Gujarat Maharashtra Roadways, Ahmedabad V. The Income tax Officer, Ward-9(4), Ahmedabad

ITA 2633/AHD/2009

• Counselvise Citation: 263320514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 23-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Section: 143(3); 194C; 201(1)

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY - AM ITA NO.2633/AHD/2009 (ASSESSMENT YEAR:-2005-06) M/S GUJARAT MAHARASHTRA ROADWAYS, NEAR VIJAY TRANSPORT, LOKHAND BAZAR SARANGPUR, AHMEDABAD- 380 002 V/S THE INCOME-TAX OFFICER, WARD-9(4), AHMEDABAD PAN: AABFG 7622 G [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N SOPARKAR, AR REVENUE BY:- SHRI VINOD TANWANI, SR. DR DATE OF HEARING:- 11-01-2012 DATE OF PRONOUNCEMENT:- 25-01-2012 O R D E R PER D K TYAGI (JM) :- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 22-07-2009 FOR TH E ASSESSMENT YEAR 2005-06. 2 DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE FI LED CONCISE GROUNDS OF APPEAL. 3 GROUND NO.1 READS AS UNDER:- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE U/S 40A(IA) OF RS.37,98,977/- [RS.27,8 3,670 + RS.10,15,307] HOLDING THAT THE APPELLANT SHOULD HAV E MADE DEDUCTION OF TDS @ 2% AS AGAINST 1% DEDUCTED BY THE APPELLANT FROM FREIGHT PAYMENTS. YOUR APPELLANT SUB MITS THAT 2 PAYMENT MADE BY IT TO THE TRUCK OPERATORS WAS IN TH E NATURE OF SUB CONTRACT AND HENCE WAS RIGHTLY SUBJECTED TO TDS @ 1%. IT IS SUBMITTED THAT IT BE SO HELD NOW. 4 AT THE TIME OF HEARING BEFORE US, THE LEARNED COU NSEL OF THE ASSESSEE SUBMITTED THAT SAME ISSUE CAME UP BEFORE T HE TRIBUNAL IN PROCEEDINGS U/S 201 / 201(1A) OF THE ACT AND THE TRIBUNAL HAD RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THE AO HAS PASSED THE ORDER IN PURSUA NCE OF THIS TRIBUNALS ORDER AND AFTER MAKING DETAILED INQUIRIE S, HAS HELD THAT THE TRUCK OWNERS FROM WHOM THE ASSESSEE HIRES THE TRUCKS ARE SUB-CONTRACTORS ONLY AND, THEREFORE THE PAYMENTS MA DE BY THE ASSESSEE TO THEM ARE COVERED BY SECTION 194C(2) OF THE ACT AND ACCORDINGLY THE ASSESSEE WAS REQUIRED TO DEDUCT TDS AT THE RATE OF 1% ONLY, THEREFORE, THE GROUND TAKEN BY THE ASSE SSEE MAY KINDLY BE ALLOWED AS THERE IS NO VIOLATION OF SECTI ON 40A(IA) ON THE PART OF THE ASSESSEE. 5 THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT IN THE PROCEEDINGS U/S 201(1A), THE MATTER HAS BEEN RESTOR ED BACK BY THE TRIBUNAL TO THE FILE OF THE AO, IN THIS APPEAL ALSO THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR F RESH ADJUDICATION FOR NECESSARY VERIFICATION. 6 WE FIND THAT IN PURSUANCE TO THE ORDER OF THE TRI BUNAL IN PROCEEDINGS U/S 201 / 201(1A), THE AO HAS PASSED TH E FOLLOWING ORDER. (3) PAYMENT OF FREIGHT TO TRUCK OPERATORS DURING THE YEAR ABOVE RS.50,000/- WHICH TAX WAS DEDUCTED AND PAID RS.55,67,311 3 THE ASSESSEE HAS FURNISHED PARTY WISE DETAILS OF TH E PAYMENT OF FREIGHT MADE TOTALING TO RS.55,67,311/- THE SAME ARE VERIFI ED ALONG WITH THE VOUCHERS FOR PAYMENT MADE ASSESSEE HAS DEDUCTED 1% TDS FROM PAYMENT MADE TO THE TRUCK OWNERS THE ASSESSEE HAS F URTHER SUBMITTED THAT THESE TRUCK OWNERS ARE SUBCONTRACTORS AND HENC E COVERED BY THE PROVISIONS OF SECTION 194C(2) AND ACCORDINGLY THE P AYMENTS MADE TO THEM ARE SUBJECT TO DEDUCTION OF TAX AT THE RATE OF 1% AND NOT AT 2%. IN SUPPORT OF ITS CLAIM AS TO THE TREATME NT OF THE TRUCK OWNERS AS SUBCONTRACTORS THE ASSESSEE FIRM HAS MADE SUBMIS SION AS UNDER:- 'WHEN GMR (GUJ. MAHARASHTRA ROADWAYS) BOOKS A PARCE L FROM THE CUSTOMER TO BE TRANSPORTED FOR HIM GMR ISSUES A GR TO THE CUSTOMER. WE LIKE TO BRING TO YOUR KIND NOTICE THE CLARIFICAT ION PROVIDED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) IN THE CIRCULA R NO. 715 THAT EACH GR ISSUED IS SEPARATE CONTRACT. WE FURNISH HER EWITH A COPY OF THE CIRCULAR FIR YOUR KIND REFERENCE. NOW, IN TERMS OF THE GR THE GMR IS A CONTRACTOR. NOW, THE GMR ENGAGES OUTSIDER TRUCK OPERATORS WHO C ARRIES OUT TRANSPORTATION OF GOODS FROM AHMADABAD 10 DESTINATI ONS. FOR THE WORK OF TRANSPORTATION THEY ARE PAID TRANSPORT CHAR GES (MOTOR BHADA) BY GMR. THE PARTIES WHO BOOK THE CONSIGNMENTS WITH GMR ALSO DEDUCT INCOME-TAX AT THE RATE OF 2% U/S 194C(1) FRO M PAYMENT OF FREIGHT TO GMR TREATING GMR AS CONTRACTOR, WHEREVER APPLICABLE. THUS GMR BEING A CONTRACTOR, WHEN IT ENGAGES THE TR UCK OPERATORS FOR TRANSPORTATION OF THE GOODS. THE TRUCK OPERATORS AR E SUB-CONTRACTORS ONLY. WE LIKE TO BEING TO YOUR KIND NOTICE THE CIRC ULAR ISSUED BY THE BOMBAY GOODS TRANSPORT ASSOCIATION WHEREIN IT IS CL EARLY MENTIONED THAT THE TRUCK OWNER IS BEING CONSIDERED AS A SUB-C ONTRACTOR. THE PAYMENT OF FREIGHT PAID TO THE TRUCK OWNERS WILL BE FALL U/S 194C(2) AND NOT U/S 194C(1). WE LIKE TO BRING TO YOUR KIND NOTICE ALSO THE SUBSE QUENT AMENDMENT MADE IN THE LAW BY FINANCE ACT 2005 BY WAY OF INSER TION OF SECOND PROVISO TO CLAUSE(L) TO SECTION 194C WHICH READ AS UNDER: - 'PROVIDED FURTHER THAT NO DEDUCTION SHALL BE MADE U NDER SUBSECTION (2) FROM THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKE LY TO BE PAID OR 4 CREDITED DURING THE PREVIOUS YEAR TO THE ACCOUNT OF THE SUB-CONTRACTOR DURING THE COURSE OF BUSINESS OR PLYING, HIRING OR LEASING GOODS CARRIAGES, ON PRODUCTION OF A DEDUCTION TO THE PERS ON CONCERNED PAYING OR CREDITING SUCH SUM, IN THE PRESCRIBED FOR M AND VERIFIED IN THE PRESCRIBED MANNER AND WITHIN SUCH TIME AS MAY B E PRESCRIBED, IF SUCH SUB-CONTRACTOR INDIVIDUAL WHO HAS NOT OWNED MO RE THAN TWO GOODS CARNAGES AT ANY TIME DURING THE PREVIOUS YEAR ' IN PURSUANCE OF THE ABOVE PROVISO, FORM NO 15 I IS PRESCRIBED. THE TITLE FORM NO. 151 AND THE CONTENTS THEREOF READ WI TH THE ABOVE PROVISO MAKE IT AMPLY CLEAR THAT THE TRUCK OWNERS A RE SUB-CONTRACTOR ONLY AND AS HAS BEEN POINTED OUT THAT IN THE PROVIS O THEY ARE GOVERNED BY SUB SEC.(2) OF SECTION' 194C. THE PAYMENTS IN SU CH CIRCUMSTANCES ATTRACT TAX DEDUCTION AT 1 % AND NOT 2%. IT IS AGREED THAT THE DECLARATION CAN BE FURNISHED BY ONLY AN INDIVIDUAL AND NOT BY OTHERS. HOWEVER IT DOES NOT CHARGE THE S TATUS OF THE TRUCK OWNERS. THEY REMAIN SUBCONTRACTORS ONLY, WHETHER TH EY CAN FURNISH DECLARATION OR NOT.' THE SUBMISSION MADE BY THE ASSESSEE IS CONSIDERED. THE ASSESSEE'S SUBMISSION THAT AS PER CBDT CIRCULAR IN FORM OF QUE STION AND ANSWER, 'EACH GR IS A CONTRACT AND ACCORDINGLY THE ASSESSEE HAVING ISSUED GR AT THE TIME OF ACCEPTING THE PARCEL BECOMES THE CON TRACTOR IS FOUND TO BE ACCEPTABLE. I HAVE ALSO NOTED THAT THE CUSTOMERS OF THE ASSESSEE HAVE DEDUCTED 2% TAX IN THE CASES WHERE THE TDS PRO VISIONS WERE, APPLICABLE TO THE RESPECTIVE CUSTOMERS. I HAVE EXAM INED ALL THE FACTS OF THE CASE, THE RELATIONSHIP BETWEEN THE ASSESSEE FIR M WITH THEIR CUSTOMERS AND WITH THAT OF THE CASE, THE FACT THAT THE CUSTOMERS DEDUCT TAX @ 2% FROM THE PAYMENTS MADE TO THE ASSESSEE TRE ATING THEM THE CONTRACTS AND ALSO THE TERMS ON WHICH THE ASSESSEE CARRIES OUT THE WORK OF THE CUSTOMERS BASED ON THE GRS ISSUED TO THEM. THE ASSESSEE HAS ALSO SUBMITTED AND EXPLAINED THE A MENDMENTS MADE IN SECTION 194C SINCE THEN AND THE PRESENT POSITION OF THE AMENDED LAW. THE SUBSEQUENT AMENDMENT IN THE LAW AND IN PAR TICULAR INSERTION OF THE SECOND PROVISO TO SEC. 194C(3) BY THE FINANC E ACT,2005 WITH EFFECT FROM 1 ST JUNE, 2005 MADE THE LAW VERY CLEAR AS TO THE STATU S OF THE TRUCK OWNERS IN SUCH A CASE. 5 HAVING CONSIDERED ALL THE FACTS OF THE CASE AND ON THE BASIS OF THE RELEVANT MATERIALS AND ALSO IN THE LIGHT OF THE SUB SEQUENT LEGAL CLARITY ON THE ISSUE. I AM OF THE OPINION THAT THE TRUCK OW NERS FROM WHOM THE ASSESSEE HIRES THE TRUCKS ARE SUBCONTRACTORS ONLY A ND THE PAYMENTS MADE WILL BE COVERED BY SECTION 194C(2) OF THE ACT, AND SUBSEQUENTLY ATTRACT DEDUCTION OF TDS @ 1% ONLY. 7 SINCE THE AO IN PROCEEDINGS U/S 201(1A), AFTER DE TAILED INQUIRIES OF THE ISSUE, HAS HELD THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TDS AT THE RATE OF 1% ONLY AS IN ASSESSEES CASE THE PROVISIONS OF SECTION 194C(2) ARE ATTRACTED, WE FEE L NO NEED TO SEND THE MATTER BACK AGAIN TO THE FILE OF THE AO AN D ALLOW THIS GROUND OF THE ASSESSEE, AS THERE IS NO VIOLATION OF SECTION 40A(IA) ON THE PART OF THE ASSESSEE. THIS GROUND OF THE ASS ESSEE IS ALLOWED. 8 GROUND NOS.2 AND 3 READ AS UNDER:- 2 THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN D ISALLOWING AN AMOUNT OF RS.32,21,551/- PAID TOWARDS CROSSING BHAD A [SECONDARY FREIGHT] U/S 40A(IA) ON THE GROUND THAT NO TDS HAS BEEN DEDUCTED BY THE DELIVERY AGENT TO THE TRUCKS O WNERS WHILE MAKING PAYMENT TO THEM. IT IS SUBMITTED THAT IT BE SO HELD NOW. 3 THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN D ISALLOWING AN AMOUNT OF RS.7,64,737/- TOWARDS PREVIOUS FREIGHT U/ S 40A(IA) OF THE ACT ON THE GROUND THAT REQUIRED TDS HAS NOT BEE N MADE FROM THE SAID PAYMENTS. 9 THESE GROUNDS HAVE BEEN DEALT WITH BY THE LEARNED CIT(A) IN PARAS 4 AND 5 OF HIS ORDER AS UNDER:- 4 NO TDS AT ALL ON SECONDARY FREIGHT DEBITED IN TH E P&L ACCOUNT OF RS.32,21,551 : 6 THE FREIGHT CHARGES PAID BY THE DELIVERY AGENTS AN D RECOVERED BACK BY THE DELIVERY AGENTS FROM THE APPELLANT HAVE BEEN DE BITED AS EXPENSE UNDER THE NOMENCLATURE OF SECONDARY FREIGHT IN THE P&L ACCOUNT REPRODUCED IN PARA 5 ABOVE. I AGREE WITH THE AO WHE N SHE STATES THAT THIS IS JUST AN ARRANGEMENT BETWEEN THE BOOKING AND THE DELIVERY AGENT OR IN OTHER WORDS THIS IS JUST AN ARRANGEMENT BETWE EN THE APPELLANT AND THE DELIVERY AGENT. AND AS THE APPELLANT IS PAYING FREIGHT TO THE DELIVERY AGENT FINALLY, THIS PAYMENT DOES ATTRACT T DS LIABILITY AND ON THE SUM OF RS.32,21,551 TDS AT 2% SHOULD HAVE BEEN DEDUCTED BY THE APPELLANT WHEREAS NO TDS HAS BEEN MADE AT ALL ON TH IS FREIGHT BY THE APPELLANT. THE ADDITION IS CONFIRMED. 5 NO TDS ON PREVIOUS FREIGHT OF RS.7,64.737: BESIDES THE FOUR PARTIES LIKE ARCO TRANSPORT COMPANY ETC. WHO DELIVE R GOODS IN THE INTERIOR PARTS OF MAHARASHTRA THE APPELLANT HAS PAR TIES IN SAURASHTRA, TO WHOM COMMISSION IS PAID AND AS WELL AS FREIGHT IS R EIMBURSED, HI THE BACKGROUND OF THE FACTUAL POSITION OF THE MODUS OPE RANDI ADOPTED BY THE APPELLANT FOR RUNNING ITS BUSINESS, ENTERING IN TO AGREEMENTS WITH THE FOUR DELIVERY AGENTS SHOWING AS IF ONLY SERVICE CHARGES ARE BEING PAID ON WHICH TDS IS DEDUCTED THOUGH THE FACT IS DE LIVERY AGENTS ARE PAID THE ENTIRE FREIGHT THAT THESE AGENTS INCUR WHI LE CONDUCTING ACTUAL TRANSPORTATION, I AM INCLINED TO AGREE WITH THE OBS ERVATIONS OF THE AO (PAGE 10 OF THE ASSESSMENT ORDER) WITH RESPECT TO A TTRACTION OF TDS LIABILITY ON 'PREVIOUS FREIGHT' OF RS.7,64,737 PAID TO THE PARTIES BOOKING AGENTS IN SAURASHTRA. ON THIS AMOUNT THE AP PELLANT DID NOT DEDUCT ANY TDS. THE ADDITION U/S.40A(IA) IS CONFIRM ED. 10 AT THE TIME OF HEARING, BOTH THE PARTIES AGREED THAT FULL DETAILS/FACTS IN RESPECT OF THESE TWO GROUNDS ARE N OT ON RECORD, THEREFORE, THE MATTER REQUIRES TO BE RESTORED FOR F RESH ADJUDICATION AFTER BRINGING ALL THE NECESSARY DETAI LS / FACTS ON RECORD. FOR THIS, WE RESTORE THESE ISSUES TO THE FI LE OF THE AO. WE HOLD ACCORDINGLY. THESE GROUNDS OF APPEAL ARE ALLOW ED FOR STATISTICAL PURPOSES. 11 GROUND NO.4 READS AS UNDER:- 7 4 THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN ENHANCING THE DISALLOWANCES U/S 40A(IA) ON ACCOUNT OF NON-DEDUCTI ON OF TDS ON PRIMARY FREIGHT PAYMENT BY A SUM OF RS.64,82,238/- PAID BY THE APPELLANT DURING THE PERIOD 1-4-2004 TO 30-9-2004. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE LAW WAS AMENDE D IN RESPECT OF TDS FOR TRANSPORT CONTRACT U/S 194C W.E.F. 1-10-200 4 AND PRIOR TO THAT TDS WAS APPLICABLE ONLY FOR TRANSPORT CONTRACTS WHI CH EXCEEDED RS.20,000/-PER CONTRACT. IT IS SUBMITTED THAT IT BE SO HELD NOW AND ADDITIONS MADE FOR RS.64,82,238/- U/S 40A(IA) BY WA Y OF ENHANCEMENT BY THE LEARNED CIT(A) BE DELETED. 12 AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL OF THE ASSESSEE SUBMITTED THAT THE SAME ISSUE CAME UP BEFO RE THE TRIBUNAL AND THE MATTER WAS RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. IN THE ORDER PASSED U/S 201(1A) IN PURSUANCE TO THE ORDER OF THE TRIBUNAL, THE AO, AFTER DETAILE D INQUIRIES, HAS COME TO THE CONCLUSION THAT THE PAYMENTS MADE WERE COVERED BY THE FIRST PROVISO TO SECTION 194C(3) AS IT STOOD PR IOR TO ITS SUBSTITUTION BY THE FINANCE ACT, 2004 AND THE PAYME NTS WERE NOT LIABLE TO DEDUCTION OF TAX AT SOURCE, THEREFORE, TH ERE WAS NO VIOLATION OF SECTION 40A(IA) OF THE ACT ON THE PART OF THE ASSESSEE AND THEREFORE THIS GROUND OF THE ASSESSEE ALSO DESE RVES TO BE ALLOWED. 13 AFTER HEARING BOTH THE PARTIES, WE FIND THAT IN THE ORDER PASSED BY THE AO IN PURSUANCE OF THE TRIBUNALS ORD ER, THE AO HAS DEALT WITH THE ISSUE AS UNDER:- THE ASSESSEE IS PARTNERSHIP FIRM INVOLVED IN AT TH E BUSINESS OF TRANSPORT CONTRACTOR AND BOOKING AGENTS. THE ASSESS EE FIRM IS HIRING TRUCKS FROM THE TRUCK OWNERS AND USES THEM FOR THEI R BUSINESS OF TRANSPORTATION AND PAID THEM TRANSPORTATION CHARGES . A SURVEY WAS CONDUCTED ON 11-03-05 ON THE BUSINESS PREMISES OF T HE FIRM AT ABOVE ADDRESS. DURING THE SURVEY IT WAS OBSERVED THAT THE ASSESSEE DID NOT 8 DEDUCT TAX AT SOURCE FROM THE SERVICE CHARGES PAID TO THEIR COUNTERPARTS IN THE STATE OF MAHARASHTRA. THE PAYMENTS IS FOUND TO BE IN THE NATURE OF PAYMENTS TO CONTRACTORS AND OR SUBCONTRACTORS AN D HENCE WAS SUBJECT TO THE DEDUCTION U/S 194C(1) OR 194C(2) OF THE ACT. THE 1TO (TDS) HAD PASSED ORDER DETERMINING THE TOTAL AMOUNT OF RS3,54,81,832/-(RS.2,88,88,221+RS.65,93,61L) ON WHI CH THE TAX WAS NOT DEDUCTED AT SOURCE U/S 194C(1) OF THE ACT. TOTA L TAX U/S 201(1) AND 201(1A) COMES TO RS.7,52,214/- AGGRIEVED TO THE ORDER ASSESSEE PREFER AN APPEAL TO THE CIT(A). THE HON'BLE CIT(A) VIDE ORDER DT.5-01-06 DIRECTED ITO ( TDS) TO VERIFY THE CLAIM OF THE ASSESSEE FOR R.S. 31,00694/-. THE A.O HAS PASSED ORDER DT.20-06-06 AND GIVE RELIEF TO THE ASSESSEE FOR RS. 31,00,694/- TOTAL DEMAND WAS REDUCED TO RS.7,17,7147- THE ASSESSEE HA S PREFERRED AN APPEAL TO THE I.T.A.T. THE HON'BLE TRIBUNAL VIDE ITS ORDER NO. 684/AHD/200 6 DT.6-12-2009 HAS RESTORED BACK THE FILE TO THE I.T.O. FOR ADJUDI CATION OF THE FOLLOWING GROUNDS BY VERIFYING THE RECORDS AND PASS ING A SPEAKING ORDER AFTER GIVING REASONABLE OPPORTUNITY TO THE TO THE ASSESSEE. THE HON'BLE ITAT HAS ISSUED DIRECTIONS FOR ADJUDICATION ON THE FOLLOWING ISSUES. (1) PAYMENTS OF FREIGHT TO PARTIES WHICH IN INDIVIDUAL CONTRACT DID NOT EXCEED RS.20.000/- AND THE TOTAL PAYMENT DURING THE FINANCIAL YEAR DID NOT EXCEED RS.50,000/- AND HENCE NO DEDUCTION WAS CALLED FOR UNDER SECTION 194C(3)(I) RS.1,37,31,418 (2) CASES WERE TOTAL PAYMENT OF FREIGHT DURING THE FINANCIAL YEAR EXCEED RS.50,000/-BUT PAYMENTS MADE PRIOR TO 1 ST OCT. 2004 RS.64,82,238 (3) PAYMENT OF FREIGHT TO TRUCK OPERATORS DURING THE YEAR ABOVE RS.50,000/-ON WHICH TAX WAS DEDUCTED AND PAID. RS.55,67,311 9 AS PER THE DIRECTIONS ISSUED BY THE HON'BLE I.T.A. TRIBUNAL A SHOW CAUSE NOTICE TO THE ASSESSEE BEING ISSUED AND SERVE D UPON THE ASSESSEE. 20-01-2010.IN RESPONSE TO SHOW CAUSE SHRI BHARAT C. MEHTA C.A. OF THE ASSESSEE FIRM ATTENDED ALONG WITH SHRI NAZIR PA TNI THE ACCOUNTANT AND SUBMIT THE DETAILS AND EXPLANATIONS CALLED FOR. I HAVE CARE FULLY CONSIDERED THE CONTENTIONS AND AL SO BOOKS OF ACCOUNTS, VOUCHERS AND RECORDS OF THE ASSESSEE PLAC ED BEFORE ME FOR VERIFICATIONS. MY FINDINGS ON THE ABOVE THREE ISSUE S ARE AS UNDER:- (1) ------ -------- (2) CASES WHERE TOTAL PAYMENT OF FREIGHT DURING THE FY EXCEEDED RS.50,000/- BUT PAYMENTS MADE PRIOR TO 1 ST OCTOBER, 2004. RS.64,82,238/- THE ASSESSEE WAS ALSO ASKED TO FURNISH THE PARTY WI SE DETAILS OF PAYMENT OF FREIGHT' MADE TO TRUCK OWNERS TOTALING T O RS.64,82,238/- ALONGWITH THE RELEVANT VOUCHERS. THE DETAILS OF T HE PAYMENTS MADE ALONGWITH THE BOOKS OF ACCOUNTS AN VOUCHERS PRODUCE D ARE EXAMINED. THE PAYMENTS OF RS.64,82,238 WERE TO THE TRUE, OWNE RS ARE PRIOR TO DT.30-09-2004. THE SUBMISSION MADE BY THE ASSESSEE IN CONNEC TIONS TO THIS AN REPRODUCED AS UNDER:- 'WE LIKE TO BRING TO YOUR KIND NOTICE THAT THE AMOU NT OF RS. 64,82,238/- COMPRISES OF SMALL PAYMENTS MADE TO THE TRUCK OWNERS WHICH ARE LESS THAN RA. 20,000/-IN INDIVIDUAL CONTR ACTS AND NR; MADE PRIOR TO THE SUBSTITUTION OF CLAUSE (1) SEC. 194C( 3). THE TOTAL PAYMENTS MADE IN AGGREGATE IN THE FINANCIAL YEAR 2004-0-5 DI D EXCEED RS.50,000/-. HOWEVER, AS THE AMENDMENT IN SECTION 1 94C(3) IS EFFECTIVE FROM 1 ST OCTOBER, 2004 AND HENCE THESE PAYMENTS ARE NOT COVERED BY THE FIRST PROVISO TO CLAUSE (1) OF SECTI ON 194C(3). FOR YOUR KIND REFERENCE WE ARE REPRODUCED THE PROVI SO POST AMENDMENT AND THE PRE-AMENDMENT AS UNDER:- CLAUSE (1) IN SUB-SECTION 194C(3) HAS BEEN SUBSTITU TED BY THE FINANCE (NO.1) ACT.2004, WITH EFFECT FROM 1ST OCTOBER,2004 WHICH READ AS UNDER- 10 (I) THE AMOUNT OF ANY SUM CREDITED OR PAID OR L IKELY TO BE CREDITED OR PAID TO THE ACCOUNT OF, OR TO THE CONTRACTOR OR SUBCONTRACTOR, IF SUCH SUM DOES NOT EXCEED TWENTY THOUSAND RUPEES. PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OR SUCH SUM. CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID D URING THE FINANCIAL YEAR EXCEEDS FIFTY THOUSAND RUPEES, THE PERSON RESP ONSIBLE FOR PAYING SUCH SUMS REFERRED TO IN SUB-SECTION (1) OR AS THE CASE MAY BE OF SUB. SEC.(2) SHALL BE LIABLE TO DEDUCT INCOME-TAX (UNDER THIS SECTION) PRIOR TO ITS SUBSECTION AS ABOVE, THE CLAUSE STOOD AS UNDER:- (I) ANY SUM CREDITED OR PAID IN PURSUANCE OF ANY CO NTRACT THE CONTRIBUTION FOR WHICH DOES NOT EXCEED TWENTY THOUS AND RUPEES. OR THE SUBSTITUTED CLAUSE IS EFFECTIVE ONLY FROM 1ST O CTOBER 2004 PRIOR TO THAT ANY PAYMENTS MADE TO CONTRACTOR OR SUBCONTRACT OR WHERE THE VALUE OF CONTRACT DID NOT EXCEED RS.20,000/- WHERE SUBJEC T TO THE TDS PROVISIONS. WE LIKE TO BRING TO YOUR KIND NOTICE THAT WHILE FRA MING THE ASSESSMENT OF INCOME U/S 143(3) ALSO THE LEARNED A.O. HAS ACCE PTED OUR CONTENTION AND HELD THAT THESE PAYMENTS TOTALING TO RS.64,82,238/- DO NOT REQUIRE TAX DEDUCTION AT SOURCE. WE FURNISH HER EWITH A COPY OF THE ASSESSMENT PASSED BY THE ITO WARDS 9(4) AHMADABAD F OR YOUR KIND REFERENCE.' I HAVE ALSO PERUSED THE ORDER PASSED BY THE A.O U/S 143(3) AND HAVE NOTED\ THAT THE AO HAS ACCEPTED THE CONTENTION OF T HE ASSESSEE AND PROVISIONS OF; SEC.40(A)(IA) HAVE NOT BEEN INVOKED FOR THE VIOLATION OF THE PROVISIONS OF SEC.194C. I HAVE ALSO PERUSED THE ORDER PASSED BY THE CIT(A) IN THE APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE AO U/S 143(3) OF THE ACT. THE CIT(A) HAS DISALLOWED THE AM OUNT OF RS.64,82,238/- AND HAS ENHANCED THE AMOUNT. I HAVE CAREFULLY EXAMINED THE ORDER PASSED BY THE LD. CIT(A) AND HAV E COME TO THE CONCLUSION THAT THE ADDITION IS MAINLY ON THE GROUN D THAT THE DETAILS OF PAYMENTS MADE AS SUBMITTED BY THE ASSESSEE WAS TRUC K WISE AND NOT PARTY WISE. THE LD. CIT(A) HAS NOT MADE THE ADDITIO N ON THE GROUND 11 THAT THE SUBSTITUTED FIRST PROVISO TO THE SEC. 194C (3) WAS APPLICABLE RETROSPECTIVELY FROM THE 1 ST APRIL, 2004 AND NOT FROM 1 ST OCT. 2004. THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF PAY MENTS OF FREIGHT TOTALING TO RS.64,82,238/- AND THE DETAILS CALLED F OR ARE SUBMITTED ALONG WITH THE RELEVANT VOUCHERS. THE DETAILS, REGA RDING VOUCHERS, PRODUCED BEFORE ME HAS BEEN EXAMINED AND I AM SATIS FIED THAT THE EXPENSES WERE MADE PRIOR TO 30 TH SEPT. 2004. THE SUBMISSION MADE BY THE ASSESSEE HAVE BEEN CONSI DERED VIS--VIS THE PROVISION OF THE LAW AND COME TO THE CONCLUSION THAT THE FIRST PROVISO TO THE SEC. 194C(3) WAS SUBSTITUTED WITH EF FECT FROM 1 ST OCTOBER, 2004 WHICH PROVIDED FOR A FINANCIAL LIMIT OF RS.50,000/- FOR THE TOTAL PAYMENTS DURING THE FY TO ATTRACT THE PRO VISION OF SEC. 194C(1) AND 194C(2). THE CONTENTION OF THE ASSESSEE IS FOUND CORRECT. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE OPINIO N THAT THE PAYMENTS MADE ARE COVERED BY THE FIRST PROVISO TO SEC. 194C( 3) AS IT STOOD PRIOR TO ITS SUBSTITUTION BY THE FINANCE (NO.2) ACT , 200 4 AND THE PAYMENTS WERE NOT LIABLE TO DEDUCTION OF TAX AT SOURCE. IN VIEW OF THE CLEAR FINDING OF THE AO WHICH HAS BE EN ARRIVED AT AFTER MAKING DETAILED INQUIRIES THAT THE PAYMENTS O F RS.64,82,238/- RELATED PRIOR TO 1 ST OCTOBER, 2004, ARE COVERED BY THE FIRST PROVISO TO SECTION 194C(3) AS IT STOOD PR IOR TO SUBSTITUTION BY THE FINANCE (NO.2) ACT,2004 AND WER E NOT THEREFORE LIABLE TO DEDUCTION OF TAX AT SOURCE, WE FIND THAT THERE IS NO VIOLATION OF SECTION 40A(IA) OF THE ACT AND T HEREFORE THIS GROUND OF THE ASSESSEE IS ALSO ALLOWED. 14 GROUND NO.5 READS AS UNDER:- 5 THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN F AILING TO APPRECIATE THAT PROVISIONS OF SECTION 40A(IA) ARE A PPLICABLE ONLY TO THE AMOUNT PAYABLE AT THE YEAR END AND NOT IN RE SPECT OF THE PAYMENTS WHICH ARE ALREADY PAID OFF BEFORE YEAR END . UNDER THE CIRCUMSTANCES, IT IS SUBMITTED THAT THE DISALLOWANC ES MADE BY THE LEARNED A.O. AS CONFIRMED BY CIT(A) FOR RS.77,8 5,265/- 12 AND ALSO THE DISALLOWANCES MADE BY WAY OF ENHANCEME NT BY THE CIT(A) FOR RS.64,82,238/- ARE NOT IN ACCORDANCE WIT H PROVISIONS OF LAW AND THE SAME BE DIRECTED TO BE DELETED. AT THE TIME OF HEARING, THIS GROUND WAS NOT PRESSED BY THE LEARNED COUNSEL OF THE ASSESSEE. THEREFORE, THE SAM E IS DISMISSED, AS NOT PRESSED. 14 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT TODAY ON 25-01-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 25-01-2012 COPY OF THE ORDER FORWARDED TO: 1. M/S GUJARAT MAHARASHTRA ROADWAYS, NEAR VIJAY TRANSPORT, LOKHAND BAZAR SARANGPUR, AHMEDABAD- 380 002 2. THE ITO, WARD-9(4), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XV, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD