The ITO, Ward-2(1), Baroda V. Shri Jaswant R.Thakkar, Baroda

ITA 224/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63084 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 22-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGHSR
• Section: 143(3); 194C

Judgement Text

ITA NO 224/ AHD/2010 A.YR.. 2006 -07 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AH MEDABAD (BEFORE SHRI D.K. TYAGI, JM & SHRI ANIL CHATURVEDI A.M.) I.T.A. NO.224 /AHD/2010. (ASSESSMENT YEAR: 2006-07) INCOMETAX OFFICER, WARD 2(1), AAYAKAR BHAVAN, RACE COURSE CIRCLE BARODA. (APPELLANT) VS. SHRI JASWANTBHAI R. THAKKAR 96 AMIN NAGAR SOCIETY, CHHANI RAMAKAKA DAIRY ROAD, BARODA. (RESPONDENT) PAN: AAQPT 8875N APPELLANT BY : MR. D.K. SINGH,SR.D.R. RESPONDENT BY : NONE (WRITTEN SUBMISSIONS) ( )/ ORDER DATE OF HEARING : 27-09- 2012 DATE OF PRONOUNCEMENT : 27 -11-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSIN ESS OF TRANSPORTATION. HE FILED RETURN OF INCOME ON 8-9-20 06 DECLARING TOTAL INCOME AT RS.4,64,227/-. THE CASE WAS SELECTED FOR SCRUTIN Y AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 143(3) VIDE ORDER DATED 31-12-2008 AND THE INCOME WAS DETERMINED AT RS.98,54,520/- AFTER MAKIN G VARIOUS DISALLOWANCE AND ADDITIONS. ITA NO 224/ AHD/2010 A.YR.. 2006 -07 2 2. AGGRIEVED BY THE ORDER OF A.O. THE ASSESSEE PREF ERRED APPEAL BEFORE CIT (A). CIT (A) VIDE HIS ORDER DATED 16-10-2009 GR ANTED PARTIAL RELIEF TO THE ASSESSEE. AGAINST THE AFORESAID ORDER OF CIT (A), T HE REVENUE IS NOW IN APPEAL BEFORE US. 3. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.80,95,912/- MADE U/S.40(A)(IA) OF THE ACT FOR VIOLATION OF PROV ISIONS OF SECTION 194C OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. NOTICED THAT THE ASSESSEE HAS RECEIVED TOTAL TRANSPORTATION INCOME O F RS.1,20,05,802/- FROM TRANSPORTATION BUSINESS INCLUDING TRANSPORTATION RE CEIPT OF RS.90,30,271/- FROM IOCL. THE ASSESSEE HAD ENTERED INTO A CONTRACT WITH IOCL ON 5-12- 2003 FOR TRANSPORTATION OF BULK LPG. THE ASSESSEE H AD CLAIMED PAYMENT OF RS.70,77,929/- AS FREIGHT FOR TANKERS WHICH ACCORD ING TO THE ASSESSEE WAS TRANSPORTATION RECEIPTS COLLECTED ON BEHALF OF KRUP A BULK CARRIER. THE ASSESSEE SUBMITTED THAT AT THE TIME OF ENTERING INT O CONTRACT WITH IOCL ASSESSEE WAS OWNER OF SIX TANKERS. SUBSEQUENTLY HE ENTERED INTO AGREEMENT WITH KRUPA BULK CARRIERS AND SOLD THE TAN KERS ON 10-7-2004 WITH EFFECT FROM 1-6-2004. PURSUANT TO THE AGREEMENT ENT ERED WITH KRUPA BULK CARRIERS, RECEIPTS FROM IOCL AFTER 1-6-2004 HAD TO BE TRANSFERRED TO KRUPA BULK CARRIERS. A.O. WAS OF THE VIEW THAT AS PER THE AGREEMENT ENTERED BY THE ASSESSEE WITH IOCL, NO CHANGE OF OWNERSHIP IN T HE TRUCK WAS PERMISSIBLE WITHOUT OBTAINING PRIOR WRITTEN CONSENT OF IOCL. HE FURTHER ITA NO 224/ AHD/2010 A.YR.. 2006 -07 3 OBSERVED THAT DURING THE YEAR THE ASSESSEE HAD RECE IVED TOTAL AMOUNT OF RS,.90,39,271/- FROM IOCL AND HAD MADE THE PAYMENT OF RS.70,77,929/- AS TRANSPORTATION PAYMENT CHARGES TO KRUPA BULK CAR RIERS. HE WAS THUS OF THE VIEW THAT THE PAYMENT MADE TO KRUPA BULK CARRIE RS WAS IN THE NATURE OF TRANSPORTATION CHARGES FOR CARRYING OUT ASSESSEES TRANSPORTATION WORK AND THEREFORE THE ASSESSEE WAS LIABLE TO DEDUCT TDS BEF ORE MAKING THE PAYMENT. SINCE THE ASSESSEE HAS NOT DEDUCTED TDS IT WAS VIOLATION OF PROVISION OF SECTION 200 AND THEREFORE BY INVOKING THE PROVISIONS OF SEC.40(A)(IA) HE DISALLOWED AND ADDED RS.70,77,929/ - TO THE INCOME. AGGRIEVED BY THE AFORESAID ACTION OF THE A.O. ASSES SEE CARRIED THE MATTER BEFORE CIT (A). CIT (A) AFTER CONSIDERING THE SUBMI SSIONS MADE BY THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 3.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTH ORISED REPRESENTATIVE AND THE ORDER OF THE A.O. THE A.O. I NVOKED THE PROVISIONS OF SECTION 40(A)(IA) ON THE GROUND THAT HE HAD TRANSFERRED THE OWNERSHIP OF THE CONTRACT WITHOUT OBTAINING PRI OR WRITTEN CONSENT FROM THE IOC AND ALSO THAT THE RC BOOK FOR TRANSFER OF THE HEAVY VEHICLE DID NOT SHOW CHANGE OF OWNERSHIP. THE A.O. HELD THAT THE PAYMENT OF RS.70,77,929/- WAS NOTHING BUT TRANSPORT ATION CHARGES PAID BY THE ASSESSEE TO M/S. KRUPA BULK CARRIERS FO R CARRYING OUT THE ASSESSEES TRANSPORTATION WORK WITH USE OF VEHICLE OWNED BY THE ASSESSEE HIMSELF. ON GOING THROUGH THE RECORD AND T HE DETAILS SUBMITTED, IT IS SEEN THAT THE APPELLANT HAS SOLD T HE SIX TANKERS ALONG WITH THE CONTRACT TO M/S. KRUPA BULK CARRIERS. THE SAME IS NOT QUESTIONED BY THE A.O. EXCEPT FOR THE FACT THAT THE CONTRACT IS NOT REGISTERED. AS SUBMITTED BY THE LD. A.R. IT IS NOT NECESSARY THAT THE CONTRACT BE REGISTERED. THE TERMS AND CONDITIONS OF THE CONTRACT HAVE BEEN ACCEPTED AS IS EVIDENCED BY THE FACT THAT IN A .Y. 2005-06, THE APPELLANT SHOWED THE SALE OF THE TANKERS WHICH WAS ACCEPTED BY THE DEPARTMENT. M/S.KRUPA BULK CARRIER ALSO FILED RETUR NS OF INCOME DECLARING INCOME FROM TRANSPORTATION U/S. 44AF.SINC E THE TERMS OF THE AGREEMENT BETWEEN M/S. KRUPA BULK CARRIER AND THE A PPELLANT STAND ITA NO 224/ AHD/2010 A.YR.. 2006 -07 4 ESTABLISHED, THE ONLY QUESTION WHICH ARISES IS CAN M/S.KRUPA BULK CARRIERS BE CONSIDERED TO BE A SUB CONTRACTOR OF TH E APPELLANT. IN THE APPELLANTS CASE HE HAS HANDED OVER ALL RIGHTS TO T HE RECEIPT FROM M/S. IOC, HE IS MERELY AN AGENT THROUGH WHOM FUNDS ARE R OUTED. FOR THIS PURPOSE A SEPARATE BANK ACCOUNT WAS OPENED, THE TIM E LIMIT FOR TRANSFER OF FUND WAS LAID DOWN AND EVEN AN ADDITION AL LIABILITY IN CASE THE FUNDS WERE NOT TRANSFERRED WITHIN THE TIME FROM PART OF THE TERMS OF THE AGREEMENT. HENCE, IT CAN CLEARLY BE STATED THAT THE INCOME STANDS DIVERTED BY AN OVERRIDING TITLE EVEN BEFORE ACCRUAL. SINCE THE CONTRACT ITSELF HAS BEEN SOLD I.E. SOURCE OF INCOME ITSELF HAS BEEN SOLD IT CANNOT BE HELD THAT M/S. KRUPA BULK CARRIERS WAS WORKING ON BEHALF OF THE APPELLANT. SINCE NO WORK HAS BEEN PERFORMED ON BEHALF OF THE APPELLANT IT CANNOT BE SAID THAT M/S. KRUPA BULK CA RRIERS IS MERELY A SUB-CONTRACTEE OF THE APPELLANT. THE APPELLANT IS NOT INVOLVED IN THE RISK AND COST OF EXECUTING THE CONTRACT. THE RELAT IONSHIP OF A CONTRACTOR AND SUB-CONTRACTOR WILL EXIST IF BOTH AR E A PARTY TO THE RISK AND COST OF PROJECT. IN THIS CASE SINCE THE APPELLA NT IS MERELY A CONDUIT FOR RECEIVING THE FUNDS IT CANNOT BE CONCLU DED THAT A RELATIONSHIP OF CONTRACTOR AND SUB-CONTRACTOR EXIST S. SINCE THE ASSESSING OFFICERS CONTENTION THAT THE PAYMENT OF RS.70,77,929/- IS NOTHING BUT PAYMENT FOR TRANSPORTATION CHARGES ON B EHALF OF THE APPELLANT IS NOT BASED ON ANY MATERIAL FACT THE ADD ITION MADE U/S. 40(A(IA) IS DIRECTED TO BE DELETED. 5. AGGRIEVED BY THE ORDER OF THE CIT (A), THE REVEN UE IS NOW IN APPEAL BEFORE US. 6. BEFORE US THE LD. D.R. SUBMITTED THAT AS PER THE CONTRACT WITH IOC AND THE TERMS OF THE AGREEMENT HAVE NOT CHANGED ANY OWNERSHIP AND PRIOR WRITTEN PERMISSION FROM IOC WAS NECESSARY. THE ASSE SSEE HAS NOT TAKEN ANY WRITTEN PERMISSION FROM IOC FOR TRANSFER OF OWN ERSHIP OF THE TRUCKS. HE FURTHER SUBMITTED THAT NO PRIOR APPROVAL OR CONSENT FOR ENTERING INTO SALES AGREEMENT OF TANKERS WITH KRUPA BULK CARRIERS WAS T AKEN FROM IOC. FURTHER THE COPY OF RC BOOK OF THE SIX VEHICLES ALSO DID NO T SHOW THE CHANGE IN ITA NO 224/ AHD/2010 A.YR.. 2006 -07 5 OWNERSHIP WHICH PROVES THE FACT THAT THE VEHICLES H AVE NOT BEEN TRANSFERRED BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THOUGH THE ASSESSEE HAD RECEIVED RS.90,39,271/- WHICH IN ENTIR ETY WAS REQUIRED TO BE TRANSFERRED TO KRUPA BULK CARRIERS BUT ON THE CONTR ARY THE ASSESSEE HAS MADE PAYMENT OF RS.70,77,929/- ONLY. IN VIEW OF THE SE FACTS THE PAYMENT TO M/S. KRUPA BULK CARRIER WAS IN THE NATURE OF TRA NSPORTATION CHARGES FOR CARRYING OUT THE TRANSPORTATION WORK. SINCE THE ASS ESSEE HAS FAILED TO DEDUCT TDS A.O. HAS RIGHTLY INVOKED THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT AND MADE THE DISALLOWANCE. 7. IN THE WRITTEN SUBMISSIONS THE ASSESSEE HAS INTE R-ALIA SUPPORTED THE ORDER OF THE CIT (A). 8. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATER IAL ON RECORD. CIT (A) WHILE DELETING THE ADDITION HAS GIVEN A FINDING THAT THE SALE OF SIX TANKERS ALONG WITH THE CONTRACT BY THE ASSESSEE TO KRUPA BULK CARRIER IS NOT IN DISPUTE. HE HAS FURTHER GIVEN A FINDING BASED ON THE TERMS AND THE CONDITIONS OF THE CONTRACT THAT IN A.Y.2005-06, THE ASSESSEE HAD SHOWN A SALE OF TANKERS IN ITS RETURN OF INCOME AND IT HAS BEEN ACCEPTED BY THE DEPARTMENT. FURTHER KRUPA BULK CARRIERS HAS ALSO SH OWN THE INCOME FROM TRANSPORTATION U/S. 44AF. THUS THE TERMS OF AGREEME NT BETWEEN KRUPA BULK CARRIER AND THE ASSESSEE STANDS ESTABLISHED. HE HAS FURTHER GIVEN A FINDING THAT THE INCOME STANDS DIVERTED BY OVERRIDING EVEN BEFORE THE ACCRUAL OF INCOME. FURTHER SINCE THE CONTRACT ITSELF HAS BEEN SOLD I.E. SOURCE OF INCOME ITSELF HAS BEEN SOLD IT CANNOT BE HELD THAT KRUPA BULK CARRIERS WAS WORKING ON BEHALF OF THE ASSESSEE. HE HAS FURTHER H ELD THAT ASSESSEE IS ALSO NOT INVOLVED IN THE RISK AND THE COST OF EXECU TING THE CONTRACT. HE HAS ITA NO 224/ AHD/2010 A.YR.. 2006 -07 6 FURTHER GIVEN A FINDING THAT RELATIONSHIP OF CONTRA CT OR AND SUB-CONTRACTEE BETWEEN THE ASSESSEE AND KRUPA BULK CARRIER DOES NO T EXIST. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO CONTROVERT THE FINDINGS OF THE CIT (A). IN VIEW OF THESE FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE C IT (A). WE THUS CONFIRM THE ORDER OF THE CIT (A) AND DISMISS THIS GROUND OF THE REVENUE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON 27 - 11 - 2012. SD/- SD/- ( D. K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)- 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO 224/ AHD/2010 A.YR.. 2006 -07 7 1.DATE OF DICTATION 22 - 11 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 26 /11 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..