ITO, Ludhiana V. Truck Operator Union, Ludhiana

ITA 864/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73573 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.864 /CHD/2013 ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, VS. TRUCK OPERATOR UNI ON, WARD V(4), VPO SAHNEWAL, LUDHIANA. G.T. ROAD, LUDHIANA. PAN: AAAAT0870C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, DR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 03.03.2014 DATE OF PRONOUNCEMENT : 20.03.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, LUDHIANA D ATED 26.02.2013 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS UNDER: 1. THAT LD. CIT(A)-II, LUDHIANA ON FACTS AS WELL A S IN LAW, HAS ERRED IN DELETING THE ADDITION OF RS.,19,71,922/- M ADE BY AO BY MAKING DISALLOWANCE OF TRANSPORTATION CHARGES ET C. IN VIEW OF THE PROVISION OF SECTION 40(A)(IA) OF THE I .T. ACT, 1961 AS THE ASSESSEE DID NOT DEDUCT TAX UNDER THE P ROVISION OF SECTION 194C(2) OF THE INCOME TAX ACT. 3. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSM ENT YEAR 2006-07 AND 2 ALSO THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HA RYANA HIGH COURT IN ASSESSEES OWN CASE IN ITA NO.865 OF 2010 DATE OF DECISION 23.3.2011. FURTHER RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE HIMACHAL PRADESH HIGH COURT IN CIT VS. SIRMOUR TRUC K OPERATORS UNION [236 CTR (HP) 550]. 4. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED IN THE PRESENT APPEAL IS WHETHER THE A SSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE OUT OF TRANSPORTATION CHARGES PAID BY IT AND BECAUSE OF THE FAILURE OF THE ASSESSEE TO DEDUCT THE SAID T AX AT SOURCE, THE SAID EXPENDITURE WAS NOT ALLOWABLE IN THE HANDS OF THE A SSESSEE IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE AS SESSEE IS DERIVING INCOME FROM COMMISSION OF TRANSPORTATION FROM DIFFE RENT PARTIES. THE ASSESSEE IS AN ASSOCIATION OF PERSONS, WHO IN TURN WAS PAYING TRANSPORTATION CHARGES TO ITS MEMBERS WHOSE TRUCKS WERE TAKEN ON HIRE. THE CUMULATIVE PAYMENTS TO SUCH MEMBERS WERE ABOVE RS.50,000/- DURING THE YEAR AND THE ASSESSING OFFICER OBSERVED THAT IN VIEW OF THE PROVISIONS OF SECTION 194C OF THE ACT, THE ASSESSEE WAS LIABLE TO DEDUCT THE TAX AT SOURCE. AS THE ASSESSEE HAD FAILED TO DEDUCT THE TAX AT SOURCE, THE SAID EXPENDITURE TOTALING RS.19,71,922/- WAS NO T ALLOWED IN THE HANDS OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BY THE ASSESSING OFFICER. THE CIT (APPEALS ), HOWEVER, DELETED THE ADDITION FOLLOWING THE ORDER OF THE TRIBUNAL. 6. WE FIND THAT IDENTICAL ISSUE AROSE BEFORE THE TR IBUNAL IN ASSESSEES OWN CASE IN ITA NO.816/CHD/2009 RELATING TO ASSESSM ENT YEAR 2006-07 AND VIDE ORDER DATED 24.2.2010 THE TRIBUNAL IN TURN FOLLOWING THE RATIO 3 LAID DOWN IN ASSESSEES OWN CASE IN ITA NO.761/CHD/ 2009 HELD THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE UND ER THE PROVISIONS OF SECTION 194C OF THE ACT. THE RELEVANT FINDINGS OF THE TRIBUNAL IN ITA NO.761/CHD/2009 WERE AS UNDER: 7. THE PROVISIONS OF SECTION 194C OF THE ACT PROVI DES THAT WHERE ANY PERSON IS RESPONSIBLE FOR PAYING ANY SUM TO A R ESIDENT CONTRACTORS FOR CARRYING OUT ANY WORK INCLUDING SUP PLY OF LABOUR FOR CARRYING OUT ANY WORK, IN PURSUANCE TO THE CONT RACT BETWEEN THE CONTRACTOR AND THE SPECIFIED PERSON, THEN AT THE TI ME OF CREDIT OF SUCH SUM OR PAYMENT IN CASH OR THROUGH CHEQUE / DRA FT OR ANY OTHER MODE, WHICHEVER IS EARLIER, TO THE ACCOUNT OF THE CONTRACTEE, SHALL DEDUCT TAX AT SOURCE AS PROVIDED UNDER SECTION 194C (1) OF THE ACT. IN CASE OF ANY SUB CONTRACT ALSO, THE PROVISIONS OF SECTION 194C ARE TO BE APPLIED. THE TAX DEDUCTION AT SOURCE IS TO BE MADE IN ALL SUCH CASES WHERE THE AMOUNT SO CREDITED OR PAID EXC EEDS RS. 20,000/-. IN CASE OF SEVERAL PAYMENTS BEING MADE TO SAME PERSON, THE CUMULATIVE AMOUNT TO BE CONSIDERED IS RS. 50,00 0/- 8. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ASSESSEE UNION BEING AN ASSOCIATION OF PERSONS WAS TAKING TENDERS FROM VARIOUS FOOD GRAINS AGENCIES FOR THE TRANSPORTATION OF THE BAGS OF FOOD GRAINS FROM THEIR RESPECTIVE GODWONS TO DIFFERENT D ESTINATIONS. IN ORDER TO ACHIEVE ITS OBJECTS, THE UNION WAS MADE TO MAINTAIN UNITY BETWEEN SEVERAL TRUCK OPERATORS, WHO IN TURN WOULD PROVIDE THEIR VEHICLES FOR THE PURPOSE. THE UNION COMPRISED OF S MALL AND POOR TRUCK OPERATORS AND AS PER THE CLAIM OF THE ASSESSE E BEFORE US, EACH INDIVIDUAL DID NOT OWN MORE THAN TWO TRUCKS. DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD MADE PAYMENT OF RS. 79,77,384/- TO 174 TRANSPORTERS AND AS PER THE DETA ILS FILED BEFORE THE AUTHORITIES BELOW, THE TRUCK NUMBER OF VEHICLES OWNED BY THE TRUCK OPERATORS AND THE PAYMENT BEING MADE TO THEM WAS DETAILED. THE ASSESSING OFFICER DISALLOWED RS.63,10,197/- BEI NG SUB CONTRACTUAL PAYMENTS MADE BY THE ASSESSEE IN EXCESS OF RS. 50,000/-, IN VIEW OF THE PROVISIONS OF SECTION 40A( IA) OF THE ACT. 4 9. WE FIND THAT SIMILAR ISSUE OF PAYMENTS TO TRUCK OWNERS BY THE TRUCK OPERATORS UNION AROSE BEFORE THE HON'BLE HIMA CHAL PRADESH HIGH COURT IN SIRMOUR TRUCK OPERATORS UNION VS CIT (ITA NO. 45 OF 2006). WE FIND SUPPORT FROM THE RATIO LAID DOW N BY THE HON'BLE HIMACHAL PRADESH HIGH COURT IN SIRMOUR TRUCK OPERAT ORS UNION VS CIT (SUPRA) WHEREIN IT WAS HELD THAT FREIGHT PAI D BY THE ASSOCIATION OF PERSONS TO TRUCK OWNERS, WHO WERE TH E MEMBERS OF THE ASSOCIATION OF PERSONS, WAS NOT LIABLE FOR DEDU CTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT. 7. SIMILAR ISSUE WAS RAISED BEFORE THE TRIBUNAL IN THE CASE OF THE JAGRAON TRUCK OPERATORS UNION VS. ITO IN ITA NO.560 /CHD/2011 RELATING TO ASSESSMENT YEAR 2006-07 - ORDER DATED 2 2.9.2011. 8. FURTHER THE HON'BLE PUNJAB & HARYANA HIGH COURT IN ASSESSEES OWN CASE(SUPRA) HELD AS UNDER: 4. THE LEARNED COUNSEL FOR THE REVENUE FAIRLY STA TES AND WE ARE ALSO OF THE SAME VIEW THAT SECTION 194C(2) OF THE A CT HAD NO APPLICATION IN THE CIRCUMSTANCES OF THE CASE WHEN T HE UNION WAS MERELY ACTING IN REPRESENTATIVE CAPACITY AND THER E WAS NO SEPARATE CONTRACT BETWEEN THE UNION AND ITS MEM BERS FOR PERFORMANCE OF THE WORK AS REQUIRED FOR APPLICABILI TY OF SECTION 194C(2) OF THE ACT. IN SUCH CIRCUMSTANCES, SECTIO N 40(A)(IA) OF THE ACT WAS NOT APPLICABLE, AS RIGHTLY HELD BY THE CIT(A) AND THE TRIBUNAL. LEARNED COUNSEL FOR THE REVENUE ALSO POIN TS OUT THAT SAME VIEW HAS BEEN TAKEN BY THE HIGH COURT OF HIMAC HAL PRADESH IN ITS ORDER DATED 20.10.2009 IN I.T.A. NO.30 OF 20 05 CIT V. M/S AMBUJA DARLA KASHLOG MANGU TRANSPORT CO.OP. SOC IETY & ORS . AGAINST WHICH SLP WAS DISMISSED BY THE HON'BLE SUPR EME COURT ON 17.1.2011 BEING SLP(CIVIL)....../2011 CC 259/ 2011 CIT SHIMLA V. M/S AMBUJA D. MANGUTRANSP. COOP. SOCIETY. 9. THE HON'BLE HIMACHAL PRADESH HIGH COURT IN CIT V S. SIRMOUR TRUCK OPERATORS UNION (SUPRA) ALSO HELD THAT THE AS SESSEE SOCIETY WHICH WAS CREATED BY THE TRANSPORTERS THEMSELVES WITH A V IEW TO ENTER INTO CONTRACT WITH THE COMPANY FOR TRANSPORTATION OF GOO DS AND MATERIAL, WAS NOTHING MORE THAN CONGLOMERATION OF THE TRUCK OPERA TORS THEMSELVES. IT WAS FURTHER HELD THAT THE MEMBERS OF THE SOCIETY WE RE VIRTUALLY OWNERS OF THE SOCIETY AND THOUGH THE TWO WERE SEPARATE JUR ISTIC ENTITIES AND 5 WHERE ONLY NOMINAL CHARGES WERE RETAINED BY THE SOC IETY FOR MEETING ITS ADMINISTRATIVE EXPENSES, THERE WAS NO SUB-CONTRACT BETWEEN THE SOCIETY AND THE MEMBERS AND THE PROVISIONS OF SECTION 194C( 2) OF THE ACT WERE NOT ATTRACTED AND THE ASSESSEE SOCIETY WAS NOT LIAB LE TO DEDUCT TAX AT SOURCE ON ACCOUNT OF PAYMENTS MADE TO THE TRUCK OWN ERS, WHO WERE ALSO MEMBERS OF THE SOCIETY. 10. FOLLOWING THE ABOVE RATIO LAID DOWN BY THE HON' BLE PUNJAB & HARYANA HIGH COURT, HON'BLE HIMACHAL PRADESH HIGH C OURT AND CHANDIGARH BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE FIND NO MERIT IN THE GROUND OF APPEAL RAISED BY THE REVENUE . THE ASSESSEE IN THE PRESENT CASE IS NOT LIABLE TO DEDUCT TAX AT SOURCE OUT OF PAYMENTS MADE TO ITS MEMBERS AND HENCE, NO MERIT IN THE DISALLOWA NCE UNDER SECTION 40(A)(IA) OF THE ACT. THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH MARCH, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6