Nabin Kumar Sahoo, Cuttack V. DCIT, Sambalpur

ITA 143/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4452 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 14-03-2011
• Court: TRIBUNAL
• Department Lawyers: K KHANRA
• Assessee Lawyers: S N SAHU
• Keywords: TDS
• Section: 40(a)(ia); 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 143/CTK/2011 / ASSESSMENT YEAR 2006 - 07 NABIN KUMAR SAHOO, PROP. GANGA ROADWAYS, AT: MADHUPUR, DIST.KEONJHAR. PAN : AEUPS 7287 P - - - VERSUS - DEPUTY COMMISSIONER OF INCOM E - TAX, CIRCLE 1(1),SAMBALPUR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.N.SAHU, AR / FOR THE RESPONDENT: / SHRI K.KHANRA, DR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE AGITATES THE ORDER OF COMMISSIONER OF INCOME - TAX (APPEALS) IN CONFIRMING THE DISALLOWANCE , AS COMPUTED BY THE ASSESSING OFFICER BEING A SUM OF 18,19,264 TRANSPORTATION CHARGES PAID BY THE ASSESS EE UNDER THE PROVISIONS OF SECTION 40(A)( I A) OF THE INCOME - TAX ACT,1961. 2. THE BRIEF FACTS ON THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE IS A TRANSPORT OPERATOR AND OWNED NINE TRUCKS. IT FILED ITS RETURN OF INCOME DECLARING INCOME OF 9,83,250 ALONG WITH THE FINANCIAL STATEMENTS DULY AUDITED U/S.44AB. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE BEING A TRANSPORT CONTRACTOR HAD PAID TRUCK HIRING CHARGES AMOUNTING TO 1,38,14,103 ON HAVING EARNED TRANSPORT CO NTRACT RECEIPT FROM TATA SPONGE IRON & OTHERS WHO HAD SUBJECTED THE PAYMENT TO THE ASSESSEE FOR TDS AMOUNTING TO 4.7LAKHS ON GROSS BILLINGS OF 3.89 CRORES. THE ASSESSING OFFICER OBSERVED THAT THE PAYMENTS MADE FOR TRUCK HIRING BY THE ASSESSEE TO PETTY TR ANSPORTERS DID NOT REQUIRE TAX I.T.A.NO. 143/CTK/2011 2 DEDUCTION AT SOURCE BUT OBSERVED THAT THE ASSESSEE HIMSELF OWNED NINE TRUCKS AND HAD ALSO OBTAINED THE SERVICES OF FOUR TRUCKS OWNED BY HIS WIFE WHO WAS A SEPARATE ASSESSEE. THE ASSESSEE HAD PAID 18 ,19,264 TO SMT.ANJU SAHU W HO HAD FILED HER RETURN OF INCOME UNDER THE PROVISIONS OF SECTION 44AE WAS CONSIDERED AS FROM A CONTRACT BETWEEN THE ASSESSEE AND HIS WIFE FOR WHICH TAX UNDER THE PROVISIONS OF SECTON194C WAS TO BE DEDUCTED. HOLDING A VIEW THAT THESE EXPENSES CANNOT BE ALL OWED UNDER THE PROVISIONS OF SECTION 40(A)(IA) HE ADDED THE SAME TO THE RETURNED INCOME OF THE ASSESSEE. AGGRIEVED THE ASSESSEE APPEALED TO THE FIRST APPELLATE AUTHORITY WHO DISMISSED THE ASSESSEES APPEAL FOR NON - PROSECUTION. 3. THE LEARNED COUNSEL FOR TH E ASSESSEE INITIATING HIS ARGUMENT SUBMITTED THAT THE LEARNED CIT(A) GAVE NO OPPORTUNITY TO THE ASSESSEE INSOFAR AS HE HAS NOT CONSIDERED THE ISSUE S AS APPEALED AGAINST BEFORE HIM ON MERITS TO THE EXTENT THAT THE ISSUE IS SQUARELY COVERED BY PLETHORA OF JU DGMENTS OF THE HONBLE HIGH COURTS AND ITAT INCLUDING THAT OF THE COORDINATE CUTTACK BENCH. IN SUPPORT OF HIS CONTENTION S HE FILED A PAPER BOOK GIVING THE COMPILATION OF JUDICIAL PRONOUNCEMENT TO THIS EFFECT. HE POINTED OUT THAT THE VERY FACT THAT THE LEAR NED ASSESSING OFFICER ALLOWED THE PAYMENT TO PETTY TRUCK OWNERS BEING THE BULK OF EXPENDITURE TOTALLING 1.38 CRORES , COULD NOT BE SEGREGATED FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 40(A)(IA). THE NATURE OF TRANSACTION THEREFORE WAS ACCEPTABL E TO THE ASSESSING OFFICER TO INDICATE THAT THE PLETHORA OF JUDGMENTS RELIED UPON BY THE ASSESSEE THAT TDS HAS TO BE DEDUCTED ONLY WHE N A WRITTEN OR ORAL CONTRACT HAS BEEN MADE ON THE BASIS OF TRANSPORT CHARGES CLAIMED . THE FACTS AS NOTED BY THE ASSESSING OFFICER INDICATE THAT THERE CANNOT BE ANY IMPLIED CONTRACT FOR EXECUT ION BETWEEN THE ASSESSEE AND HIS WIFE FOR TRANSPORTING THE GOODS WHEN THE ASSESSEE HIMSELF OWNS NINE TRUCKS. HAVING ALLOWED THE EXPENSES CLAIMED I.T.A.NO. 143/CTK/2011 3 FOR MAKING PAYMENT TO OTHER TRUCK OWNERS , THE ASSESSING OFFICER ERRED IN IDENTIFYING THE AMOUNTS PAID TO THE ASSESSEES WIFE ON FOUR TRUCKS WHICH HAS BEEN PAID ON THE ACTUAL FREIGHT CARRIED BY THE WIFE SMT. ANJU SAHUS TRUCKS BY GIVING THE DATES, VEHICLE NUMBERS AND THE AMOUNT PAID BEING LESS TH AN 20,000 EACH. IT IS NOT THE CASE OF THE ASSESSING OFFICER TO IDENTIFY EACH AND EVERY TRUCK WHEREIN A PARTICULAR QUANTITY WAS THE PART AND PARCEL OF THE CONTRACT WHEN HE NOTED THE TOTAL PAYMENT WAS MORE THAN 50,000 IN THE AY. THE ASSESSING OFFICER HAD A LSO VERIFIED THE PAYMENTS TO OTHER TRUCK OWNERS WAS NOT TO BE VISITED WITH THE PROVISIONS OF SECTION 194C THEREFORE CANNOT BE HELD TO BE APPLICABLE IN THE CASE OF SMT. ANJU SAHU. THIS ISSUE OF DISALLOWANCE U/S.40(A)(IA) IS SQUARELY COVERED BY VARIOUS DECIS IONS OF THE TRIBUNAL FOLLOWING THE RATIO OF THE DECISION IN THE CASE OF CIT V. UNITED RICE LAND LTD [217 CTR 332 (P & H)] AND ANOTHER DECISION OF HONBLE HIMCHAL PRADESH IN THE CASE OF ITO V. RAMA NANDA & CO. (163 ITR 702).THE SUBSTANCE OF THESE JUDICIAL P RONOUNCEMENTS ON THE BASIS OF FACTS AS BROUGHT ON RECORD ARE THAT THE FREIGHT CHARGES PAID TO THE TRUCK OWNERS CANNOT BE HELD TO BE IN PURSUANCE TO A CONTRACT FOR A SPECIFIC PERIOD , QUANTITY OR PRICE FOR CARRYING OUT THE WHOLE OR PART OF THE WORK OR IF NO THING HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO PROVE THAT THERE WAS WRITTEN OR ORAL AGREEMENT BETWEEN THE PARTIES FOR CARRIAGE OF GOODS THE ASSESSEE WILL NOT BE REQUIRED TO DEDUCT TAX U/S.194C. THE ONLY CONTENTION WAS THAT DISALLOWING THIS UN DER THE PROVISIONS OF SECTION 40(A)(IA) WAS AS OBSERVED BY THE ASSESSING OFFICER THAT THE RECIPIENT OF THE FREIGHT CHARGE IS THE ASSESSEES WIFE WHO BEING A SEPARATE ENTITY HOLDING PERMANENT ACCOUNT NUMBER FILING RETURNS UNDER THE PROVISIONS OF SECTION 44A E WAS TO BE TAXED ON THE BASIS OF A ORAL OR IMPLIED AGREEMENT. 4. THE LEARNED DR OPPOSED THE CONTENTION OF THE ASSESSEES COUNSEL BY INDICATING THAT THE ASSESSEE BEING A TRANSPORT CONTRACTOR WAS SUBJECTED TO I.T.A.NO. 143/CTK/2011 4 ON NON - DEDUCTION OF TAX AT SOURCE WHETHER ORAL C ONTRACT WITH THE REMAINING TRUCK OWNERS FOR TRANSPORTING THE GOODS WAS A PART OF EXPENDITURE TO BE CLAIMED ACCORDINGLY AND ALLOWABLE. THE ASSESSING OFFICER HAD CLEARLY NOTED THAT THE ASSESSEE HAD PAID 18,91,264 TO HIS WIFE BEING A TRANSPORTER IN HER OWN RIGHT OWNING FOUR TRUCKS WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE AS WAS NOT DONE THEREFORE PROPERLY DISALLOWED U/S.40(A)(IA). 5. WE HA VE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE FACTS AND CIRCUMSTANCES ARE CLEARLY LEAD TO A FINDING THAT THE ISSUE STANDS COVERED BY PLETHORA OF JUDGMENTS WHICH COMPILATION HAS BEEN SUBM ITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE PAPER BOOK. SEC. 194C(2) IS ATTRACTED IF ALL THE FOLLOWING CONDITIONS ARE SATISFIED : (A) THE ASSESSEE SHOULD BE A CONTRACTOR; (B) THE ASSESSEE, IN HIS CAPACITY AS A CONTRACTOR, SHOULD ENTER INTO A CONTR ACT WITH A SUB - CONTRACTOR FOR CARRYING OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR; (C) THE SUB - CONTRACTOR SHOULD CARRY OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR; (D) PAYMENT SHOULD BE MADE FOR CARRYING OUT T HE WHOLE OR ANY PART OF THE WORK. THE STRINGENT CLAUSES IN THE WORK ORDER SUGGEST THAT THE ASSESSEE IS SOLELY RESPONSIBLE FOR ALL THE ACTS AND DEFAULTS COMMITTED BY THE ASSESSEE AND/OR ITS EMPLOYEES. IT IS NOT ESTABLISHED BY THE REVENUE THAT OTHER LORRY OW NERS, FROM WHOM THE VEHICLES WERE HIRED, HAVE ALSO BEEN FASTENED WITH ANY OF THE ABOVESAID LIABILITIES. IN A SUB - CONTRACT, A PRUDENT CONTRACTOR WOULD INCLUDE ALL THE LIABILITY CLAUSES IN THE AGREEMENT ENTERED INTO BY HIM WITH THE SUB - CONTRACTOR. THE ASSESS EE HAS ALSO CLAIMED BEFORE THE TAX AUTHORITIES THAT THE RESPONSIBILITY IN THE WHOLE PROCESS LIES WITH IT ONLY. THOUGH THE PASSING OF LIABILITY IS NOT THE ONLY CRITERIA TO DECIDE ABOUT THE EXISTENCE OF SUB - CONTRACT, YET THIS CONTENTION OF THE ASSESSEE READ WITH THE LIABILITY CLAUSES OF THE WORK I.T.A.NO. 143/CTK/2011 5 ORDER SUPPORTS ITS SUBMISSION THAT THE INDIVIDUAL VEHICLE OWNERS ARE SIMPLE HIRERS OF THE VEHICLES. AS PER THE PRO VISIONS OF S. 194C(2), THE SUB - CONTRACTOR SHOULD CARRY OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE DICTIONARY MEANING OF THE WORDS 'CARRY OUT' IS TO 'CARRY INTO PRACTICE'; 'TO EXECUTE'; 'TO ACCOMPLISH'. IT SIGNIFIES A POSITIVE INV OLVEMENT IN THE EXECUTION OF THE WHOLE OR ANY PART OF THE MAIN WORK BY SPENDING HIS TIME, MONEY, ENERGY, ETC. AND FURTHER TAKING THE RISKS IN CARRYING ON THE SAID ACTIVITY. IN THE INSTANT CASE, THERE IS NO MATERIAL TO SUGGEST THAT THE OTHER LORRY OWNERS IN VOLVED THEMSELVES IN CARRYING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE BY SPENDING THEIR TIME, ENERGY AND BY TAKING THE RISKS ASSOCIATED WITH THE MAIN CONTRACT WORK. IN THE ABSENCE OF THE ABOVESAID CHARACTERISTICS ATTACHED TO A SUB - CONTRACT IN T HE INSTANT CASE, THE PAYMENT MADE TO THE LORRY OWNERS STANDS AT PAR WITH THE PAYMENTS MADE TOWARDS SALARIES, RENT, ETC. HENCE THE REASONING OF THE TAX AUTHORITIES TO HOLD THAT THE PAYMENT MADE FOR HIRED VEHICLES IS A SUB - CONTRACT PAYMENT IS NOT CORRECT AN D NOT BASED ON RELEVANT CONSIDERATIONS. HENCE, IT CANNOT BE SAID THAT THE PAYMENTS MADE FOR HIRED VEHICLES WOULD FALL IN THE CATEGORY OF PAYMENT TOWARDS A SUB - CONTRACT WITH THE LORRY OWNERS. IN THAT CASE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE, AS PER THE PROVISIONS OF S. 194C(2), ON THE PAYMENTS MADE TO THE LORRY OWNERS FOR LORRY HIRE. CONSEQUENTLY, THE PROVISIONS OF S. 40(A)(IA) SHALL NOT APPLY TO SUCH PAYMENTS. 6. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE CONTENTION OF THE LEA RNED COUNSEL FOR THE ASSESSEE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY PLETHORA OF DECISIONS AS CITED AT THE BAR. THE APPEAL OF THE ASSESSEE IS, THEREFORE, ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE MADE U/S.40(A )(IA) . I.T.A.NO. 143/CTK/2011 6 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 21 ST APRIL, 2011 SD/ - SD/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDIC IAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 21 ST APRIL, 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : NABIN KUMAR SAHOO, PROP. GANGA ROADWAYS, AT: MADHUPUR, DIST.KEONJHAR. 2 / THE RESPONDENT: DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 1(1),SAMBALPUR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETAR Y ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY.