Leader Transport Co., Anand V. The Income tax Officer, Ward-1, Anand

ITA 2621/AHD/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8721 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 23-03-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 14-12-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Keywords: Proportionate interest
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA.NO.2621/AHD/2005 ASSTT.YEAR : 2002-2003 LEADER TRANSPORT CO. AMUL DIARY ROAD ANAND. VS. ITO, WARD-1 ANAND. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DHIREN SHAH REVENUE BY : SMT. NEETA SHAH O R D E R PER G.D. AGARWAL, VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST ORDER OF THE CIT(A)-IV, BARODA DATED 18-10- 2005. THE FIRST GROUND RAISED BY THE ASSESSEE READS AS UNDER: 1. THE LD.CIT(A) ERRED IN FACT AND IN LAW IN CONFI RMING THE DISALLOWANCE OF RS.5,04,340/- UNDER SECTION 40A(3) OF THE IT ACT, BEING 20% OF RS.25,21,700/- PAYMENTS MADE IN CASH. 2. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE ASSESSEE IS A TRANSPORTER AND IT H IRES TRUCKS OF OTHER PERSONS FOR THE PURPOSE OF TRANSPORT BUSINESS; THAT THE HIRE CHARGES IS PAID IN PIECEMEAL BASIS I.E. SOME ADVANCE IS GIVEN TO TH E DRIVER OF THE TRUCK AND THEREAFTER THE FINAL PAYMENT IS MADE. THE AO H AS CLUBBED ALL THE PAYMENTS AND HELD THAT THE PAYMENT SO MADE WAS IN E XCESS OF RS.20,000/- . HE SUBMITTED THAT THE SECTION 40A(3) OF THE ACT, AS IT STOOD AT THE RELEVANT TIME IS APPLICABLE ONLY IN RESPECT OF EACH PAYMENT. IF EACH PAYMENT IS BELOW RS.20,000/- THEN THE ASSESSEE IS O UT OF THE PURVIEW OF SECTION 40A(3). IN SUPPORT OF THE CONTENTION, HE R ELIED ON THE DECISION OF ITA.NO.2621/AHD/2005 -2- HONBLE ORISSAL HIGH COURT IN THE CASE OF CIT VS. A LOO SUPPLY CO., 121 ITR 680. HE FURTHER SUBMITTED THAT THE SECTION 40A (3) IS AMENDED BY THE FINANCE ACT, 2008 W.E.F. 1-4-2009 WHEREIN THE AGGRE GATE PAYMENT MADE TO A PERSON IN A DAY IS TO BE CONSIDERED. HOWEVER THAT WOULD BE APPLICABLE FROM THE ASSESSMENT YEAR 2009-2010 AND N OT TO THE YEAR UNDER APPEAL WHICH IS THE ASSESSMENT YEAR 2002-2003. HE THEREFORE SUBMITTED THAT THE PAYMENT MADE BY THE ASSESSEE BELOW RS.20,0 00/- IS OUT OF THE PURVIEW OF THE SECTION 40A(3). HE ALTERNATIVELY SU BMITTED THAT EVEN OTHERWISE, THE PAYMENT MADE TO THE DRIVER IS COVERE D BY THE RULE 6DD(G) OF THE I.T. RULES, BECAUSE THE PAYMENT IS MADE TO T HE DRIVER WHO DOES NOT HAVE BANK ACCOUNT IN THE VILLAGE OR TOWN WHERE PAYM ENT IS MADE. 3. THE LEARNED DR ON THE OTHER HAND STATED THAT WHE N THE BILL OF THE TRANSPORTATION CHARGES WAS ABOVE RS.20,000/-, THE A SSESSEE HAS SHOWN THE PAYMENT BELOW RS.20,000/- JUST TO AVOID THE APPLICA BILITY OF SECTION 40A(3). SHE ALSO SUBMITTED THAT THERE IS NO SEPARA TE RECEIPT OR VOUCHER FOR PAYMENT BELOW RS.20,000/-. SUCH PAYMENT IS SUP PORTED BY THE SELF MADE VOUCHERS PREPARED BY THE ASSESSEES STAFF ON W HICH COMPLETE NAME AND ADDRESS IS NOT MENTIONED. SHE SUBMITTED THAT T HE DISALLOWANCE UNDER SECTION 40A(3) MADE BY THE AO AND SUSTAINED BY THE CIT(A) IS QUITE JUSTIFIED AND SAME SHOULD BE UPHELD. SHE ALSO RELI ED ON THE FINDINGS OF THE AO AS WELL AS THE CIT(A). 4. IN THE REJOINDER, IT IS SUBMITTED BY THE LEARNED COUNSEL THAT THE ADVANCES OF TRUCK HIRE CHARGES IS PAID TO THE DRIVE R WHO DOES NOT ISSUE ANY RECEIPT AND THEREFORE THE VOUCHER IS PREPARED B Y THE ASSESSEES STAFF WHICH IS SIGNED BY THE DRIVER WHO RECEIVES THE ADVA NCE. IN SUCH VOUCHER TRUCK NUMBER, DRIVERS NAME ETC. IS MENTIONED. SUCH ADVANCE IS ADJUSTED WHILE MAKING THE FINAL PAYMENT OF THE TRANSPORTATIO N CHARGES. HE ALSO ITA.NO.2621/AHD/2005 -3- STATED THAT THE GENUINENESS OF THE TRANSPORTATION W ORK AS WELL AS THE TOTAL PAYMENT IS NOT DOUBTED BY THE REVENUE AND THEREFORE THERE IS NO JUSTIFICATION TO DOUBT THE VOUCHERS WHICH IS DULY S IGNED BY THE DRIVERS. 5. WE HAVE HEARD THE LEARNED DR AND PERUSED MATERIA L PLACED BEFORE US. AS PER THE SECTION 40A(3), AS IT STOOD AT THE R ELEVANT TIME, THE DISALLOWANCE IS REQUIRED TO BE MADE WHERE THE ASSES SEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH THE PAYMENT IS MADE IN A SUM EXCEEDING RS.20,000/- OTHERWISE THAN THE ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT. THUS, SECTION 40A(3) REFERS TO EACH PA YMENT. IT IS ONLY AFTER THE AMENDMENT BY THE FINANCE ACT, 2008, THE AGGREGA TE PAYMENT MADE TO A PERSON, IN A DAY IS TO BE CONSIDERED. SECTION 40 A(3), AS IT STOOD PRIOR TO THE AMENDMENT BY THE FINANCE ACT, 2008 WAS INTERPRE TED BY THE HONBLE ORISSA HIGH COURT IN THE CASE OF ALOO SUPPLY CO. (S UPRA). THEIR LORDSHIPS HELD AS UNDER: THEREFORE, IF AN ASSESSEE MAKES PAYMENT AT DIFFERE NT TIMES DURING THE DAY AND HE HAS NO IDEA THAT HE HAS TO PAY TO TH E SAME PERSON ON MORE THAN ONE OCCASION, HE CANNOT BE SUBJECTED T O THE STATUTORY PROVISION CONTAINED IN S. 40A(3) OF THE ACT, UNLESS ANY ONE PAYMENT IS ABOVE RS.2,500. THE STATUTORY LIMIT OF RS.2,500 UNDER S.40A(3) OF THE ACT APPLIES TO PAYMENT MADE TO A PARTY AT A TIME AND NOT TO THE AGGREGATE OF THE PAYMENTS MADE TO A PARTY IN TH E COURSE OF THE DAY AS RECORDED IN THE CASH BOOK. THUS, THEIR LORDSHIPS OF HONBLE ORISSA HIGH COURT HAS HELD THAT THE STATUTORY LIMIT OF PAYMENT UNDER SECTION 40A(3) OF THE ACT APPLIES TO EACH PAYMENT AND NOT TO THE AGGREGATE OF THE PAYMEN T MADE TO A PARTY IN THE COURSE OF THE DAY. THE RATIO OF THE ABOVE DECI SION WOULD BE SQUARELY APPLICABLE TO THE YEAR UNDER CONSIDERATION BEFORE U S. THE LEARNED DR HAS ALSO POINTED OUT THAT THE ASSESSEE HAS NOT BEEN ABL E TO PROVE THAT THE PAYMENT WAS MADE BELOW RS.20,000/- AT A TIME, BECAU SE SUCH PAYMENT IS ITA.NO.2621/AHD/2005 -4- ONLY SUPPORTED BY SELF MADE VOUCHERS. WE ARE UNABL E TO ACCEPT THIS CONTENTION OF THE LEARNED DR BECAUSE WHEN THE PAYME NT IS MADE TO THE TRUCK DRIVER IT CANNOT BE EXPECTED THAT THE DRIVER WOULD ISSUE RECEIPT OR VOUCHER. IN SUCH CIRCUMSTANCES, IF THE VOUCHER IS PREPARED BY THE ASSESSEES STAFF, WHICH IS SIGNED BY THE DRIVER, WH O RECEIVES THE PAYMENT, IT WOULD BE SUFFICIENT EVIDENCE TO ESTABLISH THE PA YMENT MADE TO SUCH DRIVER. THE GENUINENESS OF THE TRANSPORT WORK DONE AND THE TOTAL PAYMENT MADE FOR SUCH WORK IS NOT DOUBTED BECAUSE THE DISAL LOWANCE IS MADE BY INVOKING PROVISIONS OF SECTION 40A(3), I.E. THE DIS ALLOWANCE IS MADE ONLY ON THE GROUND THAT THE PAYMENT IS MADE IN VIOLATION OF SECTION 40A(3). WHEN THE GENUINENESS OF THE TRANSPORTATION WORK DON E AND THE PAYMENT MADE FOR SUCH WORK AS A WHOLE IS NOT DOUBTED, IN OU R OPINION, THERE IS NO JUSTIFICATION TO IGNORE THE SELF MADE VOUCHERS BY W HICH THE PAYMENT IS MADE. AS PER THE SELF MADE VOUCHER, PAYMENT WAS BE LOW RS.20,000/- AT A TIME, IN RESPECT OF SUCH PAYMENT THE DECISION OF TH E HONBLE ORISSA HIGH COURT, IN THE CASE ALOO SUPPLY CO. (SUPRA) WOULD BE SQUARELY APPLICABLE. RESPECTFULLY FOLLOWING THE CASE, WE DELETE THE DISA LLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT. ACCORDINGLY, GROUND OF NO.1 OF THE ASSESSEE IS ALLOWED. 6. THE GROUND NO.2 OF THE ASSESSEE READS AS UNDER: THE LD.CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMI NG THE DISALLOWANCE OF PARKING EXPENSES INCURRED AT MADRAS BRANCH AMOUNTING TO RS.94,845/-. 7. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE AO DISALLOWED THE EXPENSES FOR PAR KING OF THE TRUCK AMOUNTING TO RS.94,845/-. THESE EXPENSES WERE MADE BY THE FIRM IN CHENNAI BRANCH ONLY WHICH WAS AT THE RATE OF RS.15/ - PER TRUCK PER TRIP. ITA.NO.2621/AHD/2005 -5- THE PAYMENT WAS MADE TO THE DRIVER OF THE TRUCK. H E THEREFORE SUBMITTED THAT THERE WAS NO JUSTIFICATION FOR DISALLOWANCE OF THE PARKING EXPENSES WHICH WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS. THE LEARNED DR ON THE OTHER HAND POINTED OUT THAT T HE ASSESSEE IS NOT THE OWNER OF THE TRUCK. IT ONLY HIRES THE TRUCK AND MA KES THE PAYMENT OF HIRE CHARGES. THEREFORE IF ANY EXPENSE ON PARKING OF TH E TRUCK IS INCURRED, IT IS THE EXPENDITURE OF THE TRUCK OWNER AND NOT THE ASSE SSEE. SHE ALSO POINTED OUT THAT THE ASSESSEE HAS ALSO BUSINESS AT OTHER BR ANCHES AS WELL AS THE HEAD OFFICE AND AT NO OTHER PLACES PARKING EXPENSE IS CLAIMED. MOREOVER, THE CLAIM OF PARKING EXPENDITURE IS NOT O N THE BASIS OF ANY ACTUAL EXPENDITURE INCURRED BY THE TRUCK OWNER, BUT IT IS PAID ON NOTIONAL BASIS AT THE RATE OF RS.15/- PER TRUCK, PER TRIP. SHE THEREFORE SUBMITTED THAT THE CLAIM OF THE PARKING EXPENSES WAS RIGHTLY DISALLOWED BY THE AO AS WELL AS THE CIT(A). 8. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE LEARNE D COUNSEL FOR THE ASSESSEE COULD NOT GIVE ANY SATISFACTORY EXPLANATIO N AS TO WHY THE ASSESSEE MADE THE PAYMENT OF PARKING EXPENSES WHEN THE TRUCKS WERE OWNED BY OTHERS AND NOT BY THE ASSESSEE. MOREOVER, NO JUSTIFICATION COULD BE GIVEN FOR MAKING SUCH PAYMENT ONLY AT CHEN NAI BRANCH WHEN NO SUCH PAYMENT IS BEING MADE AT HEAD OFFICE OR OTH ER BRANCHES. THE CLAIM OF TRUCK EXPENSES IS ONLY NOTIONAL BASIS I.E. ON THE BASIS OF PER TRIP AND NOT ON THE BASIS OF ACTUAL PARKING EXPENSES INC URRED BY THE TRUCK OWNER. CONSIDERING THE TOTALITY OF THE ABOVE FACTS , WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LO WER AUTHORITIES ON THIS POINT, THE SAME IS UPHELD, THE GROUND NO.2 OF THE A SSESSEE IS REJECTED. 9. GROUND NO.3 AND 4 OF THE APPEAL READ AS UNDER: ITA.NO.2621/AHD/2005 -6- 3. THE LD.CIT(A) ERRED IN FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF PROPORTIONATE INTEREST AMOUNTING TO RS.34,310/-. 4. THE LD.CIT(A) ERRED IN FACT AND IN LAW IN CONFIR MING PARTIAL DISALLOWANCE OF RS.43,950/- ON ACCOUNT OF SALARY EX PENSES OF NAMAKKAL BRANCH DEBITED IN BARODA BRANCH. 10. AT THE TIME OF HEARING BEFORE US, NO SPECIFIC A RGUMENTS WERE ADVANCED TO CONTROVERT THE ABOVE DISALLOWANCES MADE BY THE AO AND ALSO SUSTAINED BY THE CIT(A). IN VIEW OF THE ABOVE, WE TREAT THESE GROUNDS AS NOT PRESSED BY THE ASSESSEE AND ACCORDINGLY REJECT THE SAME. 11 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31 ST MARCH, 2010. SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 31-03-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER AR, ITAT, AHMEDABAD