M/s. Pramukh Jute Traders, Dist.Anand V. The Income tax Officer,Ward-2, Anand

ITA 3422/AHD/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8977 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 16-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: N C AMIN
• Keywords: Business income
• Section: 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND A.N. PAHUJA, ACCOUNTANT MEMBER) ITA NO.3422/AHD/2008 [ASSTT.YEAR : 2005-2006] M/S.PRAMUKH JUTE TRADERS AT. VALASAN 388 326 DIST: ANAND. VS. ITO, WARD-2 ANAND. ASSESSEE BY : SHRI N.C.AMIN REVENUE BY : SHRI C.K.MISHRA O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THIS APPEAL BY THE ASSESSEE RELATES TO THE ASSESSMENT YEAR 2005-2006. THE ASSE SSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF PURCHASING JUTE BAGS FRO M CALCUTTA AND SELLING THEM. 2. THE FIRST ISSUE IN THE APPEAL COVERED BY THE GRO UND NOS.1 TO 7 IS THAT THE DEPARTMENTAL AUTHORITIES ARE NOT JUSTIFIED IN DISAL LOWING THE TRANSPORT CHARGES OF RS.1,72,200/- PAID BY THE ASSESSEE. THE ASSESSING OFFICER HAS DISALLOWED THE TRANSPORT CHARGES BY INVOKING SECTION 40(A)(IA) OF THE INCOME TAX ACT WHICH SAYS THAT ANY AMOUNT PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR FOR CARRYING OUT ANY WORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER-XVII-B OF THE ACT, BUT NOT DEDUCTED OR HAVING BEEN DEDUCTED HAS N OT BEEN DEPOSITED WITH THE GOVERNMENT, WILL NOT BE ALLOWED AS A DEDUCTION IN C OMPUTING THE BUSINESS INCOME OF THE ASSESSEE. THE ASSESSEE PAID RS.1,27, 408/- TO M/S.BHARAT ROADLINES AND RS.44,792/- TO ROADCO (INDIA) CORPORA TION AS TRANSPORT CHARGES. IT WAS THE VIEW OF THE AO THAT THE ASSESSEE FAILED TO DEDUCT TAX FROM SUCH PAYMENT AS PRESCRIBED BY SECTION 194C OF THE ACT. HE THEREFORE DISALLOWED THE TRANSPORT CHARGES. THE SAME WAS CONFIRMED BY THE C IT(A) AND HENCE THE PRESENT GROUNDS. PAGE - 2 ITA NO.3422/AHD/2008 -2- 3. IT IS THE CONTENTION OF THE ASSESSEE THAT THE TR ANSPORTERS WERE ENGAGED BY AGENTS IN CALCUTTA AND THE ASSESSEE WAS MERELY PAYI NG THE TRANSPORT CHARGES TO THEM AND THAT THERE WAS NO TRANSPORT CONTRACT BETWE EN THE ASSESSEE AND THE TRANSPORTERS NAMED ABOVE. IT WAS THEREFORE SUBMITT ED THAT THERE WAS NO LIABILITY TO DEDUCT TAX UNDER SECTION 194C. WE FIND THAT THE CONTENTION IS CORRECT. AT PAGE 9 OF THE PAPER BOOK THE ASSESSEE HAS PLACED A COPY OF THE ACCOUNT OF BHARAT ROADLINES FOR THE PERIOD ENDED 31-3-2005 WHI CH SHOWS THAT THERE WAS FOUR PAYMENTS AGGREGATING TO RS.1,27,408/-. THE BI LLS OF BHARAT ROADLINES PLACED PAGES 11 TO 15 OF THE PAPER BOOK SHOW THE NA MES OF THE JUTE MILLS IN CALCUTTA FROM WHERE THE JUTE GOODS WERE TRANSPORTED . FROM THESE BILLS IT APPEARS TO US THAT IT WAS THE JUTE MILLS WHICH ENGA GED THE TRANSPORTERS THROUGH AGENTS IN CALCUTTA AND THE ASSESSEE WAS REQUIRED TO PAY THE TRANSPORT CHARGES. THE MATERIAL ON RECORD DOES NOT SHOW THE EXISTENCE OF ANY TRANSPORT CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTERS. THE SAM E IS THE CASE WITH ROADCO (INDIA) CORPORATION, CALCUTTA TO WHOM THE ASSESSEE HAS PAID THE TRANSPORT CHARGES OF RS.44,792/-. THE BILLS AT PAGES 18 AND 19 DO NOT SHOW THAT THERE WAS ANY CONTRACT FOR TRANSPORT BETWEEN THE ASSESSEE AND THE TRANSPORTERS. THESE ARE SINGLE TRIPS. CIRCULAR NO.715 DATED 8-8-1995 I SSUED BY THE CBDT SHOWS THAT EACH GOODS RECEIPT CAN BE CONSIDERED TO BE A S EPARATE CONTRACT IF THE GOODS ARE TRANSPORTED AT ONE TIME. THIS REQUIREMENT IS S ATISFIED AS CAN BE SEEN FROM THE BILLS ISSUED BY THE TRANSPORTERS. THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN CITY TRANSPORT CORPORATION VS. ITO DATE D 12-9-2006 IN ITA NOS.7708 TO 7711/MUM/2003 (COPY PLACED AT PAGE 46 O F THE PAPER BOOK) AND THE JUDGMENT OF THE PUNJAB AND HARYANA HIGH COURT I N CIT VS. UNITED RICE LAND LIMITED DATED 12-5-2008 IN IT APPEAL NO.638 OF 2007 (COPY FILED AT PAGE 41 OF THE PAPER BOOK) SUPPORT THE ASSESSEES CASE. IN THESE CIRCUMSTANCES WE HOLD THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX UNDER SECTION 194C FROM THE TRANSPORT CHARGES. CONSEQUENTLY, SECTION 40(A)(IA) IS NOT ATTRACTED. THE TRANSPORT CHARGES OF RS.1,72,200/- IS ACCORDINGLY D IRECTED TO BE ALLOWED. THE GROUNDS ARE ALLOWED. PAGE - 3 ITA NO.3422/AHD/2008 -3- 4. THE SECOND ISSUE PROJECTED IN GROUND NOS.8 AND 9 IS WHETHER THE DEPARTMENTAL AUTHORITIES ARE JUSTIFIED IN DISALLOWI NG THE INTEREST OF RS.1,09,165/- PAID ON THE DEPOSITS MADE BY JITENDRA R. PATEL (INDIVIDUAL). THE AO HAS TAKEN THE VIEW THAT THE ASSESSEE FAILED TO D EDUCT TAX FROM THE INTEREST PAYMENT AS REQUIRED BY SECTION 194A AND THEREFORE T HE INTEREST CANNOT BE ALLOWED AS A DEDUCTION, HAVING REGARD TO THE PROHIB ITION CONTAINED IN SECTION 40(A)(IA). THE ASSESSEES CONTENTION BEFORE US IS THAT JITENDRA PATEL IS A PARTNER IN THE ASSESSEE FIRM AS KARTA OF THE HUF WHEREAS THE INTEREST IS PAID TO HIM ON THE DEPOSIT MADE BY HIM IN HIS INDIVIDUAL CAPACITY. WE DO NOT SEE HOW THIS MAKES ANY DIFFERENCE TO THE POSITION. ACCORDING TO SECTION 40(A)(IA) ANY INTEREST PAYABLE TO A RESIDENT WILL BE ALLOWED AS A DEDUCTION ONLY IF THE TAX REQUIRED TO BE DEDUCTED THEREFROM HAS BEEN DEDUCTED AND PAID TO THE GOVERNMENT. SECTION 194A REQUIRES A FIRM PAYING IN TEREST TO DEDUCT TAX FROM THE PAYMENT. THE ASSESSEE HAS NOT DONE SO. THEREF ORE, THE INTEREST CANNOT BE ALLOWED AS A DEDUCTION. THE ASSESSEE HAS NOT BEEN ABLE TO SHOW ANY PROVISION IN THE ABOVE SECTIONS OR IN THE ACT UNDER WHICH THE INTEREST PAYMENT IS EXEMPT FROM TAX DEDUCTION. ACCORDINGLY, WE UPHOLD THE ORD ERS OF THE INCOME TAX AUTHORITIES AND DISMISS THE GROUNDS. 5. THE OTHER GROUNDS RELATING LEVY OF INTEREST ARE CONSEQUENTIAL. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 18 TH SEPTEMBER, 2009. SD/- SD/- (A.N. PAHUJA) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 18-09-2009 PAGE - 4 ITA NO.3422/AHD/2008 -4- COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD