M/s Chandana Kedarish (HUF), Rajahmundry V. The DCIT Circle-1,Rajahmundry, Rajahmundry

ITA 21/VIZ/2012

• Counselvise Citation: 2125314 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Section: 143(3); 194C

Judgement Text

ITA NO.21/VIZAG/2012 CHANDANA KEDARISH (HUF) RAJAHMUNDRY IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 21 /VIZAG/ 20 1 2 ASSESSMENT YEAR : 2007 - 08 CHANDANA KEDARISH (H UF) RAJAHMUNDRY VS. DCIT CIRCLE - 1 RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AABHC 8970N ASSESSEE BY : SHRI G.V.N. HARI, CA REVENUE BY : SHRI D. MANOJ KUMAR, ADDL. CIT DATE OF HEARING : 11.12.2013 DATE OF PRONOUNCEMENT : 13 .12.2013 ORDER PER B. RAMAKOTAIAH:- THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE CIT DATED 8.9.2011 ON THE DISALLOWANCE U/S 40A(IA) OF THE INC OME-TAX ACT BY THE DCIT, CIRCLE-1, RAJAHMUNDRY. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS IN TH E BUSINESS OF TRADING IN CLOTH. THE ASSESSING OFFICER IN THE COURSE OF ASSE SSMENT U/S 143(3) OF THE ACT NOTICED THAT ASSESSEE HAS PAID LORRY FREIGHT CHARGE S AMOUNTING TO ` .2,70,689/- AND DISALLOWED THE SAME U/S 40A(IA) OF THE ACT. IT WAS SUBMITTED THAT AS THERE IS NO CONTRACT AND THE DELI VERY IS NOT AT THE HANDS OF ASSESSEE. FURTHER, ASSESSEE HAS NOT ENGAGED ANY PA RTICULAR AGENT FOR DELIVERY OF GOODS AND ASSESSEE WAS ONLY PAYING AMOU NTS ON DELIVERY AS MENTIONED BY THE SUPPLIER AND THESE AMOUNTS ARE NOT COVERED BY THE PROVISIONS OF SECTION 194C OF THE ACT. THE ASSESSI NG OFFICER DID NOT AGREE AND LD. CIT(A) CONFIRMED WITH THE OPINION OF THE ASSESS ING OFFICER. ITA NO.21/VIZAG/2012 CHANDANA KEDARISH (HUF) RAJAHMUNDRY 2 3. IT WAS FAIRLY ADMITTED THAT THIS ISSUE IS COVERE D BY THE ORDERS OF THE ITAT, VISAKHAPATNAM IN ASSESSEES GROUP CASE IN ITA NOS.68 TO 70/VIZAG/2009 DATED 13.04.2012, WHEREIN THE ITAT GA VE RELIEF IN THE QUANTUM DISALLOWANCE MADE U/S 40A(IA) OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE ISSUE OF LORRY FREIGHT WHETHER COVERED BY THE PROVISIONS OF SECTION 194C WAS EXAMINED IN DETAIL IN ITA NOS.85 & 86/VIZA G/2009 DATED 03.05.2013, WHEREIN IT WAS HELD AS UNDER: 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND CAREFULLY PERUSED THE RECORD. WE AGREE WITH THE VIEW EXPRESSED BY LD CIT( A) THAT THE TRANSPORT BILLS/VOUCHERS BY THEMSELVES CONSTITUTE A CONTRACT. HOWEVER, THE QUESTION THAT ARISES HERE IS WHETHER THERE WAS A CONTRACT BETWEEN THE ASSESSEES HEREIN AND THE TRANSPORT CONTRACTORS IN THE FACTS AND CIRCUMSTANCES OF THE P RESENT CASE. ACCORDING TO THE ASSESSEES, THE SUPPLIERS THEMSELVE S DISPATCH THE GOODS TO THEM BY ENGAGING THE LORRIES AT THEIR END. THUS, AC CORDING TO THE ASSESSEES, THE CONTRACT IS BETWEEN THE SUPPLIERS AND THE TRANS PORT CONTRACTORS AND NOT BETWEEN HIM AND THE TRANSPORT CONTRACTORS. 7. IN OUR VIEW, THE 'PARTIES TO A CONTRACT' HAVE TO BE DETERMINED ON THE BASIS OF CONDUCT OF THE PARTIES. MERE PAYMENT OF FR EIGHT CHARGES, BY ITSELF, CANNOT CONSTITUTE CONTRACTUAL PAYMENTS SO AS TO ATT RACT THE PROVISIONS OF SEC. 194C OF THE ACT. SIMILARLY, THE FACT THAT THE SUPPL IERS HAVE ONLY ENGAGED LORRIES DOCS NOT BY ITSELF MEAN THAT THE CONTRACT E XISTS BETWEEN THE SUPPLIERS AND LORRY OWNERS ONLY. WE SHALL ELABORATE FURTHER TH IS POINT. IF A SUPPLIER ENGAGES LORRIES TO TRANSPORT GOODS ON HIS OWN VOLIT ION, THEN IT MAY BE SAID THAT THE CONTRACT EXISTS BETWEEN THE SUPPLIER AND T HE TRANSPORT CONTRACTOR. ON THE OTHER HAND, IF HE ENGAGES THE LORRIES ON THE INSTRUCTIONS OF THE BUYERS, THEN HE IS ACTING AS THE AGENT OF THE BUYERS ONLY AND IN THAT CASE, THE CONTRACT ACTUALLY EXISTS BETWEEN THE BUYERS AND T HE TRANSPORT CONTRACTORS. IF THE BUYERS THEMSELVES ENGAGES THE L ORRIES FOR TRANSPORTATION OF GOODS, THEN THERE MAY NOT BE ANY CONFUSION AS TO THE FACT THAT THE CONTRACT EXISTS BETWEEN THE BUYERS AND THE TRANSPORT CONTRACTORS. 8. IN THE INSTANT CASE, WE NOTICE THAT THE ASSESSEE S HEREIN HAVE REITERATED THE FACT THAT THEY HAVE NOT INSTRUCTED THE SUPPLIERS TO DISPATCH THE GOODS IN A PARTICULAR LORRY OR AGENCY. ACCORDING TO THE ASSESS EES, THE SUPPLIERS THEMSELVES HAVE ENGAGED THE LORRIES FOR SENDING GOO DS TO THEM. THE LD CIT(A) HAS HELD AS UNDER ON THIS MATTER: - 'ADMITTEDLY, THE TRANSPORT SERVICES HAD BEEN PROVID ED BY VARIOUS TRANSPORTERS, X , AS EVIDENT FROM COPIES OF TRANSPORT CHARGES RECEIPTS/BILLS AND THE APPELLANT HAS : MADE THE PAY MENTS WITH REFERENCE TO SUCH RECEIPTS/BILLS. IT IS IMMATERIAL THAT / THE APPELLANT NEVER DIRECTED THE SUPPLIERS TO DISPATCH GOODS THROUGH A PARTICULAR TRANSPORTER OR THAT THE SUPPLIER OF GOOD S ENTRUSTED THE ITA NO.21/VIZAG/2012 CHANDANA KEDARISH (HUF) RAJAHMUNDRY 3 JOB OF TRANSPORTATION OF THE APPELLANT'S GOODS TO V ARIOUS TRANSPORTERS DEPENDING UPON THE WILLINGNESS AND READINESS OF A PARTICULAR TRANSPORTER AT THE GIVEN POINT OF TIME T O TRANSPORT THE GOODS OF THE APPELLANT AT A COST AGREEABLE TO THE A PPELLANT, SINCE, EVENTUALLY, A PARTICULAR TRANSPORTER DELIVERS GOOD S AT THE APPELLANT'S PREMISES AND THE APPELLANT PAYS THE FREIGHT CHARGES TO THE REPRESENTATIVE OF THE TRANSPORTER (WHETHER THE DRIVER OR ANYBODY ELSE) IN CONNECTION WITH SUCH DELIVERY OF GOODS...... HENCE, THERE DOES EXIST UNAMBIGUOUS CONTRACTUAL RELATIONSHIP BETWEEN THE VARIOUS TRANSP ORTERS, (WHO FREIGHTED THE GOODS OF THE APPELLANT FOR WHICH THE APPELLANT HAS PAID THE AGREED TRANSPORT CHARGES), AND THE APPELLA NT.' WE NOTICE THAT THE VIEW EXPRESSED BY LD. CIT(A) IS NOT IN ACCORDANCE WITH THE LEGAL POSITION DISCUSSED BY US IN THE PRECEDING PARAGRAPH ON THE IMPUGNED MATTER. WE FURTHER NOTICE THAT THE TAX AUTHORITIES HAVE NOT RE BUTTED THE CLAIM OF THE ASSESSEES HEREIN THAT THEY HAVE NOT INSTRUCTED THE SUPPLIERS TO DISPATCH THE GOODS BY A PARTICULAR AGENCY. IT WAS ALSO NOT BROUGHT ON RECOR D THAT THE ASSESSEES HEREIN HAVE ONLY REQUESTED THE SUPPLIERS TO DISPATCH THE GOODS BY LORRIES. UNDER THESE FACTS AND CIRCUMSTANCES, IN OUR VIEW, IT CANNOT BE SAID THAT MERE PAYMENTS OF LORRY FREIGHTS, BY ITSELF, CONSTITUTE A CONTRACT BETWEEN THE ASSESS EES HEREIN AND THE TRANSPORT AGENCIES. ACCORDINGLY, IN OUR VIEW, THE PROVISIONS OF SEC. 4 0(A)(IA) CANNOT BE INVOKED IN THE FACTS AND CIRCUMSTANCES OF THESE CASES. ACCORDINGLY, WE SET ASIDE THE ORDERS PASSED BY LTD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION IN BOTH THE CASES. 4. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DEDUCT TAX ON THE MERE PAYMENT OF LORRY FREIGHTS AN D THEREFORE THERE IS NO NEED FOR DISALLOWANCE UNDER 40(A)(IA). ACCORDING LY, AO IS DIRECTED TO DELETE THE SAME AND THE APPEAL OF ASSESSEE IS ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13 TH DEC13 SD/ - SD/ - ( SAKTIJIT DEY ) ( B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 13 TH DECEMBER, 2013 ITA NO.21/VIZAG/2012 CHANDANA KEDARISH (HUF) RAJAHMUNDRY 4 COPY TO 1 CHANDANA KEDARISH (HUF) PROP: CHANDANA READY MADES VEERABHADRAPURAM, RAJAHMUNDRY 2 DCI T CIRCLE - 1, RAJAHMUNDRY 3 THE CI T, RAJAHMUNDRY 4 THE CIT (A) , RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM