Conzug Logistics Pvt. Ltd., Visakhapatnam V. Dy CIT, Central Circle, Vijayawada

CO 79/VIZ/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3741 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 14-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V SRINIVASA RAO
• Keywords: Unexplained cash credit; Search and seizure
• Section: 143(3); 153A; 194C; 263

Judgement Text

ITA NO.507 /VIZAG/2017 & CO 79/VIZAG/2017 M/S. CONZUG LOGISTICS PVT. LTD., VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.507/VIZAG/2017 ( / ASSESSMENT YEAR: 2005-06) THE DCIT, CENTRAL CIRCLE VIJAYAWADA M/S. CONZUG LOGISTICS PVT. LTD. VISAKHAPATNAM [PAN NO. AACCC2833J ] ( ' / ASSESSEE) ( ()' / RESPONDENT) C.O. NO.79/VIZAG/2017 (ARISING OUT OF I.T.A.NO.507/VIZAG/2017) ( / ASSESSMENT YEAR: 2005-06) M/S. CONZU G LOGISTICS PVT. LTD. VISAKHAPATNAM THE DCIT, CENTRAL CIRCLE VIJAYAWADA ( ' / ASSESSEE) ( ()' / RESPONDENT) / ASSESSEE BY : SHRI V. SRINIVASA RAO, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 15.03.2018 / DATE OF PRONOUNCEMENT : 0 4.04.2018 ITA NO.507 /VIZAG/2017 & CO 79/VIZAG/2017 M/S. CONZUG LOGISTICS PVT. LTD., VISAKHAPATNAM 2 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, {CIT(A)}, V ISAKHAPATNAM VIDE ITA NO.42/2015-16/CIT(A)-3/VSP/2017-18 DATED 30.6.2 017 FOR THE ASSESSMENT YEAR 2005-06. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE LD. CIT(A). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF HANDLING AND TRANSPORT C ONTRACTORS AT VISAKHAPATNAM AND CONSIGNMENT AGENT OF RINL, NAG PUR. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y.200 5-06 ORIGINALLY ON 01.10.2005 ADMITTING THE TOTAL INCOME OF RS.1,33,430/-. CONSEQUENT TO SEARCH AND SEIZURE OP ERATIONS IN THE CASE OF M/S. MAHA MARUTHI LOGISTICS PRIVATE LIM ITED, A NOTICE U/S.153A OF THE INCOME TAX ACT, 1961 (HEREINAFTER C ALLED AS 'THE ACT') WAS ISSUED ON 29.12.2010 AND IN RESPONSE TO T HE NOTICE, THE ASSESSEE FILED THE RETURN OF INCOME ON 14.2.20 11 ADMITTING THE TOTAL INCOME OF RS.1,33,430/-. THE ASSESSMENT W AS COMPLETED U/S. 143(3) R.W.S. 153A OF THE ACT VIDE O RDER DT.29.12.2011 WHEREIN THE INCOME OF THE ASSESSEE WA S ITA NO.507 /VIZAG/2017 & CO 79/VIZAG/2017 M/S. CONZUG LOGISTICS PVT. LTD., VISAKHAPATNAM 3 ASSESSED AT RS. 1,33,430/-. VIDE ORDER DT.03.03.20 14. U/S. 263 OF THE ACT, THE COMMISSIONER OF INCOME TAX (CEN TRAL) HELD THAT THE ASSESSMENT ORDER DT.29.12.2011 IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUN D THAT THE ASSESSING OFFICER DID NOT PROPERLY EXAMINE SOME OF THE ISSUES RELATING TO BANK DEPOSITS AND TDS. CONSEQUENTLY THE ASSESSING OFFIC ER HAS TAKEN UP THE CASE FOR REASSESSMENT AS PER THE DIRECTION O F THE ORDER PASSED UNDER SECTION 263 OF THE ACT AND GIVEN EFFE CT TO THE REVISION ORDER BY PASSING ASSESSMENT ORDER DT.26.03 .2015 U/S. 143(3) R.W.S. 263 OF THE ACT. THUS THE TOTAL INCOME WAS AS SESSED AT RS.74,50,790/- BY MAKING AN ADDITION OF RS.27,00 ,000/- TOWARDS UNEXPLAINED CASH CREDIT AND ADDITION OF RS. 46,17,360/- TOWARDS DISALLOWANCE OF EXPENDITURE U/S. 40(A)(IA) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) ALLOWED THE AP PEAL OF THE ASSESSEE DELETING BOTH THE ADDITION OF ` 27,00,000/- IN RESPECT OF CASH CREDITS AND THE ADDITION MADE IN RESPECT OF DISALLO WANCE U/S 40(A)(IA) OF THE ACT. ITA NO.507 /VIZAG/2017 & CO 79/VIZAG/2017 M/S. CONZUG LOGISTICS PVT. LTD., VISAKHAPATNAM 4 4. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REV ENUE IS IN APPEAL BEFORE US AGAINST THE ADDITION U/S 40(A)(IA) OF THE ACT. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE DELETION O F ADDITION FOR MADE U/S 40(A)(IA) OF THE ACT. DURING THE APPEAL H EARING, THE LD. D.R. ARGUED THAT THE PAYMENT WAS MADE TO CONCOR, A COMPANY WHICH IS ENGAGED IN THE CARRIAGE OF GOODS. SINCE T HE PAYMENT WAS NOT DIRECTLY MADE TO THE RAILWAYS, THE LD. D.R. CON TENDED THAT THE PAYMENT ATTRACT THE TDS U/S 194C OF THE ACT. SINCE THE ASSESSEE FAILED TO DEDUCT THE TDS, THE A.O. HAS RIGHTLY MADE THE ADDITION, HENCE, REQUESTED TO CONFIRM THE ORDER OF THE A.O. 5. ON THE OTHER HAND, THE LD. A.R. ARGUED THAT AS P ER SECTION 194C OF THE ACT, IN EXPLANATION (IV)(C), WORK SHALL INCLUDE CARRIAGE OF GOODS OR PASSENGERS OR ANY MODE OF TRANSPORT, OT HER THAN BY RAILWAYS. SINCE THE CONCOR IS A SUBSIDIARY ORGANIZ ATION OF THE INDIAN RAILWAYS AND THE RAILWAYS HAVE CARRIED THE G OODS, THERE IS NO CASE FOR TDS U/S 194C OF THE ACT. HE RELIED ON THE ORDER OF THE COORDINATE BENCH OF ITAT, HYDERABAD IN THE CASE OF RAS POLYBUILD PRODUCT PVT. LTD. VS. DCIT (2016) 48 CCH 254 (HYD) (TRIB). ITA NO.507 /VIZAG/2017 & CO 79/VIZAG/2017 M/S. CONZUG LOGISTICS PVT. LTD., VISAKHAPATNAM 5 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE HAS TRANSPORTED THE GOODS BY RA ILWAYS THROUGH CONCOR, THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT GOODS WERE CARRIED BY THE INDIAN RAILWAYS. AS PER SUB CLAUSE (C) OF EXPLANATION (IV) OF SECTION 194C OF THE ACT FROM THE DEFINITION OF WORK, THE CARRIAGE OF GOODS BY RAILWAYS IS EXCLUD ED FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE U/S 194C OF T HE ACT. THE LD. CIT(A) HAS DEALT THE ISSUE IN DETAIL IN PARA NO.6.3 OF THE CIT(A) ORDER, WHICH IS EXTRACTED FOR THE SAKE OF CLARITY A ND THE SAME READS AS UNDER: 6.3) GROUND NO.2: THIS GROUND IS DIRECTED AGAINST A DDITION OF ` 46,17,360/- TOWARDS DISALLOWANCE U/S 40(A)(IA) OF T HE ACT. THE SHORT DISPUTE IS WHETHER THE AMOUNT PAID BY THE APP ELLANT TO CONCOR TOWARDS RAILWAY FREIGHT ATTRACTS THE PROVISI ONS OF SECTION 194C OF THE ACT OR NOT. IN THIS REGARD, IT IS PERTI NENT TO CONSIDER THE RELEVANT PROVISIONS OF SECTION 194C OF THE ACT, WHI CH ARE EXTRACTED AS UNDER: 194C. PAYMENT TO CONTRACTORS (1) ANY PERSON RESPO NSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER IN THIS S ECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (IN CLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE O F A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON SHALL , AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRAC TOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CH EQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO- (I) ONE PER CENT WHERE THE PAYMENT IS BEING MADE OR CRE DIT IS BEING GIVEN TO AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY; (II) TWO PER CENT WHERE THE PAYMENT IS BEING MADE OR CRE DIT IS BEING GIVEN TO A PERSON OTHER THAN AN INDIVIDUAL OR A HIN DU UNDIVIDED FAMILY, ITA NO.507 /VIZAG/2017 & CO 79/VIZAG/2017 M/S. CONZUG LOGISTICS PVT. LTD., VISAKHAPATNAM 6 OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THERE IN. .. EXPLANATION: FOR THE PURPOSES OF THIS SECTION: .. WORK SHALL INCLUDE- (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION O F PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRAN SPORT OTHER THAN BY RAILWAYS; (D) CATERING; (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PU RCHASED FROM SUCH CUSTOMER. FROM THE ABOVE EXPLANATION, IT IS VERY MUCH CLEAR T HAT THE EXPRESSION 'WORK' DOES NOT INCLUDE CARRIAGE OF GOODS BY RAILWA YS. FURTHER, THE PROVISIONS OF SECTION 194C ARE APPLICABLE ONLY FOR SUM PAID FOR CARRYING OUT A WORK. A SIMPLE READING OF THE PROVIS IONS MAKES IT VERY CLEAR THAT WHEN THE AMOUNT PAID IS FOR CARRYING OUT A JOB WHICH INCLUDES CARRIAGE OF GOODS BY RAILWAYS, THEN SUCH A MOUNT PAID TO ANY PERSON SHALL NOT BE TREATED AS A PAYMENT FOR WORK I N TERMS OF SECTION 194C OF THE ACT. IT IS NOWHERE STIPULATED IN THIS S ECTION THAT THE PAYMENT HAS TO BE MADE DIRECTLY TO RAILWAYS. THE AP PELLANT HAS RIGHTLY PLACED RELIANCE IN THE DECISION OF HYDERABA D BENCH OF ITAT IN THE CASE OF RASPOTYBUILD PRODUCTS PVT LTD. VS. DCII (2016) 48 CCH 254 (HYD)(TRIB). THE HON'BLE TRIBUNAL HELD AS UNDER IN THEIR ORDER: 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS AND PERUSED THE RECORD. AS RIGHTLY POINTED OUT BY THE LEARNED COUNS EL APPEARING ON BEHALF OF THE ASSESSEE, SECTION 194C SPEAKS OF PAYM ENT MADE TO CONTRACTORS WITH AN EXCEPTION THAT EVEN PAYMENTS MA DE TO CONTRACTORS WOULD STAND OUTSIDE THE PURVIEW OF THAT PROVISION I F SUCH PAYMENT IS MADE TYIARDS CARNAGE CHARGES. IN THE INSTANT CASE, THE ASSESSEE CATEGORICALLY SUBMITTED THAT THE PAYMENT WAS MADE T O M/S. EXIM SERVICES TOWARDS FREIGHT CHARGES THAT TOO FOR CORN GOODS_BY RAIL. THIS CLAIM OF THE ASSESSEE IS NOT DISPUTED BY THE TAX AU THORITIES EXCEPT STATING THAT THE PAYMENT IS NOT MADE DIRECTLY TO TH E RAILWAYS BUT TO THE AGENT. IN OUR CONSIDERED OPINION THE OPENING PA RT OF SECTION 194C REFERS TO PAYMENTS MADE TO CONTRACTORS BUT AT THE S OME TIME MAKES ITA NO.507 /VIZAG/2017 & CO 79/VIZAG/2017 M/S. CONZUG LOGISTICS PVT. LTD., VISAKHAPATNAM 7 AN EXCEPTION TO THE PAYMENTS MADE TO SUCH CONTRACTO RS IF THAT AMOUNT HAS TO BE UTILISED FOR PAYMENT OF RAIL FARES. IF TH E INTENTION OF THE LEGISLATURE WAS TO MAKE THE PAYMENT DIRECTLY TO THE RAILWAY AUTHORITIES, THEN THE EXCEPTION PROVIDED IN THE EXP LANATION SHOULD NOT HAVE BEEN INTRODUCED IN SECTION 194C OF THE ACT. TH US, ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT E VEN IF PAYMENT IS MADE TO AN AGENT SO LONG AS THE PAYMENT IS MEANT FO R MEETING THE EXPENDITURE IN THE FORM OF PAYMENT TO THE RAILWAYS, T STANDS EXCLUDED FROM THE PROVISIONS OF SECTION 194C OF THE ACT. UND ER THESE CIRCUMSTANCES, WE ACCEPT THE PLEA OF THE ASSESSEE B Y HOLDING THAT THERE WAS NO NEED TO DEDUCT TAX AT SOURCE WITH RESP ECT TO THE IMPUGNED PAYMENT TO THE CONTRACTOR. EVEN OTHERWISE, IN THE LIGHT OF DECISION OF THE ITAT, HYDERABAD BENCH IN THE CASE O F ACIT, CENTRAL CIRCLE-2, HYDERABAD VS., MIS. JANAPRIYA PROPERTIES PVT. LTD., HYDERABAD (SUPRA) SECTION 40(A)(IA) CANNOT BE INVOK ED IN RESPECT OF PAYMENTS ALREADY MADE BEFORE THE END OF THE ACCOUNT ING YEAR. WE DIRECT THE A.O. ACCORDINGLY. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF ITAT, HYDERABAD BENCH, I HOLD THAT THE IMPUGNED PAYMENT DOES NOT FALL WITHIN THE SCOPE OF THE PROVISIONS OF SECTION 194C OF THE ACT AND CONSEQUEN TLY THE DISALLOWANCE PROVIDED IN SECTION 40(A)(IA) IS ALSO NOT APPLICABLE. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLO WANCE OF RS.46,17,360/-. 7. THE LD. CIT(A) HAS FOLLOWED THE ORDER OF THE COO RDINATE BENCH OF HYDERABAD AND THE FACTS ARE NOT DISPUTED BY THE LD. D.R., THE LD. D.R. ALSO DID NOT BRING ANY OTHER DECISION IN F AVOUR OF THE REVENUE. THEREFORE, RESPECTFULLY FOLLOWING THE VIE W TAKEN BY THE COORDINATE BENCH, WE HOLD THAT THE IMPUGNED PAYMENT DOES NOT ATTRACT THE TDS U/S 194C OF THE ACT AND NO DISALLOW ANCE IS CALLED FOR U/S 40(A)(IA) OF THE ACT. HENCE THE ORDER OF TH E LD. CIT(A) IS UPHELD AND THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.507 /VIZAG/2017 & CO 79/VIZAG/2017 M/S. CONZUG LOGISTICS PVT. LTD., VISAKHAPATNAM 8 8. CO/79/VIZ/2007 : CO IS SUPPORTIVE OF THE ORDER LD.CIT(A). SINCE WE HAVE UPHELD THE ORDER OF THE LD. CIT(A) CR OSS OBJECTION OF THE ASSESSEE IS SUSTAINED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THE CO IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 4 TH APR18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 04.04.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE ASSESSEE THE DCIT, CENTRAL CIRCLE, VIJAYAW ADA 2. / THE RESPONDENT M/S. CONZUG LOGISTICS PVT. LTD. , C/O MAHA MARUTHI LOGISTICS PVT. LTD., D.NO.50-20, P&T COLONY, SEETHA MMADHARA, VISAKHAPATNAM- 530013. 3. + / THE PRINCIPAL CIT(CENTRAL), VISAKHAPATNAM 4. + ( ) / THE CIT (A)-3, VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM