HEMANT M. BHANUSHALI, MUMBAI V. DCIT 23(2), MUMBAI

ITA 2335/MUM/2011

• Counselvise Citation: 233519914 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 14-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 22-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: KISHORE K PODDAR
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) AND SHRI RAJENDR A SINGH (A.M) ITA NO. 2335/MUM/2011(A.Y. 2007-08) SHRI HEMANT M. BHANUSHALI, 601, YASHWANT SMRITI, OPP. TARA PATIL HOSPITAL, S.N.ROAD, TAMBE NAGAR, MULUND (WEST), MUMBAI 400 080. PAN:ACRPB 4874G (APPELLANT) VS. THE DCIT 23(2), MUMBAI. (RESPONDENT) APPELLANT BY : SHRI KISH ORE K. PODDAR RESPONDENT BY : SHRI V.V.SHASTRI DATE OF HEARING : 14/05/2012 DATE OF PRONOUNCEMENT : 1 6/05/2012 ORDER PER N.V.VASUDEVAN, J.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 21/2/2011 OF THE CIT(A) 33, MUMBAI RELATING TO ASSESSMENT YEA R 2007-08. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER: 1.THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HE REINAFTER REFERRED TO AS CIT(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF RS.25,67,236/- MADE BY THE LD. A. 0. UNDER SECTION 40(A)(IA) R.W.S . 194C(2) AND (3) OF THE ACT WITHOUT APPRECIATING THE FACTS AND CIRCUMST ANCES OF THE CASE. 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE LD. A. 0. HAS DISALLOWED RS.25,67,236/- WITHOUT ESTABLISHING THE SAME IS A P AYMENT TO THE SUB-CONTRACTORS. HENCE, THE DISALLOWANCE OF RS.25,6 7,236/- UNDER SECTION 40(A)(IA) R.W.S. 194C(2) AND (3) IS NOT AT ALL JUSTIFIED AND HENCE, THE SAME MAY BE DELETED. 3. THE LD. CIT(A) FURTHER FAILED TO APPRECIATE THAT THE CIRCULAR NO. 715 DATED 08.08.1995 IS CLEARLY APPLICABLE TO THE FACT OF THE APPELLANTS CASE. HENCE, THE DISALLOWANCE OF RS.25,67,236/- UND ER SECTION ITA NO. 2335/MUM/2011(A.Y. 2007-08) 2 40(A)(IA) R.W.S. 194C(2) AND (3) IS NOT AT ALL JUST IFIED AND HENCE, THE SAME MAY BE DELETED 2. THE ASSESSEE IS AN INDIVIDUAL. HE IS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF CARGO IN HEAVY LOAD CONTAINERS FR OM AND TO VARIOUS PORTS, YARDS, GODOWNS, FACTORIES ETC. AS PER REQUIREMENT O F THE CUSTOMERS. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THA T THE ASSESSEE HAD MADE PAYMENT OF FLEET HIRE CHARGES OF RS. 7,19,75, 985/-. THE A.O FURTHER NOTICED THAT ON THE AFORESAID PAYMENTS THE ASSESS EE HAD DEDUCTED TAX AT SOURCE ONLY OF PAYMENT TO THE TUNE OF RS. 6,83,21,0 98/-. THE ASSESSEE EXPLAINED BEFORE THE AO THAT IN RESPECT OF FREIGHT CHARGES OF RS. 15,31,147/- NO TAX WAS DEDUCTIBLE FOR THE REASON THAT EACH BILL COMPRISED IN THE FORESAID FREIGHT CHARGES WAS LESS THAN RS. 20,000/- AND AGGR EGATE OF BILLS OF ONE SUB-CONTRACTOR WAS LESS THAN RS.50,000/- IN A YEARS AND, THEREFORE, THE PROVISIONS OF TDS WERE NOT ATTRACTED. THE AO HOWE VER, ON GOING THROUGH THE DETAILS THEREOF, NOTICED THAT IN THE FOLLOWING CASES BILLS AMOUNT EXCEEDED THE LIMIT OF RS.20,000/- AND AS SUCH ASSESSEE WAS R EQUIRED TO DEDUCT TAX IN TERMS OF CLAUSE (1) SUB-SECTION (3) OF SECTION 194C OF THE ACT. IN THIS REGARD, THE AO WAS OF THE VIEW THAT THE GOODS ARE TRANSPORT ED IN PURSUANCE OF A CONTRACT FOR A SPECIFIC PERIOD OR QUANTITY AND AS S UCH EACH G.R. CANNOT BE SEPARATE CONTRACTS AND ALL G.RS WILL HAVE TO BE AGG REGATED FOR THE PURPOSES OF TDS AS CLARIFIED IN CIRCULAR NO: 715 OF THE CBD T. NAME BILL NO: AMOUNT ------- --------- --------- - ALLAUDDIN TRANSPORT COMPANY 54 22,000/- BILAL TRANSPORT 1 89 25,800/- CARGO TRANSPORT ORGANIZATION 58 30,400/- GOKUL CONTAINER MOVERS 457 22,800/- ----- ------ TOTAL 1,01,800/ - THUS, OUT OF THE TOTAL MOTOR FLEET HIRE CHARGES OF RS. 7,19,75,958/-, RS.6,98,51,245/- (RS.6,83,21,098/- + RS.15,31,147/- ) WERE CONSIDERED FOR ITA NO. 2335/MUM/2011(A.Y. 2007-08) 3 TDS AS ABOVE. THERE WAS A DIFFERENCE OF RS.21,23,7 13/- (RS.7,19,75,958/- - RS.6,98,51,245/-), WHICH HAS NOT BEEN CONSIDERED FO R TDS. IT HAS BEEN EXPLAINED BY THE ASSESSEE THAT MOTOR FLEET HIRE CHA RGES INCLUDES LOADING AND UNLOADING CHARGES PAID TO THE SUB-CONTRACTORS OF RS .24,81,950/- OF WHICH ASSESSEE WAS ABLE TO RECOVER RS.24,65,436/- FROM I TS PRINCIPALS. IT WAS CONTENDED THAT TDS PROVISIONS ARE NOT APPLICABLE O N THIS-LOADING AND UNLOADING CHARGES. THE CONTENTION OF THE ASSESSEE W AS NOT ACCEPTED BY THE AO. THE AO HELD THAT THE SUB-CONTRACTORS HAVE INCL UDED THE LOADING AND UNLOADING CHARGES IN THEIR BILLS AND IN TURN, ASSES SEE HAS ALSO CHARGED THE PRINCIPALS THE SAME AMOUNT. THIS BEING PART AND PAR CEL OF MOTOR FLEET HIRE CHARGES BILLED TO THE ASSESSEE, THE SAME IS LIABLE FOR TDS. IN THIS REGARD THE AO ALSO REFERRED TO THE CLARIFICATION ISSUED BY THE CBDT IN CIRCULAR NO: 715. IN THE SAID CIRCULAR THE TERM TRANSPORT CONTRACTS WOULD IN ADDITION TO CONTRACTS FOR TRANSPORTATION AND LOADING / UNLOADIN G OF GOODS ALSO COVER CONTRACTS FOR FLYING OF BUSES ETC., ALONG WITH THE STAFF (EG., DRIVER, CONDUCTOR, CLEANER ETC.). THIS CLARIFICATION ACCORD ING TO THE AO, CLEARLY SHOWS THAT THE CONTRACT CHARGES AND SUB-CONTRACT CH ARGES INCLUDES LOADING AND UNLOADING CHARGES. THE AO WAS OF THE VIEW THAT SECTION 194C SPEAKS OF ANY PERSON (BEING A CONTRACTOR ...) RESPONSIBLE FO R PAYING ANY SUM TO ANY RESIDENT THEREIN, AND IN HIS OPINION, THE ABOVE E XPRESSION WOULD INCLUDE LOADING AND UNLOADING CHARGES ALSO. IN VIEW OF TH ESE FACTS, THE AO HELD THAT TDS OUGHT TO HAVE BEEN MADE ON ANY SUM PAID BY THE ASSESSEE TO ITS SUB-CONTRACTORS. ACCORDINGLY THE AO HELD THAT TDS W AS APPLICABLE ON RS.24,65,436/- AS PER CLAUSE (I) OF SUB-SECTION (3) OF SECTION 194C OF THE ACT. SINCE ASSESSEE HAS NOT DEDUCTED TAX ON THIS AMOUNT AS PER CLAUSE(IA) OF CLAUSE(A) OF SECTION 40 OF THE ACT, THE AO HELD THA T THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION FROM THE TOTAL INCOME OF THE SAID SUM OF RS.24,65,436/-. ACCORDINGLY, THE SAME WAS ADDED BAC K UNDER CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 OF THE ACT. THUS, THE TOTA L DISALLOWANCE UNDER CLAUSE(IA) OF CLAUSE(A) OF SECTION 40 OF THE ACT C OMES TO RS.25,67,236/-. ITA NO. 2335/MUM/2011(A.Y. 2007-08) 4 3. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED T HE ORDER OF THE A.O FOR THE FOLLOWING REASONS: 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER WHER EIN ASSESSING OFFICER HAS BROUGHT THE FACT ON RECORD THAT THE APP ELLANT PAID MOTOR FLEET HIRE CHARGES OF RS.7,19,75,985/- AND EFFECT T DS ONLY ON RS.6,83,21,098/-. THE APPELLANT ALSO SUBMITTED BEF ORE ASSESSING OFFICER THAT FLEET HIRE CHARGES AMOUNTING TO RS.1 5,31,147/- WAS PAID TO THE PARTIES WHERE SINGLE BILL WAS LESS THAN RS.2 0,000/- AND AGGREGATING BILL OF SUB-CONTRACTORS WAS ALSO LESS T HAN RS.50,000/- IN THE YEAR AND HENCE EXEMPT U/S.194C. THE ASSESSING O FFICER VERIFIED DETAILS GIVEN FOR THESE PARTIES AND FOUND THAT THER E ARE FEW BILLS FOR MORE THAN AN AMOUNT OF RS.20,000/- IN CASE OF FOUR PARTIES TOTALING TO RS. 1,01,800/-. THE ASSESSING OFFICER ALSO NOTICED THAT OUT OF MOTOR FLEET HIRE CHARGES AT RS.7,19,75,958/- ONLY RS.6,83 ,21,098/- AND RS.15,31,147/- TOTALING TO RS.6,98,52,245/- ARE NOT ATTRACTING DISALLOWANCE U/S.40(A)(IA). THEN THE ASSESSING OFFI CER ALSO NOTICED THAT AN AMOUNT OF RS.24,81,950/- WAS PAID AS LOADING AND UNLOADING CHARGES TO THE SUB-CONTRACTORS OVER AND ABOVE THIS MOTOR FLEET CHARGES FOR WHICH NO TDS WERE MADE AND NO EXPLANATION WAS G IVEN. ACCORDINGLY ASSESSING OFFICER DISALLOWED THIS AMOUN T OF RS.24,65,436/- UNDER THE HEAD LOADING AND UNLOADING CHARGES U/S.40(A)(IA). THUS THE ADDITION OF RS.25,67,236/- WAS MADE U/S.40(A)(IA). 4.4 DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS REITERATED HIS STAND AND CITED VARIOUS CASE LAWS. I FIND THAT BY V ARIOUS GRS GOODS HAVE BEEN TRANSPORTED FOR THE SAME PARTY FROM WHOM THE APPELLANT HAS GOT THE JOB. IN VIEW OF THIS I AM CONVINCED THA T A SINGLE GR CANNOT BE TREATED AS CONTRACT AS IT HAS BEEN EXECUTED BY V ARIOUS GRS OVER A PERIOD OF TIME. THUS ALL THE GRS IN THE CASE OF APP ELLANT FOR THE FREIGHT CHARGES PAID MAKE ONE CONTRACT IN THE LIGHT OF CBDT CIRCULAR NO.715 DATED 08.08.1995 CITED AND RELIED BY APPELLANT ONLY . 4.5 IN VIEW OF THIS I AM CONVINCED THAT AN AMOUNT O F RS.1,01,800/- ALONG WITH LOADING AND UNLOADING CHARGES AT RS.24,6 5,436/- PAID BY APPELLANT ARE LIABLE FOR TDS. THE ADDITION FOR RS.2 5,67,236/- IS UPHELD. 4. AT THE TIME OF HEARING OF THIS APPEAL IT WAS AGR EED BY BOTH THE PARTIES THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION IN ASSESSEES OWN CASE IN A.Y 2005-06 ITA NO.2336/MUM/2011 AND THIS TRIBUNAL HELD AS FOLLOWS: ITA NO. 2335/MUM/2011(A.Y. 2007-08) 5 11. WE HAVE HEARD THE ISSUE AT LENGTH AND WE HAVE GONE THROUGH THE DETAILS PROVIDED/SUBMITTED BY THE AR. EXCEPT FOR TH E OBSERVATION OF THE AO THAT THE BUSINESS OF THE ASSESSEE IS CONTINU OUS, NOWHERE HAS THE AO PROVED THAT THE ASSESSEE HAD BOUND HIMSELF I N CONTRACTS WITH OUTSOURCED THIRD PARTIES. WE ARE IN COMPLETE AGREEM ENT WITH THE SUBMISSIONS OF THE AR THAT AT BEST THE BUSINESS DON E BY THE ASSESSEE FOR WHOM HE HIRES TRUCKS/LORRIES/CONTAINERS WOULD A MOUNT TO JOB WORK BECAUSE WHATEVER HE RECEIVES FROM HIS CUSTOMER S ARE PAID TO THE OUT SOURCED LORRY OWNERS, THAT TOO ON HIS OWN RISKS AND PERILS AND ALSO WHERE THE OUT SOURCED TRANSPORTERS ARE NOT BINDING THE ASSESSEES CUSTOMERS. WE ALSO FEEL THAT THE MODES OPERANDI FOL LOWED BY THE ASSESSEE COMES WITHIN THE FOUR CORNERS OF THE CIRCU LAR, WHICH THE ASSESSEE HAD BEEN PLEADING BEFORE THE REVENUE AUTHO RITIES. UNDER THESE CIRCUMSTANCES AND FACT THE ASSESSEE WAS NOT L IABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO OUTSOURCED LORRY OWNERS. CONSEQUENTLY, THE PROVISIONS OF SECTION 40(A)(IA) S HALL NOT APPLY ON THE ASSESSEE. 5. IT IS NOT IN DISPUTE BEFORE US THAT THE FACTS I N THE PRESENT ASSESSMENT YEAR ARE IDENTICAL AND, THEREFORE, THE DECISION OF THE I TAT RENDERED IN ASSESSEES OWN CASE WILL APPLY IN THE PRESENT ASSESSMENT YEAR ALSO. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT HOL D THAT THE DISALLOWANCE MADE BY THE AO DESERVES TO BE DELETED AND THE SAME IS HEREBY DIRECTED TO BE DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 16 TH DAY OF MAY 2012 SD/- SD/- (RAJENDRA SINGH ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 16 TH MAY 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RH BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO. 2335/MUM/2011(A.Y. 2007-08) 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 14/05/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 14/05/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROV ED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER