The DCIT, Circle-2, JUNAGADH V. M/s. Bhagyoday Trading Co. P. Ltd., JUNAGADH

ITA 276/RJT/2011

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0114 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IS AGAINST
• Section: 143(3); 194C

Judgement Text

, . .. . . . . . , , , , .. # , , , , & & & & ./ ITA NO. 276/RJT/2011 / ASSESSMENT YEAR:- 2005-06 THE DY. COMMR. OF INCOME TAX, CIRCLE-1, JUNAGADH. ( +/ APPELLANT) M/S BHAGYODAY TRADING CO. P. LTD. PLOT NO. 1213/1214, GIDC-II, BLOCK NO.1, SABALPUR, JUNAGADH. PAN : AACCB 3106 H ,-+/ RESPONDENT . / APPELLANT SHRI AVINASH KUMAR, D.R. ,-+ 0 / BY RESPONDENT SHRI VIMAL DESAI, C.A. 0 / DATE OF HEARING 01/08/2012 0 / DATE OF PRONOUNCEMENT 03 /08/2012 / / / / ORDER PER T.K. SHARMA, J.M : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 08-03- 2011 OF C.I.T.(A)-XXI, DELETING THE ADDITION OF RS.8 ,92,567/- WHICH WAS MADE BY A.O. ON ACCOUNT OF TRANSPORTATION EXPENSES U/S 40(A)(IA) OF IT A CT 1961. 2. THE FACTS IN BRIEF ARE THAT ASSESSEE IS A COMPANY. FOR THE ASSESSMENT YEAR IN APPEAL HE FILED INCOME OF RS.55,990/-. A.O. FRAMED ASSESSMENT U/S 143(3) ON 14-12- 2007. WHEREIN, HE DISALLOWED TRANSPORTATION EXPENSES A MOUNTING TO RS.8,92,567/-, ON THE GROUND THAT ASSESSEE HAS NOT DEDUCTED THE TDS U/S 194C OF THE IT ACT 1961. HE ACCORDINGLY INVOKED THE PROVISION CONTAINED IN 40(A) (I A) OF THE IT ACT 1961. ON APPEAL LD.CIT(A) DELETED THE ADDITION FOR THE DETAILED REA SON GIVEN IN PARA-5 WHICH READS AS UNDER : I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE A.O. IN THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE DISALLOWANCE U /S 40(A) (IA) IS BASED ON THE GROUND OF NON DEDUCTION OF TAX AT SOURCE FROM TH E PAYMENTS OF TRANSPORTATION EXPENSES. IT IS OBSERVED FROM THE ASSESSMENT ORDER THAT THE APPELLANT EXPLAINED TO THE A.O. THAT THERE WAS NO CONT RACT BETWEEN THE APPELLANT ITA-276/RJT/2011 2 AND THE TRANSPORTER. THE SUPPLIERS WERE BOOKING THE TR ANSPORTER FOR DELIVERING THE GOODS FROM THEIR PREMISES TO APPELLANTS DESTINATION. T HEREFORE, THEY WERE BOOKING THE TRANSPORTER THEY KNEW. THE APPELLANT WAS NO T CONCERNED ABOUT THE TRANSPORTER AS THE RESPONSIBILITY OF ARRANGING THE TRANSP ORTATION WAS ON THE SUPPLIER AND HENCE THERE WAS NOT ANY ORAL OR WRITTEN CO NTRACT WITH THE TRANSPORTER. THE LIABILITY OF THE APPELLANT WAS CONFINED ONLY TO THE PAYMENT AT THE TIME OF UNLOADING IRRESPECTIVE OF WHO WAS THE TRANSPORTER. HOWE VER, THE A.O. FAILED TO TAKE NOTE OF THE SAME. THE A.O. SEEMS TO HAVE BEEN MOTI VATED BY THE FACT THAT AGGREGATE AMOUNTS OF TRANSPORTATION DURING THE YEAR WE RE IN EXCESS OF RS.50,000/- AND HENCE SECTION 194C WAS APPLICABLE. THE A PPELLANT ALSO SUBMITTED, WITH REFERENCE TO COPIES OF BILTIES IN PAPER BOOK, THAT THERE WERE DIFFERENT RATES CHARGES BY THE TRANSPORTER FOR THE SAME DESTINATIONS DURING DIFFERENT PERIOD FALLING IN THE YEAR UNDER APPEAL. HAD THERE BEEN ANY CONTRACT WITH THE TRANSPORTER, SUCH DIFFERENCE IN RATES WOULD N OT HAVE BEEN THERE FOR SAME DESTINATIONS. ON CAREFUL CONSIDERATION OF MODUS OPERANDI OF THE BUSINESS AND BILTIES ISSUED BY THE TRANSPORTER, IT BECOMES CLEAR THAT NE ITHER THERE WAS ANY CONTRACT BETWEEN THE APPELLANT AND THE TRANSPORTER NO R THE APPELLANT WAS REQUIRED TO ENTER INTO ANY CONTRACT WITH THE TRANSPORT ER. THE A.O. HAS ALSO NOT ESTABLISHED FACTUM OF ANY CONTRACT WHILE INVOKING THE PRO VISIONS OF SECTION 194C. THE EXISTENCE OF A CONTRACT IS A PRE-REQUISITE FOR SECTION 1 94C AS HELD BY THE HONBLE SUPREME COURT IN CASE OF BIRLA CEMENT WORKS (24 8 ITR 216). THE HONBLE PUNJAB & HARIYANA HIGH COURT HAS ALSO EXAMINED THIS ASPECT IN CASE OF UNITED RICE LAND LTD. (322 ITR 594) AND AFTER OBSERVIN G THAT THERE WAS NO CONTRACT FOR SPECIFIC PERIOD, QUANTITY OR PRICE, HELD THA T SECTION 194C WAS NOT APPLICABLE. THE KOLKATTA AND CUTTACK ITAT HAVE ALSO HELD , IN THE CONTEXT OF TRANSPORTATION, THAT IT THERE IS NO CONTRACT, SECTION 19 4C IS NOT APPLICABLE AND NO DISALLOWANCE U/S 40(A) (IA) CAN BE MADE IRRESPECTIVE OF T HE AMOUNT INVOLVED. THE STAND OF THE APPELLANT DULY SUPPORTED BY JUDICIAL PR ONOUNCEMENT IS CONVINCING AND HENCE ACCEPTED. EVEN OTHERWISE, THE AMOUNT IS PAID TO THE PARTY AND THEREFORE SECTION 40(A)(IA) IS NOT APPLICABLE AS HE LD BY VARIOUS BENCHES OF TRIBUNAL IN THE DECISIONS RELIED UPON BY THE APPELLANT INCLUDING THE DECISION OF HONBLE RAJKOT BENCH. IN VIEW OF THE FOREGOING DISCUSSION , I HOLD THAT DISALLOWANCE U/S 40(A)(IA) IS NOT IN ACCORDANCE WITH THE LAW AND HENCE THE SAME IS HEREBY DELETED. THE APPELLANT GETS RELIEF OF RS.8 ,92,567/-. 3. AGGRIEVED WITH THE LD.CIT(A), REVENUE IS IN APPEA L BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US ON BEHALF OF REV ENUE SHRI AVINASH KUMAR, D.R. APPEARED AND POINTED OUT THAT AGGREGATE AMOUNT OF T RANSPORTATION CHARGES PAID DURING THE YEAR WERE IN EXCESS OF RS.50,000/- AND HENCE SECTION 194C WAS APPLICABLE. SINCE, THE ASSESSEE HAS NOT DEDUCTED THE TDS, DISALLOWANCE U/S 40( A) (IA) WAS RIGHTLY MADE. AS AGAINST THIS SHRI VIMAL DESAI, CA APPEARED ON BEHAL F OF ASSESSEE, WHEMENTLY SUPPORTED THE ORDER OF THE LD.CIT(A). APART FROM TH IS, HE POINTED OUT THAT THE TRANSPORTATION CHARGES WERE NOT OUTSTANDING AS ON 31 ST MARCH 2005. THEREFORE, AS PER THE DECISION OF SPECIAL BENCH IN THE CASE OF MERILYN SHIP PING & TRANSPORT VS. A.C.I.T., REPORTED IN 20 TAXMANN.COM 244 NO DISALLOWANCE CAN BE M ADE. ITA-276/RJT/2011 3 5. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THR OUGH THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THERE WAS NO CONTRADI CTED AS SUCH THE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TDS U/S 194C OF THE IT ACT 196 1. EVEN, OTHERWISE ALSO, SINCE TRANSPORTATION CHARGES WERE NOT OUTSTANDING AS ON 31 ST MARCH 2005, AS PER RATIO OF DECISION OF ITAT VISHAKHAPATNAM BENCH, SPECIAL BENCH IN T HE CASE OF MERILYN SHIPPING & TRANSPORT VS. A.C.I.T. , NO DISALLOWANCE CAN BE MADE U /S 40(A) (IA) OF THE IT ACT 1961. WE THEREFORE, INCLINED TO UPHELD THE ORDER OF THE LD . C.I.T.(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. 0 # 03/08/2012 < 0 THIS ORDER PRONOUNCED IN OPEN COURT ON 03 /08/ 2012 . -SD- -SD- (A.K. GARODIA) (T.K. SHARMA) ( ) ( ) ACCOUNTANT MEMBER JUDICIAL MEMBER # / ORDER DATE 03 /08/2012 /RAJKOT PUJARA/- 0 00 0 ,? ,? ,? ,? @? @? @? @? / COPY OF ORDER FORWARDED TO:- 1. + / APPELLANT- THE DY. COMMR. OF INCOME TAX, CIRCLE-1, RAJKOT. 2. ,-+ / RESPONDENT- M/S BHAGYODAY TRADING CO. P. LTD., JUNA GADH. 3. B / CONCERNED C.I.T-XXI, AHMEDABAD. 4. B- / CIT (A)-III, RAJKOT. 5. ? ,, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY ASTT. REGISTRAR , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.