SOUTH SEAS DISTILLERIES & BREWERIES P.LTD, MUMBAI V. CIT 5, MUMBAI

ITA 2170/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84468 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Assessee Lawyers: P R TOPRANI
• Section: 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI , BEFORE : SHRI I.P.BANSAL, JM & SHRI R.C.SHARMA , A M ITA NO. 2170 / MUM/20 1 3 ( ASSESSMENT YEAR : 200 8 - 200 9 ) SOUTH SEAS DIST & BREW PVT. LTD., A - 103, 1 ST FLOOR, AAVISHKAR, 36 - KHATAVWADI, NAUSHIR BARUCHA MARG, OPP. GRANT ROAD RLY. STN. GRANT ROAD (W), MUMBAI - 400 007 VS. CIT - 5, MUMBAI PAN/GIR NO. : A A B CS 4534 M ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI P.R.TOPRANI /REVENUE BY : MS. MANJUNATHA SWAMY DATE OF HEARING : 22 ND OCT . 201 4 DATE OF PRONOUNCEMENT : 11/12/ 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , DATED 21 - 2 - 2013 FOR ASSESSMENT YEAR 200 8 - 0 9 , IN THE MATTER OF OR DER PASSED U/S. 263 OF THE I.T. ACT . 2. R IVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. WE FOUND THAT DURING THE COURSE OF PROCEEDINGS U/S.263 , THE CIT OBSERVED THAT THE ASSESSEE DID NOT DEDUCT TDS ON PAYMENT OF TRANSPORTATION CHARGES. THE ASSESSEE HA S DEBITED RS. 67,29,345/ - TO THE PROFIT AND LOSS ACCOUNT IN RESPECT OF TRANSPORTATION CHARGES PAID OUT OF WHICH THE AO HAD DISALLOWED 25% ON SUCH AMOUNT I.E. RS. 16,82,336/ - . AS PER CIT, THE AO SHOULD HAVE DISALLOWED THE ENTIRE AMOUNT OF RS. 6729,345/ - . THUS, THE ORDER PASSED BY ITA NO 2170 /1 3 2 THE AO WAS CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 3. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ASSESSMENT WAS FRAMED UNDER SCRUT INY I.E. U/S.143(3) OF THE ACT. I N ITS PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS CLAIMED. EXPENSES. OF RS.67,29,345/ - ON ACCOUNT OF TRANSPORTATION. VIDE ORDER SHEET ENTRY DATED 15.12.2010, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY NO TDS WAS DEDUCTED ON TRANSP ORTATION PAYMENTS AND WHY DISALLOWANCE SHOULD NOT BE MADE UNDER SECTION40(A)(IA) OF THE I. T ACT. VIDE REPLY DATED 22.12.2010, THE ASSESSEE SUBMITTED AS FOLLOWS .: - . 'TRANSPORTATION : TRANSPORT PAYMENTS HAVE BEEN MADE TO TRANSPORTERS HEN' THEY UNLOAD GOO DS DISPATCHED BY THE SELLERS AT THE FACTORY. THE FACTORY IS SITUATED AT 30.KMS AWAY FROM THE NEAREST BANK. THE GOODS PURCHASED ARE JOWAR, MALT, COAL, CHEMICALS ETC. WHICH ARE USED - IN - THE MANUFACTURING IF SPIRIT/PRODUCT COMING OUT OF THE DISTILLERY . TR ANSPORTATION AS PER PROFIT.& LOSS ALC .... . RS:94,85;992/ - LESS: A) BILLING OF S.S.ROADWAYS (TRANSPORTATION OF EXPORT CONTAINERS FROM FACTORY TO DOCK) RS.11,47,186/ - B) A.J.COAL PVT. LTD. RS.13,06,960/ - C) JAIN COAL CORPORATION RS.2,77,811/ - D) VANRAJ FUEL & CARBON RS.24,690/ - RS.67,29,345/ - FREIGHT/TRANSPORTATION CHARGES ARE PAID FOR PURCHASE OF SUCH ITEMS WHICH ARE ENTITLED TO CONCERNED PURCHASE ACCOUNT IN THE LEDGER. THERE IS NO ORAL OR WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE RECEIPT OF GOODS FOR TRANSPORTATION OF CARRIAGE THEREOF. THE PAYMENTS OF THE FREIGHT HAVE NOT BEEN MADE IN PURSUANCE TO A CONTRACT OF TRANSPORTATION OF GOODS FOR A SPECIFIC PERIOD, QUANTITY OF PRICE. 'PAYMENTS HAVE BEEN MADE ON THE BASIS OF DELIVERY M EMO ISSUED BY THE SELLER. ADVANCES TO SUCH TRANSPORTERS ARE ALSO PAID BY THE SELLER OF GOODS WHICH IS REFLECTED IN THEIR RESPECTIVE BILL AND ONLY THE DIFFERENCE IS PAID AT THE FACTORY RELIANCE WAS PLACED ON THE JUDGMENT OF PUNJAB &,HARYANA HIGH COURT IN C IT V: BHAGWATI STEELS 326 'ITR 108 P&H. THERE WOULD NOT ARISE ANY NECESSITY OF DEDUCTION OF TAX AT SOURCE ON THE FREIGHT AMOUNT SEPARATELY SHOWN IN INVOICES, IN TERMS OF SEC.194C SINCE FREIGHT EXPENSES ADDED TO ITA NO 2170 /1 3 3 THE COST OF GOODS IN THE INVOICES RAISED WOUL D BE HELD TO BE PART OF THE COST OF PRODUCT PURCHASES. I HAVE CONSIDERED THE ABOVE REPLY FILED BY THE ASSESSEE. THE ASSESSEE HAS NOT MAINTAINED PARTY - WISE DETAILS OF TRANSPORTATION CHARGES PAID. HENCE, IT IS NOT POSSIBLE TO DETERMINE TO WHICH PARTIES PA YMENT OF MORE THAN RS.20,000 WAS MADE DURING THE YEAR AND HENCE TDS WAS REQUIRED TO BE DEDUCTED. CONSIDERING THE ABOVE FACTS, IT IS HELD THAT 25% OF THE ABOVE SUM RS.67,29,345/ - AMOUNTING TO RS.16,82,336/ - WAS PAID TO TRANSPORTATION IN VIOLATION OF SECTIO N 40(A)(IA) OF THE I.T. ACT. THUS, AN ADDITION OF RS.16,82,336/ - IS HEREBY MADE IN THE HANDS OF THE ASSESSEE UNDER SECTION 40(A)(IA0 OF THE I.T.ACT. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE I.T.ACT ARE SIMULTANEOUSLY INITIATED FOR FURNISHING INAC CURATE PARTICULARS OF INCOME. 4 . IT IS CLEAR FROM THE ABOVE OBSERVATION OF THE AO THAT THE AO HAS PROPERLY APPLIED HIS MIND WITH REGARD TO THE EXPENDITURE INCURRED ON TRANSPORTATION VIS - - VIS PROVISIONS OF SECTION 40 (A)(IA). BY CONSIDERING THE FACT THAT I T WAS NOT POSSIBLE TO DETERMINE TO WHICH PARTIES PAYMENT OF MORE THAN RS. 2 0 ,000/ - WAS MADE DURING THE YEAR, THE AO HAS DISALLOWED 25% ON ENTIRE PAYMENT WHICH WORKS OUT TO RS. 16,82,336/ - . THE ASSESSMENT SO FRAMED IS NOT ERRONEOUS INSOFAR AS THE AO HAS APPLI ED HIS MIND WITH REGARD TO THE DISALLOWANCE OF TRANSPORTATION EXPENSES, FOR WHICH THE AO HAS SPECIFICALLY CALLED THE ASSESSEE TO EXPLAIN REGARDING TDS DEDUCTED THEREON. WE FOUND THAT PAYMENT OF FREIGHT WAS MADE IN PURSUANT TO THE CONTRACT OF TRANSPORTATION OF GOODS FOR SPECIFIC PERIOD, QUANTITY AND PRICE. THE PAYMENT WAS MADE ON THE BASIS OF DELIVERY MEMO ISSUED BY THE SELLER, WHEREIN ON SOME OF THE OCCASIONS ADVANCES WERE ALSO PAID BY THE SELLER OF GOODS WHICH IS REFLECTED IN THEIR RESPECTIVE BILLS OF SALE S AND THE DIFFERENCE WAS PAID AT THE FACTORY. THE ASSESSEE HAS ALSO RELIED ON THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. BHAGWATI STEELS 326 ITR 108 P&H , WHEREIN IT WAS HELD THAT T HERE WOULD NOT ARISE ANY NECESSITY OF DEDUCTION OF T AX AT SOURCE ON THE FREIGHT ITA NO 2170 /1 3 4 AMOUNT SEPARATELY SHOWN IN INVOICES, IN TERMS OF SEC.194C SINCE FREIGHT EXPENSES ADDED TO THE COST OF GOODS IN THE INVOICES RAISED WHICH WOULD BE PART OF THE COST OF PRODUCT SO PURCHASE D . BY CONSIDERING ALL THESE FACTS AND RECOR DING A FINDING TO THE EFFECT THAT ASSESSEE HAS NOT MAINTAINED PARTYWISE DETAILS OF TRANSPORTATION CHARGES PAID, THE AO DISALLOWED 25% OF TOTAL DISALLOWANCE OF CHARGES OF RS. 67,29,345/ - , WHICH AMOUNTED TO RS.16,82,336/ - U/S.40(A)(IA) OF THE ACT. THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. MAX INDIA LTD. 295 ITR 282, IN WHICH THE APEX COURT HAS HELD AS UNDER : - THE PHRASE PREJUDICIAL TO THE INTEREST OF THE REVENUE IN SECTION 263 OF THE INCOME - TAX ACT, 1961, HAS TO BE READ IN CONJUNCTION WITH THE EXPRES SION ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENU E, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 5 . IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENT, THE ASSESSMENT FRAMED BY AO IN THE INSTANT CASE IS NOT ERRONEOUS A S THE AO HAS APPLIED HIS MIND WITH REGARD TO DISALLOWANCE OF T RANSPORT EXPENSES VIDE - ORDER SHEET ENTRY DATED 15.12.2010 IN TERMS OF W HICH HE HAD SPECIFICALLY CALLED UPON ASSESSEE TO EXPLAIN AS TO WHY NO TDS WAS DEDUCTED ON. TRANSPORTATION PAYMENTS AND WHY DISALLOWANCE SHOULD NOT BE MADE UNDER - SECTION 40(A)(IA) OF THE I.T. A CT AND AFTER CONSIDERING THE REPLY OF ASSESSEE, THE AO HAD MADE DISALLOWANCE OF RS. 16,82,326/ - U/S.40(A)(IA) OF THE I.T.ACT. ITA NO 2170 /1 3 5 6 . ON MERITS ALSO, WE FOUND THAT ASSESSEE HAS ENTERED INTO PRIVITY OF CONTRACT WITH THE SUPPLIER OF GOODS. SUPPLIER CHOOSES TRANSPORTER ACCORDING TO HIS WISH ON WHICH WE HAVE NO CONTROL. THEREFORE, VIEW OF CIT THAT ENTIRE AMOUNT OF TRANSPORT CHARGES SHOULD BE DISALLOWED IS NOT TENABLE. THE AO HAS CONSIDERED THIS ASPECT AND HAS MADE DISALLOWANCE OF 25% OF TRANSPORTATION CHARGES ON THE GROUND THAT IT IS NOT POSSIBLE TO DETERMINE TO WHICH PARTIE S PAYMENT OF MORE THAN RS.20, 000/ - WAS MADE DURING THE YEAR. THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BHAGWATI STEELS (326 ITR 108) SUPPORTS THE CASE OF ASSESSEE IN WH ICH IT WAS HELD THAT ESSENCE OF AGREEMENT HAS TO BE SEEN INASMUCH A S AGREEMENT WITH THE SUPPLIER OF GO ODS FOR SALE CANNOT BE SEGREGATED INTO FOR GOODS AND FOR FREIGHT. IN THE SAID CASE, IT HAS BEEN HELD THAT THE FREIGHT EXPENSES ARE TO BE ADDED TO THE COS T OF GOODS INVOICED AND TDS PROVISIONS DO NOT APPLY. I T COULD NOT BE INFERRED THAT THE ASSESSEE HAS - PAID' AMOUNT OF FREIGHT , SEPARATELY BECAUSE IT W AS ADDED TO THE COST, OF GOODS PURCHASED. IN VIEW OF THE ABOVE DISCUSSIONS, THE ORDER PASSED BY THE AO WAS N EITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 / 1 2 / 201 4 . / 1 2 / 2014 SD/ - SD/ - ( ) ( I.P.BANSAL ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 11 / 1 2 /2014 /PKM , PS ITA NO 2170 /1 3 6 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//