NB Shipping & Trading Compnay, Jagatsinghpur V. ITO, Jagatsinghpur

ITA 492/CTK/2012

• Counselvise Citation: 49222114 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: P R MOHANTY
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 492/CTK/2012 (ASSESSMENT YEAR-2008-09) NB SHIPPING & TRADING COMPANY TCL 11/3, NUA BAZAR, PARADEEP, DIST-JAGATSINGHPUR-754142. PAN: AAFFN8564K (APPELLANT) VS. THE INCOME TAX OFFICER, WARD-1, PARADEEP, JAGATSINGHPUR-754142 (RESPONDENT) APPELLANT BY : SHRI P.R. MOHANTY, AR RESPONDENT BY : SHRI N.K. NEB, DR DATE OF HEARING : 30/04/2014 DATE OF PRONOUNCEMENT : 27/06/2014 O R D E R PER BENCH: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)- CUTTAK, DATED 20.02.2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THE FOLLOWING GROUNDS ARE RAISED IN THIS APPEAL AS UNDER. 1. FOR THAT THE ORDER PASSED BY THE LD. C.I.T.(APPEALS), LACKS CORRECT INTERPRETATION OF LAW, AS WELL AS CONTRARY TO FACTS ON RECORD, THEREFORE THE SAME IS BAD IN LAW. 2. FOR THAT THE ADDITION U/S. 40A(IA), FOR AN AMOUNT OF RS. 55,27,817/-, IS COMPLETELY ILLEGAL, AS THE ADDITION IS BASED ON INCORRECT APPRECIATION OF LAW, AS WELL AS FACTS ON RECORD. 2.1 THE ASSESSEE HAS FILED THE RETURN SHOWING THE INCOME AT RS. 49,925/- IN ITR-V. THE RETURN WAS PROCESSED U/S. 143(1) ON 23.12.2009. THE ASSESSEE HAS CLAIMED EXPENSES OF RS.53,67,817/- AND RS. 6,68,000/- IN P&L A/C TOWARDS PAYMENT OF HIRE CHARGES. IN COURSE OF HEARING THE ASSESSEE WAS ASKED WHETHER TDS WAS MADE OR NOT ON SUCH PAYMENTS. IN RESPONSE TO THIS QUERY THE LEARNED AR SUBMITTED THAT THE HIRE CHARGES HAVE NOT PAID TO THE VEHICLE OWNERS NAMELY 2. ITA NO. 492/CTK/2012 (A.Y.2008-09) NB SHIPPING & TRADING COMPANY VS. ITO ITYARANJA SWAIN, ANIL KUMAR NAYAK, ADHIRAJ NAYAK AND TARINI PRASAD JENA AND SUCH HIRE CHARGES HAVE BEEN ADJUSTED AGAINST THE PAYMENTS WHICH WERE TO BE PAID BY THE ASSESSEE TO THE FINANCERS TOWARDS INSTALMENTS AGAINST THE LOANS OBTAINED AND INSURANCE OF THE VEHICLES AND IT CANNOT BE TREATED AS HIRE CHARGES PAID BY THE ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. THE AO FURTHER FOUND FROM THE LEDGER ACCOUNT THAT IN NUMBER OF CASES HIRE CHARGES AMOUNTING TO RS. 50,000/- AND ABOVE HAS BEEN PAID TO THE LOADER OWNERS THROUGH CHEQUES ON DIFFERENT DATES, BUT NO TDS U/S. 194C OF I.T. ACT, 1961 HAS BEEN MADE. FURTHER LUMP-SUM PAYMENTS HAVE BEEN MADE TO LOADER OWNERS TOWARDS HIRE CHARGES AT INTERVALS. THE PAYMENTS TO THE LOADER OWNERS HAVE NOT BEEN MADE DAILY AGAINST COMPLETION OF EACH DAYS WORK OF SUCH LOADERS. LUMP-SUM PAYMENTS MADE ON DIFFERENT DATES THEREFORE, DO NOT RELATE TO THE HIRE CHARGES PAYABLE FOR A DAYS WORK. IT CONSTITUTES THE TRANSPORTATION CHARGES PAYABLE FOR WORKS DONE FOR MORE THAN ONE DAY. AS PER GENERAL PARTICLES THE VEHICLE OWNERS RECEIVED THE HIRE CHARGES ON COMPLETION OF EACH DAYS WORK. THEREFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE TDS WAS DEDUCTED THEREFORE, HE DISALLOWED A SUM OF RS.55,27,871/- CLAIMED BY THE ASSESSEE TOWARDS HIRE CHARGES U/S. 40(A)(IA). 2.2. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 2.3. THE AR SUBMITTED THAT ASSESSEE HAS ACQUIRED 4 MEMBER MACHINES UNDER AN AGREEMENT WITH FOUR DIFFERENT PERSONS, WHO COULD NOT REPAY THEIR INSTALMENTS AND WERE IN DEFAULT IN PAYING THE INSTALMENTS FOR WHICH THE ASSESSEE HAS TAKEN THE LIABILITIES OF THE SAID PERSONS BY PAYING THE INSTALMENTS ON THEIR LOANS, WHICH WERE BOOKED UNDER THE HEAD HIRE CHARGES IN THE P&L A/C. IT WAS SUBMITTED THAT ALTHOUGH THE NOMENCLATURE OF THE EXPENSES HAS BEEN GIVEN AS HIRE CHARGES, BUT IN REALITY NO HIRE CHARGES, BUT IN REALITY NO HIRE CHARGES HAVE BEEN PAID BY THE ASSESSEE FIRM TO THE INDIVIDUAL MACHINE OWNERS EXCEPT THE INSTALMENTS OF 3. ITA NO. 492/CTK/2012 (A.Y.2008-09) NB SHIPPING & TRADING COMPANY VS. ITO MACHINES WERE PAID ON BEHALF OF SUCH MACHINE OWNERS ON DEFAULT, WHICH IS CLEARLY EVIDENCED FROM THE INSTRUMENT OF AGREEMENT. THE LEARNED AR SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) IS NOT APPLICABLE ON SUCH PAYMENT. THE LEARNED AR RELIED UPON THE DECISION OF ACIT VS. SANJAY KUMAR (2011)63 DTR 441, NASIB SINGH, HIOOPATNA VS. ACIT, R.R. CARRYING CORPORATION VS. ACIT (2009) 126 TTJ (CTK) 240. 2.4 THE LEARNED DR RELIED UPON THE ORDER OF REVENUE AUTHORITIES. 2.5. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS.53,67,817/- & RS. 6,68,000/- IN PROFIT AND LOSS ACCOUNT TOWARDS THE PAYMENT OF HIRE CHARGES. IT IS ON FACT OF RECORD THAT THE ASSESSEE HAS NOT MADE ANY TDS TOWARDS THE PAYMENT OF HIRE CHARGES. THE ASSESSEE HAS SUBMITTED BEFORE THE AO, COPY OF THE AGREEMENT BETWEEN ASSESSEE AND SHRI TARINI PRASAD JENA, SHRI ITYA RANJAN SWAIN, SHRI ANIL KUMAR NAYAK, AND SHRI ADHIRAJ NAYAK. THE ASSESSEE HAS EXECUTED THE AGREEMENT WITH FOUR OWNERS OF THE MACHINE. THE AGREEMENT IS COMMON IN ALL. THE COPY OF THE AGREEMENT WHEREIN IT HAS STATED THAT THE FIRST PARTY BEING THE ABSOLUTE OWNER OF THE MACHINE WAS IN A CONDITION OF FINANCIAL DEFICIENCY WAS ALSO INCAPABLE TO MAINTAIN AND PAY THE INSTALMENT DUES FOR ITS MACHINE WAS IN SEARCH OF A PARTY WHO MAY HELP HIM FOR THE REPAYMENT OF LOAN AND MAINTENANCE OF HIS MACHINE AND THE PARTY OF 2 ND PART WAS ALSO IN SEARCH OF MACHINERIES FOR HIS WORK BY AGREEMENT. THE ASSESSEE FILED THE LEDGER COPY OF ACCOUNT WHEREAS IT IS STATED THAT LOADER HIRE CHARGES AND VOLVO HIRING CHARGES FOR THE PERIOD OF 01.07.2007 TO 31.3.2008 BEFORE THE AO. THE LEDGER ACCOUNT SHOWS THAT THE LOADER HIRE CHARGES THAT A LUMP SUM PAYMENT HAVE BEEN MADE TO LOADER OWNERS TOWARDS THE HIGHER CHARGES AT INTERVALS. THE ASSESSEE HAS MADE PAYMENTS TO THE LOADER OWNERS NAMELY SHRI TARINI PRASAD JENA, SHRI ITYA RANJAN SWAIN, SHRI ANIL KUMAR NAYAK, AND SHRI ADHIRAJ NAYAK. THE ASSESSEE HAS PAID SUM OF THE HIGHER CHARGES TO THE FINANCER 4. ITA NO. 492/CTK/2012 (A.Y.2008-09) NB SHIPPING & TRADING COMPANY VS. ITO TOWARDS INSTALMENT AGAINST THE LOAN OBTAINED AND INSURED OF THE VEHICLE. THE ASSESSEE HAS PAID INSTALMENT FOR THE LOANS OBTAINED FOR FINANCIAL BY THE VEHICLE OWNER INSTEAD OF PAYING HIRE CHARGES DIRECT TO THEM. AS PER SECTION 194C(1) WHICH REVEALS THAT IF ANY PERSON HAS PAID TO ANY RESIDENT ANY AMOUNT IN RESPECT OF CARRYING OUT ANY WORK WHICH INCLUDES SUPPLY OF LABOUR OR FOR CARRYING OUT ANY WORK HE HAS TO DEDUCT TAX @ 2 PER CENT FROM THE SAID PAYMENT. THE WORK HAS BEEN DEFINED IN EXPLN. (III) WHICH, INTER ALIA, INCLUDES UNDER CLAUSE (C) THEREOF AS CARRIES ON GOODS AND PASSENGERS BY ANY MODE ETC. OTHER THAN BY WAY OF RAILWAYS. THUS, 194C(1) WHICH INCLUDES CARRYING OUT ANY WORK, THE CBDT WHICH HAS CLARIFIED THAT WHAT WILL CONSTITUTE WORK OR WHAT WILL EXCLUDE WORK. IN CIRCULAR NO 681 OF 8TH MARCH. 1994 CBDT HAS OPINED, INTER ALIA, THAT THE PROVISIONS OF S. 194C WOULD NOT APPLY IN RELATION TO PAYMENTS MADE FOR HIRING OR RENTING OF EQUIPMENTS, ETC. WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE HAS ACQUIRED 4 NUMBERS MACHINES UNDER AN AGREEMENT WITH FOUR DIFFERENT PERSONS, WHO COULD NOT REPAY THEIR INSTALMENTS AND WERE IN DEFAULT IN PAYING THE INSTALMENT FOR WHICH THE ASSESSEE HAS TAKEN THE LIABILITIES OF THE SAID PERSON BY PAYING THE INSTALMENTS ON THEIR LOANS, WHICH WERE BOOKED UNDER THE HEAD HIRE CHARGES IN THE P&L A/C. WE FIND THAT THE ASSESSEE HAS FILED THE COPY OF LEDGER ACCOUNT WHICH STATES THE LOADER HIRE CHARGES AND VOLVO HIRING CHARGES FOR THE PERIOD 01.07.2007 TO 31.3.2008 BEFORE AO. THE LOADER HIRE CHARGES HAVE BEEN MADE TO LOADER OWNERS TOWARDS HIRE CHARGES AT INTERVALS. THE PAYMENTS TO THE LOADER OWNERS HAVE NOT BEEN MADE DAILY AGAINST COMPLETION OF EACH DAYS WORK OF SUCH LOADERS. LUMP SUM PAYMENT MADE ON DIFFERENT DATES. WE ARE OF THE VIEW THAT IN LEDGER ACCOUNT OF LOADER HIRE CHARGES AND VOLVO HIRING CHARGES IN RELATION TO PAYMENTS TO THE OWNER FROM CONTRACTORS AT INTERVALS INSTEAD OF DAILY ON COMPLETION OF EACH DAYS WORK. WE FIND THAT ASSESSEE HAS MADE PAYMENT WHICH IS ABOVE 50,000/- THEREFORE, ASSESSEE IS REQUIRED TO DEDUCT THE TAX AT SOURCE. THE TRANSPORTATION CHARGES PAYABLE FOR WORK DONE FOR MORE THAN ONE DAY. AS PER GENERAL PARTICLES THE TRANSPORT OWNER 5. ITA NO. 492/CTK/2012 (A.Y.2008-09) NB SHIPPING & TRADING COMPANY VS. ITO RECEIVED THE HIRE CHARGES ON COMPLETION OF EACH DAYS WORK. UNLESS THERE IS ANY NEGOTIATION /AGREEMENT EITHER ORAL OR WRITTEN, NO VEHICLE OWNER SHALL RECEIVE THE HIRE CHARGES FROM THE CONTRACTORS AT INTERVALS INSTEAD OF DAILY ON COMPLETION OF EACH DAYS WORK. WE FIND THAT ASSESSEE HAS SUBMITTED THE DECISION OF HONBLE ITAT DELHI G BENCH IN THE CASE OF ACIT VS. SANJAY KUMAR, ITA NO.584/DEL/2010. THIS JUDGEMENT RELATES TO THE PAYMENT MADE BY THE ASSESSEE FOR HIRING OF CRANES TO CRANE OWNERS WAS WITH REFERENCE TO THE PERIOD OF LEASE AND NOT AT ALL RELATED TO THE WORK/OUTPUT DERIVED FROM THE CRANES AND THEREFORE, SUCH PAYMENT CANNOT BE SAID TO BE PAYMENT MADE FOR WORKS CONTRACT COVERED BY S.194C AND IN THE CASE OF NASIB SINGH, HILLPATNA VS. ACIT 50 TTJ (CTK), ITA NO.440/CTK/2011, WHEREIN THE ASSESSEE HAS EXECUTED THE CONTRACT OF TRANSPORT BY USING HIS OWN TRUCKS AND ALSO BY HIRING LORRIES FROM OTHER LORRY OWNERS . THE ASSESSEE IS NOT REQUIRED TO TDS U/S. 194C SINCE THERE WAS NO DIRECT CONTRACT BETWEEN THE OTHER LORRY OWNERS AND CONTRACTORS AND OTHER LORRY OWNERS SIMPLY PLACES THE VEHICLE AND DISPOSAL OF THE ASSESSEE. IN THE CASE OF CARRYING COPORATION VS. ACIT 126, TTJ (CTK), ITA NO. 179/CTK/ 2009 WHEREIN IT HAS HELD THAT IN ABSENCE OF ANY THING ON RECORD TO SUGGEST EXISTENCE OF ANY CONTRACT BETWEEN THE ASSESSEE AND OTHER TRANSPORTERS WHOSE VEHICLES WERE ENGAGED BY ASSESSEE FOR EXECUTING VARIOUS CONTRACTS, THERE WAS NO CONTRACT OR SUB-CONTRACT RELATIONSHIP BETWEEN THE ASSESSEE AND SAID OTHER TRANSPORTERS AND THEREFORE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX U/S. 194C FROM THE PAYMENTS MADE TO OTHER TRANSPORTERS AND THEREFORE, SAME COULD NOT BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA). IN THE CASE OF BHAIL BULK CARRIERS VS. ITO 50 SOT 622 (MUM), ITA NO.3536/MUM/2011 WHEREIN IT IS HELD THAT IF THE ASSESSEE TRANSPORTER DO NOT HIRE THE TANK, THE RESPONSIBILITY OF DEDUCT TDS UNDER 194C WOULD NOT ARISE. IN THE CASE OF MYTHRI TRANSPORT CORPORATION VS. ACIT, 124 TTJ 970, ITA NO. 183/VIZAG/2008, WHEREIN IT HAS HELD THAT ASSESSEE IS A TRANSPORT CONTRACTOR WHO HAS EXECUTED THE WHOLE OF THE CONTRACT FOR TRANSPORTATION OF BITUMEN BY HIRING LORRIES FROM OTHER LORRY OWNERS WHO SIMPLY 6. ITA NO. 492/CTK/2012 (A.Y.2008-09) NB SHIPPING & TRADING COMPANY VS. ITO PLACED THE VEHICLES AT THE DISPOSAL OF THE ASSESSEE WITHOUT INVOLVING THEMSELVES IN CARRYING OUT PART OF THE WORK UNDERTAKEN BY THE ASSESSEE, IT CANNOT BE SAID THAT THE PAYMENTS MADE FOR HIRING VEHICLES FELL IN THE CATEGORY OF PAYMENTS TOWARDS SUB-CONTRACTS, THEREFORE, ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE. WE FIND THAT ALL THE DECISIONS IN ALL THESE TRIBUNAL DECISIONS FACTS OF THE CASE OF THE ASSESSEE IS ENTIRELY DIFFERENT. IN THE INSTANT CASE, AS DISCUSSED ABOVE THE ASSESSEE HAS PAID HIRE CHARGES IN PROFIT AND LOSS ACCOUNT AND THE VEHICLES WERE HIRED BY AN AGREEMENT WITH THE OWNERS OF THE VEHICLES. THEREFORE, IN OUR OPINION, AO AND CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. 3. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. 4. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTAK ON THE OPEN COURT ON 27.06.2014. SD/- SD/- ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 27.06.2014 P.S.- *PK* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER