Gala Packaging Industries, Nani Daman V. The Income tax Officer,Vapi Ward-4, Daman

ITA 1457/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1819 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-12-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD TANWARI
• Keywords: TDS
• Section: 40(a)(ia); 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, D-BENCH, AHMEDABAD. BEFORE: SHRI T.K. SHARMA, JUDICIAL MEMBER , AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER. ITA NO.1457/AHD/2009 ITA NO.1458/AHD/2009 (ASSESSMENT YEAR 2006-2007) GALA PACKAGING INDUSTRIES, 3-1, GOLDEN INDUSTRIAL ESTATE, SOMNATH ROAD, DABHEL, NANI DAMAN. VERSUS INCOME-TAX OFFICER, VAPI WARD 4, DAMAN. GALA POLY PLAST, 3-B, GOLDEN INDUSTRIAL ESTATE, SOMNATH ROAD, DABHEL, NANI DAMAN. INCOME-TAX OFFICER, VAPI WARD 4, DAMAN. (APPELLANT) (RESPONDENT) PAN: AADFG 4526 E FOR THE APPELLANT: SHRI. SAKAR SHARMA, AR FOR THE RESPONDENT SHRI. VINOD TANWARI, SR. DR ORDER PER T K SHARMA (JUDICIAL MEMBER): BOTH THESE APPEALS, THOUGH PERTINENT TO TWO DIFFERENT ASSESSEES, WERE HEARD O N THE SAME DATE, ARGUED BY REPRESENTATIVE, THEREFORE THESE ARE DISPOSED OF BY COMMON ORDER, INVOLVED IDENTICAL ISSUES. THEREFORE THESE ARE DIS POSED OF TOGETHER. 2. GALA PACKAGING INDUSTRIES: THIS APPEAL IS AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT, VIDE ORDER DATED 16-03-2009, FOR THE ASSESSMENT YEAR 2006-2007 AND THE GROUNDS OF APPEAL RAISED ARE AS UNDER: 1. LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRM ING DISALLOWANCE OF TRANSPORT CHARGES AMOUNTING TO RS.1 3,93,678/- 2 ITA NO.1457/AHD/2009 ITA NO.1458/AHD/2009 (ASSESSMENT YEAR 2006-2007) FORMING PART OF PURCHASE BILL BY INVOKING PROVISION S OF SECTION 40(A)(IA) OF THE ACT. 2. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING ACTION OF ASSESSING OFFICER IN EXCLUDING DISALLOWAN CE OF TRANSPORT CHARGES AMOUNTING TO RS.13,93,678/- MADE U/S 40(A)( IA) FOR THE PURPOSE OF COMPUTING GRANTING DEDUCTION U/S 80IB OF THE ACT. 2. GALA POLY PLAST: THIS APPEAL IS AGAINST THE ORDER DATED 16- 03-2009 OF LD. COMMISSIONER OF INCOME TAX(APPEALS)- I, SURAT FOR THE ASSESSMENT YEAR 2006-2007. THE GROUNDS OF APPEAL R AISED ARE AS UNDER: 1. LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRM ING DISALLOWANCE OF TRANSPORT CHARGES AMOUNTING TO RS.6 ,20,390/- FORMING PART OF PURCHASE BILL BY INVOKING PROVISION S OF SECTION 40(A)(IA) OF THE ACT. 2. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING ACTION OF ASSESSING OFFICER IN EXCLUDING DISALLOWAN CE OF TRANSPORT CHARGES AMOUNTING TO RS.6,20,390/- MADE U/S 40(A)(I A) FOR THE PURPOSE OF COMPUTING GRANTING DEDUCTION U/S 80IB OF THE ACT. 3. THE FACTS IN BRIEF IN THE CASE OF M/S. GALA PACK AGING INDUSTRIES REGARDING TO CONTROVERSY INVOLVED IN GROUND NO.1 AR E THAT IN THE PROFIT AND LOSS ACCOUNT, ASSESSEE HAD BOOKED TRANSPORTATIO N EXPENSES OF RS.13,93,674/-. WITH REGARD TO NON DEDUCTION OF TD S, ASSESSEE STATED THAT IT HAS PURCHASED PLASTIC GRANULES FROM RELIANC E INDUSTRIES AND THE PARTY HAS RAISED THE BILL INCLUDING TRANSPORT CHARG ES. ASSESSEE MADE THE FULL PAYMENT AS PER THEIR BILLS. NO TRANSPORT CHAR GES WERE PAID SEPARATELY TO ANY TRANSPORTER BECAUSE ASSESSEE HAD NOT HIRED A NY TRANSPORTER FOR CARRYING GOODS TO THE FACTORY PREMISES. IT IS ONLY FOR THE SAKE OF 3 ITA NO.1457/AHD/2009 ITA NO.1458/AHD/2009 (ASSESSMENT YEAR 2006-2007) CONVENIENCE, ASSESSEE HAS BIFURCATED THE PURCHASE V ALUE AS WELL AS AMOUNT OF FREIGHT CHARGES WHICH WERE SHOWN BY THE S UPPLIER IN THE BILL. IN VIEW OF THIS, LIABILITY OF DEDUCTING TDS DOES NO T ARISE. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, ASSESSING OF FICER HELD THAT ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 40(A)(IA). THEREFORE HE DISALLOWED THE ENTIRE EXPENSES OF RS.13,93,376/-. ON APPEAL B EFORE THE LD. COMMISSIONER OF INCOME TAX(APPEALS), IT WAS CONTEND ED THAT ASSESSEE HAS ENTERED INTO A CONTRACT WITH THE RELIANCE INDUS TRY, WHICH CONSISTS OF PURCHASE OF GOODS AS WELL AS TRANSPORTATION OF GOOD S. THEREFORE, IT IS A COMPOSITE CONTRACT, BUT SELLER HAS BIFURCATED THE S ALE PRICE AND TRANSPORT CHARGES SEPARATELY. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE G ROUND THAT THE TRANSPORT CHARGES ARE CLEARLY FOR TRANSPORT OF GOODS THEREFOR E ASSESSEE WAS REQUIRED TO DEDUCT THE TDS U/S 194-C OF THE I.T. ACT, 1961. AGGRIEVED BY THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS), A SSESSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING ON BEHALF OF THE ASSESSEE SHRI. SAKAR SHARMA, APPEARED AND CONTENDED THAT UNDER SECTION 1 94-C OF THE INCOME- TAX ACT,1961, A PERSON RESPONSIBLE FOR PAYING ANY S UM REFERRED IN THAT SECTION TO THE CONTRACTOR. IN THIS CASE, ASSESSEE HAS NOT APPOINTED ANY CONTRACTOR FOR TRANSPORTING THE GOODS. ASSESSEE PL ACED THE ORDER FOR SUPPLY OF GOODS AT ITS PREMISES. THE SALE PRICE IN CLUDES TRANSPORTATION CHARGES ALSO. HOWEVER, SUPPLIER BIFURCATED THE COS T AND TRANSPORT CHARGES FOR THE PURPOSE OF THEIR ACCOUNTING. SIMILAR BIFUR CATION WAS DONE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. THE FACTS REMAI NED THAT ASSESSEE HAS NOT APPOINTED ANY CONTRACTOR. IN CASE THE GOODS AR E LOST IN THE TRANSIT, IT WAS THE DUTY OF THE SUPPLIER TO MAKE GOOD THE LOSS BECAUSE THE SUPPLIER WAS REQUIRED TO DELIVER THE GOODS SAFELY. THE GOOD S ARE INSPECTED AT THE 4 ITA NO.1457/AHD/2009 ITA NO.1458/AHD/2009 (ASSESSMENT YEAR 2006-2007) ASSESSEES PREMISES. IN THESE CIRCUMSTANCES WHATEV ER AMOUNT IS PAID, IT IS THE COST OF RAW-MATERIAL. THEREFORE, THE PROVIS ION OF SECTION 194-C OF THE INCOME-TAX ACT,1961 ARE NOT APPLICABLE IN RESPE CT OF TRANSPORTATION CHARGES WHICH ARE REFLECTED BY THE SUPPLIER OF THE GOODS TO THE ASSESSEE IN THE BILL RAISED. 5. COUNSEL OF THE ASSESSEE ALSO SUBMITTED THAT NO D EMAND FOR NON DEDUCTION/SHORT DEDUCTION OF TDS ON TRANSPORTATION CHARGES HAS BEEN RAISED BY THE DEPARTMENT. THIS ALSO PROVES THAT AS SESSEES IS NOT REQUIRED TO DEDUCT TAX AT SOURCE WHEN IT HAS MADE THE PAYMEN T FOR PURCHASE OF RAW-MATERIAL WHICH, INTER-ALIA, INCLUDE TRANSPORTAT ION CHARGES. THE COUNSEL OF THE ASSESSEE ALSO PRODUCED ALL THE BILLS WHICH INDICATE THAT PURCHASES WERE MADE FROM GAIL INDIA LIMITED, A GOVE RNMENT OF INDIA UNDERTAKING, HALDIA PETROCHEMICALS LIMITED AND RELI ANCE INDUSTRIES LIMITED. IN THE TAX INVOICE CUM EXCISE INVOICE RAI SED, THIS ASSESSEE HAS SHOWN EXCISE DUTY, EDUCATIONAL CESS, AS WELL AS FRI GHT CHARGES SEPARATELY FOR THEIR ACCOUNTING PURPOSE. SO FAR AS ASSESSEE I S CONCERNED, THE ENTIRE AMOUNT REPRESENTS THE COST OF RAW-MATERIAL. IN THE SE CIRCUMSTANCES, PROVISION CONTAINED IN SECTION 194-C OF THE INCOME TAX ACT HAS NO APPLICATION. 6. ON THE OTHER HAND SHRI. VINOD TANWARI, SR. DR AP PEARED FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. THE LEARNED DR POINTED OUT THAT SUPPLIER OF THE GOODS HAS ALSO PRO VIDED TRANSPORT SERVICES FOR WHICH THEY HAVE CHARGE TRANSPORTATION CHARGES. TRANSPORT CHARGES ARE SEPARATELY REFLECTED IN THE INVOICE RAISED, THEREFO RE ASSESSEE WAS REQUIRED TO DEDUCT TDS UNDER SECTION 194-C OF THE I.T. ACT I N RESPECT OF FREIGHT/TRANSPORT CHARGES SEPARATELY REFLECTED IN T HE PURCHASE INVOICE. 5 ITA NO.1457/AHD/2009 ITA NO.1458/AHD/2009 (ASSESSMENT YEAR 2006-2007) 7. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE AUTHORITY BELOW. PRIMA-FACIE IT APPEARS THA T ASSESSEE WAS NOT HAVING ANY OPTION TO TAKE THE DELIVERY OF THE GOODS AT THE PREMISES OF SELLER. AS A MATTER OF FACT, GOODS PURCHASED FROM AFORESAID 3 PARTIES ARE PLASTIC GRANULES, WHICH IS A BYPRODUCT OF THE SUPPL IER. WHENEVER AN ORDER IS BOOKED, SUPPLIER WAS REQUIRED TO DELIVER THE GOO DS AT THE PREMISES OF THE ASSESSEE. AS PER CONTRACT OF SALE, ALL THE 3 S UPPLIERS WERE REQUIRED TO DELIVER THE GOODS AT THE ASSESSEE PREMISES, THEY HA VE RAISED COMPOSITE BILLS. IN THESE CIRCUMSTANCES, IN OUR OPINION, ASS ESSEE WAS NOT REQUIRED TO DEDUCT TAX UNDER SECTION 194-C OF THE INCOME TAX AC T, 1961. THIS VIEW IS ALSO SUPPORTED BY THE FACT THAT NO DEMAND FOR NO N DEDUCTION OF TAX (TDS) OUT OF PAYMENT MADE TO AFORESAID 3 PARTIES WA S RAISED AGAINST THE ASSESSEE. HENCE WE HOLD THAT RS.13,39,674/- FORMIN G PART OF PURCHASE BILL WHICH CANNOT BE DISALLOWED BY INVOKING THE PRO VISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT AND THEREFORE DISALLOWANCE O F RS.13,93,674/- IS DELETED. 8. THE GROUND NO.1 OF GALA POLY PLAST IS AGAINST DI SALLOWANCE OF TRANSPORT CHARGES AMOUNTING TO RS.6,20,390/- UNDER SECTION 40(A)(IA) . AT THE TIME OF HEARING, BEFORE US BOTH THE SIDES CONCE DED THAT REASONS FOR DISALLOWANCE AS WELL AS REASONS GIVEN BY LD. COMMIS SIONER OF INCOME TAX(APPEALS) FOR CONFIRMING ARE SAME AS IN THE CASE OF GALA PACKAGING INDUSTRIES. IN THAT CASE WE HAVE DELETED THE DISAL LOWANCE OF RS. 13,93,674/-. WE, THEREFORE, FOLLOWING OUR ORDER IN THE CASE OF GALA PACKAGING (SUPRA) DELETED THE DISALLOWANCE OF RS.62 ,390/-. THE GROUND NO.1 IS ACCORDINGLY ALLOWED. 9. WITH REGARD TO GROUND NO.2 IN RESPECT OF BOTH TH E ASSESSEE, BOTH THE SIDES CONCEDED THAT IN CASE DISALLOWANCE OF TRA NSPORT CHARGES IS 6 ITA NO.1457/AHD/2009 ITA NO.1458/AHD/2009 (ASSESSMENT YEAR 2006-2007) DELETED, THIS GROUND WILL BECOME INFRUCTUOUS. IN R ESPECT OF BOTH THE ASSESSEE, TRANSPORT CHARGES WHICH WERE DISALLOWED U NDER SECTION 40(A)(IA) , ARE DIRECTED TO BE ALLOWED, THEREFORE THIS GROUND IN RESPECT OF BOTH THE ASSESSEE, IS RENDERED INFRUCTUOUS. GROUND NO. 2 OF BOTH THE ASSESSEE IS ACCORDINGLY DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 18 TH DECEMBER, 2009. SD/- SD/- (D.C. AGRAWAL) ( T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED: 18/12/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.