ACIT, Circle-1, Kurnool, Kurnool V. Sri Mohammed Suhail, Kurnool

ITA 1536/HYD/2014

• Counselvise Citation: 153622514 RSA 2014
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: K NEERAJA
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1536/HYD/2014 ASSESSMENT YEAR 2010-2011 ACIT, CIRCLE-1 KURNOOL VS. MR. MOHAMMED SUHAIL, KURNOOL PAN BANPS1890N (APPLICANT) (RESPONDENT) FOR REVENUE : MR. RAJAT MITRA FOR ASSESSEE : MS. K. NEERAJA DATE OF HEARING : 05.02.2015 DATE OF PRONOUNCEMENT : 13.02.2015 ORDER PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-IV, HYDERABAD DATED 11.07.2014. REVENUE HAS RAISED 5 GROUNDS OUT OF WHICH, GROUND NOS.2 TO 4 ARE MATERIA L WHICH ARE AS UNDER : 2. WHETHER LD. CIT(A) IS CORRECT IN LAW IN HOLDING THAT THE LIABILITY TO DEDUCT TAX CEASES THE MOMENT THE APPELLANT OBTAINS PAN AND CANNOT BE CONSIDERED TO BE REINSTATED ON A SUBSEQUENT NON-COMPLIANCE WITH THE PROVISIONS OF SECTION 194C(7) OF THE ACT, IN VI EW OF THE FACT THAT BOTH THE SUB-SECTIONS ARE FALLING UNDER THE SAME SECTION 194C AND ARE TO BE READ HARMONIOUSLY AND ARE TO BE READ TOGETHER. 3. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THA T MERE COMPLIANCE TO THE PROVISIONS OF THE SECTION 194C(6) DO NOT ABSOLVE THE ASSESSEE FROM DISCHARGING ITS ONUS TO SUBMIT THE PAN OF THE CONTRACTORS OBTAINED TO THE APPROPRIATE AUTHORITY. 2 ITA.NO.1536/HYD/2014 MR. MOHAMMED SUHIL, KURNOOL 4. LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT TH E PROVISIONS OF SECTION 40(A)(IA) AS PER WHICH THE ON US OF ASSESSEE WILL BE TREATED TO HAVE BEEN DISCHARGED ONLY WHEN HE DEDUCTS AND REMITS TAX TO GOVERNMENT ACCOUNT AND ON SAME ANALOGY, THE BENEFITS OF PROVISIONS OF SECTION 194C(6) WILL BE AVAILABLE TO ASSESSEE ONLY WHEN HE COMPLIES WITH THE PROVISIONS OF SECTION 194C97) OF THE ACT. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL DERIV ING INCOME FROM EXPORT OF IRON ORE TO VARIOUS COUNTRIES . ASSESSEE FILED ITS RETURN OF INCOME FOR IMPUGNED ASSESSMENT ADMITTING TOTAL INCOME OF RS.1,15,06,755. IN THE COURSE OF AS SESSMENT PROCEEDINGS, A.O. NOTICED THAT ASSESSEE HAD INCURRE D TOTAL TRANSPORT CHARGES ON IRON ORE OF RS.4,50,60,353. A. O. ASKED ASSESSEE TO FURNISH DETAILS OF DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT ON THE TRANSPORT CHARGES PA ID TO THREE DIFFERENT TRANSPORTERS VIZ., M/S. VINAYAK TRANSPORT , KHALEEL TRANSPORT AND M/S. MOBIN LOGISTICS. ASSESSEE MADE T DS OF RS.6,83,500 ON AMOUNTS PAID TO M/S. KHALEEL TRANSPO RT. WITH REFERENCE TO OTHER TWO TRANSPORTERS, ASSESSEE SUBMI TTED THAT PARTIES CONCERNED FURNISHED PAN AND THEREFORE, TDS WAS NOT REQUIRED TO BE MADE IN ACCORDANCE WITH SECTION 194C (6). ON THE REASON THAT ASSESSEE HAS NOT COMPLIED WITH PROV ISIONS OF SECTION 194C(7) AND FURTHER ASSESSEE WAS NOT COVERE D BY THE PROVISIONS OF SECTION 44AE AND FURTHER HOLDING THAT ASSESSEE SHOULD HAVE DEDUCTED TAX UNDER SECTION 194C(1), A.O . DISALLOWED AN AMOUNT OF RS.4,43,76,853 UNDER SECTIO N 40(A)(IA). 3. BEFORE THE LD. CIT(A), ASSESSEE FILED DETAILED SUBMISSIONS MAINLY CONTENDING THAT PROVISIONS OF SE CTION 194C(6) OVERRIDE THE GENERAL PROVISION OF SECTION 1 94C(1) AND SINCE ASSESSEE HAS OBTAINED PAN OF THE TRANSPORTERS , THERE IS 3 ITA.NO.1536/HYD/2014 MR. MOHAMMED SUHIL, KURNOOL NO NEED TO DEDUCT ANY TDS AS PER PROVISIONS OF THE ACT. FURTHER, IT WAS SUBMITTED THAT NOTIFICATION BY THE BOARD TO WHOM THE DETAILS ARE TO BE SUBMITTED IN THE FORM OF STATEMENTS WAS ISSUED ON 15.10.2010 APPLICABLE FOR F.Y. 2010-2 011 I.E., A.Y. 2011-2012 AND NOT TO THE IMPUGNED ASSESSMENT Y EAR. 3.1. LD. CIT(A) ACCEPTING THE CONTENTION OF ASSESS EE DISCUSSED THE ISSUE ELABORATELY AND HELD AS UNDER : 4.5 I HAVE CONSIDERED THE FACTS ON RECORD AND THE SUBMISSIONS OF THE AR . SEC.40(A)(IA) APPLIES WHEN 'TAX IS DEDUCTIBLE AT SOURCE' FROM ANY PAYMENT MADE BY AN ASSESSEE. WHETHER OR NOT THE TAX WAS DEDUCTIBLE AT SOURCE FROM THE PAYMENT MADE TO THE TRANSPORTERS IS TO BE DISCERNED FROM SEC.194C. 4.6 SUB-SECTIONS (6) AND (7) OF SEC.194C PROVIDE THAT: '(6) NO DEDUCTION SHALL BE MADE FROM ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF THE CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES, ON FURNISHING OF HIS PERMANENT ACCOUNT NUMBER, TO THE PERSON PAYING OR CREDITING SUCH SUM. (7) THE PERSON RESPONSIBLE FOR PAYING OR CREDITING ANY SUM TO THE PERSON REFERRED TO IN SUB-SECTION (6) SHALL FURNISH, TO THE PRESCRIBED INCOME-TAX AUTHORITY OR THE PERSON AUTHORIZED BY IT, SUCH PARTICULARS, IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. ' SEC.194C(6) PROVIDES EXEMPTION FROM THE APPLICATION OF SEC.194C IF THE CONDITION SPECIFIED THEREIN IS FULFILLED, NAMELY, THAT THE APPELLANT OBTAINS THE P AN OF THE TRANSPORTERS CONCERNED. THE LIABILITY TO DED UCT TAX CEASES THE MOMENT THE APPELLANT OBTAINS THE PAN OF THE CONTRACTORS CONCERNED. THAT LIABILITY CANNOT BE 4 ITA.NO.1536/HYD/2014 MR. MOHAMMED SUHIL, KURNOOL CONSIDERED TO BE REINSTATED ON A SUBSEQUENT NON- COMPLIANCE WITH THE PROVISIONS OF SEC.194C(7). 4.7 THERE IS NO DISPUTE THAT THE APPELLANT HAD OBTAINED THE PAN OF THE THREE PARTIES CONCERNED . BY VIRTUE OF THIS FACT, IT HAD NO LIABILITY TO DEDU CT TAX PAID TO THE THREE TRANSPORTERS AND CONSEQUENTLY, WA S NOT LIABLE TO ANY DISALLOWANCE U/S 40(A)(IA). 4.8 THE ASSESSING OFFICER HAS ALSO INVOKED SEC.44AE TO SUGGEST THAT THE TRANSPORTERS IN QUESTI ON DID NOT QUALIFY FOR THE BENEVOLENCE OF SEC.194C(6). THE ASSESSING OFFICER HAS OBSERVED THAT SEC.194C(6) APPLIES ONLY TO THOSE TRANSPORT OPERATORS TO WHOM SEC.44AE APPLIES, THAT THE THREE TRANSPORTERS IN QUESTION DID NOT OWN ANY TRUCKS, THAT THE NUMBER OF TRUCKS ENGAGED BY THEM ON HIRE WAS MORE THAN TEN AND THAT FOR BOTH THESE REASONS, SEC.44AE DID NOT APPLY TO THEM. 4.9 SEC.194C(6) REFERS MERELY TO PAYMENTS TO 'A CONTACTOR DURING THE COURSE OF BUSINESS OF PLYIN G, HIRING OR LEASING GOODS CARRIAGE'. THERE IS NO REFE RENCE TO SEC.44AE IN SEC.194C(6) ITSELF. THE REFERENCE TO SEC.44AE HAS BEEN MADE IN EXPLANATION (II) TO SEC.194C WHICH MERELY DEFINES THE TERM 'GOODS CARRIAGE' WITH REFERENCE TO EXPLANATION (A) OF SEC.44AE. THE MERE FACT THAT THE MEANING ASSIGNED T O THE WORDS, 'GOODS CARRIAGE' IN SEC.44AE HAS BEEN IMPORTED INTO SEC.194C(6) DOES NOT MEAN THAT SEC.194C(6) APPLIES ONLY TO THOSE PERSONS TO WHOM SEC.44AE APPLIES. 4.10. EVEN OTHERWISE, SEC.44AE APPLIES TO AN ASSESSEE WHO IS ENGAGED IN PLYING, HIRING OR LEASIN G OF TRUCKS AND WHO OWNS NOT MORE THAN TEN GOODS CARRIAGES. THE ASSESSING OFFICER HAS OBSERVED IN HI S ORDER THAT THE THREE TRANSPORTERS DID NOT OWN ANY TRUCKS AT ALL. IT IS POSSIBLE THAT THE THREE TRANSP ORTERS HAD ENGAGED MORE THAN TEN TRUCKS ON HIRE. HOWEVER, SEC.44AE REFERS ONLY TO OWNERSHIP OF TRUCKS AS A 5 ITA.NO.1536/HYD/2014 MR. MOHAMMED SUHIL, KURNOOL CONDITION. THE NUMBER OF TRUCKS HIRED BY THE PARTIE S IS OF NO CONSEQUENCE TO THE APPLICATION OF SEC.44AE. THEREFORE, EVEN IF THE ASSESSING OFFICER'S INTERPRE TATION OF SEC.194C(6) WITH REFERENCE TO SEC.44AE WERE TO B E ACCEPTED, SEC.194C(6) HAS TO BE HELD APPLICABLE TO THE APPELLANT ON THE FACTS OF THE CASE. 4.11 IN VIEW OF THE ABOVE, THE DISALLOWANCE OF RS.4,43,76,853 U/S 40(A)(IA) IS SET ASIDE. THE APPEAL IS ALLOWED ON THIS ISSUE. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE SUBMISSIONS AND NOTIFICATIONS ISSUED I N THIS REGARD, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DEVIATE FROM THE ORDER OF LD. CIT(A). EVEN THOUGH NEW PROVI SIONS WERE INTRODUCED AND ASSESSEES WERE MADE LIABLE TO DEDUCT TAX ON THE PAYMENTS MADE TO TRANSPORTERS, PROVISIONS OF SE CTION 194C(6) GIVES EXEMPTION TO THE PERSONS NOT TO DEDUC T THE AMOUNT, IN CASE THEY OBTAIN/FURNISH THE PAN. ASSESS EE HAS COMPLIED WITH THESE PROVISIONS. THEREFORE, THERE IS NO NEED TO DEDUCT ANY TAX AND DISALLOWANCE UNDER SECTION 40(A) (IA) DOES NOT ARISE. EVEN THOUGH IT WAS STATED IN SUB SECTION (7) THAT PERSON RESPONSIBLE FOR PAYING OR CREDITING ANY SUM TO THE PERSON REFERRED TO IN SUB-SECTION (6) SHALL FURNISH , TO THE PRESCRIBED INCOME TAX AUTHORITY OR THE PERSON AUTHO RISED BY IT, SUCH PARTICULARS IN SUCH FORM WITHIN SUCH TIME AS MAY BE PRESCRIBED, THIS PROVISION WAS NOT MADE APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR AS THE RELEVANT NOTIFICATI ON WAS NOT ISSUED IMMEDIATELY. IN FACT, THE BOARD HAS GIVEN NO TIFICATION ON 15.10.2010, WHICH WAS MADE EFFECTIVE FOR THE FORTHC OMING SECOND QUARTER STATEMENT DUE ON 15 TH OCTOBER, 2010. SINCE CBDT ITSELF HAS ISSUED NOTIFICATION IN A LATER YEAR , ASSESSEES CONTENTION THAT IN THE IMPUGNED ASSESSMENT YEAR, NO SUCH PRESCRIBED AUTHORITY WAS STATED HAS TO BE ACCEPTED. EVEN 6 ITA.NO.1536/HYD/2014 MR. MOHAMMED SUHIL, KURNOOL OTHERWISE, AS RIGHTLY POINTED OUT BY THE LD. CIT(A) PROVISIONS OF SECTION 194C(6) ARE INDEPENDENT OF SECTION 194C(7). JUST BECAUSE THERE IS VIOLATION OF PROVISIONS OF SECTION 194C(7), DISALLOWANCE UNDER SECTION 40(A)(IA) DOES NOT ARISE , IF ASSESSEE COMPLIES WITH THE PROVISIONS OF SECTION 194C(6). IN VIEW OF THIS, WE DO NOT FIND ANY MERIT IN REVENUE APPEAL. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.02.20 15. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH FEBRUARY, 2015 VBP/- COPY TO 1. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, AAYAKAR BHAVAN, OPP. CHILDREN PARK, N.R. PET, KURNOOL. 2. MR. MOHAMMED SUHAIL, 87-1368-16-17-25, YELUKURU ESTATE, NANDIKOTKUR ROAD, KURNOOL. 3. CIT(A)-IV, HYDERABAD. 4. CIT-III, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD.