ACIT, CHENNAI V. Shri M.Sivalingam, CHENNAI

ITA 1944/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5083 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS
• Assessee Lawyers: K MEENAKSHISUNDHARAM
• Section: 194C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 1944/MDS/2010 ASSESSMENT YEAR : 2005-06 THE ACIT CIRCLE IX CHENNAI VS SHRI M.SIVALINGAM PROP.SIVA SHANMUGAM TRANSPORT NEW NO.40, RAJAJI SALAI CHENNAI [PAN AAIPS8520R ] (APPELLANT) (RESPONDENT) C.O. NO. 171/MDS/2010 ASSESSMENT YEAR : 2005-06 SHRI M.SIVALINGAM PROP.SIVA SHANMUGAM TRANSPORT CHENNAI VS THE ACIT CIRCLE IX CHENNAI (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI B. SRINIVAS ASSESSEE BY : SHRI K.MEENAKSHISUNDHARAM O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJ ECTION FILED BY THE ASSESSEE, FOR ASSESSMENT YEAR 2005-06, ARE DIRE CTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 5.8.2010. ITA 1944/2010 & CO 171/2010 :- 2 -: 2. THE FIRST ISSUE OF REVENUES APPEAL IS REGARDING DELETION OF ADDITION OF ` 16,89,379/- MADE ON ACCOUNT OF NON-DEDUCTION OF TA X ON THE PAYMENTS TOWARDS TRANSPORT CHARGES U/S 40(A)(IA ). THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE IS DOING T HE BUSINESS OF TRANSPORT AND HANDLING CONTRACT. FOR ASSESSMENT YE AR 2005-06, THE ASSESSEE ADMITTED TOTAL INCOME OF ` 40,93,747/- IN THE RETURN FILED ON 26.12.2005. DURING THE COURSE OF ASSESSMENT PROCEE DINGS UNDERTAKEN IN PURSUANCE OF NOTICE U/S 148 OF THE ACT ISSUED O N 17.5.2008, THE ASSESSING OFFICER HAS ADDED THE FOLLOWING AMOUNTS: TRANSPORT HIRE CHARGES ` 16,89,379 VEHICLE MAINTENANCE ` 3,00,000 INTEREST ` 9,65,816 3. AGGRIEVED ON THESE ADDITIONS, THE ASSESSEE FILED AP PEAL BEFORE THE LD. CIT(A), WHO HAS GIVEN PART RELIEF TO THE AS SESSEE. THE ASSESSING OFFICER HAS ADDED A SUM OF ` 16,89,379/- TOWARDS TRANSPORT HIRE CHARGES U/S 40(A)(IA) OF THE ACT FOR NON-DEDUC TION OF TAX. ALL THE TRANSACTIONS WERE FOUND TO BE EXCEEDING ` 20,000/- AND ACCORDINGLY, THE ASSESSING OFFICER HAS DISALLOWED THE ENTIRE SUM OF ` 69,89,379/-. THE FOLLOWING AMOUNTS WERE PAID BY THE ASSESSEE DUR ING THE YEAR: ITA 1944/2010 & CO 171/2010 :- 3 -: 19.5.04 2,00,000 KIRABANANDA 20.5.04 2,00,000 PTHMAVATHI 10.7.04 58,916 12.7.04 86,707 10.7.04 1,00,000 HYDRO 17.7.04 1,00,000 23.8.04 1,43,124 20.9.04 60,000 RAGUNATHAN 4.11.04 1,00,000 AJITH TRANSPORT 18.11.04 47,458 ARUNA TRANSPORT 25.11.04 3,00,000 ARUNA TRANSPORT 1.12.04 50,000 SPR TRANSPORT 10.12.04 51,854 24.12.04 51531 ARUNA TRANSPORT 27.12.04 89,779 13.1.05 50,000 ARUNA TRANSPORT TOTAL 16,89,379 4. BEFORE THE LD. CIT(A), WRITTEN SUBMISSIONS WERE FI LED STATING THEREIN THAT THE ASSESSING OFFICER HAS NOT SPECIFIE D AS TO UNDER WHICH SECTION THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AND HAS NOT DEDUCTED THE SAME. THE ASSESSEE IS A TRANSPORT CONTRACTOR A TTACHED WITH CHENNAI PORT TRUST FOR CLEARING OPERATIONS. THE AS SESSEE POSSESSED ONLY 15 VEHICLES OF HIS OWN. THERE IS NO DISPUTE R EGARDING THE FACTS THAT THE PAYMENTS IN QUESTION WERE MADE ONLY FOR HI RING VEHICLES OF OTHERS. IT IS TRUE THAT ADDITION U/S 40(A)(IA) CAN BE MADE ONLY IN RESPECT OF PAYMENTS MADE FOR CARRYING OUT ANY WOR K CONTRACT. ACCORDING TO THE ASSESSEE, HIRING OF VEHICLES OF OT HERS FOR SUPPLEMENTING ONES OWN FLEET OF VEHICLES DOES NOT FALL UNDER SECTION 194(C) OF THE ACT. TAX DEDUCTION OBLIGATION FOR H IRING OF PLANT AND MACHINERY, FURNITURE, VEHICLES ETC. WAS INTRODUCED ONLY WITH EFFECT FROM ITA 1944/2010 & CO 171/2010 :- 4 -: 13.7.2006 BY THE FINANCE ACT, 2005. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2005-06. THE LD. CIT(A) HAS DELET ED THE DISALLOWANCE BY RELYING ON THE DECISION RENDERED IN THE CASE OF CIT VS POOMPUHAR SHIPPING CORPORATION, 282 ITR 3(MAD), IN WHICH IT H AS BEEN HELD THAT THE ASSESSEE WAS NOT LIABLE TO TAX FOR THE PAYMENT MADE TOWARDS TRANSPORT HIRE CHARGES. THE LD.DR HAS DISPUTED THE APPLICATION OF THIS DECISION BECAUSE ACCORDING TO HIM, THIS DECISION WA S RENDERED IN DIFFERENT CONTEXT WHICH WAS REGARDING APPRECIATING THE RETROSPECTIVITY OF THE AMENDED PROVISIONS. IN CONTRAST, THE LD.DR HAS RELIED ON A DECISION OF THE HON'BLE RAJASTHAN HIGH COURT RENDER ED IN THE CASE OF SHREE CHOUDHARY TRANSPORT COMPANY VS ITO, 225 CTR(R AJ) 125 AND ALSO ON THE PROVISIONS OF EXPLANATION III(C) APPEND ED TO SECTION 194C. AS AGAINST WHICH THE CASE OF THE ASSESSEE IS THAT I N NO CASE SECTION 194C WOULD APPLY TO THE FACTS OF THIS CASE. 5. AFTER GIVING OUR THOUGHTFUL CONSIDERATION TO THE FA CTS AND CIRCUMSTANCES OF THE CASE VIS--VIS LEGAL POSITION ON THE ISSUE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS C ORRECTLY DELETED THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE AND NO INT ERFERENCE IS CALLED FOR. WHILE SITTING IN CHENNAI, WE ARE BOUND TO FOL LOW THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT. IN THIS CASE, I T HAS BEEN HELD AS THUS: ITA 1944/2010 & CO 171/2010 :- 5 -: HELD, DISMISSING THE APPEAL, THAT THE PAYMENT OF H IRE CHARGES FOR TAKING TEMPORARY POSSESSION OF THE SHIP S BY THE ASSESSEE-COMPANY WOULD NOT FALL WITHIN THE PROV ISION OF SECTION 194C AND HENCE NO TAX WAS REQUIRED TO BE DEDUCTED. THE HIRING OF SHIPS FOR THE PURPOSE OF USING THEM I N THE ASSESSEES BUSINESS DID NOT AMOUNT TO A CONTRACT FO R CARRYING OUT ANY WORK AS CONTEMPLATED IN SECTION 19 4C. 6. ACCORDINGLY, BY FOLLOWING THE ABOVE HON'BLE JURISD ICTIONAL HIGH COURTS DECISION, GROUND NO.2 RAISED BY THE REVENU E IN THIS RESPECT STANDS DISMISSED. 7. GROUND NO.3 OF THIS APPEAL RELATES TO DELETION OF A DDITION OF ` 9,65,816/- MADE ON ACCOUNT OF DISALLOWANCE OF INTER EST PAYMENTS. THE ASSESSING OFFICER HAS DISALLOWED INTEREST TO TH E TUNE OF ` 9,65,816/- OUT OF THE TOTAL INTEREST PAID OF ` 14,48,726/- BECAUSE THE REQUISITE DETAILS WERE NOT FILED BY THE ASSESSEE. THEREFORE, HE HAS DISALLOWED 2/3 RD OF THE TOTAL CLAIM. BEFORE THE LD. CIT(A), THE LD .AR OF THE ASSESSEE CLARIFIED THAT THE INTEREST OF ` 14,73,196/- WHICH WAS DEBITED IN THE INCOME AND EXPENDITURE ACCOUNT ACTUA LLY RELATED TO THE YEAR ENDING 31.3.2005. AS AGAINST WHICH THE ASSESS ING OFFICER HAS TAKEN THE INTEREST OF ` 14,48,726/- AND OUT OF THAT 2/3 RD HAS BEEN DISALLOWED. THE CASE OF THE REVENUE IS THAT VARIOU S DETAILS ON THE BASIS OF WHICH THIS ADDITION HAS BEEN DELETED WERE NEVER PRODUCED BEFORE THE ASSESSING OFFICER AND WERE PRODUCED BEFO RE THE LD. CIT(A) ITA 1944/2010 & CO 171/2010 :- 6 -: FOR THE FIRST TIME. THE REVENUE HAS TAKEN A PLEA UNDER RULE 46A OF THE I.T. RULES, THAT NO OPPORTUNITY WAS GIVEN TO TH E ASSESSING OFFICER TO VERIFY THE DETAILS OF NAMES OF PERSONS AND RELAT ABLE AMOUNTS OF INTEREST QUA THEREIN, WHICH WERE FURNISHED BEFORE THE LD. CIT(A). WE HAVE ALSO FOUND THIS FACT TO BE CORRECT. THIS ISSU E IS HIT BY RULE 46A AS NO OPPORTUNITY WAS GIVEN TO THE ASSESSING OFFICER. THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER TO VERIFY THE RECORDS/EVIDENCE SUBMITTED BEFORE THE LD. CIT(A) FO R THE FIRST TIME. GROUND NO.3, THEREFORE, STANDS ALLOWED FOR STATISTI CAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE CROSS OBJECTION FILED BY THE ASSESSEE, ONLY EFFECTIVE GROUND IS NO.3. IT RELATES TO DISALLOWANCE OF ` 2 LAKHS MADE ON ACCOUNT OF SELF-MADE VOUCHERS, WHICH ACCORDING TO THE ASSES SEE, CANNOT BE AVOIDED IN THIS LINE OF BUSINESS. THE OTHER GROUND S ARE IN SUPPORTIVE OF THE LD. CIT(A)S ORDER. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE HAS ADDED ` 2 LAKHS TOWARDS VEHICLE MAINTENANCE. IN THIS REGARD, THE ASSESSEE HAS BEEN MAINTAINING SELF-MAD E VOUCHERS. OUT OF TOTAL SUCH EXPENSES CLAIMED AT ` 1,23,83,310/-, THE ASSESSING OFFICER HAS DISALLOWED A LUMPSUM AMOUNT OF ` 2 LAKHS. IT IS TRUE THAT THE ASSESSEE HAS RELIED ENTIRELY ON SELF-MADE VOUCHERS WITH RETARD TO ITA 1944/2010 & CO 171/2010 :- 7 -: MAINTENANCE OF VEHICLES. IN PRINCIPLE, THE ASSESSIN G OFFICER HAS ACCEPTED THIS MODE OF PAYMENT YET IN ORDER TO ANSWE R POSSIBLE PILFERAGE, HE HAS MADE ADHOC DISALLOWANCE OF ` 2 LAKHS WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A). KEEPING IN VIEW THE QUANTUM OF AMOUNTS PAID WHICH INCLUDES DIESEL CHARGES, WE ARE OF THE CONSIDERED OPINION THAT IF THIS ADDITION IS FURTHER RESTRICT ED TO ` 1 LAKH FROM ` 2 LAKHS, THE ENDS OF JUSTICE WOULD MEET. HENCE, WE O RDER TO DELETE ` 1 LAKH AND SUSTAIN ` 1 LAKH IN THIS ACCOUNT. CONSEQUENTLY, THIS GROUN D IS PARTLY ALLOWED. 10. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. 11. TO SUMMARIZE THE RESULT, THE APPEAL OF THE REVEN UE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE CROSS OBJECTION OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.5.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 19 TH MAY, 2011 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR/