Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 3109 (ITAT-NAGPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 4 day(s)
Appellant
Respondent
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
Judgement Text
1 ITA NO. 335/NAG/201 4 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. ITA NO. 335/NAG/2014 ASSESSMENT YEAR : 2007 - 08. THE INCOME - TAX OFFICER, M/S SUTLEJ TRANSPORT COMPANY WARD - 3, 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 PRONOUNCEMENT : 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.3,44,03,875/ - MADE U/S 40(A)(IA) OF THE ACT. 2. WHETHER ON THE FACTS 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. 335/NAG/201 4 ARRIVING AT A WRONG CONCLUSION THAT NO RELATIONSHIP OF A CONTRACTOR BETWEEN THE APPELLANT AND THE SMALL CONTRAC TOR EXIST S . 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 TRANSPORT IN ITA NO. 333/NAG/2014 FOR ASSESSMENT YEAR 2007 - 08 VIDE OUR ORDER OF EVEN DATE. IN T HE 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 THE RELEVANT PORTION OF OUR ORDER IN THE SAID CASE AS UNDER : 14. NOW WE DEAL WITH THE IS SUE 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 ASSES SEE HAS CONTENDED THAT THERE WAS NO REGULAR CONTRACT OF HIRING OF THE TRUCKS 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 C ONTRACTUAL OBLIGATION BY VIRTUE OF VARIOUS AGREEMENTS WITH CORPORATE CLIENTS. 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, MANIG ARH CEMENT AND MARATHA CEMENT ETC. HENCE IT IS THE PLEA OF THE ASSESSEE THAT 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 REG ARD LEARNED COUNSEL OF THE ASSESSEES CONTENTION IS THAT THE ISSUE IS SQUARELY 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 T HIS 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 O UT 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. 335/NAG/201 4 PRINCIPAL FOR FULFILLING 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 FRO M OUTSIDE, THE RESPONSIBILITY OF SUCCESSFUL COMPLETION OF TRANSPORTATION WORK 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 PRINCIPA LS BY SUCH OUTSIDE TANK OWNERS THAT THEY WILL SHARE THE RISK AND RESPONSIBILITY 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 1 94C(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 CONDI TION OF CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT IS NOT FULFILLED 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 A LONG 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 RESPONSIBILITY 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 RESPO NSIBILITY 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 SECT ION 194C, AS THE CARRYING OUT ANY WORK INDICATES DOING SOMETHING TO CONDUCT 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 DECISIO N OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. POMPUHAR SHIPPING CORPORATION 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 THE 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 W AS SUBJECT MATTER OF APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN 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. 335/NAG/201 4 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 BECAU SE 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 TH E YEAR IN QUESTION RS.2,83,06,986/ - TOWARDS FREIGHT CHARGES. THE CONTRACT DOCUMENT 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 OUTSIDE 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 ASSESSI NG OFFICER, THE FIRST APPELLATE AUTHORITY AND TRIBUNAL FOND THAT TDS (TAX DEDUCTED 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 T O THE LEGAL PROVISIONS THAT THE RISK AND RESPONSIBILITY FOR CARRYING OUT THE 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 TANKER 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 FIND 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 DI SMISSED. 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 VARIO US LOCATIONS OF AMBUJA CEMENT, MANIGARH CEMENT, MARATHA CEMENT ETC. THE ASSESSEE 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 THROUGH 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 CONTRA CT WORK WAS SOLELY THAT OF THE ASSESSEE. THERE IS NO MATERIAL TO SUGGEST THAT 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 H AVE ANY RESPONSIBILITY OR LIABILITY TOWARDS THE AMBUJA CEMENT OR OTHER PRINCIPALS 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 TH E CASE ARE FULLY IN CONSONANCE WITH THE DECISION OF HONBLE JURISDICTIONAL 5 ITA NO. 335/NAG/201 4 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. HEN CE REVENUES APPEAL IS LIABLE TO BE DISMISSED ON THIS PLANK AS WELL. 3. RESPECTFULLY 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 SUTL EJ TRANSPORT CO. KOSARA ROAD, PADOLI , CHANDRAPUR. 2. I.T.O., WARD - 3 , 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 .
Mehul