ITO, Wd-10(1), Kolkata, Kolkata V. M/s Dutsan G. Engineers Pvt. Ltd., Kolkata

ITA 317/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4635 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 20-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K M ROY
• Keywords: Question of law
• Section: 194C; 147; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.317/KOL/2014 ASSESSMENT YEARS:2006-07 ITO WARD-10(1) AAYAKAR BHAWAN, 3 RD FLOOR, ROOM NO. 78, P-7, CHOWRINGHEE SQUARE, KOLKTA-700 069 / V/S . M/S DUTSAN G. ENGINEERS PVT. LTD., METRO POINT, 26, N.S.C. BOSE ROAD, KOLKATA-700 040 [ PAN NO.AABCD 7854 R ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SALLONG YADEN, ADDL. CIT-DR /BY RESPONDENT SHRI K.M. ROY, FCA /DATE OF HEARING 03-08-2016 /DATE OF PRONOUNCEMENT 24-08-2016 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA DATED 06.11.2013. ASSESS MENT WAS FRAMED BY JCIT(OSD), UNDER CIT-IV, KOLKATA U/S 143(3)/147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 28.11.2011 FOR ASSESSMENT YEAR 2006-07. SHRI K.M.ROY, LD. AUTHORIZED REPRESENTATIVE APPEARE D ON BEHALF OF ASSESSEE AND SHRI SALLONG YADEN, LD. DEPARTMENTAL REPRESENTATIVE APPE ARED ON BEHALF OF REVENUE. 2. SOLITARY ISSUE RAISED BY REVENUE IS AS REGARDS T HAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER FOR AN AMOUN T OF 72,51,950/- U/S 40(A)(IA) OF THE ACT ON ACCOUNT OF NON DEDUCTION OF TAX DEDUCTE D AT SOURCE (TDS FOR SHORT). ITA NO.317/KOL/2014 A.Y . 2006-07 ITO WD-10(1) KOL. VS. M/S DUSTAN G ENGINEERS PVT. LTD. PAGE 2 3. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE, IS A PRIVATE LIMITED COMPANY AND HAS FILED ITS RETURN OF INCOME DECLARIN G TOTAL INCOME OF 26,29,296/-. THEREAFTER CASE WAS SELECTED FOR SCRUTINY U/S 147 O F THE ACT FOR NON DEDUCTION OF TDS AND ACCORDINGLY NOTICES U/S. 148/143(2) OF THE ACT WAS ISSUED. THE ASSESSEE, DURING THE YEAR, HAS CLAIMED MACHINE HIRED CHARGES FOR AN AMOUNT 72,51,950/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT THE PROVISION OF TDS HAS BEEN VIOLATED BY THE ASSESSEE BY NOT DEDUCTING TDS AND T HEREFORE HE INVOKED THE PROVISION OF SEC. 40(A)(IA) OF THE ACT BY DISALLOWING THE MAC HINE HIRED CHARGES FOR AN AMOUNT OF 72,51,950/-. THE MACHINE HIRE CHARGES WERE DISALLOW ED AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS,. GUIDELINE (III ) OF CBDTS CIRCULAR NO 681 DATED 8.3.1994 REITERATED THAT THE PROVISIONS OF SECTION 194C WOULD NOT APPLY IN RELATION TO PAYMENTS MADE FOR HIRING OR RENTING OF EQUIPMENTS, ETC., THE AMENDMENT IN SECTION 194I TO ENLARGE THE MEANING OF RENT AND TO INCLU DE ITEMS (D) TO (H) IN RESPECT OF MACHINERY, PLANT, ETC., HAS BEEN BROUGHT ABOUT BY S ECTION 15 OF THE TAXATION LAWS (AMENDMENT) ACT, 206 (29 OF 2006), WHEREBY CLAUSE ( I) HAS BEEN SUBSTITUTED W.E.F. 13- 7-2006, FOR N FROM A.YR. 2007-08. IN THE CASE OF AS STT. CIT VS. REWA PUBLICATION PVT. LTD. (2010) 16 TTJ 49 (TRIBUNAL INDORE), WHERE THE ASSESSEE TOOK MACHINERY ON RENT ALONG WITH STAFF. AO HELD THAT IT WAS PAYMENT OF WO RK U/S. 194C AND THEREFORE TDS SHOULD HAVE BEEN DEDUCTED. ASSESSEE CONTENDED THAT IT WAS PAYMENT OF RENT AND THEREFORE TES SHOULD NOT MADE, IF WAS HELD THAT LOO K TO CBDT CIRCULAR NO. 3 DATED 26.09.1972, IT IS PAYMENT FOR RENT AND TDS SHALL NO T BE DEDUCTED. WHEN INDISPUTABLY SECTION 194I CAME TO PROVIDE FOR TAX DEDUCTION AT S OURCE IN RESPECT OF MACHINERY/EQUIPMENT ONLY WITH EFFECT FROM 1-6-2007, AND THE RELEVANT ASSESSMENT YEAR IS 2006-07, THERE WAS NO SCOPE TO FIND FAULT W ITH THE APPELLANT ASSESSEE FOR ANY VIOLATION OF SECTION 40(A)(IA) AS HELD IN CIT V. D. RATHINAM (011) 335 ITR 101 (MAD.) CITED SUPRA. THEREFORE, THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER UNDER SEC. 40(A)(IA) OF THE ACT IS UNJUSTIFIED. THE CONSEQUENT ADDITION OF RS.72,51,950/- IS HEREBY DELETED. BEING AGGRIEVED BY THIS ORDER OF LD CIT(A) REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US BOTH PARTIES RELIED ON THE ORDERS OF A UTHORITIES BELOW AS FAVOURABLE TO THEM. ITA NO.317/KOL/2014 A.Y . 2006-07 ITO WD-10(1) KOL. VS. M/S DUSTAN G ENGINEERS PVT. LTD. PAGE 3 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT THE TDS PROVISIONS ON THE MACHINES HIRING CHARGES WERE NOT THE SUBJECT MATTER OF SEC. 194-I OF THE ACT FOR THE YEAR UNDER CONSIDERATION I.E. FINANCIAL YEAR 2005-06. THE PROV ISIONS OF TDS ON RENT ON MACHINES & EQUIPMENTS BECAME APPLICABLE WITH EFFECT FROM 01. 06.2007. THE INSTANT CASE RELATES TO THE FINANCIAL YEAR 2005-06, THEREFORE IT IS CLEA R THAT THE MACHINES HIRED CHARGES WERE NOT APPLICABLE FOR AY 2006-07. ACCORDINGLY, IN OUR CONSIDERED VIEW, THE PROVISION FOR DEDUCTING TDS, IN THE INSTANT CASE, DOES NOT APPLY. IN THIS CONNECTION, WE ARE RELYING IN THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. POOMPUHAR SHIPPING CORPORATION LIMITED 282 ITR 3 (MAD). THE R ELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW. UNDER S. 194C, THE TAX IS TO BE DEDUCTED WHEN A CO NTRACT WAS ENTERED INTO FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BE TWEEN THE CONTRACTOR AND THE ENTITIES MENTIONED IN SUB-S. (1) OF S. 194C. IN THE PRESENT CASE, THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE SHIPPING COMP ANIES TO CARRY OUT ANY WORK. ON THE OTHER HAND, THE ASSESSEE-COMPANY HIRED THE S HIPS BELONGING TO OTHER SHIPPING COMPANIES FOR A FIXED PERIOD ON PAYMENT OF HIRE CHARGES. THE HIRED SHIPS WERE UTILISED BY THE ASSESSEE IN THE BUSINESS OF CA RRYING THE GOODS FROM ONE PLACE TO ANOTHER IN PURSUANCE OF AN AGREEMENT ENTER ED INTO BETWEEN THE ASSESSEE AND THE TAMIL NADU ELECTRICITY BOARD. THER E WAS NO AGREEMENT FOR CARRYING OUT ANY WORK OR TRANSPORT ANY GOODS FROM O NE PLACE TO ANOTHER BETWEEN THE ASSESSEE AND THE OTHER SHIPPING COMPANIES. THE ASSESSEE-COMPANY SIMPLY HIRED THE SHIPS ON PAYMENT OF HIRE CHARGES AND IT W AS UTILISED IN THE BUSINESS OF THE ASSESSEE AT THEIR OWN DISCRETION. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE ENTERED INTO THE SAID CONTRACT WITH THE SH IPPING COMPANY FOR TRANSPORT OF COAL FROM ONE PLACE TO ANOTHER. THE HIRING OF SH IPS 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 S. 194C. THE TERM 'HIRE ' IS NOT DEFINED IN THE IT ACT. SO, ONE HAS TO TAKE THE NORMAL MEANING OF THE WORD ' HIRE '. NORMAL HIRE IS A CONTRACT BY WHICH ONE GIVES TO ANOTHER TEMPORARY PO SSESSION AND USE OF THE PROPERTY OTHER THAN MONEY FOR PAYMENT OF COMPENSATI ON AND THE LATTER AGREES TO RETURN THE PROPERTY AFTER THE EXPIRY OF THE AGREED PERIOD. THEREFORE, WHEN THE ASSESSEE ENTERED INTO A CONTRACT FOR THE PURPOSE OF TAKING TEMPORARY POSSESSION OF SHIPS IN THE SHIPPING COMPANY IT COULD NOT BE CO NSTRUED AS IF THE ASSESSEE ENTERED INTO ANY CONTRACT FOR CARRYING OUT ANY WORK , AND WHEN THE CONTRACT IS NOT FOR CARRYING OUT ANY WORK, THE REVENUE CANNOT INSIS T THAT ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE UNDER S. 194C. THE EXPLANATI ON INTRODUCED IS W.E.F. 1ST JULY, 1995. HENCE IT WILL BE APPLICABLE ONLY FOR TH E FUTURE ASSESSMENT ORDERS AND IT WILL NOT BE APPLICABLE TO THE ASSESSMENT YEAR IN CO NSIDERATION. THE TRIBUNAL ALSO CONSIDERED THE FACT THAT THE SHIPPING COMPANIES WHI CH RECEIVED THE HIRE CHARGES ARE ALSO INCOME-TAX ASSESSEES AND THEY HAD SHOWN TH E HIRE CHARGES IN THEIR RESPECTIVE IT RETURNS AND PAID THE TAXES ON THE SAM E. THE SAID FACT WAS ALSO NOT DISPUTED BY THE REVENUE. SO, THE PAYMENT OF HIRE CH ARGES FOR TAKING TEMPORARY POSSESSION OF THE SHIPS BY THE ASSESSEE-COMPANY WOU LD NOT FALL WITHIN THE PROVISION OF S. 194C AND HENCE NO TAX IS REQUIRED T O BE DEDUCTED, AND THERE IS NO ERROR OR INFIRMITY IN THE ORDER OF THE LOWER AUTHOR ITIES. HENCE, NO SUBSTANTIAL ITA NO.317/KOL/2014 A.Y . 2006-07 ITO WD-10(1) KOL. VS. M/S DUSTAN G ENGINEERS PVT. LTD. PAGE 4 QUESTION OF LAW ARISES FOR CONSIDERATION OF THE COU RT.SEDCO FOREX INTERNATIONAL DRILL INC. & ORS. VS. CIT & ANR. (2005) 199 CTR (SC) 320 : (2005) 279 ITR 310 (SC) RELIED ON. AS IN THE PRESENT CASE, THE CONTRACT WAS FOR MACHIN E HIRING ON RENT AND NOT FOR A WORK CONTRACT AS SPECIFIED UNDER SECTION 194-C OF THE AC T. THEREFORE, THE PROVISION OF SEC. 194C OF THE ACT WAS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. AS REGARDS TO THE APPLICABILITY OF PROVISION OF SEC. 194-I OF THE ACT IT WAS NOTICED THAT THE PROVISION ARE APPLICABLE FOR THE PAYMENT OF RENT AND TAX IS TO BE DEDUCTED AT SOURCE ON THE PAYMENT OF SPECIFIED RENT, MEANING OF RENT FOR THE PURPOS E OF THIS SECTION HAS BEEN MENTIONED IN THE EXPLANATION-I APPENDED TO SEC. 194I OF THE A CT. IN THE EXPLANATION-I THE WORDS MACHINERY / EQUIPMENT HAS BEEN ADDED WITH EFFECT FROM 13.06.2006 BY THE FINANCE ACT, 2006. THEREFORE, THE PROVISION OF SEC. 194-I O F THE ACT IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE BECAUSE THE PREVIOUS YEAR RELEVANT TO AY UNDER CONSIDERATION ENDS ON 31 ST MARCH, 2006. IN VIEW OF THE ABOVE, WE FIND NO REAS ON TO INTERFERE INTO THE ORDER OF LD. CIT(A). WE HOLD ACCORDINGLY. THIS GROU ND OF REVENUES APPEAL IS DISMISSED. 6. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24/08/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP ! - 24/08/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO WARD-10(1), AAYAKAR BHAWAN, 3 RD FL, ROOM NO.78, P-7, CHOWRI NGHEE SQUARE, KOLKATA-700 069 2. /RESPONDENT-M/S DUSTAN G ENGINEERS PVT. LTD., METRO POINT, 26, N.S.C. BOSE R OAD, KOLKATA-700 040 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORD ER/ , / '#,