Rajesh Bhalla, Kullu V. DCIT, Mandi

ITA 947/CHANDI/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2509 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 20-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.947/CHD/2012 (ASSESSMENT YEAR : 2009-10) RAJESH BHALLA PROP.M/S DURGA, VS. THE D.C.I.T., FURNITURE INDUSTRY, MANIKARAN, CIRCLE MANDI, ROAD, PARLA BHUNTER DISTT. KULLU. (H.P.) (H.P.) PAN: ACMPB9764A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARRY RIKHY RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 05.11.2015 DATE OF PRONOUNCEMENT : 05.01.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INC OME TAX (APPEALS), SHIMLA DATED 20.7.2012 FOR ASSESSMEN T YEAR 2009-10. 2. THE GROUND NOS.1 AND 5 OF THE APPEAL ARE GENERAL AND, HENCE NEED NO ADJUDICATION. 3. THE GROUND NOS. 2 AND 4 OF THE APPEAL ARE NOT PRESSED AND, THEREFORE, THE SAME ARE DISMISSED AS N OT 2 PRESSED. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CARRIAGE CONTRACTOR ALSO ENGAGED IN T HE BUSINESS OF PROVIDING WAREHOUSE FACILITY FOR THE ST ORAGE OF CEMENT TO M/S A.D. HYDRO POWER LTD. DURING THE YEA R, HE HAD ACQUIRED TRUCKS THROUGH THE TRUCK UNION, NAMELY , LOWER KULLU SNOWER VALLEY TRUCK OPERATORS UNION, BHUNTAR ON HIRE BASIS AND MADE PAYMENT AMOUNTING T O RS.46,53,0030/- TO THE UNION. SINCE TAX WAS NOT DEDUCTED UNDER SECTION 194 OF THE INCOME TAX ACT, 1 961 (IN SHORT THE ACT), THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CARRIAGE EXPENSES AMOUNTING TO RS.46,53,03 0/- SHOULD BE DISALLOWED TO THE ASSESSEE INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE RE PLY OF THE ASSESSEE WAS THAT THE TRUCKS WERE ACQUIRED FROM THE TRUCK UNION FOR EXECUTING THE CONTRACT OF CARRIAGE OF CEMENT ON BEHALF OF M/S A.D. HYDRO POWER LTD. MOR E THAN 250 TRUCK OPERATORS CARRIED THE CEMENT FROM TH E PREMISES OF THE ASSESSEE TO THE SITE OF M/S A.D. HY DRO POWER LTD. RELIANCE WAS PLACED ON A NUMBER OF JUDG MENT TO THE EFFECT THAT HE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON CARRIAGE PAYMENTS MADE TO TRUCK UNION. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWED AN AMOUNT OF RS.46,53,030/- INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 5. AGGRIEVED BY THIS ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT (APPEALS) AND REITERA TED THE 3 SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. HOW EVER, THE LEARNED CIT (APPEALS) REJECTED THE CONTENTION O F THE ASSESSEE. HE WAS OF THE VIEW THAT ALL THE PAYMENTS WERE MADE BY THE ASSESSEE TO THE TRUCK UNION AND IT WAS NONE OF ASSESSEES CONCERN THAT TO WHOM THE SAID PAYMENT WAS DISBURSED BY THE TRUCK UNION. THE INDIVIDUAL TRUCK OWNERS, IF ANY, WERE PERSONA-NON-GRATA FOR THE ASSE SSEE AS HIS INTERFACE WAS ONLY WITH THE ASSESSEE. FURTHER , HE HELD THAT THE ASSESSEE HAD AN IMPLICIT CONTRACT WIT H THE TRUCK OPERATORS UNION TO ENSURE HIM AN INCESSANT A ND UNINTERRUPTED SUPPLY OF TRUCKS/VEHICLES SO AS TO EX ECUTE HIS OWN CARRIAGE CONTRACT WITH M/S A.D. HYDRO POWER . IN THIS WAY, THE APPEAL OF THE ASSESSEE, ON THIS GROUN D, WAS DISMISSED. 6. AGGRIEVED BY THIS, THE ASSESSEE HAS COME IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. THE CRUX OF HIS ARGUMENTS WAS THAT THE PAYMENT WAS MADE BY THE ASSESSEE TO THE TRUCK UNION TO BE REIMBURSED TO THE INDIVIDUAL TRUCK OWNERS. THE ASSESSEE DOES NOT HAV E ANY CONTRACT WITH THE TRUCK UNION. THE TRUCK UNION IS JUST A FACILITATOR TO ENGAGE THE TRUCKS ON BEHALF OF THE A SSESSEE. AS REGARDS THE WORK DONE BY THE INDIVIDUAL TRUCK OW NERS, IT WAS ARGUED THAT EVEN WITH THESE TRUCK OWNERS, TH E ASSESSEE DOES NOT HAVE ANY CONTRACT. IN ANY CASE, THE PAYMENT MADE TO THESE TRUCK OWNERS ON ANY OCCASION DOES 4 NOT EXCEED RS.20,000/-. RELIANCE WAS PLACED ON A N UMBER OF JUDGMENTS INCLUDING THAT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. UNITED RICE LAND LTD. (2010) 322 ITR 594 (P&H). IN THIS WAY, IT WAS ARGUED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BE DELET ED. 8. THE LEARNED D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEA LS). HE FURTHER ARGUED THAT THOUGH THERE IS NOT A WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE TRUCK ASSOCIATION, THE AGREEMENT CAN BE ORAL ALSO. THERE FORE, THE ASSESSEE WAS LIABLE TO DEDUCTION OF TAX AT SOUR CE UNDER SECTION 194C ON THE PAYMENT MADE TO THE SAID ASSOCIATION. SINCE THE ASSESSEE HAS NOT DEDUCTED T AX AT SOURCE, THE ASSESSING OFFICER HAS RIGHTLY INVOKED T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE PROVISIONS OF SECTION 194C OF THE ACT ARE APPLI CABLE TO A PERSON WHO IS RESPONSIBLE TO PAY ANY SUM TO ANY O THER PERSON FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT. HE IS LIABLE TO DEDUCT TAX AT SOURCE AT THE TIME OF CREDIT OF SUCH SUM OR AT THE TIME OF PAYMENT THE REOF. FOR THE RELEVANT ASSESSMENT YEAR, THESE PROVISIONS ARE APPLICABLE IF ANY SUCH INDIVIDUAL SUM EXCEEDS RS.20 ,000/- THIS IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE H AS HIRED TRUCKS FOR CARRYING OUT HIS CARRIAGE CONTRACT 5 BUSINESS WITH THE HELP OF LOWER KULLU SNOWER VALLEY TRUCK OPERATORS UNION, BHUNTER AND HIRED TRUCKS FO R CARRIAGE OF CEMENT THROUGH THEM AND CARRIAGE CHARGE S ARE BEING REMITTED TO TRUCK OWNERS THROUGH UNION. THE LEARNED CIT (APPEALS) IN HIS ORDER AT PARA 8 HAS AD MITTED THE FACT THAT THE ASSESSEE HAS HIRED THE TRUCKS ON LY THROUGH THE TRUCK OPERATORS UNION, BHUNTER AND HAD NOT DEALT INDIVIDUALLY AND DIRECTLY WITH THE TRUCK OWNE R. FURTHER, IT HAS ALSO BEEN ADMITTED BY HIM THAT THE PAYMENTS WERE MADE BY THE ASSESSEE TO TRUCK UNION O NLY. HE HIMSELF STATED THAT THE INTERFACE OF THE ASSESSE E IS ONLY WITH THE TRUCK OPERATORS UNION. IN SUCH A SCENARI O, WE HAVE TO CHECK THE APPLICABILITY OF PROVISIONS OF SE CTION 194C OF THE ACT ON THE PAYMENTS MADE TO TRUCK OPERA TORS UNION. THE FACT IS THAT SINCE THERE IS NO CONTRACT OR AGREEMENT BETWEEN THE ASSESSEE AND THE TRUCK OPERAT ORS UNION. SECTION 194C OF THE ACT CANNOT BE INVOKED, AS THE PROVISIONS OF SECTION 194C OF THE ACT ARE APPLIED O NLY WHEN THERE IS A CONTRACT. THE CONTENTION OF THE LE ARNED CIT (APPEALS) THAT THERE WAS AN IMPLICIT CONTRACT B ETWEEN THE ASSESSEE AND THE TRUCK UNION IS DEVOID OF ANY M ERITS, AS NOWHERE ANY LOWER AUTHORITIES HAS BEEN ABLE TO DEMONSTRATE THE SAME. EVEN IN THE CERTIFICATE ISSU ED BY THE UNION, AS APPEARING IN THE RECORD, THERE IS NO MENTION OF ANY SUCH AGREEMENT OR FOR THAT MATTER ANY SUCH UNDERSTANDING BETWEEN THE ASSESSEE AND THE UNION. EVEN BEFORE US, WHILE ARGUING ON THE LINES OF AN ORAL AG REEMENT, THE LEARNED D.R. HAS NOT BEEN ABLE TO CONCLUSIVELY 6 DEMONSTRATE THE SAME. IN SUCH CIRCUMSTANCES, IN TH E ABSENCE OF ANY WRITTEN OR ORAL CONTRACT, SECTION 19 4 OF THE ACT DOES NOT COME INTO PLAY. THE PROVISIONS OF SEC TION 40(A)(IA) OF THE ACT ARE, THUS, NOT APPLICABLE TO T HE FACTS OF THE CASE. RELIANCE PLACED BY THE LEARNED COUNSEL F OR THE ASSESSEE ON THE JUDGMENT IN THE CASE OF UNITED RIC E LAND LTD. (SUPRA) IS NOT OUT OF PLACE, WHEREBY IT HAS BE EN HELD BY THE HON'BLE HIGH COURT THAT IN THE ABSENCE OF AN Y WRITTEN OR ORAL AGREEMENT, THE PROVISIONS OF SECTIO N 40(A)(IA) OF THE ACT CANNOT BE APPLIED. IN VIEW OF THE ABOVE, WE DIRECT THE ASSESSING OFFICER TO DELETE TH E DISALLOWANCE ON THIS COUNT MADE BY HIM. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF JANUARY, 2016. SD/- SD/- (H.L. KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 5 TH JANUARY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7