ITO 22(2)(1), NAVI MUMBAI V. JAGTAP & SONS, MUMBAI

ITA 1793/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78711 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Department
• Bench Allotted: J
• Next Hearing Date: 09-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 15-03-2012
• Court: TRIBUNAL
• Department Lawyers: D K SINHA
• Section: 194C

Judgement Text

J IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI SANJAY GARG, JM ./I.T.A. NO.1793/M/2012 ( / ASSESSMENT YEAR: 2008 - 2009 ) ITO - 22(2)(1), R.NO.419, 4 TH FLOOR, TOWER NO.6, VASHI RLY STN COMPLEX, VASHI, NAVI MUMBAI 400 705. / VS. M/S. JAGTAP & SONS, AKSHAY DHAM AMRUT VIHAR, R.NO.31, 3 RD FLOOR, SANGHANI ESTATE, GARDEN LANE, GHATKOPAR (W) - 400 086. ./ PAN : AAACN 4412 E ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI D.K. SINHA, DR / RESPONDENT BY : SHRI NISHIT GANDHI / DATE OF HEARING : 09.04.2014 / DATE OF PRONOUNCEMENT : 09.04.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 15.3.2012 IS AGAINST THE ORDER OF THE CIT (A) - 33, MUMBAI DATED 23.12.2011 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) OF THE ACT OF RS. 59,93,759/ - RELYING ON THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. GREWAL BROTHERS IN ITA NO.662 OF 2010 (P&H) (HC) AND CIT VS. SIRMOUR TRU CK OPERATORS UNION (2010) 236 CTR (H) 550 DISREGARDING THE FACT THAT THE FACTS AND CIRCUMSTANCES ARE ENTIRELY DIFFERENT IN THE PRESENT CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT *+(A) ERRED IN DELETING THE DISALLOWANC E MADE BY THE AO U/S 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS IN DEFAULT IN NOT DEDUCTING THE TAX ON PAYMENT MADE TO PARTNERS AND THEREFORE LIABLE FOR DISALLOWANCE BY VIRTUE OF SECTION 40(A)(IA) OF THE ACT. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE IS A FIRM RECEIVED CONTRACT AMOUNTS FROM M/S. RELIANCE INDUSTRIES LTD AFTER EFFECTING THE 2 TDS AS PER THE PROVISIONS OF THE ACT. THE SAID AMOUNTS WERE TRANSFERRED TO THE PARTNERS OF THE FIRM, WHO ACT UALLY EXECUTED THE CONTRACT. THE PARTNERS FORMED SYNDICATE FOR THE PURPOSE OF GETTING THE CONTRACTS FROM THE RELIANCE INDUSTRIES LTD. DURING THE ASSESSMENT PROCEEDINGS, AO NOTICED THAT THE FIRM MADE THE PAYMENTS TO THE PARTNERS WITHOUT MAKING TDS. THERE FORE, AO INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND MADE DISALLOWANCE AND THE GROSS ADDITION ON THIS GROUND IS RS. 59,93,759/ - . MATTER TRAVELLED TO THE CIT (A). 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDER ING THE SUBMISSIONS MADE BY THE ASSESSEE, CIT (A) DELETED THE ADDITION FOLLOWING THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SIRMOUR TRUCK OPERATORS UNION (2010) 236 CTR (HP) 550. PARA 4.2 TO 4.4 OF THE IMPUGNED ORDE R AR E RELEVANT IN THIS REGARD, WHICH READ AS UNDER: 4.2. THE APPELLANT HAS ALSO CITED DECISION IN THE CASE OF CIT VS. GREWAL BROTHERS IN ITA NO.662 OF 2010 GIVEN BY THE HONBLE PUNJAB & HARYANA HIGH COURT AND CIT VS. SIRMOUR TRUCK OPERATORS UNION [2010] 236 C TR (HP) 550. I HAVE GONE THROUGH THE SAME. THE UNDISPUTED FACT IN THE CASE IS THAT THE APPELLANT FIRM WAS GIVEN THE CONTRACT BY M/S. RELIANCE INDUSTRIES LTD., WHICH WAS ACTUALLY CARRIED OUT BY PARTNERS OF THE APPELLANT FIRM. THE AO HAS TREATED THAT IT WA S A SUB - CONTRACT BETWEEN THE FIRM AND ITS PARTNERS AND HENCE, THERE WAS A LIABILITY TO DEDUCT TDS U/S 194C. ON THE OTHER HAND, THE APPELLANT HAS SUBMITTED THAT THE FIRM WAS NOTHING BUT AN ENTITY CREATED BY THE PARTNERS TO DO THE JOB FOR M/S. RELIANCE INDU STRIES LTD AS THEY WERE NOT READY TO ENTERTAIN INDIVIDUAL TANKER OPERATORS. THIS FACT IS ALSO NOT DISPUTED THAT THE TANKERS USED BY THE FIRM WAS IN THE PERSONAL NAME OF THE PARTNERS AND THERE NO CONTRACT ENTERED BETWEEN THE FIRM AND ITS PARTNERS FOR DOING THIS JOB. IN THE GIVEN SET OF FACTS, I FIND THAT CASE LAW CITED BY THE APPELLANT OF GREWAL BROTHERS SQUARELY COVERS THE ISSUE. 4.3. THE APPELLANT HAS ALSO CITED CASE LAW OF CIT VS. SIRMOUR TRUCK OPERATORS UNION [2010] 236 CTR (HP) 550 WHEREIN IT WAS DECI DED THAT THERE BEEN NO SUB - CONTRACT BETWEEN THE SOCIETY AND ITS MEMBERS SECTION 194C(12) IS NOT ATTRACTED. 4.4. RESPECTFULLY, FOLLOWING THE DECISION GIVEN IN THESE TWO CASES ON THE IDENTICAL SET OF FACS THE ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT. HENCE GROUND NO.2 IS ALLOWED. 4.1. AGGRIEVED, REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE EXPLAINED THE ABOVE MENTIONED FACTS OF THE CASE AND FILED C O P I E S THE CITED JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SIRMOUR TRUCK OPERATORS UNION (SUPRA) 3 AND READ OUT THE RELEVANT CONCLUSIONS. HE F URTHER MENTIONED THAT THE ISSUE STAND COVERED THEREFORE, THE APPEAL OF THE REVENUE IS REQU IRED TO BE DISMISSED. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO AND FAIRLY MENTIONED THAT THERE ARE NO CERTAIN DECISIONS SUPPORTING THE GROUNDS RAISED BY THE REVENUE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE A UTHORITIES AS WELL AS THE APPLICABILITY OF THE SAID JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SIRMOUR TRUCK OPERATORS UNION (SUPRA). THE CONCLUSION OF THE SAID DECISION IS REPRODUCED HERE UNDER: ASSESSEE - SOCIETY HAVING BEEN CREAT ED BY TRANSPORTERS WITH A VIEW TO ENTER INTO CONTRACTS WITH COMPANIES FOR TRANSPORTATION OF GOODS AND TO ENSURE ALLOCATION FO WORK AMONG ALL MEMBERS ON AN EQUITABLE BASIS, THERE IS NO SUB - CONTRACT BETWEEN THE SOCIETY AND THE MEMBERS AND, THEREFORE, SECTION 194C(2) IS NOT ATTACTED TO THE FACTS OF THE CASE AND ASSESSEE SOCIETY IS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO THE TRUCK OWNERS WHO ARE ITS MEMBERS. 8. WE HAVE ALSO PERUSED THE CONCLUSION OF ANOTHER JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. GREWAL BROTHERS [2011] 240 CTR (P&H) 325 WHICH READ S AS UNDER: PARTNERS OF THE ASSESSEE FIRM HAVING EXECUTED THE TRANSPORTATION CONTRACTS UNDERTAKEN BY THE FIRM BY USING THEIR OWN TRUCKS AND THE ASSESSEE HAVING A CTED AS AN AGENT IN ROUTING THE PAYMENTS TO THE PARTNERS, IT CANNOT BE HELD THAT THERE WAS A SEPARATE CONTRACT BETWEEN THE FIRM AND THE PARTNERS AND THEREFORE, SUCH PAYMENTS COULD NOT BE DISALLOWED UNDER SECTION 40(A)(IA) ON THE GROUND THAT THE TAX WAS NOT DEDUCTED AT SOURCE UNDER SECTION 194C. 9. FURTHER, LD COUNSEL BROUGHT OUR ATTENTION TO THE DECISION OF THE ITAT, HYDERABAD BENCH IN THE CASE OF M/S. HINDUSTAN RATNA JV VS. ITO VIDE ITA NO.372/HYD/2013 DATED 18.12.2013 FOR THE PROPOSITION THAT THE ASSESSE E IS NOT ALLOWABLE TO DEDUCT TD S TO HIS TWO PARTNERS SO AS TO ATTRACT THE PROVISIONS OF SECT ION 40(A)(IA) OF THE ACT. CONSIDERING THE ABOVE LEGAL PROPOSITIONS AND THE FACTUAL MATRIX OF THE PRESENT CASE THAT THE PAYMENTS MADE BY THE FIRM TO THE 4 PARTNERS NAMELY (I) B.B. JAGTAP (RS. 8,80,616/ - ); (II) P.E. JAGTAP (RS. 21,76,317/ - ); (III) D.P. JAGT AP (RS. 20,04,565/ - AND (IV) S.B. JAGTAP (RS. 9,32,216/ - ) TOTALING TO RS. 59,93,759/ - DO NOT ATT R ACT THE PROVISIONS OF SECTION 40(A)(IA) READ WITH SECTION 194C OF THE ACT. THEREFORE, THE GROUNDS RAISED BY THE REVENUE DO NOT SURVIVE. ACCORDINGLY, GROUND S RAISED BY THE REVENUE ARE DISMISSED . 4 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH APRIL, 201 4 . S D / - S D / - (SANJAY GARG) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 9.4.2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI