ITO, WARD-1, Gudur V. M/s.S.V. Transport, Gudur

ITA 1502/HYD/2011

• Counselvise Citation: 150222514 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 19-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Section: 68; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1502/HYD/2011 : ASSESSMENT YEAR 2008 - 09 AND CO NO.83/HYD/2011 THEREIN INCOME TAX OFFICER WARD 1, GUDUR V/S. M/S. S.V.TRANSPORT, CHILLAKUR, GUDUR, NELLORE DISTRICT ( PAN - ABFFS 1472 E) (APPELLANT) (RESPONDENT/CROSS - OBJECTOR) A ND ITA NO.1503/HYD/2011 : ASSESSMENT YEAR 2008 - 09 AND CO NO.84/HYD/2011 THEREIN INCOME TAX OFFICER WARD 1, GUDUR V/S. M/S. DIVYA TRANSPORT, GUDUR, NELLORE DISTRICT. ( PAN - AADFD 3840 J ) (APPELLANT) (RESPONDENT/CROSS - OBJECTOR) ASSESSEE BY : SHRI S.RAMA RAO DEPARTMENT BY : SHRI RAJAT MITRA DATE OF HEARING 22 . 12 .2014 DATE OF PRONOUNCEMENT 24.12.2014 O R D E R PER BENCH: THESE TWO APPEALS PREFERR E D BY THE RE VENUE AGAINST TWO SEPARATE ORDERS PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) GUNTUR DATED 15.6.2011 IN TH E CA S E OF TWO ASSESSEES INVOLVE S OM E COMMON ISSUES AND THE SAME TH E R E FORE , HA VE BEEN H E ARD TOGE T HER AND ARE BEIN G DISPOSED OF BY A SINGLE ITA N O. 1 502&1503 /HYD/201 1 & COS TH E RE IN M/S. S.V.TRANSPORT, CHILLAKUR, GUDUR, NELLORE DISTRICT AND ANR. 2 CONSOLIDATED O R DER ALONGWITH THE CROSS - OBJ E CTION S FIL E D BY THE ASSESS EE S B EING CO NO.83 AND 84/HYD/2014. 2. AS THE MA T ERIAL FACTS INVOLVED IN THE CASE OF BOTH THE ASSESSEES ARE SIMILAR, WE TAKE UP THE C A S E OF M /S. S.V. TRANSPORT FOR THE PU R PO SE OF NARRATING THE FACTS AND DECIDING THE ISSUE INVOLVED THERE IN THE LI G HT OF TH E SAID FACTS. THE MAIN COMMON ISSUE INVOLVED IN TH E CROSS APPEALS FILED IN THIS CASE REL A TES TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRANSPORT CHARGES PAID BY TH E ASSESSEES BY INVOKING THE P R OVIS I ONS OF S.40A(IA) , WHICH STANDS DELE TED BY THE LEARNED CIT(A), AND THE SAME HAS BEEN RAISED BY TH E REV ENUE AND THE ASSESSEE BY WAY OF THE FOLLOWING G ROUNDS - GROUNDS IN REVENUES APPEAL GROUNDS OF APPEAL 1. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), GUNTUR HAS ERRED IN DELETING THE ADDITION MADE U/S.40A(IA) OF RS.64,48,238/ - THOUGH THE ASSESSEE FIRM HAS FAILED TO DEDUCT THE TAX U/S.194 - C OF THE ACT ON THE AMOUNTS PAID TO EACH TRANSPORT CONTRACTOR HAS EXCEED RS.50,000 DURING THE FINANCIAL YEAR 2007 - 08 RELEVANT TO THE ASST. YEAR 2008 - 0 9. 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), GUNTUR HAS ERRED IN DELETING THE ADDITION MADE U/S.40(A)(IA) ON THE GROUND THAT THE PROVISIONS OF SECTION 194C ARE NOT ATTRACTED AS HIRING OF VEHICLES WERE TAKEN FROM OPEN MARKET. THOUGH THE ASSESSEE HAS HIRED THE VEHICLES FROM THE OPEN MARKETS THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC.194C FOR NOT DEDUCTING THE TAX ON THE VEHICLES WHERE THE AGGREGATE AMOUNT EXCEEDS RS.50,000. THE H ON'BLE KARNATAKA HIGH COURT HAS HELD THAT THE EXISTENCE OF WRITT EN CONTRACT AS A CONDITION PRECEDENT FOR PAYMENT OF TDS. THE CONTRACT MAY BE IN WRITING OR IT MAY BE ORAL BUT THE LIABILITY TO PAY TAX ARISES WHEN RECIPIENT OF THE SAID AMOUNT RECEIVES PAYMENT IN EXCESS OF RS.20,000 OF EACH PAYMENT OR RS.50,000/ - IN AGGREG ATE. ITA N O. 1 502&1503 /HYD/201 1 & COS TH E RE IN M/S. S.V.TRANSPORT, CHILLAKUR, GUDUR, NELLORE DISTRICT AND ANR. 3 3 . THE LD. CIT(A) OUGHT NOT TO HAVE ALLOWED THE ASSESSEE'S CLAIM AS THE ASSESSEE HAS CLEARLY VIOLATED RULE 29D(4)(II) OF I.T. RULES AND THE PROVISIONS OF SEC.197A(2) OF THE I. T .ACT. ASSESSEES CROSS OBJECTIONS : GROUNDS OF CROSS - OBJECTIONS 1 . THE O RDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN SO FAR AS APPLICATION OF THE PROVISIONS OF SEC. 194C ARE CONCERNED, IS JUSTIFIED FOR THE ELABORATE REASONS DISCUSSED THEREIN. 2 . THE LEARNED CIT (APPEALS) OUGHT TO HAVE OBSERVED THAT SOME OF THE PAYMENTS MADE TO THE LORRY OWNERS WERE SINGLE TRUCK OWNER AND NO TAX NEED BE DEDUCTED AT SOURCE AS THE ASSESSEE OBTAINED FORM NO.15 - I AT LEAST IN RESPECT OF THOSE VEHICLES. 3 . THE LEARNED CIT (APPEALS) OUGHT TO HAVE OBSERVED THAT THE PROVISIONS OF SEC 4 O(A) (IA) OF THE I. T. ACT WOULD APPLY TO THE AMOUNTS ACTUALLY REMAINED PAYABLE AS ON 31.3.2008 AND THE SAID PROVISIONS DO NOT APPLY FOR THOSE AMOUNTS WHICH WERE ACTUALLY PAID WITHIN THE PREVIOUS YEAR AND, THEREFORE, OUGHT TO HAVE OBSERVED THAT TO THAT EXTENT TH E ASSESSING OFFICER IS PREVENTED FROM APPLYING THE PROVISIONS OF SEC 4 (A)(IA) OF THE I T. ACT. 4 . THE LEARNED C IT (APPEALS) ERRED IN CONFIRMING THE A DDITION MADE OF RS.11 LAKHS BY APPLYING THE PROVISIONS OF SEC.68 OF THE I T. ACT. THE LEARNED CIT(APPEALS) O UGHT TO HAVE OBSERVED THAT THE AMOUNT WAS INTRODUCED BY THE PARTNERS ITA N O. 1 502&1503 /HYD/201 1 & COS TH E RE IN M/S. S.V.TRANSPORT, CHILLAKUR, GUDUR, NELLORE DISTRICT AND ANR. 4 AS THEIR CAPITAL AND THE IDENTITY OF THE PARTIES INTRODUCING THE AMOUNT IS PROVED BEYOND DOUBT. THE LEARNED CIT (APPEALS) OUGHT TO HAVE SEEN THAT THE PARTNERS HAVE SUBSTANTIAL SOURCE FOR INVESTMENT AND, THEREFORE, NO ADDITION SHOULD HAVE BEEN MADE U/S. 68 OF TH E I.T. ACT PARTICULARLY WHEN THEY ARE ASSESSED TO TAX. 3. THE M A TERIAL FACTS OF THE CASE RELEVANT TO THIS COMMON ISSUE ARE AS FOLLOWS : THE ASSESSEE IS A PARTNER S HIP FIRM , WHICH IS ENGA G ED IN THE BUSIN E SS OF ORGANIZING TRAN S PORTATION OF GOODS ON CONTR A CT BASIS. THE MODUS OPERANDI FOLLO W E D BY THE ASSESSEE FIRM IS TO TAKE CONTRACT S FOR TRANSPO R TATION OF GOODS A ND TO EXECUT E THE SAME BY HIRING LORRIES IN AND AROUND THE VICINITY O F TH E NELLORE DI S TRI C T. THE RETURN OF INCOME FOR THE YE A R UNDER CONSIDERATION WAS FILED BY THE ASSESSEE FIRM ON 30.9.2008 DECLARING TOTAL INCOME OF R S . 1 , 7 4, 130 . DURIN G TH E COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NO T ICED BY THE ASSESSING OFFICER THAT THE ASSES SEE HAS PAID TOTAL CHARGES OF R S . 64 , 4 8 ,2 38 FOR HIRING LORRIES WHICH EXCEEDED THE PAYMENT S O F RS .50,000 MADE TO A SINGLE LORRY OWNER DURING THE YEAR UNDER CON S ID E RATION. ACCO R D I NG TO THE ASSESSING OFFICER, THE SAID PAYMENT S W ERE COVERED BY TH E P R OV I SION S OF S.194C AND TH E R E FORE , THE ASSESSEE W A S LIA B LE TO DEDUCT TAX AT SOU R CE FROM THE SAID PAYMENTS. SIN C E NO SUCH DEDUCTION ON ACCOUNT OF TAX AT SOU R CE WAS MADE BY TH E ASSESSEE F R OM THE SAID PAYM E N T S, THE ASSESSING OFFICER INVOKED THE P R O VI SION S OF S.40(A)(I A) AND MADE A DISALLOWANCE OF RS.64,4 8 ,238 ON ACCOUNT OF TRANSPORT/LORRY HIRE CHARGES CLAIMED BY THE ASSESSEE. ON APPEAL, THE LEARNED CIT(A) DELETED THE SAID DISALLOWANCE MA D E BY THE ASSESSING OFFICER HOLDING THAT SINCE THE OWNERS OF THE VEHICLES/LORRIES WERE NO T SUB - CONTRACTORS, THE PAYM E N T S MADE BY THE ASSESSEE TO THEM WERE NO T COVERED BY THE P R O V IS I ONS OF S . 194C. AGGRIEVED BY THE ORDER OF TH E ITA N O. 1 502&1503 /HYD/201 1 & COS TH E RE IN M/S. S.V.TRANSPORT, CHILLAKUR, GUDUR, NELLORE DISTRICT AND ANR. 5 LEARNED CIT(A), THE REVENUE HAS PREFERRED TH IS APPEAL, WHILE THE ASSESSEE HAS ALSO FILED ITS CROSS - OBJECTIONS . 4 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED REPR E SEN T ATIVES OF BO T H THE SIDES H A VE AGREED THAT TH E COMMON ISSUE INVOLVED IN THE PRESENT APPEAL AND THE CROSS OBJECTION IS LIABL E TO B E R E S TORED BACK TO THE FILE OF THE ASSESSING OFFICER, KEEPING IN VIEW THE D ECISION OF THE SP E CIAL B ENCH OF ITAT IN THE CASE OF MERYLIN SHIPPIN G AND TR A NSPO R T , VISAKHAPATNAM V/S. ADDL. CIT VISAKHAPATNAM DATED 29.3.2012 AND ANOTHER DECISION OF VISAKHAPATNAM BENC H OF THE TRIBUNAL IN TH E CA S E OF M YTHRI TRANSPORT CORPORATION (124 TTJ (VISAKHA) 970) , AS HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL IN TH E CA S E OF NEW BOM B AY GOODS TRA N S PORT ( ITA NOS.1628 AND 1825/HYD/2012 DATED 4.6.2014). IN THE SAID ORD E R, TH E COORD INATE BENCH O F THIS TRIBUNAL HAS SET ASIDE A SIMILAR IS S UE TO THE F ILE OF THE ASSESSING OFFICER FOR THE FOLLO WI N G REASONS GIVEN IN PARAGRAPH NO.8 THEREOF - 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. AS FOR THE RESTRICTION OF THE DISALLOWANCE IN TERMS OF S.40A(IA) MADE BY THE ASSESSING OFFICER TO THE AMOUNTS PAYABLE AT THE END OF THE FINANCIAL YEAR, AS DIRECTED BY THE CIT(A), IN VIEW OF THE FACT THAT THE JURISDICTIONAL HIGH COURT, AS NOTED ABOVE, HAS ORDERED INTERIM SUSPENSION OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS (SUPRA), RELIED UPON BY THE CIT(A) IN T HE IMPUGNED ORDER, WE ARE OF THE VIEW THAT THE RELIEF GRANTED BY THE CIT(A) CANNOT BE SUSTAINED, TILL THE FINAL OUTCOME ON THE ISSUE PENDING BEFORE THE HONBLE HIGH COURT. FURTHER, IN THE CASE OF MYTHRI TRANSPORT CORPORATION (SUPRA), R ELIED UPON BY THE LEARNED COUNSEL BEFORE US, IT HAS BEEN HELD BY THE VISAKHAPATNAM BENCH OF THE TRIBUNAL THAT WHERE AN ASSESSEE IS A TRANSPORT CONTRACTOR, HAVING ITSELF EXECUT E D THE WHOLE OF THE CONTRACT FOR TRANSPORTATION OF BITUMEN BY HIRING LORRIES FROM OTHER ITA N O. 1 502&1503 /HYD/201 1 & COS TH E RE IN M/S. S.V.TRANSPORT, CHILLAKUR, GUDUR, NELLORE DISTRICT AND ANR. 6 LORRY OWNERS, WHO SIMPLY PLACED THE VEHICLES AT THE DISPOSAL OF THE ASSESSEE, WITHOUT INVOLVING THEMSELVES IN CARRYING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE, IT CANNOT BE SAID THAT THE PAYMENT S MADE FOR THE HIRING OF THE VEHICLES FELL IN THE CATEGORY OF PAYMENTS TO SUB - CONTRACTS AND THEREFORE, ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AS PER PROVISIONS OF S.194C(2) OF THE ACT FROM THE PAYMENTS MADE TO THE LORRY OWNERS, A ND CONSEQUENTLY, THE PROVISIONS OF S.40A(IA) ARE ALSO NOT APPLICABLE TO SUCH PAYMENTS. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WITH A DIR ECTION TO RECOMPUTE THE DISALLOWANCE IF ANY WARRANTED, IN CONSONANCE WITH THE FINAL OUTCOME OF THE M ATTER PENDING BEFORE THE JURISDICTIONAL HIGH COURT IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS (SUPRA), AND ALSO KEEPING IN MIND THE DE CISION OF THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF MYTHRI TRANSPORT CORPORATION (SUPRA). THE ASSESSING OFFICER SHALL ACCORDINGLY PASS APPROPRIATE ORDERS IN ACCORDANCE WITH LAW, AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. CONSEQUENTLY, GROUNDS OF THE ASSESSEE AS WELL AS REVENUE IN THESE CROSS APPEALS ON THIS ISSUE ARE ALLOWED FOR STATISTICAL PURPOSES. 5 . AS THE ISSUE INVOL V ED IN THE PR E SENT CA S E AS WELL AS ALL THE M A TERIAL FAC TS RELEVANT THERETO ARE ADMITTEDLY SIMILAR TO THE C AS E OF M/ S. NEW BOMBAY GOODS TRANSPO R T (SUPRA) , WE FOLLOW THE DECISION RENDERED BY TH E TRIBUNAL IN THE SAID CA S E , TO WHICH ONE OF US, VIZ. JUDICIAL MEMBER, IS A PARTY, AND R E STORE THE MATTER RELATING TO THE DISALLOWANCE ON ACCOUNT OF TR A NSPORT/LORRY CHAR G ES UNDER S.40A(IA) TO THE FILE O F THE ASSESSING OFFICER FOR DECIDING TH E SAME AFRESH AS PER THE SAME DIRECTION S , AS GIVEN BY THE TRIBUNAL IN TH E CA S E OF N EW BOMBAY GOODS TRANSPO R T (SUPRA). ALL THE G R OUNDS IN THE REVENUE APPEAL AND RELEVANT GROUNDS OF THE ASSESSEE IN ITS CROSS OBJECTION, VIZ. G R OUNDS NO.1 TO 3 ARE ALLOWED FOR STATI S T I CAL PU R PO S ES. 6 . AS REGARDS THE RE M AINING ISSUE RAISED IN GROUND NO.4 OF THE ASSESSEES CROSS OBJ E CTION RELATING TO ADDITIO N OF R S .11 LAKHS ITA N O. 1 502&1503 /HYD/201 1 & COS TH E RE IN M/S. S.V.TRANSPORT, CHILLAKUR, GUDUR, NELLORE DISTRICT AND ANR. 7 MADE BY THE ASSESSING OFFICER UN D ER S.68 AND CONFIRMED BY THE LEARNED CIT(A), THE LEARNED COUN S EL FO R THE ASSESSEE AT TH E TIME OF H EA RING B E FORE US, HAS NO T PR E SSED THE SAME. GROUND NO.4 IS ACCORD I NGLY DISMISSED AS NO T PR E S S ED. 7 . INSOFAR AS THE CA S E OF M/S. DIVYA TRANSPORT IS CONCERNED, THE MAIN ISSUE INVOLVED THEREIN AS RAISED IN G R OUNDS NO.1 TO 3 OF THE REVENUES APPEAL AND GROUNDS N O.1 TO 3 OF THE ASSESSEES CROSS OB JECTION RELATING TO DISALLOWANCE UNDER S.40(A)(IA) ON AC C OUN T OF TRANSPORT/LORRY CHAR G ES AMOUNTING TO RS .44,83,241 IS S I M ILAR TO THE ON E INVOLVED IN THE CA S E OF M/S. SV TRANSPO R T CONSIDERED HEREINABOVE . HENCE, FOLLO W IN G OUR DECISION RENDERED IN THE CASE OF M/S. SV TRANSPO R T HEREINABOVE, W E R ESTORE THIS I S SUE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE S A ME AF R ESH AS PER THE SAME DIRECTION S AS GIVEN BY US IN TH E CA S E OF M/S. S . V . TRAN S PORT HER E INABO V E. 8 . IN SO FAR AS THE REMAINING ISSUE RAISED IN GROUND NO.4 OF THE ASSESSEES CROSS OBJECTION RELATING TO ADDITION OF RS. 27.50 LAKHS MADE BY THE ASSESSING OFFICER UNDER S.68 AND CONFIRMED BY THE LEARNED CIT(A) IS CONCERNED , THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US, HAS NOT PRESSED THE SAME. GROUND NO.4 IS ACCORDINGLY DISMISSED AS N OT PRESSED. 9 . IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES, WHILE THE CROSS - OBJECTIONS OF THE ASSESSEES ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA N O. 1 502&1503 /HYD/201 1 & COS TH E RE IN M/S. S.V.TRANSPORT, CHILLAKUR, GUDUR, NELLORE DISTRICT AND ANR. 8 ORDER PRONOUNCED IN THE COURT ON 24TH DECEMBER, 2014 SD/ - SD/ - ( ASHA VIJAYARAGHAVAN) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 24 TH DECEMBER, 2014 COPY FORWARDED TO: 1. 2. M/S. S.V.TRANSPORT, CHILLAKUR, GUDUR,NELLORE DISTRICT M/S.DIVYA TRANSPORT, NO.13/92, RAJA STREET, GUDUR, NELLORE DISTRICT. 3 . INCOME TAX OFFICER WARD 1 , GUDUR 4 . COMMISSIONER OF INCOME - TAX(APPEALS), GUNTUR 5 . 6 . COMMISSIONER OF INCOME - TAX, GUNTUR DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S