ITO 13(3)(3), MUMBAI V. CHETAN M. VIRA, MUMBAI

ITA 6300/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59912 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 23-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: VIJAY KOTHARI
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI V.D. RAO , J.M. ITA NO. : 6300/MUM/2010 ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER WARD-13(3)(3) ROOM NO.429, 4 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD NEW MARINE LINES MUMBAI-400 020. SHRI CHETAN M. VIRA 101-A, 1 ST FLOOR DOSTI ENCLAVE, DSOUNZA NAGAR 90 FT RD., SAKINAKA MUMBAI-400 072. PAN NO: AABPV 3278 L (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI A.C. TEJPAL RESPONDENT BY : SHRI VIJAY KOTHARI DATE OF HEARING : 22.3.2012 DATE OF PRONOUNCEMENT : 27.3.2012 O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 30.6.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING ADDITION OF RS.49,56,563/- UNDER SECTION 40(A)(IA). 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO WAS PROP RIETOR OF M/S. SANJAY CARRIER WAS TAKING VEHICLE ON HIRE BASIS AND GIVING VEHICLE ON HIRE TO VARIOUS CLIENTS AS PER THEIR REQUIREMENTS. T HE AO NOTED THAT ITA NO. 6300/M/10 A.Y.07-08 2 THE ASSESSEE HAD RECEIVED GROSS FREIGHT OF RS.49,56,563/- W AS PASSED ON TO THE PARTIES WHOM FREIGHT WAS PAYABLE AND WAS NO T REFLECTED IN THE P&L ACCOUNT. THE ASSESSEE HAD SHOWN ONLY COMMISSION INCO ME OF RS.5,88,150/-. THE AO ALSO NOTED THAT THE ASSESSEE HAD AL SO PAID TOTAL FREIGHT OF RS.49,56,563/- ON WHICH NO TAX HAD BEEN DE DUCTED. HE, THEREFORE, HELD THAT CLAIM OF DEDUCTION TO THE ABOVE EXTENT WAS NOT ALLOWABLE IN VIEW OF THE PROVISIONS OF SECTION 40(A)(I A). AS PER WHICH ANY PAYMENT TO CONTRACTOR /SUB-CONTRACTOR IS NOT ALLOWABL E IF TAX HAS NOT BEEN DEDUCTED AT SOURCE. 2.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT THE ASSESSEE WAS NOT DOING ANY WORK ON CONTR ACT. THE ASSESSEE WAS ONLY HIRING TRANSPORT VEHICLES FOR SUPPLYING TO VARIOUS CLIENTS WHICH SHOULD BE TREATED AS CONTRACT FOR SALE AND NO T CONTRACT FOR WORK. THE ASSESSEE REFERRED TO CIRCULAR NO.715 OF CB DT IN WHICH IT WAS CLARIFIED THAT BEFORE TAKING ANY DECISION REGARDING APPLICABILITY OF TDS UNDER SECTION 194C, IT HAD TO BE EXAMINED WHETHE R CONTRACT WAS FOR WORK OR FOR SALE. THE ASSESSEE THUS ARGUED THAT THER E BEING ONLY CONTRACT FOR SALE, NO TAX WAS REQUIRED TO BE DEDUCTED AN D, THEREFORE, DISALLOWANCE UNDER SECTION 40(A)(IA) WAS NOT JUSTIFIED. CIT(A) AGREED WITH THE ASSESSEE THAT TAKING VEHICLES ON HIRE AND GIVIN G THEM FOR HIRE WAS AKIN TO CONTRACT FOR SALE AND NOT CONTRACT FOR WORK AND THEREFORE PROVISIONS OF SECTION 194C WERE NOT APPLICABLE. HE, THER EFORE, DELETED ITA NO. 6300/M/10 A.Y.07-08 3 THE ADDITION MADE BY AO AGGRIEVED BY WHICH REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE CIT(A) THAT THE ASSESSEE HAD NOT DONE ANY CO NTRACT FOR WORK AND IT WAS ONLY CONTRACT FOR SALE. IT WAS ALSO SUBM ITTED THAT EVEN IF THE PROVISIONS OF SECTION 194C WERE APPLICABLE T REATING THE WORK AS CONTRACT WORK, THE ASSESSEE BEING AN INDIVIDUAL WA S EXEMPT FROM THE SAID PROVISIONS. IT WAS POINTED OUT THAT PROV ISIONS OF CLAUSE (K) OF SECTION 194C(1) MAKING THE TDS PROVISION APPLI CABLE IN CASE OF INDIVIDUAL AND HUF ETC. ALSO WAS APPLICABLE ONLY FROM 1. 6.2007 AND WAS THUS NOT APPLICABLE FROM ASSESSMENT YEAR 2007-08. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. MUTRUJABHAI HANIFBHAI KHANUSIYA IN (ITA NO.1856/AHD. /09) FOR ASSESSMENT YEAR 2006-07 ORDER DATED 31.10.2011. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TD S ON THE OTHER GROUND THAT IT HAD MADE PAYMENT TO SUB-CONTRACTO RS WHICH WERE COVERED UNDER SECTION 194C(2), AND IN SUCH CASES, TDS PROVI SION WAS NOT APPLICABLE IN CASE OF INDIVIDUAL AND HUF. IN THI S CONNECTION, HE REFERRED TO THE VARIOUS TDS CERTIFICATES PLACED AT PAGE S-14 TO 83 OF THE PAPER BOOK IN WHICH THE PAYEE WAS REFERRED TO AS SUB- CONTRACTOR. IT WAS THUS ARGUED THAT, IN EITHER CASE, NO TAX WAS REQUIRE D TO BE DEDUCTED AND THEREFORE DISALLOWANCE MADE UNDER SECTION 4 0(A)(IA) WAS ITA NO. 6300/M/10 A.Y.07-08 4 NOT JUSTIFIED. THE LD. DR SUPPORTED THE ORDER OF CIT( A) AND PLACED RELIANCE ON THE ORDER OF AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DISALL OWANCE MADE UNDER SECTION 40(A)(IA) AS PER WHICH ANY AMOUNT PAYABLE TO A CONTRACTOR/SUBCONTRACTOR FOR CARRYING OUT ANY WORK CAN NOT BE ALLOWED AS DEDUCTION UNLESS THE TAX DEDUCTIBLE HAS BEEN DEDUCTED AT SOURCE. IN THE PRESENT CASE, THE ASSESSEE IS IN THE BUSINESS OF TAKING VEHICLES ON HIRE AND GIVING ON HIRE TO CERTAIN CLIENTS. THE ISSUE IS WHETHER SUCH ACTIVITY CAN BE CONSIDERED AS CONTRACT FOR WORK AND WHETHE R PROVISIONS OF TDS OF SECTION 194C ARE APPLICABLE. THE LD. AR FOR THE ASSESSEE HAS ARGUED THAT THE ACTIVITY OF THE ASSESSEE AMOUNTED TO CONT RACT FOR SALE AND NOT CONTRACT FOR WORK WITH WHICH WE ARE UNABLE TO AGREE AS TAKING /GIVING VEHICLES ON HIRE CAN NOT BE CONSIDERED AS SALE. IT HAS THEREFORE, TO BE CONSIDERED AS CONTRACT WORK OF PROVIDI NG VEHICLES ON CONTRACT TO CLIENTS AFTER TAKING THE SAME FROM SUB CONTRA CTORS. 4.1 THEREFORE, THE PAYMENT MADE BY THE ASSESSEE FOR TAK ING VEHICLES ON HIRE HAS TO BE CONSIDERED AS PAYMENT MADE TO SUB- CONTRACTORS AS THE ASSESSEE IS A CONTRACTOR SUPPLYING VEHICLES TO ITS CLIENTS. THE PROVISIONS REGARDING PAYMENT TO SUB-CONTRACT OR ARE CONTAINED IN SECTION 194C(2) WHICH IS NOT APPLICABLE IN C ASE OF ITA NO. 6300/M/10 A.Y.07-08 5 INDIVIDUALS AND THEREFORE THE ASSESSEE IS NOT REQUIRED T O DEDUCT ANY TAX AT SOURCE. THE FACT THAT THE PAYMENT HAD BEEN MADE TO SUB- CONTRACTOR IS ALSO CLEAR FROM THE TDS CERTIFICATES PLACED ON RECORD IN WHICH PAYEE HAS BEEN REFERRED TO AS SUB-CONTARCTORS. FUR THER EVEN IF THE PAYMENT WAS CONSIDERED AS PAYMENT TO A CONTRACTOR, THESE ARE COVERED UNDER SECTION 194C(1) AND IN SUCH CASES, THE PROVISI ONS FOR DEDUCTING TAX AT SOURCE IN CASE OF INDIVIDUAL IS APPLICABL E ONLY FROM 1.6.2007 AS PER CLAUSE(K). THEREFORE, THE PROVISION IS NOT APPLICABLE IN ASSESSMENT YEAR 2007-08 WITH WHICH WE ARE CONCERNED. THE SAME VIEW HAS BEEN TAKEN BY AHMEDABAD BENCH OF THE TRIBUNA L IN CASE OF DCIT VS. MUTRUJABHAI HANIFBHAI KHANUSIYA (SUPRA). THE REFORE, IN OUR VIEW, IN EITHER CASE ASSESSEE WAS NOT REQUIRED TO DEDUCT TA X AT SOURCE UNDER THE PROVISIONS OF SECTION 194C AND THEREFORE, PRO VISIONS OF SECTION 40A(I)(A) WERE NOT APPLICABLE. WE, THEREFORE SEE NO INFIRMITY IN THE ORDER OF CIT(A) DIRECTING THE AO TO DELETE TH E ADDITION AND SAME IS UPHELD. 5. APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.3.2012. SD/- SD/- (V.D. RAO) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 27.3.2012. JV. ITA NO. 6300/M/10 A.Y.07-08 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.