ITO, Rampur Bushahr V. The Siraj Truck Operator Union, Kullu

ITA 490/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5357 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 09-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: PRAVEEN KAPOOR
• Keywords: TDS; Set aside
• Section: 143(3); 194C; 195; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI D K SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 490/CHD/2011 ASSESSMENT YEAR: 2006-07 THE ITO, RAMPUR BUSHAHR VS. M/S TRUCK OPERATOR UNI ON, (HP) VPO ANNI, KULLU PAN: (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAISHREE SHARMA RESPONDENT BY: SHRI PRAVEEN KAPOOR ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A), SHIMLA DATED 24.2.2011 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS OF APPEAL: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 79,63,504/- MADE ON ACCOUNT OF VIOLATION OF SECTION 40(IA). 2 THE LD. CIT(A) HAS ALSO DELETED THE 50% OF ADDIT ION OF RS. 79,578/- MADE ON ACCOUNT OF DISALLOWANCE OF 20% OF EXPENSES UNDER THE HEAD VEHICLE HIRE EXPENSES DEBITED TO P & L ACCOUNT AT RS. 3,97,881/- . 3 IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO RESTORED. 3. THE ISSUE RAISED VIDE GROUND NO. 1 IN THE PRESEN T APPEAL IS IN RESPECT OF THE APPLICABILITY OF PROVISIONS OF SECTI ON 194C OF THE I.T. ACT WITH REGARD TO THE PAYMENTS MADE BY THE ASSESSEE TO THE TRUCK OPERATORS. 2 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E UNION EXECUTED CONTRACT OF TRANSPORTATION OF TIMBER AND FUEL WOOD OF THE DIVISIONAL MANAGER, FOREST WORKING DIVISION, RAMPUR BUSHAHR. T HE ASSESSEE PROVIDES THE REQUISITE NUMBER OF TRUCKS FOR THE SAI D TRANSPORTATION OF TIMBER AND FUEL WOOD ETC. THE ASSESSEE UNION WAS AS SOCIATED FOR THE PURPOSE OF MAINTAINING UNITY BETWEEN THE TRUCK OPER ATORS. THE ASSESSEE UNION DOES NOT OWN ANY TRUCK. ALL THE PAYMENTS WERE RECEIVED BY THE ASSESSEE UNION AFTER DEDUCTION OF TAX AT SOURCE. T HE ASSESSEE FURTHER MAKES PAYMENT TO THE INDIVIDUAL TRUCK OWNERS ACCORD ING TO RATES FIXED WITH THE FOREST DEPARTMENT. THE ASSESSEE HAD NOT D EDUCTED ANY TDS OUT OF THE AFORESAID PAYMENTS BEING MADE TO DIFFERENT T RUCK OWNERS DEBITED AS TRANSPORTATION EXPENSES. DURING THE YEAR UNDER CON SIDERATION, AGAINST RECEIPT OF RS. 77,37,497/- AND G.R RECEIPT OF RS. 8 ,12,020/-, TRANSPORTATION EXPENSES OF RS. 79,63,504/- WERE BOO KED. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROVISIONS OF SECT ION 194C (2) OF THE ACT WERE APPLICABLE TO THE SUB CONTRACTUAL PAYMENTS MAD E BY THE ASSESSEE TO THE TRUCK OPERATORS AND THE EXEMPTION FROM DEDUCTIN G TAX WAS ONLY AVAILABLE IF THE ASSESSEE HAD FILED THE PRESCRIBED FORM IN FORM 15-I OF INCOME TAX RULES. THE ASSESSING OFFICER DISALLOWED THE ENTIRE SUB CONTRACTUAL PAYMENTS MADE IN VIEW OF THE PROVISIONS OF SECTION 40A (IA) OF THE ACT, TOTALING RS. 79,63,504/-. 5. THE CIT(A) HELD THAT THE PROVISIONS OF SECTION 1 94C OF THE ACT WERE NOT APPLICABLE FOR THE PAYMENTS MADE BY THE AS SESSEE TO THE TRUCK OPERATORS IN VIEW OF THE RATIO LAID DOWN BY THE HON 'BLE HIMACHAL PRADESH HIGH COURT IN CIT V. SIRMOUR TRUCK UNION {2010 195 TAXMAN 62 (HP)}. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A ). 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE QUESTION WHICH ARISES BEFORE US IS WHETHER THE ASSE SSEE WAS TO DEDUCT TDS UNDER THE PROVISIONS OF 194C OF THE ACT ON THE PAYM ENTS BEING MADE BY THE ASSESSEE UNION TO INDIVIDUAL TRUCK OPERATORS ON ACCOUNT OF TRANSPORTATION CHARGES. 7. THE PROVISIONS OF SECTION 194C OF THE ACT PROVID ES THAT WHERE ANY PERSON IS RESPONSIBLE FOR PAYING ANY SUM TO A RESID ENT CONTRACTORS FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FO R CARRYING OUT ANY WORK, IN PURSUANCE TO THE CONTRACT BETWEEN THE CONT RACTOR AND THE SPECIFIED PERSON, THEN AT THE TIME OF CREDIT OF SUC H SUM OR PAYMENT IN CASH OR THROUGH CHEQUE / DRAFT OR ANY OTHER MODE, W HICHEVER IS EARLIER, TO THE ACCOUNT OF THE CONTRACTEE, SHALL DEDUCT TAX AT SOURCE AS PROVIDED UNDER SECTION 194C (1) OF THE ACT. IN CASE OF ANY SUB C ONTRACT ALSO, THE PROVISIONS OF SECTION 194C ARE TO BE APPLIED. THE TAX DEDUCTION AT SOURCE IS TO BE MADE IN ALL SUCH CASES WHERE THE AM OUNT SO CREDITED OR PAID EXCEEDS RS. 20,000/-. IN CASE OF SEVERAL PAY MENTS BEING MADE TO SAME PERSON, THE CUMULATIVE AMOUNT TO BE CONSIDERED IS RS. 50,000/- 8. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ASSESSEE UNION BEING AN ASSOCIATION OF PERSONS WAS TAKING TENDERS FROM T RANSPORTATION OF TIMBER AND FUEL WOOD ETC. OF THE DIVISIONAL MANAGER , FOREST WORKING DIVISION, RAMPUR BUSHAHR BUT THE ASSESSEE UNION DID NOT OWN ANY TRUCK. THE ASSESSEE HAD RECEIVED SUM OF RS. 77,37,497/- FR OM EXECUTION OF SAID CONTRACT, BESIDES HAD EARNED INTEREST INCOME OF RS. 23,857/- AND G.R. RECEIPTS AT RS. 8,12,020/- DRUING THE FINANCIAL YEA R 2005-06. IN ORDER TO ACHIEVE ITS OBJECTS, THE UNION WAS MADE TO MAINTAIN UNITY BETWEEN SEVERAL TRUCK OPERATORS, WHO IN TURN WOULD PROVIDE THEIR VE HICLES FOR THE PURPOSE. 4 DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD DEBITED TO THE P & L ACCOUNT A SUM OF RS. 79,63,504/- AS VEHICLE HIRE EX PENSES. THE ASSESSING OFFICER DISALLOWED RS.79,63,504/- BEING SUB CONTRAC TUAL PAYMENTS MADE BY THE ASSESSEE ON WHICH TAX WAS NOT DEDUCTED AT SO URCE, IN VIEW OF THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. 9. WE FIND THAT SIMILAR ISSUE OF PAYMENTS TO TRUCK OWNERS BY THE TRUCK OPERATORS UNION AROSE BEFORE THE HON'BLE HIMACHAL P RADESH HIGH COURT IN SIRMOUR TRUCK OPERATORS UNION VS CIT (SUPRA). WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HON'BLE HIMACHAL PRADESH HIGH COURT IN SIRMOUR TRUCK OPERATORS UNION VS CIT (SUPRA) WHEREI N IT WAS HELD THAT FREIGHT PAID BY THE ASSOCIATION OF PERSONS TO TRUCK OWNERS, WHO WERE THE MEMBERS OF THE ASSOCIATION OF PERSONS, WAS NOT LIAB LE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT. 10. FURTHER, IN CIT VS AMBUJA DARLA KASHLOG MANGU T RANSPORT COOP SOCIETY (2009) 31 DTR (HP) 49, IT WAS HELD THAT THE PAYMENT BY SOCIETY / AOP TO MEMBER TRUCK OWNER IS NOT A SUB CONTRACT LIA BLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C (2) OF THE ACT. 11. THEIR LORDSHIPS OF JURISDICTIONAL HIGH COURT IN CIT VS UNITED RICE LAND LIMITED (213 CTR 332 (P & H) HELD THAT IN THE ABSENCE OF ANY ORAL OR WRITTEN AGREEMENT BETWEEN THE TRANSPORTERS FOR T HE CARRIAGE OF ANY QUANTITY, PRICE OR FOR A SPECIFIC PERIOD, THERE WAS NO LIABILITY TO DEDUCT TAX U/S 194 C OF THE ACT FROM THE PAYMENTS MADE TO THE TRANSPORTERS. 12. DRAWING STRENGTH FROM THE ABOVESAID RATIOS LAID DOWN BY HON'BLE HIMACHAL PRADESH HIGH COURT IN SIRMOUR TRUCK OPERAT ORS UNION VS CIT (SUPRA), CIT VS . AMBUJA DARLA KASHLOG MANGU TRANSPORT COOP SOCIETY 5 (SUPRA) AND HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS UNITED RICE LAND LIMITED (SUPRA), WE HOLD THAT THE ASSESSEE UNI ON IS NOT LIABLE DEDUCT TAX AT SOURCE FROM THE TRANSPORTATION CHARGES BEING PAID TO IT CONSTITUENTS, THE INDIVIDUAL TRUCK OWNERS, FOR THE CARRIAGE OF GOODS. WE CONFIRM THE ORDER OF CIT(A) IN HOLDING THAT THE PRO VISIONS OF SECTION 194C OF THE ACT WERE NOT APPLICABLE TO THE PAYMENTS MADE BY THE ASSESSEE TO THE TRUCK OPERATORS AND HENCE THE ASSESSEE IS EN TITLED TO THE CLAIM OF DEDUCTION OF EXPENDITURE ON ACCOUNT OF TRANSPORTATI ON CHARGES TOTALING RS. 79,63,504/-. THE GROUND OF APPEAL NO. 1 RAISED BY T HE REVENUE IS REJECTED. .13 THE ISSUE IN GROUND NO.2 IS AGAINST THE DISALLO WANCE OF 10% OF EXPENSES UNDER THE HEAD VEHICLE HIRE EXPENSES. T HE AO HAD DISALLOWED 20% OF THE EXPENSES AS THE ASSESSEE HAD FAILED TO P RODUCE BILLS/VOUCHERS FOR VERIFICATION. THE CIT(A) RESTRICTED THE DISALL OWANCE TO 10% THAT NO BILLS/VOUCUERS WERE PRODUCED BEFORE THE CIT(A). I N THE INTEREST OF JUSTICE WE UPHOLD THE ORDER OF LD. CIT(A) IN RESTRI CTING THE ADHOC DISALLOWANCE TO 10% OF TOTAL EXPENSES. UNDER THE HE AD VEHICLE HIRE EXPENSES. THUS GROUND NO. 2 RAISED BY THE REVENUE IS ALSO REJECTED. 14 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH JUNE, 2011 SD/- SD/- (D K SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH JUNE, 2011 SURESH COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 6