I.T.O Wd - 34(2),kolkata., Kolkata V. M/s Akshoy Kumar Ghose & Sons., Kolkata

ITA 156/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100179 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 18-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 194C

Judgement Text

I.T.A. NO. 156/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 156/KOL/ 2013 ASSESSMENT YEAR : 2009-2010 INCOME TAX OFFICER,................................ .................................APPELLANT WARD-34(2), KOLKATA, AAYAKAR BHAWAN (POORVA), 110, SHANTIPALLY (7 TH FLOOR), KOLKATA-700 107 -VS.- M/S. AKSHOY KUMAR GHOSE & SONS,.................... .....................RESPONDENT 15/1, STRAND ROAD, CUSTOMS HOUSE KOLKATA-700 001 [PAN : AAIFA 2121 L] APPEARANCES BY: SHRI G. MALLIKARJUNA, CIT, D.R., FOR THE DEPARTMENT N O N E, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : DECEMBER 09, 2015 DATE OF PRONOUNCING THE ORDER : DECEMBER 16, 2015 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DA TED 17.10.2012 FOR THE ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUND S:- (1) THAT LD. CIT(A) ERRED IN GIVING RELIEF TO THE ASSES SEE FIRM BY ALLOWING THE DISALLOWANCE U/S 40(A)(IA) OF THE I NCOME TAX ACT, 1961 FOR PAYMENT MADE ON ACCOUNT OF TRANSPORTATION CHARGES OF RS.1,03,98,235/- THOUGH T HE LIABILITIES OF TDS WERE ARISEN ON SUCH PAYMENTS. (2) THE LD. CIT(A) ALSO ERRED IN GIVING RELIEF IN FAVOU R OF THE ASSESSEE FIRM BY RELYING ON THE JUDGMENT IN THE CAS E OF MERILYN SHIPPING & TRANSPORTS VS.- ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-1, VISAKHAPATNAM, VIDE ITAT, SPECIAL BENCH, VISAKHAPATNAMS ORDER DAT ED 29.03.2012 IN ITA NO. 477/VIZ./2008 THOUGH THE CASE OF I.T.A. NO. 156/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 6 MERILYN SHIPPING & TRANSPORTS HAS BEEN STAYED FROM OPERATION BY THE HONBLE ANDHRA PRADESH HIGH COURT. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES AS CU STOMS CLEARING & FORWARDING AGENT. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 19.05.2010 DECLARING TOTAL INCOM E OF RS.13,95,146/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS PAID A TOTA L SUM OF RS.6,78,48,890/- ON ACCOUNT OF REIMBURSEMENT OF EXP ENSES. ON PERUSAL OF THE DETAILS FILED BY THE ASSESSEE IN THIS REGARD, T HE ASSESSING OFFICER NOTICED THAT NO TAX WAS DEDUCTED BY THE ASSESSEE ON THE PAYMENTS MADE TOWARDS TRANSPORTATION CHARGES TO THE EXTENT OF RS. 1,03,98,235/-. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WA S REQUIRED TO DEDUCT TAX AT SOURCE FROM THESE PAYMENTS MADE ON ACCOUNT O F TRANSPORTATION CHARGES AS PER THE PROVISION OF SECTION 194C OF THE ACT AND SINCE THERE WAS FAILURE ON THE PART OF THE ASSESESE TO COMPLY W ITH THIS REQUIREMENT, TRANSPORTATION CHARGES OF RS.1,03,98,235/- WERE DIS ALLOWED BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC TION 40(A)(IA) OF THE ACT. 3. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF TRANSPORTATION CHARGES UNDER SECTION 40(A)(IA) WAS CHALLENGED BY THE ASSESSEE IN APPEAL FILED BEFORE THE LD. CIT(APPEALS ). DURING THE COURSE OF APPELLATE PROCEEDINGS, THE FOLLOWING SUBMISSIONS WE RE MADE ON BEHALF OF THE ASSESSEE IN SUPPORT OF ITS CASE THAT THE DISALL OWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRANSPORTATION CHAR GES UNDER SECTION 40(A)(IA) IS NOT SUSTAINABLE:- THE APPELLANT'S SOURCE' OF INCOME IS ACTING AS CUS TOMS CLEARING AND FORWARDING AGENT. THE WORK INCLUDES CLEARING OF GOODS FROM THE SHIP TO DELIVERY OF GOODS TO ITS DESTINATION WH ICH ESSENTIALLY INCLUDES THE TRANSPORTATION. THE APPELLANT HAS NO V EHICLES OF ITS OWN AND HENCE HAVE TO PROCURE THE VEHICLE OF ITS OW N AND HENCE HAVE TO PROCURE THE VEHICLE FROM THE TRANSPORTERS O N HIRE BASIS. THE APPELLANT RAISES THE BILL, WHICH INCLUDE THE NA TURE OF EXPENSES I.T.A. NO. 156/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 6 INCURRED ON BEHALF OF THE PARTY. THE PARTY PAYS THE BILL AMOUNT AFTER DEDUCTION OF INCOME TAX DEDUCTIBLE AT SOURCE. IN COURSE OF VERIFICATION THE ID. INCOME TAX OFFICE R NOTICED THE PAYMENT OF RS.11406775.00 TOWARDS THE TRANSPORT ATION CHARGES OF WHICH A SUM OF RS.910240.00 PAID TO M/S. MULTIMODE MARINE UPON WHICH APPROPRIATE TDS WAS DEDUCTED U/S. 194C OF THE INCOME TAX ACT, 1961 BECAUSE THERE EXISTS A CONTRAC T BETWEEN THE DEDUCTOR AND DEDUCTEE. THAT BESIDE THE ABOVE THE AP PELLANT PAID A SUM OF RS.L0398235.00 TO DIFFERENT TRANSPORTER OR LORRY DRIVERS/OWNERS FOR THAT THERE IS NO CONTRACT BETWEE N THE DEDUCTOR AND DEDUCTEE. THE ENTIRE LIABILITIES ON ACCOUNT OF TRANSPORTATION CHARGES WAS DISCHARGED DURING THE FINANCIAL YEAR AN D THERE REMAIN NO OUTSTANDING PAYABLE TO THE TRANSPORTER OR VEHICLE OWNER. A LIST OF THE SAID PARTIES IS ENCLOSED FOR Y OUR HONOUR'S KIND PERUSAL. SECTION 194C OF THE INCOME-TAX ACT, 1961 ENVISAGES THAT A PERSON RESPONSIBLE FOR PAYING ANY SUM TO A RESIDENT REFERRED TO AS A CONTRACTOR OR SUB-CONTRACTOR SHALL DEDUCT THE TAX AT SOURCE IF THE CREDIT OR PAYMENT IS IN PURSUANCE OF CONTRACT B ETWEEN THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT TO THE CO NTRACTOR OR SUB-CONTRACTOR. 194C PAYMENTS TO THE CONTRACTORS AND SUB-CONTRACTOR S: - ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RE SIDENT (HEREINAFTER IN THIS SECTION REFERRED TO AS CONTRAC TOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYI NG OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRA CTOR AND A SPECIFIED PERSON. 194C(2) EXPLANATION IV(C), THE EXPRESSION 'WORK' SH ALL INCLUDE CARRIAGE OF GOODS OR PASSENGER BY ANY MODE OF TRANSPORT OTHER THAN RAILWAYS. THAT IN COURSE OF ASSESSMENT PROCEEDING, THE LD. IN COME-TAX ACT, 1961 NEVER CONFRONTED THE ASSESSEE WITH THE IS SUE THEREBY ENABLING TO EXPLAIN THE LEGAL DICTUM AND, HENCE, JE OPARDIZING THE PRINCIPLE OF NATURAL JUSTICE. IT IS HUMBLY SUBMITTE D THAT THE LD. INCOME TAX OFFICER NEVER SOUGHT ANY INFORMATION, EX PLANATION OR SHOW CAUSE IN THIS INSTANT CASE THE ASSESSMENT RECO RD IS A TESTIMONY OF THIS VITAL FACT. THAT THE ID. INCOME TAX 'OFFICER HAS NOT INEVITABLE BROUGHT ON RECORD ANY DOCUMENT WHATSOEVER TO SUGGEST THAT T HESE EXISTS ANY CONTRACT BETWEEN THE APPELLANT AND THE CARRIERS . ON TOP OF ALL, IT IS NOW JUDICIALLY SETTLED THAT IN THE ABSENCE OF SPECIFIC CONTRACT FOR THE HIRING OF THE TRUCKS, AS IN THE CASE OF I.T.A. NO. 156/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 6 HIRING FROM ISOLATED RANDOM PARTIES, NO LIABILITY T O DEDUCT AT SOURCE ARISES. THE LIABILITY TO DEDUCT TAX AT SOURC E COULD HAVE ARISEN UNDER SECTION 194C(2) IN THE CASE ONLY IF AL L THE TRUCK- OWNERS/DRIVERS HAD ENTERED INTO CONTRACTS WITH THE ASSESSEE TO CARRY OUT AND EXECUTE THE ASSESSEE'S OBLIGATION EN MASSE ACCEPTING THEIR ROLE AS CONTRACTORS FOR THE WORK WH OLLY OR IN ANY PART OF THE CONTRACT JOB OF THE ASSESSEE. IN THE CA SE THERE IS NO SUCH CONTRACT AS MAY ATTRACT SECTION 194C(2). THE I TAT BENCHES IN UNISON HAVE HELD AS THE STATE OF LAW THAT MERE H IRING TRACKS DOES NOT PREDICATE APPLICATION OF THE SAID SECTIONS . THERE HAS TO BE A CONTRACT FORMALLY BINDING THE TRUCK-OWNERS DRI VERS TO THE WHOLE THE OBLIGATIONS AS BIND THE HIRER UNDER THIS CONNECTION WITH HIS CONTRACTEE AS A SUBCONTRACTOR UNDER THE MAIN CO NTRACT INTER SE THE ASSESSEE AND THE ASSESSEE AND HIS CONTRACTEE . REFERENCE IS PLACED ON THE DECISION IN DY. CIT VS. SATISH AGARWA L & CO. (2010) 122 ITO 35 (TASR.) MYTHERI TRANSPORT CORPN. V. ACIT (2010) 124 ITO 40 (TV ISHKHA), MRS. KAVITA CHUG VS. ITO (2010) 134 TT] 103 (TCAL). M/S. SEVEN HILLS CARGO CARRIER \I. INCOME T AX OFFICER, 2012 (7) TMI 37 ITAT VISAKHAPATNAM. THIS PRINCIPLE THAT UNDERLIES THE DECISION FOUND AF FIRMATION IN CIT V. D. RATHINAM (2011) 335 ITR 101 (MAD.). TH E HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V UN ITED RICE LAND LTD. (2008) 217 CTR (P & H) 305: (2008) 174 TA XMAN 286 (P & H) HAS HELD THAT WHEN THE FREIGHT CHARGES ARE PAI D DIRECTLY BY THE ASSESSEE TO THE TRUCK OWNERS, THERE WAS NO ORAL OR WRITTEN CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTERS, NO TAX AT SOURCE WAS TO BE DEDUCTED ON THE FREIGHT CHARGES PA ID TO THE TRUCK OWNERS. THE SPECIAL BENCH AT VISAKHAPATNAM, ITAT IN ITA NO. 477/VIZ./2008 VIDE ITS ORDER IN THE CASE OF MERILYN SHIPPING TRANSPORT V. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-I, VISAKHAPATNAM HAS DEALT THE ISSUE AND HELD THAT THE TERM PAYABLE IN SECTION 40(A)(IA) INCLUDE PAID AND PAYABLE BOTH. IN VIEW OF THE ABOVE THE APPELLANT RESPECTFULLY SUB MITS THAT THE ADDITION MADE BY THE LD. INCOME TAX OFFICE R IS NOT AT ALL SUSTAINABLE AND DESERVE TO BE DECIDED IN VIEW OF TH E EXPLICIT PROVISION OF SECTION 194C(1) READ WITH SECTION 40(A )(IA) OF THE INCOME TAX ACT, 1961 CONTRARY TO THE VIEW TAKEN WHI LE MAKING THE ADDITION, THEREFORE, IT IS PRAYED THAT THE ADDI TION OF RS.10398235.00 MAY KINDLY BE DELETED AND/OR TO PASS SUCH ORDER WHICH YOUR HONOUR DEEM FIT AND NECESSARY. 4. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE AS SESSEE, THE LD. CIT(APPEALS) DELETED THE DISALLOWANCE MADE BY THE A SSESSING OFFICER ON ACCOUNT OF TRANSPORTATION CHARGES UNDER SECTION 40( A)(IA) FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 4.2 OF HIS IMPUGNED ORDER:- 4.2. I HAVE PERUSED THE ASSESSMENT ORDER AND CONSI DERED THE SUBMISSION OF THE APPELLANT. IN VIEW OF THE FAC TS THAT I.T.A. NO. 156/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 6 THE AMOUNTS OF TRANSPORTATION EXPENSES DID NOT REMA IN PAYABLE AT THE END OF THE YEAR AS THE SAME WAS PAID DURING THE YEAR ITSELF. THEREFORE, FOLLOWING THE JUDGMENT IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS.- ADDITIO NAL COMMISSIONER OF INCOME TAX, RANGE1, VISAKHAPATNAM, ITAT, SPECIAL BENCH, VISAKHAPATNAM IN ITA NO. 477/VIZ./2008 ORDER DATED 29.03.2012 WHICH IS BEING FOLLOWED BY THE ITAT, KOLKATA ALSO, THE APPEAL ON T HIS GROUND IS ALLOWED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE US, NOBODY HAS APP EARED ON BEHALF OF THE ASSESSEE. THIS APPEAL OF THE REVENUE IS, THEREF ORE, BEING DISPOSED OF EX PARTE QUA THE RESPONDENT-ASSESSEE AFTER HEARING THE ARGUMENT S OF THE LD. D.R. AND PERUSING THE RELEVANT MATERIAL AVAILAB LE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. D.R., THE DECISION OF VISAKHAP ATNAMA SPECIAL BENCH OF ITAT IN THE CASE OF MERILYN SHIPPING & TRANSPORT S (SUPRA) RELIED UPON BY THE LD. CIT(APPEALS) TO GIVE RELIEF TO THE ASSES SEE HAS BEEN SUBSEQUENTLY OVERRULED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS.-CRESCENT EXPORT SYNDICATE REPORTED IN 262 CTR 525 HOLDING THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE NOT ONLY TO AMOUNT WHICH IS SHOWN AS PAYABLE ON THE DATE OF BALANCE-SH EET, BUT ALSO TO SUCH EXPENDITURE, WHICH HAS BECOME PAYABLE AT ANY TIME D URING THE RELEVANT PREVIOUS YEAR AND IS ACTUALLY PAID WITHIN THE PREVI OUS YEAR WITHOUT MAKING TDS. RESPECTFULLY FOLLOWING THE SAID DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE IMPUGNE D ORDER OF THE LD. CIT(APPEALS) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) BY RELYING ON THE DECISION OF VISAKHAPATNAM SPECIAL BENCH OF ITAT IN THE CASE OF MERILYN SHIPPI NG & TRANSPORTS (SUPRA). IT IS, HOWEVER, OBSERVED THAT THE ASSESSEE IN ITS SUBMISSIONS MADE BEFORE THE LD. CIT(APPEALS) HAD RAISED VARIOUS OTHER ISSUES/ CONTENTIONS WHILE CHALLENGING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRANSPORTATION CHARGES UNDER SECTION 40(A)(IA), BUT THE SAME HAS NOT BEEN CONSIDERED OR EXAMINED BY TH E LD. CIT(APPEALS) IN I.T.A. NO. 156/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 6 OF 6 VIEW OF THE RELIEF ALLOWED BY HIM TO THE ASSESSEE B Y RELYING ON THE DECISION OF VISAKHAPATNAM SPECIAL BENCH OF ITAT IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) AND THIS POSITION CLE ARLY EVIDENT FROM THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) HAS NOT BEEN DISPUTED EVEN BY THE LD. D.R. WE, THEREFORE, CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO REMIT THE MATTER BACK TO THE LD. CIT(APP EALS) FOR CONSIDERING AND EXAMINING THE OTHER CONTENTIONS/ISSUES RAISED B Y THE ASSESSEE AND TO DECIDE THE ISSUE ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 16, 2015. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 16 TH DAY OF DECEMBER, 2015 COPIES TO : (1) INCOME TAX OFFICER, WARD-34(2), KOLKATA, AAYAKAR BHAWAN (POORVA), 110, SHANTIPALLY (7 TH FLOOR), KOLKATA-700 107 (2) M/S. AKSHOY KUMAR GHOSE & SONS, 15/1, STRAND ROAD, CUSTOMS HOUSE KOLKATA-700 001 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-XX, KOLK ATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.