The ITO, TDS-1, RAJKOT-GUJARAT V. Best Tours & Forex Pvt. Ltd., RAJKOT-GUJARAT

ITA 530/RJT/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5505 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 29-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DM RINDANI
• Keywords: Recovery proceedings; Rule of consistency; Bonafide belief; Services rendered outside India; Additional evidence; Question of law; Non-deduction of tax; TDS
• Section: 143(3); 206AA; 133A; 40(a)(ia); 194C; 201(1); 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT L LL LK KK KOZJH OZJH OZJH OZJH OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA EK/KQFERK JKW; EK/KQFERK JKW; EK/KQFERK JKW; EK/KQFERK JKW;] U;KF;D LNL; DS LE{KA ] U;KF;D LNL; DS LE{KA ] U;KF;D LNL; DS LE{KA ] U;KF;D LNL; DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ITA NO. 530/RJT/2015 ( / ASSESSMENT YEAR : 2014-15) ITO, TDS-1, RAJKOT VS. BEST TOURS & FOREX PVT. LTD., SHIVAM COMPLEX, DR. YAGNIK ROAD, RAJKOT. ./ ./PAN/GIR NO. : AABCB 6210 B CO NO. 62/RJT/2015 (IN ITA NO.530/RJT/2015) ( / ASSESSMENT YEAR : 2014-15) BEST TOURS & FOREX PVT. LTD., SHIVAM COMPLEX, DR. YAGNIK ROAD, RAJKOT. VS. ITO, TDS-1, RAJKOT / (APPELLANT) ( / RESPONDENT ) ASSESSEE BY : SHRI PRAVEEN VERMA, SR. D.R. REVENUE BY : SHRI D. M. RINDANI, A.R. / DATE OF HEARING : 31/08/2018 / DATE OF PRONOUNCEMENT: 01/11/2018 - 2 - / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THIS IS AN APPEAL BY THE REVENUE ALONG WITH A CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX -1, RAJKOT, DATED 31.08.2015 FOR ASSESSM ENT YEAR 2014- 15. 2. FIRST WE TAKE UP REVENUES APPEAL IN ITA NO.530/ RJT/2015 FOR ASST. YEAR 2014-15. THE REVENUE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THE LD CIT(A) ERRED IN LAW IN HOLDING THAT TDS PROVISIONS WERE NOT APPLICABLE IN RESPECT OF PAYMENTS MADE BY THE ASSESSEE COMPANY TO DESTINATION MANAGEMENT COMPANIE S. IN RESPECT OF PAYMENTS MADE AND STYLED AS MISCELLANEOU S PURCHASES AND IN RESPECT OF PAYMENTS MADE UNDER THE HEAD PACKAGE TOUR EXPENSES, TOTALING TO RS 1,84,87,998/- AND DETERMINING TDS LIABILITY. @20% OF RS 36,97,600/- A ND INTEREST LIABILITY OF RS 8,87,424/- TOTAL TAX LIABI LITY OF RS 45,85,024/- WITHOUT APPRECIATING THE FACT THAT SUCH PAYMENT MADE TO DESTINATION MANAGEMENT COMPANIES WAS IN THE NATURE OF CONTRACT PAYMENTS AS THE ASSESSEE COMPANY DID NO T DIRECTLY BOOKED THE HOTELS, TRANSPORT AND OTHER SERVICE FOR THE CLIENT BUT INSTEAD ALL THIS WORK WAS GOT DONE BY THE DESTINATI ON MANAGEMENT COMPANIES FOR WHICH LUMP-SUM PAYMENTS WA S MADE TO THEM. 2. THE CIT(A) ERRED IN LAW IN HOLDING THAT THE ASSE SSEE'S NATURE OF BUSINESS WAS ACCEPTED AS TRAVEL AGENT AND ON SIM ILAR KIND OF PAYMENTS MADE IN PAST NO LIABILITY WAS AFFIXED BY T HE DEPARTMENT FOR TDS. 3. THE CIT(A) ERRED IN LAW IN HOLDING THAT THE APPE LLANT ASSESSEE CAN BE SAID TO HAVE ENTERTAINED A BONA-FIDE BELIEF THAT IT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE IMPUGNE D PAYMENTS AND THEREFORE CANNOT BE HELD TO BE AN ASSESSEE IN D EFAULT. 4. THE CIT(A) ERRED IN FACTS ON HOLDING THAT THE NA TURE OF EXPENDITURE WAS EXPLAINED DURING THE COURSE OF APPE LLATE - 3 - PROCEEDINGS ALONG WITH SUBMISSIONS IN THE FORM OF L EDGERS ETC WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAI LED TO DO SO DURING THE PROCEEDINGS BEFORE ASSESSING OFFICER. 5. THE CIT(A) ERRED IN FACTS ON HOLDING THAT THE AS SESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM FURNISHING THE D ETAILS OF PANS DURING THE COURSE OF PROCEEDINGS U/S 201(1)AND 201(1A) BEFORE THE ASSESSING OFFICER AS A RESULT OF WHICH T DS LIABILITY WAS DETERMINED @ 20% INSTEAD OF APPLICABLE RATE OF 2% U/S 194C AND THE DETAILS WERE SUBMITTED LATER ON DURING THE COURSE OF PROCEEDINGS BEFORE THE LD CIT(A) WHO HELD THAT T HE TDS LIABILITY COULD BE CALCULATED @ 2% U/S 194C AND NOT 20%. 6. THE CIT(A) ERRED IN LAW IN ADMITTING ADDITIONAL EVIDENCES WITHOUT APPRECIATING THE FACTS THAT DURING THE COUR SE OF PROCEEDINGS BEFORE THE ASSESSING OFFICER THE APPELL ANT ASSESSEE FAILED TO SUBMIT THE SAID EVIDENCE IN RESP ECT OF PAN. 7. THE CIT(A) ERRED IN LAW IN ADMITTING ADDITIONAL EVIDENCES WITHOUT GIVING OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE EVIDENCE OR DOCUMENTS OR TO CROSS EXAMINE IN VI OLATION OF THE PROVISIONS OF RULE 46A. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) OUGHT TO HAVE UPHELD THE ' ORDER-OF THE ASSESSING OFFICER PA SSED U/S 201(1) AND 201(1A). 9. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EFFECT. 10. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE REVENUE IN THIS APPEAL HAS RAISED AS MANY AS 10 GROUNDS OF APPEAL BUT THE INTERCONNECTED ISSUE IS THAT LD. CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 36,97,600/- AND RS. 8,87,424/- ON ACCOUNT OF NON-DEDUCTION OF TDS AND INTEREST THEREO N UNDER SECTION 201(1)/201(1A) OF THE ACT. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF TOURS AND FOREX. A SURVEY OPERATION WAS CARRIED OUT U/S 133A OF THE ACT DATED - 4 - 8.10.2014 AT THE OFFICE PREMISES OF THE ASSESSEE. T HE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS INCURRED CERTAIN EXPEN SES WITHOUT DEDUCTING THE TDS. THE DETAILS OF THE EXPENSES ON W HICH TDS WAS NOT DEDUCTED STANDS AS UNDER: SR NO. HEAD OF THE EXPENDITURE AMOUNT AMOUNT (A) HOTEL AND OTHER IATA AGENTS 1. DIRECT PAYMENT TO THE HOTELS 8,96,738 2. PAYMENT TO HOTELS THROUGH OTHER TRAVEL AGENTS PACKAGE TOUR EXPENSES 51,42,585 60,39,323 (B) MISC. PURCHASE OF (PASSBOOK, VISA CHARGES ET C.) 1. VISA PROCESSING FEE 42,28,133 2. CRUISE PAYMENTS 40,69,861 3. CAR HIRE CHARGES 1,03,892 4. HOTEL BOOKING PAYMENT 8,76,948 5. PAYMENT TO AGENTS FOR DOMESTIC TOUR PACKAGES 20,35,031 1,13,13,865 (C) PACKAGE TOUR EXPENSES 11,34,810 11,34,810 4.1 ON QUESTION BY AO ABOUT THE NON-DEDUCTION OF TD S, THE ASSESSEE MADE REPLY AS DETAILED UNDER: HOTEL AND OTHER IATA AGENTS: I. THE PAYMENT WAS DIRECTLY MADE TO THE HOTELS ON BEHA LF OF INDIVIDUAL TRAVELERS. IN MOST OF THE CASES, THE PAY MENT TO THE - 5 - HOTELS DID NOT EXCEED THE LIMIT AS SPECIFIED U/S 19 4C OF THE ACT. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE ALSO S UBMITTED THAT IT IS NOT LIABLE FOR DEDUCTION OF TDS ON THE P AYMENT MADE TO THE HOTELS. THE ASSESSEE IN THIS CONNECTION RELI ED ON THE CBDT CIRCULAR NO. 5 OF 2012. II. SIMILARLY, THE PAYMENT MADE TO THE HOTEL THROUGH VA RIOUS TRAVEL AGENTS WAS NOT SUBJECT TO TDS AS THE ASSESSE E WAS ACTING ONLY AS BOOKING AGENTS. THEREFORE SUCH PAYME NT MADE AS AN AGENT IS OUTSIDE THE PURVIEW OF TDS. MISC. PURCHASES (PASSBOOK, VISA CHARGES ETC.) I. THE ASSESSEE FURTHER SUBMITTED THAT THE EXPENSES WE RE INCURRED UNDER THE HEAD MISC. PURCHASES ON BEHALF O F THE CUSTOMERS WHICH ARE REPRESENTING THE REIMBURSEMENT OF THE EXPENSES. II. MOST OF THE PAYMENTS WERE MADE TO DESTINATION TRAVE L MANAGEMENT COMPANIES OR TO HOTELS OR TO CRUISE COMP ANIES OR TO AIRLINES COMPANIES OR FOR VISA AND CAR EXPENSES ETC. AS THE ASSESSEE WAS ACTING MERELY AS INTERMEDIARY, THEREFO RE, THERE WAS NO LIABILITY TO DEDUCT THE TDS FROM SUCH PAYMEN TS. 4.2 BESIDES THE ABOVE, THE ASSESSEE ALSO SUBMITTE D THAT THE RECIPIENT OF THE AFORESAID PAYMENT HAVE DULY DISCLOSED THE TR ANSACTIONS IN THEIR INCOME TAX RETURN AND HAVE OFFERED THE SAME TO THE TAX. THEREFORE THERE IS NO LIABILITY FOR THE DEDUCTION OF TDS. - 6 - HOWEVER, THE AO DISREGARDED THE CONTENTION OF THE A SSESSEE AND HELD THAT THE ASSESSEE AS IN DEFAULT FOR NON-DEDUCTION O F TDS U/S 194C OF THE ACT. 4.3 AS THE ASSESSEE HAS NOT FURNISHED THE PAN OF TH E RECIPIENT/PAYEES, THEREFORE THE AO WORKED OUT THE L IABILITY FOR THE TDS @20% AS DETAILED UNDER: SR. NO. EXPENSE HEAD AMOUNT IN RS. APPLICABLE SECTION TDS@20% 1 HOTELS & OTHER IATA AGENTS 60,39,323/- 194C 12,07,865/- 2 MISC PURCHASE OF (PASSPORT, VISA CHARGES ETC) 1,13,13,865/- 194C 22,62,773/- 3 PACKAGE TOUR EXPENSES OF 11,34,810 194C 2,26,962/- TOTAL 1,84,87,998/- 36,97,600/- 9. IN TERMS OF PROVISIONS OF SECTION 201(1A) OF TH E I T ACT, THE ASSESSEE IS LIABLE TO PAY SIMPLE INTEREST @ 1% WORK ED OUT AT RS.8,87,424/-, FOR THE PERIOD FROM 01.04.2013 TO MA RCH'2015 (24 MONTHS), THE WORKING OF WHICH IS AS UNDER. AS THE A SSESSEE HAS NOT SUBMITTED ANY DETAILS, THE BENEFIT OF HON'BLE APEX COURT DECISION IN THE CASE OF M/S HINDUSTAN COCA COLA BEVERAGES LTD., AS REPORTED IN 293 ITR 226 OR BENEFIT OF FIRST PROVISION TO SECTIO N 201(1) OF THE I T ACT IS NOT GIVEN. SR. NO. NATURE OF PAYMENT DEFAULT AMOUNT. INTEREST RATE INTEREST AMOUNT 1. HOTELS & OTHER IATA AGENTS 12,07,865/- 1% 2,89,888/- 2, MISC PURCHASE OF (PASSPORT, VISA CHARGES ETC . 22,62,773/- 1% 5,43,066/- 3. PACKAGE TOUR EXPENSES OF 2,26,962/- 1% 54,470/- - 7 - TOTAL INTEREST 36,97,600/- 8,87,424/- 10. THE SUMMARY OF DEFAULT AS UNDER: S. NO. DEFAULT NATURE AMOUNT 1 NON DEDUCTION OF TDS U/S.201 36,97,600/- 2. INTEREST U/S 201(1A) 8,87,424/- TOTAL 45,85,024/- THUS THE AO RAISED THE DEMAND FOR THE TAX & INTERES T FOR RS. 36,97,600/- & RS. 8,87,424/- RESPECTIVELY . 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A). THE ASSESSEE BEFORE THE LD CIT(A) SUBMITTED THAT TH E PAYMENT TO THE HOTELS WAS PAID ON BEHALF OF THE INDIVIDUAL CUSTOME RS WHICH WAS NOT MADE IN PURSUANCE OF ANY CONTRACT WITH THE HOTELS. THEREFORE, THERE WAS NO LIABILITY TO DEDUCT THE TDS U/S 194C OF THE ACT. SIMILARLY THE PAYMENT WAS MADE TO THE VARIOUS TRAVEL AGENTS FOR B OOKING THE ROOMS IN THE HOTELS ON BEHALF OF THE INDIVIDUAL CUSTOMERS . IN SUCH CASE, THE ASSESSEE WAS ACTING ONLY AS A TRAVEL AGENT ON BEHAL F OF THE CUSTOMERS WHICH IS REPRESENTING THE REIMBURSEMENT OF THE COST . THEREFORE SUCH EXPENSE IS NOT SUBJECT TO THE PROVISION OF TDS U/S 194C OF THE ACT. 5.1 SIMILARLY, THE VISA FEE WAS COLLECTED FROM THE CUSTOMERS, WHICH WAS PAID TO THE CONSULATE OF VARIOUS COUNTRIES. THE RE IS NO PROVISION UNDER THE ACT FOR DEDUCTION OF TDS ON THE PAYMENT O F VISA CHARGES. - 8 - BESIDES, IN NONE OF THE CASES THE PAYMENT ON ACCOUN T OF VISA CHARGES EXCEEDED RS. 75,000/- PER PAYEE. 5.2 A SUM OF RS. 40,69,861/- WAS PAID TO DOMESTIC TRAVEL AGENTS FOR THE PURCHASE OF FOREIGN CRUISE TICKETS FOR THE PASS ENGERS. AGAIN, THERE IS NO PROVISION UNDER THE INCOME TAX ACT TO DEDUCT THE TDS FOR THE PURCHASE OF FOREIGN CRUISE TICKETS FOR THE PASSENGE RS. 5.3 THE ASSESSEE REGARDING TAXI CHARGES SUBMITTED T HAT THE PAYMENT WAS MADE ON BEHALF OF THE INDIVIDUAL CUSTOMERS AND IN NONE OF THE CASES THE PAYMENT EXCEEDED THE LIMIT AS SPECIFIED U /S 194C OF THE ACT. 5.4 A SUM OF RS. 8,76,948/- WAS PAID TO DIFFERENT H OTELS ON BEHALF OF VARIOUS INDIVIDUAL CUSTOMERS. THE PAYMENT TO THE HO TELS IS OUTSIDE THE PURVIEW OF TDS PROVISIONS. 5.5 SIMILARLY A SUM OF RS. 20,35,031/- WAS PAID TO DIFFERENT DESTINATION TRAVEL OPERATORS FOR ORGANIZING THE DOM ESTIC TOUR PACKAGES. THE PAYMENT TO DOMESTIC DESTINATION TRAVEL AGENTS I NCLUDES HOTEL CHARGES, TAXI CHARGES, TICKETS AND FOOD ETC. AS THE ASSESSEE WAS ACTING MERELY A TRAVEL AGENT ON BEHALF OF HIS CUSTOMER, IT WAS NOT LIABLE FOR THE DEDUCTION OF TDS U/S 194C OF THE ACT. 5.6 THE PAYMENT OF RS. 11,34,810/- WAS PAID MAINLY FOR AIR TICKET, VISA CHARGES, DOCUMENT CHARGES AND TOUR KITS ETC. I N NONE OF THE CASE THE PAYMENT TO THE PARTIES EXCEEDED THE LIMIT AS SP ECIFIED U/S 194C OF THE ACT. - 9 - 5.7 THE ASSESSEE ALSO CLAIMED THAT IT IS REGISTERED WITH IATA AS TRAVEL AND BOOKING AGENTS. THUS, IT WAS ACTING AS T HE MEDIATOR BETWEEN THE CUSTOMERS AND OTHER TOUR OPERATORS/ TAXI OPERAT ORS/ HOTELS ETC. THEREFORE, IT WAS NOT LIABLE FOR THE DEDUCTION OF T DS. THE ASSESSEE IN SUPPORT OF HIS CLAIM RELIED ON THE CIRCULAR OF CBDT NO.715 OF DATED 08.08.1995 AND 713 DATED 02.08.1995 WHEREIN IT WAS CLARIFIED THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS ON THE PAYMENT OF TICKET BOOKINGS. SIMILARLY, PRINCIPLES CAN BE USED IN THE CONTEXT OF THE PAYMENT MADE ON BEHALF OF INDIVIDUAL TRAVELERS TO THE CRUISE COMPAN IES. 5.8 THE STATEMENT RECORDED U/S 133A OF THE DIRECTOR OF THE COMPANY CANNOT BE USED AGAINST THE ASSESSEE AS IT WAS TAKEN ON THE SPOT DURING SURVEY. AT THAT RELEVANT TIME, THE DIRECTOR OF THE COMPANY DID NOT HAD ANY ACCESS TO HAVE THE PROFESSIONAL ADVICE. THEREFO RE THE CONTENTS OF THE STATEMENT RECORDED U/S 133A CANNOT BE CONSTRUED TO HAVE ADMITTED THE LIABILITY FOR THE DEDUCTION OF TDS BY THE ASSES SEE. 5.9 THE ASSESSEE IN SUPPORT OF HIS CLAIM ALSO RELIE D ON THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. CARGO LINKERS REPORTED IN 179 TAXMAN 151. 5.10 THE ASSESSEE ALSO PLACED HIS RELIANCE ON THE C ERTAIN JUDGMENT AS DETAILED UNDER : 1. RAJKOT TRIBUNAL IN THE CASE OF ITO VS. SHARADKUMAR P. MAJITHIA REPORTED IN ITA NO.381/RJT/2006. - 10 - 2. HIGH COURT OF GUJARAT IN THE CASE OF ITO VS. GUJARA T NARMADA VALLEY REPORTED IN 247 ITR 305. 3. CUTTACK TRIBUNAL IN THE CASE OF R. R. CARYYING CORPORATION VS. ACIT REPORTED IN 126 TTJ 240. 4. HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT(T DS) VS. UNITED RICE LAND LTD. REPORTED IN 322 ITR 594. 5. HIGH COURT OF BOMBAY IN THE CASE OF EAST INDIA HOTE LS LTD. VS. CBDT REPORTED IN 320 ITR 526. 5.11 THE LD CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: DECISION: 7. THE MATERIAL ON RECORD AND THE CONTENTIONS ADVA NCED BY THE A.R. BEFORE ME ARE CAREFULLY PERUSED. AT THE OUTSET I FIND IT PERTINENT THAT IN PAST ALL ALONG, THE NATURE OF BUSINESS OF THE APPELLANT HAS BEEN ACCEPTED AS A TRAVEL AGENT AND THE APPELLANT IS REGISTERED WITH IATA AND IT THUS A N ACCREDITED AGENT. I ALSO FIND THAT IN A SCRUTINY ASSESSMENT ORDER PAS SED U/S 143(3) OF THE ACT FOR A.Y. 2007-08 (PAGE 127), THE NATURE OF BUSI NESS AS TRAVEL AGENT HAS BEEN ACCEPTED AND ON SIMILAR KINDS OF PAY MENTS MADE IN PAST ALL ALONG, THERE WAS NO LIABILITY AFFIXED BY T HE DEPT. FOR IDS. I DO NOT FIND ANY MATERIAL CHANGE IN FACTS IN CIRCUMSTAN CES NOW MENTIONED IN THE ORDER U/S 201 OR NOTICED DURING THE SURVEY S O AS TO JUSTIFY A CHANGE IN VIEW OF A SETTLED POSITION AND ON WHICH A CONSISTENT STAND IS BEING TAKEN BOTH BY THE APPELLANT AND THE DEPT. I AM ALSO PERSUADED BY THE ARGUMENT OF THE A.R. THAT NON-D EDUCTION OF TAX AT SOURCE ON PAYMENTS RECEIVED FROM CUSTOMERS WHICH A RE IN TURN PAID TO OTHER TRAVEL AGENTS/ OPERATORS /DESTINATION COMP ANIES IS A WIDELY PREVALENT PRACTICE IN TRAVEL INDUSTRY AND THE RULE OF CONSISTENCY ALSO REQUIRES THAT SUCH PRACTICE IS TO BE FOLLOWED, MORE SO WHEN THE QUESTION IS ONLY OF VICARIOUS LIABILITY TO DEDUCT T AX AT SOURCE WHEN THE PAYMENTS HAVE ALREADY BEEN MADE AND NOW IT IS A QUE STION OF RECOVERY FROM THE PAYER. IN THE CASE OF GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. (2001) 247 ITR 0305 GUJARAT HIGH COURT HAS CLEARLY HELD THAT WHEN THE ASSESSEE-PAYER IS UNDER BONAFIDE BELIEF AND HAS NOT BEEN DEDUCTING TAX AT SOURCE IN PAST, IN SU CH CASES, RECOVERY CANNOT BE MADE FROM THE PAYER U/S 201 OF THE ACT. I N THIS REGARD, I FIND THAT THE DECISION IN CASE OF CARGO LINKERS (SU PRA) WITH REFERENCE - 11 - TO C & F AGENT IS ALSO APPOSITE. IN THE PRESENT CAS E I FIND NOT ONLY FROM THE EXPLANATIONS FURNISHED BEFORE THE I .T.O. ALONGWITH EVIDENCE AS ALSO IN VIEW OF THE ACCEPTED PAST PRACT ICE IN THIS REGARD ON SAME FACTS, AND MORE SO WHEN TDS WAS MADE BY CUS TOMERS OF THE APPELLANT WHEN APPLICABLE TO THE RESPECTIVE PAYERS ON PAYMENTS RECEIVED BY THE APPELLANT AS THEIR AGENT, I FIND TH AT THE ASSESSEE CAN BE SAID TO HAVE ENTERTAINED A BONAFIDE BELIEF THAT IT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE IMPUGNED PAYMENTS AND THEREFORE IN THE LIGHT OF ABOVE, IT CANNOT BE HELD TO BE AN A SSESSEE IN DEFAULT. ON THIS GROUND ITSELF, I HOLD THAT RE COVERY OF RS.36,97,600/- AND INTEREST OF RS, 8,87,424/- BY OR DER U/S 201(1)/201(1A) CANNOT BE SUSTAINED. I FURTHER FIND ON APPRECIATION OF THE EVIDENCE ON R ECORD AND UPON ANALYSIS OF THE EXACT NATURE OF PAYMENTS MADE BY THE APPELLANT THAT IT CANNOT BE SAID THAT TDS LIABILITY IS ATTRAC TED UPON THE APPELLANT. I FIND THAT EACH AND EVERY NATURE OF PAY MENT HAS BEEN EXPLAINED IN DETAIL BY THE APPELLANT NOT ONLY BY WA Y OF REPLIES TO SHOW CAUSE NOTICES BUT ALSO BEFORE ME BY WAY OF SUPPORTI NG EVIDENCE PLACED IN PAPERBOOK. IN PARTICULAR, I FIND THAT IN RESPECT OF PAYMENTS TO HOTELS OF RS. 60,39,323/- (PAGE 4, 5) THEY WERE MEANT FOR ROOM RENT OF INDIVIDUAL CUSTOMERS AND THE APPELLANT ACTED AS AN INTERMEDIARY AND INVOICES ARE RAISED BY HOTELS WITH SPECIFIC CUS TOMERS NAMES (PAGE 67-79). VIDE CIRCULAR NO. 005 OF 2002 DATED 30-07-2002, THE BOARD HAS ALSO CLARIFIED THAT IN RESPECT OF ROOM CHARGES PAID WHERE THERE IS NO RUNNING CONTRACT, TDS IS NOT ATTRACTED. HENCE, I HOLD THAT THE ASSESSEE WAS NOT IN DEFAULT IN RESPECT OF THE SAID TOTAL PAYMENT OF RS.60,39,323/. AS REGARDS, TOTAL PAYMENT OF RS.1,13,13,865/- DESCR IBED BY THE I.T.O. AS MISC. PURCHASES (PASSPORT, VISA CHARGES E TC.) OF RS. 42,28,133/- (PAGE 6), THE DETAILED BREAK UP IS FURN ISHED IN THE PAPERBOOK WHEREFROM IT CAN BE SEEN THAT ON VISA FEE S TO COUNTRY CONSULATES, THERE IS NO EXPRESS PROVISION IN LAW RE QUIRING THE PAYER TO DEDUCT TAX AT SOURCE (PAGE 80-93). ONE CAN ALSO NOT ENVISAGE A CONTRACT IN THIS REGARD; IT IS A LEGAL FEE. IN RESP ECT OF CRUISE TICKET CHARGES OF RS. 40,69,861- (PAGE 6), WHI CH ARE PAID FOR INDIVIDUAL PASSENGERS, I HOLD THAT BOTH IN VIEW OF THE AFORESAID CIRCULARS AS ALSO THE POSITION THAT THAT APPELLANT ACTS AS AGENT OF ITS CUSTOMERS AND IS NOT ITSELF A CRUISE OPERATOR, IN M Y CONSIDERED VIEW THERE WAS NO REQUIREMENT FOR TDS (PAGE 94 - 97), IN THIS CASE IT IS FURTHER RELEVANT TO NOTE THAT ON SUCH PAYMENTS THE APPELLANT HAS ON THE CONTRARY RECEIVED COMMISSION FROM CRUISE COMPAN IES WHICH FACTOR - 12 - FURTHER GOES TO SUBSTANTIATE THE STAND OF THE APPEL LANT THAT IT ACTED AS A BOOKING AGENT FOR ITS CUSTOMERS WHO BOOKED TOURS WITH IT AND NOT AS A CRUISE OPERATOR ITSELF. IN RESPECT OF CAR HIRE CH ARGES OF RS. 1,03,892/-PAID TO A SINGLE PERSON, THE DETAILS FILE D (PAGE 98-103) ?HOW THAT ALTHOUGH THE NATURE OF PAYMENT ITSELF DID FALL WITHIN SEC. 194C, THERE ARE SEPARATE PAYMENTS FOR INDIVIDUAL TR AVELERS AND SEPARATE INVOICE RAISED BY APPELLANT ON ITS CUSTOME RS (PAGE 102, 103) WHO BOOKED THE VEHICLE AND THUS IT WOULD MAKE SEPAR ATE CONTRACT AND THE PAYMENT PER INDIVIDUAL DID NOT EXCEED THE LIMIT U/S 194C AND HENCE THERE WAS NO QUESTION OF DEDUCTING TDS THEREO N, MORE SO WHEN THERE IS NO RUNNING CONTRACT BETWEEN THE APPELLANT AND THE TAXI OPERATOR. WITH REGARD TO PAYMENT OF RS. 8,76,948/- (PAGE 7) THE RECORDS SHOW THAT THEY WERE ALSO IN RESPECT OF HOTE L ROOM BOOKING FOR DIFFERENT TRAVELERS WHOSE COLLECTION WAS PASSED ON BY THE APPELLANT TO HOTELS OR TO OTHER PARTIES AND FOR REASONS STATED A BOVE, THERE CAN BE NO LIABILITY TO DEDUCT TAX AT SOURCE ON SUCH PAYMEN TS (PAGE 104 - 106). IN RESPECT OF PAYMENT TOTALING RS. 20,35,031/ - (PAGE 7) THE EVIDENCE SHOW THAT THESE ARE MADE FOR DOMESTIC PACK AGE TOURS OF DIFFERENT TRAVELERS AND WERE MADE TO DESTINATION TR AVEL COMPANIES TOWARDS HOTEL, TAXI, TICKETS, FOOD ETC. IN RESPECT OF WHICH IT IS PATENT ON RECORD AND IT IS NOT EVEN THE CASE OF THE I.T.O. TH AT THE APPELLANT ITSELF WAS THE TOUR ORGANIZER OR OPERATOR BUT THE APPELLAN T OBTAINED BOOKINGS FROM ITS CUSTOMERS AND PASSED ON THE PAYME NTS TO DESTINATION COMPANIES AFTER RETAINING ITS MARGIN (PAGE 107 - 109), THE RAJKOT TRIBUNAL IN THE CASE OF I.T.O. VS. SHARA DKUMAR P. MAJITHIA IN I.T.A. NO. 381/R/2006 HAS HELD THAT IN THE CASE OF A TRANSPORT BOOKING AGENT, DEDUCTION OF TAX AT SOURCE IS NOT RE QUIRED UPON PAYMENTS MADE BY SUCH TRANSPORT AGENT TO THE TRANSP ORT OPERATORS BECAUSE THEY ARE ACTING AS AGENTS AND NOT AS TRANSP ORT OPERATORS THEMSELVES. HENCE I FIND FORCE IN THE CONTENTIONS OF THE A.R. THAT IN CASE OF A TRAVEL BOOKING AGENT OR AN INTERMEDIARY, THERE CANNOT BE A TDS LIABILITY ON ITSELF FOR VARIOUS REASONS BECAUSE IT DID NOT ACT ON ITS OWN NAME OR ACCOUNT, THE NAME OF THE TRAVELER WAS CONTAINED IN THE FINAL BOOKINGS MADE BY THE DESTINA TION COMPANIES AND CONVERSELY THE NAME OF THE DESTINATION COMPANY WAS ALSO MADE KNOWN TO THE TRAVELER, AS CAN BE SEEN FROM THE TRAV EL VOUCHERS PLACED IN THE PAPERBOOK. IN I.T.O. VS HONEST PUBLICITY 1 48 TTJ 022 AHMEDABAD TRIBUNAL HAS HELD THAT AN ADVERTISING AGE NT IS NOT REQUIRED TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE B Y IT TO OTHER ADVERTISING AGENTS INCLUDING RNEDIA AND HENCE DISAL LOWANCE U/S 40(A)(IA) WAS NOT SUSTAINED IN THIS CASE. -BASED ON EVIDENCE AND NATURE OF TRANSACTIONS ON RECORD, APART FROM MY FIN DINGS ON MERITS OF DEDUCIBILITY GIVEN ABOVE, EVEN IF THE ENTIRE CHAIN OF TRANSACTIONS - 13 - STARTING FROM PAYMENT BY CUSTOMER UNTIL PAYMEN T BY TRAVEL AGENT/COMPANY TO ULTIMATE DESTINATION IS SEEN THR OUGH, IT IS OBVIOUS THAT TDS WAS MADE AT THE FIRST STAGE ITSELF ON THE GROSS PAYMENT RECEIVED BY THE APPELLANT IN APPLICABLE CASES, WHIC H OBVIOUSLY INCLUDED THE INCOME ELEMENT OF THE APPELLANT AS AN ASSESSEE AND HENCE ALSO THERE COULD NOT HAVE TDS AT EVERY SUBSEQ UENT STAGE INVOLVING THE PAYMENTS IN TURN MADE BY THE APPELLAN T IN ITS CAPACITY AS TRAVEL AGENT, FOR ITS INDIVIDUAL TRAVELER-CUSTOM ER, AS MADE FOR VARIOUS PURPOSES SHOWN IN THE SUMMARY CHARTS. IN RESPECT OF PAYMENTS OF RS. 11,34,810/- MENTIONED IN PARA 8 OF THE ORDER, THE SUMMARY CHART WITH EVIDENCE (PAGE 8, 62 - 66) CLEARLY REVEALS THAT ON MOST OF THE NATURE OF THE P AYMENTS SUCH AS AIR TICKET, VISA, INSURANCE, TOUR KITS, DOCUMENTATION C HARGES, NO TDS PROVISIONS ARE APPLICABLE AT ALL. CONSIDERING THE S AME, I HOLD THAT THE ASSESSEE CANNOT BE HELD TO BE IN DEFAULT FOR NON-DE DUCTION OF TDS ON ANY OF THE IMPUGNED PAYMENTS MENTIONED IN PARA 8 OF THE ORDER FOR WHICH RECOVERY IS ORDERED BY THE I.T.O. IT IS ALSO NOTED FROM FACTS ON RECORD AND IF NOT EV EN THE CASE OF THE I.T.O. OR THE FINDINGS DURING SURVEY THAT THERE WERE ANY CONTRACTS OR AGREEMENTS BY THE APPELLANT WITH THE PAYEES. IN THE CASE OF R. R. CARRYING CORPORATION VS. A.C.I.T. 126 TTJ 240 AND I N THE CASE OF C.I.T. VS. UNITED RISE LAND LTD. 322 ITR 594 IT IS HELD THAT WHEN NO CONTRACTS EXIST BETWEEN THE ASSESSEE AND OTHER PART IES, WHETHER WRITTEN OR ORAL, PROVISIONS OF SEC. 194C CANNOT BE APPLIED TO PAYMENTS MADE IN ABSENCE OF ANY SUCH CONTRACTS. IN EAST INDIA HOTELS V C.B.D.T. 320 ITR 526 BOMBAY HIGH COURT HAS HELD T HAT SERVICES PROVIDED BY A HOTEL TO ITS CUSTOMERS DOES NOT AMOUN T TO WORK U/S 194C. IT ALSO RELEVANT THAT THOSE WHO BOOKED TOURS WITH APPELLANT AND MADE PAYMENTS FOR IT HAVE DEDUCTED TAX AT SOURCE AN D THUS AT THE THRESHOLD OF THE CHAIN ITSELF, TDS LIABILITY IS DIS CHARGED WHERE ATTRACTED. THERE COULD BE NO TDS LIABILITY AT THE I NTERMEDIATE STAGE OR AT EVERY STAGE OF SUCCESSIVE PAYMENTS, FOR REASONS STATED ABOVE. I FURTHER FIND THAT THE I.T.O. HAS ORDERED TAX RECO VERY BY APPLYING TDS RATE OF 20% ON THE GROUND THAT THE PANS OF PAYE ES WERE NOT ON RECORD, AS AGAINST THE RATE OF 2% PRESCRIBED U/S 19 4C. IN THIS REGARD THE A.R. ARGUED BEFORE ME THAT THE I.T.O. WHILE PAS SING ORDER U/S 201(1) COULD NOT HAVE RECOVERED TAX @ 20% BECAUSE S EC. 206AA CASTS A DUTY ON THE DEDUCTEE TO FURNISH PAN TO THE DEDUCTOR IF HE IS ENTITLED TO RECEIVE ANY SUM OR INCOME OR AMOUNT ON WHICH TAX IS DEDUCTIBLE AND HENCE THE ASSESSEE CANNOT BE FAULTED WHEN IT WAS THE - 14 - DEDUCTEE WHO WAS REQUIRED TO FURNISH PAN IN A CASE WHERE THE DEDUCTEE REQUIRED THE TDS TO BE DEDUCTED AT PRESCRI BED RATES, PARTICULARLY WHEN AS PER ACCEPTED TRADE PRACTICE, T HE ASSESSEE HAD A BONAFIDE BELIEF THAT NO TDS ON IMPUGNED PAYMENTS WE RE REQUIRED TO BE MADE FOR REASONS ALREADY ADVANCED, THE ALLEGED D EFAULT OF THE ASSESSEE CANNOT BE CALCULATED @ 20% BUT AT BEST AT THE PRESCRIBED RATE OF 2%. DURING APPELLANT PROCEEDINGS, THE ASSES SEE WAS CALLED UPON BY ME SPECIFICALLY TO FURNISH LIST OF PAN, WHI CH INFORMATION THE APPELLANT FURNISHED. THE A.R. SUBMITTED IN THIS REG ARD THAT DURING TDS PROCEEDINGS BEFORE THE I.T.O., THE ASSESSEE MEN TIONED THAT IT WAS TRYING TO OBTAIN PANS OF THE PAYEES BECAUSE IT HAS NO OCCASION TO REQUIRE THE SAME ON ACCOUNT OF ITS HONEST BELIEF OF NON-DEDUCTION OF TAX AT SOURCE IN THE LIGHT OF THE ESTABLISHED ASSES SMENT HISTORY IN THIS REGARD BUT THE ASSESSEE COULD NOT OBTAIN THE PANS W ITHIN TIME AND THEREFORE, IT WAS PREVENTED BY SUFFICIENT CAUSE FRO M FURNISHING THE SAME. IN VIEW OF ABOVE, THE DETAILS OF PAN AS CALLE D FOR BY ME ARE TAKEN ON RECORD AND THEREFORE IT IS HELD THAT EVEN ASSUMING THAT TDS WAS REQUIRED TO BE MADE ON IMPUGNED PAYMENTS, WHICH IS NOT SO IN VIEW MY FINDINGS ON MERITS, THE SAME CAN NOW BE CAL CULATED @ 2% U/S 194C AND NOT @ 20%. IN THE SIGHT OF ABOVE, THE ASSESSEE IS HELD AS NOT IN DEFAULT U/S 201(1) OF THE ACT AND THE RECOVERY OF TAX AND INTER EST OF RS. 45,85,024/- IS THEREFORE DELETED. IN THE RESULT, AL L GROUNDS OF APPEAL ARE ALLOWED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DR BEFORE US RELIED ON THE ORDER OF AO. 7. ON THE OTHER HAND, THE LD. AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1-141 AND SUBMITTED THAT THE POS ITION OF THE ASSESSEE AS TRAVEL AGENT HAS BEEN ACCEPTED BY THE R EVENUE CONSISTENTLY IN EARLIER YEARS. THERE WAS ASSESSMENT FRAMED U/S 1 43(3) OF THE ACT IN - 15 - THE A.Y. 2007-08 BUT NO DISALLOWANCE WAS MADE ON AC COUNT ON NON- DEDUCTION OF TDS. 7.1 THE LD. AR FURTHER CLAIMED THAT THERE WAS AN AS SESSMENT U/S 143(3) OF THE ACT PERTAINING TO THE A.Y. 2014-15 & 2015-16 BUT THERE WAS NO DISALLOWANCE ON ACCOUNT OF NON-DEDUCTION OF TDS. 7.2 THE LD AR BEFORE US HAVE ALSO FILED THE BREAKUP OF THE PAYMENTS AS DISCUSSED AFORESAID WHICH ARE PLACED ON PAGES 1- 8 OF THE PAPER BOOK. THE LD. AR ON THE BASIS OF THESE SUBMISSION D EMONSTRATED THAT THE PAYMENT MADE BY THE ASSESSEE WAS NOT SUBJECT TO TDS EITHER BY, THE OPERATION OF LAW OR THE PAYMENT DID NOT EXCEED THE LIMIT AS SPECIFIED U/S 194C OF THE ACT. THEREFORE, THERE WAS NO LIABIL ITY OF TDS ON THE ASSESSEE U/S 194C OF THE ACT. 7.3 THE LD. AR FURTHER SUBMITTED THAT THE COPIES OF THE PAN WERE NOT COLLECTED FROM THE PAYEES THEREFORE THESE WERE NOT FILED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE LD. AR BEFORE US SUBMITTED THAT THE PAN OF ALL THE PARTIES HAVE BEEN SUBSEQUENTLY OBTAINED FROM THE PAYEES AND FURNISHED TO THE LD. C IT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS. THE DETAILS OF THE ALL PAN OF THE PAYEES ARE PLACED ON PAGES 129-135 OF THE PB. 7.4 ALTERNATIVELY, THE LD. AR SUBMITTED THAT ONCE T HE PAN HAS BEEN FURNISHED THEN THE LIABILITY IF APPLICABLE U/S 194C OF THE ACT THEN IT SHOULD BE LIMITED TO 2% OF THE PAYMENT MADE BY THE ASSESSEE. - 16 - 7.5 THE LD. AR VEHEMENTLY SUPPORTED THE ORDER OF LD . CIT(A) 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE DISPU TE RELATES TO THE PAYMENT MADE BY THE ASSESSEE TO DIFFERENT HOTELS/ T AXI OPERATORS / TRAVEL AGENTS ETC ON BEHALF OF CUSTOMERS WITHOUT DEDUCTING THE TDS U/S 194C OF THE ACT. THEREFORE, THE AO INVOKED THE PROVISION OF SECTION 201 OF THE ACT AND RAISED THE DEMAND OF TDS ALONG WITH INT EREST. FROM THE PRECEDING DISCUSSION, WE NOTE THAT THERE I S NO DISPUTE THAT THE ASSESSEE HAS NOT BEEN DEDUCTING ANY TDS FOR THE LAS T SEVERAL YEARS AND NO DISALLOWANCE ON ACCOUNT OF NON-DEDUCTION OF TDS HAS BEEN MADE BY THE REVENUE INCLUDING IN THE ASSESSMENT FRAMED U NDER SECTION 143(3) OF THE ACT FOR THE EARLIER & SUBSEQUENT YEAR S. THUS, IN OUR CONSIDERED VIEW, THE ASSESSEE WAS UNDER THE BONA-FI DE BELIEF THAT IT IS NOT LIABLE FOR THE DEDUCTION OF TDS U/S 194C OF THE ACT. THEREFORE, THE ASSESSEE IS NOT LIABLE FOR TDS U/S 194C OF THE ACT. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT NARMADA VALLEY FERTILIZERS COMPANY LTD. REPORTED IN 247 ITR 305, WHEREIN IT WAS HELD AS UNDER: IN THE FACTS AND CIRCUMSTANCES OF THE CASE, NO SUB STANTIAL QUESTION OF LAW COULD BE SAID TO HAVE ARISEN IN THIS CASE IN RE SPECT OF THE ORDER PASSED BY THE TRIBUNAL. THOUGH THE HIGH COURT'S ATT ENTION WAS INVITED BY BOTH THE COUNSELS TO SEVERAL DECISIONS OF THE SU PREME COURT, OF THE HIGH COURT AS WELL AS OF OTHER HIGH COURTS, IT WAS NOT NECESSARY TO DEAL WITH THEM IN THE PRESENT CASE. IT MAY BE THAT THE AMBIT 2ND SCOPE OF THE FIRST PART OF SECTION 201 ( 1 ) AND THE PROVISO MAY BE DIFFERENT. AT THE SAME TIME, HOWEVER, IT COULD NOT BE SAID THAT T HE TRIBUNAL HAD COMMITTED AN ERROR OF LAW IN CONSIDERING THE CIRCUM STANCES INCLUDING THE CIRCUMSTANCES THAT EVEN THOUGH NOTICES WERE ISS UED IN 1993-94, THE MATTER WAS NOT PURSUED FURTHER AND THAT A RECTI FICATION ORDER WAS - 17 - PASSED IN FAVOUR OF AN EMPLOYEE. ULTIMATELY, IT COU LD NOT BE GAINSAID THAT THE LIABILITY WAS THAT OF THE EMPLOYEES. EVEN IN RESPECT OF AN INDIVIDUAL EMPLOYEE, WHEN AN ORDER OF RECTIFICATION WAS MADE BY THE AUTHORITIES AND DEDUCTION WAS MADE, THE TRIBUNAL CO ULD NOT BE SAID TO BE WRONG IN RECORDING A FINDING THAT THERE WAS AN H ONEST AND BONA FIDE BELIEF ON THE PART OF THE ASSESSEE THAT WITH REGARD TO OTHER ALLOWANCES ALSO THE CASE WOULD NOT FALL UNDER SECTI ON 201 IF THE AMOUNT WAS NOT DEDUCTED AT SOURCE. IT WAS STATED AT THE BAR THAT FROM 1997-98, THE COM PANY HAD STARTED DEDUCTING THE AMOUNT OF TAX AT SOURCE FROM THE AMOU NTS WHICH WERE TO BE PAID TO ITS EMPLOYEES IN RESPECT OF DISPUTED ALLOWANCES. FOR THE FOREGOING REASONS, WITHOUT ENTERING INTO LA RGER QUESTION AND WITHOUT LAYING DOWN ANY PRINCIPLE OF LAW, IT WAS TO BE HELD THAT BY ALLOWING APPEALS AND SETTING ASIDE THE ORDERS PASSE D BY THE AUTHORITIES BELOW, THE TRIBUNAL HAD NOT COMMITTED A NY ERROR OF LAW AND NO SUBSTANTIAL QUESTION OF LAW AROSE FOR CONSID ERATION OF THE HIGH COURT. THE APPEALS, THEREFORE, DESERVED TO BE DISMISSED AN D WERE, ACCORDINGLY, DISMISSED. 8.1 WE ALSO FIND SUPPORT AND GUIDANCE FROM THE JUDG MENT OF DELHI HIGH COURT IN THE CASE OF CARGO LINKERS (SUPRA) REPORTED IN 15 SOT 144 WHEREIN IT WAS HELD AS UNDER: THE ASSESSEE MERELY ACTED AS AN INTERMEDIARY TO FA CILITATE THE CONTRACT FOR CARRIAGE OF GOODS. THE PRINCIPAL CONTR ACT FOR CARRIAGE OF GOODS WAS BETWEEN THE EXPORTER AND THE CARRIER AIRL INE. AN IMPLIED CONTRACT TO CARRY GOODS COULD NOT BE PRESUMED BETWE EN THE ASSESSEE AND THE AIRLINES. SECTION 194C CONTEMPLATES AN OBLI GATION ONLY ON THE PART OF THE EXPORTER TO DEDUCT TAX AT SOURCE. THE N ATURE OF THE TRANSACTION, IN THE INSTANT CASE, CLEARLY SHOWED TH AT THE PROVISIONS OF SECTION 194C WERE NOT ATTRACTED VIS-A-VIS THE ASSES SEE. IT WAS ALSO NOT IN DISPUTE THAT NO OTHER PERSON IN THE TRADE HAD BE EN DEDUCTING TAX AT SOURCE 8.2 WE ALSO NOTE THAT IN THE SIMILAR FACTS AND CIRC UMSTANCES THE RAJKOT TRIBUNAL IN THE CASE OF ITO VS. SHARAD KUMAR P. MAJITHIA IN - 18 - ITA NO. 381/RJT/2006 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND ALSO GONE THROUGH THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THAT IT IS RELEVANT TO NOTE THAT IN THE ASSESSMENT ORDER PASSED U/S 143(3) FOR A.Y. 1998-99 IN THE CASE OF THE ASSESSEE ITSELF, THE A.O. HAS CLEARLY STATED THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORTATION ON COMMISSION BAS IS. IN THE ASSESSMENT OF THE ASSESSEE FOR A.Y. 2000-01 THE A.O . STATED THAT THE BUSINESS OF THE ASSESSEE WAS THAT OF A TRANSPORT CO NTRACTOR END COMMISSION AGENT AND GP WAS ESTIMATED ON THE BASIS OF RATE OF PROFIT ON GROSS FREIGHT. IN THAT YEAR, THE ASSESSEE WENT INTO APPEAL AND THE FIRST APPELLATE AUTHORITY DELETED THE ADDITION ON A CCOUNT OF GP AND WHILE DOING SO IT WENT ON TO HOLD THAT THE A.O, H AD NEITHER UNDERSTOOD THE NATURE OF BUSINESS OF THE A SSESSEE CLEARLY NOR HAD HE TAKEN THE FIGURES CORRECTLY AND HAD AL SO NOT UNDERSTOOD THE ACCOUNTING PROCEDURE FOLLOWED BY THE ASSESSEE. THE SAID APPELLATE ORDER HAS BEEN ACCEPTED BY THE DEPT. WE ALSO FIND THAT ALTHOUGH THE PRINCIPAL OF RES JUDICATA DOES NOT APPLY TO TAX PROCEEDINGS, IT IS LAID DOWN BY MANY COURTS INCLU DING THE APEX COURT IN CASES REPORTED AT 193 JTR 321 (SCJ, 282 ITR 273 (SC) AND 215 ITR 323 (GUJ.) THAT HEN THERE IS NO CHANGE IN F ACTS AND CIRCUMSTANCES THE VIEW ACCEPTED IN PAST SHOULD CONTINUE IN THE INTEREST OF CONSISTENCY. WE FI ND THAT THE C.I.T. (APPEALS) IN THE PRESENT APPEALS HAS TAKEN NOTE OF THE FACTUAL ASPECTS OF THE MODUS OPERANDI OF THE BUSINE SS ACTIVITY OF THE ASSESSEE AND NO CHANGE THEREIN FROM EARLIER YEA RS HAS BEEN POINTED OUT BY ANY OF THE LOWER AUTHORITIES OR BY THE REVEN UE BEFORE US. IT IS ALSO NOT THE CASE OF THE DEPT. THAT THE MATERIAL FO UND DURING SURVEY ALTERS THE ESTABLISHED NATURE OF BUSINESS THE C.I .T. (APPEALS) HAS RELIED UPON THE LETTER WRITTEN BY ONE OF THE CONSIG NERS BUT THE ASSESSEE STATES THAT THE SAID CONSIGNOR HAD IN AN EARLIER LE TTER STATED THAT ASSESSEE WAS ONLY A BOOKING AGENT AND FOR SEVERAL OTHER REASONS THE NATURE OF BUSINESS IS APPARENTLY THERE OF A COMMISSION AGENT AND ONLY ON BASIS OF ONE AND THAT TOO FROM ONE OF THE MANY PARTIES DEALT WITH BY THE ASSESSEE, IT CANNOT BE SOLD THAT THE NATURE OF THE ACTIVITY BECOMES DIFFERENT THA N ACCEPTED IN PAST. NO AGREEMENT WITH ANY PRINCIPAL HAS ALSO BEEN FOUND NOR IT IS REFERRED TO BY THE A.O. WE ALSO FIND THAT FROM' THE OVERALL CONDUCT OF THE ASSESSEE ALL THESE YEARS, I TS MANNER OF KEEPING ACCOUNTING RECORDS WHICH ARE DULY AUDITED, IT CANNO T BE SAID ON FACTS THAT THE ASSESSEE IS NOT A BOOKING AGEN T BUT ALSO A - 19 - TRANSPORT CONTRACTOR. AS FAR AS THE BHADA BOOK IS CONCERNED, WE FIND THAT IT IS MORE OF A ROUGH STATISTICAL RECORD RELATING TO TRUCKS BOOKED BY THE ASSESSEE, PARTICULARS O F TRIPS AND FREIGHT MOUNTS. WE FIND THAT THE RECORDS SEIZED NO WHERE ESTABLISH HAT THE ASSESSEE IS NOT MERELY A BOOKING AGENT WE ALS O FIND FROM THE MATERIAL PLACED IN THE PAPER BOOK THAT THE APPE LLANT HAS RECONCILED THE FIGURES OF FREIGHT RECEIVED AND PASSED ON. WE HAVE ALSO NOTED THAT IF THE QUANTUM OF INCOME ESTIMATED BY THE A.O. WE RE TO BE EARNED BY THE ASSESSEE EVERY YEAR, ATLEAST SOME INCRIMIN ATING MATERIAL OR ASSETS WOULD HAVE COME TO LIGHT DURING SURVEY. NOTH ING OF THE KIND HAS BEEN FOUND. AS A TRANSPORT CONTRACTOR, A BUSINE SSMAN WOULD NORMALLY EMPLOY AT LEAST SOME CAPITAL OR OWN O R HIRE TRUCKS ONCE AT LEAST. A CONVENTIONAL TRANSPORTER ACCEPTS CARGO, LOADS IT ON OWN OR HIRED TRUCKS AND DELIVERS IT TO DESTINATION. IN THIS CASE, NO SUCH ACTIVITIES APPEAR TO HAVE BEEN UNDERTAKEN BY THE ASSESSEE. IT IS ALSO PERTINENT THAT THE NATURE OF BUSINESS AS COMMISSION AGENT HAS COME TO BE ACCEPTED BY THE DEPT. ALL THESE YEARS, INCLUDING BY WAY OF SCRUTINY ASSESSMENTS. H ENCE, TAKING INTO ACCOUNT THE FACTS ON RECORD, THE JUDICIAL PRONOUNCEMENTS CITED, THE WIDELY PREVALENT TRADE PRACTICE IN TH IS REGION AND OVERALL CIRCUMSTANCES SURROUNDING THE CONDUCT OF THE ASSESS EE, WE HOLD THAT THE ASSESSEE CANNOT BE SAID TO BE A TRANSPORT CONTR ACTOR BUT HE IS A TRANSPORT BOOKING AGENT. THEREFORE, THE ORDER OF TH E C.I.T. (APPEALS) AS WELL AS THAT OF THE A.O. ON THIS ISSUE IS REVERS ED. THE 1 S ' GROUND OF APPEAL IN THE APPEAL OF THE ASSESSEE IS ALLOWED. 8.3 IT IS ALSO IMPORTANT TO NOTE THAT AS PER THE CBDT CIRCULAR NO.005 DATED 30-07-2002 THE PAYMENT MADE TO THE HOTEL IS NOT SUBJECT TO TDS U/S 194C OF THE ACT. THE RELEVANT EXTRACT OF TH E CIRCULARS READS AS UNDER: QUESTION 6 : WHETHER PAYMENT UNDER A CONTRACT FOR CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT WOU LD INCLUDE PAYMENT MADE TO A TRAVEL AGENT FOR PURCHASE OF A TI CKET OR PAYMENT MADE TO A CLEARING AND FORWARDING AGENT FOR CARRIAGE OF GOODS ? ANSWER : THE PAYMENTS MADE TO A TRAVEL AGENT OR AN AIRLINE FOR PURCHASE OF A TICKET FOR TRAVEL WOULD NOT BE SUBJEC TED TO TAX DEDUCTION AT SOURCE AS THE PRIVITY OF THE CONTRACT IS BETWEEN THE INDIVIDUAL PASSENGER AND THE AIRLINE/TRAVEL AGENT, NOTWITHSTANDING THE FACT THAT THE PAYMENT IS MADE B Y AN ENTITY - 20 - MENTIONED IN SECTION 194C(1). THE PROVISION OF SECT ION 194C SHALL, HOWEVER, APPLY WHEN A PLANE OR A BUS OR ANY OTHER MODE OF TRANSPORT IS CHARTERED BY ONE OF THE ENTITIES ME NTIONED IN SECTION 194C OF THE ACT. AS REGARDS PAYMENTS MADE T O CLEARING AND FORWARDING AGENT FOR CARRIAGE OF GOODS, THE SAM E SHALL BE SUBJECTED TO TAX DEDUCTION AT SOURCE UNDER SECTION 194C OF THE ACT. QUESTION 7 : WHETHER A TRAVEL AGENT/CLEARING AND FO RWARDING AGENT WOULD BE REQUIRED TO DEDUCT TAX AT SOURCE FRO M THE SUM PAYABLE BY THE AGENT TO AN AIRLINE OR OTHER CARRIER OF GOODS OR PASSENGERS ? ANSWER : THE TRAVEL AGENT, ISSUING TICKETS ON BEHAL F OF THE AIRLINES FOR TRAVEL OF INDIVIDUAL PASSENGERS, WOULD NOT BE REQUIRED TO DEDUCT TAX AT SOURCE AS HE ACTS ON BEHA LF OF THE AIRLINES. THE POSITION OF CLEARING AND FORWARDING A GENTS IS DIFFERENT. THEY ACT AS INDEPENDENT CONTRACTORS. ANY PAYMENT MADE TO THEM WOULD, HENCE, BE LIABLE FOR DEDUCTION OF TAX AT SOURCE. THEY WOULD ALSO BE LIABLE TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENTS TO A CARRIER OF GOODS QUESTION 20 : WHETHER PAYMENTS MADE TO A HOTEL FOR ROOMS HIRED DURING THE YEAR WOULD BE OF THE NATURE OF REN T ? ANSWER : PAYMENTS MADE BY PERSONS, OTHER INDIVIDUAL S AND HUFS FOR HOTEL ACCOMMODATION TAKEN ON REGULAR BASIS WILL BE IN THE NATURE OF RENT SUBJECT TO TDS UNDER SECTION 194-I. HOWEVER, OFTEN, THERE ARE INSTANCES, WHERE CORPORAT E EMPLOYERS, TOUR OPERATORS AND TRAVEL AGENTS ENTER INTO AGREEMENTS WITH HOTELS WITH A VIEW TO MERELY F IX THE ROOM TARIFFS OF HOTEL ROOMS FOR THEIR EXECUTIVES/GUESTS/ CUSTOMERS. SUCH AGREEMENTS, USUALLY ENTERED INTO FOR LOWER TAR IFF RATES, ARE IN THE NATURE OF RATE-CONTRACT AGREEMENTS. A RA TE-CONTRACT, THEREFORE, MAY BE SAID TO BE A CONTRACT FOR PROVIDI NG SPECIFIED TYPES OF HOTEL ROOMS AT PRE-DETERMINED RATES DURING AN AGREED PERIOD. WHERE AN AGREEMENT IS MERELY IN THE NATURE OF A RATE CONTRACT, IT CANNOT BE SAID TO BE ACCOMMODATION TA KEN ON REGULAR BASIS, AS THERE IS NO OBLIGATION ON THE PA RT OF THE HOTEL TO PROVIDE A ROOM OR SPECIFIED SET OF ROOMS. THE OC CUPANCY IN SUCH CASES WOULD BE OCCASIONAL OR CASUAL. IN OTHER WORDS, A RATE-CONTRACT IS DIFFERENT FOR THIS REASON FROM OTH ER AGREEMENTS, WHERE ROOMS ARE TAKEN ON REGULAR BASIS. CONSEQUENTLY, THE PROVISIONS OF SECTION 194-I WHILE APPLYING TO HOTEL ACCOMMODATION TAKEN ON REGULAR BASIS WOULD NO T APPLY TO RATE CONTRACT AGREEMENTS. - 21 - 8.4 WE ALSO EXTEND OUR RELIANCE ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIA ASSOCIATION OF TOUR OPERATORS VS. CBDT WHEREIN IT WAS HELD AS UNDER: THE PETITIONERS CARRY ON THE BUSINESS OF CONDUCTIN G AND ORGANISING TOURS, INTERNATIONAL AND A FEW DOMESTIC TOURS, THEY PROVIDE HOTEL ACCOMMODATIONS, TRANSPORT FACILITIES, GUIDES FOR LO CAL AND OTHER SIGHT- SEEING AND RELATED SERVICES, WHEN IT IS STATED THAT THEY PROVIDE HOTEL ACCOMMODATIONS, IT SHOULD BE UNDERSTOOD THAT THEY D ID NOT RENDER THE HOTEL SERVICES AS SUCH BUT ARRANGE FOR THE ACCOMMOD ATIONS IN HOTELS FOR THE TOURISTS. IT IS CLEAR THAT NO TANGIBLE PROP ERTY IS PRODUCED BY THE ACTIVITY OF THE PETITIONERS. THEY ARE ACTUALLY REND ERING SERVICES OF CONDUCTING TOURS OR ACT AS AGENTS IN PROVIDING ACCO MMODATIONS. THEIR CASES CANNOT IN ANY WAY BE DIFFERENT FROM THE CASES OF COMMISSION AGENTS AND BROKERS. THE IMPUGNED CIRCULA R TO THE EXTENT IT PURPORTS TO EXTEND THE PROVISIONS OF S. 194C TO THE ACTIVITIES OF THE PETITIONERS IS ULTRA VIRES AND UNENFORCEABLE.S.R.F . FINANCE LTD, VS. CBDT (1994) 76 TAXMAN 432 (DEL) FOLLOWED. 8.5 BESIDES THE ABOVE, WE ALSO NOTE THAT THERE WERE CERTAIN PAYMENTS BY THE ASSESSEE ON WHICH THERE IS NO LIABILITY OF T DS U/S 194C OF THE ACT. THESE PAYMENTS INCLUDE VISA EXPENSES, AIRLINE TICKETS INSURANCE, PAYMENTS TO RAILWAYS, PAYMENT TO THE AGENTS BASED O UTSIDE INDIA AND RENDERING SERVICE OUTSIDE INDIA. 8.6 AS WE HAVE ALREADY HELD THAT THE PAYMENT BY THE TRAVEL AGENTS ON BEHALF OF THE CUSTOMERS IS NOT SUBJECT TO TDS, THER EFORE WE ARE NOT INCLINED TO ADJUDICATE THE DISPUTES IN DETAIL ON ME RIT. IN VIEW OF ABOVE, WE FIND NO REASON TO TAKE A VIEW CONTRARY TO THE OR DER OF LD CIT(A). HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. - 22 - 9. NOW WE TAKE UP ASSESSEES CROSS OBJECTION NO.62/ RJT/2015 IN ITA NO.530/RJT/2015 PERTAINING TO THE ASST. YEAR 20 14-15. FOLLOWING GROUNDS RAISED IN CO. 1. THE ITO, (TDS)-1, RAJKOT, VIDE GROUND NO.4 OF T HE GROUNDS OF APPEAL ERRED IN STATING THAT THE ASSESSEE RESPOND ENT DID NOT EXPLAIN THE NATURE OF EXPENDITURE BEFORE THE ITO(TD S). 2. THE ITO, (TDS)-1, RAJKOT HAS FAILED TO APPRECIAT E THAT THE DETAILS OF PANS OF PAYEES WERE SUBMITTED TO THE LD CIT(A) AS CALLED BY FOR BY HIM AND HENCE IT DID NOT CONSTITUT E ADDITIONAL EVIDENCE U/R 46A, IN VIEW OF RULE (4) THEREOF. 10. AT THE OUTSET, WE NOTE THAT THE GROUNDS RAISED IN THE CROSS OBJECTION ARE SUPPORTING THE ORDER OF THE LD. CIT(A ). AS SUCH THERE WAS NO GRIEVANCE RAISED BY THE ASSESSEE IN ITS CROS S OBJECTION. THEREFORE, WE ARE INCLINED TO DISMISS THE SAME AS I NFRUCTUOUS. HENCE, THE CROSS OBJECTION FIELD BY THE ASSESSEE IS DISMIS SED AS INFRUCTUOUS. 11. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED AND THE CO OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS . THIS ORDER PRONOUNCED IN OPEN COURT ON 01/11/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LN L; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 01/11/2018 PRITI YADAV, SR.PS - 23 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' # $' / CONCERNED CIT 4. # $' () / THE CIT(A)-1, RAJKOT. 5. '() * +'+, , , ./ ! / DR, ITAT, AHMEDABAD. 6. * 01 2 3 / GUARD FILE. / BY ORDER, '' +' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !', $% / ITAT, AHMEDABAD 1. DATE OF DICTATION 10/10/2018 (DICTATION-PAD 10 PA GES ATTACHED AT THE END OF THIS APPEAL- FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26/10/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 30/10/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER