Arya Roadways Co.Pvt. Ltd., Kolkata V. ITO, Ward - 3(3), Kolkata [New ITO, Ward - 12(1), Kolkata], Kolkata

ITA 1454/KOL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8900 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BRIJESH KR SINGH
• Section: 143(3); 40(a)(ia); 194C; 201(1); 139

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI, M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 1454 / KOL / 20 17 ASSESSMENT YEAR :2010-11 ARYA ROADWAYS CO PVT LTD., TIVOLI COURT, BLOCK-B, FLAT-93, 1C, BALLYGUNGE CIRCULAR ROAD, KOLKATA-700 019 [ PAN NO.AAECA 9139 M ] V/S . ITO WARD-3(3), [NEW ITO WARD-12(1)] AAYAKAR BHAVANA, 7 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI BRIJESH KR. SINGH, ADVOCATE /BY RESPONDENT SHRI A.K. SINGH, CIT-DR /DATE OF HEARING 06-12-2018 /DATE OF PRONOUNCEMENT 26-12-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010-11 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-15 , KOLKATAS ORDER DATED 21.02.2017 PASSED IN CASE NO.385/CIT(A)-15/15 -16/3(3)/R&T/KOL INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE SIDES. 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS IN THE INSTANT APPEAL. IT FIRSTLY SEEKS TO REVERSE BOTH THE LOWER AUTHORITIES ACTION DISALLOWING / ADDING ITS FREIGHT CHARGES OF 11,68,46,218/- AS WELL AS LOADING / UNLOADING CHARGES OF 10,87,385/- PAID TO VARIOUS PARTIES ON ITA NO.1454/KOL/2017 ASSESSMENT YE AR 2010-11 ARYA ROADWAYS CO PVT LTD VS. ITO W D-12(1) KOL. PAGE 2 ACCOUNT OF NON-DEDUCTION OF TDS. THE CIT(A)S DETA ILED DISCUSSION QUA BOTH THESE TWO ISSUES READ AS UNDER:- 3.1 GROUNDS OF APPEAL NO.1: ASSESSEE IS INTO TRANSP ORT AND HANDLING SERVICES. IT HAS PAID LORRY HIRE CHARGES TO SEVERAL PARTIES BUT TAX WAS NOT DEDUCTED AT SOURCES. FINANCE ACT, 2009, W.E.F. 01.1 0.2009, CLARIFIED THAT ASSESSEE NEED NOT DEDUCT TAX AT SOURCE ON PAYMENTS TO TRANSPORTERS, IF PAYEES HAD FURNISHED PAN.AS ASSESSEE HAD COLLECTED PAN OF THE PAYEES, AO HELD THAT IT WAS NOT LIABLE TO DEDUCT TDS ON PAYMEN T MADE AFTER 01.10.2009. HOWEVER, ON PAYMENTS MADE DURING 01.04.2009 AND 30. 09.2009, ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE. AS ASSESSEE H AS FAILED TO DEDUCT TDS ON PAYMENTS TO FOUR TRANSPORTERS, AO HAS INVOKED TH E PROVISION OF SECTION 40(A)(IA). THESE FOUR TRANSPORTERS ARE: SL.NO. NAME QUANTUM OF FREIGHT CHARGES PAID WITHOUT TDS (IN RS) 1 JAI GOPAL PARIWAAHAN 5,16,67,761.00 2 CARGO LINERS PVT LTD 2,99,34,500.00 3 JAGANNATH ENTERPRISE 2,30,45,272.00 4 R.M. LOGISTICS 1,21,98,685.00 INVOKING THE PROVISION OF SECTION 40(A)(IA) AO HAS DISALLOWED RS.11,68,46,218/-. IN APPEAL PROCEEDINGS, AR HAS SUBMITTED FORM 26A (U NDER RULE 31ACB) FROM CHARTERED ACCOUNTANT AND HAS CLAIMED TH AT ALL THE FOUR PAYEES HAVE INCLUDED THE RECEIPT FROM ASSESSEE IN T HEIR RETURN OF INCOME AND PAID TAXES. ALTHOUGH AR HAS NOT SPECIFIC ALLY MENTIONED ANYTHING, BUT IT INTENDED TO FILE CERTIFICATE OF TH E CHARTERED ACCOUNTANT IN COMPLIANCE OF CONDITIONS LAID DOWN IN SECOND PROVIS O TO SECTION 40(A)(IA). FURTHER IT HAS BEEN HELD BY SEVERAL COUR TS/TRIBUNALS THAT IF PAYEES COMPLY WITH CONDITIONS LAID DOWN IN FIRST PR OVISO TO SECTION 201(1), THEN ASSESSEE WOULD NOT BE HELD TO BE IN DE FAULT FOR SECTION 40(A)(IA). NOW LET US TAKE A LOOK AT THESE PROVISIONS: SECTION 201(1) ALONG WITH FIRST PROVISO READS AS UN DER:- WHERE ANY PERSON, INCLUDING THE PRINCIPAL OFFICER O F A COMPANY,- (A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE PROVISION OF THIS ACT; OR (B) REFERRED TO IN SUB-SECTION (1A) OF SECTION 192 , BEING AN EMPLOYER. DOES NOT DEDUCT, OR DOES NOT PAY, OR AFTER SO DEDUC TING FAILS TO PAY, THE WHOLE OR ANY PART OF THE TAX, AS REQUIRED BY OR UND ER THIS ACT, THEN, SUCH PERSON, SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSE QUENCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT I N RESPECT OF SUCH TAX: [ PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER O F A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TA X IN ACCORDANCE WITH THE PROVISION OF THIS CHAPTER ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT- (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTIO N139; ITA NO.1454/KOL/2017 ASSESSMENT YE AR 2010-11 ARYA ROADWAYS CO PVT LTD VS. ITO W D-12(1) KOL. PAGE 3 (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED B Y HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIF ICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PR ESCRIBED:] PROVIDED [FURTHER ] THUS PERUSAL OF SECTION 201(1), ALONGWITH FIRST PRO VISO, MAKES IT CLEAR THAT ASSESSEE WOULD BE DEEMED TO HAVE DEDUCTED AND PAID THE TAX ON SUMS PAID, ON THE DATE OF FURNISHING OF RETURN OF I NCOME BY THE RESIDENT PAYEE. PERUSAL OF THE CERTIFICATES OF CHARTERED ACC OUNTANT INFORM 26A SHOWS THAT JAI GOPAL PARIWAHAN PVT. LTD., CARGO LIN ERS PVT LTD AND JAGANNATH ENTERPRISE (PROP: ANIRUDHA MONDAL) HAVE N OT FILED ANY RETURN OF INCOME. HENCE, CONDITIONS LAID DOWN IN FIRST PRO VISO TO SECTION 201(1) ARE NOT FULLY SATISFIED. HENCE, DISALLOWANCE MADE U /S.40(A)(IA) BY AO AE JUSTIFIED IN RESPECT OF PAYMENTS MADE TO THESE 3 PA RTIES. NOW COMING TO THE 4 TH PARTY, IT WAS NOTICED THAT R.M. LOGISTICS IS A PROPRIETORY CONCERN OF SASWATA NAYAK. IN FORM 26A, IT WAS MENTIONED THAT THIS PARTY HAD FILED RETURN OF INCOME ON 31.03 .2011. APPELLANT HAD ALSO SUBMITTED A COPY OF THE ACKNOWLEDGEMENT OF THE RETURN FILED. HOWEVER, ON VERIFICATION, AO INFORMED THAT NO RETUR N WAS FILED. ASSESSING OFFICER'S REPORT WAS FORWARDED TO ASSESSE E. IN RESPONSE AR APPEARED ON 20.02.2017 AND EXPLAINED THAT RETURN WA S FILED ONLINE BUT VERIFICATION (ITRV) WAS NOT FORWARDED. NOW THIS PAR TY HAS FORWARDED THE ITRV WITH A REQUEST TO CONDONE THE DELAY IN SENDING ITRV. IN MY OPINION, ONLINE RETURN FILING IS COMPLETE ONLY WHEN VERIFICATION REGARDING FILING OF ONLINE RETURN IS SENT TO CPC, IN THE FORM OF ITRV. NON-RECEIPT OF ITRV MAKES THE ONLINE RETURN NON-EST. THUS R.M. LOGISTICS (PROP: SASWATA NAYAK), IN EFFECT, HAS NOT FILED ANY RETURN AND SITUATION IN HIS CASE IS ALSO LIKE THE OTHER 3 PAYEES. HENCE, PAYMEN TS MADE TO THIS PARTY ARE ALSO RIGHTLY DISALLOWED U/S.40(A)(A) AND THE SAME IS UPHELD. WITHOUT PREJUDICE TO THE ABOVE, EVEN IF IT IS PRESU MED THAT RETURN FILED ON 31.033.2011 IS VALID, THEN ALSO ASSESSEE WOULD N OT BE ENTITLED FOR RELIEF AS THIS RETURN IS FILED BEYOND THE DUE DATE MENTIONED IN SECTION 139(1). FURTHER SECOND PROVISO TO SECTION 40(A)(IA) READS AS UNDER:- ANY INTEREST, COMMISSION OR BROKERAGE RENT, ROYALTY , FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPP LY OF LABOUR FOR CARRYING OUT ANY WORK) ON WHICH TAX IS DEDUCTIBLE A T SOURCE UNDER CHAPTER XVII-BAND SUCH TAX HAS NOT BEEN DEDUCTED OR , AFTER DEDUCTION, [HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIF IED IN SUB-SECTION(1) OF SECTION 139;] [PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TA X HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUT ING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID:] ITA NO.1454/KOL/2017 ASSESSMENT YE AR 2010-11 ARYA ROADWAYS CO PVT LTD VS. ITO W D-12(1) KOL. PAGE 4 [PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO D EDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIO N OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201 , THEN, FOR THE PURPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE ASS ESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISH ING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAI D PROVISO.] SECOND PROVISO TO SECTION 40(A)(IA) MENTIONS THAT I T SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID TAX ON THE DATE OF FURNISHING OF RETURN BY THE RESIDENT PAYEE. THIS 4 TH PAYEE HAS FILED HIS RETURN BEYOND THE DUE DATE. HENCE, ASSESSEE WOULD BE DEEME D TO HAVE DEDUCTED AND PAID TAX AT SOURCE BEYOND THE DUE DATE OF FILING THE RETURN. IN SUCH A SITUATION FIRST PROVISO TO SECTIO N 40(A)(IA) MENTIONS THAT DEDUCTION WOULD BE ALLOWED TO THE ASSESSEE IN COMPU TING THE INCOME OF THE PREVIOUS YEAR IN WHICH TAX HAS BEEN PAID. AS IS APPARENT FROM THE ABOVE, ASSESSEE WOULD NOT BE ALLOWED DEDUCTION IN T HE CURRENT YEAR. IN VIEW OF THE ABOVE, DISALLOWANCE OF RS.211,68,46, 218/- IS CONFIRMED. 3.2 GROUNDS OF APPEAL NO.2: ASSESSEE HAD PAID RS.11 ,06,113/- AS CARRIAGE, LOADING & UNLOADING CHARGES. HOWEVER, O N PAYMENTS MADE TO FOLLOWING 4 PARTIES (SAME AS THOSE MENTIONED IN PARA 3.1), TAX WAS NOT DEDUCTED AT SOURCE, AS PER THE PROVISION OF SEC TION 194C : SL.NO. NAME QUANTUM OF FREIGHT CHARGES PAID WITHOUT TDS (IN RS) 1 JAI GOPAL PARIWAAHAN 3,30,387.00 2 CARGO LINERS PVT LTD 5,16,102.00 3 JAGANNATH ENTERPRISE 1,28,287.00 4 R.M. LOGISTICS 1,12,609.00 TOTAL 10,87,385.00 HENCE, INVOKING THE PROVISIONS OF SECTION 40(A)(IA) , AO HAS DISALLOWED RS.10,87,385/-. ISSUE INVOLVED HERE IS SAME AS IN P ARA 3.1. HENCE, FOR REASONS MENTIONED THEREIN, DISALLOWANCE OF RS.10,87 ,385/- ARE CONFIRMED. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. CASE FILE PERUSED. THERE IS NO DISPUTE ABOUT THE AS SESSEE BEING ENGAGED IN TRANSPORT AND HANDLING SERVICES. IT ADMI TTEDLY MADE THE IMPUGNED FREIGHT AND LOADING / UNLOADING CHARGES TO FOUR PARTIES M/SJAI GOPAL PARIWAHAN, CARGO LINERS PVT. LTD.,, JAGANNATH ENTERPRISE AND R.M. LOGISTICS. THIS WHAT HAS MADE BOTH THE LOWER A UTHORITIES TO INVOKE SEC. 40(A)(IA) TO DISALLOW THE TWIN PAYMENTS ON ACC OUNT OF NON- ITA NO.1454/KOL/2017 ASSESSMENT YE AR 2010-11 ARYA ROADWAYS CO PVT LTD VS. ITO W D-12(1) KOL. PAGE 5 DEDUCTION OF TDS. LEARNED CIT-DR VEHEMENTLY CONTEND S DURING THE COURSE OF HEARING THAT THE ASSESSEE HAS MADE THE IM PUGNED PAYMENTS U/S 194C OF THE ACT AS CONTRACTUAL EXPENSES & THERE FORE, IT OUGHT TO HAVE DEDUCTED MANDATORY TDS THEREUPON. HE STRONGLY SUPPORTS BOTH THE LOWER AUTHORITIES ACTION INVOKING THE IMPUGNED DISALLOWANCE. WE FIND NO REASON TO CONCUR WITH REVENUES ABOVE VEHEM ENT CONTENTIONS. THE CIT(A)S ABOVE EXTRACTED DETAILED REASONING MAK ES IT CLEAR THAT HE HAS NOWHERE CONCLUDED THAT THE ASSESSEES PAYEES HA D EVER MADE THEMSELVES LIABLE FOR ITS FREIGHT OR LOADING / UNLO ADING RESPONSIBILITES NOR THERE IS ANY MATERIAL ON RECORD INDICATING THE ASSE SSEE TO HAVE PASSED ON ANY OF ITS CONTRACTUAL LIABILITY TO THE FOUR PAY EES THEREBY TREATING THEM AS SUB-CONTRACTORS INVITING SEC. 194C TDS DEDUCTION . THIS TRIBUNALS CO- ORDINATE BENCHS DECISION IN BHAIL BULK CARRIERS VS ITO IN ITA NO. 3536/MUM/2011 DECIDED ON 07.03.2012 HAS DECLINED REVENUES SIMIL AR ARGUMENTS IN CASE OF FREIGHT PAYMENTS AS FOLLOWS:- '8. WE HAVE HEARD THE PARTIES AT LENGTH AND ALSO GO NE THROUGH THE FINDINGS OF THE AUTHORITIES BELOW AND THE CASE LAWS AS HAVE BEEN REFERRED IN THE APPELLATE ORDER AS WELL AS RELIED U PON BY THE LEARNED COUNSEL. THE RELEVANT FACTS FOR ADJUDICATION OF THE ISSUE ARE THAT THE APPELLANT IS CARRYING OUT THE BUSINESS OF TRANSPORT ATION OF OIL THROUGH TANKERS. IT ENTERED INTO A CONTRACT WITH VARIOUS CO MPANIES (HERE MAINLY BPCL) FOR TRANSPORTING THE OILS TO VARIOUS DESTINAT IONS AS PER THE AGREEMENT ENTERED INTO BY THE SAID COMPANY. THE APP ELLANT WAS SOLELY RESPONSIBLE FOR EXECUTING THE CONTRACT ON BEHALF OF ITS PRINCIPAL. FOR FULFILLING ITS TRANSPORTATION COMMITMENT, THE APPEL LANT BESIDES USING ITS OWN TANKERS WAS ALSO HIRING THE TANKERS FROM OUTSID E PARTIES AS AND WHEN REQUIRED. IN SUCH A CASE OF HIRING FROM OUTSID E, THE RESPONSIBILITY OF SUCCESSFUL COMPLETION OF TRANSPORTATION WORK RES TED UPON THE APPELLANT. FROM THE RECORD OR THE FINDINGS OF THE A UTHORITIES BELOW NO WHERE IT IS BORNE OUT THAT THERE WAS ANY KIND OF WR ITTEN OR ORAL CONTRACT WITH THE PRINCIPALS BY SUCH OUTSIDE TANK OWNERS THA T THEY WILL SHARE THE RISK AND RESPONSIBILITY WITH THE APPELLANT. 8.1 AT THIS STAGE, IT IS NOT IN DISPUTE THAT THE DE PARTMENT'S CASE IS THAT IN THE PRESENT CASE PROVISIONS OF SECTION 194C(1) ARE APPLICABLE AND NOT SECTION 194C(2) . ONCE IT IS HELD THAT IT IS A CASE OF 194C(1) THEN IT WOULD BE SENT THAT THIS SECTION APPLIES TO ANY PAYM ENT MADE TO A PERSON FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRAC T ITA NO.2023/KOL/2016 BAJAJ ROADWAYS A.Y.2005-06 4 BETWE EN THE CONTRACTOR AND THE PERSON MAKING THE PAYMENT. IF TH E CONDITION OF 'CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT' IS NOT FULFILLED THEN ITA NO.1454/KOL/2017 ASSESSMENT YE AR 2010-11 ARYA ROADWAYS CO PVT LTD VS. ITO W D-12(1) KOL. PAGE 6 THE PROVISIONS OF THIS SECTION WILL NOT BE APPLICAB LE AT ALL. HERE IN THIS CASE, THE CONTRACT FOR CARRYING OUT THE WORK WAS BE TWEEN THE BPCL AND THE APPELLANT. THE APPELLANT ALONE HAD RISK AND RES PONSIBILITY FOR CARRYING OUT THE CONTRACT WORK AS PER THE AGREEMENT ENTERED INTO BY IT WITH ITS PRINCIPAL I.E. BPCL. THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THERE WAS ANY CONTRACT OR ITA NO : 3536/MUM/20 11 M/S. BHAIL BULK CARRIERS SUB-CONTRACT WHETHER WRITTEN OR ORAL WITH THE OUTSIDE TANK OWNERS AND THE APPELLANT, WHEREBY THE RISK AND RESPONSIBILITY WHICH IS ASSOCIATED WITH A CONTRACT HAS ALSO BEEN P ASSED ON TO THESE OUTSIDE PARTIES. ONCE THE CIT(APPEALS) HAS ACCEPTED THE FACT THAT THE OUTSIDE TANK OWNERS DO NOT HAD ANY RESPONSIBILITY O R LIABILITY TOWARDS THE PRINCIPAL, THEN IT CANNOT BE HELD THAT THESE OU TSIDE PARTIES WERE PRIVITY TO THE CONTRACT BETWEEN THE APPELLANT AND I TS PRINCIPAL. THUS THE PAYMENT MADE TO THE OUTSIDE PARTIES DO NOT COME OR FALL WITHIN THE PURVIEW OF SECTION 194C , AS THE 'CARRYING OUT ANY WORK' INDICATES DOING SOMETHING TO CONDUCT THE WORK IN PURSUANCE OF CONTRACT AND HERE IN THIS CASE, IT WAS SOLELY BETWEEN APPELLANT AND I TS PRINCIPAL. 8.2 THE JUDGMENT OF HON'BLE MADRAS HIGH COURT IN TH E CASE OF CIT VS. POMPUHAR SHIPPING CORPORATION LTD . (SUPRA) ALSO FORTIFIES THE CASE OF THE APPELLANT. IN THIS CASE THE ASSESSEE WHICH WAS A TAMIL NADU GOVERNMENT UNDERTAKING WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF COAL FROM THE PORTS OF HALDIA, VISAKHAPATNAM AND PARADEEP TO CHENNAI AND TUTICORIN UNDER CONTRACTS EXECUTED WITH THE TAMIL NADU ELECTRICITY BOARD. THE ASSESSEE OWNED THREE SHIPS. SINCE THREE SHIPS WERE NOT SUFFICIENT TO CARRY OUT THE CONTRACTS ENTE RED INTO WITH TAMIL NADU, THE ASSESSEE HIRED SHIPS BELONGING TO OTHER S HIPPING COMPANIES AND PAID HIRE SHIPPING CHARGES FOR USING THE SHIPS. THE ASSESSEE, HOWEVER, DID NOT DEDUCTED TAX UNDER SECTION 194C BEFORE THE MAKING PAYMENT OF HIRE CHARGES TO THE SHIPPING COMPANIES. THE ASSESSING OFFICER DIRECTED THE ASSESSEE TO PAY TAX U/S.201(1) AND LEVIED INTEREST U/S.201(1A) ON THE GROUND THAT TDS SHOULD HAVE BEEN DEDUCTED U/S.194C OF THE ACT. ON THE THESE FACTS, THE HON'BL E HIGH COURT OBSERVED AND HELD AS UNDER :- 'WE HEARD THE ARGUMENTS OF LEARNED COUNSEL. UNDER SECTION 194C , THE TAX IS TO BE DEDUCTED WHEN A CONTRACT WAS ENT ERED INTO FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CO NTRACT ITA NO : 3536/MUM/2011 M/S. BHAIL BULK CARRIERS BETWEEN THE CONTRACTOR AND THE ENTITIES MENTIONED IN SUB-SECTIO N (1) OF SECTION 194C . IN THE PRESENT CASE, THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE SHIPPING COMPANIES TO CARRY OUT ANY WORK. ON THE OTHER HAND, THE ASSESSEE-COMPANY H IRED THE SHIPS BELONGING TO OTHER SHIPPING COMPANIES FOR A F IXED PERIOD ON PAYMENT OF HIRE CHARGES. THE HIRED SHIPS WERE UT ILISED BY THE ASSESSEE IN THE BUSINESS OF CARRYING THE GOODS FROM ONE PLACE TO ANOTHER IN PURSUANCE OF AN AGREEMENT ENTERED INTO B ETWEEN THE ASSESSEE AND THE TAMIL NADU ELECTRICITY BOARD. THER E WAS NO AGREEMENT FOR CARRYING OUT ANY WORK OR TRANSPORT AN Y GOODS FROM ONE PLACE TO ANOTHER BETWEEN THE ASSESSEE AND THE OTHER ITA NO.1454/KOL/2017 ASSESSMENT YE AR 2010-11 ARYA ROADWAYS CO PVT LTD VS. ITO W D-12(1) KOL. PAGE 7 SHIPPING COMPANIES. THE ASSESSEE- COMPANY SIMPLY HI RED THE SHIPS ON PAYMENT OF HIRE CHARGES AND IT WAS UTILISE D IN THE BUSINESS OF THE ASSESSEE AT THEIR OWN DISCRETION. I T IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE ENTERED INTO THE SAID CONTRACT WITH THE SHIPPING COMPANY FOR TRANSPORT IT A NO.2023/KOL/2016 BAJAJ ROADWAYS A.Y.2005-06 5 OF CO AL FROM ONE PLACE TO ANOTHER. THE HIRING OF SHIPS FOR THE P URPOSE OF USING THE SAME IN THE ASSESSEE'S BUSINESS WOULD NOT AMOUNT TO A CONTRACT FOR CARRYING OUT ANY WORK AS CONTEMPLATED IN SECTION 194C . THE TERM 'HIRE' IS NOT DEFINED IN THE INCOME- TAX ACT. SO, WE HAVE TO TAKE THE NORMAL MEANING OF THE WORD 'HIR E'. NORMAL HIRE IS A CONTRACT BY WHICH ONE GIVES TO ANOTHER TE MPORARY POSSESSION AND USE OF THE PROPERTY OTHER THAN MONEY FOR PAYMENT OF COMPENSATION AND THE LATTER AGREES TO RE TURN THE PROPERTY AFTER THE EXPIRY OF THE AGREED PERIOD. THE REFORE, IN OUR VIEW, WHEN THE ASSESSEE ENTERED INTO A CONTRACT FOR THE PURPOSE OF TAKING TEMPORARY POSSESSION OF SHIPS IN THE SHIP PING COMPANY IT COULD NOT BE CONSTRUED AS IF THE ASSESSE E ENTERED INTO ANY CONTRACT FOR CARRYING OUT ANY WORK, AND WH EN THE CONTRACT IS NOT FOR CARRYING OUT ANY WORK, THE REVE NUE CANNOT INSIST THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT S OURCE UNDER SECTION 194C OF THE ACT. FURTHER, THE OTHER ARGUMENT OF COUNSEL WAS, SECTION 194C WAS AMENDED WITH EFFECT FROM JULY 1, 1995, INCORPORATING THE EXPLANATION AND THE SAID EX PLANATION CLARIFIES THE EXISTING PROVISION OF SECTION 194C OF THE ACT. HENCE, IT WOULD BE APPLICABLE RETROSPECTIVELY. WE A RE CONCERNED WITH THE ASSESSMENT YEAR 1994-95. IN A RE CENT JUDGMENT, THE SUPREME COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILL INC. V. CIT [2005] 279 ITR 310, CONSIDERING THE SCOPE OF THE EXPLANATION, HELD THAT THERE IS NO PRINCIPLE OF INTERPRETATION WHICH WOULD JUSTIFY READING THE EXPL ANATION AS OPERATING RETROSPECTIVELY, WHEN THE EXPLANATION COM ES INTO FORCE WITH EFFECT FROM A FUTURE DATE. IN THIS CASE, THE EXPLANATION INTRODUCED IS WITH EFFECT FROM JULY 1, 1995. HENCE IT WILL BE APPLICABLE ONLY FOR THE FUTURE ASSESSMEN T ORDERS AND IT ITA NO : 3536/MUM/2011 M/S. BHAIL BULK CARRIERS WIL L NOT BE APPLICABLE 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 THE HIRE CHARGES IN THEIR RESPEC TIVE INCOME- TAX RETURNS AND PAID THE TAXES ON THE SAME. THE SAI D FACT WAS ALSO NOT DISPUTED BY THE REVENUE. SO, WE ARE OF THE VIEW THAT THE PAYMENT OF HIRE CHARGES FOR TAKING TEMPORARY POSSES SION OF THE SHIPS BY THE ASSESSEE-COMPANY WOULD NOT FALL WITHIN THE PROVISION OF SECTION 194C AND HENCE NO TAX IS REQUIRED TO BE DEDUCTED, AND THERE IS NO ERROR OR INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES. HENCE, NO SUBSTANTIAL QUESTION O F LAW ARISES FOR CONSIDERATION OF THIS COURT. HENCE, WE DISMISS THE ABOVE TAX CASE. NO COSTS. CONSEQUENTLY, THE CONNECTED TCMP NO . 1253 OF 2005 IS CLOSED. ITA NO.1454/KOL/2017 ASSESSMENT YE AR 2010-11 ARYA ROADWAYS CO PVT LTD VS. ITO W D-12(1) KOL. PAGE 8 8.4 THUS IN VIEW OF THE FINDINGS GIVEN ABOVE AND TH E LAW LAID DOWN BY THE HON'BLE HIGH COURT AS ABOVE, WE ARE OF THE CONS IDERED OPINION THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TDS U/S. 194 C(1) FOR PAYMENTS MADE TO THE OUTSIDE PARTIES AND CONSEQUENTLY THE DI SALLOWANCE MADE U/S.40(A)(IA) BY THE AUTHORITIES BELOW ARE DELETED. THE APPELLANT THUS GETS RELIEF OF RS.56,03,210/- .' 4. WE ADOPT THE ABOVE DETAILED REASONING MUTATIS MU TANDIS TO CONCLUDE THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN INVOKING THE TWO DISALLOWANCE(S) UNDER CHALLENGE U/S 40(A)(IA) OF TH E ACT. THE SAME ARE ACCORDINGLY DELETED. THE ASSESSEES TWO SUBSTANTIVE GROUNDS ARE ACCEPTED. 5. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 26/12/2018 SD/- SD/- ( %) (' %) (M.BALAGANESH) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 26 / 12 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ARYA ROADWAYS CO PVT LTD., TIVOLI COURT, BLOCK-B, FLAT-93, 1C, BALLYGUNGE CIRCUL AR ROAD, KOLKATA-19 2. /RESPONDENT-ITO WARD-12(1), AAYAKAR BHAVAN,7 TH FL, P-7, CHOWRINGHEE SQ. KOL-69 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ / 3,