ASST. CIT 13(2), MUMBAI V. JANARDHAN V. SAWANT, MUMBAI

ITA 6506/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7630 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 22-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHASARTHI NAIK
• Assessee Lawyers: NAMRATA DEDHIA
• Keywords: Business income
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI P.M. JAGTAP (ACCOUNTANT MEMBER) AND SHRI VIVEK VARMA (JUDICIAL MEMBER) ITA NO.6506/MUM/2010 ASSESSMENT YEAR: 2007-08 ASST. COMMISSIONER OF INCOME-TAX 13(2), R.NO. 421, 4 TH FLOOR, AAYKAR BHAVAN, MUMBAI 400020. VS. SHRI JANARDHAN V. SAWANT SHOP NO. 19, PLOT NO. 5, GROUND FLOOR, KASHIRAM JAMNADAS BLDG. P.DMELLO ROAD, WADI BUNDER, MUMBAI 400009. PAN NO. AACPS1835M (APPELLANT) (RESPONDENT) APPELLANT BY : MR PARTHASARTHI NAIK RESPONDENT BY : MISS NAMRATA DEDHIA DATE OF HEARING : 22.03.2012 DATE OF PRONOUNCEMENT : 28.03.2012 ORDER PER VIVEK VARMA, JM: THE APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A) 24, MUMBAI, DATED 11.06.2010. THE REVENUE HEREIN HAVE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS OVERLOOKED 1 ST PROVISO TO SUB-SECTION - 194C OF THE I.T. ACT, 1961, WHERE IT IS CLEARLY STATED AN INDIVIDUAL OR HUF WHOS E TOTAL SALES AND GROSS RECEIPTS EXCEED THE MONITORY LIMIT U/S. 44AB WOULD BE LIABL E FOR DEDUCTION OF TAX U/S. 194C OF THE I.T. ACT, 1961. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN REDUCING ADDITION OF RS. 2,00,000/- TO RS. 1,00,000/- ON ACCOUNT OF PART EXPENSES OF HIRE CHARGES PAYMENT, PACKING CHARGES, CONVEYANCE, STAFF WELFARE, SUNDRY EXPENSES AND TEA & OTHER EXPENSES. ITA NO.6506/MUM/2010 ASSESSMENT YEAR: 2007-08 2 3) THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY NEW GROUND, IF NECESSARY. EFFECTIVELY ONLY GROUNDS NO. 1 & 2 WERE TAKEN UP THE DR. GROUND NO. 1 RELATES TO ACCEPTANCE BY THE CIT(A) ON NON APPLICABILITY OF SECTION 40(A)(IA). 2. IN FACTS OF THE CASE AS SEEN FROM THE ASSESSMENT ORDER AND CIT APPEALS ORDER AND AS SUBMITTED BY THE AR OF THE ASSESSEE ARE, THAT THE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF M/S INDIRA FORKLIFT AND HIRING SE RVICES AND SHREE SHERAVALI TRANSPORT. HE IS IN RECEIPT OF HIRE CHARGES FROM VARIOUS PARTIES FOR HIRE OF FORKLIFT, TRUCK, TRAIER ETC., THESE VEHICLES MAY BE OWNED OR TAKEN ON HIRE BY THE ASSESSEE AND WH ERE THE ASSESSEE HIRES THE VEHICLES, FROM THIRD PARTIES, HIRE CHARGES ARE PAID TO THE PARTIES BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS DETAILS OF HIRING CHARGES WERE SUBMITTED, WHEREIN IT WAS SUBMITTED THAT HIRING CHARGES CONSISTS OF PAYMENTS MADE TO THE OWNERS OF VEHICLES FOR HIRING THEIR VEHICLES AND DOES NOT FORM ANY SUB CONTRACT OF ANY TRANSPORTATION SINCE ASSESSEE HIRES VEHICLES FROM DIFFERENT OWNERS & ENGAGES ITS OWN LABOUR AND EXECUTES THE CONTACT ON ITS OWN. THE AO HAS NOT ACCEPTED THE SUBMISSION GIVE N, STATING THAT ASSESSEE IS A CONTRACTOR WHO HIRES VEHICLES FROM OTHERS TO EXECUTE THE CONTRACTS. HOWEVER THE ASSESSING OFFICER REJECTING THE SUBMISSION CONSIDERED THE SA ME AS SUB-CONTRACT UNDER SECTION 194C(2) AND DISALLOWED RS. 45,65,700/- U/S 40(A)(IA). 3. THE ASSESSEE, NOT SATISF IED, APPROACHED THE CIT(A), BEFORE WHOM, THE ASSESSEE REITERATED HIS CONTENTION AND ARGUMENTS. THE CIT(A), IN HIS ORDER AFTER GOING THROUGH THE SUBMISSIONS MADE, OBSERVED, AS PER THE DETAILS PRIMA FACIE MOST OF THE PARTIES ARE NOT BIG ENOUGH AND WHO ARE AT ALL ENGAGED IN TAKING ANY JOB WORK / SUB CONTRACT, BUT THESE PARTIES ARE SOLELY ENGAGED IN HIRING OF VEHICLES, AND AS MENTIONED EARLIER ASSESSEE A ITA NO.6506/MUM/2010 ASSESSMENT YEAR: 2007-08 3 SOLE PROPRIETOR AND SMALL TIME CONTRACTOR TAKES VEHICLES ON HIRE FROM DIFFERENT PARTIES, ENGAGES HIS OWN LABOUR AND EXECUTES THE JOB / CONTRACT. THERE IS NO SUB CONTRACT IN SUCH A CASE AS HELD BY THE HONBLE ITAT VISHAKAPATNAM IN THE CASE OF MYTHRI TRANSPORT CORPORATION VS. ASSISTANT COMMISSIONER OF INCOME TAX 124 TTJ (VISHAKA) 970 (2009) WHEREIN IT IS HELD THAT THOUGH THE PASSING OF LIABILITY IS NO T THE ONLY CRITERIA TO DECIDE ABOUT THE EXISTENCE OF SUB-CONTRACT, YET CONTENTION OF THE ASSESSEE IS THAT THERE IS NO LIABILITY OF THE INDIVIDUAL VEHICLES OWNERS WHO ARE SIMPLE HIRERS OF THE VEHICLES. AS PER THE PROVISIONS OF S.194(2), THE SUB-CONTRACTOR SHOULD CARRY OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE DICTIONARY MEANING OF THE WORDS CARRY OUT IS TO CARRY INTO PRACTICE OR TO EXECUT E TO ACCOMPLISH. IT SIGNIFIES A POSITIVE INVOLVEMENT IN THE EXECUTION OF THE WHOLE OR ANY PART OF THE MAIN WORK BY SPENDING HIS TIME, MONEY, ENERGY, ETC. AND FURTHER TAKING THE RISKS IN CARRYING ON THE SAID ACTIVITY. IN THE INSTANT CASE, THE OTHER LORRY OWNERS ARE NOT AT ALL INVOLVED IN CARRYING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE NOR ARE THEY SPENDING THEIR TIME, ENERGY AND THEY DO NOT TAKE ANY RISK ASSOCIATED WITH THE MAIN CONTRACT WORK. IN THE ABSENCE OF THE ABOVE SAID CHARACTERISTICS ATTACHED TO A SUB-CONTRACT IN THE INSTANT CASE, THE PAYMENT MADE TO THE LORRY OWNERS STANDS AT PAR WITH TH E PAYMENTS MADE TOWARDS SALARIES, RENT, ETC. HENCE THE REASONING OF THE TAX AUTHORITIES TO HOLD THAT THE PAYMENT MADE FOR HIRED VEHICLES IS A SUB-CONTRACT PAYMENT IS NOT CORRECT AND NOT BASED ON RELEVANT CONSIDERATIONS. IT CANNOT BE SAID THAT THE PAYMENTS MADE FOR HIRED VEHICLES WOULD FALL IN THE CATEGORY OF PAYMENT TOWARD S A SUB-CONTRACT WITH LORRY OWNERS. IN THAT CASE THE ASSESSEE IS NOT LIA BLE TO DEDUCT TAX AT SOURCE, AS PER THE PROVISIONS OF S.194C (2), ON THE PAYMENTS MADE TO THE LORRY OWNERS FOR LORRY HIRE. CONSEQUENTLY, THE PROVISION OF S.40 (A)(A) SHALL NOT APPLY TO SUCH PAYMENTS. THE SAME VIEW HAS BEEN TAKEN BY HONBLE BOMBAY HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF COMMISSIONER OF INCOME-TAX, (TDS) CHANDIGARH V. UNITED RICE LAND LTD. IT APPEAL NO. 633 OF 2007, 174 TAXMAN 286 (P&H). DEDUCTION OF T.D.S. BY AN INDIVIDUAL COVERED U/S 44AB ON CONTRACTS IS EFFECTIVE FROM 01.07.2007. WHICH WOULD BE EFFECTIVE FROM 1.6.2007 I.E. A.Y. 2008-09 AND NOT A.Y. 2007-08 AND SINCE THE CASE OF THE APPE LLANT PERTAINS TO A.Y. 2007-08 THE AMENDED PROVISIONS WILL NOT AP PLY TO THE CASE OF THE APPELLANT AND THEREFORE, THE APPELLANT WAS NOT REQUIRED TO DEDUCT TDS ON PAYMENT MADE BY HIM SINCE THE AMENDMENT APPLIES FOR A.Y. 2008-09 AND NO T FOR A.Y. 2007-08. ALSO, THE FACT THAT AS STATED BY THE APPELLANT THERE IS NO SUB CONTRACT BETWEEN THE APPELLANT AND THE PARTIES GIVING THE FORKLIFT ON HIRE FOLLOWING THE RATION OF THE DECISION OF THE HONBLE ITAT VISHAKAPATNAM IN THE CASE OF MYTHRI TRANSPORT CORPORATION VS ASSISTANT COMMISSIONER OF INCOME TAX 124 TTJ (VISHAKA) 970 (2009) AND HONBLE BOMBAY HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF COMMISSIONER OF INCOME-TAX, (TDS) CHANDIGARH V. UNITED RICE LAND LTD. IT APPEAL NO. 633 OF 2007, 174 TAXMAN 286 (P&H), THE ISSUE STANDS RESOLVED IN FAVOUR OF THE ITA NO.6506/MUM/2010 ASSESSMENT YEAR: 2007-08 4 APPELLANT AS THE ELEMENT OF A CONTRACT / SUB-CONTRACT ARE NOT PRESENT AND THEREFORE EVEN ON THIS POINT APPELLA NT IS NOT LIABLE TO DEDUCT TDS. 4. GOING INTO THE DETAILED ARGUMENTS TAKEN BY THE CIT(A) IN HIS ORDER WE ARE OF THE VIEW THAT THE FINDINGS OF THE CIT(A) SHOULD NOT BE DISTURBED, WHICH TAKES INTO ACCOUNT COMPLETE FACTUAL DETAILS OF THE CASE. WE ARE INCLINED TO ACCEPT THE VIEW TAKEN BY THE CIT(A) AND THEREFORE, REJECT THE GROUND AS RAISED BY THE DEPARTMENT ON THE ISSUE OF SECTION 40(A)(IA). 5. GROUND NO. 2 IS ON ACCOUNT OF REDUCING THE ADDITION OF RS. 2,00,000 TO RS. 1,00,000 ON ACCOUNT OF PART PAYMENT OF HIS CHARGES PAYMENT, PACKING CHARGES, CONVEYANCE, STAFF WELFARE, SUNDRY EXPENSES AND TEA & OTHER EXPENSES. 6. BOTH SIDES SUBMITTED THAT AN APPROPRIATE VIEW MAY BE TAKEN. SINCE THE DR HAS VIRTUALLY NOT ARGUED ON THIS ISSUE, WE THEREFORE, REFRAIN OURSELVES TO TAKE ANY OTHER DECISION ON THE ISSUE, AND SUST AIN THE DECISION OF CIT(A). 7. THE GROUND AS RAISED BY THE REVENUE IS THEREFORE, REJECTED. 8. THE APPEAL, THUS FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH, 2012 SD/- SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATED : 28 TH MARCH, 2012 RASIKA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS), XXIV, MUMBAI 4. COMMISSIONER OF INCOME TAX CONCERN 5. DEPARTMENTAL REPRESENTATIVE, BENCH I MUMBAI ITA NO.6506/MUM/2010 ASSESSMENT YEAR: 2007-08 5 //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI