The Dy. Commissioner of Income Tax, Hyderabad V. New Bombay Goods Transport Agency, Hyderabad

CO 128/HYD/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8002 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 10-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: T CHAITANYA KUMAR
• Section: 142(1); 194C; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1220/HYD/2012 ASSESSMENT YEAR: 2006-07 DY. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 7(1), HYDERABAD. VS. NEW BOMBAY GOODS TRANSPORT AGENCY, RESPONDENT HYDERABAD. (PAN AADFN3217H) C.O. NO. 128/HYD/2012 (IN ITA NO. 1220/HYD/2012 ASSESSMENT YEAR: 2006-07) NEW BOMBAY GOODS TRANSPORT AGENCY, CROSS OBJECT OR HYDERABAD. (PAN AADFN3217H) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT CIRCLE 7(1), HYDERABAD. REVENUE BY : SMT. VIDISHA KALRA ASSESSEE BY : SHRI T. CHAITANYA KUMAR DATE OF HEARING : 20/11/2012 DATE OF PRONOUNCEMENT : 27/11/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE CIT(A)-VI, HYDERABAD DATED 25/05/2012 FOR THE ITA NO. 1220/HYD/2012 & C.O. NO. 128/HYD/12 M/S NEW BOMBAY GOODS TRANSPORT AGENCY 2 ASSESSMENT YEAR 2006-07. THE ASSESSEE ALSO FILED C. O. AGAINST THE SAID ORDER OF THE CIT(A). 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED ITS RETURN OF INCOME FOR THE AY 2006-07 ON 31/10/2006 ADMITTING TOTAL INCOME OF RS. 6,81,660/- AND THE SAME WAS PROCESSED U/S 143(1) OF THE IT ACT ON 01/03/2007. THE ASSESSEE DEBITED AN AMOUNT OF RS. 2,66,47,850/- TOWARDS LORRY HIRE CHARGES ON WHICH N O TDS HAD BEEN DEDUCTED. THE ASSESSMENT WAS REOPENED U/S 147(A) BY ISSUE OF NOTICE U/S 148 AND NOTICES U/S 143(2) AND 142(1) OF IT ACT WERE SERVED ON THE ASSESSEE. SINCE THE REASSESSMENT WER E GETTING BARRED BY TIME LIMITATION, THE AO COMPLETED THE ASS ESSMENT U/S 144 EXPARTE, WHILE DOING SO, THE FOLLOWING ADDITIONS MA DE TO THE INCOME RETURNED: 1. PENALTY DISALLOWANCE RS. 16,775 2. LORRY HIRE CHARGES DISALLOWED U/S 40(A)(IA) R S.2,66,47,850 3. LOSS ON SALE OF CAR RS. 1,76,899 4. REMUNERATION EXCESS CLAIMED RS. 70,000 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE AR OF THE ASSESSEE, WITH REFERENCE TO DISALLOWANCE OF LORRY HIRE CHARGES OF RS. 2,66,47,8 50/- U/S 40(A)(IA), SUBMITTED THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S SHANGHI POLYSTERS FOR TRANSPORT OF ITS GOO DS, THAT IT ENGAGES LORRIES AS AND WHEN REQUIRED FOR THE PURPOS E OF TRANSPORT, AND THAT THE ENTIRE RESPONSIBILITY FOR TRANSPORTING THE GOODS IS ON THE ASSESSEE AND NO PART OF THE RESPONSIBILITY IS T RANSFERRED TO THE HIRED LORRY OWNERS, SO THAT THERE IS NO CONTRACTUAL RELATION WITH THE ITA NO. 1220/HYD/2012 & C.O. NO. 128/HYD/12 M/S NEW BOMBAY GOODS TRANSPORT AGENCY 3 LORRY OWNERS FOR HIRE OF LORRIES. THE AR ALSO SUBMI TTED THAT THE ENTIRE AMOUNT OF HIRE CHARGES HAD BEEN PAID DURING THE PREVIOUS YEAR AND THAT SECTION 40(A)(IA) WAS NOT APPLICABLE IN VIEW OF THE DECISION OF THE ITA VISAKHAPATNAM SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT IN ITA NO. 477/VIZ/2008, DT. 29/03/2012. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) HELD THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF THE ITAT, VIZAG IN THE CASE OF MERI LYN SHIPPING AND TRANSPORTS (SUPRA) AND ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US AND ALSO THE ASSESSEE FILED C.O. AGAINST THE VERY SAME ORDER OF THE CIT(A). 7. THE GROUNDS RAISED BY THE REVENUE ARE AS FOLLOWS :- 1. THE ORDER OF THE CIT(A) IS ERRONEOUS IN FACT AND LAW. 2. THE CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO THE AMOUNT PAYABLE AS PER BALANCE SHEET. SECTION 40(A)(IA) APPLIES TO SUCH EX PENDITURE WHICH BECOMES PAYABLE AT ANY TIME IN THE RELEVANT P REVIOUS YEAR. 3. WITH DUE RESPECTS TO THE HONBLE ITAT, VISAKHAPA TNAM BENCH, I SUBMIT THIS IS NOT BINDING ON THE AO. BESI DES THE QUESTION WAS ANSWERED IN THE JUDGMENT IS DIFFERENT FROM THE ISSUE INVOLVED IN THE INSTANT CASE. 8. THE ASSESSEE RAISED THE FOLLOWING CROSS OBJECTIO NS IN ITS C.O: 1. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE P ROVISIONS OF SEC. 194C HAVE NO APPLICATION IN RESPECT OF PAYM ENTS MADE ITA NO. 1220/HYD/2012 & C.O. NO. 128/HYD/12 M/S NEW BOMBAY GOODS TRANSPORT AGENCY 4 BY THE ASSESSEE AND CONSEQUENTLY THE PROVISIONS OF SEC. 40(A)(IA) ARE NOT APPLICABLE. 2. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT (I) THERE WERE NO WORKS CONTRACTS BETWEEN THE ASSESSEE AND TH E LORRY DRIVER/OWNER; (II) SOME OF THE LORRY OWNERS POSSESS ES ONE OR TWO LORRIES IN WHICH CASE DEDUCTION OF TAX NEED NOT BE MADE AND (III) FOR SOME OF THE LORRY OWNERS THE AMOUNT P AID IS LESS THAN RS. 50,000/- AND, THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) HAVE NO APPLICATION. 3. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE P ROVISIONS OF SEC. 40(A)(IA) ARE NOT APPLICABLE AS NO DEDUCTIO N OF TAX NEED BE MADE IN RESPECT OF THE PAYMENTS MADE BY THE APPE LLANT AND, THEREFORE, OUGHT TO HAVE DELETED THE ENTIRE AD DITION MADE BY THE AO U/S 40(A)(IA) OF THE IT ACT. 9. WE HAVE HEARD THE ARGUMENTS OF THE LEARNED DR SM T. VIDISHA KALRA AND THE LEARNED COUNSEL FOR THE ASSESSEE SHRI T. CHAITANYA KUMAR. 10. AS REGARDS THE APPEAL OF THE REVENUE, WE FIND T HAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BE NCH OF ITAT, VIZAG BENCH IN THE CASE OF MERILYN SHIPPING AND TR ANSPORTS, VISAKHAPATNAM VS ADDL.CIT ( 2012-TIO:-184-ITAT-VIZG -SB), WHEREIN IT HAS BEEN HELD THAT FOLLOWING THE MAJORI TY VIEW OF THE SPECIAL BENCH, THE PROVISIONS OF SECTION 40A(IA) CA NNOT BE INVOKED WITH RESPECT TO THE AFORESAID PAYMENTS WHICH WERE A CTUALLY PAID DURING THE FINANCIAL YEAR BUT IT CAN BE INVOKED WIT H RESPECT TO THE AMOUNT WHICH REMAINED PAYABLE AS ON DATE. 11. RESPECTFULLY FOLLOWING THE DECISION OF THE SPEC IAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS(SUPRA), WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO APPLY THE RATIO OF THE SPECIAL BENCH AND DISALLOW U/S 40(A)(IA) ONLY S UCH AMOUNTS ITA NO. 1220/HYD/2012 & C.O. NO. 128/HYD/12 M/S NEW BOMBAY GOODS TRANSPORT AGENCY 5 WHICH HAVE NOT BEEN PAID AND IS OUTSTANDING AS ON T HE LAST DAY OF THE PREVIOUS YEAR. 12. THE ASSESSEE HAS RAISED THE FOLLOWING CROSS OBJ ECTIONS IN ITS C.O.: 1. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE P ROVISIONS OF SECTION 194C HAVE NO APPLICATION IN RESPECT OF P AYMENTS MADE BY THE ASSESSEE AND CONSEQUENTLY THE PROVISION S OF SEC. 40(A)(IA) ARE NOT APPLICABLE. 2. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT I) THERE WERE NO WORKS CONTRACTS BETWEEN THE ASSESSEE AND TH E LORRY DRIVER/OWNER; II) SOME OF THE LORRY OWNERS POSSESSE S ONE OR TWO LORRIES IN WHICH CASE DEDUCTION OF TAX NEED NOT BE MADE AND III) FOR SOME OF THE LORRY OWNERS THE AMOUNT PA ID IS LESS THAN RS. 50,000/- AND, THEREFORE, THE PROVISIONS OF SEC. 40(A)(IA) HAVE NO APPLICATION. 3. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE P ROVISIONS OF SEC. 40(A)(IA) ARE NOT APPLICABLE AS NO DEDUCTIO N OF TAX NEED BE MADE IN RESPECT OF THE PAYMENTS MADE BY THE APPE LLANT AND, THEREFORE, OUGHT TO HAVE DELETED THE ENTIRE AD DITION MADE BY THE AO U/S 40(A)(IA) OF THE I.T. ACT. 13. WE FIND THAT THE CROSS OBJECTIONS RAISED BY THE ASSESSEE IN ITS C.O., HAVE BEEN CONSIDERED BY THE HONBLE HIGH COUR T OF MADRAS IN THE CASE OF CIT VS. POOMPUHAR SHIPPING CORPORATION LTD. WHEREIN IT HAS BEEN HELD AS UNDER:- UNDER S. 194C, THE TAX IS TO BE DEDUCTED WHEN A CON TRACT WAS ENTERED INTO FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE ENTITIES ME NTIONED IN SUB-S.(1) OF S. 194C. IN THE PRESENT CASE, THERE WA S NO CONTRACT BETWEEN THE ASSESSEE AND THE SHIPPING COMP ANIES TO CARRY OUT ANY WORK. ON THE OTHER HAND, THE ASSESSEE -COMPANY HIRED THE SHIPS BELONGING TO OTHER SHIPPING COMPANI ES FOR A FIXED PERIOD ON PAYMENT OF HIRE CHARGES. THE HIRED SHIPS WERE UTILIZED BY THE ASSESSEE IN THE BUSINESS OF CARRYIN G THE GOODS FROM ONE PLACE TO ANOTHER IN PURSUANCE OF AN AGREEM ENT ENTERED INTO BETWEEN THE ASSESSEE AND THE TAMIL NAD U ITA NO. 1220/HYD/2012 & C.O. NO. 128/HYD/12 M/S NEW BOMBAY GOODS TRANSPORT AGENCY 6 ELECTRICITY BOARD. THERE WAS NO AGREEMENT FOR CARRY ING OUT ANY WORK OR TRANSPORT ANY GOODS FROM ONE PLACE TO ANOTH ER BETWEEN THE ASSESSEE AND THE OTHER SHIPPING COMPANI ES. THE ASSESSEE-COMPANY SIMPLY HIRED THE SHIPS ON PAYMENT OF IRE CHARGES AND IT WAS UTILIZED IN THE BUSINESS OF THE ASSESSEE AT THEIR OWN DISCRETION. IT IS NOT THE CASE OF THE REV ENUE THAT THE ASSESSEE ENTERED INTO THE SAID CONTRACT WITH THE SH IPPING COMPANY FOR TRANSPORT OF COAL FROM ONE PLACE TO ANO THER. THE HIRING OF SHIPS FOR THE PURPOSE OF USING THE SAME I N THE ASSESSEES BUSINESS WOULD NOT AMOUNT TO A CONTRACT FOR CARRYING OUT ANY WORK AS CONTEMPLATED IN S. 194C. T HE TERM HIRE IS NOT DEFINED IN THE IT ACT. SO, ONE HAS TO TAKE THE NORMAL MEANING OF THE WORD HIRE. NORMAL HIRE IS A CONTRACT BY WHICH ONE GIVES TO ANOTHER TEMPORARY POSSESSION AND USE OF THE PROPERTY OTHER THAN MONEY FOR PAYMENT OF COMPEN SATION AND THE LATTER AGREES TO RETURN THE PROPERTY AFTER THE EXPIRY OF THE AGREED PERIOD. THEREFORE, WHEN THE ASSESSEE ENT ERED INTO A CONTRACT FOR THE PURPOSE OF TAKING TEMPORARY POSSES SION OF SHIPS IN THE SHIPPING COMPANY IT COULD NOT BE CONST RUED AS IF THE ASSESSEE ENTERED INTO ANY CONTRACT FOR CARRYING OUT ANY WORK, AND WHEN THE CONTRACT IS NOT FOR CARRYING OUT ANY WORK, THE REVENUE CANNOT INSIST THAT ASSESSEE OUGHT TO HA VE DEDUCTED TAX AT SOURCE U/S 194C. THE EXPLANATION IN TRODUCED IS W.E.F. 1 ST JULY, 1995. HENCE, IT WILL BE APPLICABLE ONLY FOR THE FUTURE ASSESSMENT ORDERS AND IT WILL NOT BE APPLICA BLE TO THE ASSESSMENT YEAR IN CONSIDERATION. THE TRIBUNAL ALSO CONSIDERED THE FACT THAT THE SHIPPING COMPANIES WHICH RECEIVED THE HIRE CHARGES ARE ALSO INCOME-TAX ASSESSEES AND THEY HAD SHOWN HE HIRE CHARGES IN THEIR RESPECTIVE IT RETURNS AND PAI D THE TAXES ON THE SAME. THE SAID FACT WAS ALSO NOT DISPUTED BY THE REVENUE. SO, THE PAYMENT OF HIRE CHARGES FOR TAKING TEMPORARY POSSESSION OF THE SHIPS BY THE ASSESSEE-COMPANY WOU LD NOT FALL WITHIN THE PROVISIONS OF S. 194 AND HENCE NO T AX IS REQUIRED TO BE DEDUCTED, AND THERE IS NO ERROR OR INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES. HENCE, NO SUBSTANTIAL QUE STION OF LAW ARISES FOR CONSIDERATION OF THE COURT. SEDCO FORE X INTERNATIONAL DRILL INC. & ORS. V. CIT & ANR., [200 5] 199 CTR (SC) 320: [2005] 279 ITR 310 (SC) RELIED ON. 14. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SHREE CHOUDHARY TRANSPORT COMPANY VS. ITO, [2009] 225 CTR (RAJ.) 125 HELD THAT ASSESSEE HAVING EXECUTED A CEMENT TRANSPORTATION ITA NO. 1220/HYD/2012 & C.O. NO. 128/HYD/12 M/S NEW BOMBAY GOODS TRANSPORT AGENCY 7 CONTRACT HIRED THE SERVICES OF TRUCK OWNERS, THERE EXISTED SUB- CONTRACTS BETWEEN THE ASSESSEE AND THE TRUCK OWNERS AND THEREFORE, S. 194C WAS APPLICABLE AND THE PAYMENTS MADE IN RES PECT OF SUCH CONTRACTS WITHOUT DEDUCTION OF TAX AT SOURCE U/S 19 4C WERE RIGHTLY DISALLOWED U/S 40(A)(IA) OF THE IT ACT. 15. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN T HE ABOVE DECISIONS, WE DISMISS THE C.O. RAISED BY THE ASSESS EE. 16. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND C.O. OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27/11/2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGH AVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED:27 TH NOVEMBER, 2012. KV COPY TO:- 1) DCIT, CIRCLE 7(1), 2 ND FLOOR, B BLOCK, IT TOWERS, HYDERABAD. 2) M/S NEW BOMBAY GOODS TRANSPORT AGENCY, H.NO. 5-6- 145, SPL. A CLASS, NAMAZ GROUND, AGAPURA, HYDERABAD . 3) THE CIT (A)-VI, HYDERABAD 4) THE CIT-VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.