Appeal details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 4159 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 11 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-02-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
C
Assessment Year
2012-2013
Appeal Filed On
07-03-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 393/BANG/2016 ASSESSMENT YEAR : 2012 - 13 M/S. FINE BLANKING PVT. LTD., BLOCK NO.201/2, 202/1 & 202/2, REVADIHAL ROAD, GOKUL VILLAGE, HUBLI 580 030. PAN: AAACF 2752 K VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE-3, HUBLI. APP ELL ANT RESPONDENT APPELLANT B Y : SHRI RAVISHANKAR, ADVOCATE RES PO NDENT BY : DR. P.V. PRADEEP KUMAR, ADDL.CIT(D R)(ITAT), BENGALURU. DATE OF HEARING : 21 . 0 1 . 2 0 1 9 DATE OF PRONOUNCEMENT : 15 . 02 . 2 0 1 9 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 26.11.2015 OF THE CIT(APPEALS), HUBLI RELATING TO ASSESSMENT Y EAR 2012-13. 2. GROUND NOS.1, 2, 11 & 12 ARE GENERAL IN NATURE A ND CALL FOR NO ADJUDICATION. 3. GROUND NO.9 IS ALSO GENERAL IN NATURE. GROUND N O.10 IS PURELY CONSEQUENTIAL. THE AO HAS TO GIVE ONLY THE CONSEQU ENTIAL EFFECT. ITA NO. 393/BANG/2016 PAGE 2 OF 10 4. GROUND NOS. 3 TO 5 RAISED BY THE ASSESSEE ARE WI TH REGARD TO THE DISALLOWANCE OF RS.39,81,198 CLAIMED BY THE ASSESSE E AS DEDUCTION WHILE COMPUTING INCOME FROM BUSINESS UNDER THE HEAD CURR ENT REPAIRS. 5. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURE OF TOOLS AND TUBES. IN THE COURSE OF A SSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED AS DED UCTION A SUM OF RS.39,81,198 ON ACCOUNT OF REPAIRS TO MACHINERY. T HE DETAILS OF ITEMS OF MACHINERY TO WHICH REPAIRS WERE CARRIED OUT BY THE ASSESSEE, THE YEAR OF PURCHASE OF THE MACHINERY, CONSIDERATION PAID AT TH E TIME OF PURCHASE AND QUANTUM OF EXPENDITURE INCURRED AS REPAIRS ON THOSE MACHINES HAS BEEN TABULATED BY THE AO IN THE FORM OF A CHART WHICH IS AS FOLLOWS:- SL. NO DESCRIPTION YEAR OF PURCHASE CONSIDERATION AT THE TIME OF PURCHASE WDV AS ON 01.04.2011 AMOUNT INCURRED DURING THE F.Y. 2011-12 REMARKS 1 MACHINERY SPARES (OUTSIDE LOCAL AREA) 2008-09 1,51,31,700 92, 92,755 31,75,000 CLAIMED AS REVENUE EXPE N SE 2 MACHINERY SPARES (OUTSIDE LOCAL AREA) 2008-09 6,91,990 4,62,466 1,00,000 CLAIMED AS REVENUE EXPENSE 3 MACHINERY SPARES (OUTSIDE LOCAL AREA) 2007-08 9,86,904 5,60,626 2,10,000 CLAIMED AS REVENUE EXPE N SE 4 MACHINERY SPARES (OUTSIDE LOCAL AREA) 2007-08 - 12,42,652 7,05,908 97,300 CLAIMED AS REVENUE EXPE N SE 5 MACHINERY SPARES (OUTSIDE LOCAL AREA) 2007-08 35,38,411 20,10,050 45,000 CLAIMED AS REVENUE EXPE N SE 6 MACHINERY SPARES (OUTSIDE LOCAL AREA) 2000-01 65,46,609 1,123,894 90,800 CLAIMED AS REVENUE EXPE N SE 7 MACHINERY SPARES (OUTSIDE LOCAL AREA) 2007-08 35,38,411 20,10,050 53,324 CLAIMED AS REVENUE EXPE N SE ITA NO. 393/BANG/2016 PAGE 3 OF 10 8 MACHINERY SPARES ( OUTSIDE LOCAL AREA) 2005-06 7,97,278 3,00,693 2,09,774 CLAIMED AS REVENUE EXPENSE 6. THE AO ON AN EXAMINATION OF THE ABOVE CHART WAS OF THE VIEW THAT THE EXPENDITURE INCURRED ON REPAIRS BY THE ASSESSEE COMPARED WITH THE CONSIDERATION PAID FOR THE PURCHASE OF MACHINERY AN D THE WRITTEN DOWN VALUE (WDV) AS ON 1.4.2011 WAS SUBSTANTIAL. HE WAS OF THE VIEW THAT THE ASSESSEE HAD CARRIED OUT MAJOR REPLACEMENT AND BY D OING SO HAD DERIVED AN ENDURING BENEFIT AND THE EXPENDITURE WAS CAPITAL IN NATURE. THE AO ACCORDINGLY DISALLOWED THE CLAIM OF ASSESSEE FOR DE DUCTION. THE AO, HOWEVER, ALLOWED DEPRECIATION ON THE AMOUNT THAT WA S DISALLOWED. AS A RESULT, THERE WAS AN ADDITION OF RS.34,21,193 TO TH E TOTAL INCOME OF THE ASSESSEE, WHICH WAS COMPUTED BY THE AO AS FOLLOWS:- ACCORDINGLY ONLY DEPRECIATION IS PERMISSIBLE ON TH IS EXPENDITURE. ACCORDINGLY, THE TOTAL AMOUNT OF EXPENDITURE CLAIME D OF RS. 39,81,198 /- IS DISALLOWED AND DEPRECIATION THEREON WHICH COMES TO RS. 5,60,005/- IS ALLOWED. WHILE CALCULATING THE DEPRECIATION ALLOWED FULL DEPRECIATION IS GIVEN FOR THOSE PLANT AND MACHINERY WHICH EXCEEDED 180 DAYS AND 50% DEPRECIATION IS GIV EN TO THE PLANT AND MACHINERY WHICH IS BELOW 180 DAYS. ACCORD INGLY THE DIFFERENCE AMOUNT OF RS. 34,21,193/- (39,81,198 - R S.5,60,005) IS ADDED TO THE, IN SOME RETURNED BY THE ASSESSEE. 7. BEFORE THE CIT(APPEALS), THE ASSESSEE BROUGHT TO HIS NOTICE THAT LIST OF MACHINERIES IN RESPECT OF WHICH REPAIRS WERE CAR RIED OUT AND ALSO COPY OF THE BILLS IN RESPECT OF CURRENT REPAIRS. THE ASSES SEE SUBMITTED THAT THE EXPENDITURE IN QUESTION WAS INCURRED ONLY FOR THE P URPOSE OF KEEPING THE MACHINERY GOING AND THERE WAS NO MAJOR REPLACEMENT. THE ASSESSEE SUBMITTED THAT IT WAS FOR THE PURPOSE OF PRESERVING AN EXISTING ASSET AND NO NEW ASSET CAME INTO EXISTENCE NOR DID THE ASSESSEE DERIVE ANY ADVANTAGE OF ENDURING NATURE. THE CIT(A), HOWEVER, DID NOT A GREE WITH THE ITA NO. 393/BANG/2016 PAGE 4 OF 10 SUBMISSIONS OF THE ASSESSEE. HE HELD THAT IT WAS O NLY AFTER THE REPLACEMENT OF PARTS OF THE MACHINERY THAT THE MACH INERY STARTED WORKING AND THEREFORE BY INCURRING THE EXPENDITURE, ENDURIN G BENEFIT RESULTED TO THE ASSESSEE AND THEREFORE EXPENDITURE WAS CAPITAL EXPE NDITURE. HE TOOK THE EXAMPLE OF MACHINE SMG FEINTOOL GERMANY. THIS WAS A MACHINERY WHICH WAS MANUFACTURED IN THE YEAR 2008. THIS WAS PURCHA SED BY THE ASSESSEE AS A SECOND-HAND MACHINE IN THE YEAR 2008-09. THE WDV OF THIS MACHINERY AS ON 1.4.2011 WAS RS.92,92,755 ON WHICH EXPENDITURE ON REPAIRS WAS RS.31,75,000. A COPY OF THE BILL EVIDE NCING PURCHASE OF PARTS FOR THIS MACHINE IS AT PAGE 142 OF PB AND IT GIVES THE FOLLOWING DESCRIPTION:- HYDRAULIC SYSTEM WITH ELECTRICAL CONTROL PANEL FOR 630T FINE BLANKING PRESS. 8. THE CITA GAVE THE FOLLOWING FINDINGS:- THIS MACHINE IS NOT A SINGLE UNIT BUT IS MADE UP O F SEVERAL PARTS. THUS, IN THE FIRST YEAR THE ASSESSEE CLAIMED DEPREC IATION OF RS.1,51,31,700/- WHICH CONSISTED OF SEVERAL PARTS, IN ITS FIRST YEAR OF OPERATION. ONLY THEN THE ASSESSEE STARTED DERIVI NG ENDURING BENEFIT. DURING THE ACCOUNTING PERIOD 2011-2012 THI S MACHINERY COULD NOT OPERATE. THE ASSESSEE FOUND THAT ONE OF T HE PARTS HAD TO BE REPLACED WITHOUT WHICH THE MACHINERY COULD NOT F UNCTION. IT IS ONLY AFTER REPLACEMENT THAT THE MACHINERY STARTED F UNCTIONING AND AN ADVANTAGE WAS DERIVED FROM THIS MACHINE. THIS MA CHINE BEING CONGREGATION OF SEVERAL PARTS STARTED FUNCTIONING A ND ENDURING BENEFIT WAS DERIVED ONLY AFTER THE REPLACEMENT OF P ARTICULAR PART. THUS THE EXPENDITURE INCURRED IS NO DOUBT A CAPITAL EXPENDITURE BECAUSE THE REPLACEMENT OF PARTICULAR PART MAINTAIN ED THE STATUS QUO WHICH IS EQUIVALENT TO A NEW PART OF THE ENTIRE MACHINERY. THUS, IT IS TO BE IMPLIED THAT THE MACHINERY PARTS, WHEN REPLACED, STARTED GIVING THE DESIRED BENEFIT BY MAKING THEM I N A WORKING CONDITION. THEREFORE THE EXPENDITURE SPENT ON SUCH REPLACEMENT IS NOT REVENUE EXPENDITURE ALTHOUGH THERE IS NO NEW AS SET GENERATED ON ACCOUNT OF REPLACEMENT OF PARTICULAR PART. ITA NO. 393/BANG/2016 PAGE 5 OF 10 9. IN RESPECT OF OTHER ITEMS OF EXPENDITURE, THERE HAS BEEN NO DISCUSSION. EVEN IN RESPECT OF THE PARTS PURCHASED FOR THE MACHINE SMG FEINTOOL GERMANY, THE DESCRIPTION OF THE ITEM PURCH ASED, COST OF WHICH WAS CLAIMED AS CURRENT REPAIRS HAS NOT BEEN SPELT OUT B Y THE CIT(APPEALS) IN THE IMPUGNED ORDER. AGGRIEVED BY THE ORDER OF CIT( A), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. FIRST LET US SET OUT THE LEGAL POSITION WITH REGARD TO WHEN AN EXPENDITURE CAN BE REGARDED AS CURRENT REPAIRS. THE HONBLE MADRAS HIGH COURT IN THE CASE OF SUPER SPINNING MILLS V. ACIT, 357 ITR 720 , AFTER CONSIDERING THE SEVERAL SUPREME COURT DECISIONS CULLED OUT THE PRINCIPLES APPLICABLE IN S UCH A SITUATION AS FOLLOWS:- THE QUESTION AS TO WHETHER THE EXPENDITURE INCURRE D ON REPLACEMENT OF MACHINERY IS REVENUE OR CAPITAL EXPE NDITURE, PARTICULARLY IN THE NATURE OF REPLACEMENTS OF PARTS , THUS RESTS ON THE NATURE OF EXPENDITURE INCURRED, VIS-A-VIS THE BENEF IT THAT THE ASSESSEE DERIVES. THE RATIO DEDUCTIBLE FROM THE DE CISIONS REFERRED TO ABOVE ARE: (I) TO DECIDE THE APPLICABILITY OF SECTION 31(I), T HE TEST IS NOT WHETHER THE EXPENDITURE IS REVENUE OR CAPITAL IN NA TURE, BUT WHETHER THE EXPENDITURE IS CURRENT REPAIRS. THE B ASIC TEST IS TO FIND OUT WHETHER EXPENDITURE IS INCURRED TO PRESER VE AND MAINTAIN AN ALREADY EXISTING ASSET AND THE EXPENDI TURE MUST NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE VIDE [2007] 293 ITR 201 (SC) (COMMISSIONER OF INCOM E TAX VS. SARAVANA SPINNING MILLS P. LTD.) (II) UNDER SECTION 31(I), THE DEDUCTION ADMISSIBLE IS ONLY FOR CURRENT REPAIRS. THEREFORE, THE QUESTION AS TO WHET HER THE EXPENDITURE INCURRED BY THE ASSESSEE CONCEPTUALLY I S REVENUE OR CAPITAL IN NATURE IS NOT RELEVANT FOR DECIDING THE QUESTION WHETHER SUCH EXPENDITURE COMES WITHIN THE ETYMOLOGICAL MEAN ING OF THE EXPRESSION CURRENT REPAIRS. IN OTHER WORDS, EVEN IF THE EXPENDITURE IS REVENUE IN NATURE, IT MAY NOT FALL I N THE CONNOTATION ITA NO. 393/BANG/2016 PAGE 6 OF 10 OF CURRENT REPAIRS [2007] 293 ITR 201 (SC) (COMMI SSIONER OF INCOME TAX VS. SARAVANA SPINNING MILLS P. LTD.) (III) A NEW ASSET OR NEW/DIFFERENT ADVANTAGE CANNOT AMOUNT TO `CURRENT REPAIRS. 2009-TIOL-86-SC-II (CIT VS. SR I MANGAYARKARASI MILLS P. LIMITED) (IV) REPAIR IMPLIES EXISTENCE OF A PART OF THE MACH INE WHICH HAS MALFUNCTIONED, THEREBY REQUIRING REPAIR TO THAT MAC HINERY, PLANT ETC. REPLACEMENT CANNOT BE A CURRENT REPAIR, FOR, REPLACEMENT AND CURRENT REPAIR DO NOT GO HAND IN HAND. IF ON E IS TO HOLD OTHERWISE, IT WOULD ONLY MAKE SECTION 31(I) WHOLLY REDUNDANT AND ABSURD. THUS, REPLACEMENT EXPENDITURE CANNOT BE SA ID TO BE `CURRENT REPAIRS VIDE [2007] 293 ITR 201 (SC) (COM MISSIONER OF INCOME TAX VS. SARAVANA SPINNING MILLS P. LTD.) AND 2009-TIOL- 86-SC-II (CIT VS. SRI MANGAYARKARASI MILLS P. LIMIT ED) (V) EXPENDITURE IS DEDUCTIBLE UNDER SECTION 37 ONLY IF IT (A) IS NOT DEDUCTIBLE UNDER SECTIONS 30-36, (B) IS OF A REVENU E NATURE, (C) IS INCURRED DURING THE CURRENT ACCOUNTING YEAR AND (D) IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS. 2009- TIOL-86-SC-II (CIT VS. SRI MANGAYARKARASI MILLS P. LIMITED); (VI) EXPENDITURE IS OF A CAPITAL NATURE WHEN IT AMO UNTS TO AN ENDURING ADVANTAGE FOR THE BUSINESS AND REPAIR IS D IFFERENT FROM BRINGING A NEW ASSET FOR THE BUSINESS. FURTHER, BRI NGING INTO EXISTENCE A NEW ASSET OR AN ENDURING BENEFIT FOR TH E ASSESSEE AMOUNTS TO CAPITAL EXPENDITURE VIDE LAKSHMIJI SUGAR MILLS (P) CO. V. CIT (AIR 1972 SC 159) REFERRED IN 2009-TIOL-86-S C-II (CIT VS. SRI MANGAYARKARASI MILLS P. LIMITED). (VII) THEREFORE, WHETHER AN EXPENDITURE IS REVENUE OR CAPITAL IN NATURE WOULD DEPEND ON THE FACTS OF EACH CASE. [2 007] 293 ITR 201 (SC) (COMMISSIONER OF INCOME TAX VS. SARAVANA S PINNING MILLS P. LTD.) 11. AS CAN BE SEEN FROM THE AFORESAID DECISION, THE QUESTIONS; WHETHER AN EXPENDITURE IS REVENUE OR CAPITAL, WHAT WOULD CO NSTITUTE THE REPAIRS AS CURRENT REPAIRS AND WHETHER REPLACEMENT OF PARTS OF A MACHINE CAN BE SAID TO BE CURRENT REPAIRS ARE QUESTIONS WHICH WILL DEPEND ON FACTS AND ITA NO. 393/BANG/2016 PAGE 7 OF 10 CIRCUMSTANCES OF EACH CASE. WE HAVE ALREADY SET OU T THE NATURE AND DESCRIPTION OF THE ITEM THAT WAS USED ON SMG FEINTO OL GERMANY. SIMILARLY FOR OTHER ITEMS OF MACHINERY, THE DESCRIPTION IS CO NTAINED IN THE PB AT PAGES NO. 143 TO 150 OF ASSESSEES PB. WITHOUT A R EFERENCE TO THE NATURE OF EXPENSES, IT IS NOT POSSIBLE TO DECIDE THE QUEST ION WHETHER THE EXPENDITURE IN QUESTION IS CURRENT REPAIRS OR CAPIT AL EXPENDITURE OR REVENUE EXPENDITURE. IN OUR VIEW, IT WILL BE JUST AND PROP ER TO SET ASIDE THE ORDER OF REVENUE AUTHORITIES ON THIS ISSUE AND REMAND THE QU ESTION FOR FRESH CONSIDERATION BY THE AO IN THE LIGHT OF PRINCIPLES LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE DECISION CITED SUPRA. THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, BEFORE DECIDING THE ISSUE. THE RELEVANT GROUNDS OF APPEAL ARE DECIDED ACCORDINGLY. 12. THE NEXT ISSUE THAT ARISES FOR CONSIDERATION IS AS TO, WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN DISALLOWING A SUM OF RS.71,76,751 U/S. 40(A)(IA) OF THE ACT. THE GRIEVANCE OF THE ASSESS EE IN THIS REGARD IS PROJECTED IN GROUNDS NO.6 TO 8. THE ASSESSEE MADE A PAYMENT OF RS.71,76,751 TO VARIOUS TRANSPORTERS, THE DETAILS O F WHICH ARE AS FOLLOWS:- S L .NO EXPENDITURE AMOUNT REMARKS 1 TRANSPORT INWARD 16,89,141/- INCLUDED IN THE PURCHASE COST OF THE MATERIAL 2 TRANSPORT OUTWARD 14,84,608/- FOR SALES 3 TRANSPORT OUTWARD (EXPORTS-AIR) 24,32,489/- SALES BY AIR TRANSPORT 4 TRANSPORT OUTWARD (EXPORT - SEA) 15,70,513/ - SALES BY SEA TRANSPORT 71,76,751/- 13. ADMITTEDLY, THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO THE TRANSPORTERS. THE AO WAS OF T HE VIEW THAT UNDER THE PROVISIONS OF SECTION 194C OF THE ACT, PAYMENT IN Q UESTION WAS A PAYMENT ITA NO. 393/BANG/2016 PAGE 8 OF 10 FOR CARRYING OUT OF WORKS FOR WHICH ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE ON SUCH PAYMENT. SINCE THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE, THE AO WAS OF THE VIEW THAT THE AMOUNT CLAI MED AS DEDUCTION WHILE COMPUTING INCOME ON ACCOUNT OF TRANSPORT CHARGES SH OULD BE DISALLOWED AND ADDED TO TOTAL INCOME OF ASSESSEE U/S. 40(A)(IA ) OF THE ACT. 14. THE ASSESSEE SUBMITTED THAT IT HAD OBTAINED DEC LARATION FROM ALL THE TRANSPORTERS WHO WERE ENGAGED FOR THE PURPOSE OF TR ANSPORTATION TO THE EFFECT THAT THE SUM IN QUESTION WAS PAID TO THEM IN THE COURSE OF THEIR BUSINESS OF PLYING GOODS CARRIAGES ALONG WITH THEIR PAN. ACCORDING TO THE PROVISIONS OF SECTION 194C(6) OF THE ACT, IF SUCH A DECLARATION IS OBTAINED, A PERSON MAKING PAYMENT NEED NOT DEDUCT TAX AT SOURCE . AFTER THE AMENDMENT BY FINANCE ACT, 2015 W.E.F. 1.6.2015, THE DECLARATION TO BE GIVEN BY THE CONTRACTOR SHOULD BE THAT HE OWNS 10 O R LESS GOODS CARRIAGES DURING THE RELEVANT PREVIOUS YEAR. SUCH DECLARATIO N IS NOT REQUIRED FOR THE AY 2012-13 WHICH IS THE ASSESSMENT YEAR IN THIS APP EAL. IN THIS APPEAL, A MERE DECLARATION BY THE TRANSPORTER THAT HE IS IN T HE BUSINESS OF PLYING GOODS CARRIAGES IS ENOUGH. IT IS UNDISPUTED THAT T HAT SUCH DECLARATION WAS OBTAINED BY THE ASSESSEE. U/S. 194C(7) OF THE ACT, THE ASSESSEE WHO IS A PERSON MAKING PAYMENT HAS TO FURNISH TO THE PRESCRI BED INCOME TAX AUTHORITY, A DECLARATION OBTAINED FROM THE CONTRACT OR. IT IS ALSO ADMITTED THAT THE ASSESSEE DID NOT FURNISH TO THE PRESCRIBED AUTHORITY THE DECLARATION OBTAINED FROM THE CONTRACTOR. THE ASSESSEE, NEVERT HELESS, PLEADED BEFORE THE AO THAT NO DISALLOWANCE U/S. 40(A)(IA) CAN BE M ADE BECAUSE OF THE PROVISIONS OF SECTION 194C(6) OF THE ACT. THE AO D ID NOT AGREE WITH THE CLAIM OF ASSESSEE FOR THE FOLLOWING REASONS:- FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSEE HAS INCURRED FREIGHT EXPENSES TO BIG TRANSPORT COMPANIES. CLEARLY SECTIO N 194C(6) & 194C(7) ARE NOT MEANT FOR THESE TRANSPORT COMPANIES BUT THESE ITA NO. 393/BANG/2016 PAGE 9 OF 10 SECTIONS ARE APPLICABLE TO SMALL TRANSPORT OPERATOR S WHO OWNS VERY FEW TRUCKS. FURTHER THE REPEATED PAYMENT TO THE, SA ME TRANSPORT COMPANY CLEARLY INDICATES THAT THE ASSESSEE WAS IN CONTRACTUAL OBLIGATION WITH THESE TRANSPORT COMPANIES AND HE IS LIABLE TO DEDUCT THE TDS U/S. 194C OF I.T. ACT AT THE PRESCRIBED RA TES. THESE PAYMENTS WERE TO BE PAID AFTER DEDUCTING TAX AT THE SOURCE. HOWEVER, THE ASSESSEE HAS NOT MADE SUCH DEDUCTION. HENCE AS PER SECTION 40A(IA). THE PAYMENT OF RS. 71,76,751/- DIS ALLOWED AND ADDED TO THE INCOME RETURNED BY THE ASSESSEE. 15. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CON FIRMED THE ORDER OF AO, BUT DID NOT DEAL WITH THE ARGUMENTS OF THE ASSE SSEE WITH REGARD TO PROVISIONS OF SECTION 194C(6) OF THE ACT. 16. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASS ESSEE HAS RAISED GROUNDS NO.6 TO 8 BEFORE THE TRIBUNAL. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND T HAT IDENTICAL ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE CALCUTTA B ENCH OF THE TRIBUNAL IN THE CASE OF SOMA RANI GHOSH V. DCIT, 74 TAXMANN.COM 90 (KOLKATA TRIB.) AND THE TRIBUNAL TOOK THE FOLLOWING VIEW:- ASSESSEE MADE PAYMENTS TO TRANSPORTERS TOWARDS CAR RIAGE INWARD AND CARRIAGE OUTWARD AND CLAIMED DEDUCTION OF SAME - ASSESSING OFFICER HAVING NOTICED THAT ASSESSEE HAD NOT DEDUCT ED TAX AT SOURCE ON SUCH PAYMENTS DISALLOWED SAME UNDER SECTION 40(A )(IA) - ASSESSEE CONTENDED BEFORE COMMISSIONER (APPEALS) TH AT BECAUSE OF PROVISION OF SECTION 194C(6), SHE WAS NOT LIABLE TO EFFECT TDS ON PAYMENTS TO TRANSPORTERS WHO HAD SUBMITTED THEIR PAN AND THOSE PAN AND ADDRESSES OF TRANSPORTERS WERE FILED BEFORE ASSESSING OFFICER - COMMISSIONER (APPEALS) HELD THA T BENEFIT UNDER SECTION 194C(6) WAS AVAILABLE ONLY WHEN ASSES SEE FULFILLED CONDITIONS LAID DOWN IN SECTION 194C(7) AND SINCE A SSESSEE HAD NOT FULFILLED CONDITIONS, ASSESSING OFFICER WAS JUSTIFI ED IN DISALLOWING SAID PAYMENTS - WHETHER FROM READING OF PROVISIONS OF SECTION 194C IT FOLLOWS THAT IF ASSESSEE COMPLIES WITH PROV ISIONS OF SECTION 194C(6), NO DISALLOWANCE UNDER SECTION 40(A)(IA) IS PERMISSIBLE, ITA NO. 393/BANG/2016 PAGE 10 OF 10 EVEN THOUGH THERE IS VIOLATION OF PROVISIONS OF SEC TION 194C(7) - HELD, YES - WHETHER SINCE ASSESSEE HAD SUBMITTED PA N AND ADDRESSES OF TRANSPORTERS BEFORE ASSESSING OFFICER AND THUS COMPLIED WITH PROVISIONS OF SECTION 194C(6), NO DIS ALLOWANCE UNDER SECTION 40(A)(IA) WAS PERMISSIBLE - HELD, YES [PARAS 34 AND 35][IN FAVOUR OF ASSESSEE] 18. IN THE LIGHT OF THE AFORESAID DECISION OF THE T RIBUNAL, WE ARE OF THE VIEW THAT THE ADDITION MADE U/S. 40(A)(IA) OF THE A CT CANNOT BE SUSTAINED IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SAM E IS DIRECTED TO BE DELETED. 19. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF FEBRUARY, 2019. SD/- SD/- ( B.R. BASKARAN ) ( N.V . VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 15 TH FEBRUARY, 2019. / D ESAI S MURTHY / COPY TO: 1 . APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.
