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ITA 443/AGR/2012

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0523 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 7 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 28-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Assessee Lawyers: V BA
• Keywords: Bonafide belief; Assessment record; TDS
• Section: 143(3); 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 443/AGRA/ 2012 ASSESSMENT YEAR 2008-09 ASSTT. COMMISSIONER OF INCOME TAX VS. M/S. REUM TRANSLINKS PVT. LTD, CIRCLE-3(1) GWALIOR UTTAM ARCADE, HUJRAT PUL, SHIVAJI MARG NO.2, LASHKAR, GWALIOR (MP) (PAN AACCR 7444N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. MISHRA, JR. D.R. RESPONDENT BY : SHRI V.BAPANA, C.A. DATE OF HEARING : 05.03.2013 DATE OF PRONOUNCEMENT : 08.03.2013 ORDER PER A.L. GEHLOT,ACCOUNTANT MEMBER: THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A) GWALIOR DATED 20.06.2012. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITS APPEAL ARE REPRODUCED AS BELOW:- ITA NO.443/AGRA/2012 A.Y. 2008-09 2 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.35, 47,812 MADE U/S 40(A)(IA) OF THE INCOME TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT ASSESSEE HAS DEBI TED VEHICLE HIRE EXPENSES OF RS.35,47,812/- IN PROFIT AND LOSS ACCOUNT. THE A .O. ASKED THE ASSESSEE WHY TDS ON VEHICLE HIRE EXPENSES HAS NOT BEEN DEDUC TED ? 4. THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS B EFORE THE REVENUE AUTHORITIES WHICH HAVE BEEN NOTICED FROM TH E ORDER OF CIT(A). THE ASSESSEE COMPANY IS ENGAGED IN BUSINESS OF TRANSPORTATION OF GOODS/MATERIAL. IN THIS MAJOR REC EIPTS ARE FROM A FIRM CALLED M/S. EMERALD INDUSTRIES, NEW DELHI. THE ASSESSEE ENTERED INTO A MEMORANDUM OF UNDERSTANDING WITH EMERALD IND USTRIES ON 15 TH OCT. 2003 FOR SUPPLY, DELIVER AND TRANSPORT STONE AGGREGATE AND GSB MATERIAL TO PATIBELL JV. NHAI PROJECT IC, ETAWA H UNDER CONTRACT WITH EMERALD INDUSTRIES WAS REQUIRED TO TRANSPORT C RUSHED MATERIAL FROM MINES TO THE DESIGNATED LOCATIONS AT IC PROJE CT. EMERALD INDUSTRIES HAD AVAILABILITY OF MINES AND CR USHER AS REQUIRED FOR THE PURPOSE OF SUPPLY OF STONE AGGREGA TE AND GSB MATERIAL. BUT HOWEVER THEY HAD NO EXPERIENCE IN LIF TING & TRANSPORTING MATERIAL FROM MINES TO THE DIFFERENT S ITES OF NHAI. THE ASSESSEE OFFERED HIS SERVICES TO CARRY ON TRANS PORT OF THESE AGGREGATES & GSB MATERIAL FROM MINES TO DIFFERENT L OCATIONS ON NHAI. BOTH THE PARTIES HAVE EXECUTED A MEMORANDUM O F ITA NO.443/AGRA/2012 A.Y. 2008-09 3 UNDERSTANDING TO WHICH THE ASSESSEE WAS REQUIRED TO TRANSPORT 10,00,000 TONS+ 20% OF STONE AGGREGATE AND 5,00,000 TONS +20% OF GSB. THE PRICE SO DECIDED BY THEM WAS RS.1.10 PER M T/KMTR. THIS PRICE IS INCLUSIVE OF ALL COSTS RELATED TO THE SAME . THE ASSESSEE ALSO OFFERED THAT HE DOES NOT HAVE SUF FICIENT FUNDS TO PURCHASE VEHICLES, REQUIRED FOR TRANSPORTATION O N REGULAR BASIS AS THE COMPANY HAD SHARE CAPITAL LESS THAN RS.20 LACS. EMERALD INDUSTRIES OFFERED TO PROVIDE THE VEHICLES EQUIPMENTS REQUIRED FOR THE PURPOSE OF TRANSPORTATION WITH THE CONDITION THAT THEY WILL RECOVER 90% COST OF VEHICLES FROM THE ASSESSE E AND REMAINING 10% SHALL BE COLLECTED FROM ASSESSEE AS INTEREST FR EE DEPOSITS IMMEDIATELY. IT WAS ALSO AGREED TO HANDOVER THE POS SESSION OF ALL THESE VEHICLES TO THE ASSESSEE AT PRICE NOT LESS TH AN 10% OF ACTUAL COST AT THE TIME OF COMPLETION OF THE PROJECT. THE MODE OF PAYMENT OF 90% BEING COST OF THESE WAS AS HIRE CHARGES BASED UPON MATERIAL SUPPLIED WHICH WAS AT R S.0.21 PER TONE/KMTR AND THE SAME WAS TO BE RECOVERED FROM THE PAYMENT OF TRANSPORTATION BILLS ISSUED BY THE ASSESSEE. AS MENTIONED ABOVE THE 10% COST WAS TO BE PAID AT T HE CONCLUSION OF TRANSPORTATION OF AGREED QUANTITY, HO WEVER EVEN THE EMERALD INDUSTRIES COLLECTED THE 10% OF THESE VEHIC LES AS WAS PAYABLE AT THE END BY WAY OF SURRENDER OF THESE VEH ICLES TO THE ASSESSEE AS INTEREST FREE ADVANCE. THE ASSESSEE GAV E RS.40 LACS ADVANCE AS INTEREST FREE DEPOSIT AGAINST VEHICLES U SED FOR TRANSPORTATION. IT WAS ALSO AGREED THAT DEPOSIT SHA LL ONLY BE ADJUSTED AGAINST THE 10% COST OF THE TRANSPORTATION EQUIPMEN TS. IT WAS NOT EXPRESSLY PROVIDED TO BE REFUNDED IN CASH IN THE EV ENT ASSESSEE REFUSES TO PURCHASE THESE EQUIPMENT. THUS IN NUTSHELL IT WAS DECIDED THAT EMERALD INDUST RIES WHO HAS TAKEN CONTRACT OF SUPPLY OF STONE AGGREGATES AND GS B MATERIAL TO PATIBELL JV, NHAI WAS HAVING MINES AND CRUSHER. THE Y ENGAGED ASSESSEE FOR THE PURPOSE OF TRANSPORTATION OF THESE MATERIALS AND PROVIDED THE FACILITY OF TRANSPORTATION EQUIPMENTS. THE TOTAL VALUE OF THESE TRANSPORTATION EQUIPMENTS WAS TO BE RECOVERED UP TO 90% ONLY AND REMAINING 10% WOULD BE COST OF THESE EQUIPMENTS AT THE ITA NO.443/AGRA/2012 A.Y. 2008-09 4 CONCLUSION OF CONTRACT. THIS 10% WAS COLLECTED BY T HE EMERALD INDUSTRIES AS INTEREST FREE DEPOSITS. THE MODE OF R ECOVERY OF 90% COST OF VEHICLES WAS BY WAY OF HIRE CHARGES FIXED ON THE BASIS OF QUANTITY OF MATERIAL TRANSPORTED. THIS RECOVERY WAS ALSO RESTRI CTED TO ONLY UP TO 90% OF CASE OF EQUIPMENT AND NOT BEYOND. THEREFORE, THIS MEMORANDUM OF UNDERSTANDING WAS WITH A VIEW TO PROV IDE TRANSPORTATION EQUIPMENTS TO THE ASSESSEE ON HIRE B ASIS WITH SURRENDER TO THESE VEHICLES AT THE CONCLUSION OF CO NTRACT AND COLLECTED RESIDUAL 10% PURCHASE PRICE BY WAY OF INTEREST FREE DEPOSIT FROM ASSESSEE. THE MEMORANDUM OF UNDERSTANDING ALSO PROVIDED THAT SINCE PRINCIPAL CONTRACTOR PAIBELL JV HAS BEEN PROVIDED C USTOM & EXCISE FACILITIES AND THEY WILL BE MADE AVAILABLE TO ASSES SEE THROUGH EMERALD INDUSTRIES WHICH RELATES TO SUPPLY OF DIESEL AND TY RES AT MUCH REDUCED PRICE THAN MARKET PRICE. THE COST OF DIESEL AND MAR KET PRICE SO SUPPLIED BY EMERALD INDUSTRIES SHALL BE DEDUCTED FR OM THE BILLS OF ASSESSEE ON REGULAR BASIS. TO CARRY ON THE SAME SPA RES/TOOKS WERE ALSO TO BE SUPPLIED BY EMERALD INDUSTRIES AT COST A ND WILL ALSO PROVIDED SPACE FOR OFFICE FOR OFFICE AND PARKING OF VEHICLES FOR FREE OF ANY CHANGE SUBJECT TO AVAILABILITY. THESE FACILITIES WERE SUBJECT TO ONE VERY IMPORTANT CONDITION THAT EQUIPMENT CANNOT BE USED FOR ANY OTHER PURPOSE STRICTLY. IN OTHER WORDS THESE CAN ONLY BE USED FOR EXCLUSIVE INTENTIO N TO CARRY ON TRANSPORTATION USING THE VEHICLES OF EMERALD INDUST RIES AND AT THE END OF IT TO HAVE POSSESSION OF THEM ONLY AT 10% COST. THE ASSESSEE COMPANY COULD HAVE NEVER COMPLETED OR ACCEPTED TO CARRY ON THIS TRANSPORTATION WITHOUT GETTING THE TRANSPORTATION EQUIPMENT FROM THE PRINCIPLES. NOW COMING TO THE ORDER OF ASSESSMENT, THE LEARNED ACIT WHILE EXAMINING THE ACCOUNTS OF THE ASSESSEE FOUND THAT A SUM OF RS.35,47,812/- HAS BEEN CLAIMED AS VEHICLE HIRE EXP ENSES IN TRANSPORTATION CONTRACT A/C. THE LEARNED ACIT ENQUI RED WHETHER ANY TDS HAS BEEN DEDUCTED ON THIS AMOUNT PAID AS HI RE CHARGES. CONSIDERING THE PROVISION OF CLAUSE 10.11 & 12 OF M .O.U OPINED TO HAVE VIOLATED THE PROVISION OF DEDUCTION OF T.D.S. U/S 194(I) AND ITA NO.443/AGRA/2012 A.Y. 2008-09 5 PROVISION OF SECTION 40(A)(IA) APPLIED AND CLAIM OF HIRE CHARGES TO THE EXTENT OF RS.35,47,812/- WAS DISCLOSED AND ADDED IN THE INCOME. TO UNDERSTAND THE PROVISIONS OF AN AGREEMENT OR M.O .U. IT CANNOT BE READ IN ISOLATION. TO UNDERSTAND THE SUM AND SUBSTANCE OF THE SAME IT HAS TO BE READ IN FULL. NO WHERE IN THI S AGREEMENT THE ASSESSEE IS REQUIRED TO PAY THE RENT. THE AGREEMENT DOES NOT STATE ANY WHERE A WORD OF LEASE OR RENT. THE ASSESSEE AS EXPLAINED ABOVE ENTERED IN TO AN AG REEMENT AND TO COMPLY WITH PROVISIONS OF 194C THE T.D.S. HA S BEEN DEDUCTED BY EMERALD INDUSTRIES FROM THE ASSESSEE ON GROSS VA LUE @ 1.05% BEING SUB CONTRACTOR. THIS GROSS VALUE INCLUDES THE HIRE CHARGES OF THESE VEHICLES. THEREFORE COMPLIANCE AS PER THE PRO VISION SEC. 194C HAS CORRECTLY BEEN DONE. HOWEVER AS REGARDS THE ASS ESSEE THIS M.O.U. IS BASICALLY FOR TRANSPORTATION OF GOODS THROUGH EQ UIPMENTS PROVIDED BY THE CONTRACTOR ON HIRE BASIS. HAD IT BEEN A PLAI N & SIMPLE AGREEMENT OF LEASE/RENT/HIRE, THERE COULD NOT BE AN Y RESTRICTION FOR THE USE OF THESE EQUIPMENT FOR WORKS OTHER THAN THE CON TRACTOR. THE SUPPLY OF DIESEL, TYRES, SPARES WOULD NOT HAVE EXEM PTION UNDER CUSTOM & EXCISE. THERE SHALL NOT BE ANY REASON TO RESTRICT THE PAYMENT OF SUCH HIRE CHARGES BEFORE CONCLUSION OF M.O.U. NO HIRE CH ARGES WERE REQUIRED TO BE PAID BY THE ASSESSMENT THEREAFTER. IT IS ALSO A CONCERN THAT THE AMOUNT OF RENT VARIES WITH THE QUANTUM OF OPERATION. THERE MAY BE A SITUATION ENVI SAGED THAT IF THE EQUIPMENT STAND IDLE. NO HIRE CHARGES CAN BE RECOVE RED BY THE CONTRACTOR. THE AGREEMENT OF LEASE/RENT ARE USUALLY BASED ON TIME OR PERIOD AND NOT BASED UPON USE & OPERATION AS PER PR OVISION U/S 194I. THE ASSESSEE INFACT MAKES THESE ENTRIES WHEN THE AM OUNT IS RECEIVED FROM THE CONTRACTOR. THERE IS NO OCCASION FOR THE CONTRACTEE TO PAY ANY SUM OR CREDIT IN HIS ACCOUNT. READING PR OVISION OF SECTION 194I WILL ITSELF MAKE IT CLEAR THAT SHALL AT THE T IME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF PAYEE OR AT THE TIME OF PA YMENT THEREOF IN CASH OR BY ISSUE OF CHEQUE OR DRAFT OF BY ANY OTHER MODE. THE COPY OF ACCOUNT OF EMERALD INDUSTRIES IS ENCLOS ED THIS SUM IS NOT CREDITED IN THIS ACCOUNT BY WAY OF HIRE CHAR GES. THESE ENTRIES ARE THROUGH CONTRACT A/C AND VEHICLE HIRE CHARGES A CCOUNT AND ITA NO.443/AGRA/2012 A.Y. 2008-09 6 RESIDUAL IN BANK ACCOUNT. THEREFORE AS FAR AS CREDI T OF ACCOUNT OF PAYEE IS CONCERNED NO SUCH CREDIT IS DONE. THE OTHE R PART IS RELATING TO PAYMENT THEREOF IN CASH OR CHEQUE OR BY DRAFT WH ICH HAS NOT BEEN DONE. AS REGARDS ANY OTHER MODE SINCE NO PAYMENT IS MADE BY THE ASSESSEE THIS IS ALSO NOT APPLICABLE. THEREFORE, TH E PROVISION OF SECTION 194J ITSELF ARE NOT APPLICABLE HENCE APPLICATION OF SECTION 40(A)(AI) DOES NOT ARISE. NOW SPECIFICALLY COMING CHAPTER XVII RELATING TO DE DUCTION OF TAXES IN THE INCOME TAX ACT, 1961. THESE PROVISIONS ARE ENACTED SO THAT THE DEPARTMENT COLLECTS THE TAX FROM THE PAYER CLAIMING EXPENSES RELATING TO INTEREST, COMMISSION, BROKERAGE, PROFES SIONAL SERVICES, CONTRACT PAYMENT, RENT ETC. THE BASIC CONCEPT OF DEDUCTION OF TAX IS THAT THE A MOUNT OF TAX DEDUCTION AT THE RATE PRESCRIBED BE MODE BY THE PAY ER BEFORE PROVIDING OR PAYING TO THE PAYEE AND THE SAME IS RE MITTED TO THE DEPARTMENT. CONSIDERING THE PROVISION MODE IN THE MEMORANDUM OF UNDERSTANDING BETWEEN EMERALD INDUSTRIES AND THE AS SESSEE, IT IS CRYSTAL CLEAR THAT AMOUNT OF HIRE CHARGES CLAIMED I N CONTRACT ACCOUNT RS.35,47,812/- IS IN FACT NOT PAID BY THE ASSESSEE NOT IT IS PROVIDED FOR PAYMENT TO THE HIRER OF THE EQUIPMENT. IN FACT IT I S THE HIRER WHO HAS DEDUCTED THE AMOUNT FROM THE BILLS RAISED BY THE AS SESSEE RELATING TO THE TRANSPORTATION. THE PROVISION OF DEDUCTION OF TAX AT SOURCE DOES NO T PROVIDE TO PAY TAX ON THE AMOUNT SO DEDUCTED. IF THIS IS SO TA X DEDUCTION AMOUNT SHALL BE PAID BY THE ASSESSEE AND THE SAME WILL NEV ER BE RECOVERED FROM THE EMERALD INDUSTRIES AS ON THIS ACCOUNT THER E IS NEVER A CREDIT AMOUNT. THE PROVISIONS NEVER MEAN THAT THE AMOUNT O F TAX DEDUCTED BE PAID BY THE DEDUCTOR FROM HIS ACCOUNT AS IT CANN OT BE RECOVERED FROM THE PERSON FROM WHO, DEDUCTION HAS BEEN MADE. THE LEARNED ACIT WAS TIME AND AGAIN EXPLAINED THAT THIS AMOUNT OF HIRE CHARGES ARE AMOUNT ACTUALLY FROM THE CONTRACT RECEIPT. ON THE CONTRARY THE ENTIRE CONTRACT RECEIPT INCLUSI VE OF THE DEDUCTION RELATING TO HIRE CHARGES HAS BEEN SUBJECTED TO DEDU CTION OF TAX U/S 194C. ITA NO.443/AGRA/2012 A.Y. 2008-09 7 THE LEARNED ACIT ON THE BASIS OF CLAUSE NO. 10,11&1 2 OF M.O.U. HAS COME TO CONCLUSION THAT PAYMENT OF RENT HAS BEEN MADE TO THE ASSESSEE. KINDLY REFER CLAUSE NO. 10 WHICH ITSE LF EXPLAIN THAT THESE CHARGES SHALL NOT BE PAID BUT SHALL BE RECOVERED IM MEDIATELY FROM PAYMENT DUE. THEREFORE THE ASSESSEE IS UNDER A BONAFIDE BELIEF T HAT ONCE NO AMOUNT IS PAID BY ASSESSEE NOR ANY PROVISION IS MAD E, THE PROVISION OF CHAPTER XVII AND SECTION 194I ARE NOT APPLICABLE. IN FACT THE HIRE CHARGE AS CLAIMED IN CONTRACT ACCO UNT IS DEDUCTED FROM AMOUNT OF THE BILL BY EMERALD INDUSTR IES AND TAX DUE TO BE DEDUCTED U/S 194C INCLUSIVE OF THESE HIRE CHARGE S HAS BEEN DONE BY EMERALD INDUSTRIES. CONSIDERING THE PROVISION OF SECTION 194(I) THE CHA PTER OF TAX DEDUCTION, THE CLAUSE IN THE M.O.U. THE FACT THAT T HE PAYMENT IS NOT GIVEN BUT IT IS DEDUCTED THE EDITION OF RS.35,47,81 2/- DESERVES TO BE DELETED. 