Sree SLN Travels , Bangalore V. Assistant Commissioner of Income Tax Circle-4(3)(1), Bangalore

ITA 704/BANG/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7146 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-07-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 09-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LIKITH K PRAKASH
• Keywords: Principle of natural justice; Non-deduction of tax; TDS; Set aside
• Section: 40(a)(ia); 194C

Judgement Text

ITA NO.704/BANG/2019 SREE SLN TRAVELS, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL CBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.704/BANG/2019 ASSESSMENTYEAR: 2013-14 SREE SLN TRAVELS NO.750, MARUTHI 14 TH C CROSS, JP NAGAR 1 ST PHASE BENGALURU 560 078 (AUTHORISED REPRESENTATIVE) CUDDAPAH RAMESH, CHARTERED ACCOUNTANT NO.23, ANAND II FLOOR,HARE KRISHNA ROAD SHIVANANDA CIRCLE BANGALORE 560 001 PAN NO : ABUFS0831N VS. ACIT CIRCLE-4(3)(1) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI LIKITH K. PRAKASH, A.R. RESPONDENT BY : MS. NEERA MALHOTRA, D.R. DATE OF HEARING : 07.07.2021 DATE OF PRONOUNCEMENT : 03.09.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 13.2.2019 PASSED BY LD. CIT(A)-9 BENGALURU AND IT R ELATES TO ASSESSMENT YEAR 2013-14. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMING THE ADDITION O F RS.9.21 CRORES MADE BY THE A.O. U/S 40(A)(IA) OF THE INCOME-TAX AC T,1961 ['THE ACT' ITA NO.704/BANG/2019 SREE SLN TRAVELS, BANGALORE PAGE 2 OF 6 FOR SHORT] FOR NON-DEDUCTION OF TAX AT SOURCE U/S 1 94C OF THE ACT FROM THE PAYMENTS MADE TOWARDS HIRE CHARGES OF VEHI CLES. 2. THE ASSESSEE IS A TRAVEL AGENT AND TOUR OPERATOR . THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.9 .21 CRORES AS VEHICLE HIRE CHARGES. HE ALSO NOTICED THAT THE ASS ESSEE HAS NOT DEDUCTED TAX AT SOURCE FROM THE ABOVE SAID PAYMENTS U/S 194C OF THE ACT. ACCORDINGLY, HE PROPOSED TO DISALLOW THE SAME U/S 40(A)(IA) OF THE ACT. THE ASSESSEE CONTENDED THAT ALL THE HI RE CHARGES HAVE BEEN PAID DURING THE YEAR AND NOTHING WAS PAYABLE A S ON 31.3.2013. ACCORDINGLY, BY PLACING RELIANCE ON THE DECISION RENDERED BY SPECIAL BENCH OF ITAT, VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING TRANSPORT COMPANY AND ALSO THE DEC ISION RENDERED BY HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF VECTOR SHIPPING SERVICES PVT. LTD., THE ASSESSEE CONTENDED THAT NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS CALLED FOR . 3. HOWEVER, THE A.O. NOTICED THAT THE HONBLE HIGH COURT OF KOLKATA HAS DISAPPROVED THE DECISION RENDERED BY SP ECIAL BENCH IN THE CASE OF MERILYN SHIPPING TRANSPORT COMPANY, IN ITS DECISION RENDERED IN THE CASE OF CRESCENT EXPORT SYNDICATE. IDENTICAL VIEW HAS BEEN EXPRESSED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF SIKANDER KHAN & OTHERS. ACCORDINGLY, THE A.O. DISA LLOWED RS.9.21 CRORES U/S 40(A)(IA) OF THE ACT. LD. CIT(A) ALSO C ONFIRMED THE SAME BY FOLLOWING THE DECISION RENDERED BY HONBLE SUPRE ME COURT IN THE CASE OF PALAM GAS SERVICE VS. CIT(2017) 81 TAXMANN. COM 43. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFOR E US. 4. THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF PROVIDING TRANSPORTATION SERVICES. WHEN EVER THERE IS SHORTAGE OF VEHICLES, IT HAS HIRED VEHICLE FROM THE OPEN MARKET AT THE PREVAILING MARKET RATE WITHOUT ENTERING INTO AN Y EXPRESS OR ITA NO.704/BANG/2019 SREE SLN TRAVELS, BANGALORE PAGE 3 OF 6 IMPLIED CONTRACT WITH ANY PERSONS. ALL THESE VEHIC LES HAVE BEEN TAKEN ON TEMPORARY BASIS WITHOUT ANY CONTRACTUAL OB LIGATION AND THESE VEHICLES HAVE BEEN USED BY THE ASSESSEE AT IT S OWN COST AND RISK FOR EXECUTING THE WORK OF TRANSPORTATION. ACC ORDINGLY, THE LD. A.R. SUBMITTED THAT MERE HIRING OF VEHICLE CANNOT B E TERMED AS AN ACTIVITY OF CARRYING OUT ANY WORK WITHIN THE MEAN ING OF SECTION 194C OF THE ACT. IN THIS REGARD, HE PLACED HIS REL IANCE ON THE DECISION RENDERED BY COORDINATE BENCH IN THE CASE O F SHRI G.T. VISWANATHAN VS. ITO (ITA NO.1103/BANG/2009 DATED 27 .7.2010). HE SUBMITTED THAT IN THE ABOVE SAID CASE, THE TRIBU NAL HAS HELD THAT HIRE CHARGES PAID FOR HIRING VEHICLES AT MARKE T RATE DOES NOT RESULT IN ENTERING INTO ANY CONTRACT WITHIN THE MEA NING OF SECTION 194C OF THE ACT. FURTHER, THE LD. A.R. ALSO PLACED HIS RELIANCE ON THE DECISION RENDERED BY VISAKHAPATNAM BENCH OF ITA T IN THE CASE OF KRANTI ROAD TRANSPORT PVT. LTD. (ITA NO.358/VIZA G/2008 DATED 11.8.2011), WHEREIN IT WAS HELD AS UNDER: 13. HAVING CAREFULLY EXAMINED THE LEGAL PROPOSITIO NS LAID DOWN BY THE TRIBUNAL IN THE AFORESAID CASE AND THE PROVISIO NS OF SECTION 194C OF THE ACT, WE ARE OF THE CONSIDERED OPINION THAT T DS AS PER SECTION 194C IS REQUIRED TO BE DEDUCTED WHEN THE PAYMENTS ARE M ADE TO THE CONTRACTOR FOR CARRYING OUT THE WORK I.E. CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY R AILWAYS SUBJECT TO OTHER CONDITIONS PRESCRIBED U/S 194C OF THE ACT BUT WHENEVER THE LORRIES AND TRUCKS ARE HIRED BY THE ASSESSEE FOR IT S OWN USE IN ANY MANNER UNDER ITS OWN CONTROL AND SUPERVISION, THE T DS IS NOT REQUIRED TO BE DEDUCTED ON PAYMENT MADE BY THE CONT RACTOR TO THE LORRY/TRUCK OWNERS. IN THE INSTANT CASE, THE ASSESSEE HAS HIRED THE TRUCKS/LORRIES FOR TRANSPORTING OF THE CONSIGNMENT BOOKED BY IT UNDER ITS OWN SUPERVISION AND CONTROL WITH ALL RESPONSIBI LITY AND LIABILITIES. THEREFORE, THE HIRING OF TRUCK AND LORRIES CANNOT B E CALLED TO BE THE WORK AS PER DEFINITION GIVEN IN EXPLANATION 3 OF SE CTION 194C OF THE ACT AND CONSEQUENT THERETO, THE ASSESSEE IS NOT LIABLE FOR DEDUCTION OF TDS ON PAYMENT TO LORRY/TRUCK OWNERS AS PER SECTION 194C OF THE ACT. WE THEREFORE, FIND NO MERIT IN THE CIT(A)'S ORDER A ND WE SET ASIDE THE SAME AND DIRECT THE A.O. TO ALLOW THE PAYMENT CLAIM ED BY THE ASSESSEE.' ITA NO.704/BANG/2019 SREE SLN TRAVELS, BANGALORE PAGE 4 OF 6 THE LD. A.R. SUBMITTED THAT THE FACTS OF THE PRESEN T CASE ARE IDENTICAL WITH THE ABOVE SAID CASE AND ACCORDINGLY, PRAYED THAT THE ADDITION MAY KINDLY BE DELETED. IN THE ALTERNATIVE , HE SUBMITTED THAT THE PAYMENTS MADE TO SOME OF THE VEHICLES ARE WITHIN THE MINIMUM AMOUNT PRESCRIBED U/S 194C OF THE ACT FOR D EDUCTING TDS. 5. THE LD. D.R., ON THE CONTRARY, SUBMITTED THAT TH E ASSESSEE IS TAKING NEW GROUNDS BEFORE THE TRIBUNAL. SHE SUBMIT TED THAT THE ASSESSEE HAD CONTENDED BEFORE THE TAX AUTHORITIES T HAT ALL AMOUNTS HAVE BEEN PAID DURING THE COURSE OF THE YEAR AND NO THING REMAIN PAYABLE AT THE YEAR END AND HENCE, PROVISIONS OF SE CTION 40(A)(IA) OF THE ACT WAS NOT APPLICABLE. THE ABOVE SAID CONTENT ION OF THE ASSESSEE IS FOUND TO BE NOT CORRECT BY LD CIT(A) AS PER THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF PA LAM GAS SERVICE (SUPRA), WHEREIN IT WAS HELD THAT THE PROVI SIONS OF SEC40(A)(IA) SHALL APPLY IN RESPECT OF EXPENDITURE PAID BY THE ASSESSEE ALSO. THE LD. D.R. SUBMITTED THAT THE FAC TS RELATING TO THE NEW CONTENTIONS OF THE ASSESSEE ARE NOT AVAILABLE O N RECORD. 6. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE R ECORD. ADMITTEDLY, THE ASSESSEE IS TAKING NEW CONTENTIONS BEFORE THE TRIBUNAL, VIZ., (A) IT HAS HIRED THE VEHICLES FROM THE MARKET ON TH E BASIS OF AVAILABLE MARKET RATE AND (B) THE ASSESSEE ITSELF HAS EXECUTED THE CONTRACT U NDERTAKEN BY IT UNDER ITS OWN COST, RISK, SUPERVISION AND CON TROL WITH ALL RESPONSIBILITY AND LIABILITY. BOTH THE CONTENTIONS GET SUPPORT FROM THE DECISIONS RENDERED BY THE CO-ORDINATE BENCHES (REFERRED SUPRA), WHICH HAV E BEEN RELIED UPON BY LD A.R. ITA NO.704/BANG/2019 SREE SLN TRAVELS, BANGALORE PAGE 5 OF 6 7. IN THE CASE OF G.T VISHWANATHAN (SUPRA), THE TRI BUNAL HAS HELD THAT HIRE CHARGES PAID FOR HIRING VEHICLES AT MARKET RATE DOES NOT RESULT IN ENTERING INTO ANY CONTRACT WITHIN THE MEANING OF SECTION 194C OF THE ACT. THE VISAKHAPATNAM BENCH OF ITAT, IN THE CASE OF KRANTI ROAD TRANSPORT PVT. LTD., HAS HELD T HAT WHENEVER THE LORRIES AND TRUCKS ARE HIRED BY THE ASSESSEE FOR IT S OWN USE IN ANY MANNER UNDER ITS OWN CONTROL AND SUPERVISION WITH A LL RESPONSIBILITY AND LIABILITY FOR CARRYING OUT ANY W ORK, THE TDS IS NOT REQUIRED TO BE DEDUCTED U/S 194C OF THE ACT ON THE HIRE CHARGES PAID BY THE ASSESSEE TO THE LORRY/TRUCK OWNERS. HO WEVER, AS POINTED OUT BY LD. CIT(DR), THE FACTS RELATING TO T HE ABOVE SAID ASPECTS ARE NOT AVAILABLE ON RECORD. IF THE FACTS PREVAILING IN THE INSTANT CASE IS HAVING PARITY WITH THE FACTS AVAILA BLE IN THE ABOVE SAID TWO CASES, WE ARE OF THE VIEW THAT IMPUGNED DI SALLOWANCE IS LIABLE TO BE DELETED. ACCORDINGLY, IN THE INTEREST OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE PROV IDED WITH AN OPPORTUNITY TO PRESENT THE FACTS PREVAILING IN THE INSTANT CASE. ACCORDINGLY, THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE A.O. 8. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR EXAMINING IT AFRESH IN THE LIGHT OF PRINCIPLES DISC USSED (SUPRA). WE ALSO DIRECT THE ASSESSEE TO FURNISH ALL THE DETAILS AND EXPLANATIONS THAT MAY BE CALLED FOR BY THE A.O. ITA NO.704/BANG/2019 SREE SLN TRAVELS, BANGALORE PAGE 6 OF 6 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD SEPT, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 3 RD SEPT, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.