ITO Ward-43(1) kolkata, Kolkata V. M/s BIHANI COMMERCIAL, Kolkata

ITA 1651/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83025 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 09-11-2012
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU ACIT
• Assessee Lawyers: N O N E
• Section: 143(3); 194C

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , . . . . ! ! ! ! /AND ' #!' ' #!' ' #!' ' #!' , ) [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM] !$ / I.T.A NO.1651/KOL/2012 #% &'/ ASSESSMENT YEAR: 2009-10 INCOME-TAX OFFICER, WD-43(1), KOLKATA. VS. M/S. B IHANI COMMERCIAL (PAN: AAIFB7955P) ()* /APPELLANT ) (+,)*/ RESPONDENT ) DATE OF HEARING: 25.07.2014 DATE OF PRONOUNCEMENT: 01.08.2014 FOR THE APPELLANT: SHRI DAVID Z CHAWNGTHU, ACIT, SR . DR FOR THE RESPONDENT: N O N E / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF CIT(A)-XXX, KOLKATA IN APPEAL NO. 320/CIT(A)-XXX/WD-43(1)/2011-12 DATED 13.07.2012. ASSESSMENT WAS FRAMED BY ITO, WARD-43(1), KOLKATA U/S. 143(3) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2009-10 VIDE HIS ORDER D ATED 30.12.2011. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO FOR THE REASON THAT THE ASS ESSEE FAILED TO DEDUCT TDS FROM TRANSPORT PAYMENTS TO THE TUNE OF RS.3,34,8,822/- U/S. 194C O F THE ACT BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE CIT(A) DECIDED T HE ISSUE THAT NO CONTRACT EXISTS BETWEEN THE ASSESSEE AND TRANSPORTERS. FOR THIS, REVENUE HAS R AISED FOLLOWING THREE GROUNDS: 1. THE LD. CIT(A) ERRED IN ACCEPTING THAT PAYMENT TO 6 DIFFERENT TRANSPORTS, TO THE TUNE OF RS.3,34,08,822/- DOES NOT FALL IN THE PURVIEW OF WORKS CONTRACT. 2. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THA T THE ASSESSEE FAILED TO DEDUCT TDS U/S. 194C FROM THE CONTRACTUAL EXPENSES PAID TO THE TRAN SPORTER THEREBY ATTRACTING THE PROVISIONS OF SEC. 40(A)(IA). 3. THE LD. CIT(A) ERRED IN DECIDING THAT LORRIES/D UMPERS TAKEN ON HIRE ON DRY BASIS FOR PERFORMANCE OF SOME CONTRACTUAL JOB BY THE ASSESSEE DOES NOT TANTAMOUNT TO SUB- CONTRACT. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE DEBIT ED CARRIAGE INWARD EXPENSES TO TRANSPORTERS TO THE TUNE OF RS.3,34,08,822/- PAID TO SIX TRANSPO RT COMPANIES. THESE TRANSPORT COMPANIES 2 ITA NO.1651/K/2012 M/S. BIHANI COMMERCIAL AY 09-10 HAVING GOODS CARRIAGES FOR THE PURPOSE OF HIRING TO WARDS CARRIAGES OF GOODS. ACCORDING TO THE AO, THE ASSESSEE IS LIABLE TO DEDUCT TDS ON THE PAY MENT MADE TO THESE TRANSPORT COMPANIES FOR DEBITING CARRIAGE INWARD EXPENSES PAID TO THESE SIX TRANSPORTERS U/S. 194C OF THE ACT. ON QUERY FROM THE AO, THE ASSESSEE STATED THAT HE HAS NOT DE DUCTED THE TDS FOR THE REASON THAT THE ASSESSEE BEING A MIDDLE MAN AND NOT THE UTILISER OF THE TRANSPORT FACILITIES AND HENCE, HE IS NOT LIABLE TO DEDUCT TDS. THE AO HAS NOT ACCEPTED THE C ONTENTION OF THE ASSESSEE AND NOTED THAT THE PAYMENTS TO THE TRANSPORTERS WERE MADE BY THE ASSES SEE ITSELF DIRECTLY THROUGH ITS BANK ACCOUNT TO THE TRANSPORTERS BANK ACCOUNT. EVEN ON QUERY, THE ASSESSEE COULD NOT EXPLAIN WHO ARE MIDDLE MEN, HE COULD NOT REPLY. THE AO HAS DETAILE D OUT THE TRANSPORTATION EXPENSES TO THE FOLLOWING PARTIES. SL. NO. NAME OF THE PARTY NATURE OF EXPENSES BILL AMOUNT (RS.) 1. 2. 3. 4. 5. 6. METAL IMPEX INDIA ARUN ENTERPRISE MANISH ENTERPRISE NAVKAR TRADING INDIAN CORPORATION BRIJESH SHYAM SUNDER TRANSPORTATION -DO- -DO- -DO- -DO- -DO- TOTAL: 50,00,000/- 75,00,000/- 75,00,000/- 18,00,000/- 1,01,40,000/- 14,68,822/- 3,34,08,822/- AS THE ASSESSEE FAILED TO DEDUCT TDS, HE DISALLOWED THE ENTIRE PAYMENT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE DIS ALLOWANCE BY HOLDING THAT THERE EXISTS NO CONTRACT BETWEEN THE PARTIES AND FOR THIS HE RECORD ED AS UNDER: 3. THE SUBMISSION OF THE APPELLANT AS ABOVE AND TH E FACTS OF THE CASE HAVE BEEN CONSIDERED. IT IS SEEN THAT THE EXPENSES, IN QUESTI ON, ARE IN RESPECT OF PAYMENT MADE UNDER THE HEAD CARRIAGE INWARDS TO SIX PARTIES THE DETAIL S OF PAYMENTS ARE REPRODUCED AS UNDER:- SL. NO. NAME OF THE PARTY NATURE OF EXPENSES BILL AMOUNT (RS.) 1. 2. 3. 4. 5. 6. METAL IMPEX INDIA ARUN ENTERPRISES MANSH ENTERPRISE NAVKARTRADING INDIAN CORPORATION BRIJESH SHYAM SUNDER TRANSPORTATION -DO- -DO- -DO- -DO- -DO- TOTAL 50,00,000/- 75,00,000/- 75,00,000/- 18,00,000/- 1,01,40,000/- 14,68,822/- 3,34,08,822/- THE A.O. HAS DISALLOWED THESE PAYMENTS HOLDING THAT THEY WERE TOWARDS SUB- CONTRACT PAYMENTS TO THESE PARTIES TOWARDS TRANSPORT CONTRAC T AND THEREFORE THESE PAYMENTS WERE COVERED THE PROVISION OF SECTION 194C AND HENCE THE APPELLANT WAS LIABLE TO DEDUCT TDS WHICH HAS NOT BEEN DONE. THE APPELLANT, ON THE OTHE R HAND, SUBMITTED THAT IT LAD HIRED LORRIES AND DUMPERS FROM THESE PARTIES ON A DRY BAS IS AND HAD USED ITS OWN DRIVER AND HELPERS AS WELL AS FUEL FOR RUNNING THESE DUMPERS N EXECUTICN OF ITS CONTRACT AND THEREFORE IT HAD NOT GIVEN ANY SUB-CONTRACT TO THESE PARTIES. THEREFORE, IT WAS CLAIMED THAT THE NATURE 3 ITA NO.1651/K/2012 M/S. BIHANI COMMERCIAL AY 09-10 OF PAYMENTS FOR THE HIRING OF DRY LORRIES AND DUMPE RS WAS NOT IN THE NATURE OF PAYMENT FOR WORK CONTRACTS AND THEREFORE NOT COVERED BY PROVISI ON OF SECTION 194C. THE ABOVE SUBMISSIONS OF THE APPELLANT WERE EXAMINED AND IT W AS SEEN THAT THE APPELLANT HAD ONLY HIRED DRY LORRIES AND DUMPERS FOR THE PURPOSE OF EX ECUTING THE CONTRACT AWARDED TO IT AND HAD SEPARATELY INCURRED EXPENSES IN THE FORM OF SAL ARY TO THE DRIVERS AND THERE HELPERS AS WELL AS FOR THE FUEL AND OIL CHARGES FOR RUNNING OF THE DUMPERS. IT IS, THEREFORE, APPARENT THAT THERE WAS NO ELEMENT OF WORKS CONTRACTS AS ENV ISAGED U/S 194C BETWEEN THE APPELLANT AND THE PERSONS FROM WHOM THE DUMPERS AND LORRIES H AD BEEN TAKEN ON HIRE. THE HONBLE TRIBUNAL IN THE CASE OF DCIT VS. SATISH AGGARWAL & CO. SUPRA HAS HELD THAT EXPLANATION III TO SECTION 194C CANNOT APPLY TO A SITUATION NOT AMOUNTING TO A CONTRACT FOR CARRYING OUT ANY WORK AS CONTEMPLATED IN SECTION 194C, AND ENTER ING INTO SUB-CONTRACT FOR HIRING OF TRUCKS WAS NOT EQUIVALENT TO ENTERING INTO A CONTRA CT FOR CARRYING OUT ANY WORK. IT IS ALSO HELD IN THE ABOVE CASE THAT THERE WAS NO CONTRACT B ETWEEN THE ASSESSEE AND OWNERS OF THE TRUCK TO CARRY OUT ANY WORK AND THAT THE ASSESSEE H AD HIRED THE TRUCKS BELONGING TO THE TRUCK OWNERS FOR A FIX PERIOD ON PAYMENT OF HIRE CH ARGES AND THAT THE TRUCKS WERE PUT TO USE BY THE PERSONNEL OF THE ASSESSEE AND NOTHING HAD BE EN BROUGHT ON RECORD TO SHOW BUT MANPOWER WAS PROVIDED ALONG WITH THE TRUCKS TO THE ASSESSEE BY THE TRUCK OWNERS AND IT WAS FNALLY HELD THAT ENTERING INTO A CONTRACT FOR HIRING OF TRUCKS WAS NOT EQUIVALENT TO ENTERING INTO A CONTRACT FOR CARRYING OUT ANY WORK AND THEREFORE PROVISIONS OF SECTION 194C WERE NOT ATTRACTED. 3.1 IT IS ACCORDINGLY SEEN THAT THE FACTS IN THE CA SE OF THE APPELLANT ARE SIMILAR TO THE FACTS IN THE ABOVE DECISION. THE APPELLANT WAS EXECUTING ITS CIVIL CONTRACT BY TAKING ONLY LORRIES/DUMPERS ON HIRE AND EMPLOYED ITS OWN MANPOW ER AND FUEL TO RUN THESE TRUCKS FOR EXECUTING ITS CIVIL CONTRACT. THEREFORE, THERE WAS NO ELEMENT OF WORKS CONTRACT BETWEEN THE APPELLANT AND THE PARTIES WHO HAD PROVIDED SUCH TRU CKS AND IN THE ABSENCE OF A WORKS CONTRACT BETWEEN THE APPELLANT AND THE ALLEGED SUB- CONTRACTORS, THE PROVSIONS OF SECTION 194C WERE NOT ATTRACTED IN RESPECT OF PAYMENTS BY T HE APPELLANT TO THESE PERSONS. THEREFORE, T IS HELD THAT THE ABOVE PAYMENTS WERE NOT COVERED BY PROVISIONS OF SECTION 194C AND THERE WAS NO LIABILITY OF THE APPELLANT TO DEDUCT TAX U/S. 194C ON SUCH PAYMENTS. ACCORDINGLY, IT IS HELD THAT THE DISALLOWANCE U/S. 40(A)(IA) WAS NOT JUSTIFIED AND THE SAME IS DELETED. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. WE HAVE HEARD LD. SR. DR AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ONLY ISSUE BEFORE US IS WHETHER THERE IS A CONTRACT FOR HIRING OF CARRIERS OF GOODS FROM THE TRANSPORT COMPANY, WHO ARE HAVING GOODS CARRIAG E. ADMITTEDLY, THE ASSESSEE HAS DEBITED CARRIAGE INWARD EXPENSES PAID TO SIX TRANSPORT CONT RACTORS, WHO ARE TRANSPORT COMPANIES HAVING IN THE CARRIAGE BUSINESS FOR THE PURPOSE OF HIRING TOWARDS CARRIAGE OF GOODS. DEFINITELY, ONCE THE HIRING IS MADE, THE CONTRACT EXISTS, AS TO WHET HER VERBAL OR WRITTEN. ONCE THERE IS A VERBAL CONTRACT THE PROVISION OF SECTION 194C WILL APPLY A ND ONCE PROVISIONS OF SECTION 194C APPLY THE PROVISIONS OF 40(A)(IA) OF THE ACT WILL APPLY. FOR THIS PROPOSITION, WE ARE RELYING ON THE CASE LAW OF THE COORDINATE BENCH IN THE CASE OF ITO VS. MGB TRANSPORT IN ITA NO. 2280/KOL/2010 FOR AY 2007-08 DATED 15 TH MARCH, 2013, WHEREIN IT IS OBSERVED AS UNDER: WE FIND THAT THIS ISSUE IS COVERED AGAINST THE AS SESSEE BY THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SMT. J. RAMA VS.- 4 ITA NO.1651/K/2012 M/S. BIHANI COMMERCIAL AY 09-10 CIT (2010) 236 CTR (KAR.) 105, WHEREIN IT IS HELD T HAT LAW DOES NOT STIPULATE THE EXISTENCE OF A WRITTEN CONTRACT AS A CONDITION PRECEDENT FOR INVOKING THE PROVISIONS OF SECTION 194C OF THE ACT WITH RESPECT TO PAYMENT OF TDS. HONBLE KARNATAKA HIGH COURT CONCL UDED AS UNDER :- IN ORDER TO PROVIDE VEHICLES TO A CUSTOMER AS PER AGREEMENT, ASSESSEE USED TO HIRE VEHICLES FROM OTHERS AND HIRING OF VEH ICLES BY THE ASSESSEE IS IN THE NATURE OF TRANSPORT CONTRACT AND HENCE, T HE DISALLOWANCE UNDER SECTION 40(A)(IA) WAS JUSTIFIED WHEN NO TAX WAS DED UCTED AT SOURCE FROM PAYMENTS MADE TO THOSE PERSONS. FURTHER, FOLLOWING SMT. J. RAMAS CASE OF HONBLE K ARNATAKA HIGH COURT (SUPRA), WE HAVE TAKEN A DECISION DATED 17.02.2012 OF ITAT, KOLKATA BENCH IN ITA NO. 199/KOL/2010 IN THE CASE OF DCIT, CIRCLE-9 VS.- KAMAL MUKHERJEE & CO. (SHIPPING) (P.) LTD., WHEREIN IT IS HELD AS UNDER :- (FROM HEAD NOTES) .UNDOUBTEDLY, THESE DECISIONS DO INDICATE THAT TH ERE IS A WORKMAN EMPLOYER RELATIONSHIP BETWEEN THE DOCK WORKERS AND THE STEVEDORES LIKE ASSESSEE WHEN THEY EMPLOY THOSE WORKERS, BUT BE THA T AS IT MAY, THE FACT REMAINS THAT THE ASSESSEE HAS MADE PAYMENTS TO THE CDLB FOR SUPPLY OF LABOUR, EVEN WHEN THIS LABOUR MAY BE TREATED AS EMP LOYED BY THE ASSESSEE FOR ALL PRACTICAL PURPOSES, THE PROVISIONS OF SECTION 194C ARE CLEARLY ATTRACTED. IN SUCH A SITUATION, I.E. WHEN L ABOUR HIRED BY THE ASSESSEE THROUGH CDLB IS CONSIDERED TO BE IN ASSESS EES EMPLOYMENT, THE PAYMENTS MADE TO CDLB CANNOT BE TREATED AS PAYM ENTS FOR ANY WORK, BUT NEVERTHELESS THESE PAYMENTS COULD STILL BE COVE RED BY THE PROVISIONS OF SECTION 194C BECAUSE THESE ARE PAYMENTS MADE FOR SUPPLY OF LABOUR WHICH ARE SPECIFICALLY COVERED BY SECTION 194C(1). CDLB IS AN AGENT OF THE STEVEDORES LIKE THE ASSESSEE IN THE SENSE THAT THE LABOUR IS RECRUITED BY THE ASSESSEE THROUGH CDLB, BUT WHEN THIS FACT DO ES NOT AFFECT THE NATURE OF PAYMENT BY THE ASSESSEE TO THE CDLB WHICH IS ADMITTEDLY IN THE NATURE OF PAYMENT FOR SUPPLY OF LABOUR. THE REASONI NG ADOPTED BY THE COMMISSIONER (APPEALS), THOUGH SOMEWHAT IMPRESSIVE AT FIRST GLANCE, IS FALLACIOUS. THERE IS NO CAUSE AND EFFECT RELATIONSH IP BETWEEN WORKERS ASSIGNED BY THE CDLB HAVING EMPLOYER WORKMAN RELATI ONSHIP WITH THE ASSESSEE, AND THE PAYMENTS BEING MADE BY THE ASSESS EE TO CDLB BEING NOT IN THE NATURE OF PAYMENT FOR SUPPLY OF LABOUR . WE FIND THAT THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF REVENUE, RESPECTFULLY FOLLOWING THE ABOVE CASE LAWS, WE ALLO W THE APPEAL OF REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. 6. ORDER PRONOUNCED IN OPEN COURT ON 01.08.2014. SD/- SD/- , . . . . , ' #!' ' #!' ' #!' ' #!' , (P. K. BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 ST AUGUST, 2014 -. #/0 #1 JD.(SR.P.S.) 5 ITA NO.1651/K/2012 M/S. BIHANI COMMERCIAL AY 09-10 2 +##3 43&5- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT ITO, WARD-43(1), KOLKATA 2 +,)* / RESPONDENT M/S. BIHANI COMMERCIAL, 64, RATAN SARK AR GARDEN ST., KOLKATA700 007. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 3:#; +# / DR, KOLKATA BENCHES, KOLKATA ,3 +#/ TRUE COPY,