ITO, Bokaro V. CCL, Rajrappa

ITA 108/RAN/2012

• Counselvise Citation: 10825114 RSA 2012
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S KUJUR
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI CIRCUI T BENCH, RANCHI (BEFORE SHRI P.K.BANSAL, HONBLE A.M.& SHR I D.T. GARASIA, HONBLE J.M.) I.T.A.NOS.108 TO 111/RAN/2012 : ASSESSMENT Y EARS 2008-2009 TO 2011-2012 I.T.O., TDS WARD, BOKARO -VS- C.C.L., RAJARAPPA (APPELLANT) PAN: ADZPT 4370Q (RESPONDE NT) C. O. NOS.02 TO 05/RAN/2013 : ASSESSMENT YEARS 2008-2009 TO 2011-2012 (ARISING OUT OF ITA NOS. 108 TO 111/RAN/20 12) C.C.L., RAJARAPPA -VS- I.T.O., TDS WARD, BOKARO (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI S.KUJUR, D.R. ASSESSEE BY : SHRI S.K.PODDAR WITH SHRI M.K.CHOWDHURY, ADVOCATE. DATE OF CONCLUDING THE HEARING : 02.05.2013 DATE OF PRONOUNCING THE ORDER : 07.05.2013 O R D E R PER BENCH : THESE APPEALS BY THE REVENUE AND THE CROSS-OBJECTIO NS BY THE ASSESSEE HAVE BEEN FILED AGAINST THE ORDER OF THE CIT(A), JAMSHED PUR ALL DATED 22.05.2012 FOR THE ASSESSMENT YEAR 2008-09 TO 2011-12 RESPECTIVELY. IN ALL THESE APPEALS FILED BY THE REVENUE AS WELL AS CROSS OBJECTIONS FILED BY THE AS SESSEE, THE FOLLOWING EFFECTIVE COMMON GROUNDS ARE TAKEN BY IT. THE GROUNDS TAKEN B Y THE ASSESSEE IN THE CROSS OBJECTIONS ARE SUPPORTIVE TO THE ORDER OF THE CIT(A ). 1. THE CIT(A) HAS ERRED IN INTERPRETING THAT THE P AYMENT FOR HIRING OF VEHICLES WAS FOR THE SERVICE CONTRACT AND NOT AS RE NT AND THUS ERRED IN HOLDING THAT THE ASSESSEE HAS CORRECTLY DEDUCTED TA X AT SOURCE AS PER PROVISIONS OF SECTION 194C INSTEAD OF SECTION 194-I OF THE I.T. ACT 1961. 2. THE CIT(A) HAS ERRED IN TREATING THE PAYMENT MA DE TO SECURITY AGENCIES AS PAYMENT MADE FOR SUPPLY OF MANPOWER AND THUS HAS INCORRECTLY HELD THAT THE DEDUCTION OF TAX AT SOURC E SHOULD BE COVERED U/S 194C AND NOT U/S 194I OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER NOTED THAT THE ASSESSEE HAS TAKEN THE VEHICLE ON RENT BUT THE ASSESSEE HAS DEDU CTED THE TDS UNDER SECTION 194C WHILE THE CORRECT PROVISION APPLICABLE WAS SECTION 194J. THE ASSESSING OFFICER, 2 THEREFORE, PASSED THE ORDER UNDER SECTION 201(1)(1A ) ON 25.02.2011. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A), AFTER ANALYZING THE PROVISIONS OF SECTION 194C AND 194-I TOOK THE VIEW, THE ASSESSEE HAS CORRECTLY DEDUCTED THE TAX UNDER SECTION 194C BY OBSERVING AS UNDER: 6.7. I HAVE CONSIDERED THE ARGUMENTS OF THE APPEL LANT AND HAVE PERUSED THE ORDER U/S 201(1)/(1A). I HAVE ALSO CONSIDERED THE R EMAND REPORT AND COUNTER COMMENTS OF THE APPELLANT. THE AO IN HIS REMAND REP ORT SUBMITTED THAT THE APPELLANT HAD ACCEPTED THE MISTAKE DURING THE ASSES SMENT PROCEEDINGS. THE CONTENTION OF THE APPELLANT THAT THE ADMISSION OF M ISTAKE IF AT ALL WAS IN RESPECT OF MISTAKE OF LAW WHICH CAN BE CORRECTED AT ANY STAGE IS ACCEPTABLE IN VIEW OF THE JUDICIAL DECISIONS RELIED UPON BY THE A PPELLANT. THE AO IN THE ORDER UNDER SECTION 201 / 201 ( 1A) AFTER PERUSAL O F THE CAR RENTAL AGREEMENT STATED THAT THE DEDUCTION OF TAX AT SOURCE IN RESPE CT OF PAYMENT OF RENTAL MADE TO OWNER OF VEHICLES SHOULD BE MADE UNDER SECTION 1 941 SINCE THE CONTRACT FOR THE VEHICLE OWNERS WAS FOR RENTAL OF THEIR VEHICLES ON A REGULAR BASIS FROM MONTH TO MONTH. THE RELEVANT EXTRACT OF A SAMPLE CO PY OF THE ENGAGEMENT OF VEHICLE IS REPRODUCED AS UNDER:- THIS IS IN CONTINUATION OF OUR LETTER OF EVEN NO. GM/SO/(E&M)/HIRING/ 08-09/120 DATED 14/06/08 THE F ORMAL WORK ORDER IS BEING ISSUED FOR THE ENGAGEMENT OF YOUR VEHICLE NO. JHO1S-8156 ON HIRING BASIS FOR THE PERIOD FROM 15/06/08 TO 11/06/09 WITH THE FOLLOWING TERMS AND CONDITIONS: 1) RATE OF HIRING RS.399/- PER DAY, PLUS COST OF D IESEL @8 KM PER LTR. WILL BE PAID ON MONTHLY BASIS AFTER SUBMISSION OF VOUCHER/CASH MEMO OF PAID AT THE RATE OF PRESENT RATE. MOBIL @500 KM RUNNING PER HR. WILL BE PAID EXTRA. 3. VEHICLE SHOULD BE PROVIDED WITH DRIVERS FOR 24 H OURS RUNNING. 5. IN CASE OF BREAKDOWN OF VEHICLE CONTINUOUS MORE THAN 24 HOURS IN A SINGLE DAY/OCCASION, ALTERNATIVE VEHICLE WILL HAVE TO BE ARRANGED BY THE OWNER OTHERWISE AMOUNT FOR NON-OPERATION WILL BE DE DUCTED ON THE BASIS OF TWICE THE HIRING CHARGES SUBJECT TO MAXIMU M 10% OF THE AWARD VALUE (HIRING CHARGES ONLY) I.E., ONE DAY CHARGES F OR NON-OPERATION AND ONE DAY CHARGE AS PENALTY. 3 THUS IT IS SEEN THAT THE APPELLANT HAD TAKEN ON HIR E CAR ALONGWITH DRIVER FOR THE TRANSPORTATION OF ITS EMPLOYEES. IT IS CLEA R FROM THE TERMS OF THE AGREEMENT THAT THE TRANSPORT SERVICE PROVIDER HAD T O PROVIDE THE VEHICLE ALONGWITH THE REQUISITE STAFF AND RELEVANT FACILITI ES, FULL MAINTENANCE AND REPAIRS OF THE VEHICLE ETC. THUS THE APPELLANT WAS NOT REQUIRED TO PROVIDE ANYTHING BUT WAS AVAILING THE SERVICES OF T RANSPORTING OF ITS EMPLOYEES AT VARIOUS LOCATIONS. THE ABOVE FACTS SH OWS THAT THE AGREEMENT FOR HIRING OF VEHICLES IS IN THE NATURE O F SERVICE CONTRACT AND THE PRINCIPLE LAID DOWN IN THE CASE LAWS RELIED BY THE APPELLANT HOLDING SUCH AN ARRANGEMENT AS SERVICE CONTRACT WOULD BE AP PLICABLE IN THE CASE OF THE APPELLANT ALSO. IN THE CASE OF ACIT VS. ACCENTURE SERVICES P. LTD. (SUPRA) ON IDENTICAL FACTS, THE LD. TRIBUNAL, MUMBAI BENCH, HELD THAT EVEN THE AMENDMENT IN THE PROVISIONS OF SECTIO N 1941 HAS INCLUDED PLANT & MACHINERY THE EXPRESSION PLANT & MACHINERY USED IN EXPLANATION TO SECTION 1941 REFERS TO ONLY THE PLAN T & MACHINERY USED BY THE ASSESSEE IN ITS BUSINESS BY HIRING THEM BUT NOT THE HIRING OF TRANSPORT SERVICE. RESPECTFULLY FOLLOWING THIS DECI SION IT IS HELD THAT THE APPELLANT HAS CORRECTLY DEDUCTED TAX UNDER SECTION 194C AND THERE IS NO LIABILITY TO DEDUCT TAX UNDER SECTION 1941 AS THE S AID PROVISIONS ARE NOT APPLICABLE TO THE HIRE CHARGES PAID FOR UTILIZATION OF TRANSPORT SERVICES IN THE CASE OF THE APPELLANT. 6.8. HOWEVER, THE OTHER CONTENTION OF THE APPELLAN T THAT IT HAD NO LIABILITY TO DEDUCT TDS UNDER SECTION 194C TOWARDS PAYMENT OF FU EL CHARGES IS NOT ACCEPTABLE. THE CONTENTION OF THE APPELLANT THAT TH E SAID PAYMENT IS REIMBURSEMENT OF THE ACTUAL EXPENSES BY THE TRANSPO RT OPERATOR IS NOT CORRECT. THE PAYMENT IS NOT REIMBURSEMENT FOR THE ACTUAL COS T OF FUEL INCURRED BY THE TRANSPORT OPERATOR BUT THE PAYMENT IS ON A CALCULAT ION OF MILEAGE PER LITRE OF THE VEHICLE AND IS PART OF HIRING CHARGES. IT IS NO T THE CASE OF THE APPELLANT THAT PAYMENT FOR FUEL CHARGES MATCHES WITH THE COST OF F UEL INCURRED BY THE TRANSPORT PROVIDERS BUT THE SAME IS PAID ON A PRESU MPTIVE BASIS WHICH CANNOT BE TERMED AS REIMBURSEMENT. THEREFORE, THE AO WAS C ORRECT IN HOLDING THAT THE APPELLANT WOULD BE LIABLE TO DEDUCT TAX IN RESP ECT OF PAYMENT TOWARDS THE FUEL CHARGES ALSO AND THE ACTION OF THE AO IN THIS REGARD IS CONFIRMED. GROUND NO. 9 IN RESPECT OF APPEAL NO. 137 TO 140 IS PARTLY ALLOWED. 3. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CON SIDERED THE SAME. WE NOTED THAT THE ASSESSEE HAS ENGAGED THE VEHICLE FOR THE P URPOSE OF CARRYING HIS STAFF. SECTION 194C EXPLANATION (4) DEFINES THE WORD WORK . THE WORK HAS BEEN DEFINED TO INCLUDE THE VARIOUS ACTIVITIES LAID DOWN THEREUN DER. CLAUSE C OF EXPLANATION (4) STATES CARRIAGE OF GOODS OR PASSENGER BY ANY MODE O F TRANSPORT OTHER THAN BY 4 RAILWAYS. THIS IS A FACT THAT THE ASSESSEE HAS ACQU IRED THE VEHICLE FOR THE PURPOSE OF TRANSPORTING ITS STAFF. IN VIEW OF CLEAR-CUT MANDAT E OF CLAUSE C OF CLAUSE (4) OF THE EXPLANATION, WE ARE OF THE FIRM VIEW THAT THE PROVI SIONS OF SECTION 194C ARE APPLICABLE IN THE CASE OF THE ASSESSEE AND THE ASSE SSEE HAS RIGHTLY DEDUCTED THE TAX AT SOURCE UNDER SECTION 194C. IN OUR OPINION, THEREFOR E, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A). IT IS NOT EVEN A CASE WHIC H WARRANTS OUR INTERFERENCE. ACCORDINGLY, THE GROUND NO.1 TAKEN BY THE REVENUE I N ALL THE APPEALS STANDS DISMISSED. 4. GROUND NO.2 TAKEN BY THE REVENUE IN ALL THE APPE ALS RELATES TO THE APPLICABILITY OF SECTION 194J IN RESPECT OF PAYMENT MADE TO SECUR ITY AGENCIES FOR THE SUPPLY OF MANPOWER. BRIEF FACTS RELATING TO THIS GROUND ARE T HAT THE ASSESSEE HAS ENGAGED THE SECURITY AGENCIES AND HAD DEDUCTED THE TAX @5%. THE ASSESSING OFFICER TOOK THE VIEW THAT THE PROVISIONS OF SECTION 194J WERE APPLI CABLE AND ACCORDINGLY THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE @10%. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) TOOK THE VIEW THAT THE PROVISION S OF SECTION 194C ARE APPLICABLE, NOT THE PROVISIONS OF SECTION 194J BY HOLDING AS UN DER: 7.5. I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLA NT AND HAVE PERUSED THE ORDER U/S 201(1)/(1A). I HAVE ALSO CONSIDERED T HE REMAND REPORT AND COUNTER COMMENTS OF THE APPELLANT. IN THIS CASE THE APPELLANT HAD DEDUCTED TDS UNDER SECTION 194J. HOWEVER, AS PER TH E EXPLANATION TO SECTION 194J THE AGREEMENT RELATING TO PROVIDING SE CURITY BY SUPPLYING SECURITY PERSON IS NOT COVERED BY THE EXPLANATION O F EITHER THE PROFESSIONAL SERVICES OR TECHNICAL SERVICES AS PROV IDED UNDER SECTION 194J. THE APEX COURT IN THE CASE OF CIT VS. SHELLY PRODUCTS & ANR 261 ITR 367 (SC) HAS HELD AS UNDER: SIMILARLY, IF ASSESSEE HAS BY MISTAKE OR INADVERTEN CE OR ON ACCOUNT OF IGNORANCE, INCLUDED IN HIS INCOME ANY AM OUNT WHICH IS EXEMPTED FROM PAYMENT OF INCOME-TAX OR IS NOT IN COME WITHIN THE CONTEMPLATION OF LAW, HE MAY LIKE WISE BRING TH IS TO THE NOTICE OF THE ASSESSING AUTHORITY, WHICH, IF SATISFIED, MA Y GRANTED HIM RELIEF AND REFUND THE TAX PAID IN EXCESS, F ANY 5 7.6. AS DISCUSSED ABOVE, THE CASE OF THE APPELLANT IS COVERED UNDER SECTION 194C AND NOT UNDER SECTION 194J WHICH WAS W RONGLY APPLIED BY THE APPELLANT WHILE MAKING THE PAYMENT TO THE SECUR ITY AGENCY. IN VIEW OF THE ABOVE DECISION OF THE APEX COURT IT IS HELD THAT ADMISSION OF MISTAKE BY THE APPELLANT BY WRONGLY APPRECIATING TH E PROVISIONS OF LAW CANNOT BE HELD AGAINST IT AND THE CORRECT POSITION OF LAW HAS TO BE APPLIED. THEREFORE, THERE IS NO SHORTFALL IN DEDUCT ION AND THE APPELLANT IS NOT LIABLE TO DEPOSIT THE TDS AMOUNT BY WAY OF S HORT DEDUCTION AS HELD BY THE AO. THE ACTION OF THE AO IN TREATING TH E APPELLANT AS ASSESSEE IN DEFAULT IN RESPECT OF THE ABOVE AMOUNTS UNDER SECTION 201(1) IS NOT CORRECT AND THE SAME IS DELETED. GROUND NO. 10 OF THE APPEAL NO.137 TO 139 IS ALLOWED. 5. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CON SIDERED THE SAME ALONG WITH THE ORDERS OF TAX AUTHORITIES BELOW. WE HAVE GONE T HROUGH THE PROVISIONS OF SECTION 194J. EXPLANATION TO SECTION 194J DEFINES THE PROFE SSIONAL SERVICES WHICH MEANS THE SERVICES RENDERED BY A PERSON IN THE COURSE OF CARR YING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF AC COUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADVERTISEMENT OR SUCH OTH ER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSE OF SECTION 44AA OR OF THIS SE CTION. UNDER SECTION 44AA, THE PROFESSION OF AUTHORISED REPRESENTATIVE, THE PROFES SION OF FILM ARTISTS (ACTOR, CAMERAMAN, DIRECTOR, MUSIC DIRECTOR, ART DIRECTION, DANCE DIRECTOR, EDITOR OR SINGER, LYRICIST, STORY WRITER, SCREEN PLAY WRITER, DIALOGU E WRITER AND DRESS DESIGNER), PROFESSION OF COMPANY SECRETARY, PROFESSION OF INFO RMATION TECHNOLOGY HAS BEEN NOTIFIED UNDER SECTION 44AA. 5.1 WE HAVE ALSO GONE THROUGH THE NOTIFICATION MADE FOR EXPLANATION TO SECTION 194J. WE FIND THAT THE CBDT HAS NOTIFIED ONLY THE P ROFESSIONAL SERVICES IN RESPECT OF SPORTS ACTIVITIES AS WELL AS TRANSACTIONS BY THE TH IRD PARTY ADMINISTRATORS WITH THE HOSPITALS TO BE PROFESSIONAL SERVICES. THE SUPPLY O F THE SECURITY PERSONS CANNOT, THEREFORE, BE TREATED TO BE THE PROFESSIONAL SERVIC ES. FEES FOR TECHNICAL SERVICES HAS BEEN DEFINED UNDER SECTION 9(1)(VII) EXPLANATION 2. EXPLANATION 2 DEFINES FEES FOR TECHNICAL SERVICES TO MEAN ANY CONSIDERATION (INCLU DING ANY LUMPSUM CONSIDERATION) FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSU LTANCY SERVICES (INCLUDING THE 6 PROVISION OF SERVICES FOR TECHNICAL OR OTHER PERSON NEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MININ G OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE THE I NCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. IN VIEW OF THIS DEFINITI ON, SUPPLY OF SECURITY PERSONNEL CANNOT BE REGARDED TO BE FEES FOR TECHNICAL SERVICE S. IN VIEW OF THIS FACT, IN OUR OPINION, THE PROVISIONS OF SECTION 194J WILL NOT AP PLY IN THE CASE OF THE ASSESSEE. THE ASSESSEE HAS RIGHTLY APPLIED THE PROVISIONS OF SECT ION 194C AND DEDUCTED THE TAX IN ACCORDANCE THEREWITH. WE, THEREFORE, CONFIRM THE OR DER OF THE CIT(A). THUS, THE GROUND NO.2 TAKEN BY THE REVENUE IN ALL THE APPEALS ALSO STANDS DISMISSED. HENCE, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. 6. THE CROSS OBJECTIONS FILED BY THE ASSESSEE BEING SUPPORTIVE TO THE ORDER OF THE CIT(A) BECOME INFRUCTUOUS AND HENCE DISMISSED. 7. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE ARE DISMISSED WHEREAS THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALSO DIS MISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE COURT ON 7 TH MAY, 2013. SD/- SD/- [D.T.GARASIA] [P.K.BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 7 TH MAY, 2013 COPY OF ORDER FORWARDED TO : 1. .C.C.L., RAJARAPPA 2. I.T.O., TDS WARD, BOKARO 3. C.I.T.(A), 4. THE .C.I.T., 5. THE D.R., I.T.A.T., TRUE COPY, BY ORDER, [MST, SR.PS] SR. PRIVATE SECRETARY (ON T OUR) ITAT, RANCHI