The aCIT,Circle-2(1), Kochi V. M/s.Unitac Energy Solutions (India) P. Ltd, Kochi

ITA 252/COCH/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9240 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-12-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 25-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: IYPE MATHEW
• Section: 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM ITA NO. 252 /COCH/201 8 : ASST.YEAR 20 13 - 20 14 THE ASST.COMMISSIONER OF INCOME - TAX, CORP.CIR.2(1) KOCHI. VS. M/S.UNITAC ENERGY SOLUTIONS (INDIA) PVT.LTD. 32/8 - B4, 2 ND FLOOR, SURYA GAYATRI, PUTHIYA ROAD, NEW JUNCTION, KOCHI - 682 032. PAN : AABCU1804G. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.A.S.BINDHU, SR.DR RESPONDENT BY : SRI. IYPE MATHEW DATE OF HEARING : 17 .12.2018 DATE OF PRONOUNCEMENT : 18 .12.2018 O R D E R PER GEORGE GEORGE K., JM THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST CIT(A) S ORDER DATED 26.03.2018 . THE RELEVANT ASSESSMENT YEAR IS 2013 - 2014 . 2. TWO ISSUES ARE RAISED IN THIS APPEAL, VIZ. (I) WHETHER THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE I.T.ACT AMOUNTING TO RS.1,17,36,529? (II) WHETHER THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.54,91,753 MADE BY THE ASSESSING OFFICER U/S 36(1)(VA) OF THE I.T.ACT ? WE SHALL ADJUDICATE THE ISSUES AS UNDER: - ITA NO. 252 / COCH /201 8 . M/S.UNITAC ENERGY SOLUTIONS (INDIA) PVT.LTD . 2 W HETHER THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE I.T.ACT AMOUNTING TO RS.1,17,36,529? 3 . THE ASSESSING OFFICER HAD DISALLOWED EXPENDITURE OF RS.1,17,36,529 BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE I.T.ACT. ACCORDING TO THE A.O., THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE U/S 194C OF THE I.T.ACT IN RESPECT OF ABOVE MENTIO NED EXPENDITURE AND HAVING FAILED TO DEDUCT THE TAX AT SO URCE, THE EXPENDITURE HAS TO BE DISALLOWED IN VIEW OF THE PROVISIONS OF SECTION 194C OF THE I.T.ACT. THE RELEVANT FINDING OF THE A.O. READS AS FOLLOWS: - PERUSAL OF SUBMISSIONS AND LEDGER ACCOUNTS SHOWED THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON PAYMENTS TO THE TUNE OF RS.1,17,36,529/ - MADE TO VEHICLE BOOKING AGENTS WHO HAVE ARRANGED VEHICLES FOR THE COMPANY ON A CONTRACTUAL BASIS AS AND WHEN REQUIRED. AS NO TAX HAS BEEN DEDUCTED AT SO URCE FROM THE SAID PAYMENTS AS REQUIRED UNDER SECTION 194C OF THE I.T.ACT, 1961, THE SAME IS DISALLOWED AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. 3.1 AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CONTENTIONS RAISED BEFORE THE CIT(A) READS AS FOLLOWS: - THE DISALLOWANCE U/S 40(A)(IA) TOTALING TO RS.1,17,36,529 WAS OF PAYMENTS MADE TO SREE SIVA BASAVA TRAVELS, PROPRIETOR OF WHICH WAS N.G.SALIMATH RS.46,93,874/ - , QRL /TOUR S & TRAVELS, PROPRIETOR IMPIYAZ DESAI OF RS.27,33,978 AND M/S.AMRATH TRANSPORT, PROPRIETOR AMRATH RS.43,08,677/ - . SECTION 194C WAS SUBSTITUTED BY THE ITA NO. 252 / COCH /201 8 . M/S.UNITAC ENERGY SOLUTIONS (INDIA) PVT.LTD . 3 FINANCE (NO.2) ACT, 2009 WITH EFFECT FROM 01.10.2009. THE SUB SECTION (6) OF 194C SPECIFIED AS FOLLOWS: NO DEDUCTION SHALL BE MADE FROM ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF A CONTRACTOR DURING A COURSE OF BUSINESS OF PLYING HIRING OR LEASING GOODS CARRIAGES, ON FURNISHING OF HIS PERMANENT ACCOU NT NUMBER TO THE PERSON PAYING OR CREDITING THIS SUM. THE A.O. DISALLOWED THIS AMOUNT ALLEGING THAT THE PAYMENTS WERE MADE TO VEHICLE BOOKING AGENTS. THIS WAS ABSOLUTELY WRONG AND THE PAYMENTS WERE MADE TO PERSONS SPECIFIED ABOVE, WHO WERE ALL ENGAGED IN THE BUSINESS OF PLYING, HIRING OR LEASING DOODS CARRIAG ES. THE DECLARATIONS FROM ALL THE THREE PERSONS ARE FURNISHED HEREWITH IN EVIDENCE OF THE FACT THAT THEY WERE ALL INCOME TAX ASSESSEE WITH PERMANENT ACCOUNT NUMBERS. SO SUB SECTION (6) OF SECTION 194C SQUARELY APPLIED TO THESE PAYMENTS AND TDS WAS NOT REQU IRED TO BE DEDUCTED FROM THESE PAYMENTS. THEREFORE THE DISALLOWANCE MADE U/S 40(A)(IA) IS NOT SUSTAINABLE UNDER LAW. 3.2 THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: - 5.4 I HAV E GONE THROUGH ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. THE ASSESSING OFFICER HAS MADE THIS DISALLOWANCE IN A MECHANICAL ROUTINE MANNER WITHOUT MAKING ANY INQUIRY OR GIVING AN OPPORTUNITY TO THE ASSESSEE OF EXPLAINING HIS STAND. HAD THE ASSESSING OFFICER CONFRONTED THE ASSESSEE, IT WOULD BE KNOWN THAT PROVISIONS, AS APPLICABLE FROM 01.10.2009 HAVE NOT BEEN VIOLATED BY THE ASSESSEE. SUBMISSION OF THE ASSESSEE IN THIS RESPECT IS SELF - EXPLANATORY. DECLARATIONS HAVE BEEN OBTAINED BY THE ASSESSEE FROM A LL THE THREE PARTIES ALONG WITH THIS ITA NO. 252 / COCH /201 8 . M/S.UNITAC ENERGY SOLUTIONS (INDIA) PVT.LTD . 4 PAN. IN VIEW OF THESE FACTS, THE DISALLOWANCE MADE CANNOT BE SUSTAINED AND THE ADDITION IS DELETED. THESE GROUNDS OF APPEAL OF THE APPELLANT ARE ALLOWED ACCORDINGLY. 3.3 THE REVENUE BEING AGGRIEVED HAS RAISED THIS ISS UE BEFORE THE TRIBUNAL. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT NO EVIDENCE WAS PRODUCED TO SHOW THAT THE PAYMENT OF RS.1,17,36,529 WAS MADE TO CONTRACTORS, WHO ARE IN THE BUSINESS OF PLYING, LEASING OF GOODS CARRIAGES ETC. THEREFORE, ACCORD ING TO THE LEARNED DR THAT THE PROVISIONS OF SECTION 194C(6) OF THE I.T.ACT WILL NOT HAVE APPLICATION AND THE ASSESSEE OUGHT TO HAVE DEDUCTED THE TAX AT SOURCE. THEREFORE, IT WAS CONTENDED THAT THE CIT(A) HAD ERRED IN DELETING THE DISALLOWANCE MADE BY THE A.O. U/S 40(A)(IA) OF THE I.T.ACT. 3.4 THE LEARNED AR, ON THE OTHER HAND, HAS FILED A PAPER BOOK ENCLOSING DECLARATION U/S 194C(6) OF THE I.T.ACT FROM M/S.AMARNATH TRANSPORTS, M/S.QRL TOURS & TRAVELS, AND M/S.SHRI SHIVBASAV TRAVELS. THE LEARNED AR SUBMIT TED THAT THE PAYMENTS ARE MADE TO CONTRACTORS, WHO ARE IN THE BUSINESS OF RUNNING OF PLYING, LEASING OF GOODS CARRIAGES AND DECLARATION WAS DULY SUBMITTED U/S 194C(6) OF THE I.T.ACT. THEREFORE, IT WAS CONTENDED THAT THE ASSESSEE WAS NOT LIABLE FOR TAX DEDU CTION AT SOURCE. 3.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE PAYMENT OF RS.1,17,36,529 WERE MADE TO THREE PARTIES, VIZ., M/S.AMARNATH TRANSPORTS, M/S.QRL TOURS & TRAVELS, AND M/S.SHRI SHIVBASAV TRAVELS. WHEN SUCH ITA NO. 252 / COCH /201 8 . M/S.UNITAC ENERGY SOLUTIONS (INDIA) PVT.LTD . 5 HUGE PAYMENTS ARE MADE BY THE ASSESSEE, NATURALLY THERE WOULD BE AGREEMENT ENTERED BY THE ASSESSEE FOR SUCH PAYMENTS. IT IS NOT CLEAR WHETHER PAYMENTS ARE MADE TO CONTRACTORS, WHO ARE IN THE BUSINESS OF PLYING, LEASING OF GOODS CARRIAGES ETC., OR TO TH E VEHICLE BOOKING AGENTS. THE ASSESSING OFFICER IN THE IMPUGNED ORDER STATED THAT THE PAYMENTS ARE MADE TO VEHICLE BOOKING AGENTS. IF EXPENDITURE IS INCURRED FOR VEHICLE BOOKING AGENTS, PROVISIONS OF SECTION 194C WOULD HAVE APPLICATION AND THE ASSESSEE OUG HT TO HAVE DEDUCTED TAX AT SOURCE. ONLY ON PERUSAL OF THE AGREEMENT ONE CAN DETERMINE WHETHER THE EXPENDITURE WAS INCURRED FOR PAYMENTS TO THE CONTRACTORS OR TO THE VEHICLE BOOKING AGENTS. T HERE IS NO MATERIAL ON RECORD TO DETERMINE WHETHER EXPENDITURE WAS INCURRED FOR PAYMENT TO CONTRACTORS, WHO ARE IN THE BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGE AND PROVISIONS OF SECTION 194C(6) OF I.T.ACT HAS APPLICATION. THE A.O. HAD ALSO MERELY MENTIONED IN THE IMPUGNED ASSESSMENT ORDER THAT THE PAYMENTS AR E MADE TO VEHICLE BOOKING AGENT S , SINCE THERE IS NO CLARIFY AS TO WHETHER PAYMENTS ARE MADE TO CONTRACTORS OR AGENTS, IN THE INTEREST OF JUSTICE AND EQUITY, WE ARE OF THE VIEW THAT THE MATTER NEEDS TO BE EXAMINED AFRESH BY THE ASSESSING OFFICER. THE ASSE SSEE SHALL PRODUCE NECESSARY EVIDENCES THAT THE PAYMENT OF RS.1,17,36,529 WAS MADE TO CONTRACTORS, WHO ARE IN THE BUSINESS OF PLYING OF VEHICLES, GOODS CARRIAGES ETC. AND NOT TO AGENTS AS ALLEGED BY THE ASSESSING OFFICER. IT IS ORDERED ACCORDINGLY. HENCE G ROUND NO.2 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 252 / COCH /201 8 . M/S.UNITAC ENERGY SOLUTIONS (INDIA) PVT.LTD . 6 WHETHER THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.54,91,753 MADE BY THE ASSESSING OFFICER U/S 36(1)(VA) OF THE I.T.ACT ? 4. THE ASSESSING OFFICER HAD DISALLOWED A SUM OF RS.54,91,753, BEING EMPLOYEES CONTRIBUTION TO PF AND ESI . THE DISALLOWANCE MADE BY THE A.O. WAS FOR THE REASON THAT THE SAID EMPLOYEES CONTRIBUTION TO PF AND ESI WAS NOT PAID BY THE ASSESSEE WITHIN THE DUE DATE SPECIFIED IN THE RESPECTIVE LABOUR STATU TES. 4.1 AGGRIEVED BY THE DISALLOWANCE, ASSESSEE FILED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) WAS OF THE VIEW THAT SINCE THE PAYMENT WAS MADE WITHIN THE DUE DATE SPECIFIED U/S 139(1) OF THE I.T.ACT, THE ASSESSEE WAS ENTITLED TO THE DEDUCTION OF CLAIM OF EMPLOYEES CONTRIBUTION TO PF AND ESI AMOUNTING TO RS.54,91,753. THE CIT(A) ALSO REFERRED TO THE JUDGMENT OF THE HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT V. RAJASTHAN STATE BEVERAGES CORPORATION PVT. LTD. [(2017) 250 TAXMAN 0016 ] . THE SLP FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE HONBLE RAJASTHAN HIGH COURT WAS DISMISSED BY THE HONBLE APEX COURT. 4.2 THE REVENUE BEING AGGRIEVED, HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. MERCHEM LIMIT ED [(2015) 378 ITR 443 (KER.)] . THE LEARNED AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME - TAX AUTHORITIES. ITA NO. 252 / COCH /201 8 . M/S.UNITAC ENERGY SOLUTIONS (INDIA) PVT.LTD . 7 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE LEARNED AR STRONGLY RELIED ON THE JUDGME NT OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. RAJASTHAN STATE BEVERAGES CORPORATION PVT. LTD. (SUPRA) . THE LEARNED AR ALSO PRODUCED COPY OF THE ORDER OF THE HONBLE APEX COURT DISMISSING THE SLP FILED AGAINST THE HONBLE RAJASTHAN HIGH COURT . IT IS TRITE LAW THAT DISMISSAL OF SLP IS NOT CONFIRMATION OF THE JUDGMENT OF THE HONBLE HIGH COURT. 4.4 THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MERCHEM LIMITED (SUPRA) AFTER ELABORATELY CONSIDERING THE JUDICIAL PRONOUNCEMENTS ON THE ISSUE HAD DECIDED THE CASE IN FAVOUR OF THE REVENUE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MERCHEM LIMITED (SUPRA) HAD CATEGORICALLY HELD THAT EMPLOYEES CONTRIBUTION TO PF AN D ESI, IF NOT PAID WITHIN THE DUE DATE MENTIONED IN THE RESPECTIVE STATUTE CANNOT BE ALLOWED AS A DEDUCTION U/S 36(1)(VA) OF THE I.T.ACT. THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MERCHEM LIMITED (SUPRA) WAS FOLLOWED BY THE RECEN T JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF ALLIAZ CORHILL INFORMATION SERVICES (P) LTD. V. DCIT [(2018) 406 ITR 150 (KER.)]. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, WE HOLD THAT THE ASSESSING OF FICER HAS CORRECTLY DISALLOWED THE SUM OF RS. 54,91,753 . THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 36(1)(VA) OF THE I.T.ACT. IT IS ORDERED ACCORDINGLY. ITA NO. 252 / COCH /201 8 . M/S.UNITAC ENERGY SOLUTIONS (INDIA) PVT.LTD . 8 4.5 THEREFORE, GROUND 3 RAISED BY THE REVENUE IS ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THIS 18 TH DAY OF DECEMBER, 2018 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN ; DATED : 18 TH DECEMBER, 2018 . DEVDAS* COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - I , KOCHI. 4. THE CIT, KOCHI. 5. DR, ITAT, COCHIN 6 . GUARD FILE.