5. THE A.O. DID NOT ACCEPT THE ASSESSEES CONTENTI ON AND HELD THAT THE ASSESSEE HAS PAID RENT TO THE EMERALD INDUSTRIE S ON WHICH TDS U/S 194-I HAS TO BE DEDUCTED BUT THE SAME HAS NOT BEEN DEDUCT ED BY THE ASSESSEE. HENCE THE ASSESSEE HAS GROSSLY VIOLATED SECTION 194 -I OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER). THE A.O. IS ACCORDING LY DISALLOWED RS.35.47,812/- INVOKING SECTION 40(A)(IA) OF THE AC T. 6. THE CIT(A) DELETED THE ADDITION AS UNDER :- ITA NO.443/AGRA/2012 A.Y. 2008-09 8 3.2 APPELLANTS SUBMISSIONS ALONG WITH ASSESSMENT ORDER HAVE CONSIDERED CAREFULLY. ASSESSMENT RECORDS HAVE ALSO BEEN PERUSED ALONG WITH MOU. A.O. HAS MADE THE ADDITION SOLELY RELYING ON CLAUSE 10,11 & 12 OF MOU WHICH ARE REPRODUCED AS UNDER :- 10 RENTAL ON ALL TRANSPORTATION EQUIPMENTS SUPPLI ED TO RTPL SHALL BE CHARGED AT RS.0.21 PER METRIC TONE ON ALL MATERIAL DELIVERED TO I-C PROJECT SITE. ALL RENTALS DUE SHALL BE RECOVERED IM MEDIATELY FROM PAYMENTS DUE TO RTPL. THE AGGREGATE AMOUNT OF RENTAL TO BE C HARGED SHALL BE 90% (NINETY PERCENT) OF THE TOTAL TRANSPORTATION EQUIPM ENT COST (HEREINAFTER REFERRED TO AS THE THE AGGREGATE RENTAL CHARGE) 11. UPON COMPLETION OF IC PROJECT BY PBJV OR AT A POINT IN TIME WHEREIN IT IS PERMISSIBLE BY THE APPLICABLE LE GISLATION WHICHEVER IS LATER AND THE FULL PAYMENT OF THE AGGREGATE RENTAL CHARG E RTPL SHALL HAVE OPTION TO PURCHASE THE AFORESAID TRANSPORTATION EQUIPMENTS AT FAIR AND REASONABLE COST DETERMINED BY BOTH THE PARTIES SO LONG AS THE COST IS NOT LESS THAN 10% (TEN PERCENT) OF THE TOTAL TRANSPORTATION EQUIPMENT COST. ALL COST ASSOCIATED WITH THE TRANSFER OF POSSESSION AND OWNERSHIP OF TH E TRANSPORTATION EQUIPMENTS TO RTPL SHALL BE BORNE BY RTPL. 12. RTPL WILL DEPOSIT 10% (TEN PERCENT) OF THE TO TAL TRANSPORTATION EQUIPMENT COST AS PERFORMANCE GUARAN TEE AMOUNT IN TWO INSTALLMENTS THAT IS 20.00 LACS AT THE TIME OF SIGN ING OF THIS AGREEMENT AND BALANCE OF 10% COST AFTER THREE MONTHS FROM THE DAT E OF THIS AGREEMENT. THIS DEPOSIT WILL BE INTEREST FREE TILL THE END OF THE S UCCESSFUL COMPLETION OF THE PROJECT. THIS DEPOSIT SHALL BE ADJUSTED AGAINST 10% OF THE TOTAL TRANSPORTATION EQUIPMENT COST AT THE TIME OF PURCHA SE OF THE EQUIPMENT BY RTPL. FROM PERUSAL OF SAME MOU, IT IS SEEN THAT THE MAI N OBJECT OF ENTERING INTO THE MOU BY THE APPELLANT COMPANY WITH M/S. EMERALD INDUSTRIES HAVING REGD. OFFICE AT S-555, GREATER KA ILASH-II, NEW DELHI IS CONTRACT BETWEEN THE PARTIES FOR TRANSPORTATION OF STONE AGGREGATES, GSB MATERIAL ETC. FROM CRUSHING PLANT AT SUMERPADA, GWA LIOR NHAI PROJECT IC, ITAWA, KANPUR NATIONAL HIGHWAY. THE SCOPE OF WORK A ND RATE ON WHICH THE APPELLANT SHALL BE PAID VIDE CLAUSE NO.1 & 2 IS AS UNDER:- I. SCOPE OF WORK: 1.1 RTPL SHALL TRANSPORT 10,00,000.00 + 20% METRIC TON ES OF STONE ITA NO.443/AGRA/2012 A.Y. 2008-09 9 AGGREGATE AND 5,00,000.00 + 20% MATRIC TONES OF GRA NULAR SUB BASE MATERIAL (HEREIN REFERRED TO AS INITIAL QUANTITY) A LL IN ACCORDANCE TO THE PROVISION OF THIS AGREEMENT. 1.2 IF EI INCREASES THE INITIAL QUANTITY OF MATE RIAL DESCRIBED IN ABOVE CLAUSE 1.1 THE SAME SHALL BE SUPPLIED AT THE RATE APPLICABLE TO THE INITIAL QUANTITY BUT SUBJECT TO MAXIMUM OF 20% INIT IAL QUANTITY. RATES WILL THEN BE REVISED AND DECIDED MUTUALLY. 2. RATE: 2.1 RTPL SHALL BE REIMBURSED AS FOLLOWS: A) TRANSPORTATION OF MATERIAL RS.1.10 PER MT/KM. 2.2 THE RATE SHALL INCLUDE FOR ALL LICENSES, APPROVAL, TAXES, ROAD TAX, STATUTORY PAYMENT, FUEL, MAINTENANCE AND ALL OTHER COSTS DIRECTLY OR INDIRECTLY ASSOCIATED WITH THE TRANSPORT AND DELIVERY OF THE MATERIAL. CLAUSE 7,8 & 9 FURTHER DEFINED THE RATES AND ITEMS INCLUDED IN THE BILLS RAISED BY THE APPELLANT COMPANY AS UNDER:- 7. THE ITEM RATES SHALL BE INCLUSIVE OF ALL TRANSP ORTATION EQUIPMENTS REQUIRED FOR THE EXECUTION AND COMPLETIO N OF THIS CONTRACT. 8. EI WILL SUPPLY, ON A HIRE, TRANSPORTATION EQUIP MENT REQUIRED FOR THE EXCLUSIVE USE IN THIS CONTRACT WHEREIN THE VALU E OF THE TRANSPORTATION EQUIPMENT DOES NOT EXCEED RS.505.70 LACS (FIVE HUND RED FIVE LACS SEVENTY THOUSAND ONLY) IN VALUE. 9. THE TOTAL COST OF THE TRANSPORTATION EQUIPMENTS SHALL INCLUDE THE COST PAID TO THE MANUFACTURER/ SUPPLIER AND ALL OTH ER ASSOCIATED COST INCLUDING BUT NOT LIMITED TO ORDERING, SHIPPING, HA NDLING, STORAGE, WAREHOUSING, TRANSPORTING, MOBILIZATION, ASSEMBLING , INSURANCE, STATUTORY CONTRIBUTION, TAXES, DUTIES AND ALL OTHER COST ETC. (HEREINAFTER REFERRED TO AS THE TOTAL TRANSPORTATION EQUIPMENT COST) EI CAN REQUEST RTPL FOR HAULAGE CONTRACT AND WILL HAVE THE FIRST R IGHT OF REFUSAL AFTER THE COMPLETION OF PROJECT IC. RTPL CANNOT ENGAGE IN ANY SUPPLY CONTRACT WITH THESE TRANSPORT EQUIPMENT UNTIL A WRITTEN PERM ISSION FROM E.I, H.O. OBTAINED. ITA NO.443/AGRA/2012 A.Y. 2008-09 10 THE APPELLANT COMPANY IS ALSO RESPONSIBLE FOR ALL COSTS INCURRED OTHER THAN THE TOTAL TRANSPORTATION EQUIPM ENT COST. HOWEVER, THE PRINCIPAL CONTRACT OR VIZ. EMERALD INDUSTRIES (EI) IS TO PROVIDE CUSTOM AND EXCISE FACILITIES AS AVAILABLE IN CASE OF TYRES /ACCESSORIES ETC. IN FACT, BASE PRICE FOR DIESEL, FUEL HAS ALSO BEEN FIXED AS RS.20/- WHICH IS TO DEDUCTED FROM THE COST OF FUEL, IF ISSUED TO THE AP PELLANT COMPANY AT AGREED RATES. AS PER CLAUSE 23, EI WILL TRANSFER AL L THE SPARES/TOOLS AT COST TO THE APPELLANT COMPANY. FROM THE PERUSAL OF ABOVE MENTIONED MOU IN TOTALI TY, APPELLANTS SUBMISSION ARE FOUND ACCEPTABLE THAT IT HAS ENTERED INTO A TRANSPORTATION CONTRACT WITH EMERALD INDUSTRIES FOR WHICH PROVISIONS OF SEC. 194C OF THE I.T. ACT ARE FOUND APPLICABLE. TDS HAS BEEN DEDUCTED ACCORDINGLY AS PER SAID PROVISIONS BY EMERALD INDUS TRIES ON GROSS CONTRACTUAL RECEIPTS PAID TO THE APPELLANT. THIS GR OSS AMOUNT ALSO INCLUDES HIRE CHARGES OF VEHICLES IN RESPECT OF WHI CH AO HAS APPLIED PROVISIONS OF SEC. 194-I. INTENTION OF THE PARTIES ENTERING INTO A CONTRACT IS TO BE GATHERED FROM THE DOCUMENT ITSELF TO BE RE AD IN TOTALITY AND NOT ISOLATION. UNLESS IT IS PROVED THAT THE SAID DOCUME NT/AGREEMENT IS A CAMOUFLAGE, THE WORDS USED IN THE DOCUMENT HAVE TO PREVAIL. THE RELATIONS BETWEEN THE PARTIES IN THE PRESENT CASE A RE NOT FOUND TO BE A LESSER AND LESSEE AS HELD BY THE A.O. THE CHARGES W HICH ARE PAYABLE TO THE APPELLANT COMPANY BY THE PRINCIPAL CONTRACTOR A RE NOT FIXED BUT VARIABLE AS PER THE TERMS OF THE CONTRACT BASED ON WEIGHT/DISTANCE OF THE TRANSPORTED MATERIAL. THERE IS NO FIXED MINIMUM GUA RANTEE AND IT CANNOT BE SAID THAT VIDE THIS AGREEMENT, RENT HAS BEEN PAI D BY THE APPELLANT COMPANY IN RESPECT OF WHICH TDS IS REQUIRED TO BE D EDUCTED U/S 194-I. THE AGREEMENT IN QUESTION IS TO BE CONSTRUED AND UN DERSTOOD AS AN AGREEMENT AS A WHOLE AND SUCH A COMPOSITE AGREEMENT CANNOT BE BROKEN UP AS DONE BY THE A.O. PARTICULARLY SO WHEN THAT IS NOT THE INTENTION OF THE PARTIES THEMSELVES. THE DOMINANT INTENTION OF T HE PARTIES TO THE AGREEMENT IS TO CARRY OUT TRANSPORTATION OF SPECIFI ED MATERIAL TO SPECIFIED LOCATIONS AND NOT MERELY LETTING OUT OF PLANT & MAC HINERY OR EQUIPMENT. THE AMOUNT TO BE RECEIVED BY THE APPELLANT CO. IS F OUND TO BE VARIABLE AND NOT FIXED. IN VIEW OF OBJECTIVES OF THE ELEMEN T BETWEEN THE PARTIES, IT CANNOT BE HELD THAT TRANSPORTATION EQUIPMENT HAS BE EN HIRED AND HIRING CHARGES PAID BY THE APPELLANT IN RESPECT OF WHICH I T IS LIABLE TO DEDUCT THE TAXES AS PER PROVISIONS OF SEC. 194-I OF THE I.T. A CT. FURTHER, THE APPELLANTS REPLY AS FILED VIDE LETTER DTD. 22.12.2 010 EXPLAINING THE TERMS OF THE AGREEMENT AND AS RELIED ON BY THE A.O. IN RE SPONSE TO THIS SPECIFIC ITA NO.443/AGRA/2012 A.Y. 2008-09 11 QUERY HAS NOT BEEN ACCEPTED BY THE A.O. WITHOUT GIV ING ANY JUSTIFICATION OR BASIS, WHO HAS RELIED SOLELY ON CLAUSE NO. 10, 1 1 & 12 OF THE SAID MOU. FURTHER, FROM RECORD, IT IS SEEN THAT ON THE BASI S OF SAME MOU WHICH HAS BEEN ENTERED INTO BETWEEN THE PARTIES ON 15 TH OCTOBER, 2003, A.O. HAS DRAWN NO ADVERSE INFERENCE IN EARLIER YEAR S PARTICULARLY SO WHEN ORDER U/S 143(3) HAS BEEN PASSED ON 08.12.08 F OR A.Y. 2006-07. THOUGH THE PRINCIPLE OF RESJUDICATA IS NOT APPLICAB LE IN CASE OF INCOME TAX PROCEEDINGS, BUT PAST HISTORY AND RECORD OF THE APPELLANT AND CONSISTENCY IS REQUIRED TO BE MAINTAINED IF THERE I S NO CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE. 3.3 IN VIEW OF FACTS AND AFTER PERUSAL OF RECORDS AND SUBMISSIONS, A.O. IS NOT FOUND JUSTIFIED IN MAKING DISALLOWANCE OF RS.35,47,812/- U/S 40(A)(IA) FOR NON DEDUCTION OF TDS U/S 194-I. THE S AME IS HEREBY, DELETED. 7. WE HAVE HEARD LEARNED REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. TO APPRECIATE THE ISSUE FIRST IT IS TO BE SEEN WHAT IS THE NATURE OF THE TRANSACTION NOTICED BY THE A.O. THE A SSESSEE ENGAGED IN BUSINESS OF TRANSPORTATION OF GOODS/MATERIAL. THE A SSESSEE ENTERED INTO A MEMORANDUM OF UNDERSTANDING WITH EMERALD INDUSTRIES ON 15.10.2003 FOR SUPPLY, DELIVER AND TRANSPORT STONE AND GSB MATERIA L TO PATIBELL JV, NHAI PROJECT IC, ETAWAH UNDER CONTRACT WITH EMERALD INDU STRIES WAS REQUIRED TO TRANSPORT CRUSHED MATERIAL FROM MINES TO THE DESIGN ATED SITES AT IC PROJECT. EMERALD INDUSTRIES HAD NO EXPERIENCE OF LIFTING & T RANSPORTING MATERIAL FROM MINES TO THE DIFFERENT SITES OF NHAI. THE ASSESSEE OFFERED HIS SERVICES TO CARRY ON TRANSPORT OF THESE MATERIALS FROM MINES TO DIFFERENT LOCATION OF ITA NO.443/AGRA/2012 A.Y. 2008-09 12 NHAI. BOTH THE PARTIES HAVE EXECUTED A MEMORANDUM O F UNDERSTANDING ACCORDING TO WHICH THE ASSESSEE WAS REQUIRED TO TRA NSPORT THE MATERIAL. THE MATERIAL AND THE PRICE SO DECIDED BY THEM WAS RS.1. 10 PER MT/KMTR. THIS PRICE IS INCLUSIVE OF ALL COSTS RELATED TO THE SAME . THE ASSESSEE EXPRESSES HIS PROBLEM THAT HE DOES NOT HAVE SUFFICIENT FUNDS TO P URCHASE VEHICLES, REQUIRED FOR TRANSPORTATION ON REGULAR BASIS. 8. EMERALD INDUSTRIES OFFERED TO PROVIDE THE VEHIC LES EQUIPMENTS REQUIRED FOR THE PURPOSE OF TRANSPORTATION WITH THE CONDITION THAT THEY WILL RECOVER 90% COST OF VEHICLES FROM THE ASSESSEE AND REMAINING 10% SHALL BE COLLECTED FROM ASSESSEE AS INTEREST FREE DEPOSITS I MMEDIATELY. IT WAS ALSO AGREED TO HANDOVER THE POSSESSION OF ALL THESE VEHI CLES TO THE ASSESSEE AT PRICE NOT LESS THAN 10% OF ACTUAL COST AT THE TIME OF COMPLETION OF THE PROJECT. 9. THE MODE OF PAYMENT OF 90% BEING COST OF THESE VEHICLES WAS AS HIRE CHARGES BASED UPON MATERIAL SUPPLIED WHICH WAS AT RS.0.21 PER TONE/KMTR AND THE SAME WAS TO BE RECOVERED FROM THE PAYMENT OF TRANSPORTATION BILL ISSUED BY THE ASSESSEE. ITA NO.443/AGRA/2012 A.Y. 2008-09 13 10. ON PERUSAL OF THE TERMS AND CONDITION OF MEMOR ANDUM OF UNDERSTANDING, WE NOTICE THAT THE PRINCIPAL CONTRAC TOR PATIBELL JV HAS BEEN PROVIDED CUSTOM AND EXCISE FACILITIES AND THEY WILL BE MADE AVAILABLE TO ASSESSEE THROUGH EMERALD INDUSTRIES WHICH RELATE S TO SUPPLY OF DIESEL AND TYRES AT MUCH REDUCED PRICE THAN MARKET PRICE. THE COST OF DIESEL AND MARKET PRICE SO SUPPLIED BY EMERALD INDUSTRIES DEDUCTED FR OM THE BILLS OF THE ASSESSEE ON REGULAR BASIS. TO CARRY ON THE SAME SPA RES/TOOLS WERE ALSO TO BE SUPPLIED BY EMERALD INDUSTRIES AT COST AND WILL ALS O PROVIDE SPACE FOR OFFICE AND PARKING OF VEHICLES FOR FREE OF ANY SUBJECT TO AVAILABILITY. 11. IN FACT, THE ASSESSEE IS RECEIVING AMOUNTS FRO M EMERALD INDUSTRIES AND EMERALD INDUSTRIES DEDUCTED THE TAX AT SOURCE UNDER SECTION 194C OF THE ACT AS THE ASSESSEE IS A SUB CONTRACTOR . THE GROSS VALUE INCLUDES THE HIRE CHARGES OF THESE VEHICLES WHICH WERE RECOV ERED AGAINST THE BILL OF THE ASSESSEE. THE ASSESSEE IN FACT MAKES THESE ENTR IES WHEN THE AMOUNT IS RECEIVED FROM THE CONTRACTOR. THERE IS NO OCCASION FOR THE CONTRACTEE TO PAY ANY SUM OR CREDIT IN HIS ACCOUNT, THEREFORE, THE DE DUCTION AT SOURCE UNDER SECTION 194I DOES NOT ARISE. ITA NO.443/AGRA/2012 A.Y. 2008-09 14 12. WE FIND THAT THE CIT(A) HAS EXAMINED THE ISSUE AT LENGTH AND FOUND THAT EMERALD INDUSTRIES HAS ALREADY DEDUCTED TAX UNDER SECTION 194C OF THE ACT WHICH INCLUDES THE HIRE CHARGES OF VEHIC LES. 13. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CAS E, IT CANNOT BE HELD THAT TRANSPORTATION EQUIPMENT HAS BEEN HIRED A ND HIRING CHARGES PAID BY THE ASSESSEE IN RESPECT OF WHICH IT IS LIABLE TO DE DUCT THE TAXES AT SOURCE, THEREFORE, THERE IS NO QUESTION OF DISALLOWANCE OF RS.35,47,812/- UNDER SECTION 40(A)(IA) OF THE ACT. THE REVENUE HAS FAILE D TO POINT OUT ANY CONTRARY MATERIAL AGAINST THE FINDING OF THE CIT(A) . IN THE LIGHT OF THESE FACTS, THE ORDER OF THE CIT(A) IS CONFIRMED. 14 IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTA NT MEMBER AMIT/ COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT ITA NO.443/AGRA/2012 A.Y. 2008-09 15 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY