M/s.Raja &Co, Palakkad V. The DCIT, Thrissur

ITA 159/COCH/2019

• Counselvise Citation: [2019] 129 COUNSELVISE.COM (IT) 9933 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-06-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: PADMANATHAN K V
• Keywords: TDS
• Section: 40(a)(ia); 194C; 201(1); 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M I .T . A. NO S . 158 & 159 / COCH/ 2019 ASSESSMENT YEAR S : 2008 - 09 & 2009 - 10 M/S. RAJA & CO., RICE MERCHANT, VADAKKANTHARA ROAD, PALAKKAD. PAN:AACFR 8905K] VS. THE DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE , THRISSUR. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) A SSESSEE BY SHRI PADMANATHAN K.V., CA REVENUE BY SMT. A.S. BINDHU, SR. DR D ATE OF HEARING 24/06/2019 DATE OF PRONOUNCEMENT 26 / 0 6 /201 9 O R D E R PER CHANDRA POOJARI, AM: TH ESE APPEAL S FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE DIFFERENT ORDER S OF THE CIT(A) - III , KOCHI AND PERTAIN TO THE ASSESSMENT YEAR S 2008 - 09 AND 2009 - 10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER MAKING ADDITIONS U/S. 40(A)(IA) WITHOUT APPRECIATING THE FACTS OF THE CASE AND LAW. 2. THERE IS NO CONTRACT, WRITTEN OR OTHERWISE BETWEEN THE APPELLANT AND THE TRANSPORTER FOR PAYMENT OF FREIGHT AND THEREFORE, THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE TO THE APPELLANT. 3. THE APPELLANT HAS MADE THE PAYMENT TO THE TRANSPORTER ON BEHALF OF THE SELLER AND PROVISIONS OF SEC. 194C ARE NOT ATTRACTED. I.T.A. NO S . 158&159/ /COCH/201 9 2 4. WITHOUT PREJUDICE TO THE ABOVE CONTENTION, THE AMENDMENTS TO SEC. 40(A)(IA) BY FINANCE ACT (NO.2), 2014 IS RETROSPECTIVE AND THE DISALLOWANCE IS TO BE LIMITED TO 30% OF THE SUM PAID ON WHICH TAX IS NOT DEDUCTED. THE APPELLANT PRAYS THAT THE ADDITION OF RS.20,03,335/ - MADE IN RESPECT OF DISALLOWANCE U/S. 40(A)(IA) OF THE ACT MAY BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT O N VERIFICATION OF THE LIST OF PAYMENTS FOR EXPENSES ON FREIGHT CHARGES FILED, IT WAS FOUND THAT THE PAYMENTS WERE MADE WITHOUT TAX DEDUCTED AT SOURCE. THE TOTAL PAYMENT WITHOUT TDS MADE U/S. 194C OF THE ACT CAME TO RS.20,03,335/ - FOR AY 2008 - 09 AND RS.20,67,060/ - FOR AY 2009 - 10. SINCE THE ASSESSEE HAD NO T COMPLIED WITH THE PROVISIONS OF SECTION 194C OF THE ACT, DISALLOWANCE U/S. 40(A)(IA) WAS MADE FOR BOTH THE ASSESSMENT YEARS. 4. ON APPEAL , THE CIT(A) OBSERVED THAT THE PURCHASE UNDERTAKEN BY THE ASSESSEE FROM THE WHOLESALE SUPPLIER IS A COMPOSITE ONE INCLUDING I) AN AMOUNT PAYABLE FOR THE GOODS SUPPLIED AND II) COST OF TRANSPORTATION. THERE IS NO CONTRACT OF ANY KIND BETWEEN THE ASSESSEE AND THE TRANSPORTER AS THE TRANSPORTER IS ACTING COMPLETELY ON BEHALF OF THE WHOLESALE SUPPLIER AND IS ONLY AN AGENT OF THE SUPPLIER WHO HAS AN UNWRITTEN CONTRACTUAL AGREEMENT WITH THE ASSESSEE . IT IS ON THE INSTRUCTIONS OF THE WHOLE SALE SUPPLIERS THAT THE ASSESSEE IS PAYING FREIGHT CHARGES TO THE TRANSPORTER WITHOUT GOING INTO THE SELECTION OF THE TRANSPORTER OR NEGOTIATING THE COST OF THE SERVICES BEING PROVIDED BY THEM. THE COMPOSITE PAYMENT MADE BY THE ASSESSEE IS DELIVERED PARTLY TO THE TRANSPORTER ON RECEIPT OF RICE AND THE REMAINING IS PAID TO THE WHOLE SALE SUPPLIER. THEREFORE, THE PROVISIONS OF SECTI ON 194C ARE APPLICABLE. I.T.A. NO S . 158&159/ /COCH/201 9 3 4.1 ACCORDING TO THE CIT(A), SINCE THE - TRANSPORTER WAS SELECTED BY THE WHOLE SELLER AND THE TRANSPORT SERVICE PRICE WAS ALSO NEGOTIATED BY HIM, THE TOTAL C OST OF THE SUPPLIES TO THE ASSESSEE INCLUDE THE COST OF THE RICE AND THE TRANSPORTATION COST. THE ASSESSEE HAD ALSO CONTEN D ED THAT SOME OF THE PAYMENT S ARE LESS THAN RS. 2 0 , 000/ - AND ONLY ONE TIME AN D HENCE SHALL NOT ATTRACT THE PROVISION OF SECTION 194C . APART FROM THE ABOVE, BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT: PAYMENTS MADE TO TRANSPORTERS : EACH PAYMENT BELOW RS. 20 , 000/ - : RS. 2, 62 , 200/ - ONLY( 1 TIME TRANSPORTERS) (THE FREIGHT HAS BEEN PAID TO DIFFERENT VEHICLES, EVEN THOUGH THE VEHICLES WERE BOOKED THROUGH LORRY BROKERS) THE CIT(A) REJECTED THE ABOVE CONTENTION IS UNACCEPTABLE AS THE STATUS OF THE TRANSPORTER, BEING AN AGENT OF THE WHOLE SELLER WOULD NOT BE KNOWN TO THE ASSESSEE FOR THE NUMBER OF TIMES THE SERVICES OF THE TRANSPORTER IS BEING UTILIZED BY THE WHOLE SELLER DURING THE YEAR, EVEN THOUGH THE PAYMENT BEING MADE BY THE ASSESSEE, ON THE INSTRUCTIONS OF THE SELLER IS LESS THAN RS.20,000/ - . HENCE THE PROVISIONS OF SECTION 194C ARE FULLY APPLICABLE IN THE COMPOSITE WORK CONTRACT. 4.2 FURTHER THE CIT(A) REJECTED THE ASSESSEES PLEA THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO AMOUNTS PAYABLE I.E. AMOUNTS ALREADY PAID AS THE ASSESSEE HAD ALREADY PAID THE FREIGHT CHARGES, THEREFORE, NO DISALLOWANCE SHOULD BE MADE U/S. 40(A)(IA). AS PER SEC. 194C, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF TH E CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MO DE, WHICHEVER IS EARLIER, THE AMOUNT IS DEDUCTED. I.T.A. NO S . 158&159/ /COCH/201 9 4 5. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR SUBMITTED THAT UNDER THE TERMS OF THE TRADE, THE RICE IS DISPATCHED BY THE OUTSTATION DEALERS FOR DELIVERY AT THE ASSESSEES BUSINESS PLA CE. THE ASSESSEE ON RECEIPT OF THE GOODS, VERIFIES THE QUALITY AND QUANTITY AND ACCEPTS THE RICE IF IT IS AS PER THE ORDER PLACED. IN THE WHOLESALE RICE TRADE, THE TERMS ARE DELIVERY AT THE PURCHASERS PREMISES. THE PURCHASE PRICE IS FIXED ON THAT BASI S. FOR THE SAKE OF CONVENIENCE, THE FREIGHT CHARGE ARE PAID BY THE PURCHASER ON BEHALF OF THE SELLER ON THE BASIS OF LR RAISED BY THE TRANSPORTER. T HE ASSESSEE HAD PAID FREIGHT CHARGES ON RICE PURCHASED BY THE FIRM OF RS.20,03,335 / - FOR AY 2008 - 09 AND RS . 20,67,060/ - FOR AY 2009 - 10 WHERE A SINGLE BILL EXCEEDS RS.20,000/ - OR THE AGGREGATE PAYMENT MADE TO THE TRANSPORTER EXCEEDS RS.50,000/ - IN A YEAR. AS THERE WAS NO PRIVITY OF CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTERS, THE ASSESSEE DID NOT DEDUCT TDS U/S. 194C. THE LD. AR SUBMITTED THAT THE AMENDMENT TO SECTION 40 (A) (IA) BY THE FINANCE ACT (NO.2) ACT 2014 WITH EFFECT FROM 1 - 4 - 2015 IS RETROSPECTIVE AND THE ASSESSEE IS ELIGIBLE TO THE BENEFIT OF THE SAID AMENDED PROVISION, WHEREBY, DISALLOWANCE IS LIMITED TO 30% OF THE AMOUNT PAID INSTEAD OF 100% DISALLOWANCE MADE BY THE ASSESSING AUTHORITY. 5.1 THE LD. AR RELIED ON THE DECISION OF THE HIGH COURT OF KERALA IN THE CASE OF THE ACADEMY OF MEDICAL SCIENCES, PARIYARAM, VS. COMMISSION ER OF INCOME TAX, KANNUR, 2018 (3 TMI 1022) WHEREIN IT WAS HELD THAT TH E FIRST PROVISO TO SEC. 201( 1 ) WAS INSERTED BY THE FINANCE ACT 2012, WITH EFFECT FROM 1 - 4 - 2013 TO PROVIDE THAT I.T.A. NO S . 158&159/ /COCH/201 9 5 WHERE THE RECIPIENT OF THE INCOME HAS INCLUDED THE AMOUNT RECEIVED WITHOUT DEDUCTION OF TAX AT SOURCE IN HIS RETURN OF INCOME U/S 139 AND THE TAX DUE THEREON HAS BEEN PAID, THEN THE PERSON WHO HAS PAID THE AMOUNT WITHOUT DEDUCTION OF TAX SHALL NOT BE TREATED AS AN ASSESSE IN DEFAULT AND CONSEQUENTLY DISALLOWANCE U/S 40 (A) (IA) WI LL NOT BE APPLICABLE TO HIM. THE COURT IN THE SAID DECISION ACCEPTED THAT THE AMENDMENT TO SECTION 201(1) IS CURATIVE IN NATURE AND WAS APPLICABLE FOR THE ASSESSMENT YEAR 2007 - 08, 2008 - 09 AND 2009 - 10. 5.2 THE LD. AR RELIED ON THE DECISION OF THIS TRI BUNAL IN THE CASE OF DCIT, TRIVANDRUM VS. M/S.K.K.ROCKS & GRANITES INDIA PVT. LTD; & VICE VERSA 2018 (9) TMI 1539 - ITAT COCHIN WHEREIN IT WAS HELD THAT THE AMENDMENT TO SECTION 40(A)(IA) BY THE FINANCE ACT 2014 IS ALSO A BENEFICIAL PROVISION AND HAS RETRO SPECTIVE OPERATION AS WAS HELD BY THIS T RIBUNAL WITH REGARD TO THE AMENDMENT EFFECTED BY THE FINANCE ACT 2012. THEREFORE, THE DISALLOWANCE SHOULD BE LIMITED TO 30% OF THE SUM PAID WITHOUT TDS IN VIEW OF THE AMENDMENT OF SECTION 40(A)(IA) BY FINANCE (NO. 2) ACT, 2014 WITH EFFECT FROM 1.4.2015. BY VIRTUE OF INSERTION OF THIS PROVISO TO SECTION 40(A)(IA), IF ANY SUCH SUM TAXED HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB - S ECTION (1) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB - SECTION(1) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF PREVIOUS YEAR, AND FURTHER, SECTION 40(A)(IA) HAS BEEN SUBSTITUTED WHEREIN 30% OF ANY SUM PAYABLE TO A RESIDENT HAS BEEN SUBSTITUTED. ACCORDING TO HIM, THOUGH I.T.A. NO S . 158&159/ /COCH/201 9 6 SUBSTITUTION TO SECTION 40(A)(IA) HAS BEEN MADE WITH EFFECT FROM 1/4/2015, THE AMENDMENT IS TO BE TREATED AS RETROSPECTIVE IN VIEW OF THE FOLLOWING DECISIONS OF THE TRIBUNAL R ELIED UPON BY HIM: 1) SMT. S. KANTA YADAV VS. ITO IN ITA NO. 6312/D EL/2016 DATED 12/05/2017 (ITAT, DELHI). 2) SHRI RAJENDRA YADAV VS. ITO IN ITA NO.895/JP/2012 DATED 29/01/2016 (ITAT JAIPUR). 3) ASPHALT INDIA CORPORATION VS. DCIT MUMBAI (ITA/1869/M UM /2014) (ITAT, MUMBAI) 4) AMRUTA QUARRY WORKS, VS. ITO (ITA NO. 1481/AHD/2013), ITAT, AHMEDABAD 5.3 IN THE LIGHT OF THE ABOVE SUBMISSIONS, IT WAS PRAYED THAT THE TRIBUNAL MAY RESTRICT THE DISALLOWANCE U/S 40 ( A ) (IA) TO 30% OF THE FREIGHT CHARGES ON WHICH THERE WAS NO DEDUCTION OF TAX AT SOURCE. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE ABOVE AMENDMENT CANNOT BE APPLIED RETROSPECTIVELY IN VIEW OF THE JUD GMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF PRUDENTIAL LOGISTICS AND TRANSPORTS VS. ITO (364 ITR 789) (KER.) WHEREIN IT WAS HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) WHICH WAS INSERTED BY FINANCE ACT OF 2012 WITH EFFECT FROM 1 - 4 - 2013 CANNOT B E APPLIED TO THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE CONTENTION OF THE LD. AR IS THAT THERE IS NO WRITTEN CONTRACT OR ORAL BETWEEN THE TRANSPORTER AND I.T.A. NO S . 158&159/ /COCH/201 9 7 THE ASSESSEE. ACCORDING TO THE L D. AR, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S. 194C OF THE ACT AND THEREFORE, THE ADDITIONS MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE LIABLE TO BE DELETED. 7.1 WE FIND THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF SMT. J. RAMA VS. CIT (2012) 344 ITR 608 WHEREIN IT WAS HELD THAT LAW DOES NOT STIPULATE THE EXISTENCE OF WRITTEN CONTRACT AS A CONDITION PRECEDENT FOR INVOKING THE PROVISIONS OF SECTION 194C OF THE ACT WITH RESPECT TO PAYMENT OF TDS. THE KARNATAKA HIGH COURT OBSERVED AS UNDER: IN ORDER TO PROVIDE VEHICLES TO A CUSTOMER AS PER AGREEMENT, THE ASSESSEE USED TO HIRE VEHICLES FROM OTHERS AND HIRING OF VEHICLES BY THE ASSESSEE IS IN THE NATURE OF TRANSPORT CONTRACT AND HENCE, THE DISALLOWANCE 7.2 THE JURISDICTIONAL HIGH COURT HAD AN OCCASION TO CONSIDER THE APPLICABILITY OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IN THE CASE OF PRUDENTIAL LOGISTICS AND TRANSPORTS (SUPRA) WHEREIN IT WAS HELD THAT SECOND PROVISO TO SECTION 40(A)(IA) WHICH WAS INSERTED BY FINANCE ACT OF 2012 WITH EFFECT FROM 1.4.2013 CANNOT BE APPLIED RETROSPECTIVELY. ON THE SAME ANALOGY, THE IMPUGNED PROVISION TO SECTION 40(A)(IA) WHICH WA S INSERTED BY FINANCE (NO.2) ACT, 2014 WITH EFFECT FROM 1.4.2015 CANNOT BE MADE APPLICABLE TO THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 WHICH IS IN THE PRESENT CASE. THE THIRD PROVISO TO SECTION 40(A)(IA) READS AS FOLLOWS: . PROVIDED THAT WHEREIN RESP ECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN AN SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB - SECTION (1) OF SECTION 139 THIRTY PERCENT OF I.T.A. NO S . 158&159/ /COCH/201 9 8 SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH TAX HAS BEEN PAID . 7.3 BY VIRTUE OF THE ABOVE AMENDMENT, SUCH SUM IS DISALLOWED U/S. 40(A)(IA) ONLY TO THE EXTENT OF 30% OF THE ADDITION MADE WITH EFFECT FROM 01/04/2015. IN VIEW OF THE JUDGMENT OF THE JURIS DICTIONAL HIGH COURT IN THE CASE OF PRUDENTIAL LOGISTICS AND TRANSPORTS VS. ITO (364 ITR 789) (KER.), WE ARE NOT IN A POSITION TO ACCEPT THE PLEA OF THE ASSESSEE THAT THIS IS TO BE APPLIED RETROSPECTIVELY AND COVER ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 ALS O. B EING SO, WE ARE INCLINED TO DISMISS THIS GROUND OF APPEAL S OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL S OF THE ASSESSEE ARE DISMISSE D . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH JUNE, 2019 SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 26 TH JUNE , 2019 GJ COPY TO: 1 . M/S. RAJA & CO., RICE MERCHANT, VADAKKANTHARA ROAD, PALAKKAD. 2. THE DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE, THRISSUR. 3 . THE COMMISSIONER OF INCOME - TAX (AP P EALS) - III , KO CHI. 4. THE COMMISSIONER OF INCOME - TAX, CENTRAL, KOCHI. 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN I.T.A. NO S . 158&159/ /COCH/201 9 9