ITO, Jaipur V. GOOD LUCK TOURS PVT. LTD., Jaipur

ITA 223/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5100 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 04-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S DAGUR ADD CIT DHK
• Assessee Lawyers: G M MEHTA
• Keywords: Question of law; Corroborative evidences
• Section: 143(3); 194C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.223 /JP/15 & C O NO. 23/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER,W ARD 3(2), JAIPUR CUKE VS. M/S GOOD LUCK TOURS PVT. LTD., 149 SINDHI COLONY, BANI PARK, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACG 7113 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.M. MEHTA ( C.A) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S. DAGUR (ADD. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27.07.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 29/07/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-I, JAIPUR DATED 18.12.2014 WHEREIN THE REVENUE HAS TAK EN FOLLOWING GROUNDS OF APPEAL: (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE O F RS. 59,24,660/- MADE U/S 40(A)(IA) OF THE IT ACT IGNORING THE FACT THAT PROVISIONS OF SECTION 194C ARE APPLICABLE IN THIS CASE AS THERE EXISTED A CONTRACT BETWEEN THE ASSESSEE AND TAXI/CAB-OWNERS WHICH CAN BE INFERRED FROM THE CIRCUMSTANCES OF THE CASE. (2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANC E MADE OUT OF THE REPAIR ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 2 AND MAINTENANCE EXPENSES OF RS. 3,00,000/- TO RS. 1,50,000/- IGNORING THE FACTS THAT DEFECTS WERE POINTED OUT TO THE ASSE SSEE VIDE NOTE SHEET ENTRY DATED 28.03.2013 AND NO OBJECTION WAS RAISED BY THE ASSESSEE ON THE PROPOSED DISALLOWANCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLA NT, A TAXI OPERATOR FILED ITS RETURN OF INCOME ON 15.210.2010 DECLARING THE TOTA L INCOME OF RS.15,75,160/-. THE APPELLANT COMPANY PROVIDES TAXI CARS AND CABS T O VARIOUS CORPORATES, AND OTHER ENTITIES. THE CASE WAS SELECTED FOR SCRUTINY AND AN ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS PASSED ASSESSING INCOME AT RS . 77,99,820/-. THE AO INVOKED SECTION 145(3) OF THE ACT AND REJECTED BOOK S OF ACCOUNTS AND MADE ADDITIONS ON ACCOUNT OF DISALLOWANCE OF RS. 59,24,6 60/- U/S 40(A)(IA) OF THE ACT AND RS.3,00,000/- ON ACCOUNT OF REPAIRS & MAINTENAN CE. 2.1 REGARDING FIRST GROUND OF APPEAL TAKEN BY THE R EVENUE, THE RELEVANT FACTS AND FINDINGS OF THE LD. CIT(A) WHICH THE ASSE SSEE HAS SUPPORTED IN ITS CROSS OBJECTION ARE AS UNDER: (1) ASSESSEE OWNS ONLY FOUR VEHICLES. TO MEET ITS CONTR ACTUAL OBLIGATION FOR SUPPLY OF VEHICLES TO AFOREMENTIONED 5 CONTRACTEE COMPANIES, ASSESSEE REQUISITIONS VEHICLES FROM MARKET OF AVAILABLE CAB OWNERS. BUT ON PERUSAL OF BILLS , IT IS ALSO SEEN THAT THE ASSESSE E HAS HIRED VEHICLES FROM SAME TAXI OWNERS AND ALSO RAISED THEIR BILLS ON MO NTHLY BASIS. ASSESSEE HAS NOT DEDUCTED TDS EVEN IN CASES OF PAYMENTS EXCE EDED RS. 50,000/-. IN SUCH 78 CASES AS LISTED OUT AND APPENDED WITH TH E ASSESSMENT ORDER, IT IS ALSO SEEN THAT ASSESSEE HAS MADE TOTAL PAYMENT OF RS. 59,24,660/- IN VIOLATION OF SECTION 194C OF THE ACT. ( 2) FROM THE ABOVE IT IS APPARENT THAT THE ASSESSEE IS PROVIDING ITS VEHICLES ALONGWITH OTHER VEHICLES ON HIRE TO AFOREMENTIONED FIVE CONCERNS AND PERFORMS THE WORK OF TRANSPORTATION. THE RISK OF P ERFORMING THE WORK OF TRANSPORTATION WAS ALWAYS WITH THE ASSESSEE AND NOT WITH THE OWNERS OF THE VEHICLES FROM WHOM THE ASSESSEE HAD OBTAINED TH E VEHICLES ON HIRE. THE ASSESSEE WAS PAID TRANSPORTATION CHARGES BY TH OSE FIVE CONTRACTEE CONCERNS FOR THE VEHICLES PROVIDED BY IT, EITHER IT S OWN VEHICLES OR VEHICLES OBTAINED BY IT ON HIRE FROM OTHER PARTIES. THE AO IN THE ASSESSMENT ORDER HAS NOT BROUGHT OUT ANY MATERIAL O N RECORD TO ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 3 ESTABLISH THAT THE OWNERS OF THE VEHICLES HAD PERFO RMED THE WORK OF TRANSPORTATION. (3) FROM THE CASE RECORD, IT CLEARLY EMERGES THAT T HE ASSESSING OFFICER DESIRED TO BRING THE PAYMENT MADE BY THE ASSESSEE W ITHIN THE NET OF SUB- SECTION (2) OF SECTION 194C OF THE ACT. THOUGH NOT SPECIFICALLY STATED SO IN THE ORDER ITSELF, THE TENOR OF THE ORDER IS CLEA R THAT HE TREATED THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE THIRD PAR TY (PRIVATE AGENCY)AS THAT OF CONTRACTOR AND SUB-CONTRACTOR. IT WAS PRECI SELY ON THE SAID PREMISE HE BASED HIS OBSERVATIONS AND CONCLUSIONS A ND HELD THAT THE PAYMENTS WERE COVERED U/S 194C OF THE ACT. MERELY B ECAUSE HE DID NOT REFER TO SUB-SECTION (2) THEREOF, WOULD NOT CHANGE THIS POSITION. A SHORT QUESTION THEREFORE IS WAS THERE RELATIONSHIP BETWEE N THE ASSESSEE AND THE SUPPLIER OF THE VEHICLES AS ONE OF CONTRACTOR A ND SUB-CONTRACTOR? THIS HAS TO BE ANALYSED WITH RESPECT TO THE WRITTEN CONT RACTS BETWEEN THE ASSESSEE AND AFOREMENTIONED 5 CONTRACTEE CONCERNS V IS A VIS CAB OWNERS (4) ON PERUSAL OF ASSESSMENT ORDER, IT IS ALSO SE EN THAT AO DID NOT BRING OUT ANY MATERIAL TO ESTABLISH THAT THE OWNER OF THE VEH ICLES PERFORMED THE WORK OF TRANSPORTATION. THE ASSESSEE HAD MERELY HIR ED THE VEHICLES FOR PERFORMING ITS PART OF THE CONTRACT WITH THESE AFO REMENTIONED CONCERNS. THAT BEING THE POSITION, THE AOS STAND THAT WORK OF TRANSPORTATION OR PART THEREOF WAS ASSIGNED TO A SUB CONTRACTOR I.E. CAB OWNERS ARE NOT CORRECT. (5) THEREFORE, AFTER DULY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS FOUND THAT THERE IS NO SUCH EITHER ORAL OR WR ITTEN CONTRACT BETWEEN THE ASSESSE COMPANY AND THE CAB OWNERS WHOSE CABS/V EHICLES WERE RENTED OUT THEIR VEHICLES TO THE ASSESSEE. FURTHER , ASSESSEE HAS ENGAGED IT OWN 4 VEHICLES AS WELL AS HIRED CABS/VEHICLES FR OM OTHER OWNERS. THESE AFOREMENTIONED 5 CONTRACTEE CONCERNS, AFTER D EDUCTING TDS, MADE PAYMENT FOR TRANSPORTATION TO THE ASSESSEE COMPANY. THIS ESTABLISHES THAT THERE IS NO NEXUS BETWEEN THE ASSESSEE COMPANY AND THE INDIVIDUAL CAN OWNERS. FURTHER IT IS THE RESPONSIBILITY OF TH E ASSESSEE TO PROVIDE VEHICLES TO THOSE CONCERNS FOR TRANSPORTATION. THE RE IS NOTHING ON RECORD TO SHOW THAT ASSESSEE HAD SUB-LET ITS JOB WORK TO O THER CAN OWNERS. AFTER OBTAINING PAYMENTS FROM THOSE 5 CONCERNS ASSESSEE R ETAINED A PORTION THERE OF TO ITSELF FOR EXECUTING THE WORK AND PAID HIRE CHARES AS PER BOILS RAISED BY CAB OWNERS. IN THIS WAY, IT CAN BE CONS TRUED THAT THE ASSESSEE HIRED THOSE CABS ALONGWITH DRIVERS AND EXECUTED WO RK WITH ITSELF. HENCE, PROVISION OF SECTION 194C OF THE ACT WAS NOT ATTR ACTED AND CONSEQUENTLY ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 4 THE AMOUNTS PAID/CREDITED TO OTHER CAB OWNERS COULD NOT BE DISALLOWED U/S 40(A)IA) OF THE ACT. ACCORDINGLY, AO IS DIRECT ED TO DELETE THE ENTIRE ADDITION MADE OF RS 59,24,660/-. 2.2 THE LD. DR HAS SUBMITTED THAT THE CONTENTION OF THE ASSESSEE THAT AS THERE WAS NO CONTRACTUAL AGREEMENT WITH THE TAXI OW NERS AND PROVISIONS OF SECTION 194C ARE NOT APPLICABLE IS ALSO NOT FOUND C ORRECT BECAUSE IN THIS CASE ASSESSEE COMPANY IS HAVING CONTRACT WITH THE CLIENT S TO PROVIDE TAXI CAR. THE CARS MAY BE ITS OWN OR HIRED ON CONTRACT FROM MARKE T. ALL THE BILLS TO THE CLIENTS ARE BEING RAISED BY THE ASSESSEE COMPANY AND ALL TH E PAYMENTS BY THE CLIENTS ARE MADE TO THE ASSESSEE COMPANY AFTER DEDUCTING T DS U/S 194C OF THE IT ACT MEANING THEREBY THAT THERE IS A CONTRACT BETWEEN TH E ASSESSEE COMPANY AND THE CLIENTS AND THERE IS NO DISPUTE ON THIS ISSUE. 2.3 THE LD. DR FURTHER SUBMITTED AS REGARDS THE REL ATIONSHIP BETWEEN THE TAXI OWNERS AND THE ASSESSEE COMPANY, ON EXAMINATIO N OF COPIES OF BILLS SUBMITTED DURING ASSESSMENT PROCEEDINGS AS WELL AS SUBMITTING REMAND REPORT DURING APPELLATE PROCEEDINGS, IT IS NOTICED THAT BI LLS HAVE BEEN RAISED ON MONTHLY BASIS I.E. THE VEHICLES WERE PROVIDED ON M ONTHLY CONTRACT AND NOT IN DAILY BASIS, HENCE THERE CERTAINLY EXISTS CONTRACT BETWEEN TAXI OWNERS AND THE ASSESSEE COMPANY. THE SECTION 194C NOWHERE PROVIDE S THE SET METHOD OF ENTERING INTO THE CONTRACT, IT CAN BE WRITTEN, ORAL OR IN ANY OTHER FORM. IT IS THE CONDUCT BETWEEN TWO PARTIES WHICH IS DECISIVE. 2.4 THE LD. DR FURTHER SUBMITTED IN THIS CASE, THE ASSESSEE COMPANY IS HIRING VEHICLES FROM THE TAXI OWNERS ON MONTHLY BASIS AT A FIXED RATE AND TERMS & CONDITIONS. THEREAFTER IT FURTHER PROVIDES THESE VE HICLES TO THE CLIENTS AS PER THEIR REQUIREMENT AND THAT TOO ON A FIXED RATE FOR A FIXED PERIOD. THEREFORE, WHEN THE RELATIONSHIP BETWEEN ASSESSEE COMPANY AND CLIENTS IS TERMED AS CONTRACT, THERE APPEARS NO REASON FOR GIVING SAME N AME TO THE RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND TAXI OWNERS. IT I S ALSO IMPORTANT TO MENTION THAT THE ASSESSEE COMPANY IS HIRING VEHICLE S FROM SAME TAXI OWNERS REPEATEDLY. ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 5 2.5 THE LD. DR FURTHER SUBMITTED THAT WHAT IS HAPPE NING IN THIS CASE IS THAT CONTRACT IS BEING MADE BETWEEN THE CLIENT AND THE A SSESSEE COMPANY FOR PROVIDING VEHICLES AND ASSESSEE COMPANY, IN TURN, I S SUB-CONTRACTING THE WORK TO TAXI OWNERS AND AS PER THE AMENDED PROVISIONS OF SECTION 194C, THE WORD CONTRACT ALSO INCLUDES SUB-CONTRACT. 2.6 THE LD. DR FURTHER SUBMITTED THAT THE OTHER SUB MISSION OF THE ASSESSEEE IS THAT SINCE TDS WAS ALREADY DEDUCTED AT SOURCES B Y THE USER OF TAXI/CAB, THE APPELLANT COMPANY WAS NOT SUPPOSED TO AGAIN MAKE DE DUCTION OF TAX AT SOURCE IS TOTALLY BASELESS BECAUSE NO SUCH PROVISIONS ARE PROVIDED IN THE ACT. HAD THIS BEEN THE POSITION, THEN THERE WOULD HAVE BEEN NO TD S ON SUB-CONTRACTS AND TDS WOULD ONLY HAVE BEEN DEDUCTED BY THE SINGLE PA RTY I.E ULTIMATE CLIENT FROM THE SINGLE CONTRACTOR AND THERE WOULD HAVE BEE N NO TDS DOWN THE LINE. 2.7 THE LD. DR FURTHER SUBMITTED THAT AS REGARDS TH E NON APPLICABILITY OF PROVISIONS OF SECTION 40(A)(IA) ONCE BOOKS OF ACCOU NTS HAVE BEEN REJECTED, THE SUBMISSION OF THE ASSESSEE COMPANY IS NOT FOUND ACC EPTABLE BECAUSE OF THE REASONS THAT AO. HAS NOT DISTURBED THE RESULTS DECL ARED BY THE ASSESSEE AND NO RECOMPUTATION OF INCOME HAS BEEN DONE. ONLY DISALL OWANCE UNDER A PARTICULAR HEAD WAS MADE AS THE VOUCHER WERE NOT FOUND SUPPORT ED WITH EVIDENCES. ON THE OTHER HAND, SECTION 40(A)(IA) IS A SPECIFIC AND TECHNICAL SECTION AND DISALLOWANCE WAS MADE SUBJECT TO NON-FULFILMENT OF CERTAIN CONDITION. 2.8 THE LD. DR FURTHER SUBMITTED THAT AS REGARDS AP PLICABILITY OF PROVISIONS OF SECTION 40(A)(IA) OF THE IT ACT ONLY ON THE AMOUNT REMAINED PAYABLE AS ON 31.3.2014, THE SUBMISSION OF THE ASSESSEE IS NOT FO UND ACCEPTABLE BECAUSE THE SECTION 40(A)(IA) IS APPLICABLE IRRESPECTIVE OF THE METHOD OF ACCOUNTING FOLLOWED BY AN ASSESSEE. THEREFORE, BY USING THE TE RM PAYABLE LEGISLATURE ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 6 INCLUDED THE ENTIRE ACCRUED LIABILITY. THE ISSUE H AS BEEN DEALT IN BY THE HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE. 2.9 IN RESPONSE, THE LD. AR HAS SUBMITTED THAT THE ASSESSEE COMPANY, A TAXI OPERATOR, WAS PROVIDING TAXI CARS AND CABS TO VARIO US CORPORATE, BUSINESS AND OTHER ENTITIES. ASSESSEE COMPANY OWNED ONLY 4 TAXI CARS HOWEVER IN CASE OF FURTHER REQUIREMENTS BY CUSTOMERS, IN THE CAPACITY AS THEIR SUB-AGENT, THE TAXI CARS/CABS WITH THEIR DRIVERS WERE ARRANGED FROM OTH ERS. SINCE BILLS WERE RAISED BY THE ASSESSEE COMPANY FOR ALL THE TAXI CARS/CABS, APPLICABLE TDS UNDER SECTION 194C OF THE ACT WAS DEDUCTED AT SOURCES BY THE CORPORATE AND OTHER BUSINESS ENTITIES ON PAYMENTS, THE MAJOR PART OF W HICH WERE REIMBURSED TO THOSE TAXI/CAB OWNERS. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS LD. AO REQUIRED A LIST OF PAYMENTS MADE TO OTHER TAXI CAR/ CAB OWNERS IN EXCESS OF THE LIMIT PRESCRIBED U/S 194C OF IT ACT. PAYMENTS TO D IFFERENT PERSONS WITH COMMON NAMES WERE TREATED BY LD. AO AS PAID TO A SI NGLE PERSON AND THEREFORE, TREATED AS PAID IN VIOLATION TO THE PROV ISIONS OF SECTION 40(A)(IA) OF IT ACT. LD. AO ALSO DID NOT CONSIDER THE FACT THAT THE ASSESSEE HAS ACTED AS AN AGENT ON BEHALF OF THE OTHER TAXI CAR/CAB OWNERS AN D IN THE SERIES OF PAYMENT, TAX WAS ALREADY DEDUCTED WHEN PAID TO THE ASSESSEE COMPANY. 2.10 THE LD AR FURTHER SUBMITTED THAT AFTER AVAILIN G THE SERVICE OF TAXI/CABS OWNED BY OTHERS BUT THROUGH ASSESSEE COMPANY, TAX W AS DEDUCTED U/S 194C BY VARIOUS CORPORATE, BUSINESS AND OTHER ENTITIES F OR WHICH THEY HAD WRITTEN CONTRACT WITH ASSESSEE COMPANY. FOLLOWING FACTS ARE RELEVANT FOR THE PURPOSE OF THIS GROUND OF APPEAL. AFTER KEEPING MINOR MARG IN FOR OFFICE MAINTENANCE COST, REMAINING AMOUNT WAS REIMBURSED TO TAXI/CAB O WNERS. THERE WAS NO WRITTEN OR ORAL CONTRACT OF THE ASSESEE COMPANY WIT H OTHER TAXI/CAB OWNERS. IN CASE OF NEED OF TAXI/CAB, THE SAME WAS ARRANGED AS PER AVAILABILITY FROM THE ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 7 OWNERS. IN APPRECIATION OF THIS FACT, ADDITIONS WE RE DELETED BY THE LD. CIT(A). IN FACT ARRANGING TAXI/CAB OF OTHERS WAS IN NATURE JOINT VENTURE WHERE A SINGLE SERVICE OF TAXI/CAB IS AVAILED AND AMOUNT RECEIVED FOR USE OF TAXI/CAB IS SHARED IN AGREED PROPORTION. ALTERNATIVELY, IN THE SERIE S OF AVAILING SERVICE OF TAXI/CAB OWNED BY OTHERS, THE ASSESSEE HAD ACTED AS AN INTER VENING PARTY OR A SUB- AGENT HAVING NO CONTRACTUAL OBLIGATION REQUIRING D EDUCTION OF TAX AT SOURCE U/S 194C OF IT ACT ON THE PAYMENTS REIMBURSED TO TAXI C AR/CAB OWNERS. TOTAL TAXI HIRE CHARGES OF RS. 58,94,660/- & PROFESSIONAL FEE OF RS.30,000/-(TOTAL RS.59,24,660/-) WAS FULLY PAID DURING THE YEAR. SM ALL SUMS OF S. 40,141/ (LESS THAN RS.20,000/- IN TOTAL FIVE CASES) REMAINED PAYA BLE ON 31.03.2010. ON IDENTICAL FACTS, USING TRUCKS AND OTHER VEHICLES OW NED BY OTHERS FOR WHICH REIMBURSEMENT WAS MADE BY SUB-AGENT WITHOUT TDS, TH E ISSUE HAS BEEN SETTLED BY VARIOUS HIGHER JUDICIAL AUTHORITIES. REL IANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS. 2.11 THE LR AR FURTHER SUBMITTED THAT THE ASSESSEE HAS ACTED IN A BONA-FIDE WAY AS PER PROVISIONS OF THE ACT WHEN ONCE TAX HAS BEEN DEDUCTED AT SOURCE IN ITS HANDS FOR USE OF TAXI CAR/CABS IT WAS NOT SUPPO SED TO DEDUCT TAX AT SOURCE WHEN PAYMENT WAS REIMBURSED TO OTHERS WHO HAD ALSO PROVIDED DRIVERS TO RUN THOSE TAXIES/CABS. 2.12 THE LD AR FURTHER SUBMITTED THAT THE SLP OF TH E DEPARTMENT AGAINST THE JUDGEMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CA SE OF CIT VS. M/S VECTOR SHIPPING SERVICES PVT. LTD. (APPLICATION OF PROVISI ONS OF SECTION 40(A)(IA) OF IT ACT FOR AMOUNT PAYABLE AS ON 31 ST MARCH) WAS DISMISSED BY HONBLE SUPREME COURT OF INDIA VIDE ORDER DATED 02.07.2014 AND APPR OVED THE JUDGEMENT OF HONBLE ALLAHABAD HIGH COURT. SECTION 40(A)(IA) OF THE IT ACT IS, THEREFORE APPLICABLE ONLY ON THE AMOUNT WHICH REMAINED PAYABL E AS ON 31 ST MARCH WHICH ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 8 COMES TO RS 40,141 OUT OF TOTAL DISALLOWANCE OF RS 59,24,660. THE ISSUE IS ALSO COVERED BY DECISION OF THIS HONBLE ITAT IN ITA NO. 757/JP/2012 IN CASE OF ACIT VS. GIRDHARILAL BARGOTI. 2.13 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUE D THE MATERIAL AVAILABLE ON RECORD. A SIMILAR ISSUE HAS BEEN DEALT RECENTLY BY THE COORDINATE BENCH IN JAIPUR IN CASE OF SIYARAM EXPORT INDIA (P) LTD. VS. ADDL. CIT, RANGE-6, JAIPUR ITA NO. 501/JP/14 WHEREIN THE ISSUE AROUND DISALLOWANCE U/S 40A(IA) HAS BEEN DISCUSSED IN LIGHT OF SPECIAL BENCH DECISION IN CA SE OF M/S MERILYN SHIPPING & TRANSPORT AND THE CONFLICTING DECISIONS OF VARIOUS HIGH COURTS. THE OPERATIVE PART OF THE DECISION IS AS UNDER: 2.5 IN THE CONTEXT OF FACTUAL MATRIX AND ABOVE LEG AL DEVELOPMENTS, FIRSTLY, IT WOULD BE RELEVANT TO REFER TO THE DECIS ION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN CASE OF JANAPRIYA ENGINEERS S YNDICATE (I.T.T.A NO 352 OF 2014 VIDE ITS ORDER DATED 24.06.2014) WHEREI N THE APPEAL FOR STATISTICAL PURPOSE WAS ADMITTED ON THE FOLLOWING S UBSTANTIAL QUESTION OF LAW: WHETHER THE LD. TRIBUNAL WAS JUSTIFIED IN LAW ON THE FACTS AND CIRCUMSTANCES OF THIS CASE IN PASSING ORDER OF REMA ND FOR REDECISION IGNORING THE SPECIAL BENCH DECISION OF THE TRIBUNAL ON THE ISSUE THOUGH THE APPEAL AGAINST THE SAME IS PENDING ADJUDICATION BEFORE THE HONBLE COURT? THE FINDINGS OF THE HONBLE HIGH COURT ARE AS UNDER : 3. WE FIND THAT THE LEARNED TRIBUNAL TAKING NOTE O F THE PENDENCY OF THE APPEAL IN THIS COURT, PREFERRED BY THE REVENUE AGAINST THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN M/S MERILYN S HIPPING & TRANSPORT IN ITA NO.477/VIZ/2008 DATED 29.03.2012, DIRECTED THE ASSESSING OFFICER TO RE-DECIDE THE ISSUE AFTER THE DISPOSAL OF THE APPEA L BY THIS COURT. ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 9 4. WE ARE OF THE VIEW THAT UNTIL AND UNLESS THE DEC ISION OF THE SPECIAL BENCH IS UPSET BY THIS COURT, IT BINDS SMALLER BENC H AND CO-ORDINATE BENCH OF THE TRIBUNAL. UNDER THE CIRCUMSTANCES, IT IS NOT OPEN TO THE TRIBUNAL, AS RIGHTLY CONTENDED BY MR. NARASIMHA SAR MA, LEARNED COUNSEL, TO REMAND ON THE GROUND OF PENDENCY ON THE SAME ISS UE BEFORE THIS COURT, OVERLOOKING AND OVERRULING, BY NECESSARY IMP LICATION, THE DECISION OF THE SPECIAL BENCH. WE SIMPLY SAY THAT IT IS NOT PERMISSIBLE UNDER QUASI JUDICIAL DISCIPLINE. UNDER THE CIRCUMSTANCES, WE SE T-ASIDE THE IMPUGNED JUDGEMENT AND ORDER, AND RESTORE THE MATTER TO THE FILE OF THE TRIBUNAL WHICH WILL DECIDE THE ISSUE IN ACCORDANCE WITH LAW AND IT WOULD BE OPEN TO THE TRIBUNAL EITHER TO FOLLOW THE SPECIAL BENCH DECISION OR NOT TO FOLLOW. IF THE SPECIAL BENCH DECISION IS NOT FOLLO WED, OBVIOUSLY REMEDY LIES ELSEWHERE. 2.6 SUBSEQUENTLY, THE COORDINATE BENCH IN CASE OF S HRI AMIT NARESH SHAH IN ITA NO. 4154/MUM/2013 DATED 10.09.2014 TAKI NG INTO COGNISANCE THE DECISION OF HONBLE ANDHRA PRADESH H IGH COURT IN CASE OF JANAPRIYA ENGINEERS SYNDICATE (SUPRA) HAS HELD AS U NDER: FROM THE CLARIFICATION ISSUED BY THE HONBLE HIGH COURT, IT IS CLEAR THAT UNTIL AND UNLESS THE DECISION OF MARILYN SHIPP ING AND TRANSPORT (SUPRA) IS REVERSED BY THE COURT, IT IS BINDING O N ALL THE BENCHES OF THE TRIBUNAL. WE FIND THAT HONBLE COURT HAS HELD THAT JUDICIAL DISCIPLINE MANDATES THAT THE DECISION OF THE SPECIAL BENCH HA S TO BE FOLLOWED BY OTHER BENCHES. AS ON TODAY, THE STAY ORDER GRANTED BY THE HONBLE COURT HAS BEEN VACATED AND THE ORDER OF THE SPECIAL BENCH IS BINDING ON OTHER BENCHES OF THE TRIBUNAL. THEREFORE, RESPECTFULLY F OLLOWING THE SAME, WE HOLD THAT THE FAA WAS JUSTIFIED IN FOLLOWING THE OR DER OF MARILYN SHIPPING ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 10 & TRANSPORT (SUPRA). CONSIDERING THE FACTS OF THE CASE AND THE CLARIFICATION ISSUED BY THE HONBLE ANDHRA PRADESH HIGH COURT ON 24.06. 2014 IN THE CASE OF JANAPRIYA ENGINEERS SYNDICATE, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSE E AND CONFIRMED THE ORDER OF THE FAA. 2.7 IN LIGHT OF DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN CASE OF JANAPRIYA ENGINEERS SYNDICATE (SUPRA), IT IS THUS C LEAR THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF M/S ME RILYN SHIPPING & TRANSPORT (SUPRA) CONTINUES TO BIND THE COORDINATE BENCHES TILL THE TIME THE SAME IS NOT OVERRULED BY THE HONBLE HIGH COURT . 2.8 FURTHER, IT IS NOTED THAT THE SPECIAL BENCH DEC ISION IN CASE OF M/S MERILYN SHIPPING & TRANSPORT (SUPRA) HAS BEEN APPR OVED AND REFERRED BY THE ALLAHABAD HIGH COURT IN CASE OF VECTOR SHIPPING SERVICES (P) LTD. AT THE SAME TIME, THERE ARE DECISIONS OF CALCUTTA HIGH COURT IN CASE OF CRESCENT EXPORTS SYNDICATE AND GUJARAT HIGH COURT I N CASE OF SIKANDARKHAN N TANVAR WHERE THE HIGH COURTS HAVE DI SAGREED WITH THE VIEW OF THE SPECIAL BENCH IN CASE OF M/S MERILYN S HIPPING & TRANSPORT (SUPRA). IT IS THUS EVIDENT THAT THE VIEW OF THE A LLAHABAD HIGH COURT AND OTHER TWO HIGH COURTS ARE IN DIRECT CONFLICT WITH E ACH OTHER. THE QUESTION THAT ARISES FOR CONSIDERATION IS WHERE THERE IS NO DECISION OF A JURISDICTIONAL HIGH COURT AND THERE ARE CONFLICTING VIEWS OF THE DIFFERENT HIGH COURT, WHICH VIEW SHOULD BE FOLLOWED. IN THIS REGARD, WE DRAW SUPPORT FROM THE JUDGEMENT OF HONBLE SUPREME COU RT IN THE MATTER OF CIT VS. VEGETABLE PRODUCTS LTD. (1972) 88 ITR 192 ( SC) WHEREIN THE HONBLE SUPREME COURT HAS LAID DOWN THE PRINCIPLE T HAT F TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADO PTED. ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 11 IN VIEW OF THE ABOVE DISCUSSIONS AND THE ENTIRETY O F FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE OF SUM OF RS.14,14,534/- U/S 40(A)(IA) OF THE IT ACT, IS HEREBY DELETED. 2.14 IN LIGHT OF ABOVE, FOLLOWING THE EARLIER DECIS ION OF THE COORDINATE BENCH IN CASE OF SIYARAM EXPORTS (SUPRA), WE HEREBY RESTR ICT THE DISALLOWANCE UNDER SECTION 40A(IA) TO THE EXTENT OF AMOUNT REMAINED PA YABLE AS ON 31 ST MARCH. THE AO IS DIRECTED TO VERIFY THE AMOUNT WHICH REMAI NED PAYABLE AS ON 31 ST MARCH AND RESTRICT THE DISALLOWANCE TO THAT EXTENT ONLY. 3. IN GROUND NO.2, THE REVENUE HAS CHALLENGED THE O RDER OF LD CIT(A) IN RESTRICTING THE DISALLOWANCE OF REPAIR AND MAINTENA NCE EXPENSE TO RS 150000 OUT OF TOTAL DISALLOWANCE MADE BY AO OF RS 3,00,000 . THE ASSESSEE IN ITS CROSS OBJECTION HAS CHALLENGED THE SUSTENANCE OF DISALLOW ANCE OF RS 150,000. 3.1 THE LD. AR SUBMITTED THAT THE BOOKS OF ACCOUNT S OF THE ASSESSEE COMPANY ARE AUDITED U/S 44AB OF THE IT ACT. ALL TH E EXPENSES WERE FOUND BY THE AUDITORS AS PROPERLY VOUCHES AND ACCOUNTED FOR. HOWEVER, LD. AO WITHOUT POINTING OUT EVEN A SINGLE DISALLOWANCE OR UNVOUCHE D OR UNSUPPORTED OR NOT PROPERLY RECORDED EXPENSES, DISALLOWED RS. 3,00,000 /- OUT OF VEHICLE REPAIRS AND MAINTENANCE EXPENSES. LD. CIT(A) SUSTAINED THE DISALLOWANCE OF RS. 1,50,000/-. THE COMPARATIVE FIGURES OF REPAIRS AND MAINTENANCE OF VEHICLES WITH IMMEDIATELY PRECEDING YEAR ARE AS UNDER: PARTICULARS A.Y. 2009-10 A.Y. 2020-11 TAXI HIRE INCOME RS. 3,97,31,295/- RS. 4,10,13,856 /- VEHICLE REPAIR & MAINTENANCE RS. 21,10,908/- 1 1,52,932/- % OF EXPENSES TO INCOME 5.31% 2.81% ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 12 THE VEHICLE REPAIRS AND MAINTENANCE EXPENSE WERE RE DUCED SUBSTANTIALLY AT 2.81% TO GROSS TAXI INCOME AS AGAINST 5.31% IN THE IMMEDIATELY PRECEDING YEAR HOWEVER, LD. AO WITHOUT POINTING OUT ANY DEFECT AN D DEFICIENCY IN AUDITED BOOKS DISALLOWANCE OF RS. 3,00,000/- AND THE REASON GIVEN IS SOME OF THE EXPENSES EITHER NO VOUCHERS ARE AVAILABLE OR IN SOM E CASES NOT ACCOMPANIED BY ANY SUPPORTING EVIDENCES. HOWEVER, NOT A SING LE INSTANCE WAS GIVEN FOR SUCH DEFECT. THE DISALLOWANCE WAS ON MERE GUESS WO RK, ON SUSPICION AND HYPOTHETICAL BASIS. THE DISALLOWANCE OF VEHICLE EX PENSES WITHOUT ANY JUSTIFIED REASONS IS UNJUSTIFIED. 3.2 THE LD AR FURTHER SUBMITTED THAT NO CASE OF THE ASSESSEE FOR THE A.Y. 2009-10 WAS SELECTED UNDER SCRUTINY NOR THERE WAS ANY DISALLOWANCE IN THAT YEAR, THEREFORE THE BASIS ADOPTED BY THE LD. CIT(A) IS NOT CORRECT. FOR A.Y.2008-09 WHICH HAS BEEN RELIED UPON BY THE LD CI T(A), THE ASSESSEE IS IN APPEAL BEFORE THIS HONBLE ITAT (ITA NO.50/JP/14) A ND THE DISALALOWANCE IN THAT YEAR ARE ON DIFFERENT ISSUE. 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE AO HAS NOT HIGHLIGHTED ANY SPECIFIC DEFECT WHILE DISALLOWING RS 3 LACS OUT OF REPAIR AND MAINTENANCE EXPENSES. THE DISALLOWANCE IS THEREFORE CLEARLY ADHOC IN NATURE WHICH CANNOT BE SUSTAINED I N EYE OF LAW AND HENCE THE SAME IS DELETED. IN RESULT, GROUND OF REVENUE IS D ISMISSED AND GROUND OF ASSESSEE IS ALLOWED. IN THE RESULT THE APPEAL FILED BY THE REVENUE AND C ROSS OBJECTIONS ARE DISPOSED OFF. ITA NO. 223/JP/15 & CO. NO.23/JP/15 ITO,WARD 3(2), JAIPUR VS. M/.S GOOD LUCK TOURS PVT. LTD. JAIPUR 13 ORDER PRONOUNCED IN THE OPEN COURT ON 29 /0 7/2016. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 29/ 07/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD 3(2), JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S GOOD LUCK TOURS PVT. LTD., JAIP UR 3. VK;DJ VK;QDR@ CIT I, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-I, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.223 /JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR