Mr. Abdul Samad, Prop. M/s S.S. Road Lines, Gwalior V. A.C.I.T., Circle-1, Gwalior

ITA 548/AGR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89209 (ITAT-AGRA)
• Duration Of Justice: 2 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BELU SINHA
• Assessee Lawyers: P K SEHGAL; UTSAV SEHGAL
• Keywords: Principle of natural justice; Non-deduction of tax
• Section: 143(3); 194C; 37; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.548/AGRA/ 2012 ASSESSMENT YEAR: 2008-09 SHRI ABDUL SAMAD, VS. ASSTT. COMMISSIONER OF INC OME TAX, PROP. M/S. S.S. ROAD LINES, CIRCLE-1, GWALIOR. R-1/1, FIRST FLOOR, SHOP NO.2, TRANSPORT NAGAR, GWALIOR. (PAN ASIPS 0203 R). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.K. S EHGAL, ADVOCATE & SHRI UTSAV SEHGAL RESPONDENT BY : SMT. BELU SINHA, SR. D.R. DATE OF HEARING : 20.07.2015 DATE OF PRONOUNCEMENT : 24.07.2015 ORDER PER INTURI RAMA RAO, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), GWALIOR DATED 3 RD OCTOBER, 2012 FOR THE A.Y. 2007-08. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. A) THAT THE LEARNED CIT (A) - GWALIOR HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ARBITRARY AND UNJUST DISALLO WANCE OF RS.96,58,950 U/S 40(A)(IA) OF THE ACT, MADE BY THE A.O., ON THE GROUND THAT THE APPELLANT FAILED TO DEDUCT TAX AT SOURCE UNDER SECT ION 194C OF THE ACT, ON ITA NO.548/AGRA/2012 A.Y. 2008-09 2 PAYMENTS MADE TO SO CALLED TRANSPORTERS, BY IGNORIN G THE NATURE OF SUCH PAYMENTS. B) THAT ON FACTS AND IN CIRCUMSTANCES OF THE APPELL ANT'S CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT (A), GWALIOR HA S ERRED IS CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING DISALLOWA NCE OF EXPENDITURE OF RS.96,58,950, BY WRONGLY INVOKING THE PROVISIONS LA ID DOWN U/S 40(A)(IA) OF THE ACT. C) THAT AS IN ANY VIEW AND CIRCUMSTANCES OF THE APP ELLANT'S CASE, THE PROVISIONS OF SECTION 194C OF THE ACT ARE NOT APPLI CABLE ON HIM AND ACCORDINGLY HE WAS UNDER NO STATUTORY OBLIGATION TO DEDUCT TAX AT SOURCE FROM PAYMENTS AGGREGATING TO RS.96,58,950, THUS THE DISALLOWANCE SUSTAINED U/S 40(A)(IA) OF THE ACT, DESERVES TO BE DELETED. D) THAT THE DISALLOWANCE OF RS.96,58,950 U/S 40(A) (IA) OF THE ACT BEING MADE BY THE AUTHORITIES BELOW, BY BRUSHING AS IDE THE FACTS OF APPELLANT'S CASE, EVIDENCES/MATERIAL PLACED ON RECO RDS AND BY MISAPPLYING THE PROVISIONS LAID DOWN U/ S 194C OF T HE ACT READ UNDER SECTION 40 (A) (IA), THUS THE SAME IS UNSUSTAINABLE AND BE KINDLY DELETED. 2. A) THAT THE VARIOUS EXPENSES DEBITED TO THE PROF IT AND LOSS ACCOUNT BEING INCURRED SOLELY FOR THE PURPOSES OF THE APPEL LANT'S BUSINESS AND THESE BEING PROPERLY VOUCHED, THUS THE LEARNED CIT( A), GWALIOR HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ARB ITRARY AND UNJUST DISALLOWANCE OF RS.2,09,083 MADE BY THE AO OUT OF S ALARY, TELEPHONE AND MOBILE, TRUCK LOADING AND AUTO EXPENSES, DEP ON CY CLE AND CAR AND MISC. EXPENSES, EVEN WITHOUT POINTING OUT A SINGLE INSTAN CE OF ANY ALLEGED NON GENUINE OR INADMISSIBLE EXPENSE. B) THAT LOOKING TO THE TURNOVER, NATURE OF EXPENSES AND LEGITIMATE BUSINESS NEEDS, THE AFOREMENTIONED EXPENSES BEING I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS CARRIE D ON BY THE APPELLANT, THUS THESE DESERVE TO BE ALLOWED AS BUSINESS EXPEND ITURE. 3. A) THAT THE LEARNED CIT (A), GWALIOR HAS ERRED B OTH IN LAW AND ON FACTS IN SUSTAINING THE DISALLOWANCE OF RS.3,66,285 MADE BY THE AO, WITH REGARD TO CLAIM FOR BREAKAGE DEDUCTION, BY COMPLETE LY BRUSHING ASIDE THE RELEVANT FACTS AND EVIDENCES/MATERIAL PLACE ON RECO RDS AND/OR PRODUCED. SUCH DISALLOWANCE IS ARBITRARY AND UNJUSTIFIED AND THUS BE KINDLY DELETED. ITA NO.548/AGRA/2012 A.Y. 2008-09 3 B) THAT IN THE TYPE OF BUSINESS CARRIED ON BY THE A PPELLANT, IT IS COMMON PRACTICE THAT THE CONTRACTEE MAKES DEDUCTION FOR LO SS SUFFERED ON ACCOUNT OF BREAKAGE AND ACCORDINGLY FOR WORKING OUT THE TRU E AND CORRECT INCOME OF THE APPELLANT FROM BUSINESS, SUCH DEDUCTION IS A LLOWABLE AS BUSINESS LOSS AND/OR EXPENDITURE UNDER SECTION 28 READ WITH SECTION 37 OF THE ACT. 4. THAT THE APPELLATE ORDER DATED 03.10.2012 IS AG AINST THE LAW AND NATURAL JUSTICE. THE APPELLANT SEEKS PERMISSION TO MODIFY AND/OR ADD , DELETE, ANY OTHER GROUND/GROUNDS OF APPEAL AS THE CIRCUMSTANCES OF THE CASE MIGHT REQUIRE OR JUSTIFIED. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE APPEL LANT IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRUCK OPERATOR/TRANSPORTATION. THE RET URN OF INCOME FOR THE A.Y. 2008-09 WAS FILED ON 1 ST OCTOBER, 2008 DECLARING TOTAL INCOME OF RS.6,85,26 0/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY UNDER CASS AND FIN ALLY THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX AC T. 1961 (THE ACT HEREINAFTER) VIDE ORDER DATED 27.12.2010 AT A TOTAL INCOME OF RS .1,09,19,578/- BY MAKING DISALLOWANCE OF RS.96,57,950/- UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NOT DEDUCTING TAX ON PAYMENTS MADE ON TRANSPORTATIO N AND DISALLOWANCES OUT OF EXPENDITURE OF RS.2,09,083/- AND ON ACCOUNT OF BREA KAGE EXPENSES OF RS.3,66,285/-. BEING AGGRIEVED BY THIS, APPELLANT FILED APPEAL BEF ORE THE LD. CIT(A), GWALIOR WHO DISMISSED THE SAME VIDE HIS ORDER DATED 3 RD OCTOBER, 2012. HENCE, THE APPELLANT IS BEFORE US WITH THE PRESENT APPEAL. ITA NO.548/AGRA/2012 A.Y. 2008-09 4 4. THE LD. COUNSEL FOR THE APPELLANT ARGUED THAT TH E A.O. FAILED TO APPRECIATE THE PROVISIONS OF SECTION 194C GOVERNING THE PAYMENTS M ADE TO THE TRANSPORTERS AND HE FURTHER SUBMITTED THAT THERE IS NO PRIVITY OF CONTR ACT BETWEEN THE ASSESSEE AND THE TRANSPORTER AND HIS ANOTHER ARGUMENT WAS THAT THE A SSESSEE WAS ONLY ACTING AS A MIDDLE MAN IN ARRANGING THE TRUCK ON COMMISSION BASIS AND, THEREFORE, HE SUBMITTED THAT THE PROVISIONS OF SECTION 194C OF THE ACT HAVE NO APPLI CATION. FINALLY, THE ARGUMENT OF THE LD. COUNSEL WAS THAT EVEN PRESUMING THAT PROVIS IONS OF SECTION 194C ARE APPLICABLE SINCE THERE WAS NO PAYMENT OUTSTANDING A S ON 31.03.2008, THE RATIO OF THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT (2012) 16 ITR (TRIB) 1 (VI SAKHAPATNAM) IS APPLICABLE. HENCE NO DISALLOWANCE CAN BE MADE. 5. ON THE OTHER HAND, THE LD. SR., DEPARTMENTAL REP RESENTATIVE HAD RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE WHOLE CASE OF THE A.O. IS THAT THE APPELLANT SHOULD HAVE DEDUCTED TAX AT SOURCE ON THE PAYMENTS MADE TO TRUCK OWNERS FROM WHOM HE HIRED TH E VEHICLES FOR THE PURPOSE OF HIS BUSINESS OF CONTRACT OF TRANSPORTATION AND, THE REFORE, FOR NON-DEDUCTION OF TAX AT SOURCE, THE AMOUNTS WERE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. BUT A.O. FAILED TO APPRECIATE THAT THERE IS NO PRIVITY OF CONTRACT BETWEEN ITA NO.548/AGRA/2012 A.Y. 2008-09 5 ASSESSEE AND THE TRUCK OWNERS. HE SIMPLY HIRED THE VEHICLES FROM THE OWNERS AND THE ENTIRE RISK OF CARRYING THE GOODS LIES WITH HIM ONL Y AND THEREFORE PRIVITY OF THE CONTRACT DOES NOT LIE WITH THE ASSESSEE AND THE TRU CK OWNERS. THEREFORE THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE IN RESPECT OF SUC H PAYMENTS AS HELD BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS WHICH ARE AS UNDER:- 1) BHAIL BULK CARRIERS VS. ITO (ITAT MUMBAI B BEN CH) (50 SOT 622) (MUM.) 2) MYTHRI TRANSPORT CORPORATION VS. ACIT (ITAT, VIS AKHAPATNAM BENCH) (124 ITD 40) (VIZAG) 3) NASIB SINGH VS. ACIT (ITAT CUTTACK BENCH) (50 SO T 486 (CUTTACK) 4) PRASHANT H. SHAH VS. ACIT (IAT, AHMEDABAD BENCH C) (52 SOT 69) (AHD) 7. THIS ONLY GOES TO SHOW THAT THE BELIEF OF THE AP PELLANT THAT THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE IS BONAFIDE AND THE ISSUE IS N OT FREE FROM DOUBT. THEREFORE, IN SUCH CIRCUMSTANCES, FOR NON-DEDUCTION OF TDS, NO DI SALLOWANCE CAN BE MADE. 8. THEREFORE, WE HOLD THAT IN THE PRESENT CASE ALSO NO DISALLOWANCE IS CALLED FOR IN THE FACTS OF THE CASE SINCE IT IS A DEBATABLE ISSUE WHETHER THE TAX IS DEDUCTIBLE OR NOT ON THE PAYMENTS MADE TO TRUCK OWNERS. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 24.07.2015). SD/- SD/- (G.C. GUPTA) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMBER DATE: 24 TH JULY, 2015 ITA NO.548/AGRA/2012 A.Y. 2008-09 6 PBN/* COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA