The ACIT Cir-2(1) Guntur, Guntur V. M/s Syed Rasheed Transporta, Ongole

ITA 235/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56881 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 27-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T LUCAS PETER
• Keywords: TDS
• Section: 40(a)(ia); 194C; 148

Judgement Text

ITA NO235/VIZAG/2011 SYED RASHEED TRANSPORTS, ONGOL E 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.235/VIZAG/2011 ASSESSMENT YEARS : 2006-07 ACIT CIRCLE-2(1) GUNTUR SYED RASHEED TRANSPORTS ONGOLE (APPELLANT) VS. (RESPONDENT) PAN NO. AAIFS 1957 J APPELLANT BY: SHRI T. LUCAS PETER, CIT(DR) RESPONDENT BY: SHRI G.V.N. HARI, CA DATE OF HEARING: 15.12.2011 DATE OF PRONOUNCEMENT: 26.12.2011 ORDER PER SHRI B.R.BASKARAN, ACCOUNTANT MEMBER:- THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29.4.2011 PASSED BY THE LD. CIT(A) GUNTUR AND IT RE LATES TO THE ASSESSMENT YEAR 2006-07. 2. THE DISALLOWANCE OF RS.6,52,49,300/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE ACT, HAVING BEEN DEL ETED BY LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 3. THE FACTS RELATING TO THE ISSUE ARE STATED I N BRIEF. THE ASSESSEE FIRM IS CARRYING ON TRANSPORT BUSINESS BY UNDERTAKING TRANS PORT CONTRACT FROM ILTD DIVISION OF M/S ITC LTD. THE ASSESSEE RECEIVED A S UM OF RS.6.91 CRORES AS TRANSPORT CHARGES FROM M/S ITC LTD. IN THE PROFIT AND LOSS ACCOUNT, IT CLAIMED A SUM OF RS.6.52 CRORES AS DEDUCTION TOWARDS LORRY HIRE CHARGES PAID BY IT TO VARIOUS LORRY OWNERS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 194C (2) OF THE ACT ON THE SAID PAYMENTS AND SINCE THE ASSESSEE HAS NOT SO DEDUCTED THE TDS, HE REOPENED ITA NO235/VIZAG/2011 SYED RASHEED TRANSPORTS, ONGOL E 2 THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT IT H AS MERELY HIRED THE LORRIES AS IT IS NOT ENTITLED TO SUB-CONTRACT THE WORK UNDE RTOOK BY IT. BY PLACING RELIANCE ON THE FOLLOWING CASE LAW, THE ASSESSEE CO NTENDED THAT THE PROVISIONS OF SEC. 194C(2) ARE NOT APPLICABLE TO IT. (A) ITO VS. RAMANAD & COMPANY (1987)(163 ITR 702) (HP). (B) ITAT, VISAKHAPATNAM BENCHS DECISION IN THE CA SE OF M/S MYTHRI TRANSPORT CORPORATION (ITA NO.183/V/2008), M. SEETH ARAMIAH (ITA NO.355/V/2008) AND M.ESWARA RAO (ITA NO.356/V/2008) . HOWEVER, THE ASSESSING OFFICER OPINED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE AS THEY HAVE BEEN REND ERED ON DIFFERENT SET OF FACTS. ACCORDINGLY HE TOOK THE VIEW THAT THE ASSESS EE IS LIABLE TO DEDUCT TAX AT SOURCE ON THE LORRY HIRE CHARGES PAID BY IT. SINCE THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE, HE DI SALLOWED THE EXPENDITURE OF RS.6,52,49,300/- RELATING TO LORRY HIRE CHARGES B Y INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. HOWEVER, THE LEARNED CI T(A) DELETED THE SAID ADDITION BY HOLDING THAT THE LORRY OWNERS DID NOT C ARRY OUT ANY CONTRACT WORK, BUT HAS ONLY FACILITATED THE ASSESSEE TO CARRY OUT THE CONTRACT UNDERTAKEN BY IT FROM ITC LTD. AGGRIEVED BY THE DECISION OF LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED D.R SUBMITTED THAT THERE EXISTED A CONTRACT BETWEEN THE ASSESSEE AND THE LORRY OWNERS AND HENCE THE PROVISI ONS OF SEC. 194C SHALL APPLY TO THE PAYMENTS MADE TO THE LORRY OWNERS. AC CORDINGLY HE SUBMITTED THAT, IF THERE IS FAILURE ON THE PART OF THE ASSESS EE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OF THE ACT ON SUCH PAYMENTS MADE TO THE LORRY OWNERS, THE SAME IS LIABLE TO BE DISALLOWED U/S 40(A)(IA) O F THE ACT. IN THIS REGARD, THE LEARNED D.R RELIED UPON THE FOLLOWING CASE LAW: (A) J.RAMA (194 TAXMANN 37) (B) SREE CHOUDHRY TRANSPORT CO. (225 CTR 125 (RAJ )) (C) VELLAPALLI BROS. (196 TAXMANN 269) (D) V.M.SANKAR (127 ITD 316) ITA NO235/VIZAG/2011 SYED RASHEED TRANSPORTS, ONGOL E 3 5. ON THE CONTRARY, THE LEARNED A.R SUBMITTED T HAT MERE HIRING OF LORRIES CANNOT BE SAID TO BE GIVING THE WORK ON SUB-CONTRA CT. IN THIS REGARD, HE STRONGLY RELIED ON THE DECISION RENDERED BY THIS BE NCH IN THE CASE OF MYTHRI TRANSPORT CORPORATION REPORTED IN 124 ITD 40, WHERE IN IT WAS HELD THAT THE MERE HIRING OF LORRIES WOULD NOT AMOUNT TO GIVING T HE WORK ON SUB-CONTRACT. ACCORDINGLY HE SUBMITTED THE PROVISIONS OF SEC. 194 C(2), WHICH WAS RELIED UPON BY THE ASSESSING OFFICER, SHALL NOT APPLY TO T HE INSTANT CASE. WITH REGARD TO THE DECISIONS RELIED UPON BY LEARNED D.R, HE SUB MITTED THAT THE SIGNIFICANCE OF THE WORDS FOR CARRYING OUT ANY WOR K AS APPEARING IN SEC. 194C(1) WERE NOT CONSIDERED IN THOSE DECISIONS. HE FURTHER SUBMITTED THAT THE SIGNIFICANCE OF THOSE WORDS WERE DULY CONSIDERE D BY THIS BENCH IN THE CASE OF KRANTI ROAD TRANSPORT PVT. LTD, IN ITS ORDER DAT ED 11-08-2011 PASSED IN ITA NO.358/VIZAG/2008. IT WAS HELD IN THAT CASE THAT T HE PROVISIONS OF SEC. 194C(1) SHALL BE ATTRACTED ONLY IN RESPECT OF THE C ONTRACT WHICH INVOLVE CARRYING OUT ANY WORK. ACCORDINGLY IT WAS HELD T HEREIN THAT MERE HIRING OF LORRIES WOULD NOT FALL IN THE CATEGORY OF CARRYING OUT ANY WORK AND HENCE THE PROVISIONS OF SEC. 194C(1) SHALL NOT APPLY. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E ASSESSEE HAS HIRED LORRIES FROM THE OPEN MARKET FOR EXECUTION OF THE CONTRACT UNDERTAKEN BY IT FOR TRANSPORTATION OF GOODS. IN THE CASE OF MYTHRI TRA NSPORT CORPORATION CITED (SUPRA), IT HAS BEEN HELD THAT MERE HIRING OF TRUCK S CANNOT BE TREATED AS GIVING WORK ON SUB-CONTRACT UNLESS THE LORRY OWNERS INVOLVED THEMSELVES IN CARRYING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE BY SPENDING THEIR TIME, ENERGY AND ALSO BY TAKING THE RISKS ASS OCIATED WITH THE MAIN CONTRACT. IN THE INSTANT CASE ALSO, THE CONTENTION OF THE ASSESSEE IS THAT IT HAS MERELY HIRED THE LORRIES FROM THE OPEN MARKET. IT IS NOT SHOWN BY THE REVENUE THAT THE LORRY OWNERS, FROM WHOM THE LORRIES WERE H IRED, UNDERTOOK THE RISKS ASSOCIATED WITH THE MAIN CONTRACT. IN THAT CASE, M ERE HIRING OF LORRIES WOULD NOT COME UNDER THE CATEGORY OF SUB-CONTRACT AS HE LD IN THE CASE OF MYTHRI TRANSPORT CORPORATION, (SUPRA). ACCORDINGLY THE PR OVISIONS OF SEC. 194C(2) SHALL NOT APPLY TO THE ASSESSEE. ITA NO235/VIZAG/2011 SYED RASHEED TRANSPORTS, ONGOL E 4 7. IN THE CASE OF KRANTI ROAD TRANSPORT PVT. LT D, THIS BENCH OF THE TRIBUNAL, VIDE ITS ORDER DATED 11-08-2011 IN ITA NO.358/VIZAG /2008 CONSIDERED THE SIGNIFICATION OF THE WORDS CARRYING OUT ANY WORK AS APPEARING IN SEC. 194C(1) OF THE ACT AND HELD THAT MERE HIRING OF LOR RIES WOULD NOT FALL IN THE CATEGORY OF CARRYING OUT ANY WORK. 8. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE INCLINED TO FOLLOW THE DECISIONS RENDERED BY THIS BENCH IN THE CASE OF M/S MYTHRI TRANSPORT CORPORATION AND M/S KRANTI ROAD TRANSPORT PVT. LTD, REFERRED (SUPRA). ACCORDINGLY WE AGREE WITH THE DECISION REACHED BY L EARNED CIT(A) ON THIS ISSUE. 9. THE LD. A.R. ALSO SUBMITTED THAT THE ASSESSEE HA S OBTAINED DECLARATION IN FORM NO.15I FROM THE LORRY OWNERS AND HENCE THER E IS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE AS PER THE SECOND PROVIS O TO SEC. 194C(3)(I) OF THE ACT. ON A CAREFUL PERUSAL OF THE SAID SECTION, WE NOTICE THAT THE PROCEDURE OF OBTAINING FORM NO.15I PRESCRIBED THEREIN SHALL APPL Y ONLY IN RESPECT OF ANY SUM PAID TO A SUB-CONTRACTOR. SINCE WE HAVE TAKEN THE VIEW THAT THE HIRING OF LORRIES WOULD NOT FALL IN THE CATEGORY OF GIVING WORK ON SUB-CONTRACT, IN OUR VIEW, THE PROVISIONS OF SEC. 194C(3)(I) SHALL NOT A PPLY TO THE INSTANT CASE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ON 26.12.2011 SD/- SD/- (D. MANMOHAN) (BR BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 26 TH DECEMBER, 2011 ITA NO235/VIZAG/2011 SYED RASHEED TRANSPORTS, ONGOL E 5 COPY TO 1 ACIT, CIRCLE-2(1), GUNTUR 2 M/S. SYED RASHEED TRANSPORTS, 37-1-162(9), ISLAMP ETA, ONGOLE. 3 CIT, GUNTUR 4 THE CIT(A), GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM