Ahmedabad Urban Development Corporation, Ahmedabad V. The Addl.CIT.,TDS Range, Ahmedabad

ITA 3047/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6273 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-06-2011
• Assessment Year: 2009-2010
• Appeal Filed On: 10-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KARTAR SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Non-deduction of tax; Reasonable cause
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER DATE OF HEARING : 17/6/11 DRAFTED ON: 2 0/6/11 ITA NO.3047/AHD/2010 ASSESSMENT YEAR : 2009-2010 AHMEDABAD URBAN DEVELOPMENT AUTHORITY SARDAR VALLABHBHAI PATEL BHAVAN USMANPURA, ASHRAM RAD AHMEDABAD-380 009 VS. THE ADDL.CIT TDS RANGE AHMEDABAD PAN/GIR NO. : AAALA 0233 B ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S.N. SOPARKAR, A.R. RESPONDENT BY: SHRI KARTAR SINGH, CIT-D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XXI AHMEDABAD DATED 22/10/2010 PASSED FOR ASSESSMENT YEAR 2009-10 . THE SUBSTANTIVE GROUND IS IN RESPECT OF CONFIRMATION OF PENALTY LEV IED U/S.271C OF THE I.T.ACT OF RS.1,75,506/-. 2. VIDE AN ORDER U/S.271C OF THE I.T.ACT DATED 24/0 6/2010, IT WAS NOTED BY THE ASSESSING OFFICER THAT THERE WAS A FAI LURE ON THE PART OF THE ASSESSEE IN DEDUCTION OF CORRECT TAX U/S.194-I OF T HE I.T.ACT. IT WAS CLARIFIED THAT THE ASSESSEE HAD DEDUCTED TAX @ 2% U/S.194C OF THE ITA NO.3047/AHD /2010 AHMEDABAD URBAN DVPT. AUTHORITY ASST.YEAR 2009-2010 - 2 - I.T.ACT INSTEAD OF @ 10% U/S.194-I OF THE I.T.ACT. THE NATURE OF PAYMENT WAS STATED TO BE TOWARDS HIRING OF CARS. T HE ASSESSING OFFICER WAS OF THE VIEW THAT WHILE MAKING THE PAYMENT FOR H IRING OF CARS, THE ASSESSEE SHOULD HAVE DEDUCTED THE TAX AS REQUIRED U /S.194-I OF THE I.T.ACT. ON THE OTHER HAND, THE ASSESSEE HAS DEDUC TED THE TAX AS PRESCRIBED U/S.194C OF THE I.T.ACT. IT WAS EXPLAI NED TO THE ASSESSING OFFICER THAT PENALTY MUST NOT BE LEVIED BECAUSE THE RE WAS A REASONABLE CAUSE AS DEFINED U/S.273B OF THE I.T.ACT BECAUSE TH E ASSESSEE WAS UNDER AN HONEST BELIEF THAT THE DEDUCTION OF TAX WAS AT T HE RATE AS PRESCRIBED U/S.194C OF THE I.T.ACT. THE ASSESSING OFFICER HA S HELD THAT THE RATE OF TAX AS PRESCRIBED U/S.194C OF THE I.T.ACT WAS IN RE SPECT OF HIRE CONTRACT WHICH WAS NOT TENABLE ON THE FACTS OF THE ASSESSEES CASE, HOWEVER, THE ASSESSEE HAD PAID RENT IN RESPECT OF H IRING OF MACHINERY, THEREFORE SHOULD HAVE DEDUCTED THE TAX AT SOURCE AS PER SECTION 194-I OF THE I.T.ACT WHICH WAS INTRODUCED W.E.F. 13/7/2006. HE HAS CONCLUDED THAT THERE WAS A VIOLATION OF TDS PROVISIONS, THERE FORE SUBJECT TO LEVY OF PENALTY U/S.271-C OF THE I.T.ACT. ACCORDINGLY, A PE NALTY OF RS.1,75,506/- U/S.271C OF THE I.T.ACT WAS LEVIED. THE SAME WAS C HALLENGED BEFORE THE FIRST APPELLATE AUTHORITY. IT WAS SUBMITTED BEFORE THE LEARNED CIT(APPEALS) THAT THE ASSESSEE IS AN AUTONOMOUS BOD Y GOVERNED UNDER GUJARAT TOWN PLANNING AND URBAN DEVELOPMENT ACT, 19 76. IT WAS ALSO INFORMED THAT THE ASSESSEE IS REGISTERED U/S.12AA O F THE I.T.ACT. THE ASSESSEE HAS DEDUCTED TAX @ 2% AS PRESCRIBED U/S.19 4C OF THE I.T.ACT. AS AGAINST THAT, THE ASSESSING OFFICER HAS HELD THA T THE TAX @ 10% SHOULD HAVE BEEN DEDUCTED AS PRESCRIBED US/.194-I OF THE I .T.ACT. IT WAS CONTEMPLATED THAT THERE COULD HAVE BEEN A BONA FID E BELIEF IN SHORT ITA NO.3047/AHD /2010 AHMEDABAD URBAN DVPT. AUTHORITY ASST.YEAR 2009-2010 - 3 - DEDUCTION OF TDS BUT IT WAS NOT A DELIBERATE FAILUR E ON THE PART OF THE ASSESSEE FOR NON-DEDUCTION OF TAX. HOWEVER, THE LE ARNED CIT(APPEALS) WAS NOT CONVINCED AND IN HIS OPINION THE ORDER PASS ED BY THE ASSESSING OFFICER WAS HUNKY-DORY JUDGEMENT. BEING AGGRIEVED , NOW THE ASSESSEE IS FURTHER IN APPEAL. 3. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE MR. S.N.SOPARKAR HAS PLACED AN ORDER OF ITAT A BENCH AHMEDABAD BEARING NO.1637/AHD/2010 FOR ASSESSMENT YEAR 2009-1 0 IN ASSESSEES OWN CASE, DATED 10/03/2011, WHEREIN WHILE DECIDING THE ISSUE OF SHORT DEDUCTION OF TAX IN RESPECT OF DEMAND CREATED U/S.2 01(1) OF THE I.T.ACT AND CONSEQUENTIAL DEMAND OF INTEREST CHARGED U/S.20 1(1A) OF THE I.T.ACT, IT WAS HELD THAT THE REVENUE AUTHORITIES HAVE WRONG LY APPLIED THE PROVISIONS OF SECTION 194-I OF THE I.T.ACT AND THE RELEVANT PORTION IS REPRODUCED BELOW:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. THE FACTS NOTED BY THE AO ARE NOT IN DISPUTE THAT THE ASSESSEE HAD HIRED CARS ON FIXED RENT PAYM ENT AND TDS WAS DEDUCTED @ 2% TREATING THE SAME AS CONTRACT AS PER SECTION 194C OF THE IT ACT. THE AO ALSO NOTED THAT THE ASS ESSEE HAD MADE VEHICLE HIRE CHARGES PAYMENT IN CONNECTION WIT H PLYING OF EMPLOYEES FROM ONE PLACE TO ANOTHER. IT WAS ALSO NO TED BY THE AO THAT VEHICLES ARE OWNED AND MAINTAINED BY CONTRA CTORS. THE ASSESSEE PAID FIXED PAYMENT FOR USE OF THE HIRED CA RS AND ALL THE EXPENSES ARE BORNE BY THE CONTRACTORS. IT IS ALSO A DMITTED FACT THAT THE ASSESSEE IS A LOCAL AUTHORITY. THE PROVISI ONS OF SECTION 194C OF THE IT ACT IS APPLICABLE TO THE ASSESSMENT YEAR UNDER APPEAL PROVIDED (A) ANY PERSON RESPONSIBLE FOR PAYI NG ANY SUM TO ANY RESIDENT ((B) ANY LOCAL AUTHORITY (AS THE AS SESSEE IS) REFERRED TO AS A CONTRACTOR FOR CARRYING OUT ANY WO RK IN PURSUANCE OF THE CONTRACT BETWEEN THE CONTRACTOR AND THE LOCA L AUTHORITIES ITA NO.3047/AHD /2010 AHMEDABAD URBAN DVPT. AUTHORITY ASST.YEAR 2009-2010 - 4 - ETC., SHALL AT THE TIME OF CREDIT OF SUCH SUM TO TH E ACCOUNT OF THE CONTRACTOR OR AT ANY TIME OF PAYMENT THEREOF IN CAS H OR ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS E ARLIER, DEDUCT AN AMOUNT EQUAL TO, (I) 1% IN CASE OF ADVERTISING , (II) OR IN ANY OTHER CASE 2%, OF SUCH SUM AS INCOME TAX OR INCOME COMPRISED THEREIN. THE DEFINITION OF WORK HAS BEEN PROVIDED IN EXPLANATION (III) TO SECTION 194C OF THE IT ACT WHICH PROVIDES FOR THE PURPOSE OF THIS SECTION, EXPRESSION WORK SHALL ALSO INCLU DE: (A) ADVERTISING, (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTI ON OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING, (C) CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN RAILWAYS, (D) CATERING. THE AO ADMITTED THAT THE ASSESSEE HAD HIRED THE CAR S ON FIXED RENT PAYMENT OWNED AND MAINTAINED BY CONTRACTOR. TH E ASSESSEE PAID VEHICLE HIRE CHARGES AND ALL THE EXPENDITURE A RE BORNE BY THE CONTRACTOR. IT IS ALSO ADMITTED FACT THAT VEHICLE C HARGES WERE PAID IN CONNECTION WITH PLYING OF EMPLOYEES FROM ONE PLA CE TO ANOTHER. THUS, IT IMPLIES THAT THE PASSENGERS WERE TRANSPORT ED BY THE DRIVERS AND VEHICLES OF THE VEHICLE OWNER/CONTRACTO R AND IN CONSIDERATION OF THAT THE VEHICLE OWNERS/CONTRACTOR S WERE PAID BY THE ASSESSEE THE FIXED AMOUNT. THEREFORE, SUB-CLAUS E (C) TO EXPLANATION (III) OF THE PROVISIONS OF SECTION 194C OF THE IT ACT WOULD APPLY IN THE CASE OF THE ASSESSEE. IN OUR OPI NION THE ABOVE PAYMENT OF VEHICLE HIRE CHARGES CLEARLY FALLS WITHI N THE SCOPE OF SECTION 194C OF THE IT ACT. THE ASSESSEE, THEREFORE , CORRECTLY DEDUCTED TAX THEREOF AS PER THE PROVISIONS OF SECTI ON 194C (EXPLANATION (III) (C)) OF THE IT ACT. SAME VIEW IS TAKEN BY ITAT AHMEDABAD B BENCH IN THE CASE OF M/S. MUKESH TRAV ELS CO. (SUPRA) COPY OF WHICH IS PLACED ON RECORD. THE AO H OWEVER, NOTED THAT THE PROVISIONS OF SECTION 194-I OF THE I T ACT WOULD APPLY IN THE MATTER BEING RENT PAID TO THE CONTRACT OR WHICH PROVIDES AS UNDER: (PRIOR TO AMENDMENT W. E. F. 1-1 0-2009) .. .. THE ABOVE DEFINITION OF RENT DOES NOT PROVIDE ANY I TEM FOR VEHICLE HIRE CHARGES. THEREFORE, PROVISIONS OF SECTION 194- I HAS BEEN WRONGLY APPLIED IN THE MATTER BY THE AO. CONSIDERIN G THE ABOVE DISCUSSIONS WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW HAVE WRONGLY APPLIED THE PROVISIONS OF SECTION 194-I OF THE IT ACT IN THE MATTER. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES ITA NO.3047/AHD /2010 AHMEDABAD URBAN DVPT. AUTHORITY ASST.YEAR 2009-2010 - 5 - BELOW AND DELETE THE DEMAND AND THE INTEREST THEREO N FOR SHORTFALL AS NOTED BY THE AO ON THIS ISSUE. IN VIEW OF THE ABOVE FINDING, THERE IS NO NEED TO ADMIT THE ADDITIONAL G ROUND OF APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 4. ONCE THE RESPECTED CO-ORDINATE BENCH HAS APPROVE D THE ACTION OF THE ASSESSEE AND HELD THAT UNDER THE FACTS AND CIRC UMSTANCES OF THE CASE, DEDUCTION OF TAX U/S.194C WAS CORRECTLY DEDUCTED AN D THE ASSESSING OFFICER WRONGLY APPLIED THE PROVISIONS OF SECTION 1 94-I OF THE I.T.ACT THEREFORE THE CONSEQUENTIAL EFFECT IS THAT THE PENA LTY U/S.271C OF THE I.T.ACT BEING DIRECTLY CONNECTED WITH THE IMPUGNED DEFAULT GETS AUTOMATICALLY CANCELLED. IN THE RESULT, WE HEREBY REVERSE THE FINDINGS OF THE LEARNED CIT(APPEALS) AND DIRECT TO DELETE THE P ENALTY. 5. AS A RESULT, APPEAL OF THE ASSESSEE STANDS AL LOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30 TH JUNE, 2011. SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 30 / 06 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPAR TMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(AP PEALS)-XXI,AHMEDABAD 5. THE DR, AHMEDABAD BENCH.6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NO.3047/AHD /2010 AHMEDABAD URBAN DVPT. AUTHORITY ASST.YEAR 2009-2010 - 6 - 1. DATE OF DICTATION..17/6/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20/6/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S30.6.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.6.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER .. 9. DATE OF DESPATCH OF THE ORDER