The Asst.CIT, Circle -11(1), Hyderabad V. Sri. G. Pullaiah, Secunderabad

ITA 1517/HYD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6280 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-08-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 05-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1517/HYD/2012 ASSESSMENT YEAR: 2005-06 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 11(1), HYDERABAD. VS. SRI G. PULLAIAH, SECUNDERABAD. PAN - AFSPG (APPELLANT) (RESPONDENT) REVENUE BY : SHRI A. SITARAMA RAO ASSESSEE BY : NONE DATE OF HEARING 11-08-2016 DATE OF PRONOUNCEMENT 24-08-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - VI, HYD ERABAD, DATED 16/07/2012 FOR AY 2005-06. 2. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE AT THE TIME OF HEARING. HOWEVER, WE PROCEED TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. DR AND ON MERITS OF THE CASE. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE PRESE NT APPEAL IS FILED AGAINST THE ORDER PASSED CONSEQUENT TO THE ITATS O RDER DATED 08/10/2010 AGAINST THE EARLIER ASSESSMENT ORDER U/S 143(3) R.W.S. 147 DATED 08/07/2009. THE ITAT HAS SET ASIDE THE ASSES SMENT WITH 2 ITA NO. 1517/H/12 SHRI G. PULLAIAH SPECIFIC DIRECTIONS TO ENQUIRE INTO THE FACTS RELAT ING TO THE DISALLOWANCE U/S 40(A)(IA). 4. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2005-06 ON 30/10/2005 ADMITTING TOTAL INCOME OF RS. 3,97,235/- . THE AO ASSESSED THE INCOME OF THE ASSESSEE AT RS. 27,70,85 1/- BY MAKING THE DISALLOWANCE OF RS. 23,73,616/- U/S 40(A)(IA) O F THE ACT BY OBSERVING AS UNDER: A) THOUGH THE ASSESSEE CLAIMED TO HAVE OBTAINED FO RM 15 I FROM THE TRUCK-OWNERS, THE ASSESSEE HAD FAILED TO FURNIS H PARTICULARS IN FORM 15J TO THE DESIGNATED CIT WITHIN THE DUE DA TE. B) THE ASSESSEE HAD NOT ONLY HIRED THE VEHICLES BUT ALSO HIRED THE MANPOWER WITH THE VEHICLES WHICH WAS APPARENT F ROM THE FACT THAT NO EXPENSES FOR DRIVERS AND FUEL HAD BEEN DEBI TED TO THE P&L ACCOUNT. THEREFORE, THE TRANSACTION WITH THE TR UCK-OWNERS WAS COVERED BY THE DEFINITION OF 'WORK' IN EXPLANAT ION (IV) TO SEC. 194C. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED APPEAL BEFORE THE CIT(A). 6. IN THE COURSE OF THE APPELLATE PROCEEDINGS, THE AR HAS SUBMITTED THAT THE TRANSPORT CHARGES WHICH WERE THE SUBJECT MATTER OF THE DISALLOWANCE HAD BEEN FULLY PAID DURING THE PRE VIOUS YEAR ITSELF AND THAT NOTHING WAS PAYABLE AT THE END OF THE PREV IOUS YEAR. THE AR RELIED ON THE DECISION OF THE ITAT VIZAG SPECIAL BE NCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS ACIT IN ITA NO. 47 7VIZ/2008 DATED 14.03.2012. 6.1 THE AR ALSO SUBMITTED THAT THE PROVISION TO SE C. 194C WAS NOT APPLICABLE TO THE ASSESSEE SINCE THERE WAS NO CONTR ACT BETWEEN THE ASSESSEE AND THE TRUCK OWNERS TO WHOM HIRE CHARGES HAD BEEN PAID. 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO BY OBSERVIN G AS UNDER: 3 ITA NO. 1517/H/12 SHRI G. PULLAIAH 5.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE AR AN D THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ORDER. IN ITS DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORT, THE IT AT VISAKHAPATNAM SPECIAL BENCH HAS HELD THAT SEC 40(A) (IA) IS APPLICABLE ONLY TO EXPENDITURE WHICH IS PAYABLE AS ON 31ST MARCH OF THE YEAR AND CANNOT BE INVOKED TO DISALLOW THE A MOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE PREVIOUS YEAR. SI NCE, AS SUBMITTED BY THE AR, THE TRANSPORT CHARGES DISALLOW ED U/S. 40(A)(IA) HAVE BEEN FULLY PAID DURING THE YEAR ITSE LF, RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT IN THE CASE OF M ERLYN SHIPPING & TRANSPORT, THE DISALLOWANCE IS SET ASIDE AND THE ASSESSEE'S APPEAL IS ALLOWED ON THIS ISSUE. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED BOTH ON FACTS AND IN L AW. 2. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITIO N OF RS.23,76,616/- MADE U/S 40(A)(IA). 3. THE LEARNED C!T(A) ERRED IN HOLDING THAT SECTION 40(A)(IA) IS APPLICABLE ONLY ON EXPENDITURE WHICH IS PAYABLE AS ON 31ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED TO DISALL OW AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE YEAR. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 9. CONSIDERED THE SUBMISSIONS OF THE LD. DR AND PER USED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF R EVENUE AUTHORITIES. IN THE CASE OF M/S MERLYN SHIPPING TRA NSPORT & OTHERS, 136 ITD 23(SB)(VIZAG), THE SPECIAL BENCH HAS HELD A S UNDER: WHEN S. 40(A)(IA) WAS PROPOSED TO BE INSERTED BY T HE FINANCE BILL 2004, IT APPLIED TO ANY AMOUNT CREDITED OR PA ID. HOWEVER, WHEN ENACTED BY THE FINANCE ACT 2004, IT A PPLIED ONLY TO AMOUNT PAYABLE. THE WORDS CREDITED/ PAID AND PAYABLE HAVE DIFFERENT CONNOTATIONS AND THE LATTE R REFERS TO AN AMOUNT WHICH IS UNPAID. THE CHANGE IN LANGUAGE B ETWEEN THE BILL AND THE ACT IS CONSCIOUS AND WITH A PURPOS E. THE LEGISLATIVE INTENT IS CLEAR THAT ONLY THE OUTSTANDI NG AMOUNT OR THE PROVISION FOR EXPENSE (AND NOT THE AMOUNT ALREA DY PAID) IS LIABLE FOR DISALLOWANCE IF TDS IS NOT DEDUCTED. ALS O, S. 4 ITA NO. 1517/H/12 SHRI G. PULLAIAH 40(A)(IA) CREATES A LEGAL FICTION BY VIRTUE OF WHIC H EVEN GENUINE AND ADMISSIBLE EXPENSES CAN BE DISALLOWED F OR WANT OF TDS. A LEGAL FICTION HAS TO BE LIMITED TO THE AR EA FOR WHICH IT IS CREATED. CONSEQUENTLY , S. 40(A)(IA) CAN APPLY ONLY TO EXPENDITURE WHICH IS PAYABLE AS OF 31ST MARCH AND DOES NOT APPLY TO EXPENDITURE WHICH HAS BEEN ALREADY PAID DU RING THE YEAR . THE CATEGORICAL FINDING OF THE CIT(A) IS THAT AS SU BMITTED BY AR, THE TRANSPORT CHARGES DISALLOWED U/S 40(A)(IA) HAVE BEE N FULLY PAID DURING THE YEAR ITSELF, THEREFORE, FOLLOWING THE DECISION OF ITAT IN CASE OF MERLYN SHIPPING AND TRANSPORT (SUPRA), THE DISALLOW ANCE IS SET ASIDE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER AND ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE G ROUNDS OF APPEAL OF REVENUE. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2016 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 24 TH AUGUST, 2016 KV COPY TO:- 1) ACIT, CIRCLE 11(1), D BLOCK, 5 TH FLOOR, IT TOWERS, HYDERABAD. 2) SHRI G. PULLAIAH, 32-469, OPP. UMCC, HAL COLONY , JEEDIMETLA, HYDERABAD. 3) CIT(A) - VI, HYDERABAD 4) CIT - V, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 5 ITA NO. 1517/H/12 SHRI G. PULLAIAH S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER