ASST CIT 13(2), MUMBAI V. JANARDAN VISHRAM SAWANT, MUMBAI

ITA 7113/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8840 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 20-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NAMRATA R DEDHIA
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J : MUMBAI BEFORE SHRI H.L.KARWA, HONBLE PRESIDENT AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA.NO.7113/MUM/2011 ASSESSMENT YEAR 2008-2009 ACIT, CIRCLE 13 (2) MUMBAI- 400 020. VS. SHRI JANARDAN VISHRAM SAWANT MUMBAI 400 009 PAN AACPS1835M (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI RAKESH RANJAN JCIT FOR RESPONDENT : MS. NAMRATA R. DEDHIA DATE OF HEARING : 25-09-2012 DATE OF PRONOUNCEMENT : 26-09-2012 ORDER PER H.L.KARWA, PRESIDENT THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-24, MUMBAI DATED 2 ND AUGUST, 2011 RELATING TO THE ASSESSMENT YEAR 2008-2009. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER : 1. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.33,75,466/- MADE U/S. 40(A)(IA) OF THE I.T. ACT, 1961. (VIII) WHILE DOING SO, THE LEARNED CIT(A) HAS OVERL OOKED 1 ST PROVISO TO SUB-SECTION (2) OF SECTION 194C OF THE I.T. ACT, 19 61, WHERE IT IS CLEARLY STATED AN INDIVIDUAL OR HUF WHOSE TOTAL SAL ES AND GROSS RECEIPTS EXCEED THE MONITORY LIMIT U/S. 44AB WOULD BE LIABLE FOR DEDUCTION OF TAX U/S. 194C OF THE I.T. ACT, 1961. 2 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A PROPRIETOR OF M/S. INDIRA FOLKLIFT & HIRING CO. AND M/S. SHREE SH ERAVALI TRANSPORT, WHICH ARE ENGAGED IN THE BUSINESS OF HIRING OF VEHICLES. THE ASSESSEE IS IN RECEIPT OF HIRE CHARGES FROM VARIOUS PARTIES FOR HIRE OF FORKL IFT/VEHICLES/TRAILORS ETC. SUCH VEHICLES WERE BEING OWNED BY THE ASSESSEE OR TAKEN ON HIRE FROM THIRD PARTIES. THE HIRE CHARGES WERE PAID BY HIM TO THE PERSONS FR OM WHOM THE ASSESSEE HIRED THE VEHICLES. THE CASE OF THE ASSESSEE IS THA T HIRING CHARGES WERE NOT PAID BY HIM FOR ANY SPECIFIC JOB. THE ASSESSEE HAS HIRED ONLY THE VEHICLES FROM DIFFERENT PERSONS AND HAD EMPLOYED HIS OWN LABOUR F OR EXECUTION OF DIFFERENT JOBS AVAILABLE WITH HIM. FURTHER, IT WAS PLEADED BY THE ASSESSEE THAT THE PERSONS TO WHOM HIRE CHARGES HAVE BEEN PAID WERE NO T SUB-CONTRACTORS IN RELATION TO ASSESSEE SINCE NO PART OF THE CONTRACT AVAILABLE WITH THE ASSESSEE WAS, ENTERED, SUB-CONTRACTED TO THESE PERSONS. THE ASSESSEE DID NOT DEDUCTED ANY TDS ON HIRING CHARGES PAID FOR THE PERIOD FROM 1-4-2007 TO 31-5-2007. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE FOR THE REASONS STATED IN PARA-5 OF THE ASSESSMENT ORDER AND DISALL OWED RS.33,75,466/- UNDER SECTION 40(A)(IA), BEING PAYMENTS MADE TOWARDS HIRE CHARGES OF FORKLIFT WITHOUT DEDUCTION AT THE SOURCE ON THE SAID PAYMENTS. 4. ON AN APPEAL, THE LEARNED CIT(A) DELETED THE DIS ALLOWANCE OF RS.33,75,466/- MADE UNDER SECTION 40(A)(IA) OF THE I.T. ACT, 1961 FOLLOWING THE ORDER OF HIS PREDECESSOR PASSED IN ASSESSEES OWN C ASE FOR THE ASSESSMENT YEAR 2007-2008. IN THE APPELLATE ORDER FOR THE ASSESSMEN T YEAR 2007-2008 ON IDENTICAL FACTS, THE LEARNED CIT(A) HELD THAT THERE WAS NO ELEMENT OF SUB- CONTRACT IN THE TRANSACTIONS BETWEEN THE ASSESSEE A ND THE VEHICLE OWNERS. WHILE DECIDING THE ISSUE IN THE YEAR UNDER CONSIDER ATION, THE LEARNED CIT(A) CONCLUDED THAT IN THE INSTANT CASE THE PAYMENTS IN QUESTION WERE MADE BETWEEN 1-4-2007 TO 31-5-2007, CLAUSE (K) OF SECTIO N 194C (1) WOULD NOT APPLY BECAUSE THE SAID PROVISION WAS INSERTED W.E.F. 1-6- 2007. ACCORDING TO CIT(A), PRIOR TO THIS, EXISTING PROVISION OF SUB-SECTION (1 ) OF SECTION 194C DID NOT 3 PROVIDE FOR DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE BY AN INDIVIDUAL OR A HUF TO A CONTRACTOR. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ORDER OF THE CIT(A) DATED 11 TH JUNE, 2010 FOR THE ASSESSMENT YEAR 2007-2008 WAS T HE SUBJECT MATTER OF REVENUES APPEAL BEFORE THE TRIBUNAL. THE I.T.A.T. MUMBAI BENCH I MUMBAI VIDE ITS ORDER DATED 28 TH MARCH, 2012 IN ITA. NO. 6506/MUM/2010 UPHELD THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE OF RS.45,65,700/- MADE UNDER SECTION 40(A)(IA) OF THE ACT. IN THE ORDER DATED 28 TH MARCH, 2012 THE TRIBUNAL HAS REPRODUCED THE ORDER OF THE CIT(A) FOR THE ASSE SSMENT YEAR 2007-2008 IN PARA-3, WHICH READS AS UNDER : 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 H IRING OF VEHICLES, AND AS MENTIONED EARLIER ASSESSEE A SOLE PROPRIETOR AND SMALL TIME CONTRACTOR TAKES VEHICLES ON HIRE FROM DIFFERENT PA RTIES, ENGAGES HIS OWN LABOUR AND EXECUTES THE JOB / CONTRACT. THUS, THERE IS NO SUB CONTRACT IN SUCH A CASE AS HE LD BY THE HONBLE ITAT VISHAKAPATNAM IN THE CASE OF MYTHRI TR ANSPORT CORPORATION VS. ASSISTANT COMMISSIONER OF INCOME TA X 124 TTJ (VISHAKA) 970 (2009) WHEREIN IT IS HELD THAT THOUGH THE PASSING OF LIABILITY IS NOT THE ONLY CRITERIA TO DECIDE ABOUT THE EXISTENCE OF SUB- CONTRACT, YET THE CONTENTION OF THE ASSESSEE IS THA T THERE IS NO LIABILITY OF THE INDIVIDUAL VEHICLES OWNERS WHO ARE SIMPLE HIRERS OF THE VEHICLES. AS PER THE PROVISIONS OF S.194(2), TH E 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 EXECUTE TO ACCOMPLISH. IT SIGNIFIES A POSITIVE INVOLVEMENT IN THE EXECUTION OF THE WHOLE OR ANY PA RT OF THE MAIN 4 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 CARRY ING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE NOR ARE THEY SPENDING THEIR TIME, ENERGY AND THEY DO NOT TAKE ANY RISK AS SOCIATED WITH THE MAIN CONTRACT WORK. IN THE ABSENCE OF THE ABOVE SAID CHARACTERISTICS ATTACHED TO A SUB-CONTRACT IN THE I NSTANT CASE, THE PAYMENT MADE TO THE LORRY OWNERS STANDS AT PAR WITH THE PAYMENTS MADE TOWARDS SALARIES, RENT, ETC. HENCE TH E REASONING OF THE TAX AUTHORITIES TO HOLD THAT THE PAYMENT MADE F OR HIRED VEHICLES IS A SUB-CONTRACT PAYMENT IS NOT CORRECT A ND NOT BASED ON RELEVANT CONSIDERATIONS. HENCE, IT CANNOT BE SAID THAT THE PAYMENTS MADE FOR HIRED VEHICLES WOULD FALL IN THE CATEGORY OF PAYMENT TOWARDS A SUB-CONTRACT WITH LORRY OWNERS. I N THAT CASE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE, AS PER THE PROVISIONS OF S.194C (2), ON THE PAYMENTS MADE TO T HE LORRY OWNERS FOR LORRY HIRE. CONSEQUENTLY, THE PROVISION OF S.40 (A)(IA) SHALL NOT APPLY TO SUCH PAYMENTS. ALSO, THE SAME VIEW HAS BEEN TAKEN BY HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF COMMISSIONER OF INC OME-TAX, (TDS) CHANDIGARH V. UNITED RICE LAND LTD. IT APPEAL NO. 633 OF 2007, 174 TAXMAN 286 (P&H). THUS, FOLLOWING THE ABOVE, IT CAN EASILY BE SAID TH AT THERE IS NO LIABILITY ON THE PART OF THE APPELLANT TO DEDUCT TD S. ALSO, DEDUCTION OF T.D.S. BY AN INDIVIDUAL COVERED U/S 44AB ON CONTRACTS IS EFFECTIVE FROM 01.07.2007 AND THE ASSE SSMENT IS FOR THE ACCOUNTING PERIOD 1-4-2006 TO 31-03-2007 I.E., ASSESSMENT YEAR 2007-08. 5 I HAVE CONSIDERED THE SUBMISSION OF THE LEARNED COU NSEL AND THE FACT THAT THE FINANCE ACT 2007 W.E.F. 1.6.2007 HAS SUBSTITUTED SUB- SECTION 1 TO INCLUDE IN ITS AMBIT INDIVIDUALS/HUF W HOSE TOTAL SALES/GROSS RECEIPTS/TURN OVER FROM THE BUSINESS OR PROFESSION EXCEED THE MONETARY LIMITS SPECIFIED IN CLAUSE (A) OR CLAUSE (B) OF SEC. 44AB 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 A PPELLANT PERTAINS TO A.Y. 2007-08 THE AMENDED PROVISIONS WIL L NOT APPLY TO THE CASE OF THE APPELLANT AND THEREFORE, THE APPELL ANT WAS NOT REQUIRED TO DEDUCT TDS ON PAYMENT MADE BY HIM SINCE THE AMENDMENT APPLIES FOR A.Y. 2008-09 AND NOT FOR A.Y. 2007-08. ALSO, THE FACT THAT AS STATED BY THE APPELLANT THER E IS NO SUB CONTRACT BETWEEN THE APPELLANT AND THE PARTIES GIVI NG THE FORKLIFT ON HIRE FOLLOWING THE RATION OF THE DECISION OF THE HO NBLE ITAT VISHAKAPATNAM IN THE CASE OF MYTHRI TRANSPORT CORPO RATION VS ASSISTANT COMMISSIONER OF INCOME TAX 124 TTJ (VISHA KA) 970 (2009) AND HONBLE HIGH COURT OF PUNJAB & HARYANA I N THE CASE OF COMMISSIONER OF INCOME-TAX, (TDS) CHANDIGARH V. UNI TED RICE LAND LTD. IT APPEAL NO. 633 OF 2007, 174 TAXMAN 286 (P&H), THE ISSUE STANDS RESOLVED IN FAVOUR OF THE APPELL ANT AS THE ELEMENT OF A CONTRACT / SUB-CONTRACT ARE NOT PRESENT AND TH EREFORE EVEN ON THIS POINT APPELLANT IS NOT LIABLE TO DEDUCT TDS. 6. IN PARA-4 OF THE ORDER, THE TRIBUNAL HAS OBSERVE D AS UNDER : 4. GOING INTO THE DETAILED ARGUMENTS TAKEN BY THE CIT(A) IN HIS ORDER WE ARE OF THE VIEW THAT THE FINDINGS OF THE C IT(A) SHOULD NOT BE DISTURBED, WHICH TAKES INTO ACCOUNT COMPLETE FAC TUAL 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 D EPARTMENT ON THE ISSUE OF SECTION 40(A)(IA). 6 7. IN OUR CONSIDERED OPINION, THE ISSUE IS SQU ARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL DATED 28 TH MARCH, 2012 IN ASSESSEES CASE FOR THE ASSESSMENT Y EAR 2007-2008 (SUPRA). RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL FO R THE ASSESSMENT YEAR 2007- 2008, WE DO NOT SEE ANY INFIRMITY IN THE FINDINGS O F THE LEARNED CIT(A) ON THIS ISSUE AND ACCORDINGLY, WE UPHOLD THE ORDER OF THE C IT(A) AND DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT, ON 26 TH SEPTEMBER, 2012. SD/- SD/- (D.KARUNAKARA RAO) (H.L. KARWA) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DATE SEPTEMBER, 2012 VBP/- COPY TO 1. ACIT, CIRCLE 13 (2), ROOM NO. 477, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI- 400 020. 2. SHRI JANARDAN VISHRAM SAWANT, SHOP 19, GROUND FLOOR PLOT, KAS HIRAM JAMNADAS BLDG., P.D. MELLO ROAD, MUMBAI 400 009 PAN AACPS1835M 3. CIT(A) - 24, MUMBAI 4. CIT - 13, MUMBAI 5. DR J BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI.