S.V.Mathaiah and Co., Mettupalayam V. ITO, Coimbatore

ITA 1189/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81270 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: G BASKAR
• Section: 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , , !' # , $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.1189/MDS./2014 ( / ASSESSMENT YEAR :2008-09) M/S.S.V.MATHAIAH AND CO., NELLITHORAI ROAD, METTUPALAYAM 641 301. VS. THE INCOME-TAX OFFICER WARD-V(1), COIMBATORE. PAN AALFS 4221 N ( &' / APPELLANT ) ( #(&' / RESPONDENT ) / APPELLANT BY : MR.G.BASKAR, ADVOCATE / RESPONDENT BY : MR.GURU BHASHYAM, JCIT D.R / DATE OF HEARING : 07.10.2014 ! /DATE OF PRONOUNCEMENT : 21.11.2014 ) / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-I, COIMBA TORE DATED ITA NO.1189/MDS/2014 2 27.02.2014 IN ITA NO.201/10-11 PASSED UNDER SECTIO N143(3 ) READ WITH SECTION SEC. 250 OF THE ACT. 2. THE ASSESSEE HAS RAISED FOUR ELABORATE GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. CIT (A), WHO HAD UPHELD THE OR DER OF THE LD. ASSESSING OFFICER IN DISALLOWING THE FREIGHT CHARGE S OF ` 3,55,370/- PAID TO LORRIES BY INVOKING SEC.40(A)(IA) OF THE AC T. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A FIRM TRADING IN POTATOES BY SUPPLYING THE GOODS TO VARIO US PLACES, FILED ITS RETURN OF INCOME ON 01.12.2008 ADMITTING ITS TOTAL INCOME OF ` 4,88,180/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S.143 (3) OF THE ACT ON 24.11.2010. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, WHILE VERIFYING THE BOOK S OF ACCOUNTS, BILLS ETC., THE LD. ASSESSING OFFICER NOTICED THAT PAYMENTS RELATING TO LORRY FREIGHT WERE MADE TO TWO PERSONS ON A REGULAR BASIS, I.E. M/S.L.S.MUTHU & G.KOTHANDAN AND M/S.JAY AMBA TRANSP ORT SERVICE WITHOUT DEDUCTING TAX AT SOURCE AND THEREFORE THE L D. ASSESSING ITA NO.1189/MDS/2014 3 OFFICER DISALLOWED FREIGHT CHARGES OF ` 3,55,370/- BY INVOKING SECTION 40(A)(IA) OF THE ACT. WHEN THE MATTER REACHED THE LD. CIT (A), THE LD. CIT (A), AFTER EXAMINING THE SUBMISSIONS OF THE ASSESSEE, PERUSING THE ORDER OF THE LD. ASSESSING OFFICER AN D BY REFERRING TO VARIOUS CASE LAWS, HELD AS FOLLOWS:- 7. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE ORDER OF THE ASSESSING OFFICER. THE ASSESS ING OFFICER HAS BROUGHT OUT IN HER ORDER THAT THE FIRM HAS TRANSPOR TED GOODS THROUGH TWO CONCERNS, NAMELY M/S/.MUTHU AND G.KOTHANDAN AND JAY AMBA TRANSPORT SERVICE ON A REGULAR BASIS. AS SEEN FROM THE FACTS, THE APPELLANT HAS PRODUCED THE INVOICE FOR TRANSPORTING BELONGINGS TO THESE TWO CONCERNS. HENCE TDS SHOULD HAVE BEEN DEDU CTED ON FREIGHT CHARGES. IT IS NOT NECESSARY THAT THERE SHO ULD BE WRITTEN CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTER F OR DEDUCTION OF TDS. FURTHER THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT ONLY IN RESPECT OF AMOUNTS PAYABLE AS ON THE LAST D AY OF THE PREVIOUS YEAR THE DISALLOWANCE U/S.40(A)(IA) OF THE INCOME T AX ACT APPLIES AND NOT IN RESPECT OF AMOUNTS ALREADY PAID TO THE PAYEE . IN THIS REGARD, A CLARIFICATION WAS ISSUED BY THE CBDT IN CIRCULAR NO .10/DV/2013 DATED 16.12.2013. IN THE CASE OF MERILYN SHIPPING AND TRA NSPORTS VS. ADDITIONAL. LD. CIT - 20 TAXMANN .COM 244 IT WAS H ELD BY THE SPECIAL BENCH OF ITAT VISHAKHAPATNAM THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT WOULD APPLY ONLY TO THOSE AMO UNTS REMAINED PAYABLE AT THE END OF THE PREVIOUS YEAR. THE ORDER OF THE SPECIAL BENCH WAS PUT UNDER INTE RIM SUSPENSION BY THE ANDHRA PRADESH HIGH COURT. THE HONBLE CALCUTTA HIGH COURT AND ITA NO.1189/MDS/2014 4 HONBLE GUJARAT HIGH COURT IN THECASE OF LD. CIT K OLKATA-XI VS. CRESCENT EXPORTS SYNDICATE (2013) 33 TAXMANN.COM 25 0(CALCUTTA) AND LD. CIT IV VS. SIKANDARKHAN N TUNVAR (2013) 33 TAXMANN.COM 132(GUJARAT) RESPECTIVELY, HAVE HELD THAT SEC.40(A) (IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNT WHICH ARE PAYABLE A T THE END OF THE PREVIOUS YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIM E DURING THE YEAR. IT IS CLEAR FROM THESE JUDGEMENTS THAT THERE IS NO SUCH CONDITION THAT AMOUNT SHOULD REMAIN PAYABLE AT THE END FOR THE YEA R. IN THE CASE OF ACIT, CIRCLE-IV(2), MUMBAI VS.RISHTI STOCK AND SHAR ES (P) LTD. IN ITA NO.112/MUM./2012 HONBLE ITAT MUMBAI IN ITS ORDER DATED 02.08.2013 EXAMINED THE DECISION OF THE HONBLE ALL AHABAD HIGH COURT IN THE CASE OF LD. CIT VS. VECTOR SHIPPING S ERVICES (P) LTD 38 TAXMANN.COM 77. AS REGARDS SECTION 40(A)(IA) IT WAS CONCLUDED THAT THE SAME WAS A ARBITER DICTA WHILE THE DECISION OF THE HONBLE GUJARAT AND CALCUTTA HIGH COURT WERE RATIO DISIDENDI . THE ITAT ACCORDINGLY APPLIED THE VIEW TAKEN BY THE HONBLE G UJART AND CALCUTTA HIGH COURT AS RATIO DISIDENDI PREVAILING OVER AN ARIBITER DICTA. THE STATUTORY PROVISIONS ARE AMPLY CLEAR IN THE CONTEXT OF SEC.40(A)(IA) OF THE INCOME TAX ACT, 1961 I.E. THE TERM PAYABLE WO ULD INCLUDE AMOUNTS WHICH ARE PAID DURING THE PREVIOUS YEAR. SI NCE THERE IS NO JURISDICTIONAL HIGH COURT DECISION ON THIS DECISION , I CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER. THE GROUNDS OF APPEAL ARE DISMISSED. 4. BEFORE US, THE LD. A.R. PLACED RELIANCE IN TH E DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPI NG & TRANPORTS VS. ADDITIONAL CIT IN [2012] 136 ITD 23 (VISHAKHAPATNAM ). LD. D.R ON ITA NO.1189/MDS/2014 5 THE OTHER HAND, VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF T HE CASE IT IS EVIDENT THAT THE ASSESSEE HAD BEEN HIRING TRUCKS FOR TRANSP ORTING ITS GOODS TO VARIOUS LOCATIONS IN ORDER TO COMPLY WITH ITS TRADI NG ACTIVITIES. THE REVENUE HAS NOT MADE A CATEGORICAL FINDING NOR HAS EXAMINED AS TO WHETHER THE WORK OF TRANSPORTATION WAS UNDERT AKEN BY THE TRANSPORTER OR CARRIED OUT BY THE ASSESSEE HIMSELF BY HIRING THE TRUCKS. MOREOVER IT IS APPARENT FROM THE FACTS OF THE CASE THAT THE ASSESSEE IS TRADING IN POTATOES AND DELIVERING THE GOODS AT VARIOUS LOCATIONS BY ITS COMMAND TO VARIOUS TRUCK DRIVERS. IN THIS SIMILAR CIRCUMSTANCE, THE TRIBUNAL RELYING IN THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. POOMPUHAR SHIPPI NG CORPORATION LTD. IN [2006] 282 ITR 3 (MAD.) HAS HELD ON MANY OC CASIONS THAT PROVISIONS OF SECTION 194C OF THE ACT WILL NOT APPL Y. THE OTHER DECISIONS IN FAVOUR OF THE ASSESSEE ARE ALSO REPROD UCED HEREIN BELOW FOR REFERENCE:- ITA NO.1189/MDS/2014 6 I) IN THE CASE OF CIT VS. UNITED RICE LAND LTD. IN (2008) 217 CTR (P&H) 332, THE HONBLE PUNJAB & HARYANA HIGH CO URT WAS PLEASED TO OBSERVE THAT: THERE BEING NEITHER ANY ORAL OR WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE TRANSPORTERS FOR CARRIAGE OF GOODS NOT IT IS PROVED THAT ANY FREIGHT CHARGES WERE PAID TO THEM IN PURSU ANCE OF A CONTRACT FOR A SPECIFIC PERIOD, QUANTITY OR PRICE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX UNDER S.194C FROM THE PAYM ENTS MADE TO THE TRANSPORTERS. II) IN A SIMILAR ISSUE THE HONBLE TRIBUNAL IN THE CASE OF R.R.CARRYLING CORPORATION VS. ACIT REPORTED IN (200 9) 126 TTJ (CTK) 240 HELD THAT: THE ASSESSEE WAS A TRANSPORTER EXECUTING VARIOUS CO NTRACTS BY ENGAGING ITS OWN VEHICLES AND TRANSPORTERS VEHICLE S. THE A.O DISALLOWED THE PAYMENTS BY TAKING PAYMENTS MADE TO THE TRANSPORTER AS SUB-CONTRACT. THERE WAS NOTHING ON R ECORD TO SUGGEST THAT ANY CONTRACT EXISTED BETWEEN THE ASSES SEE AND THE ALLEGED TRANSPORTER AS SUB-CONTRACTOR. THERE WAS N EITHER WRITTEN NOR ORAL AGREEMENT IN THIS REGARD. THERE WAS NO DI SPUTE TO THE SETTLED LEGAL PROPOSITIONS THAT WRITTEN AGREEMENT W AS NOT ITA NO.1189/MDS/2014 7 COMPULSORY. EVEN ORAL AGREEMENT CAN BE INFERRED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE A.O. HAD NOT MADE OU T ANY CASE THAT ON THE BASIS OF THE CONTRACT OF THE BUSINESS B Y THE ASSESSEE, THERE EXISTED CONTRACTOR AND SUB-CONTRACTOR RELATIO NSHIP BETWEEN THE ASSESSEE AND THE ALLEGED SUB-CONTRACTOR. THE A .O HAD NOT MADE OUT THE CASE THAT THE ALLEGED SUB-CONTRACTOR H AD BEEN ENGAGED ON SOME DEFINITE TERMS AND CONDITIONS FOR E XECUTING THE WORK OF THE ASSESSEE. BASICALLY, THE ASSESSEE HAD ENGAGED DIFFERENT TRANSPORTERS FOR EXECUTING ITS DIFFERENT WORK. EVEN, THERE WAS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAD ASSIGNED ANY PARTICULAR PORTION OF WORK TO A PARTICULAR TRAN SPORTER. SO, THE A.O. WAS NOT JUSTIFIED IN MAKING THE PROVISIONS OF SECTION 40(A)(IA). III) THE HONBLE TRIBUNAL, HYDERABAD A BENCH I N THE CASE OF K.SRINIVAS NAIDU VS. ACIT REPORTED IN (2010) 131 TT J (HYD.)(UO) 17 WAS VERY EMPHATIC IN ITS RESOLVE THAT : IN THE ABSENCE OF EVIDENCE ON RECORD TO PROVE THAT THE ASSESSEE INDIVIDUAL HAD MADE PAYMENT OF FREIGHT CHARGES TO T HE OWNERS OF THE TRUCK IN PURSUANCE OF ANY CONTRACT AS A CONTRAC TOR AND NOT AS A SUB-CONTRACTOR, IT CANNOT BE HELD THAT THE ASSESSEE WAS A CONTRACTOR AND THE PROVISIONS OF SECTION 194C(1) AP PLIED TO SUCH PAYMENT AND NOT S.194C(2), HOWEVER, AMOUNT HAVING B EEN PAID ITA NO.1189/MDS/2014 8 AND NOT PAYABLE, S.40(A)(IA) COULD NOT BE INVOKED T O DISALLOW THE CLAIM. IV) IN THE CASE OF CIT VS. POOMPUHAR SHIPPING COR PORATION LTD. IN [2006] 282 ITR 3 (MAD.), HONBLE MADRAS HIG H COURT HELD THAT:- DISMISSING THE APPEAL THAT THE PAYMENT OF HIRE CHARGES FOR TAKING FOR TAKING TEMPORARY POSSESSION OF THE SHIPS BY THE ASSESSEE-COMPANY WOULD NOT FALL WITHIN THE PROVISIO NS OF SECTION 194C AND HENCE NO TAX WAS REQUIRED TO BE DEDUCTED. THE HIRING OF SHIPS FOR THE PURPOSE OF USING THE M IN THE ASSESSEES BUSINESS DID NOT AMOUNT TO A CONTRACT FO R CARRYING OUT ANY WORK AS CONTEMPLATED IN SEC.194C . V) IN THE CASE OF SHRI J.PRASHANTH HEDGE VS. THE A DDL. CIT IN ITA NO.665/BANG/2010 VIDE ORDER DATED 21.01.2011, BANAGALORE TRIBUNAL HELD THAT :- 6.10. IN AN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS ANALYZED IN THE PRECEDING PARAGRAPHS W E ARE OF THE CONSIDERED VIEW THAT THE ENTIRE ISSUE REQUIRES FRES H AND COMPREHENSIVE CONSIDERATION AS TO WHETHER ASSESSEE WAS REQUIRED TO DEDUCT TAX U/S 194C OF THE ACT WHILE MAKING PAYMENT S OF HIRE CHARGES TO THE DRIVERS OF THE VEHICLES/TRUCKS WHO T RANSPORTED THE BAMBOOS FROM THE FOREST AREA TO THE PAPER MILLS AT BHADRAVATHI AND DANDELI. THE LD. AO IS DIRECTED TO MAKE A CLEAR FIN DING AS TO WHETHER ITA NO.1189/MDS/2014 9 THE PAYMENTS MADE ARE FOR HIRING THE VEHICLES/TRUCK S OR IN PURSUANT TO A CONTRACT FOR CARRYING OUT THE WORK OF TRANSPORTAT ION. IF IT IS ESTABLISHED THAT THE PAYMENTS ARE MADE IN PURSUANT TO A CONTRACT FOR CARRYING OUT THE WORK OF TRANSPORTATION, THEN THERE SHOULD BE A FURTHER EXAMINATION AND DETERMINATION OF THE ACTUAL CONTRAC TOR I.E., (I) THE OWNER OF THE VEHICLE/TRUCK (REPRESENTED BY THE DRIVER OR SELF). (II) THE DRIVER OF THE VEHICLE/TRUCK WHO MIGHT HAVE TAKEN THE VEHICLE ON HIRE FROM THE OWNER. (III) THE PERSON WHO HAS ACTUAL CONTROL OF THE VEHI CLE/TRUCK WHO MIGHT HAVE HIRED THE VEHICLE/TRUCK FROM THE OWNER. IT IS PERTINENT TO MENTION HERE THAT IF THE ASSESSE E HAD ONLY HIRED OUT THE VEHICLE/TRUCK AND IS IN POSSESSION AND CONTROL OF THE VEHICLE/TRUCK AND THEREBY CARRY OUT THE WORK OF TRANSPORTATION HI MSELF, THE PROVISIONS OF SECTION 194C OF THE ACT WILL NOT APPL Y. ACCORDINGLY, THE ISSUE IS REMITTED BACK ON THE FILE OF THE AO WITH A SPECIFIC DIRECTION TO LOOK INTO ALL THESE ISSUES IN TOTALITY AS DELIBERATED UPON SUPRA AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD . IT IS ORDERED ACCORDINGLY. THE ASSESSEE IS ALSO AT LIBERTY TO FURNISH DOCUMENTS REQUIRED UNDER THE AMENDED SECTIO N 194C(3) OF THE ACT AND CLAIM BENEFIT ACCORDINGLY, IF FOUND ELI GIBLE. FURTHER CONSIDERING THE AFORESAID DECISIONS, AND TH E FACTS AND CIRCUMSTANCES OF THE CASE BEFORE US, THE DECISIONS CITED BY THE REVENUE CANNOT BE RELIED UPON. SINCE THE DECISIONS CITED HEREIN ABOVE ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE ITA NO.1189/MDS/2014 10 US, WE HEREBY DIRECT THE LD. ASSESSING OFFICER TO D ELETE THE ADDITIONS MADE BY INVOKING SEC.40(A)(IA) OF THE ACT OF ` 3,55,370/-. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED IN ITS FAVOUR. ORDER PRONOUNCED ON 21 ST NOVEMBER, 2014 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD ) (A.MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 21 ST NOVEMBER, 2014. K S SUNDARAM. '# $%&% /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. '() /CIT(A) 4. ' /CIT 5. %*+ , /DR 6. +-. /GF