2023 (7) TMI 647 - AT - Income Tax

Tribunal decisions on time limits, TDS obligations, and fair hearings for assessment years 2013-14 and 2014-15

Shri Srinivas Rudrappa, Versus The Income Tax Officer, Bengaluru.

Shri Srinivas Rudrappa, Versus The Income Tax Officer, Bengaluru. - TMI Issues Involved:1. Non-deduction of TDS on the commission paid to M/s Bigtree Entertainment Pvt. Ltd.2. Barred by limitation under section 201(3) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Non-deduction of TDS on the Commission Paid to M/s Bigtree Entertainment Pvt. Ltd.:The core issue revolves around whether the assessee should have deducted TDS under section 194H on the commission/service charges retained by M/s Bigtree. The assessee, a proprietor of cinema theatres, had an agreement with M/s Bigtree, which facilitated online ticket booking through its platform. The payment made by customers included ticket costs and convenience fees. The ticket cost was remitted to the cinema owners after deducting TDS, while the convenience fee was retained by M/s Bigtree as its revenue.The Assessing Officer (AO) considered this convenience fee as a commission/service charge paid by the cinema owners (assessee) to M/s Bigtree, thereby necessitating TDS deduction under section 194H. The AO computed the TDS payable by the assessee on such convenience fees, issuing a show-cause notice under sections 201(1) and 201(1A) of the Act. The assessee contended that the relationship with M/s Bigtree was of principal-to-principal and not principal-agent, thus section 194H was not applicable. However, the AO was not convinced and held the assessee as 'assessee in default' for non-deduction of TDS.The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the convenience fees were charges for using M/s Bigtree's ticket booking platform, amounting to constructive payment of commission.2. Barred by Limitation under Section 201(3) of the Income Tax Act, 1961:The assessee raised a legal issue regarding the order being barred by limitation. The AO issued the show-cause notice on 16/03/2021 and passed the order on 30/03/2021 for the financial year 2012-13. The assessee argued that the order was beyond the statutory period as per section 201(3) of the Act, which prescribes a limitation period of six years from the end of the financial year in which the payment was made. The Tribunal agreed with the assessee, referencing the decision of the coordinate bench in the case of M/s Coffee Day Enterprises Ltd., which supported the view that the order was not passed within the prescribed time period.Tribunal's Decision:Assessment Year 2013-14:The Tribunal allowed the appeal on the legal issue of limitation, holding that the order passed by the AO was beyond the statutory period as per section 201(3) of the Act. Consequently, the order was quashed.Assessment Year 2014-15:On the merits, the Tribunal noted that M/s Bigtree charged a convenience fee from end customers for using its online platform, and the relationship between the assessee and M/s Bigtree was not of principal-agent. The Tribunal observed that the transaction charges retained by M/s Bigtree were margins charged from end customers for the provision of services, and the assessee had no obligation to deduct TDS on these charges. However, the Tribunal directed the AO to verify the liability in situations where tickets are refunded, ensuring proper opportunity for the assessee to be heard.Conclusion:The appeals filed by the assessee were allowed, with the order for the assessment year 2013-14 being quashed on the ground of limitation and the case for the assessment year 2014-15 being allowed for statistical purposes with directions for further verification by the AO.