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IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE S/SHRI I.P. BANSAL, (JM) AND B.R.BASKARAN (AM)
.. , .. ,
./I.T.A. No.6901/Mum/2011
( / Assessment Year : 2006-2007)
Marissa Clarissa Domnique / Income Tax Officer -19(3)(3),
Alveyn, Piramal Chambers, Lalbaug,
Vs.
104, Rodhol Apartments, Mumbai.
St.Roque Road,
Bandra (W),
Mubmai-400050
( /Appellant) .. ( / Respondent)
. / . /PAN/GIR No. :ABMPA2076M
/ Assessee by: None
/ Revenue by:: Shri Vivek Batra
/ Date of Hearing
: 5.1.2015
/Date of Pronouncement : 9. 1.2015
/ O R D E R
Per B.R.BASKARAN, Accountant Member:
The assessee has filed this appeal challenging the order dated
21.7.2011 passed by the ld. CIT(A)-30, Mumbai and it relates to the assessment
year 2006-07.
2. The assessee is aggrieved by the decision of the ld. CIT(A) in confirming
the disallowance made under section 40(a)(ia) of the Income tax Act, 1961 (the
Act) for not deducting the tax at source u/s 194J of the Act from some of the
expenses incurred by the assessee.
ITA No.6901/M/2011
2
3. None appeared on behalf of the assessee though, on an earlier occasion,
the case was adjourned at specific request of the assessee. Hence we proceed
to dispose of the appeal ex-parte, without the presence of the assessee.
4. Facts relating to the issue under consideration are stated in brief. The
assessee is an individual and working as Creative Consultant Artiste. According
to the assessee, she is engaged in the business of creating promotional
campaigns for medical brands especially for pharmaceutical companies. In the
immediately preceding year i.e. in assessment year 2005-06, the assessee had
disclosed gross receipt of Rs.14,18,150/- and declared profit/income as
"business income". However, in the year under consideration (AY 2006-07), the
assessee disclosed gross receipt of Rs.24,00,382/- and the profit was declared
as "professional income". It is pertinent to note that the assessee got her
accounts audited u/s 44AB of the Act and filed Tax audit report along with her
return of income filed for AY 2006-07. It is also pertinent to note that the
provisions of section 44AB of the Act prescribe different monetary limits for
persons carrying on business or carrying on profession for getting the accounts
audited. As per the provisions of sec. 44AB existing at the relevant point of time,
the monetary limit of total sales, turnover or gross receipts, as the case may be,
for getting the accounts audited was Rs.40 lakhs for "business" and Rs.10 lakhs
for "Profession".
5. During the course of assessment proceedings, the AO noticed that the
assessee has incurred expenditure under the head Illustration charges, Assistant
Artiste Charges, Computer Graphics and Visual Charges etc., aggregating to
Rs.8,37,093/-. The AO also noticed that the assessee has got her accounts
audited for the year under consideration treating her activity as "Professional
activity". In the immediately preceding year, the gross receipts declared by the
assessee had exceeded Rs.10.00 lakhs, but the assessee did not get her
accounts audited. As per the proviso to sec. 194J of the Act, the TDS provisions
of sec. 194J shall apply to an Individual, if his gross sales or gross receipts or
turnover of the immediately preceding year has exceeded the monetary limits
prescribed in sec. 44AB of the Act. Since the assessee herself has treated her
activity as her professional activity in the present year and since the gross
receipts of the immediately preceding year exceeded the monetary limit of
ITA No.6901/M/2011
3
Rs.10.00 lakhs, the AO took the view that the provisions of proviso to sec. 194J
shall apply and hence the assessee was liable to deduct tax at source on the
aforesaid expenditure in terms of provisions of section 194J of the Act. Since,
the assessee did not deduct tax at source, the AO disallowed aforesaid
expenditure by invoking the provisions of section 40(a)(ia) of the Act.
6. Before the ld. CIT(A), the assessee contended that her activity was
business activity and hence the monetary limit of Rs.40.00 lakhs prescribed in
sec. 44AB of the Act shall apply. Since her gross receipts did not exceed the
monetary limit, she contended that she was not liable to deduct tax at source u/s
194J of the Act. The ld. CIT(A), however, rejected the said claim on the
reasoning that the assessee had declared income for the year under
consideration as professional income and also got her accounts audited under
section 44AB of the Act, even though the gross receipts were less than Rs.40.00
lakhs, meaning thereby the assessee herself has accepted that she was carrying
on profession. Accordingly, the ld. CIT(A) held that the provisions of section
194J are applicable to the assessee. Accordingly, he confirmed the addition
made by the AO u/s 40(a)(ia).
7. We have heard the ld. DR and perused the material available on record.
We notice from the paper book filed by the assessee that the assessee has
furnished certain documents in the form of invoices issued by her to various
clients in order to substantiate her claim that she was actually engaged in the
business activity relating to promotional campaign. However, we notice that the
First Appellate Authority did not consider those materials and also did not
express any opinion thereon. The ld. CIT(A) was simply carried away by the fact
that the assessee got her accounts audited u/s 44AB of the Act during the year
under consideration by treating her activity as Professional Activity.
8. In the instant case, the contention of the assessee is that she is carrying on
business. Accordingly it is contended that the provisions of section 44AB shall
not apply to her, since her turnover was less than Rs.40 lakhs for the year under
consideration as well as for the immediately preceding year. However, both the
tax authorities have held that the activity carried on by the assessee was in the
nature of professional activity and accordingly held that provisions of section
ITA No.6901/M/2011
4
44AB shall apply, since her gross receipt have exceeded Rs.10 lakhs during the
year under consideration and also in the immediately preceding year. The
applicability of the TDS provisions of sec. 194J would depend upon the question
as to whether the activity carried on by the assessee would fall in the category of
"Business" or in the category of "Profession".
9. We have already noticed that the tax authorities have formed their view only
on the basis of the fact that the assessee has got her accounts audited in the
year under consideration u/s 44AB, even though the turnover was less than
Rs.40 lakhs. In our view, the nature of activity carried on by the assessee should
be examined objectively by the tax authorities. It is well settled proposition of
law that the claim made by the assessee in the return of income or books of
account can not be considered to be the sole determining factor for deciding any
issue and they need to examined objectively. For example, the activity of a civil
engineer providing mere consultancy services would fall in the category of
"Profession", while the activity of construction and sale of buildings would fall in
the category of "Business".
10. We notice from the paper book furnished by the assessee that she has
placed some documents to substantiate her claim that she was carrying on the
business activity. However, neither the ld.CIT(A) nor the AO has examined
those documents. In the absence of such examination and also in the absence of
a clear finding thereon, we find it difficult to adjudicate the issue relating to the
nature of activity carried on by the assessee. We have already noticed that the
clear decision about the nature of the activity of the assessee is required in order
to adjudicate the dispute relating to the applicability of provisions of sec. 194J /
40(a)(ia) of the Act.
11. Hence, in our view, the issue relating to the nature of activity of the
assessee requires fresh examination at the end of the ld. CIT(A). Accordingly,
we set aside the order of ld. CIT(A) and restore all the matters to his file with a
direction to examine whether the activity of the assessee would fall in the
category of business or profession by duly considering the various materials /
explanations that may be may be furnished by the assessee before him and
accordingly decide the issue of applicability of provisions of sec. 194J / 40(a)(ia)
ITA No.6901/M/2011
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of the Act. The assessee is also directed to co-operate with tax authorities for
expeditious disposal of the appeal.
12. In the result the appeal filed by the assessee is allowed for statistical
purposes.
The above order was pronounced in the open court on 9th Jan, 2015.
9th Jan, 2015
sd sd
(.. /I.P. BANSAL) (.. ,/ B.R. BASKARAN)
/ Judicial Member /Accountant Member
Mumbai: 9th Jan,2015.
. ../ SRL , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6.
/ Guard file.
/ BY ORDER,
true copy (Asstt. Registrar)
, /ITAT, Mumbai
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