ITO, WARD- 4, Chandrapur V. M/S. K.S.R. TRANSPORT COMPANY, Chandrapur

ITA 334/NAG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3125 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 20-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Question of law; Non-deduction of tax
• Section: 194C

Judgement Text

1 ITA NO. 33 4 /NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. ITA NO. 33 4 /NAG/2014 ASSESSMENT YEAR : 2007 - 08. THE INCOME - TAX OFFICER, M/S K.S.R. TRANSPORT COMPANY WARD - 4 , CHANDRAPUR. VS. CHANDRAPUR. PAN AABFK 3222D APPELLANT. RESPONDENT. APPELLANT BY : SHRI NARENDRA KANE. RESPONDENT BY : SHRI K.P. DEWANI. DATE OF HEARING : 13 - 01 - 2016 DATE OF PRONOUNC EMENT : 25 TH FEBRUARY, 2016. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - II , NAGPUR DATED 27 - 03 - 2014 AND PERTAINS TO ASSESSMENT YEAR 2007 - 08. THE GROUNDS OF APPEAL READ AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.19,64,65,677/ - MADE U/S 40(A)(IA) OF THE ACT. 2. WHETHER ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN IGNORING THE PRACTICE OF ORAL CONTRACTS THAT EXIST IN THIS LINE OF BUSINESS AND WHICH ARE HONOURED BY THE LAW OF LAND IN ARRIVING AT AN ERRONEOUS CONCLUSION THAT PROVISIONS U/S 194C(2) ARE NOT ATTRACTED. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT NON - EXISTENCE OF A FORMAL CONTRACTUAL AGREEMENT VITIATES THE VERY EXISTENCE OF AN ORAL CONTRACT, AND THEREBY 2 ITA NO. 33 4 /NAG/2014 ARRIVING AT A WRONG CO NCLUSION THAT NO RELATIONSHIP OF A CONTRACTOR BETWEEN THE APPELLANT AND THE SMALL CONTRACT OR EXIST. 2. THE FACTS OF THE CASE AND THE ORDERS OF THE AO AND THE CIT(APPEALS) ARE SIMILAR TO THE ONE DEALT WITH BY THIS TRIBUNAL IN THE CASE OF M/S CHADDHA TRANSPO RT IN ITA NO. 333/NAG/2014 FOR ASSESSMENT YEAR 2007 - 08 VIDE OUR ORDER OF EVEN DATE. IN THE SAID ORDER WE HAVE AFFIRMED THE ORDER OF LEARNED CIT(APPEALS). APPLYING THE SAME REASONING WE AFFIRM THE ORDER OF LEARNED CIT(APPEALS). WE MAY GAINFULLY REPRODUCE TH E RELEVANT PORTION OF OUR ORDER IN THE SAID CASE AS UNDER : 14. NOW WE DEAL WITH THE ISSUE ON THE GROUND THAT ASSESSEE WAS NOT LIABLE TO DEDUCT TDS ON PAYMENT AS THAT THE ASSESSEES CASE IS NOT COVERED BY THE PROVISIONS OF SECTION 194C(2) OF THE I.T. ACT INASMUCH AS THERE WAS NO CONTRACT WITH THE TRUCK/LORRY OWNERS. IN THIS REGARD THE ASSESSEE HAS CONTENDED THAT THERE WAS NO REGULAR CONTRACT OF HIRING OF THE TRUC KS FOR CONTINUE TRANSPORTATION OF VARIOUS GOODS WITH THE TRUCKS/LORRY OWNERS. THAT THERE WAS NO ORAL OR WRITTEN AGREEMENT FOR HIRING TRUCKS FOR TRANSPORTATION OF GOODS TO PERFORM A CONTRACTUAL OBLIGATION BY VIRTUE OF VARIOUS AGREEMENTS WITH CORPORATE CLIE NTS. THAT THE ASSESSEE ALONE IS LIABLE AND UNDER ITS CONTROL AND SUPERVISION HAS EXECUTED THE WHOLE OF CONTRACTS ON BEHALF OF VARIOUS CORPORATE ENTITIES, NAMELY, AMBUJA CEMENT, MANIGARH CEMENT AND MARATH A CEMENT ETC. HENCE IT IS THE PLEA OF THE ASSESSEE TH AT HIRING OF TRUCKS IN THIS CASE IS NOT IN THE NATURE OF PAYMENT MADE TO SUB CONTRACTORS ON WHICH THERE IS OBLIGATION TO DEDUCT THE TAX AT SOURCE U/S 94C OF THE I.T. ACT. IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEES CONTENTION IS THAT THE ISSUE IS SQUA RELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN ITA NO. 1219 OF 2012 IN THE CASE OF M/S BHAIL BULK CARRIERS VIDE ORDER DATED 12 - 11 - 2014. IN THIS CASE HONBLE BOMBAY HIGH COURT HAS UPHELD THE DECISION OF MUMBAI ITAT IN THE CASE OF BHAIL BULK CARRIERS VS. ITO 50 SOT 0622. IN THIS CASE THE ITAT HAS DISCUSSED THE ISSUE IN PARA 8 & 8.1 OF ITS ORDER AS UNDER : 8. WE HAVE HEARD THE PARTIES AT LENGTH AND ALSO GONE THROUGH THE FINDINGS OF THE AUTHORITIES BELOW AND THE CASE LAWS AS HAVE BEEN REFERRED IN THE APPELLATE ORDER AS WELL AS RELIED UPON BY THE LEARNED COUNCIL. THE RELEVANT FACTS FOR ADJUDICATION OF THE ISSUE ARE THAT THE APPELLANT IS CARRYING OUT THE BUSINESS OF TRANSPORTATION OF OIL THROUGH TANKERS. IT ENTERED INTO A CONTRACT WITH VARIOUS COMPANIES (HERE MAINLY BPCL) FOR TRANSPORTING THE OILS TO VARIOUS DESTINATIONS AS PER THE AGREEMENT ENTERED INTO BY THE SAID COMPANY. THE APPELLANT WAS SOLELY RESPONSIBLE FOR EXECUTING THE CONTRACT ON BEHALF OF ITS 3 ITA NO. 33 4 /NAG/2014 PRINCIPAL FOR FUL FILLING ITS TRANSPORTATION COMMITMENT, THE APPELLANT BESIDES USING ITS OWN TANKERS WAS ALSO HIRING THE TANKERS FROM OUTSIDE PARTIES AS AND WHEN REQUIRED. IN SUCH A CASE OF HIRING FROM OUTSIDE, THE RESPONSIBILITY OF SUCCESSFUL COMPLETION OF TRANSPORTATION W ORK RESTED UPON THE APPELLANT. FROM THE RECORD OR THE FINDINGS OF THE AUTHORITIES BELOW NO WHERE IT IS BORNE OUT THAT THERE WAS ANY KIND OF WRITTEN OR ORAL CONTRACT WITH THE PRINCIPALS BY SUCH OUTSIDE TANK OWNERS THAT THEY WILL SHARE THE RISK AND RESPONSIB ILITY WITH THE APPELLANT. 8.1 AT THIS STAGE, IT IS NOT DISPUTE THAT THE DEPARTMENTS CASE IS THAT IN THE PRESENT CASE PROVISIONS OF SECTION 194C(1) ARE APPLICABLE AND NOT SECTION 194C(2). ONCE IT IS HELD THAT IT IS A CASE OF 194C(1) THEY IT WOULD BE SENT THAT THIS SECTION APPLIES TO ANY PAYMENT MADE TO A PERSON FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE PERSON MAKING THE PAYMENT. IF THE CONDITION OF CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT IS NOT FULFILLE D THEY THE PROVISIONS OF THIS SECTION WILL NOT BE APPLICABLE AT ALL. HERE IN THIS CASE, THE CONTRACT FOR CARRYING OUT THE WORK WAS BETWEEN THE BPCL AND THE APPELLANT. THE APPELLANT ALONG HAD RISK AND RESPONSIBILITY FOR CARRYING OUT THE CONTRACT WORK AS PER THE AGREEMENT ENTERED INTO BY IT WITH ITS PRINCIPAL I.E. BPCL. THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THERE WAS ANY CONTRACT OR SUB - CONTRACT WHETHER WRITTEN OR ORAL WITH THE OUTSIDE TANK OWNERS AND THE APPELLANT, WHEREBY THE RISK AND RESPONSIBILIT Y WHICH IS ASSOCIATED WITH A CONTRACT HAS ALSO BEEN PASSED ON TO THESE OUTSIDE PARTIES. ONCE THE CIT(APPEALS) HAS ACCEPTED THE FACT THAT THE OUTSIDE TANK OWNERS DO NOT HAD ANY RESPONSIBILITY OR LIABILITY TOWARDS THE PRINCIPAL, THEN IT CANNOT BE HELD THAT THESE OUTSIDE PARTIES WERE PRIVITY TO THE CONTRACT BETWEEN THE APPELLANT AND ITS PRINCIPAL THUS THE PAYMENT MADE TO THE OUTSIDE PARTIES DO NOT COME OR FALL WITHIN THE PURVIEW OF SECTION 194C, AS THE CARRYING OUT ANY WORK INDICATES DOING SOMETHING TO COND UCT THE WORK IN PURSUANCE OF CONTRACT AND HERE IN THIS CASE, IT WAS SOLELY BETWEEN APPELLANT AND ITS PRINCIPAL. THEREAFTER THE TRIBUNAL HAD REFERRED THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. POMPUHAR SHIPPING CO RPORATION LTD. AND CONCLUDED AS UNDER : THUS IN VIEW OF THE FINDINGS GIVEN ABOVE AND THE LAW LAID DOWN BY THE HONBLE HIGH COURT AS ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TDS U/S 194C(1) FOR PAYMENTS MADE TO T HE OUTSIDE PARTIES AND CONSEQUENTLY THE DISALLOWANCE MADE U/S 40(A)(IA) BY THE AUTHORITIES BELOW ARE DELETED. THE APPELLANT THUS GETS RELIEF OF 56,03,210/ - . THIS ORDER OF THE ITAT WAS SUBJECT MATTER OF APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT I N INCOME TAX APPEAL NO. 1219 OF 2012 VIDE ORDER DATED 12 TH NOV., 2014. THE HONBLE HIGH COURT HELD AS UNDER : 2. THE APPEAL AROSE OUT OF THE ORDER OF THE FIRST APPELLATE AUTHORITY DATED 15 TH FEBRUARY 2011. THE ONLY ISSUE WAS DIS - ALLOWANCE OF RS.56,03,210/ - UNDER 4 ITA NO. 33 4 /NAG/2014 SECTION 40(A)(IA) FOR THE FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OF THE INCOME TAX ACT,1961. THE TRIBUNAL FOUND THAT THIS DIS - ALLOWANCE WAS NOT PERMISSIBLE BECAUSE THE ASSESSEE A PARTNERSHIP FIRM IS IN THE BUSINESS OF TRANSPORT. IT IS A TRANSPORT CONTACTOR. IT WAS AWARDED A CONTRACT OF OIL TRANSPORTATION TO VARIOUS LOCATIONS OF BHARAT PETROLEUM CORPORATION LTD., AND OTHER COMPANIES. THE ASSESSEE RECEIVED DURING THE YEAR IN QUESTION RS.2,83,06,986/ - TOWARDS FREIGHT CHARGES. THE CONTRACT D OCUMENT SHOWS THE ASSESSEE ALONG WAS RESPONSIBLE FOR TRANSPORTATION OF OIL FROM ONE DESTINATION TO OTHER. THE CONTRACTUAL LIABILITY WAS DISCHARGED BY TRANSPORTING OIL MOSTLY THROUGH THE ASSESSEES OWN TANKERS AND ALSO FROM SOME HIRED TANKERS BELONGING TO O UTSIDE PARTIES. AN AMOUNT OF RS/.1,79,03,198/ - WAS PAID TO VARIOUS PARTIES AND THE ASSESSEE FURNISHED THE DETAILS. THE AMOUNTS PAID AND SUMMARY THEREOF IS NOTED AND WHAT THE ASSESSING OFFICER, THE FIRST APPELLATE AUTHORITY AND TRIBUNAL FOND THAT TDS (TAX D EDUCTED AT A SOURCE) HAD NOT BEEN REMITTED OR THERE IS NO DEDUCTION IN CASES OF THIRD PARTIES. THE TRIBUNAL NOTED THE RIVAL CONTENTIONS AND RENDERED A FINDING OF FACT BY REFERRING TO THE LEGAL PROVISIONS THAT THE RISK AND RESPONSIBILITY FOR CARRYING OUT TH E CONTRACT WORK WAS SOLELY THAT OF THE ASSESSEE. THERE IS NO MATERIAL TO SUGGEST THAT THERE WAS ANY CONTRACT OF SUB - CONTRACT, WHETHER WRITTEN OR ORAL WITH THE OUTSIDE TANKER OWNERS AND THE ASSESSEE. IT IS IN THESE CIRCUMSTANCES AND WHEN THESE OUTSIDE TANKE R OWNERS DO NOT HAVE ANY RESPONSIBILITY OR LIABILITY THE BHARAT PETROLEUM CORPORATION LTD. OR OTHER PRINCIPALS THEN, IN THE ABSENCE OF ANY PRIVITY, THE OBLIGATION TO DEDUCT THE TAX AT SOURCE WAS NOT THAT OF THE ASSESSEE. IN SUCH CIRCUMSTANCES, WE DO NOT FI ND THAT THE APPEAL RAISES ANY SUBSTANTIAL QUESTION OF LAW, THE FINDINGS CANNOT BE TERMED AS PERVERSE OR VITIATED BY ERROR OF LAW APPARENT ON THE FACE OF THE RECORD. THE APPEAL IS DISMISSED. 15. NOW WE EXAMINE THE PRESENT CASE ON THE ANVIL OF ABOVE JURISDICTIONAL HIGH COURT DECISION. IN THIS CASE ALSO THE ASSESSEE IS A TRANSPORT CONTRACTOR. THE ASSESSEE WAS AWARDED CONTRACT OF TRANSPORTATION TO VARIOUS LOCATIONS OF AMBUJA CEMENT, MANIGARH CEMENT, MARATHA CEMENT ETC. THE AS SESSEE RECEIVED FREIGHT CHARGES FROM THESE COMPANIES. THE CONTRACT WITH THESE COMPANIES SHOWS THAT THE ASSESSEE WAS RESPONSIBLE FOR TRANSPORTATION OF CEMENT FROM ONE DESTINATION TO OTHER. THE CONTRACTUAL LIABILITY WAS DISCHARGED BY TRANSPORTING CEMENT TH ROUGH ASSESSEEW OWN TRUCKS AND ALSO FROM HIRED TRUCKS BELONGING TO OUTSIDE PARTIES. IT IS CLEAR FROM THE FACTS ON RECORD THAT THE RISK AND RESPONSIBILITY FOR CARRYING OUT THE CONTRACT WORK WAS SOLELY THAT OF THE ASSESSEE. THERE IS NO MATERIAL TO SUGGEST T HAT THERE WAS ANY CONTRACT OR SUB CONTRACT WRITTEN OR ORAL WITH THE OUTSIDE TRUCK OWNERS AND THE ASSESSEE. IT IS IN THESE CIRCUMSTANCES THAT WHEN THESE OUTSIDE TRUCK OWNERS DO NOT HAVE ANY RESPONSIBILITY OR LIABILITY TOWARDS THE AMBUJA CEMENT OR OTHER PRI NCIPALS THEN IN ABSENCE OF ANY PREVITY THE OBLIGATION TO DEDUCT THE TAX AT SOURCE WAS NOT THAT OF THE ASSESSEE. 16. IN VIEW OF THE AFORESAID DISCUSSION, WE FIND THAT THE FACTS OF THE CASE ARE FULLY IN CONSONANCE WITH THE DECISION OF HONBLE JURISDICTIONAL 5 ITA NO. 33 4 /NAG/2014 HIGH COURT IN THE CASE OF BHAIL BULK CARRIERS (SUPRA). ACCORDINGLY WE HOLD THAT THE LEARNED CIT(APPEALS)S ORDER DOES NOT HAVE ANY INFIRMITY AND ACCORDINGLY WE UPHOLD THE SAME. HENCE REVENUES APPEAL IS LIABLE TO BE DISMISSED ON THIS PLANK AS WELL. 3. R ESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, WE UPHOLD THE ORDER OF LEARNED CIT(APPEALS). 4. IN THE RESULT THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF FEBRUARY, 2016. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 25 TH FEBRUARY, 2016. COPY FORWARDED TO : 1. M/S K.S.R. TRANSPORT COMPANY CHADDA BUILDING KOSARA ROAD, PADOLI CHANDRAPUR. 2. I.T.O., WARD - 4 , CHANDRAPUR. 3. C.I.T., NAGPUR. 4. CIT(APPEALS) II, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE. ASSISTANT REGISTRAR, ITAT, NAGPUR .