The ITO, Ward-2, Surendranagar V. M/s. Bhavna Roadways, Surendranagar

ITA 230/RJT/2008

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72580 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-07-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Section: 194C; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT BEFORE SHRI T K SHARMA, JM AND SHRI D K SRIVASTAVA, AM ITA NO. 230 /RJ T/20 08 ASSESSMENT YEAR : 200 5 - 0 6 ITO, WARD - 2 , SURENDRANAGAR V. M/S. BHAVNA ROADWAYS, TRAMWAY ROAD, SURENDRANAGAR PAN : AADFB 5223 B DATE OF HEARING : 1 2 .0 7 .2013 DATE OF PRONOUNCEMENT : 13 . 0 9 .2013 REVENUE BY : SHRI AVINASH KUMAR, DR ASSESSEE BY : SHRI TEJ SHAH, ADVOCATE ORDER D. K. SRIVASTAVA : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT(A) - X VI , AHMEDABAD ON 15 .0 2 .20 08, ON THE FOLLOWING GROUNDS: - 1. THE LD. CIT (A) HAS ERRED IN LAW AS WELL AS ON FACTS IN RESTRICTING THE ADDITION OF RS. 48,00,000 / - MADE U/S 40(A)(IA) OF THE ACT TO RS.21,05,295/ - 2. THE LD. CIT ( A) HAS ERRED IN DISTINGUISHING SECTION 40(A)(IA) OF THE ACT AND GRANTING RELIEF TO THE APPELLANT. AS PER THE PROVISION OF SECTION 194 - C OF THE ACT, THE RATE OF DEDUCTION OF TAX AT SOURCE OUT OF PAYMENT/CREDIT MADE TO SUB - CONTRACTORS IS OF 1%. BOTH THE SECT ION 40(A)(IA) AND 194 - C OF THE ACT ARE VERY CLEAR AS REGARDS TO THE DISALLOWANCE OF EXPENSES CLAIMED IN RESPECT OF PAYMENT MADE TO SUB - CONTRACTORS. THE PROVISIONS OF SECTION 40(A)(IA) DO NOT PROVIDE SUCH EXCEPTIONS OR ALLOWING ANY RELIEF IN SUCH SITUATIO N IN RESPECT OF DETERMINING TAX DEDUCTIBLE AT PRESCRIBED RATE AND ADJUSTING TAX DEDUCTED AT RATE LOWER THAN THE PRESCRIBED RATE AS HAS BEEN DIRECTED BY THE LD CIT(A). 3. THAT O N FACT AND IN THE CIRCUMSTANCES OF THE CASE, T HE LD. CIT (A) OUGHT TO HAVE UPHE LD THE ABOVE ADDITIONS MADE BY THE ASSESSING OFFICER. 4 . IT IS THEREFORE PRAYED IN APPEAL BEFORE THE HON BLE ITAT THAT THE ORDER OF THE CIT (A) MAY BE QUASHED AND THAT OF ASSESSING OFFICER BE RESTORED TO THE EXTENT. 2 230 - RJT - 2008 - BHAVNA ROADWAYS 2. THE APPEAL FILED BY THE REVENUE WA S DISMISSED BY THIS TRIBUNAL BY ITS ORDER DATED 22.07.2009. AGGRIEVED BY THE ORDER PASSED BY THIS TRIBUNAL, THE REVENUE CHALLENGED THE SAME BEFORE THE HON BLE HIGH COURT. BY ITS ORDER DATED 20.12.2011, THE HON BLE HIGH COURT HAS REMANDED THE MATTER BACK TO THIS TRIBUNAL, WITH THE FOLLOWING OBSERVATIONS: - 4. ON HAVING HEARD BOTH THE SIDES AND HAVING CONSIDERED THE MATERIALS BEFORE US, IT IS CLEAR FROM THE RECORD THAT TRIBUNAL WHILE CONSIDERING RIVAL SUBMISSIONS MERELY ENDORSED THE ORDER OF CIT(APPEALS) BY SAYING THAT IT WAS A WELL REASONED AND CORRECTLY GIVEN ORDER APPRECIATING THE FACTS APPROPRIATELY. IT HAS NOT INDEPENDENTLY GIVEN ANY REASON TO ARRIVE AT SUCH FINDINGS. BOTH SIDES HAVE AGREED THAT THE ORDER LACKS INDEPENDENT APPLICATION OF MIND AND CONSEQU ENTIAL REASONINGS ON THE PART OF THE TRIBUNAL. 5. RESULTANTLY, THIS APPEAL IS ALLOWED REMANDING THE MATTER BACK TO THE TRIBUNAL FOR IT TO HEAR BOTH THE SIDES AND ARRIVE AT ITS OWN FINDINGS ON THE ISSUE WHICH WAS AT LARGE BEFORE IT. 6. BEFORE PARTING, IT MAY BE NOTED THAT ALL THE ISSUES ARE KEPT OPEN AND TRIBUNAL SHALL DECIDE THE MATTER WITHOUT BEING INFLUENCED BY ANY OBSERVATIONS MADE HERE - IN - ABOVE. 3. PURSUANT TO THE AFORESAID DIRECTION S , THE APPEAL WAS LISTED FOR HEARING ON 05.06.2012, 14.12.2012, 14. 06.2013 AND 12.07.2013. THE HEARING ULTIMATELY TOOK PLACE ON 12.07.2013. 4. THE ASSESSEE IS A FIRM. IT FILED ITS RETURN OF INCOME FOR THE YEAR UNDER APPEAL ON 28.10.2005 RETURNING TOTAL INCOME AT RS.14,46,245/ - . THE ASSESSEE IS ENGAGED IN TRANSPORT BUSIN ESS , I.E. , BUSINESS OF PLYING, HIRING, LEASING AND GODOWN HIRING. IN THE COURSE OF SCRUTINY, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD PAID A SUM OF RS. 2,68,00,000/ - TOWARDS TRANSPORTATION EXPENSES TO M/S. MEHUL ROADWAYS OUT OF WHICH TA X @ 0.5% WAS DEDUCTED. ON FURTHER SCRUTINY, THE ASSESSING OFFICER NOTICED THAT A CERTIFICATE U/S 197 OF THE INCOME - TAX ACT FOR LOWER 3 230 - RJT - 2008 - BHAVNA ROADWAYS DEDUCTION OF TAX WAS ISSUED AS PER WHICH THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE @ 0.5% UPTO RS.2,20,00,000/ - . IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD PAID RS.48,00,000/ - OVER AND ABOVE THE AFORESAID LIMIT OF RS.2,20,000/ - AND THEREFORE THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE @ 2% IN RESPECT OF AMOUNT EXCEEDING R S.2,20,00,000/ - . SINCE THE ASSESSEE HAD DEDUCTED 0.5% OUT OF THE AFORE SAID AMOUNT OF RS.48,00,000/ - ALSO, THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE HAS FAILED TO DEDUCT THE TAX AT SOURCE IN ACCORDANCE WITH SECTION 194C IN RESPECT OF THE SAID AMOUNT OF RS.48,00,000/ - AND ACCORDINGLY DISALLOWED THE SAME U/S 40(A)(IA), WITH THE FOLLOWING OBSERVATIONS: - 4. ON PERUSAL OF THE DETAILS FILED IT IS NOTICED THAT THE ASSESSEE HAS MADE PAYMENT OF RS.2,68,00,000/ - AS TRANSPORTATION EXPENSES TO M/S. MEHUL ROADWAYS AND DEDUCTED T AX @ 0.5% . ON FURTHER SCRUTINY OF THE DETAILS IT IS NOTICED THAT MEHUL ROADWAYS HAD OBTAINED CERTIFICATE U/S 197 OF THE ACT FOR LOWER DEDUCTION OF TAX AND THE LIMIT FOR SUCH EXEMPTION WAS UPTO RS.2,20,000/ - ONLY. THE ASSESSEE WAS, THEREFORE, BOUND TO DEDUC T TAX @ 2% +SURCHARGE & EDUCATION CESS ON THE EXCESS AMOUNT OF RS.48,00,000/ - PAID TO MEHUL ROADWAYS. BY NOT DOING SO, THE ASSESSEE HAS VIOLATED SECTION 40(A)(IA) OF THE ACT. SECTION 40(A)(IA) SPECIFIED THAT ANY INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB - CONTRACTOR , BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION , HAS NOT BEEN PAID DURING THE PREVIOUS YEAR OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB - SECTION (1) OF SECTION 200, SUCH AMOUNTS SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID . IN THE CIRCUMSTANCES VIDE LETTER DATED 21/6/2007 THE ASSESSEE WAS REQUESTED TO SHOW CAUSE AS TO WHY THE AMOUNT PAID IN EXCESS OF RS.2,20,00,000/ - I.E. RS. 48,00,000/ - SHOULD NOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT. 4 230 - RJT - 2008 - BHAVNA ROADWAYS 5. THE ASSESSEE HAS VIDE LETTER DATED 25/6/2007 ADMITTED THAT IT HAS NOT DEDUCTED TAX @ 2% ON THE EXCESS AMOUNT PAID TO MEHUL ROADWAYS, BUT IT HAS STATED THAT WHILE DEDUCTING THE TAX, THE LIM IT TO WHICH LOWER DEDUCTION WAS ALLOWED WAS NOT KNOWN AND DUE TO THIS REASON ONLY TAX HAS BEEN DEDUCTED AT 0.5%, AND THERE IS NO WILLFUL ACT IN NOT DEDUCTING THE TAX AT 2% AND REQUESTED TO ACT AS PER LAW. SINCE THE ASSESSEE HAS NOT DEDUCTED TAX ON RS.48,00 ,000/ - , THE SAME IS ADDED TO THE INCOME OF THE ASSESSEE U/S 40(A)(IA) OF THE ACT. 5. ON APPEAL, THE LD . CIT(A) HOWEVER PARTLY ALLOWED THE RELIEF TO THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS: - 3.4 DURING THE APPEAL, APPELLANT CLAIMED THAT IN ANY CASE THE ASSESSEE HAS DEDUCTED THE TAX AT THE RATE AS PRESCRIBED BY THE AO ON THE BALANCE AMOUNT OF RS.48 LAKHS ALSO, SO HE SHOULD BE ALLOWED THE DEDUCTION TO THE EXTENT OF AMOUNT DEDUCTED AS TDS. AS PER PROVISIONS OF SECTION 40(A)(IA) PAYMENT MADE EVEN IN THE SUBSEQUENT YEAR ARE ALLOWABLE ON PAYMENT BASIS. IN THE ASSESSEE S CASE THE DEDUCTION HAS NOT BEEN MADE DURING THE PREVIOUS YEAR ITSELF ALTHOUGH AT THE LOWER RATE ON THE BALANCE AMOUNT OF RS.48 LAKHS. THIS CONTENTION OF THE APPELLANT CARRIES WEIGHT AS THE INTENTION OF THE LAW IS VERY CLEAR THAT TDS HAS TO BE PAID IN THE YEAR UNDER CONSIDERATION OR MAY BE PAID EVEN IN THE LATER YEAR AND DEDUCTION IS TO BE ALLOWED ON THE PAYMENT BASIS DEPENDING ON THE CONDITIONS MENTIONED IN PROVISO TO SEC. 40(A)(IA). SO IN T HE ASSESSEE S CASE IT IS OBSERVED THAT TDS AMOUNT DEDUCTED OVER AND ABOVE RS.2.20 CRORES RELATE TO PART OF PAYMENT OF RS.48 LAKHS. THIS AMOUNT OF TDS NEEDS TO BE GIVEN CREDIT AGAINST PART OF RS.48 LAKHS. THIS CONTENTION OF APPELLANT IS ACCEPTABLE AND A.O. IS TO ALLOW THE CREDIT OF T.D.S. AS PER PRESCRIBED RATE AGAINST THE PAYMENT OUT OF RS.48 LAKHS. FOR THIS PURPOSE , AO WILL CALCULATE THE TOTAL T.D.S. DEDUCTIBLE ON THE AMOUNT OF RS.48 LAKHS AS PER PRESCRIBED RATE AND SET OFF THE T.D.S. DEDUCTED AND PAID WIT HIN TIME LIMIT AND THIS PART OF PAYMENT OF RS.48 LAKHS IS TO BE ALLOWED. THEREAFTER, BALANCE AMOUNT OUT OF RS.48 LAKHS ON WHICH 5 230 - RJT - 2008 - BHAVNA ROADWAYS THE TAX HAS NOT BEEN DEDUCTED AND PAID AS PRESCRIBED UNDER CH. XVII - B, IS TO BE DISALLOWED. THE AO IS DIRECTED TO COMPUTE THE SU M ALLOWABLE ACCORDINGLY. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. AGGRIEVED BY THE ORDER PASSED BY THE LD . CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD . DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ASSESSMENT ORD ER. 7 . IN REPLY, THE LD . COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE LD CIT(A). IN SUPPORT OF THE ORDER PASSED BY THE LD CIT(A), HE RELIED UPON THE DECISION IN DCIT V. S.K. TEKRIWAL, (2011) 15 TAXMANN.COM 289 (KOL.). 9. WE HAVE HEARD B OTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS. THE AMOUNTS PAYABLE TO A CONTRACTOR OR SUB - CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK, (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B BUT IF SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION , HAS NOT BEEN PAID, WITHIN THE SPECIFIED TIME , IS LIABLE TO BE DISALLOWED U/S 40(A)(IA) IRRESPECTIVE OF THE PROVISIONS OF SECTIONS 30 TO 38 OF THE INCOME - TAX ACT WHILE COMPUTING THE INCOME CHARGEABLE U/S 28 OF THE INCOME - TAX ACT. IN THE CASE BEFORE US, THE ASSESSEE WAS PERMITTED BY THE AO TO DEDUCT TAX AT LOWER RATE, I.E., @ 0.5% OUT OF PAYMENTS UP - TO RS.2.20 CRORES. THE ASSESSEE HOWEVER CONTINUED TO DEDUCT TAX AT LOWER RATE EVEN IN R ESPECT OF PAYMENTS EXCEEDING RS. 2.20 CRORES. THE ISSUE BEFORE US IS WHETHER THE CIT(A) IS RIGHT IN DIRECTING THE AO ALLOW THE CREDIT OF T.D.S. AS PER PRESCRIBED RATE OUT OF PAYMENTS AMOUNTING TO RS.48,00,000/ - . ON THE FACTS OF THE CASE, THE ORDER OF THE CIT( A) IS REASONABLE. IT IS THEREFORE CONFIRMED. THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 13.9. 201 3 SD/ - SD/ - (T. K. SHARMA) ( D. K. SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT: 13 . 0 9 .2013 B T 6 230 - RJT - 2008 - BHAVNA ROADWAYS COPY OF ORDER FOR WARDED TO: - 1 . APPELLANT ITO, WARD - 2, SURENDRANAGAR 2 . RESPONDENT - M/S. BHAVNA ROADWAYS, TRAMWAY ROAD, SURENDRANAGAR 3 . CONCERNED CIT - V , AHMEDABAD 4 . CIT (A) - X V I , AHMEDABAD 5 . DR, ITAT, RAJKOT 6 . GUARD FILE. BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT