M/s Mini Dairy, Kolkata V. ITO, WD-50(2), KOLKATA, Kolkata

ITA 962/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1369 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 06-09-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 01-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: S M SURANA
• Section: 194C

Judgement Text

1 ITA NO.962/KOL/2015 MINI DAIRY, AY 2010-11 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE .., /AND . ' # $% % , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 962/KOL/2015 ASSESSMENT YEAR: 2010-11 M/S. MINI DAIRY (PAN:AAOFM0668C) VS. INCOME-TAX OFFICER, WD-50(2), KOL APPELLANT RESPONDENT DATE OF HEARING 06.09.2017 DATE OF PRONOUNCEMENT 06.10.2017 FOR THE APPELLANT SHRI S. M. SURANA, ADVOCATE FOR THE RESPONDENT SHRI KALYAN NATH, ADDL. CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-15, KOLKATA DATED 09.06.2015 FOR AY 2010-11. 2. GROUND NOS. 1, 7 AND 5 ARE GENERAL IN NATURE AND REQUIRE NO ADJUDICATION. 3. GROUND NOS. 2 TO 5 ARE AGAINST THE ACTION OF THE LD. CIT(A) IN DISALLOWING THE FREIGHT CHARGES BY APPLYING SEC. 40(A)(IA) OF THE INCOME-TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4. BRIEF FACTS ARE THAT THE AO DURING THE ASSESSMEN T PROCEEDINGS NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF FREIGHT EXPENSES TO THE TU NE OF RS.27,03,311/-. ACCORDING TO THE AO, SINCE THERE HAS BEEN NO TDS DEDUCTED ON THE SAI D EXPENCE, HE RESTRICTED THE ALLOWANCE OF THE EXPENDITURE CLAIMED BY THE ASSESSEE AND THUS DISALLOWED RS.18,35,801/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A), WHO WAS PLEASED TO CONFIRM THE SAME. AGGRIEVED, THE ASSESSEE IS BEFORE US. 2 ITA NO.962/KOL/2015 MINI DAIRY, AY 2010-11 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE MAIN PLEA OF THE ASSESSEE IS THAT THERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE TRUCK OWNERS. ACCORDING TO THE ASSESSEE, WHICHEVER TRUCK WAS AVAILABLE ON A DAY TO DAY BASIS IT WAS HIRED LOCALLY AND FREIGHT CHARGES WERE SETTLED AND PAID. SINCE THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND LORRY OWNERS AND THERE WAS NO FIXED AMOUNT OF FREIGHT OR ANY RATE CONTRACT WAS THERE ON RECORD, THE DISALLOW ANCE U/S. 40(A)(IA) OF THE ACT FOR INFRINGEMENT OF SEC. 194C OF THE ACT CANNOT BE SADD LED ON THE ASSESSEE. WE NOTE THAT IN SIMILAR CASES, THE TRIBUNAL HAS BEEN CONSISTENTLY T AKING THE VIEW THAT SINCE THERE WAS NO CONTRACT BETWEEN THE ASSESSEE FIRM AND THE TRUCK OW NERS, TAX DEDUCTION AT SOURCE U/S. 194C OF THE ACT CANNOT BE ATTRACTED. WE NOTE THAT THERE WAS NO CONTRACT EITHER VERBAL OR WRITTEN IS ENTERED INTO WITH THE OWNERS/DRIVERS IN THIS CASE, SO IT IS PURELY TEMPORARY TRANSPORTING ARRANGEMENT MADE BY THE ASSESSEE. IN SUCH A SCENAR IO, NO DISALLOWANCE WAS WARRANTED. MOREOVER, WE NOTE THAT THE PAN OF ALL THE TRUCK OWN ERS WERE FURNISHED BEFORE THE AUTHORITIES BELOW WHICH IS EVIDENT FROM PAGE 3 OF T HE LD. CIT(A)S ORDER AND, THEREFORE, IN ANY CASE, THE DISALLOWANCE WAS NOT WARRANTED. THE AFORESAID VIEW OF OURS HAS BEEN UPHELD BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF C IT VS. STUMM INDIA, ITA NO. 127 OF 2009 DATED 16.08.2010, WHEREIN THE HONBLE JURISDIC TIONAL HIGH COURT HELD AS UNDER: IT IS URGED BEFORE US THAT THE LEARNED TRIBUNAL OU GHT NOT TO HAVE ACCEPTED THE JUDGMENT AND ORDER OF THE CIT(APPEAL) WHO HAS QUASH ED THE DISALLOWANCE OF DEDUCTION OF RS.41,33,710/- AND ON ACCOUNT OF TAX D EDUCTION AT SOURCE. THE LEARNED TRIBUNAL HAS RECORDED THE FACT THAT THE DEPARTMENT HAS NOT BEEN ABLE TO BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS MA DE THE PAYMENT TO THE TRANSPORTERS IN PURSUANCE OF CONTRACT FOR CARRIAGE OF GOODS OF THE ASSESSEE AND THE QUESTION OF DEDUCTION AT SOURCE UNDER SECTION 194C DOES NOT AND CANNOT ARISE. IN THE ABSENCE OF EVIDENCE OF PAYMENT MADE BY THE ASSESSEE TO THE TRANSPORTERS, THE ASSESSEE CANNOT BE SADDLED WITH THE LIABILITY OF DEDUCTING T AX AT SOURCE. BEFORE US NO OTHER POINT HAS BEEN URGED NOT IT IS SAID THAT THE AFORES AID FACT FINDING IS TRUTHFUL WITHOUT ANY BASIS WHATSOEVER. 6. RESPECTFULLY FOLLOWING THE AFORESAID PRESCRIPTIO N OF LAW, WE DELETE THE ADDITION AND ALLOW THIS GROUND OF APPEAL OF ASSESSEE. 7. GROUND NO. 6 IS AGAINST THE ACTION OF THE LD. CI T(A) IN DISALLOWING THE SALARY PAID TO PARTNERS. THE BRIEF FACTS OF THE CASE ARE THAT DUR ING ASSESSMENT PROCEEDINGS THE AO NOTED 3 ITA NO.962/KOL/2015 MINI DAIRY, AY 2010-11 THAT AS PER THE PARTNERSHIP DEED DATED 16.04.2008 I N CLAUSE 9(B) THE PARTNERS REMUNERATION WAS CLEARLY QUANTIFIED AT RS.15000/- FOR RUBY GHOSH AND RS. 2000/- FOR ANUPAM KR. GHOSH PER MONTH, SO THE AO WAS OF THE OPINION THAT THE WO RKING PARTNERS ARE ONLY ELIGIBLE FOR REMUNERATION OF RS.2,04,000/- AND SINCE THE REMUNER ATION CLAIMED BY THE ASSESSEE IS TO THE TUNE OF RS.4,05,317/- THE DIFFERENCE OF RS.2,01,317 /- WAS DISALLOWED AND ADDED TO ITS TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO CONFIRM THE SAME. AGGRIEVED, ASS ESSEE IS BEFORE US. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE MAIN PLEA OF THE ASSESSEE IS THAT THE AO HAS NOT TAKEN NOTE OF THE SUB-CLAUSE 9(A) OF THE PARTNERSHIP DEED WHICH PROVIDED FOR PAYMENT OF REMUNERATION IN TERMS OF SECTION 40(B)(V) OF THE ACT AND, THEREFORE, THE ACTION OF T HE AO WAS MISPLACED. WE HAVE GONE THROUGH THE PARTNERSHIP DEED AND TAKES NOTE OF THE CLAUSES 9(A) AND 9(B) OF THE PARTNERSHIP DEED, WHICH ARE AS UNDER: `9(A) THAT THE REMUNERATION OF THE PARTNERS SHALL BE FIXED BY THE PARTNERS MUTUALLY BEFORE BEGINNING OF EACH YEAR AND SHALL BE SUBJECTED TO TH E LIMIT AS LAID DOWN IN SUB CLAUSE (V) OF CLAUSE (B) OF SECTION 40 OF THE INCOME TAX ACT, 196 1 AND ALL THE PARTNERS SHALL BE WORKING PARTNERS. 9(B) THE PARTNERS SHALL BE ENTITLED TO MONTHLY REM UNERATION AS DETAILED BELOW: RUBY GHOSH RS. 15,000/- (FIFTEEN THOUSAND P.M. ) ANUP KUMAR GHOSH RS. 2,000/- (TWO THOUSAND P.M. ) HOWEVER PARTNERS MAY REDUCE, INCREASE THE REMUNERAT ION AS MUTUALLY AGREED. 9. FROM A READING OF THE AFORESAID CLAUSE, WE NOTE THAT THE PARTNERS SMT. RUBY GHOSH AND SHRI ANUP KUMAR GHOSH HAVE AGREED FOR A MONTHLY REMUNERATION OF RS.15,000/- AND RS.2,000/- PER MONTH RESPECTIVELY. HOWEVER, IT HAS TO BE SEEN THAT THE PARTNERS HAVE AGREED BY THIS DEED TO REDUCE OR INCREASE THE REMUNERATION AS MUTUALLY AGREED UPON; AND NEEDS TO BE READ ALONG WITH CLAUSE 9(A) WHICH PRESCRIBES AN UPPER CEILING OF REMUNERATION TO BE MUTUALLY AGREED UPON. WE NOTE THAT CLAUSE 9(A) GIVE S THE UPPER LIMIT PRESCRIBED AS PER SECTION 40(B)(V) OF THE ACT, WHICH IMPLIES THAT THE ASSESSEE FIRM CAN GIVE REMUNERATION TO THE WORKING PARTNERS WITHIN THE LIMIT PRESCRIBED AS PER THE AMOUNT WORKED OUT U/S. 40(B)(V) OF THE ACT. IN SUCH A SCENARIO, THE AO OUGHT TO HA VE SEEN WHETHER THE REMUNERATION CLAIMED 4 ITA NO.962/KOL/2015 MINI DAIRY, AY 2010-11 BY THE ASSESSEE HAS BREACHED THE PROVISION OF SEC. 40(B)(V) OF THE ACT AND IF IT IS NOT THEN THE REMUNERATION HAS TO BE ALLOWED BECAUSE THE PARTNERS HIP DEED EMPOWERS THE WORKING PARTNERS TO MUTUALLY COME TO AN AGREEMENT IN RESPEC T OF THEIR REMUNERATION SUBJECT TO THE UPPER CEILING AS SPECIFIED IN CLAUSE 9(A). SO, THE REFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMAND THE MATTER BACK TO THE FILE OF TH E AO TO VERIFY WHETHER THE WORKING PARTNERS REMUNERATION IS WITHIN THE LIMIT PRESCRIB ED U/S. 40(B)(V) OF THE ACT AND IF IT IS SO, THE DEDUCTION AS CLAIMED BY THE ASSESSEE FIRM HAS T O BE ACCEPTED. WITH THIS OBSERVATION, WE ALLOW THIS GROUND OF APPEAL OF APPEAL OF ASSESSEE F OR STATISTICAL PURPOSES. 10. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 6 TH OCTOBER, 2017. SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6 TH OCTOBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. MINI DAIRY, KALASHIMA, NATTAGRAM, NORTH 24 PARGANAS, WEST BENGAL, PIN-743249. 2 RESPONDENT ITO, WARD-50(2), KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY