Sakun Agrawal, Jharsuguda V. ITO, Jharsuguda

ITA 252/CTK/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7222 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 21-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: H K PADHEE
• Keywords: Depreciation; Business expenditure
• Section: 143(3); 194C; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 SMT. SAKUN AGARWAL, L/H OF LATE BIJAY KR. AGRAWAL, M/S. TRANSPORT STATION, PO: BELPAHAR, DIST: JHARSUGUDA. VS. ITO, WARD - 1, JHARSUGUDA PAN/GIR NO. ( ASSESSEE ) .. ( RESPONDENT ) ASSESSEE BY : SHRI H.K.PADHEE, AR REVENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 1 6 /01/ 2017 DATE OF PRONOUNCEMENT : 16 /01/ 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - CUTTACK, DATED 27.2.2015 , FOR THE ASSESSMENT YEAR 2010 - 2011 . 2. IN GROUND NO.2(A), THE GREIVANCE OF THE ASSESSEE IS THAT THE LD CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER MAKING ADDITION OF RS.2,58,360/ - ON ACCOUNT OF INTRODUCTION OF UNDISCLOSED INCOME. 2 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER FOUND THAT THE ASSES SEE HAS CAPITALIZED INTEREST PAYABLE AMOUNTING TO RS.2,58,360/ - IN HER CAPITAL ACCOUNT IN THE BUSINESS OF M/S. TRANSPORT STATION DURING THE YEAR. ON VERIFICATION OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE H AS DEBITED THE SAME INTEREST PAYABLE OF RS.2,58,360/ - IN P&L ACCOUNT AND HAS SHOWN IT AS LIABILITY UNDER THE HEAD INTEREST PAYABLE IN THE BALANCE SHEET. THE ASSESSING OFFICER TREATED THE SAME AS INTEREST PAYABLE BUT NOT ACTUALLY PAID AND ADDED IT TO T HE INCOME OF THE ASSESSEE STATING THAT THE SAME CANNOT BE CLAIMED IN THE P&L ACCOUNT. 4. ON APPEAL BEFORE LD CIT(A), THE ASSESSEE SUBMITTED THAT SHE IS THE PROPRIETOR OF M/S.TRANSPORT STATION AND PARTNER OF M/S.AGRASEN ELECTRONICS. SHE HAS TWO ACCOUNTS NAM ELY CURRENT A/C. AND CAPITAL A/C. WITH M/S.AGRASEN ELECTRONICS. SHE HAD OVERDRAWN HER CAPITAL A/C. AND THE FIRM HAS CHARGED INTEREST @12% AMOUNTING TO RS.2,58,360/ - ON HER CURRENT A/C. THE OVERDRAWN AMOUNT WAS UTILIZED AS INVESTMENT IN THE PROPRIETARY BUSI NESS M/S.TRANSPORT STATION AND THE INTEREST PAID AMOUNTING TO RS.2,58,360/ - WAS DEBITED TO THE P & L A/C. OF M/S. TRANSPORT STATION. THE AMOUNT OF RS.2,58,360/ - HAS BEEN SHOWN AS INTEREST PAYABLE AS ON 31.3.2009 IN THE BALANCE SHEET OF M/S.TRANSPORT STATIO N BECAUSE THE OVERDRAWN AMOUNT FROM THE FIRM 3 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 M/S.AGRASEN ELECTRONICS WAS EARLIER SHOWN IN THE CAPITAL AS CAPITAL CONTRIBUTION. 5. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HELD THAT THE ASSESSEE HAD TAKEN PERSONAL LOAN FROM M/S.AGRASEN ELECTRONICS AS A PARTNER DURING THE YEAR AND INTRODUCED THE SAME AS CAPITAL IN HER PROPRIETARY BUSINESS M/S.TRANSPORT STATION IN THE SAME YEAR. SHE HAD DEBITED INTEREST OF RS.2,58,360/ - TO THE P & L A/C. OF M/S.TRANSPORT STATION. SHE HAS ALSO SIMULTANEOUSL Y ACCOUNTED FOR THIS INTEREST AS PAYABLE IN HER BALANCE SHEET. HE OBSERVED THAT INTEREST AMOUNT CAN ONLY BE ALLOWED IF IT IS PAID DURING THE YEAR. IN THIS CASE SINCE THE AMOUNT APPEARS AS PAYABLE IN THE BALANCE SHEET, THE DEBITED AMOUNT IN THE P & L A/C. AGAINST INTEREST CAN ONLY BE A PROVISION. THE PROVISION FOR INTEREST PAYMENT IS NOT TREATED AS AN EXPENDITURE AND THEREFORE CANNOT BE ALLOWED IN THE P & L A/C. HENCE, THE ACTION OF THE ASSESSING OFFICER IS SUSTAINED AND THE ADDITION ON THE ISSUE IS CONFIR MED. 6. BEFORE ME, LD A.R. OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES BELOW. 7. I FIND THAT IN THE INSTANT CASE, THE ASSESSE HAS OVERDRAWN HER CAPITAL ACCOUNT IN THE PARTNERSHIP FIRM M/S. AGRASEN ELECTRONICS, WHERE SHE I S A PARTNER AND INVESTED THE SAME IN HER PROPRIETARY BUSINESS IN THE NAME OF M/S. 4 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 TRANSPORT STATION. THE INTEREST CHARGED BY THE FIRM FROM THE ASSESSEE ON THE OVERDRAWN ACCOUNT OF RS.2,58,360/ - WAS CLAIMED AS EXPENDITURE IN THE PROPRIETARY BUSINESS M/S. T RANSPORT STATION BY DEBITING TO THE PROFIT AND LOSS ACCOUNT AS THE CORRESPONDING LIABI LITY TOWARDS THE INTEREST AS WAS INTEREST PAYABLE IN THE BALANCE SHEET OF TRANSPORT STATION. THE ONLY GROUND FOR NOT ALLOWING THE DEDUCTION FOR THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE BY THE ASSESSING OFFICER AS WELL AS LD CIT(A) IS THAT THE INTEREST WAS NOT PAID DURING THE YEAR BUT WAS SHOWN AS PAYABLE AND, THEREFORE, WAS ONLY A PROVISION AND HENCE, CANNOT BE ALLOWED AS DEDUCTION TO THE ASSESSEE. I DO NOT AGRE E WITH THE CONCLUSION AS ARRIVED AT BY THE ASSESSING OFFICER AS WELL AS LD CIT(A). THE INCOME OF THE ASSESSEE AS PER THE INCOME TAX ACT HAS TO BE DETERMINED ON THE BASIS OF REGULARLY FOLLOWED METHOD OF ACCOUNTING BY THE ASSESSEE AS PER SECTION 145 OF THE I.T.ACT, 1961. THE INCOME TAX ACT ALLOWS THE ASSESSEE TO FOLLOW EITHER CASH SYSTEM OF ACCOUNTING OR MERCANTILE SYSTEM OF ACCOUNTING FOR DETERMINING ITS INCOME FROM BUSINESS OR PROFESSION. IN THE INSTANT CASE, I FIND FROM THE ASSESSMENT ORDER U/S 143(3) OF THE ACT DATED 28.3.2013 , THE ASSESSING OFFICER HAS STATED THAT METHOD OF ACCOUNTING OF THE ASSESSEE IS MERCANTILE. ACCORDING TO THE MERCANTILE METHOD OF ACCOUNTING, EXPENDITURE INCURRED AND ACCRUED AS ON THE DATE OF THE BALANCE SHEET OF THE ASSESSEE IS ALLOWABLE AS DEDUCTION TO THE ASSESSEE IF THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IT IS NOT 5 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 IN DISPUTE THAT THE AMOUNT OVERDRAWN FROM THE PARTNERSHIP FIRM M/S. AGRASEN ELECTRONICS WAS UTILIZED BY THE ASSESSEE IN ITS PROPRIETARY BUSINESS OF M/S. TRANSPORT STATION. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE WAS LIABLE TO PAY INTER EST OF RS.2,58,360/ - ON THE OVERDRAWN CAPITAL ACCOUNT WITH THE FIRM. IN THE ABOVE BACKGROUND OF THE C ASE, I AM OF THE CONSIDERED VIEW THAT THE INTEREST EXPENDITURE ACCRUED AS ON THE BALANCE SHEET DATE IS A BUSINESS EXPENDITURE, WHICH IS ALLOWABLE DEDUCTION TO THE ASSESSEE. I, THEREFORE, SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE DISALLOWANC E OF RS.2,58,360/ - AND ALLOW THIS GROUND OF APPEAL. 8. IN GROUND NO.2 (B) OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENDITURE U/S.40(A)(IA) OF THE I.T . ACT, 1961 OF RS.4,67,600/ - . 9. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE A SSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED TIPPER HIRE CHARGES OF RS.4,67,600/ - TO THE PROFIT AND LOSS ACCOUNT AND HAS SHOWN AN EQUAL AMOUNT OF RS.4,67,600/ - AS LIABILITY IN THE BALANCE SHEET. THE ASSESSING OFFICER FOUND FROM THE LEDGER COPIES OF THE ASSESSEE THAT THE ABOVE AMOUNT WERE PAID TO DIFFERENT PERSONS BY CASH DURING THE PERIOD AND PAYMENT TO EACH PERSON EXCEEDED RS.50,0 00/ - IN CASH 6 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 DURING THE FINANCIAL YEAR. THEREFORE, THE ASSESSING OFFICER OBSERVING THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TDS UNDER SECTION 194C OF THE ACT, WHICH HAS NOT BEEN DONE BY THE ASSESSEE, DISALLOWED RS.4,67,600/ - U/S.40(A)(IA) OF THE ACT. 10. ON APPEAL BEFORE LD CI T(A), THE ASSESSEE SUBMITTED THAT THERE WAS NO PRE - EXISTING CONTRACT. THE WORK WAS ASSESSED AS PER REQUIREMENT AND AFTER NEGOTIATION THE PAYMENT WAS FINALIZED. THE ASSESSEE RELIED ON THE DECISION OF ITAT, DELHI 'D' BENCH IN THE CASE OF LDS ENGINEERS PVT. LTD. V. 1T0 - 41,CCH 083 (2014) WHERE IN, IT WAS HELD THAT MACHINERY GIVEN ON MONTHLY RENTAL CANNOT BE CONSTRUED AS WORKS CONTRACT AND TAX AT SOURCE IS NOT REQUIRED TO BE DEDUCTED FOR PAYMENT MADE FOR HIRING OF SUCH MACHINERY. HE ALSO R ELIED ON THE DECISION OF ITAT, CUTTACK IN THE CASE OF M/S.UTKAL GALVANIZERS LTD. V. ACIT,CIR - L(L),CUTTACK IN ITA NO.300/CTK/2013 DATED 22.10.2014 , WHERE IT HAS BEEN HELD THAT THE AMOUNT REMAINING PAYABLE AT THE END OF THE YEAR FROM A CONTRACT SHOULD ONLY B E LIABLE TO BE COMING UNDER THE PURVIEW O F SECTION 40(A)(IA) OF THE ACT. 11. LD CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HELD THAT HONBLE CALCU TTA HIGH COURT IN THE CASE OF C RESENT EXPORT SYNDICATE & MD JAKIR HOSSAIN MONDAL, (2013) 33 TAXMANN. COM 123 (CAL) AND HONBLE GUJARAT 7 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 HIGH COURT IN THE CASE OF CIT VS. SIKANDERKHAN N. TUNVAR (2013) 33 TAXMANN.COM 133 (GUJ) HELD THAT THE DECISION OF ITAT ,VISAKHAPATNAM, SPECIAL BENCH IN THE CASE OF MERILYN SH IPPING AND TRANSPORTS , 146 TTJ 1 (VIZ) (SB) , WHEREIN, IT WAS HELD THAT SECTION 40(A)(IA) APPLIES TO THE AMOUNT OUTSTANDING AND PAYABLE AS AT THE END OF THE YEAR AND NOT TO THE AMOUNT PAID DURING THE YEAR IS NOT A GOOD LAW. THE ONLY DECISION IN FAVOUR OF THE ASSESSEE IS THAT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS VICTOR SHIPPING SERVICES (P) LTD., (2013) 357 ITR 642(ALL), AND, THEREFORE, BY THE MAJORITY VIEW, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. 12. BEFORE ME, LD A. R. OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD CIT(A) AND LD D.R. SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 13. I FIND THE UNDISP UTED FACTS ARE THAT RS.4,67,600/ - WAS PAID BY THE ASSESSEE TOWARDS TIPPER HIRE CHARGES AND HAS BEEN SHOWN AS OUTSTANDING LIABILITY IN THE BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS DISALLOWED DEDUCTION FOR THE SAME AS NO TDS WAS DEDUCTED U/S.1 94C OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE TO HIRING OF TRUCKS. FOR THIS, LD A.R. RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. BHASKARAN, (2014) 90 CCH 0227 (CHEN HC), WHEREIN, IT HAS BEEN HELD THAT 8 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 THE HIRING OF SHIPS FOR THE PURPOSE OF USING THE SAME IN THE ASSESSEES BUSINESS WOULD NOT AMOUNT TO A CONTRACT FOR CARRYING OUT ANY WORK AS CONTEMPLATED IN SECTION 194C OF THE ACT. THE TERM HI RE WAS NOT DEFINED IN THE INCOME TAX ACT. SO, WE HAVE TO TAKE THE NO RMAL MEANING OF THE WORD HIRE . NORMAL HIRE WAS A CONTRACT BY WHICH O NE GIVES TO ANOTHER TEMPORARY P OSSESSION AND USE OF THE PROPERTY OTHER THAN MONEY FOR PAYMENT OF COMPENSATION AND T HE LATTER AGREES TO RETURN THE PROPERTY AFTER THE EXPIRY OF THE AGREED PERIOD. PAYMENT OF HIRE CHARGES FOR UTILIZING SAME IN ITS BUSINESS, SUCH PAYMENT OF HIRE CHARGES WOULD NOT FALL WITHIN PROVISIONS OF SECTION 194C OF THE ACT. NO CONTRARY DECISION HAS B EEN CITED BY LD D.R. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF BHASKARAN (SUPRA), I SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE DISALLOWANCE OF RS.4,67,600/ - ON ACCOUNT OF HIRE CHARGES PAID BY HOLDING THAT PROVISIONS OF SECTION 194C IS NOT APPLICABLE ON HIRE CHARGES . THIS GROUND IS ACCORDINGLY ALLOWED. 14. IN GROUND NO. 2 (C), THE GRIEVANCE OF THE ASSESSEE IS THAT LD CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING RS.54,593/ - U/S.43B OF THE ACT. 9 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 15. I FIND THAT THIS GROUND OF APPEAL DOES NOT ARISE OUT OF THE ORDER OF LD CIT(A) AND HENCE, SAME IS DISMISSED. 16. GROUND NO. 2 (D) OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.7,68,833/ - U/S.40(A)(IA) OF THE ACT. 17. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED RS.13,83,889/ - TOWARDS INTEREST TO BANKS AND PRIVATE FINANCIERS. ON VERIFICATION, HE FOUND THAT RS.7,68,833/ - WAS PAID TO PRIVATE FINANCIERS INDUSLND BANK LTD., CITI CORP. FINANCE LTD. AND HDFC FINANCE LTD. FROM WHICH, TDS HAS NOT BEEN DEDUCTED BY THE ASSESSEE AS REQUIR ED U/S.194A OF THE ACT. HENCE, HE DISALLOWED DEDUCTION FOR RS.7,68,833/ - U/S.40(A)(IA) OF THE ACT. 18. ON APPEAL BEFORE LD CIT(A), THE ASSESSEE SUBMITTED THAT SHE HAD PAID RS.8,55,924/ - TOWARDS FINANCIAL CHARGES UNDER HIRE PURCHASE AGREEMENT (WRONGLY TAKE N AS RS.7,68,833/ - BY THE AO) AND THE PROVISIONS OF SECTION 194A OF THE ACT IS NOT APPLICABLE TO SUCH INTEREST PAYMENT. IT WAS SUBMITTED THAT ITAT HYDERABAD BENCH IN THE CASE OF DCIT VS. AGARWAL GLOBAL STEELS LTD., AND ITAT CUTTACK BENCH IN THE CASE OF UTK AL GALVANIZERS LTD.,(ITA 10 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 NO.300/CTK/2013) DT.22.10.14) HAVE HELD THAT ONLY THE AMOUNT REMAINING PAYABLE AT THE END OF THE FINANCIAL YEAR SHOULD BE SUBJECTED TO TDS. LD CIT(A) FOLLOWING THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CRESENT EX PORT SYNDICATE & MD JAKIR HOSSAIN MONDAL, (2013) 33 TAXMANN. COM 123 (CAL) AND HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDERKHAN N. TUNVAR (2013) 33 TAXMANN.COM 133 (GUJ) CONFIRMED THE ORDER OF THE ASSESSING OFFICER DISALLOWING RS.7,68,833/ - U/S.40(A)(IA) OF THE ACT. 19. I FIND THAT HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VICTOR SHIPPING SERVICES (P) LTD., (2013) 357 ITR 642(ALL ) HAS HELD THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION ON THE GROUND THAT TAX HAS NOT BEEN DEDUCTED AT SOURCE, THE AMOUNT SHOULD BE PAYABLE AND NOT IT HAS BEEN PAID BY THE END OF THE YEAR. THE SLP FILED AGAINST THE JUDGMENT OF HONBLE ALLAHAB AD HIGH COURT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT VIDE JUDGMENT DATED 2.7.2014 IN CC NO.(S) 8068/2014. IN THE INSTANT CASE, THE ASSESSEE HAS PAID INTEREST OF RS.7,68,833/ - TO PRIVATE FINANCER INDSIND BANK LTD., CITI CROP. FINANCE LTD., AND HDF C FINANCE LTD, AND NO AMOUNT WAS OUTSTANDING AND PAYABLE. THEREFORE, IN VIEW OF THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF VICTOR SHIPPING SERVICES (P) LTD (SUPRA), NO DISALLOWANCE U/S.40(A)(IA) WAS WARRANTED IN THE CASE OF THE ASSESSEE. LD CIT(A) HAS FOLLOWED THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF 11 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 CRESENT EXPORT SYNDICATE & MD JAKIR HOSSAIN MONDAL (SUPRA) AND HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDERKHAN N. TUNVAR (SUPRA) IN CONFIRMING THE DISALLOWANC E. LD A.R. OF THE ASSESSEE SUBMITTED THAT WHERE THERE ARE CONTRARY DECISIONS OF HONBLE HIGH COURTS ON AN ISSUE AND NONE OF WHICH IS HONBLE JURISDICTIONAL HIGH COURT, THEN THE DECISION IN FAVOUR OF THE ASSESSEE SHOULD BE FOLLOWED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS.VEGETABLE PRODUCTS LTD., 88 ITR 192 (SC). 20 . IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THERE IS NO AMOUNTING OUTSTANDING AND PAYABLE AT THE END OF THE YEAR. THEREFORE, I SET ASIDE THE ORDERS O F LOWER AUTHORITIES AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VICTOR SHIPPING SERVICES (P) LTD(SUPRA) DELETE THE DISALLOWANCE OF RS.7,68,833/ - MADE U/S.40(A)(IA) OF THE ACT. THIS GROUND IS ALLOWED. 21. IN GROUND NO. 2 (E) OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.10,87,029/ - . 22. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE DURING THE FINANCIAL YEAR EXECUTED JOB WORKS LIKE HOOKING, LOADING, UNLOADING, SHIFTING, TRANSPO RTATION, UNHOOKING AND STACKING WORK OF 12 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 M/S. TATA REFRACTORIES LTD. FOR THE PURPOSE OF THIS CONTRACT JOB, THE ASSESSEE HAD USED CRAIN, JCB LOADER, PAY LOADER, TRUCK, TIPPER, TRACTORS ETC. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE TRUCKS, TIPPERS AND TRACTORS THAT THE ASSESSEE HAS USED WILL COME UNDER THE MEANING OF MOTOR LORRY AS VEHICLES FOR CARRYING HEAVY LOADS BY ROAD BUT THE CRAIN, JCB LOADER, PAY LOADERS ETC. ARE NOT COMING UNDER THE MEANING OF MOTOR LORRY FOR CARRYING HEAVY LOADS BY ROADS OR RO AD TRANSPORT VEHICLES. THE ASSESSING OFFICER RELIED ON THE FOLLOWING DECISION AND, THEREFORE, ALLOWED 15% DEPRECIATION IN PLACE OF 30% DEPRECIATION CLAIMED BY THE ASSESSEE. 1) CITV. PROGRESSIVE ENGG. CO. (AP) 230 ITR 729. 2) CIT V. SIBSON CONSTRUCTION & CO . (1996) 221 ITR 468 (GUAHATI). 3) MAGTRON EARTH MOVERS V. ITO (ITA NO.818/BANG/2010 FOR THE AY 2006 - 07. 23. BEFORE LD CIT(A), THE ASSESSEE ARGUED THAT ABOVE MACHINERIES HAVE ALREADY BEEN DECLARED AS HEAVY MOTOR VEHICLES AS THE SAME WERE REGISTERED AS HEA VY MOTOR VEHICLES UNDER THE MOTOR VEHICLES ACT AND SHOULD THEREFORE BE TREATED AS MOTOR LORRIES. THE ASSESSED RELIED ON THE FOLLOWING DECISIONS: `1) GUJCO CARRIERS V. CIT (2002) 256 ITR 50 (GUJ). 2) LDS ENGINEERS PVT. LTD. V. ITO (2014) 41 CCH 083(DELHI TR IB. D BENCH). 3) FIS LOGISTICS P LTD. V. ACIT (2013) 26 ITR (TRIB B BENCH) 605 KOL. 4) ANSARI HOLDING AND INVESTMENT P LTD. V. DCIT, (2007) 12 SOT 438 (ITAT HYD A BENCH) 13 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 24. LD CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HELD THAT THE ASSESSEE HAS TRIED TO EXPLAIN THAT ALL THE ABOVE VEHICLES ARE HEAVY MOTOR LORRIES AND SHOULD BE ALLOWED DEPRECIATION OF 30%, BUT THE SAME HAVE NOT SATISFIED THE SECOND CONDITION FOR ALLOWANCE OF DEPRECIATION @30% THAT THE VEHICLES SHOULD BE USED BY THE ASSESSEE FOR HI RING PURPOSE. IN THE INSTANT CASE THE ASSESSEE HAS USED THE SAME IN HER OWN BUSINESS WHILE EXECUTING THE JOB CONTRACT U/S .194C OF THE ACT FROM M/S.TATA REFRACTORIES LTD. THEREFORE , LD CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN ALLOWING 15% DEP RECATION ON THE ABOVE VEHICLES TO THE ASSESSEE. 25. BEFORE ME, LD A.R. OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND LD D.R. SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 26. LD A.R. OF THE ASSESSEE COLD NOT CONTROVERT THE FINDINGS OF LD CIT(A) THAT THE ASSESSEE HAS FAILED TO SATISFY THE SECOND CONDITION FOR ALLOWANCE OF DEPRECIATION @30% THAT THE VEHICLES SHOULD BE USED BY THE ASSESSEE FOR HIRING PURPOSE AND NOT USED IN OWN BUSINESS OF THE ASSESSEE. THE HONBLE M.P. H IGH COURT IN THE CASE OF CIT VS. ANUPCHAND & CO. 239 ITR 466 (M.P.) HELD AS UNDER: 14 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 'THE ASSESSEE WAS A REGISTERED FIRM DERIVING INCOME FROM CONTRACT WORK. THE ASSESSEE CLAIMED DEPRECIATION ALLOWANCE AT THE RATE OF 40 PER CENT ON TRUCKS USED FOR ITS BUSINESS PURPOSE. THE INCOME TAX OFFICER ALLOWED ONLY 30 PER CENT ALLOWANCE ON THE GROUND THAT THE VEHICLES WERE USED FOR THE ASSESSEE'S OWN BUSINESS OF TRANSPORTING GOODS. ON A REFERENCE : HELD, THAT THE BENEFIT OF 40 PER CENT DEPRECIATION ALLOWANCE WAS ADMISSIBLE ONLY FOR VEHICLES USED FOR BUSINESS OF HIRE IN VIEW OF THE PROVISIONS OF ENTRY NO. III(II)E(1 - A) OF PART I OF APPENDIX I TO THE INCOME TAX RULES, 1962, AND SINCE THE ASSESSEE USED THE VEHICLES FOR ITS OWN BUSINESS OF TRANSPORTING ITS GOODS ONLY 30 PER CENT DEPRECIATION WAS ALLOWABLE.' THIS WAS FOLLOWED IN M/S ANAMAY CONSTRUCTION CO. VS UNION OF INDIA, IN I.T.A. NO.2/2013 ORDER DATED 5 TH OCTOBER, 2015. HENCE, I DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF LD CI T(A), WHICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 27. IN GROUND NO.3 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT LD CIT(A) ERRED IN ENHANCING THE ASSESSMENT BY RS.5,75,000/ - UNDER THE HEAD TIPPER HIRE CHARGES. 28. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE, THE LD CIT(A) OBSERVED THAT THE ASSESSEE HAS CLAIMED UNDER THE HEAD TIPPER HIRE CHARGES OF RS.4,67,600/ - AND RS.5,75,000/ - UNDER THE HEAD PAY LOADER HIRE 15 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 CHARGES AGGREGATING TO RS.10,42,600/ - . THE ASSESSEE CLAIMED THAT NO TDS WAS DEDUCTED FROM THE PAYMENTS MADE AS THERE WAS NO AMOUNT OUTSTANDING AND PAYABLE AS AT THE END OF THE FINANCIAL YEAR. LD CIT(A) OBSERVED THAT FROM THE BALANCE SHEET, IT IS SEEN THAT RS.4,67,600/ - IS SHOWN AS TIPPER HIRE CHARGES PAYABLE AND RS.5, 75,000/ - IS SHOWN AS LOADER HIRE CHARGES PAYABLE IN THE CURRENT LIABILITIES. THE ASSESSEE HAS CLAIMED THE SAME AMOUNT AS EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, LD CIT(A) HELD THAT AS NO TDS WAS DEDUCTED FROM THE PAYMENTS MADE UNDER THE HE AD TIPPER HIRE CHARGES AND LOADER HIRE CHARGES, THEREFORE, RS.10,42,600/ - WAS NOT ALLOWABLE DEDUCTION U/S.40(A)(IA) OF THE ACT IN PLACE OF RS.4,67,600/ - MADE BY THE ASSESSING OFFICER, THEREBY ENHANCING THE ASSESSMENT BY RS.5,75,000/ - . 29. BEFORE ME LD A.R . SUBMITTED THAT THE LD CIT(A) HAS MADE DOUBLE ADDITION OF RS.4,67,600/ - WHICH WAS ALREADY DISALLOWED BY THE ASSESSING OFFICER UNDER THE HEAD TIPPER HIRE CHARGES. 30. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDER OF LD CIT(A). 31. I FIND THAT BEING AG GRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER DISALLOWING DEDUCTION UNDER THE HEAD TIPPER HIRE CHARGES OF RS.4,67,600/ - FOR NON - DEDUCTION OF TDS U/S.194C. THE ASSESSEE PREFERRED APPEAL BEFORE LD 16 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 CIT(A). LD CIT(A) FOUND THAT APART FROM RS.4,67,600/ - UNDER THE HEAD TIPPER HIRE CHARGES A SUM OF RS.5,75,000/ - UNDER THE HEAD LOADER HIRE CHARGES WAS ALSO OUTSTANDING AND PAYABLE AND HENCE, MADE THE ADDITION FROM RS.4,67,600/ - TO RS.10,42,600/ - BY FURTHER DISALLOWING RS.5,75,000/ - . HENCE, THE CONTENTI ON OF LD A.R. OF THE ASSESSEE THAT THE DOUBLE ADDITION MADE BY LD CIT (A) IS NOT CORRECT. 32. WHILE DECIDING GROUND NO.2(D) OF THE APPEAL, I HAVE ALREADY HELD THAT PROVISIONS OF SECTION 194C ARE NOT APPLICABLE IN CASE OF TIPPER HIRE CHARGES PAID BY THE ASSESSEE. THE FACTS IN THIS GROUND OF APPEAL ARE IDENTICAL TO THE FACTS IN GROUND NO.2(D) OF THE APPEAL. THEREFORE, FOR THE REASONS GIVEN WHILE DECIDING GROUND NO.2(D) OF THE APPEAL, I SET ASIDE THE ORDER OF LD CIT(A) AND DELETE THE ADDITION OF RS.5,75,0 00/ - AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 33 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 16.1.2017 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 16 /01 /2017 B.K.PARIDA, SPS 17 ITA NO.252/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK 1. THE ASSESSEE : SMT. SAKUN AGARWAL, L/H OF LATE BIJAY KR. AGRAWAL, M/S. TRANSPORT STATION, PO: BELPAHAR, DIST: JHARSUGUDA 2. THE RESPONDENT. ITO, WARD - 1, JHARSUGUDA 3. THE CIT(A) CUTTACK 4. CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//