Sri Chagarlamudi Sambasiva Rao, Warangal V. JCIT, Karimnagar

ITA 575/HYD/2010

• Counselvise Citation: 57522514 RSA 2010
• Duration Of Justice: 4 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 21-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATTA
• Assessee Lawyers: C P RAMASWAMY
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 575/HYD/2010 ASSESSMENT YEAR : 2006-07 SRI CHAGARLAMUDI SAMBASIVA RAO, KARIMNAGAR. PAN AEAPC 3152 M) JOINT COMMISSIONER OF INCOME- TAX, KARIMNAGAR. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI C.P. RAMASWAMY REVENUE BY SHRI KIRAN KATTA DATE OF HEARING 18-06-2014 DATE OF PRONOUNCEMENT 30-06-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 09/02/2010 OF CIT(A)-III, HYDERABAD FOR THE ASSESSM ENT YEAR 2006- 07. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS: 1. THE APPELLANT OBJECTS TO THE ADDITION MADE BY TH E AO OF RS. 17,09,133/- BY INVOKING THE PROVISION SEC. 40(A((IA ) AND SUSTAINED BY THE LEARNED CIT(A), HYDERABAD AS BAD I N LAW AND ON FACTS. 2. THE APPELLANT OBJECTS FOR THE ADDITION SUSTAINED TO THE EXTENT OF 50% ON ACCOUNT OF DISALLOWANCE OF HIRE CHARGES ( RS. 5,00,000/-), SALARIES TO DRIVERS & HELPLERS (RS. 2, 00,000/-) AND LOADING LABOUR PAYMENTS (RS. 50,000/- AS BAD IN LAW AND ON FACTS. 2. BRIEFLY THE FACTS RELATING TO THE ISSUE RAISED I N FIRST EFFECTIVE GROUND ARE THAT DURING SCRUTINY ASSESSMENT PROCEEDI NG, WHILE EXAMINING P&L A/C, THE AO NOTICED THAT DURING THE Y EAR THE ASSESSEE 2 ITA NO. 575/H/10 SRI CHAGARLAMUDI SAMBASIVA RAO HAS DEBITED TOTAL AMOUNT OF RS. 2,08,54,720/- AS HI RE CHARGES PAID TO THE FOLLOWING THREE TIPPER OWNERS: 1. BHUPALPALLY COAL TRANSPORTATION RS. 1,91,66,4 35/- 2. GODAVARIKHANI COAL TRANSPORTATION RS. 13,41,1 98/- 3. MANDAMARRI COAL TRANSPORTATION RS. 3,47,087 /- TOTAL RS. 2,08,54,720/- ============ 2.1 WHEN THE AO CALLED UPON THE ASSESSEE TO PRODUCE PROOF OF TDS ON PAYMENT OF HIRE CHARGES, ASSESSEE IN HIS REPLY D ATED 27/11/2008 FURNISHED COPIES OF DECLARATION IN FORM NO. 15-I OB TAINED FROM LORRY OWNERS AND FORM NOL. 15-J CONTAINING DETAILS OF LOR RY OWNERS, WHICH WERE FILED BEFORE THE CCIT, HYDERABAD. IT WAS ALSO STATED BY THE ASSESSEE THAT NO TDS RETURN WAS FILED BY HIM DURING THE YEAR. THE AO ON VERIFYING THE DETAILS PRODUCED BEFORE HIM NOTICE D THAT AS PER FORM NO. 15J FILED BEFORE THE CCIT, THE ASSESSEE HAS REC EIVED DECLARATIONS FROM 15 PARTIES TOWARDS HIRE CHARGES PAID TO THEM, WHICH AMOUNTED TO RS. 1,44,19,065/- WHEREAS THE TOTAL HIRE CHARGES DE BITED TO P&L A/C FOR THE YEAR IS RS. 2,08,54,720/-. HE, THEREFORE, A SKED THE ASSESSEE TO EXPLAIN WHETHER TDS WAS DEDUCTED ON THE BALANCE AMOUNT OF RS. 64,35,655/-. IN RESPONSE TO THE QUERY RAISED BY THE AO, ASSESSEE FURNISHED NECESSARY DETAILS. ON VERIFYING THE DETAI LS, THE AO NOTED THAT PAYMENTS OF RS. 47,25,035/- WERE BELOW RS. 50, 000/-, HENCE, DO NOT ATTRACT PROVISIONS CONTAINED U/S 194C OF THE AC T. 2.2 HOWEVER, PAYMENT OF RS. 17,09,133/- PAID TO 10 PARTIES EXCEEDED THRESHOLD LIMIT OF RS. 50,000/-. THEREFORE , AO ALLEGING THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX ON SUCH PAYME NT AS PER THE PROVISIONS OF SECTION 194C OF THE ACT, ADDED THE SA ME TO THE TOTAL INCOME OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT . 3. BEING AGGRIEVED OF SUCH ADDITION, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) ALSO SUSTAIN ED THE ADDITION. 3 ITA NO. 575/H/10 SRI CHAGARLAMUDI SAMBASIVA RAO 4. LEARNED AR SUBMITTED BEFORE US THAT DURING THE R ELEVANT ASSESSMENT YEAR AS PER THE PROVISIONS CONTAINED U/S 194C OF THE ACT, ASSESSEE BEING AN INDIVIDUAL WAS NOT REQUIRED TO DE DUCT TAX AT SOURCE. IT WAS SUBMITTED THAT BY VIRTUE OF AMENDME NT TO SECTION 194C OF THE ACT BY FINANCE ACT, 2007 WITH EFFECT FROM 01 /06/2007 PAYMENTS MADE BY INDIVIDUALS AND HUF WERE ALSO BROUGHT WITHI N THE AMBIT OF SECTION 194C. HOWEVER, SINCE THE SAID AMENDMENT IS APPLICABLE TO THE AY 2008-09 AND NOT TO THE ASSESSMENT YEAR UNDER DISPUTE, NO DISALLOWANCE CAN BE MADE OF THE PAYMENT MADE TOWARD S HIRE CHARGES FOR NOT DEDUCTING TAX AT SOURCE U/S 194C OF THE ACT . IN THIS CONTEXT, LEARNED AR RELIED UPON A DECISION OF ITAT, HYDERABA D BENCH IN CASE OF ITO VS. SMT. M. BHAGYALAXMI IN ITA NO. 857/HYD/2 011 DATED 05/10/2012. 5. THE LEARNED DR RAISING A TECHNICAL OBJECTION SUB MITTED THAT SINCE THE ARGUMENT ADVANCED BY THE ASSESSEES COUNS EL WITH REGARD TO INAPPLICABILITY OF SECTION 194C IS BEING RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL, THE MATTER MAY BE REMITTED BAC K TO THE FILE OF THE CIT(A) FOR FRESH CONSIDERATION. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI ALS ON RECORD AS WELL AS THE ORDERS OF THE REVENUE AUTHORITIES. T HE SPECIFIC PLEA OF THE LEARNED AR OF THE ASSESSEE IS THAT SINCE PAYMEN TS MADE BY INDIVIDUALS AND HUFS WERE BROUGHT INTO THE AMBIT OF SECTION 194C BY FINANCE ACT, 2007 WITH EFFECT FROM 01/06/2007 WHICH IS APPLICABLE FROM AY 2008-09 NO DISALLOWANCE U/S 40(A)(IA) CAN B E MADE IN THE IMPUGNED ASSESSMENT YEAR FOR NOT COMPLYING THE PROV ISIONS OF SECTION 194C OF THE ACT. ON A PERUSAL OF THE DECISI ON OF THE COORDINATE BENCH IN CASE OF ITO VS. SMT. M. BHAGYAL AXMI (SUPRA) IT IS SEEN THAT WHILE CONSIDERING IDENTICAL ISSUE, THE BENCH HELD AS UNDER: 4 ITA NO. 575/H/10 SRI CHAGARLAMUDI SAMBASIVA RAO 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE ISSUE BEFORE US IS AS TO WHETHER THE ASSES SEE BEING AN INDIVIDUAL WAS AT ALL REQUIRED TO DEDUCT TAX U/S 19 4 C OF THE ACT. THUS, FOR ARRIVING AT PROPER CONCLUSION THE PROVISION AS CONT AINED UNDER SECTION 194C PREVAILING DURING THE RELEVANT ASSESSMENT YEAR UNDER DISPUTE HAS TO BE LOOKED INTO. AFTER GOING THROUGH THE PROVISIO N AS IT STOOD AT THE RELEVANT PERIOD, WE FIND THAT PAYMENTS MADE BY INDI VIDUALS AND HUFS TO A CONTRACTOR WERE NOT WITHIN THE PURVIEW OF SECTION 194C(1) OF THE ACT. FINANCE ACT, 2007 AMENDED THE PROVISIONS OF SECTION 194C BY SUBSTITUTING THE EARLIER SUB-SECTION (1) WITH EFFEC T FROM 1-6-2007. UNDER THE NEW PROVISION BROUGHT TO THE STATUTE UNDER SUB- SECTION (1) OF SECTION 194C, PAYMENT MADE BY INDIVIDUALS AND HUF WERE ALSO BROUGHT WITHIN THE AMBIT OF THE PROVISION U/S 194 C (1) (K) OF THE ACT. THE AFORESAID PROVISIONS WERE BROUGHT TO THE STATUTE W.E.F. 1-6-2 007. THEREFORE, THE AMENDED PROVISION OF SECTION 194C(1) REQUIRING THE INDIVIDUALS AND HUFS TO DEDUCT TAX AT SOURCE ON PAYMENT MADE TO CON TRACTORS WILL ONLY BE APPLICABLE W.E.F. 1-6-2007 THAT MEANS FROM ASSES SMENT YEAR 2008-09 AND CANNOT BE APPLIED FOR THE ASSESSMENT YEAR 2006- 07. IN THE AFORESAID VIEW OF THE MATTER, THE CIT(A) IS CORRECT IN HOLDIN G THAT THE ASSESSEE BEING NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 194C, NO DISALLOWANCE U/S 40(A)(IA) COULD HAVE BEEN MADE. ACCORDINGLY, WE UPH OLD THE DECISION OF THE CIT (A) AND DISMISS THE GROUND RAISED BY THE DE PARTMENT. 6.1 ON GOING THROUGH THE AFORESAID DECISION OF THE COORDINATE BENCH, WE ARE OF THE VIEW THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH AS ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL, HENCE, OUTSIDE PURVI EW OF SECTION 194C OF THE ACT AS THE ASSESSMENT YEAR IN THE PRESENT CA SE IS ALSO 2006- 07. IN VIEW OF THE CLEAR PROVISION OF LAW AND DECIS ION OF THE COORDINATE BENCH, NO USEFUL PURPOSE WOULD BE SERVED IN REMITTI NG THE MATTER BACK TO THE CIT(A). ACCORDINGLY, ACCEPTING THE CONT ENTION OF THE LEARNED AR AND FOLLOWING THE DECISION OF THE COORDI NATE BENCH IN CASE OF ITO VS. SMT. M. BHAGYALAXMI (SUPRA) WE DELETE TH E ADDITION MADE OF RS 17,09,133/-. THIS GROUND IS ALLOWED. 7. THE NEXT ISSUE IS WITH REGARD TO ACTION OF THE C IT(A) IN SUSTAINING 50% OUT OF THE TOTAL DISALLOWANCE MADE B Y THE AO TOWARDS HIRE CHARGES, SALARIES TO DRIVERS AND HELPERS AND L OADING LABOUR PAYMENTS. 5 ITA NO. 575/H/10 SRI CHAGARLAMUDI SAMBASIVA RAO 8. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI ALS ON RECORD. DURING THE ASSESSMENT PROCEEDING, THE AO ALLEGING I NADEQUACY OF EVIDENCE DISALLOWED AN AMOUNT OF RS. 5 LAKH OUT OF HIRE CHARGES AND AN AMOUNT OF RS. 2 LAKHS FROM SALARIES TO DRIVERS A ND HELPERS AND AN AMOUNT OF RS. 50,000/- ON ACCOUNT OF LOADING LABOUR PAYMENTS. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE WAS OF THE VIEW THAT THE DISALLOWANCE MADE BY THE AO IS ON TH E HIGHER SIDE, THEREFORE, RESTRICTED THE DISALLOWANCE TO 50%. WE A RE OF THE VIEW THAT THE ORDER OF THE CIT(A) IN RESTRICTING THE DISALLOW ANCE TO 50% OF THE AMOUNT DISALLOWED BY THE AO IS JUST AND REASONABLE AND DO NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, WE UPHOLD THE OR DER OF THE CIT(A) ON THIS ISSUE BY DISMISSING THE GROUND RAISED BY TH E ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30/06/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 30 TH JUNE, 2014 KV COPY TO:- 1) SRI CHAGARLAMUDI SAMBASIVA RAO, C/O G.S. MADHAVA RAO & CO., CAS., H.NO. 11-26-54, SUDHAMA BUILDING, M.G. RO AD, WARANGAL 506 012. 2) JCIT,KARIMNAGAR RANGE, KARIMNAGAR. 3) CIT(A)-III, HYDERABAD. 4) THE CIT-II, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.