ITO (TDS) 3(5), MUMBAI V. YASH CONTAINER TERMINAL P. LTD, MUMBAI

ITA 6341/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48398 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 13-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK PER R K
• Section: 133A; 194C; 201(1)

Judgement Text

1 ITA NO.6341/MUM/2009 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI G GG G BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI D MAN MOHAN, VP & SHRI D MAN MOHAN, VP & SHRI D MAN MOHAN, VP & SHRI D MAN MOHAN, VP & SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM ITA NO. ITA NO. ITA NO. ITA NO. 6341/MUM/2009 6341/MUM/2009 6341/MUM/2009 6341/MUM/2009 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 200 200 200 2007 77 7- -- -08 0808 08) )) ) THE INCOME TAX OFFICER (TDS)3(5) MUMBAI VS YASH CONTAINER TERMINAL P LTD CALCUTTWALA BLDG 2 ND FLOOR 137/41 SAMUEL STREET MUMBAI 9 ( (( ( APPELLANT APPELLANT APPELLANT APPELLANT ) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAACY0946J AAACY0946J AAACY0946J AAACY0946J A SSESSEE BY SHRI ASHOK SHARMA REVENUE BY SHRI A K NAYAK PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 24.9.2009 OF THE CIT(A)-14, MUMBAI RELATING TO ASSE SSMENT YEAR 2007-08. 2 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF CARGO CONTAINER A ND IT IS MAINLY DONE FOR M/S NHAVA SHEVA INTERNATIONAL CONTAINER TERMINAL PVT LT D (NSICT). A SURVEY ACTION U/S 133A OF THE I T ACT WAS CARRIED OUT AT THE OFFI CE PREMISES OF THE ASSESSEE ON 31.1.2007. DURING THE COURSE OF SURVEY ACTION, STAT EMENT OF THE DIRECTOR SHRI LAXMICHAND DHARSI MOTA WAS RECORDED ON OATH. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTED THAT THE COMPANY HAS PAID CERTAIN AMOUNTS TO M/S LA XMICHAND DHARSI DURING THE FINANCIAL YEAR 2006-07 RELATING TO ASSESSMENT YEAR 2007-08 AND TAX HAS BEEN 2 ITA NO.6341/MUM/2009 DEDUCTED THEREON AT SOURCE @ 1.12% BEING THE PAYMEN T MADE AS SUB- CONTRACTOR. THE ASSESSING OFFICER TREATED THIS PAY MENT AS HIRE CHARGES AND ACCORDINGLY, HELD THAT THE ASSESSEE WAS LIABLE TO D EDUCT TAX AT SOURCE AS PER PROVISIONS OF SEC. 194-I OF THE I T ACT MAINLY ON T HE GROUND THAT THERE IS NO WRITTEN AGREEMENT FOR SUB CONTRACT BETWEEN THE ASSE SSEE AND M/S LAXMICHAND DARSHI. AFTER VERIFICATION OF FEW BILLS, THE ASSESS ING OFFICER CAME TO THE CONCLUSION THAT THE AMOUNT PAID TO M/S LAXMICHAND D ARSHI IS FOR THE USE OF THEIR CONTAINERS AND HELD THAT THE ASSESSEE IS LIABLE TO DEDUCT TDS AS PROVIDED UNDER THE PROVISIONS OF SEC. 194-I OF THE I T ACT, 1961. THE DIFFERENCE OF TDS OF RS. 26,78,249/- WAS TREATED AS SHORT DEDUCTION OF TAX U/S 201(1) OF THE I T ACT FOR NON-PAYMENT OF TDS IN TIME AS PRESCRIBED UNDER THE ACT. 3 BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE PAYM ENTS ARE MADE BY THE ASSESSEE FOR TRANSPORTATION OF CONTAINERS FROM ONE PLACE TO ANOTHER AS PER THE BILLS SUBMITTED BY THE SUB-CONTRACTOR FOR THE TRANS PORT OF CONTAINERS CARRIED OUT BY THEM. THERE IS NO WRITTEN AGREEMENT AND THAT THE RE IS ORAL UNDERSTANDING AS STATED IN REPLY TO QUESTION NO.7 PUT TO THE CONTRA CTOR DURING THE COURSE OF SURVEY. MERELY BECAUSE THERE IS NO WRITTEN AGREEME NT IT CANNOT BE TREATED AS HIRE CHARGES AS THE ASSESSEE HAD CORRECTLY DEDUCTED TDS @ 1.12% AND THEREFORE THE ACTION OF THE ASSESSING OFFICER IN H OLDING THE SAME AS HIRE CHARGES IS WRONG. IT WAS SUBMITTED THAT M/S LAXMICHAND DH ARSHI, FROM WHOM TAXES HAVE BEEN DEDUCTED AS SUB-CONTRACTOR, HAVE ALREADY CONSIDERED THE ABOVE AMOUNTS WHILE PAYING TAXES. PROVISIONS OF SEC. 194- I, 194C AND 194J WERE BROUGHT TO THE NOTICE OF THE CIT(A). VARIOUS QUEST IONS PUT TO THE CONTRACTOR DURING THE COURSE OF SURVEY WERE ALSO BROUGHT TO TH E NOTICE OF THE CIT(A) AND THE BILLS SUBMITTED BY M/S LAXMICHAND DHARSHI WERE PROD UCED BEFORE THE CIT(A) FOR 3 ITA NO.6341/MUM/2009 PERUSAL. IT WAS SUBMITTED THAT NO ADVERSE INFERENC E CAN BE DRAWN ON THE BASIS OF THE REAL NATURE OF WORK CARRIED BY THE PARTY. I T WAS SUBMITTED THAT THE PAYMENTS HAVE BEEN MADE FOR TRANSPORTATION OF CARGO CONTAINERS AND ACCORDINGLY, IT WAS SUBMITTED THAT TAX @ 1.12% HAS BEEN DEDUCTED AT SOURCE OUT OF PAYMENT MADE TO SUB CONTRACTOR. THE ASSESSING OF FICER IS NOT JUSTIFIED IN TREATING SUCH PAYMENT AS RENT. 4 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, THE CIT(A), RELYING ON A COUPLE OF DECISIONS, HELD THAT PROVISIONS OF LAW CONTAINED IN SEC. 194C ARE APPLICABLE TO PAYMENTS DEBITED UNDER THE HEAD TRANS PORT CHARGES ON ACCOUNT OF TRANSPORTATION OF CONTAINERS DONE BY THE PARTY TO W HOM SUCH PAYMENTS HAVE BEEN MADE BY THE ASSESSEE. FROM THE FACTS ON RECOR D, IT IS CLEAR THAT THE ASSESSEE ENTERED INTO A CONTRACT OR UNDERSTANDING W ITH M/S LAXMICHAND DHARSHI FOR CARRYING OUT WORK OF TRANSPORTATION OF CONTAINE RS WITHIN THE MEANING OF SEC. 194C. SUCH ACTIVITY HAS TO BE COVERED WITHIN THE EX PRESSION WORK INCLUSIVELY DEFINED BY EXPLANATION III TO SEC. 194C OF THE I T ACT. ON THE FACTS OF THE CASE, THE PAYMENT IS HELD TO BE ON ACCOUNT OF SUB CONTRACT WO RK. HE HELD THAT EXISTENCE OF WRITTEN CONTRACT IS NOT A BASIC REQUIREMENT AS PER LAW. THE CONTRACT BETWEEN THE NSICT AND THE ASSESSEE ALSO SHOWS THAT THE NATURE O F TRANSACTION IS THAT OF TRANSPORTATION OF CONTAINER THROUGH TRUCKS, WHICH T HE ASSESSEE HAS SUB- CONTRACTED TO M/S LAXMICHAND DHARSHI AND THE OTHER FACTORS LIKE PREPARATION AND SUBMISSION OF BILLS ON THE BASIS OF TRANSPORTATION OF CONTAINER THROUGH TRUCKS AND THE STATEMENT OF THE DIRECTORS RECORDED DURING THE COURSE OF SURVEY DEPOSING THE FACT THAT M/S LAXMICHAND DHARSHI HAS WORKED AS SUB CONTRACTOR FOR TRANSPORTATION OF CONTAINER FULLY STRENGTHENS THE C ASE OF THE ASSESSEE THAT THE TAX HAS BEEN RIGHTLY DEDUCTED U/S 194C OF THE I T ACT. 4 ITA NO.6341/MUM/2009 4.1 THE CIT(A) HAS ALSO FAVOURABLY CONSIDERED THE ALTERNATE GROUND RAISED BY THE ASSESSEE, ACCORDING TO WHICH, IF TAX DUE HAS BE EN PAID BY THE DEDUCTEE ASSESSEE, THEN THE AMOUNT CANNOT BE RECOVERED FROM THE DEDUCTOR IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF HINDUSTAN COCO COLA BEVERAGES P LTD VS CIT REPORTED IN 293 ITR 226(SC) AND CBDT CIRCULAR NO.275/201/95-IT(B) DATED 29.1.1995. 5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL HERE BEFORE US WITH THE FOLLOWING GROUNDS: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD CIT(A) ERRED IN NOT APPRECIATING THE FACTS THAT THE RE WAS NEITHER ANY WRITTEN AGREEMENT NOR ANY WRITTEN ARRANGEMENT BETWE EN THE ASSESSEE COMPANY AND M/S LAXMICHAND DHARSHI ON THE BASIS OF WHICH THE HIRING CHARGES PAID CAN BE TREATED AS SUB -CONTRACT. II) ON THE FACTS AND IN THE CIRCUMSTANCES F THE CASE AN D IN THE LD CIT(A) ERRED IN NOT APPRECIATING THE FACTS THAT THE RELEVA NT BILLS ISSUED BY M/S LAXMICHAND DHARSHI MENTIONED THAT THE PAYMENT W ERE MADE FOR THE HIRE CHARGES FOR USE OF THEIR CONTAINERS AN D THUS, FALL UNDER THE PURVIEW OF SEC. 194-I OF THE ACT. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD CIT(A) ERRED IN NOT ACCEPTING THE FACT THAT W.E.F 1 3.7.2006 SECTION 194-I HAS BEEN AMENDED TO EXPAND THE DEFINITION OF RENT TO INCLUDE PAYMENT FOR HIRING OF MACHINERY, PLANT OR EQUIPMENT AND ASSESSES PAYMENT WERE IN THE NATURE OF RENT FOR THE MEANING OF SEC 194-I OF I T ACT, 1961. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD CIT(A) WAS NOT CORRECT IN DELETING THE DEMAND RAISE D U/S 201(1) AND 201(1A). 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT(A) AND THE PAPER BOOK 5 ITA NO.6341/MUM/2009 FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT T HAT THE ASSESSEE HAS DEDUCTED TAX @ 1.12% FROM THE PAYMENTS MADE TO M/S LAXMICHAN D DHARSHI DURING THE FINANCIAL YEAR 2006-07 U/S 194C OF THE I T ACT BEIN G THE PAYMENT MADE TO SUB CONTRACTOR. ACCORDING TO THE AO, SUCH PAYMENTS MADE TO M/S LAXMICHAND DHARSHI HAS TO BE TREATED AS HIRE CHARGES PAID FOR TRANSPORTATION OF CONTAINERS/TRUCKS AS PER BILLS RAISED SINCE THERE I S NO WRITTEN CONTRACT/ SUB CONTRACT AGREEMENT BETWEEN THE PARTIES CONCERNED. THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE AS PER PROVISION S OF SEC. 194-I OF THE I T ACT @ 22.44% OF THE HIRE CHARGES PAID. WE FIND, THE CI T(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON TWO COUNTS. FIRSTLY, ACCO RDING TO THE CIT(A), THE PAYMENTS MADE BY THE ASSESSEE TO M/S LAXMICHAND DHA RSHI FOR CARRYING OUT THE WORK OF TRANSPORTATION OF CONTAINERS FALL WITH IN THE MEANING OF SEC. 194C OF THE I T ACT. SECONDLY, SINCE THE DEDUCTEE ASSESSEE HAS PAID THE TAX DUE; THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES P LTD (SUPRA), PAYMEN TS CANNOT BE RECOVERED FROM THE DEDUCTOR. 6.1 ALTHOUGH THE REVENUE HAS TAKEN A GROUND CHALLEN GING THE ORDER OF THE CIT(A) IN HOLDING THAT THE PAYMENT MADE BY THE ASSE SSEE TO M/S LAXMICHAND DHARSHI DOES NOT COME UNDER THE PROVISIONS OF SEC. 194-I, WE FIND, THE REVENUE HAS NOT TAKEN ANY GROUND CHALLENGING THE ORDER OF T HE CIT(A) IN ACCEPTING THE ALTERNATE GROUND RAISED BY THE ASSESSEE; ACCORDING TO WHICH, IF THE TAX DUE HAS BEEN PAID BY THE DEDUCTEE THEN THE AMOUNT CANNOT B E RECOVERED FROM THE DEDUCTOR. SINCE THE LD CIT(A) HAS GIVEN A FINDING THAT THE PAYEE HAS ALREADY CONSIDERED THE AMOUNT WHILE PAYING THE TAX DUE, TH EREFORE, THE SAME CANNOT BE RECOVERED FROM THE ASSESSEE. THE FINDINGS OF TH E LD CIT(A) HAS NEITHER BEEN 6 ITA NO.6341/MUM/2009 PROVED TO BE FALSE NOR INCORRECT. SINCE THE REVENU E HAS NOT CHALLENGED THE FAVOURABLE DECISION OF THE CIT(A) ON THE ALTERNATE GROUND RAISED BY THE ASSESSEE BEFORE HIM; THEREFORE, THE ASSESSEE CANNOT BE HELD AS AN ASSESSEE IN DEFAULT FOR SHORT DEDUCTION OF TAX U/S 201(1) IN RESPECT OF THE AMOUNT OF RS. 26,78,249/-. SINCE THE ORDER OF THE LD CIT(A) HAS TO BE SUSTAINE D ON THE BASIS OF THE ALTERNATE GROUND RAISED BY THE ASSESSEE BEFORE HIM WHICH HAS NOT BEEN CHALLENGED BY THE REVENUE; THEREFORE, THE GROUNDS RAISED BY THE REVENUE BECOME ACADEMIC IN NATURE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVE NUE ARE DISMISSED. 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING I.E 6.4.2011 SD/- SD/- ( (( ( D MANMOHAN D MANMOHAN D MANMOHAN D MANMOHAN ) )) ) VICE PRESIDENT ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 6 TH , APRIL 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI