount of service coupon is ₹ 5000/- (Rs.6000/- from June'12 onwards). (iii) Accounting for service coupon amount happens as under: (iv) The value of service coupon recovered as part of the Sale Price shown in the Sales invoice is credited to an Income Account styled Service tax Coupon Account. This entry is passed at the time of recording sales to the dealer. A snap shot of the accounting entry passed in the SAP system is given below. (v) Since full amount of credit is already taken to the P L Account at the time of booking the sale, a provision is made for the unexpired service coupons at the end of the year. (vi) In respect of free services the dealer is obliged to render only free service to the customer. In the case of service coupons the customer redeems the service coupon with the dealer on servicing the vehi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been considered : A perusal of the aforesaid facts clearly shows that amount given by the manufacturer to the dealer in respect of free service coupon is fixed amount as per class of vehicle wise, i.e., (i) LCVs - ₹ 2500/- per vehicle, (ii) HCVs - ₹ 5000/- per vehicle (Rs. 6000 from June 2012 onwards) As per the contract, the dealer is obliged to render the requisite services against the free services coupons reimbursable to him at amount of ₹ 2500/- per LCV vehicle and ₹ 5000/- per HCV vehicle (Rs. 6000 from June 2012 onwards). Therefore, the said payment of ₹ 2500/- per LCV vehicle and ₹ 5000/- per HCV vehicle (Rs. 6000 from June 2012 onwards), is for carrying out the work by way of contract between the assessee company and the dealer. Hence, a payment for works contract . The appellant's argument that the said amount represents part of the price at which it sells its vehicles to the dealers is not maintainable under the facts and circumstances of the case. 4.6 Since the payment of ₹ 213,46,000/- is in the nature of payment to contractor for work assigned by the assessee company to the dealer - the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee in consideration of availing a service for itself. As already stated, even if taken as a service availed by the assessee, sec. 194J is not attracted as this is not a technical service. In para 29.43, the tribunal considers the Revenue s reliance on Circular 8 of 2009 dated 24.11.2009, concerning tax deductible at source u/s. 194-J, wherein it stood clarified by the Board that the payments made by TPA on behalf of Insurance Company to hospitals are liable for tax deduction at source, before concluding at para 29.45 of its order, which reads as under: 29.45 On this factual matrix, and as Sec. 194J is not attracted in this case, we uphold the contentions of the assessee and allow this ground of appeal. Clearly, the said decision stands rendered with reference to whether the impugned payment falls within the purview of section 194J of the Act or not. All the observations by the tribunal must be considered and viewed in that perspective. We may though add that the tribunal also considered the discharge of the payment by the service recipient, in-as-much as it found that the payment was in fact made by the customer, i.e., the person availing the service, as a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its parameters, are not met. The customer is charged for the value of some services - in the nature of repairs and maintenance of his vehicle, to be undertaken on it reaching different milestones (reckoned in terms of mileage, lapse of time, etc.), i.e., qua the vehicle purchased from the company manufacturing and selling the vehicles, as the assessee-company, which (services) are though only through its authorized dealers. Clearly, what is carried out, even as held by the ld. CIT(A), is work within the scope of the term as defined u/s. 194C. The authorized dealers through whom the vehicle is sold, are not paid for the services (value of which is embedded in the sale price of the vehicle sold to the customer) at the time of it s sale. The reason is simple. It is not certain as to which dealer and, rather, from which place the dealers being spread across the country, the customer may avail all or any of the stipulated services, usually three is number. The customer cannot be bound to a particular dealer, seriously impairing the flexibility and the practicality of the scheme for the provision of such free services. Why, a customer may sell his vehicle to another, so that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of the contract of sale, and is accordingly to be honored, is of little moment. As afore-stated, the vehicle manufacturer, as the assessee-company, is the beneficiary of the value of these services in-as-much as the consideration for the same is already received by it in advance, making it is a part of the sale arrangement (of the vehicle). We, accordingly, see no reason as to why the provision of section 194C is not applicable, or how could it be said as not so. 6.4 Section 194J requires deduction of tax at source on fees for technical services, in contradistinction to payment under a work contract u/s. 194C and, thus, is on an altogether different footing. The tribunal found the nature of the repairs as not qualifying for being considered as technical services and, accordingly, the consideration therefor as fees for technical services , for which reference stands made to Explanation 2 to section 9(1)(vii). Each of the decisions relied upon by the tribunal in Hero Motocorp Ltd. (supra) are also in the context of section 194J, and not applicable in the instant case. True, the observation in Hero Motocorp Ltd. (supra) with regard to the service recipient (custome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d tax due on the income declared by him in such return of income, on furnishing a certificate to this effect from an Accountant in the form prescribed. In other words, the law seeks to put in place a system to implement and operationalize the decision by the Hon ble Apex Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. vs. CIT [2007] 293 ITR 226 (SC), wherein it stands clarified that tax deduction at source, being a mode of payment of tax, where the same stands deposited with the Exchequer by the payee, the same discharges the payer from the obligation to deduct the same. The said amendment has been held by the Hon ble Delhi High Court in the case of CIT vs. Ansal Landmark Township Pvt. Ltd. (vide its decision in ITA No.160 and 161 of 2015 dated 26/08/2015) as retrospective. Accordingly, even for other years prior to A.Y. 2013-14, or for the periods prior to 01.7.2012, as the case may be, where the conditions of the amended section 201 are met, and the assessee-payer, consequently, not deemed to be an assessee in default, the provision of section 40(a)(ia) shall not apply. This, in fact, represents the current and the consistent approach by the tribunal in the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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