The ITO, Ward-6(3), Surat V. Om Bhole Transport & Construction Co., Surat

ITA 435/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85634 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Depreciation; Additional evidence
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NO. 435 / AHD/ 20 1 2 (A SSESSMENT YEAR: 2007 - 08) THE I.T.O., WARD - 6(3), SURAT V/S M/S. OM BHOLE TRANSPORT AND CONSTRUCTION , 93 - 94, VISHNU NAGAR SOCIETY, HAZIRA ROAD, BUS S TOP NO. 3, INCHHAPORE, SURAT (APPELLANT) (RESPONDENT) PAN: AAAFO 9876 C APPELLANT BY : SHRI B.L. YADAV, SR. D.R. RESPONDENT BY : SHRI RAJESH M. UPADHYAY, A.R. ( )/ ORDER DATE OF HEARING : 23 - 12 - 2014 DATE OF PRONOUNCEMENT : 23 - 01 - 2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) - IV, SURAT DATED 12.10.2011 FOR A.Y. 2007 - 08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 07 - 08 ON 31.10.2007 DECLARING TOTAL INCOME AT RS. NIL AFTER ADJUSTMENT OF CARRY FORWARD UNABS ORBED DEPRECIATION. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 18.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 28,63,830/ - . AGGRIEVED BY THE ORDER OF A.O., ITA NO 435/AHD/2012 . A.Y. 2007 - 08. 2 ASSESSEE CARRIED THE M ATTER BEFORE CIT(A) WHO VIDE ORDER DATED 12.10.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AS WELL AS REVENUE CARRIED THE MATTER BEFORE HON BLE TRIBUNAL. HON BLE TRIBUNAL VIDE ORDER DATED 21.09.2012 IN ITA NO. 43 5/AHD/2012 AND C.O. NO. 78/AHD/2012 DISMISSED THE APPEAL OF REVENUE AND ALLOWED THE C.O OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF TRIBUNAL, THE REVENUE CARRIED THE MATTER BEFORE HON BLE HIGH COURT. HON BLE HIGH COURT IN TAX APPEAL NO. 309/AHD/20 13 ORDER DATED 15.07.2013 SET ASIDE THE MATTER TO TRIBUNAL TO DECIDE THE FOLLOWING QUESTIONS. (A) WHETHER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON BLE ITAT IS JUSTIFIED IN DELETING THE ADDITION OF RS. 22,18,322/ - AND RS. 1,68,528/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE U/S. 40(A)(IA) OF THE ACT RELYING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTERS. (B) WHETHER SECTION 40(A)(IA) OF THE INCOME TAX ACT CAN BE INVOKED ONLY TO DIS ALLOW EXPENDITURE OF THE NATURE REFERRED TO THEREIN, WHICH IS SHOWN AS PAYABLE AS ON THE DATE OF THE BALANCE SHEET OR IT CAN BE INVOKED ALSO TO DISALLOW SUCH EXPENDITURE WHICH BECAME PAYABLE AT ANY TIME DURING THE RELEVANT PREVIOUS YEAR AND WAS ACTUALLY P AID WITHIN THE PREVIOUS YEAR. 4. THUS THE MATTER IS BEFORE US IN THE SECOND ROUND TO DECIDE THE ABOVE 2 GROUNDS. 5. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAD MADE AGGREGATE PAYMENT OF RS. 22,18,322 / - FOR THE FOLLOWING EXPENSE S. SR. NO. NATURE OF PAYMENT AMOUNT (RS.) 1 TRANSPORTATION CHARGES 3,08,150 2 HOLD EXPENSES 2,16,508 3 TRAILOR EXPENSES 1,34,215 4 MACHINERY RENT EXPENSES 2,68,846 5 GCB RENT EXPENSES 8,90,902 6 TRUCK HIRE EXPENSES 3,99,701 TOTAL 22, 18,322 ITA NO 435/AHD/2012 . A.Y. 2007 - 08. 3 6. A.O NOTICED THAT WHILE MAKING THE AFORESAID PAYMENT S , ASSESSEE SHOULD HAVE DEDUCTED TDS WHICH IT HAD FAILED TO DO SO AND THEREFORE IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) R.W.S. 194C DISALLOWED THE AGGREGATE PAYMENT OF RS. 22,18,322/ - . AGGR IEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 12.10.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: - 3.3 I HAVE GONE THROUGH THE FACTS OF THE CASE. TDS PROVISIONS COULD NOT BE APPLIED TO 'HOLD EXPENSES' AS THESE WERE NOT PAID BY THE APPELLANT BUT RETAINED BY THE PRINCIPAL. EXPECTING THE APPELLANT TO DEDUCT TAX FROM MONEYS RETAINED WOULD BE ASKING FOR THE IMPOSSIBLE. IT IS THEREFORE HELD THAT SECTION 40(A)(IA) IS NOT ATTRACTED IN RESPECT OF HOLD EXPENSES . DISALLOWANCE MADE OF RS. 2,16,508/ - ON THIS ACCOUNT IS THEREFORE DELETED. THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT AS ALL THE EQUIPMENT, BE IT TRAILER, JCB, TRUCK, MACHINERY, ETC. WERE TAKEN ON HIRE WITHOU T SERVICES OF DRIVER OR FUEL AND HENCE COULD NOT AMOUNT TO 'WHOLE OR ANY PART OF THE WORK' REFERRED IN SECTIONL94C. HOWEVER, 1 DO NOT FIND MYSELF IN AGREEMENT WITH THE CLAIM OF THE APPELLANT THAT SECTION 1941 WAS NOT APPLICABLE IN HIS CASE AS TRAILER/JC B/TRUCK/OTHER MACHINERY TAKEN ON HIRE BY HIM WAS COMMERCIAL VEHICLE AND THEREFORE DID NOT FALL WITHIN THE DEFINITION OF RENT AS PROVIDED IN EXPLANATION TO SECTION 1941. THE APPELLANT HAS RELIED ON SEVERAL DECISIONS WHICH CAN BE CATEGORIZED INTO TWO BROAD SETS - ONE SET WHICH RELATES TO DEPRECIATION RATES ON SIMILAR MACHINERY AND HENCE INAPPLICABLE TO THE ISSUE ON HAND AS THE QUESTION BEFORE THE COURT WAS DIFFERENT FROM THE ISSUE BEFORE US. THESE DECISIONS HAVE BEEN QUOTED OUL OF CONTEXT AND DO NOT HELP TH E APPELLANT'S CAUSE. THE SECOND SET OF DECISIONS RELATE LO THE ISSUE DIRECTLY BUT I AM UNABLE TO BRING MYSELF TO ACCEPT THE REASON GIVEN IN THESE DECISIONS FOR HOLDING THAT HIRE CHARGES PAID FOR MACHINERY WAS NOT COVERED WITHIN THE MEANING OF RENT IN SECTI ON 1941. IT HAS BEEN HELD IN THE SAID DECISIONS THAT THE SECTION WAS APPLICABLE ONLY WHEN AGREEMENT WAS PREDOMINANTLY IN RESPECT OF LAND OR BUILDING OR MACHINERY ATTACHED THERETO. THIS WAS THE SITUATION PRIOR TO THE AMENDMENT BROUGHT W.E.F. 13.07.2006 WH ICH CHANGED THE MEANING OF RENT AND BROUGHT WITHIN ITS MEANING RENT PAID FOR MACHINERY OR PLANT OR EQUIPMENT, WHETHER OR NOT ATTACHED TO BUILDING OR LAND. ANOTHER REASON GIVEN IS THAT THE DEFINITION OF RENT DOES NOT PROVIDE ANY ITEM FOR VEHICLE HIRE CHARGE S AND SINCE TRAILER/JCB/TRUCK/OTHER MACHINERY FALLS WITHIN THE CATEGORY OF VEHICLES, THE SECTION DOES NOT APPLY TO THEM. THIS IS A VERY NARROW AND WRONG INTERPRETATION OF THE EXPLANATION. THE DEFINITION OF RENT PROVIDED IN THE EXPLANATION BELOW SECTION 194 1 IS BROAD ENOUGH TO COVER ALL PLANT, MACHINERY AND EQUIPMENT. BEFORE BEING CLASSIFIED AS A VEHICLE, FOR THE REASON THAT IT IS REGISTERED WITH THE RTO, THE TRAILER/JCB/TRUCK/OTHER MACHINERY, ARE EQUIPMENT AND MACHINERY AND THEY DO NOT LOOSE THIS CHARACTER, I.E. BEING EQUIPMENT/MACHINERY EVEN WHEN THEY ARE CLASSIFIED AS A VEHICLE. - WITH DUE RESPECT TO THE DECISION OF THE HON BLE AHMEDABAD ITAT AND THE HON'BLE MUMBAI ITAT. I BEG TO DIFFER AND HOLD THAT THE DEFINITION OF RENT IN SECT ION - 1941 INCLUDES RENT PAID FOR TRAILER/JCB/TRUCK/OTHER SIMILAR MACHINERY. ITA NO 435/AHD/2012 . A.Y. 2007 - 08. 4 3.3.1. THE ALTERNATIVE PLEA OF THE APPELLANT THAT SECTION 40(A)(IA) CAN BE APPLIED ONLY TO PAYMENTS OUTSTANDING AS AT THE YEAR END IS ALSO NOT ACCEPTABLE, DESPITE DECISIONS REFERRED BY THE APPELLANT, AS GIVING SUCH NARROW INTERPRETATION WOULD NOT ONLY DEFEAT THE PURPOSE OF INTRODUCING SECTION 40(A)(IA) BUT ALSO MAKE IT UNWORKABLE. 3.3.2. THE SECOND ALTERNATE PLEA OF THE APPELLANT THAT SECTION 1941 WAS AMENDED W.E.F. 13.06.2006 AND TH EREFORE ALL CREDITS AND PAYMENTS MADE BEFORE THAT DATE DID NOT ATTRACT SECTION 40(A)(IA) IS ACCEPTABLE ONLY IN PART, I.E. IN CASES WHERE PAYMENTS HAD BEEN MADE BEFORE THAT DATE. IN CASES WHERE ONLY CREDITS HAD BEEN GIVEN AND PAYMENTS REMAINED OUTSTANDING O N THAT DATE WOULD STILL ATTRACT SECTION 40(A)(IA). 3.3.3. THE THIRD ALTERNATE PLEA THAT SECTION 40(A)(IA) IS ATTRACTED ONLY IN RESPECT OF PERSONS TO WHOM PAYMENT OF RENT IN EXCESS OF RS. 1,20,000/ - HAS BEEN MADE DURING THE YEAR IS ACCEPTABLE IN VIEW OF 1 ST PROVISO TO SECTION 1941. HOWEVER, IT IS BEING CLARIFIED H ERE THAT THE LIMIT OF RS. 1.20,000/ - IS THE AGGREGATE OF CREDITS DURING THE YEAR AND NOT PAYMENTS AS MENTIONED BY THE APPELLANT IN HIS SUBMISSIONS. THE APPELLANT HAS GIVEN A WORKING IN RESPECT OF PE RSONS TO WHOM RENT LESS THAN RS. 1,20,000/ - WAS REQUIRED TO BE PAID AND THIS AMOUNT TOTALS UP TO RS. 11,22,809/ - . IN PRINCIPLE, THE APP ELLANT IS ENTITLED TO RELIEF TO THIS EXTENT. HOWEVER, FROM THE ASSESSMENT ORDER IT APPEARS THAT THESE DETAILS WERE NOT BE FORE THE A.O. AND HENCE HE IS DIRECTED TO CHECK THE VERACITY OF THE CLAIM OF THE APPELLANT AND ALLOW IT ACCORDING TO MY DECISION GIVEN ABOVE. 4. THE A.O. HAS DISALLOWED PAYMENTS OF? 1,60,528/ - MADE TO GE CAPITAL TREATING IT AS INTEREST PAYMENT. THE APPELLA NT HAS CLAIMED THE PAYMENT TO BE ON ACCOUNT OF HIRE PURCHASE OF L & T HYDRAULIC ESCALATOR. THE APPELLANT FILED COPY OF REGISTRATION CERTIFICATE WITH RTO WHICH MENTIONS THAT THE EQUIPMENT IS SUBJECT TO HIRE PURCHASE AGREEMENT WITH GE CAPITAL. THE PAYMENTS M ADE TO GE CAPITAL DO NOT INCLUDE ANY ELEMENT OF INTEREST AND THEREFORE SECTION 1 94A WAS NOT ATTRACTED IN RESPECT OF THIS PAYMENT. SINCE THERE WAS NO LIABILITY TO DEDUCT TAX. SECTION 40(A)(IA) HAS NO APPLICATION. THIS ADDITION IS DELETED. 7. BEFORE US, LD. D .R. SUPPORTED THE ORDER OF A.O AND RELIED ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDAR KHAN TUVAR AND ORS. REPORTED IN (2013) 357 ITR 312 (GUJ) . ON THE OTHER HAND LD. A.R. SUBMITTED A CHART WHEREIN HE SUBMITTED THAT THE NO N APPLICABILITY OF TDS FOR THE REASON THAT SECTION 194I WAS AMENDED WITH EFFECT FROM 13.07.2006 AND THEREFORE ALL THE CREDITS OR PAYMENTS TILL THAT DATE DO NOT ATTRACT SECTION 194I AND THEREFORE NO DISALLOWANCE U/S. 40(A)(IA) COULD BE MADE IN RESPECT OF SU CH CREDITS OR PAYMENTS. HE FURTHER SUBMITTED THAT U/S. 194I, THE TDS WOULD ONLY BECOME APPLICABLE IF THE AGGREGATE PAYMENT EXCEEDED RS. 1,20,000/ - . HE SUBMITTED THAT THE PAYMENTS OF THE AMOUNT DID NOT EXCEED RS. 1,20,000/ - AND THEREFORE ASSESSEE WAS NOT ITA NO 435/AHD/2012 . A.Y. 2007 - 08. 5 RE QUIRED TO DEDUCT TDS. WITH RESPECT TO HIRE CHA RGES PAID TO G.E. CAPITAL, A.R . SUBMITTED THAT A.O HAS TREATED THE HIRE CHARGES PAID BY THE ASSESSEE AS INTEREST BUT IN FA CT IT IS NOT INTEREST BUT ARE HIRE CHARGES AND THEREFORE ASSESSEE IS NOT LIABLE TO DEDU CT TDS U/S. 194A ON THE HIRE CHARGES . THE LD. A. R. FURTHER SUBMITTED THAT THE AMENDED SECOND PROVISO TO SECTION 40(A)(IA) WHICH HAS BEEN INSERTED BY FINANCE ACT, 2012 IS CLARIFICATORY IN NATURE AND THE SAME IS RETROSPECTIVE. HE THEREFORE SUBMITTED THAT IF THE PAYEE HAS INCLUDED T HE AMOUNT PAID BY THE ASSESSEE AS ITS INCOME, NO DISALLOWANCE U/S. 40(A)(IA) COULD BE MADE. HE FURTHER SUBMITTED THAT SINCE THE AFORESAID PLEA WAS NO T TAKEN BY THE ASSESSEE BEFORE A.O THE MATTER MAY BE REMITTED TO THE FILE OF A.O FO R VERIFICATION OF THE CONTENTIONS OF THE ASSESSEE . THE LD. D.R. IN THE REJOINDER SUBMITTED THAT T HE PLEAS TAKEN NOW BY THE ASSESSEE BEFORE HON BLE TRIBUNAL WAS NOT TAKEN BY IT BEFORE THE A.O , RATHER THE A .R. OF THE ASSESSEE HAD AGREED BEFORE THE A.O FOR TH E DISALLOWANC ES . HE THEREFORE SUPPORTED THE ORDER OF A.O. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, THE QUESTION IS ABOUT DISALLOWANCE U/S. 40(A)(IA) OF THE ACT ON ACCOUNT OF NON DEDUCTION OF TDS . WE FIN D THAT ASSESSEE IN THE CHART SUBMITTED BEFORE US HAS GIVEN THE REASONS FOR NON APPLICABILITY OF TDS AND THEREFORE NO DISALLOWANCE U/S. 40(A)(IA) BE MADE IN THE CASE. WE FIND THAT THE AFORESAID SUBMISSIONS WERE NOT MADE BEFORE A.O BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT AND WE ARE THEREFORE OF THE VIEW THAT T HE SUBMISSION MADE NOW BY THE ASSESSEE BEFORE US NEEDS FACTUAL VERIFICATION. WE THEREFORE REMIT THE ISSUE TO THE FILE OF A.O TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE BY HO N BLE HIGH COURT IN T.A. NO. 309/A/2013 ORDER DATED 15.07.2013 , SUBMISSIONS MADE BY THE ASSESSEE, THE CASE LAWS RELIED UPON BY HIM AND IN ACCORDANCE WITH LAW. ASSESSEE IS ALSO FREE TO FURNISH ANY ADDITIONAL EVIDENCE REQUIRED IN SUPPORT OF HIS CONTENTION S . NEEDLESS TO S TATE THAT A.O SHALL DECIDE THE ISSUE AFRESH AFTER GIVING A REASONABLE OPPORTUNITY OF H EARING TO THE ASSESSEE. THUS THE GROUND S OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO 435/AHD/2012 . A.Y. 2007 - 08. 6 9. IN TH E RESULT, THE APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL P URPOSES. ORDER PRONOUNCED IN OPEN COURT ON 23 - 01 - 201 5 . SD/ - SD/ - (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD