Appeal Details
Counselvise Citation
[2013] 121 COUNSELVISE.COM (IT) 9556 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
9 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
15-11-2013
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
29-10-2013
Assessment Year
2009-2010
Appeal Filed On
23-01-2013
Judgement Text
, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . . . . , , , , ! ! ! ! ' #$ ' #$ ' #$ ' #$ , , , , % % % % BEFORE S/SHRI N.S. SAINI, ACCOUNTANT MEMBER AND KUL BHARAT, JUDICIAL MEMBER) IT(SS)A NO.41 TO 44/AHD/2013 [ASSTT.YEAR : 2007-2008 TO 2010-2011] GYANCHAND GANDHI (HUF) PROP: RAMAN ROADWAYS C/O. RAMAN ROADWAYS OUTSIDE SARJAWA GATE, SIROHI RAJASTHAN. PAN : AACHG 9679 M /VS. ACIT, CENT.CIR.2(2) AHMEDABAD. IT(SS)A NO.111 TO 114/AHD/2013 [ASSTT.YEAR : 2007-2008 TO 2010-2011] DCIT, CENT.CIR.2(2) AHMEDABAD. /VS. GYANCHAND GANDHI (HUF) PROP: RAMAN ROADWAYS C/O. RAMAN ROADWAYS OUTSIDE SARJAWA GATE, SIROHI RAJASTHAN PAN : AACHG 9679 M ( (( ('( '( '( '( / APPELLANT) ( (( ()*'( )*'( )*'( )*'( / RESPONDENT) + , - / REVENUE BY : SHRI T.P.KRISHNAKUMAR CIT-DR /$ , - / ASSESSEE BY : SHRI TUSHAR HEMANI '0 , $1/ DATE OF HEARING : 29 TH OCTOBER, 2013 234 , $1/ DATE OF PRONOUNCEMENT : 15-11-2013 IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -2- 5 / O R D E R PER BENCH : THESE CROSS APPEALS ARE FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE CONSOLIDATED ORDER OF THE C IT(A)-III, AHMEDABAD DATED 14.12.2012. 2. IN THE ASSESSEES APPEAL, THE SOLE ISSUE INVOLVE D IS THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE MADE UNDER SECTION 40A(3) OF THE I.T.ACT IN RESPECT OF T HE FOLLOWING AMOUNTS: ASSTT.YEAR AMOUNTS ( ` ) 2007-2008 9,286/- 2008-2009 5,34,973/- 2009-2010 11,96,342/- 2010-2011 1,23,044/- 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY IS ENGAGED IN THE BUSINESS OF TRANSPORTATION. DURING THE YEAR, THE ASSESSEE USED ITS OWN TRUCKS AS WELL AS HIRED TRUCK S FROM OUTSIDE THE PARTIES, FOR WHICH THE FREIGHT PAYMENTS WERE MA DE. THE AO OBSERVED THAT IN CERTAIN CASES, THE ASSESSEE-COMPAN Y HAD MADE FREIGHT PAYMENTS TO BROKERS IN CASH IN EXCESS OF LI MITS PRESCRIBED UNDER SECTION 40A(3) OF THE ACT. THE AO ISSUED SHO W CAUSE NOTICE TO THE ASSESSEE AS TO WHY SUCH PAYMENT SHOUL D NOT BE DISALLOWED UNDER SECTION 40A(3). THE EXPLANATION G IVEN BY THE ASSESSEE WAS NOT ACCEPTED BY THE AO FOR THE REASONS THAT THE PROVISIONS OF SECTION 40A(3) WERE APPLICABLE IN THE RELEVANT IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -3- ASSESSMENT YEARS, WHERE THE ASSESSEE INCURRED ANY E XPENDITURE AND IN RESPECT OF WHICH, THE PAYMENT WAS MADE IN EX CESS OF ` 20,000/- OTHER THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DRAFT, 20% OF SUCH EXPENDITURE WAS TO BE TO BE DISALLOWED AS DEDUCTION. THE AO ALSO OBSERVED THAT ONLY EXCEPTIONS AVAILABLE HAVE BEEN PRESCRIBED UNDER RULE 6DD OF THE IT RULES, 1962, AN D THE ASSESSEE WAS ALLOWED EXCEPTION WITH REGARD TO THE P AYMENT IN EXCESS OF LIMIT PRESCRIBED UNDER RULE 6DD(J) IN RES PECT OF PAYMENT MADE ON BANK HOLIDAYS. THE AO ALSO NOTED THAT RULE 6DD(J) WAS NOT ON THE STATUTE AS IT HAS BEEN OMITTE D W.E.F. 25.7.1995. THE AO ALSO NOTED THAT THE EXCEPTIONS A RE NOW PROVIDED UNDER SECTION 40A(3) ITSELF. IN THE SECON D PROVISO, IT HAS BEEN PROVIDED THAT NO DISALLOWANCE SHALL BE MAD E IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES, AS MAY BE PRESC RIBED. SUCH CASES AND CIRCUMSTANCES HAVE BEEN SPECIFIED IN RULE 6DD OF THE I.T. RULES. HE SUBMITTED THAT SUB-CLAUSES (1) AND (2) OF RULE 6DD(J) WAS DELETED W.E.F. 25.7.1995 AND THAT PRIOR TO THE AMENDMENTS, THE RULE MAKING AUTHORITY HAD GIVEN THE POWER FOR UNAVOIDABLE CIRCUMSTANCES AND GENUINE DIFFICULTIES AS PERMISSIBLE GROUNDS FOR WAVING THE REQUIREMENT. TH E RULE MAKING AUTHORITY IN ITS WISDOM HAS SOUGHT TO TAKE A WAY THE SAID PERMISSIBLE FACTORS. THE AO ALSO OBSERVED THAT TH E RULE MAKING AUTHORITY IN ORDER TO PROMOTE PAYMENTS THROUGH BANK ING CHANNELS FOR CURBING BLACK MONEY, HAS PROVIDED FOR DISALLOWA NCE UNDER SECTION 40A(3), THEREFORE, THE ARGUMENTS THAT THE R EQUIREMENT OF BUSINESS OR CONFIRMATIONS FROM CERTAIN PAYEES WERE OF NO AVAIL TO IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -4- THE ASSESSEE. THE AO FURTHER NOTED THAT THE LEGIS LATURE NEVER INTENDED TO EXCLUDE THE TRANSPORTERS FROM THE AMBIT OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND THEY WE RE ALWAYS WITHIN THE PURVIEW OF THE PROVISIONS OF THE SAID SE CTION INSPITE OF THE DIFFICULTIES AND PROBLEMS FACED BY THEM. THE A O ALSO NOTED THAT THE CASE LAWS RELIED UPON BY THE ASSESSEE-COMP ANY WERE NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE , AS THESE DECISIONS HAVE BEEN GIVEN WITH REGARD TO ASSESSMENT YEARS PRIOR TO 25.07.1995 WHEN CLAUSE (J) OF RULE 6DD WAS LAID DOWN, WHERE THE TAX PAYER ESTABLISHES THAT THE PAYMENT COULD NO T BE MADE BY CROSSED CHEQUE OR DRAFT DUE TO EXCEPTIONAL CIRCUMST ANCES, NO DISALLOWANCE UNDER SECTION 40A(3) CAN BE MADE, WAS ON THE STATUTE. THE DECISIONS IN THESE CASES HAVE BEEN RE NDERED IN THE LIGHT OF THE PROVISIONS OF SECTION 40A(3) OF THE AC T READ WITH OLD CLAUSE (J) OF RULE 6DD. AFTER OMISSION OF THE SAID CLAUSE FROM THE RULES, NO SUCH CLAUSE WHICH PROVIDED FOR ALLOWA NCE OF DEDUCTION INSPITE OF BREACH OF THE PROVISIONS OF SE CTION 40A(3) NO EXCEPTIONAL CIRCUMSTANCES HAVE BEEN PRESCRIBED. I N VIEW OF THE ABOVE REASONS, THE AO DISALLOWED THE PAYMENT IN EXC ESS OF ` 20,000/- MADE DURING THE YEARS UNDER CONSIDERATION IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. 4. THE ASSESSEE IN THE APPEAL BEFORE THE LEARNED CI T(A) MADE WRITTEN SUBMISSIONS, WHICH ARE QUOTED IN PARA-5 OF THE ORDER OF THE LEARNED CIT(A), WHICH READS AS UNDER: IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -5- 5. APPELLANT IN ITS WRITTEN SUBMISSIONS ARGUED THA T DISALLOWANCE U/S. 40A(3) I. WE ARE IN THE BUSINESS OF HIRING OF TRUCK S AS WELL AS PROVIDING OUR OWN TRUCKS FOR TRANSPORTATION OF GOODS FOR OUR CUSTOMERS WHICH INCLUDE GROUPS & COMPANIES LIKE HUL, KALPATHARU POWER, RELIANCE ETC., WITH WHOM WE FIX FREIGHT CHARGES TO BE PAID B Y THEM DEPENDING UPON THE DESTINATION FOR PROVIDING O R ARRANGING TRUCKS FOR TRANSPORTING THEIR GOODS BY TRUCKS . AS STATED THE TRANSPORTATION OF GOODS FOR CLIENTS IS DONE BY US; (I) BY OUR OWN FLEET OF TRUC KS AND (II) BY HIRING OUT SIDE TRUCKS (TRANSPORTATION OF GOODS BY ARRANGING/HIRING OUTSIDE TRUCKS ACCOUNTS FOR OUR MAJOR TURNOVER FREIGHT INCOME, APPROX. 78%) THUS, TO THE EXTENT OF TRANSPORTATION OF CLIENTS GO ODS BY OWN TRUCKS, IT IS OUR OWN TRANSPORTATION WORK. HOWEVER, WHEN THE TRANSPORTATION OF GOODS FOR CLIENTS IS DONE BY US BY HIRING OUTSIDE TRUCKS, OUR ROLE FOR ALL PRACTICAL PURPOSES IS OF AGENT FOR OUR CLIENT. WE COLLECT THE AGREED FREIGHT CHARGES FR OM OUR CLIENTS AND IN TURN PAY/REIMBURSE THE FREIGHT CHARGES TO TRUCKWALAS/BROKERS TOWARDS TRANSPORTING GOODS OF OUR CLIENTS. IN THE RELATIONSHIP OF AGENT AND PRINCIPAL WHAT WE GET IS DIFFERENCE OF FREIGHT PAID TO OUTSIDE TRUCKWALA/BROKER AND WHAT WE CHARGE TO OUR CLIENT. AS WE CARRYOUT TRANSPORTATION WORK BY OUR OWN FLEET OF TRUCKS AS WELL AS BY OUTSIDE HIRED TRU CKS, IN ACCOUNTS FREIGHT RECEIVED IS BOOKED AS FREIGHT INCOME AND FREIGHT PAID IS DEBITED AS FREIGHT PAID A/C. AND IN RESPECT OF OWN TRUCKS ALL THE EXPENSES LIKE DIESEL, R.T.O. SALARIES OF DRIVERS ETC. ARE DEBITED . HOWEVER, FOR SAKE OF CONVENIENCE ENTIRE FREIGHT RECEIVED AND PAID IS ROUTED THROUGH PROFIT & LOSS IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -6- ACCOUNT. THIS ACCOUNTING SYSTEM, OF ROUTING FREIGHT PAYMENTS AND RECEIPTS THROUGH OUR BOOKS OF ACCOUNTS IS ADOPTED AND FOLLOWED BY US FOR ACCOUNTING CONVENIENCE. HOWEVER, THE FACT REMAINS THAT IN RESPECT OF ENGAGING OUTSIDE TRUCKS WHAT WE GET IS FREIGHT DIFFERENCE IN THE NATURE OF COMMISSION FOR HIRING TRUCKS FOR THE CUSTOMER. SIR, IN RESPECT OF OUTSIDE TRUCKS, WE COULD HAVE ADOPTED THE SYSTEM OF ACCOUNTING WHEREBY THE TURNOVER RELATABLE TO HIRED TRUCKS AND CONSEQUENT PAYMENT OF FREIGHT COULD HAVE BEEN EXCLUDED FROM THE TOTAL TURNOVER AND EXPENSES AND ONLY INCOME BOOKED IN PROFIT & LOSS ACCOUNT WOULD HAVE BEEN THE DIFFERENCE OF FREIGHT PAID AND RECEIVED IN THE NATURE OF COMMISSION AND IN THAT CA SE BECAUSE OF ESTABLISHMENT OF AGENT RELATIONSHIP THE PROVISIONS OF 40A (3) R.W.S RULE 6DD WOULD NOT HAVE BEEN APPLICABLE. TO SUBSTANTIATE OUR ABOVE CONTENTIONS, WE ARE ENCLOSING HEREWITH THE FOLLOWING CHARTS SHOWING BREAK UPS:- (1) BREAK UP OF FREIGHT INCOME SHOWING INCOME FROM OWN TRUCKS AND FROM TRUCKS HIRED (2) BREAK OF EXPENDITURE FOR OWN TRUCKS AND TOWARDS FREIGHT CHARGES ETC. FOR OUTSIDE TRUCKS (3) STATEMENT OF GROSS INCOME EARNED FROM OWN TRUCKS AND FROM OUTSIDE HIRED TRUCKS. THE CHART-I SHOWS % OF INCOME FROM TRUCKS HIRED TO TOTAL FREIGHT INCOME RECEIVED BY THE COMPANY YEARWISE AS UNDER- A.Y. % OF OUTSIDE FREIGHT INCOME IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -7- 2007-08 76.04 2008-09 79.18 2009-2010 79.70 2010-2011 72.30 THUS, ON PERUSAL OF ENCLOSED CHART HONOUR WILL FIND THAT, COMPANYS MAJOR BUSINESS ACTIVITY IS HIRING O F TRUCKS FOR TRANSPORTATION OF GOODS FOR ITS CUSTOMER S APPROX, 78% AND BUSINESS OF TRANSPORTATION AS TRANSPORTER FROM ITS OWN FLEET OF TRUCKS APPROX. 22 %, HENCE, IT CAN VERY WELL BE SAID THAT MAINLY WE ARE ACTING AS AGENT FRO ARRANGING TRUCKS FOR OUR CLIENT S. THE CHART-ILL SHOWS GROSS INCOME EARNED BY THE COMPANY BY OPERATING OWN TRUCKS AND. BY HIRING OUTSIDE TRUCKS. ON PERUSAL OF THE SAID CHART YOU WI LL FIND THAT, WE HAVE EARNED DIFFERENCE OF FREIGHT RECEIVED AND PAID RANGING FROM 2.79% TO 3.83% ON THE TOTAL FREIGHT INCOME RECEIVED AND WHICH, IS IN THE NATURE OF COMMISSION INCOME FOR HIRING TRUCKS FOR OUR CLIENTS. AS STATED HEREINABOVE, AS WELL AS OBSERVED AND NARRATED IN THE JUDGEMENT REFERRED ABOVE, JUST FOR ACCOUNTING CONVENIENCE ENTIRE FREIGHT INCOME INCLUDING IN RESPECT OF OUTSIDE TRUCKS AS WELL AS FREIGHT PAYMENT EXPENSES HAVE BEEN ROUTED THROUGH BOOKS OF ACCOUNTS AND SHOWN AS TURNOVER AND EXPENSES. OTHERWISE THIS COULD HAVE BEEN VERY WELL REDUCED FROM TURNOVER AND EXPENSES AND SHOWN IN THE BOOKS OF ACCOUNTS AND DIFFERENCE OF FREIGHT PAI D AND RECEIVED IN THE NATURE OF COMMISSION INCOME COULD HAVE BEEN SHOWN AS INCOME. IF ACCOUNTING TREATMENT HAS BEEN GIVEN AS STATED ABOVE PROVISIONS OF SECTION 40A(3) WOULD NOT HAVE BEEN INITIATED. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -8- THE RATIO OF THE JUDGEMENT IN THE CASE OF G.A ROADLINES V. I.T.O. CITED HEREIN BELOW SQUARELY APPLIES TO THE FACTS OF OUR CASE. (I) G.A. ROAD CARRIERS V. I.T.O ITAT HYDERABAD BENCH ' B' (2011) 44 SOT 145 (HYD.) IN THE JUDGEMENT REFERRED ABOVE, IN PARA 9 OF ITS ORDER, IT AT HAS STATED AS UNDER: SINCE, WE HELD THAT THE ASSESSEE-FIRM WAS NOT WRONG IN EXCLUDING THE TRANSACTION RELATING TO FREI GHT CHARGES RECEIVED FROM THE CONSIGNORS AND PAID TO TH E VEHICLE OWNERS FROM, ITS PROFIT AND LOSS ACCOUNT, T HE ONLY OTHER ISSUE THAT REMAINS TO BE ADJUDICATED UPO N IS WHETHER THE AMOUNT MENTIONED IN THE TDS CERTIFICATES, THE DEDUCTION OF TDS BY CONSIGNOR FRO M THE GROSS FREIGHT CHARGES PAID TO THE ASSESSEE-FIRM , WOULD BECOME ASSESSEE'S GROSS BUSINESS RECEIPTS OR NOT. SIMILAR ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN THE CASE OF PARAS TRANSPORT CO. V. ITO( 2006)151 TAXMAN 7 (AGRA)(MAG.). IN THAT CASE, IT WAS HELD THAT WHERE THE RECEIPTS CONSISTED ON TWO ACCOUNTS ON ACCOUNT OF ASSESSEE'S OWN TRUCKS AS WEL L AS ON ACCOUNT OF TRUCKS OWNED BROTHERS BUT -HIRED B Y THE ASSESSEE., THE WHOLE OF THE RECEIPTS COMPUTED O N THE BASIS OF IDS CERTIFICATES COULD NOT BE ATTRIBUT ED AS RECEIPT ON ACCOUNT OF PLYING OF TRUCKS ON ASSESSEE' S OWN ACCOUNT AND THE TOTAL RECEIPTS COMPUTED ON THE BASIS OF TDS CERTIFICATES COULD NOT BE CONSIDERED A S ASSESSEE'S OWN RECEIPTS FOR THE PURPOSE OF SECTION 44AB OF THE INCOME TAX ACT. THE RATIO LAID DOWN IN THIS CASE SUPPORTS THE CONTENTIONS OF THE ASSESSEE. FURTHER IN PARA 10 OF ITS ORDER IT AT HAS OPINED AS UNDER:- IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -9- IN OUR CONSIDERED OPINION, THE NATURE OF BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE-FIRM FOR ASSESSMENT YEAR UNDER CONSIDERATION WAS PRIMARILY THAT OF AN AGENT. THE GROSS FREIGHT CHARGES PAID BY THE CONSIGNOR TO THE ASSESSEE-FIRM WERE A KIND OF REIMBURSEMENT OF SIMILAR PAYMENTS MADE BY THE ASSESSEE FIRM TO THE OWNERS OF THE TRANSPORT VEHICL ES ENGAGED. THE DEDUCTION OF TAX AT SOURCES BY THE CONSIGNORS FROM THE FREIGHT CHARGES PAID TO THE ASSESSEE-FIRM BY IT CANNOT LEAD TO THE CONCLUSION T HAT THE FREIGHT CHARGES CONSTITUTED THE ASSESSEE-FIRM'S GROSS BUSINESS RECEIPTS OR TRADING TURNOVER. SIMILARLY, THE ROUTING OF FREIGHT CHARGES PAID BY T HE CONSIGNORS AND PAYMENTS MADE BY THE ASSESSEE-FIRM TO THE VEHICLE OWNERS THROUGH ITS BANK ACCOUNT WOUL D NOT CONSTITUTE THE RECEIPTS AND EXPENSES AS PART OF ANY TRADING TRANSACTION OF THE ASSESSEE FIRM. THE PAYMENTS MADE TO THE VEHICLE OWNERS THEREFORE WOULD NOT CONSTITUTE ASSESSEE'S BUSINESS EXPENDITURE FOR THE PURPOSE OF COMPUTATION OF PROFIT AND GAINS OF ANY BUSINESS CARRIED ON BY THE ASSESSEE-FIRM IN ACCORDANCE WITH THE PROVISION OF INCOME TAX ACT. THE CIT(A) IS WRONG IN OBSERVING THAT THE ASSESSING OFFICER FOUND THAT THE STATUTORY AUDIT REPORT IS NO T DISCLOSING THE FULL FACTS SPECIALLY ON SECTION 40(A)(2)(B) AND SECTION 40A(3) WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFOR E US THAT THE AUDIT REPORT UNDER SECTION 44AB, THE AUDITOR DISCLOSED THE DETAILS WITH REGARD TO SECTIO N 40A(2)(B) OF THE ACT, IT IS PERTINENT TO NOTE THAT FIXING OF RATE BETWEEN THE BEEDI MANUFACTURERS AND THE ASSESSEE-FIRM HAS NOTHING TO DO WITH THE NATURE OF RELATIONSHIP. IT MAY BE POSSIBLE THAT AS A MATTER O F CONVENIENCE THE RATES MIGHT HAVE FIXED BY BOTH THES E PERSONS. IN THIS JUDGEMENT IT WAS HELD AS UNDER:- IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -10- AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION CANNOT BE SUSTAINED. HENCE THE ADDITION MADE ON THIS ACCOUNT IS TO BE DELETED. THEREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED. II. THE RATIO OF FOLLOWING JUDGEMENT ALSO VERY WELL APPLIES CIT VS. BALAJI ENGINEERING AND CONSTRUCTION (2010) 323 ITR 351 (KAR) WE ARE ENCLOSING HEREWITH COPY OF FULL JUDGEMENTS O F CASES CITED HEREIN ABOVE. YOUR HONOUR WILL APPRECIATE THE OBSERVATION, ANALYSIS AND FINDINGS GIVEN BY THE HON'BLE ITATAND HIGHCOURT IN THE SAID ORDERS. IF THE RATIO OF SAID JUDGEMENTS IS APPLIED TO THE FACTS OF OUR CASE, IN THE INTEREST OF JUSTICE AND EQUITY, THE DISALLOWANCE MA DE U/S. 40A(3) SHALL BE CONSIDERED UNWARRANTED BY YOUR HONOUR WE REQUEST YOU TO DELETE THE ADDITION. WITHOUT PREJUDICE TO THE ABOVE. : II. DURING ASSESSMENT PROCEEDINGS, APPELLANT VI DE ITS LETTER DT. 21/12/2011 HAS MADE SUBMISSIONS WHICH IS REPRODUCED HEREUNDER IN BRIEF: 1. AS STATED IN TO REPLY TO SHOW CAUSE NOTICE O F A.Y. 2007-08 TO A.Y. 2010-11, THE PAYMENTS IN CASH EXCESS OF LIMITS STIPULATED IN SECTION 40A HAS BEEN MADE AS THE TRUCK WAS GOING ON LONG HAUL AND IN THE LONG ROUTE HE REQUIRED TO INCUR HUGE EXPENSE ON FUE L TAXES, ROUTE CONTINGENCIES ETC. IN THESE CASES, WHI CH IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -11- ARE VERY FEW AS COMPARED TO NO OF PAYMENT ENTRIES, TRANSPORTER INSISTENCE FOR CASH PAYMENT WAS TO THE EXTENT THAT IF NOT AGREED, THE TRUCK WOULD NOT HAVE BEEN AVAILABLE TO US WHICH MIGHT RESULT IN LOOSING BUSINESS DUE TO DELAYS OR PAYING HIGHER FREIGHTS. B UT HOWEVER, THE PERSONS/PARTIES TO WHOM AND THROUGH WHOM CASH PAYMENT IS MADE ARE ALL GENUINE EXISTING PERSONS HAVING THEIR IDENTITY AND VEHICLE. WE ARE ENCLOSING HEREWITH YEARWISE LIST OF TOTAL SUCH PAYMENTS. 2. NOTE AS TO INTENTIONS OF THE LEGISLATURE TO INTRODUCE SECTION 40A(3) BY FINANCE BILL, 1968. 3. A. FURTHER WE HAVE STATED THAT, WE ARE ENGAGED IN TRANSPORT INDUSTRY WHEREIN WE ARE REQUIRED TO TRANSPORT GOODS OF OUR CLIENT FROM VARIOUS DESTINAT ION TO THE RECEIVING DESTINATIONS AND IN THE PROCESS, W E ARE REQUIRED TO HIRE THE OUTSIDE TRUCKS. IN MOST OF THE CASES SINGLE PERSON OWNS 1 OR 2 TRUC KS ONLY WHICH WE BOOK THEM FOR TRANSPORTING OUR CLIENT S GOODS MOSTLY THROUGH BROKER. BUT THEY INSIST FOR CA SH PAYMENT .IRRESPECTIVE OF ANY AMOUNT, NOT ONLY THAT PAYMENT OF ENTIRE FREIGHT IN CASH BECOMES THEIR CONDITION OF HIRING MANY A TIMES. IN MANY CASE, TRUCKS COME FROM LONG DISTANCE PLACES LIKE SOUTH, NORTH EAST CARRYING GOODS TO THIS PART OF COUNTRY. AFTER UNLOADING GOODS, THEY ARE AVAILABLE FOR HIRING BUT THEY ARE NOT KNOWN TO US AND OUR BROKER AND LANGUAGE IS ALSO A BARRIER. THEIR DESTINATION BEING FAR OFF LONG HAUL JOURNEY REQUIR ES TO EXPEND HEAVILY ON TOLL TAXES, DIESEL, LODGING AN D BOARDING, CONTINGENCIES ETC. AND HENCE THEY ARE NOT WILLING TO COME UNLESS PAYMENT OF ENTIRE STIPULATED FREIGHT ADVANCE IS PAID IN CASH. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -12- IN VIEW OF PECULIAR CIRCUMSTANCE OF THE TRANSPORT INDUSTRY, BROKER/DRIVER/OWNER INSIST FOR ENTIRE STIPULATED FREIGHT PAYMENT IN CASH ONLY AND SOMETIM E SHOW THEIR INABILITY TO BOOK OUR GOODS, IF CASH PAYMENT TERMS ARE NOT AGREED UPON. HOWEVER, IN OUR CASE, BUSINESS BEING VOLUMINOUS, WE REQUIRE MORE NUMBER OF VEHICLES FOR OUR CLIENTS EVERYDAY AND MAD E TO AGREE TO THEIR CONDITION OF CASH PAYMENT. NOT AGREEING TO THEIR CONDITION OF CASH PAYMENT MAY RESULT IN NOT GETTING THE VEHICLE AND IN TURN DELAYING/DEFAULTING IN DELIVERING THE GOODS OF CLIE NT IN TIME AND LOOSING BUSINESS. HOWEVER, WHILE MAKING PAYMENT IN CASH EXCEEDING STIPULATED AMOUNT, WE ENSURE ABOUT GENUINENESS AND IDENTITY OF THE PARTY, SO THAT PROVISIONS OF SECTIO N 40(A)(3) ARE COMPLIED WITH IN SPIRIT. B. FURTHER TO SUBSTANTIATE OUR CONTENTION I.E. T O ESTABLISH IDENTITY AND EXISTENCE OF THE RECEIVER AN D TO PROVE GENUINENESS OF THE CASH PAYMENT MADE EXCEEDING THE LIMITS PRESCRIBED IN SECTION 40A(3) A S STATED IN THE SUBJECT MATTER OF THIS REPLY THE RECE IVER OF SUCH PAYMENTS HAS ON OUR REQUEST HAS CONFIRMED THE PAYMENTS RECEIVED, THEIR INSISTENCE FOR CASH PAYMENT AND THEIR IDENTITY PROOFS. WE HAVE RECEIVED CONFIRMATION LETTERS IN MOST OF THE CASES. COPIES O F LETTERS ARE ENCLOSED HEREWITH FOR YOUR REFERENCE. T HIS WILL ENABLE YOUR HONOUR TO APPRECIATE AND ACCEPT TH E IDENTITY AND GENUINENESS OF PAYMENT AND ALLOW THE SAME. HOWEVER, IF YOUR HONOUR SO REQUIRES YOU MAY CALL THEM FOR CONFIRMATION OF THEIR CONFIRMATORY LETTERS. WE SHALL BE FURNISHING REMAINING CONFIRMATION LETTERS SHORTLY. C. SIR, WE ARE TRANSPORTER CATERING TO TRANSPO RTATION REQUIREMENTS OF MANY A CORPORATES LIKE HUL, RELIANCE, KALPATARU ETC. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -13- TRANSPORTATION WORK IS CARRIED OUT BY US FROM OWN FLEET OF TRUCKS AS WELL AS BY HIRING OUTSIDE TRUCKS . WE ARE GIVING HEREUNDER THE FIGURES OF TOTAL FREIGHT PAYMENTS AND FREIGHT PAYMENT MADE IN EXCESS OF STIPULATED LIMITS IN SECTION 40A(3) FOR THE REASONS STATED HEREIN ABOVE. A.Y. TOTAL FREIGHT PAYMENTS % TO TOTAL PAYMENT EXCEEDING INT. STIPULATED LIMIT --------------------------- ---------------------------------------------- 2007-2008 554489346 5349447 0.96 2008-2009 808868968 705918 0.08 2009-2010 1039293196 69247389 6.66 2010-2011 847691269 9485912 1.10 ON PERUSAL OF THE FIGURES* STATED HEREIN ABOVE YOUR HONOUR WILL FIND THAT THE % OF SUCH PAYMENTS ARE NO T THAT SIGNIFICANT AS COMPARED TO TOTAL FREIGHT PAYME NT EXCEPTING IN A.Y. 2008-09 THAT TOO FOR THE GENUINE REASONS STATED IN SUBMISSION BEFORE A.O. APPELLANT ALSO CITED VARIOUS JUDGEMENTS ON THE ISSU E OF DISALLOWANCE OF 40A(3), COPY OF LETTER ENCLOSED. III. THE LEARNED A.O. DISREGARDED THE CONTENTIONS OF THE APPELLANT AND MADE THE DISALLOWANCE AS STATED HEREINABOVE SPECIALLY WHEREIN WE HAVE CONTENDED THAT WE BOOK TRUCKS FOR TRANSPORTING OUR CLIENTS GOODS MOSTLY THROUGH BROKERS. HOWEVER, FOR THE PRACTICAL DIFFICULTIES, THE BROKERS INSIST FOR FREI GHT PAYMENT IN CASH FOR ONWARD PAYMENT TO DRIVERS/DRIVER CUM OWNERS OF THE TRUCK IN THE CIRCUMSTANCES MENTIONED HEREIN IN PARA 3 ABOVE. AS STATED ABOVE, THE BROKERS WHO HIRE TRUCKS FOR US ACT AS AGENT FOR US AND THE SECTION 40A(3) READ WIT H RULE 6DD PERMITS THE SAME AND HENCE THE PAYMENTS IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -14- MADE EXCEEDING RS.20,000/- (AND RS. 35,000/- AFTER 1/10/2009) OUGHT NOT-TO HAVE BEEN DISALLOWED BY A.O. WE REQUEST YOUR HONOUR TO APPRECIATE OUR SUBMISSION AS TO PAYMENTS MADE IN CASH EXCEEDING THE LIMITS STIPULATED IN SECTION 40A(3) IN VIEW OF FACTS AND CIRCUMSTANCES NARRATED HEREIN ABOVE AS WELL AS IN THE LIGHT OF JUDGEMENTS CITED HEREIN ABOVE AND PRAY YOUR HONOUR TO DELETE THE ADDITIONS MADE IN VARIOUS ASSESSMENT YEARS IN APPEAL BEFORE YOU.' WITHOUT PREJUDICE TO OUR GROUNDS OF APPEAL CONTAINE D IN PARA I & II (1 TO 3) AND III OF OUR OF SUBMISSIO N DT. 21/3/2012, WE SUBMIT THAT; A. AS SUBMITTED WE HAVE FURNISHED THE CONFIRMATIO N OF THE RECIPIENT OF FREIGHT HAVING PAN. IT CAN BE VERY WEL L SAID THAT THE FREIGHT RECEIVED BY THEM FROM US MIGHT HAV E BEEN SHOWN BY THE RECIPIENTS AS THEIR INCOME. AND IN THE SCENARIO OF DISALLOWANCE OF PAYMENTS U/S. 40A(3) OF THIS MAGNITUDE, MAY RESULT IN DOUBLE TAXATION, WHICH WAS HELD MANY A COURTS, IS NOT PERMISSIBLE .UNDER THE TAXATI ONS JAWS OF THE LAND. B. SIR, WE ARE IN THE BUSINESS OF TRANSPORTATION O F GOODS BY TRUCKS OWNED BY US AS WELL AS FROM TRUCK HIRED FROM OTHER TRUCK OWNERS THROUGH BROKERS AND DIRECTLY. IN THIS INDUSTRY, GROSS PROFIT RANGES FROM 5% TO 7% OF FREI GHT INCOME CONSIDERING MIX OF OWN TRUCK BUSINESS AND FR OM OUTSIDE TRUCKS. IF ABNORMAL AND HUGE DISALLOWANCE MADE U/S. 40A(3), SPECIALLY IN A.Y. 2009-10, IS NOT CONSIDERED AS EXP ENSES, THEN OUR G.P. WILL GO VERY HIGH, UNHEARD OF IN OUR TRADE. THIS WILL AMOUNT TO TAXATION OF NONREAL INCOME IN H ANDS OF APPELLANT.' IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -15- 5. THEREAFTER, THE LEARNED CIT(A) CONFIRMED THE ACT ION OF THE AO BY OBSERVING AS UNDER: 6. ARGUMENTS OF THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED, THE FACT THAT PAYMENTS EXCEEDING RS,20, 000/- IN CASH HAVE BEEN MADE BY APPELLANT REMAINS UNDISPU TED. APPELLANT HAS ARGUED THAT THESE PAYMENTS WERE MADE TO TRUCK DRIVERS WHO INSISTED PAYMENT IN CASH. THIS AR GUMENT OF THE APPELLANT IS NOT ACCEPTABLE BECAUSE APPELLAN T HAS NOT MADE PAYMENTS TO INDIVIDUAL TRUCK OWNERS BUT TO VARIOUS BROKERS THROUGH WHOM THE TRUCKS WERE ENGAGE D. IN SUCH A CASE, APPELLANT CANNOT ARGUE THAT PAYMENTS W ERE REQUIRED TO BE MADE IN CASH. THE CASE OF THE APPELL ANT IS NOT COVERED BY ANY OF THE EXCEPTIONS MENTIONED IN R ULE 6DD. 6.1 THE RELIANCE PLACED BY THE APPELLANT ON THE DEC ISION OF HON'BLE ITAT HYDERABAD BENCH IN THE CASE OF GA ROAD CARRIERS IS ALSO MISPLACED BECAUSE FACTS OF CASE AR E DIFFERENT. IN THE CASE OF G.A ROAD CARRIERS IT WAS FOUND BY HON'BLE ITAT THAT APPELLANT WAS CONSISTENTLY FOLLOW ING THE SAME METHOD OF ACCOUNTING. IT ACCOUNTED THE FIXED PERCENTAGE OF COMMISSION OUT OF FREIGHT INCOME EARN ED BY VEHICLE OWNERS. IN HIS CASE, NEITHER FREIGHT PAYMEN TS MADE TO TRUCK DRIVERS CONSTITUTED ANY BUSINESS EXPENSES NOR THE REIMBURSEMENT OF FREIGHT CHARGES FROM THE CUSTOMERS FORMED TURNOVER IN HIS BOOKS OF ACCOUNTS. UNDER SUC H CIRCUMSTANCES IT WAS HELD BY HON'BLE ITAT THAT NATU RE OF BUSINESS OF APPELLANT IS OF AN AGENT. HOWEVER, IN T HE CASE OF APPELLANT, THE ENTIRE FREIGHT CHARGES FROM THE C USTOMERS HAVE BEEN INCLUDED IN HIS BOOKS OF ACCOUNTS, AS TUR NOVER AND ALL THE FREIGHT PAYMENTS MADE TO THE DRIVERS AR E PART OF BUSINESS EXPENSES. IN SUCH A CASE, PROVISIONS OF SE CTION 40A(3) ARE CLEARLY APPLICABLE. 6.2 THE ALTERNATE ARGUMENT OF THE APPELLANT THAT IF DISALLOWANCE U/S. 40A(3) IS MADE IN HIS CASE, THE G P WILL GO ABNORMALLY HIGH IS ALSO NOT ACCEPTABLE. THE IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -16- DISALLOWANCE MADE U/S. 40(A)(3) IS IN THE NATURE OF A TECHNICAL DISALLOWANCE FOR VIOLATION OF SPECIFIC PR OVISIONS OF INCOME TAX ACT. THE OBJECT OF THESE PROVISIONS I S TO CHECK EVASION OF TAXES SO THAT THE PAYMENT IS MADE FROM THE DISCLOSED SOURCES. IT IS NOT FOR ESTIMATION OF INCO ME OF APPELLANT. THEREFORE, THE ARGUMENT THAT GP WILL INC REASE ABNORMALLY AFTER MAKING DISALLOWANCE U/S. 40A(3) IS NOT ACCEPTABLE. 6.3 IN VIEW OF ABOVE MENTIONED FACTS AND FOR REASON S GIVEN BY AO IN DETAIL IN THE ASSESSMENT ORDER AS MENTIONE D ABOVE, I HOLD THAT THE DISALLOWANCE MADE U/S. 40A(3 ) FOR ALL THE 4 YEARS IS JUSTIFIED. DISALLOWANCE OF RS.10,69, 889/FOR A.Y. 2007-08, RS.7,05198/- FOR A.Y. 2008-09, RS.6,92,47,389/- FOR A.Y. 2009-10 AND RS.94,85,912/ - FOR A.Y. 2010-11 ARE CONFIRMED. GROUND NO.2,3&4 OF THE APPEALS ARE THUS DISMISSED FOR ALL THE 4 YEARS. 6. THE LEARNED AR OF THE ASSESSEE SUBMITTED BEFORE US THAT SINCE IN ALL THE YEARS THE ISSUE INVOLVED IS IDENTI CAL, THEREFORE, THE SAME ARE ARGUED TOGETHER. HE SUBMITTED THAT A SEAR CH ACTION UNDER SECTION 132 WAS CARRIED OUT IN THE ASSESSEES CASE ON 11.02.2010. THE AO FOUND THAT CERTAIN CASH PAYMENT S WERE MADE IN EXCESS OF LIMIT PRESCRIBED UNDER SECTION 40 A(3), AND HENCE, HE MADE THE IMPUGNED ADDITIONS. HE SUBMITTE D THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORTAT ION, AND HAS ENTERED INTO CONTRACT WITH M/S.HINDUSTAN LEVER LTD. , RELIANCE, KALPATARU, ETC. FOR TRANSPORTATION OF GOODS. COPIE S OF FEW SUCH AGREEMENTS ARE PLACED AT PAGE NOS.45 TO 65 OF THE P APER BOOK. HE SUBMITTED THAT CONSEQUENT TO THE AFORESAID ARRANGEM ENT, SUCH GOODS ARE TRANSPORTED THROUGH TRUCKS OWNED BY IT AS WELL AS IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -17- THROUGH HIRED TRUCKS. IT WAS SUBMITTED THAT AS RE GARD PAYMENTS IN RESPECT OF HIRING CHARGES OF THE TRUCKS, THE SAI D PAYMENT WAS MADE IN CASH BY THE ASSESSEE TO BROKERS WHO, IN TUR N, WAS REQUIRED TO MAKE PAYMENTS TO THE CONCERNED TRUCK OW NER/DRIVERS ON BEHALF OF THE ASSESSEE. HE SUBMITTED THAT THE FACT THAT THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE TO BROKERS WAS NOT IN DISPUTE AT ALL. IN VIEW OF THE ABOVE, IT WAS CONT ENDED THAT THERE WAS NO VIOLATION OF PROVISIONS OF SECTION 40A(3) R. W.S. RULE 6DD OF THE INCOME TAX RULES, SINCE THE CASH PAYMENTS HA VE BEEN MADE TO BROKERS. RELIANCE WAS PLACED AT PAGE NO.1 1 POINT-III OF THE CIT(A)S ORDER. IT WAS FURTHER SUBMITTED THAT EVEN THE LEARNED CIT(A) HAS RECORDED A FINDING THAT THE ASSE SSEE HAS NOT MADE PAYMENTS TO INDIVIDUAL TRUCK OWNERS BUT TO VAR IOUS BROKERS THROUGH WHOM THE TRUCKS ARE ENGAGED. RELIANCE WAS PLACED AT PAGE NO.12, PARA 6 OF THE LEARNED CIT(A)S ORDER. IT WAS FURTHER SUBMITTED THAT ULTIMATE RECIPIENT OF THE PAYMENT VI Z. THE DRIVERS/OWNERS OF THE TRUCK HAVE INSISTED FOR CASH PAYMENTS AS THEY HAVE TO TRAVEL HUGE DISTANCE AND CASH WAS REQU IRED FOR MEETING WITH THE EXPENDITURE AND EXIGENCIES DURING THE TRIPS. FOR THIS, RELIANCE WAS PLACED PARA 2.2. OF THE ASSESSME NT ORDER. IT WAS FURTHER SUBMITTED THAT AS PER CLAUSE-K OF RULE 6D D OF THE IT RULES, NO DISALLOWANCE U/S.40A(3) CAN BE MADE WHERE CASH PAYMENT WAS TO BE MADE TO AN AGENT WHO IN TURN WAS REQUIRED TO MAKE CASH PAYMENT ON BEHALF OF THE ASSESSEE. IT WA S SUBMITTED THAT AS PER BLACKS LAW DICTIONARY, BROKER MEANS AN AGENT WHO ACTS AS ON INTERMEDIARY OR NEGOTIATOR, ESPECIALLY B ETWEEN IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -18- PROSPECTIVE BUYERS AND SELLERS. THEREFORE, IT WAS SUBMITTED THAT IT IS ESTABLISHED BEYOND DOUBT THAT THE CONCERNED PAYM ENTS WERE MADE BY THE ASSESSEE TO ITS AGENTS/BROKERS. WHEN T HE PAYMENTS WERE MADE TO BROKERS AND THE FACT THAT THE ULTIMATE RECIPIENT OF THE PAYMENT VIZ. THE DRIVERS/ OWNERS OF THE TRUCKS HAVE DEMANDED CASH PAYMENTS IS NOT DISPUTED, EXCEPTION CARVED OUT AS PER RULE 6DD(K) CLEARLY GETS INVOKED AND NO DISALLOWANCE U/S .40A(3) IS CALLED FOR AND THE SAME BE DELETED. HE PLACED RE LIANCE ON THE DECISION OF THE ITAT, AHMEDABAD BENCH IN THE CASE O F VIJAYKUMAR P. DESAI (INDIVIDUAL & HUF) ITA NO.46 TO 57/AHD/2013 AND 85 TO 96/AHD/2013 CONSOLIDATED ORDE R DATED 29.8.2013, AND ALSO ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SRI SHANMUGA GINNING F ACTORY 37 TAXMANN.COM 422 (MAD.). IN THE ALTERNATIVE, THE L EARNED AR SUBMITTED THAT THE ASSESSEE HAS ON ONE HAND RECEIVE D FREIGHT FROM VARIOUS COMPANIES, AND ON THE OTHER HAND, IT HAS PA SSED ON CONSIDERATELY PORTION OF THE SAME TO ITS BROKERS FO R MAKING PAYMENTS IN RESPECT OF HIRING CHARGES. THE ASSESS EE RETAINS ONLY A SMALL AMOUNT FROM THE GROSS RECEIPTS RECEIVED FRO M THE CONCERNED COMPANIES, AND THE SAME RANGES BETWEEN 2. 79% TO 3.83% OF SUCH GROSS RECEIPTS. HE PLACED RELIANCE O N PAGE NO.17 OF THE PAPER BOOK. IT WAS ARGUED THAT MERELY FOR T HE SAKE OF CONVENIENCE, ASSESSEE RECORDED FREIGHT INCOME RECEI VED FROM THE COMPANIES AS WELL AS THE FREIGHT EXPENSES PAID THRO UGH BROKERS. IT IS SUBMITTED THAT WHAT THE ASSESSEE EARNS AS INC OME IS MERELY THE FREIGHT DIFFERENCE AND THE SAME IS IN THE NATUR E OF IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -19- COMMISSION. WHEN THE ASSESSEE EARNS MERELY FREIGHT DIFFERENCE, THE FREIGHT PAID TO THE BROKERS IS NOT ITS EXPENDIT URE AT ALL. ONCE THE PAYMENTS ARE NOT IN THE NATURE OF EXPENDITURE, THERE IS NO QUESTION OF DISALLOWANCE OF ANY EXPENDITURE INVOKIN G THE PROVISIONS OF SECTION 40A(3). HE PLACED RELIANCE O N THE DECISION OF THE ITAT, IN THE CASE OF G.A. ROADLINES VS. ITO, 44 SOT 145 (HYD) AND ITO VS. SHRI ASHISH V. PATEL, ITA NO.676/ AHD/2013 ORDER DATED 28.6.2013. 7. ON THE OTHER HAND, THE LEARNED DR ARGUED AND SUP PORTED THE ORDER OF THE AO, AND SUBMITTED THAT THE PAYMENT S WERE NOT MADE TO THE BROKERS, BUT TO THE PARTIES. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, THE AO OBSERVED THAT THE ASSESSEE HAS MADE CASH PAYMENTS FOR FREIGHT CHARGES TO BROKERS, WHICH WAS IN EXCESS OF THE LIMIT PRESCRIBED UNDER SECTION 40A(3) OF THE AC T. HE, THEREFORE, BY INVOKING THE PROVISIONS OF SECTION 40 A(3) OF THE ACT, MADE DISALLOWANCE OF ` 9,286/- FOR A.Y.2007-2008, `5,34,973/- FOR A.Y.2008-2009 `11,96,342/- FOR A.Y.2009- 2010 AND FOR A.Y. 2010-2001 `1,23,044/- . ON APPEAL, THE LEARNED CIT(A) HAS CONFIRMED THE ACTION OF THE AO, ON THE GROUND THAT THE ENTIRE FREIGHT CHARGES FROM CUSTOME RS HAVE BEEN INCLUDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, AS THE TURNOVER AND FREIGHT PAYMENTS HAVE BEEN MADE TO THE DRIVERS ARE PART OF IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -20- THE BUSINESS EXPENSES, AND THEREFORE, THE PROVISION S OF SECTION 40A(3) ARE APPLICABLE TO THE ASSESSEE. THE LEARNED CIT(A) HAS ALSO OBSERVED THAT THE ARGUMENTS OF THE ASSESSEE TH AT THE PAYMENTS WERE MADE TO TRUCK DRIVERS, WHO INSISTED F OR PAYMENT IN CASH WAS NOT EXCEPTIONAL CASE, BECAUSE THE ASSES SEE HAS NOT MADE PAYMENTS TO INDIVIDUAL TRUCK OWNERS BUT TO VAR IOUS BROKERS THROUGH WHOM THE TRUCKS WERE ENGAGED, AND THEREFORE , THE CASE OF THE ASSESSEE WAS NOT COVERED BY THE EXCEPTIONS MENT IONED IN RULE 6DD. THE ALTERNATIVE ARGUMENTS OF THE ASSESSE E THAT IF THE DISALLOWANCE IS MADE UNDER SECTION 40A(3), THE GP W ILL GO ABNORMALLY HIGH, WAS ALSO NOT ACCEPTED BY THE LEARN ED CIT(A) ON THE GROUND THAT THE DISALLOWANCE UNDER SECTION 40A( 3) OF THE ACT WAS A TECHNICAL DISALLOWANCE FOR VIOLATION OF SPECI FIC PROVISIONS OF INCOME TAX ACT. BEFORE US, THE LEARNED AR OF TH E ASSESSEE HAS RELIED ON THE DECISION OF THE AHMEDABAD BENCH O F THE TRIBUNAL IN THE CASE OF VIJAYKUMAR P. DESAI (INDIVI DUAL & HUF) (SUPRA), WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 6. WE FIND THAT ON THIS ASPECT, IT IS NOTED BY THE LEARNED CIT(A) THAT AS PER THE REMAND REPORT OF THE AO, THE AO HAD ISSUED NOTICES U/S 133(6) OF THE ACT TO ALL EIG HTEEN PERSONS WHOSE NAMES WERE AVAILABLE IN THE SEIZED MATERIALS REGARDING CASH PAYMENTS EXCEEDING RS.20,0 00/- AND ALL OF THEM HAD CONFIRMED THAT THEY WERE ACTING AS AGENTS ON BEHALF OF THESE TWO ASSESSEES FOR MAKING PURCHASES ON THEIR BEHALF AND THEY WERE GETTING COMMISSION IN THE RANGE OF 0.75% TO 1%, THEY HAD AL SO CONFIRMED THAT THEY WERE RECEIVING CASH PAYMENT FRO M THESE TWO ASSESSEES AND WERE IN TURN MAKING CASH PA YMENT TO THE RADDIWALAS FROM WHOM THEY WERE MAKING PURCHA SES IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -21- ON BEHALF OF THESE TWO ASSESSEES. THESE FACTS ARE N OTED BY THE LEARNED CIT(A) FROM THE REMAND REPORT IN THE RE MAND REPORT, IT WAS ALSO REPORTED BY THE AO THAT THE AO HAD ALSO ISSUED NOTICE U/S 131 OF THE ACT TO THREE SUCH AGENTS ON RANDOM BASIS OUT OF TOTAL EIGHTEEN AGENTS AND OU T OF THESE THREE PERSONS, TWO APPEARED BEFORE THE AO AND CONFIRMED THAT THEY WERE ACTING AS AGENT FOR THESE TWO ASSESSEES FOR MAKING PURCHASES ON BEHALF OF THESE T WO ASSESSEES. IT WAS ALSO CONFIRMED BY THEM THAT THEY WERE TAKING PAYMENT IN CASH FROM THESE TWO ASSESSEES AND PAYMENT WAS MADE IN CASH TO THE SUPPLIERS OF THE GO ODS. IT WAS ALSO CONFIRMED THAT THEY WERE TAKING COMMISSION RANGING FROM 0.5% TO 0.75% ON SUPPLY OF WASTE PAPER S TO THE ASSESSEE. IN THE LIGHT OF THESE FACTS, IT IS S EEN THAT THE PROVISIONS OF CLAUSE (K) OF RULE 6DD OF THE IT RULE S ARE SQUARELY APPLICABLE AND HENCE, IN THE FACTS OF THE PRESENT CASE, NO DISALLOWANCE U/S 40A (3) OF THE ACT IS JUS TIFIED. HENCE, ON THIS ASPECT, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT(A). ACCOR DINGLY, WE CONFIRM HIS ORDER ON THIS ASPECT, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT (A). ACCORDINGLY, WE CONFIRM HIS ORDER ON THIS ASPECT. 9. WE FIND THAT IN THE INSTANT CASE ALSO, IT IS NOT IN DISPUTE THAT THE PAYMENTS WERE MADE BY THE ASSESSEE TO THE BROKE RS FROM WHOM THE TRUCKS WERE HIRED ON PAYMENT, AND IN TURN WAS REQUIRED TO MAKE THE PAYMENT IN CASH TO THE TRUCK-DRIVERS IN EACH. AS PER OXFORD DICTIONARY & THESAURUS-II PAGE NO.15, AN AGE NT IS: I) PERSON ACTING FOR ANOTHER IN BUSINESS ETC. II) PERSON OR THING PRODUCING EFFECT III) BROKER, DELEGATE, ENVOY, EXECUTOR, FUNCTIONARY, GO- BETWEEN, INTERMEDIARY, MEDIATOR, MIDDLEMAN, NEGOTIATOR, PROXY, REPRESENTATIVE, SURROGATE, TRUST EE. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -22- THEREFORE, A BROKER IS AKIN TO AN AGENT. THUS, THE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS, WHICH WERE IN THE CASE OF VIJAYKUMAR P. DESAI (SUPRA), AND THEREFORE, THE DECISION IN THAT CASE IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. HE NCE, RESPECTFULLY FOLLOWING THE ABOVE-CITED DECISION OF THE TRIBUNAL, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES, AND DELETE THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, AND THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE REVENUES APPEALS, THE SOLE ISSUE INVOLV ED IS THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DELETIN G THE FOLLOWING ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE U/S.40(A)(IA) OF THE I.T.ACT. ASSTT.YEAR AMOUNT (RS.) 2007-2008 1,03,968/- 2008-2009 3,62,609/- 2009-2010 6,38,067/- 2010-2011 10,07,915/- 11. THE AO OBSERVED THAT THE ASSESSEE-COMPANY HAS M ADE FREIGHT PAYMENTS IN SOME CASES WITHOUT DEDUCTING TD S AS PER THE PROVISIONS OF SECTION 194C OF THE ACT. HE ASKED TH E ASSESSEE- COMPANY TO EXPLAIN THE REASONS FOR THE SAME. AFTER CONSIDERING THE REPLIES OF THE ASSESSEE, THE AO DISALLOWED THE ` 1,03,968/- FOR A.Y.2007-2008, FOR A.Y. 2008-2009 ` 3,62,609/-, FOR 2009- 2010 ` 6,38,067/- AND FOR A.Y 2010-2011 OF ` 10,07,915/-. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -23- 12. ON APPEAL BEFORE THE LEARNED CIT(A), THE ASSESS EE SUBMITTED THAT THE ASSESSEE WAS IN THE BUSINESS OF TRANSPORTATION OF GOODS BY TRUCKS AND THE ASSESSEE CARRIED THE WOR K OF TRANSPORTING GOODS BY TRUCKS OWNED AS WELL AS TRUCK S HIRED FROM OTHER TRUCK OWNERS. IT WAS SUBMITTED THAT THE ASS ESSEE COMPANY WAS MERELY HIRING THE TRUCKS OF OTHER TRUCK OWNERS AND THEIR DUTIES ARE LIMITED TO THE EXTENT OF CARRYING OUT TH E GOODS FROM ONE POINT TO ANOTHER. THE OUTSIDE TRUCK OWNERS, HIRED BY THE COMPANY WERE NEVER CONFRONTED WITH THE MAIN CONTRAC TOR OF THE COMPANY NOR DO THEY STEP IN THE SHOES OF THE ASSESS EE BEFORE THEM. THEY WERE INDEPENDENT CONTRACTORS IN RESPECT OF PARTICULAR JOB ALLOTTED TO THEM AND NOT AT ALL A SUBCONTRACTOR ON BEHALF OF ASSESSEE IN RESPECT OF MAIN CONTRACT UNDERTAKEN BY THE ASSESSEE FROM THE MAIN CONTRACTOR. IT WAS ARGUED THAT VARI OUS TRUCKS OWNERS TO WHOM THE PAYMENTS ARE MADE CANNOT BE TERM ED AS SUB- CONTRACTOR OF THE ASSESSEE, AND HENCE, THERE WAS NO LIABILITY ON THE PART OF THE ASSESSEE TO MAKE TDS FROM PAYMENTS MADE TO THEM, AND THEREFORE THERE WAS NO VIOLATION OF SECTION 40( A)(IA)OF THE ACT. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE CUTTACK BENCH OF THE ITAT IN THE CASE OF NASIB SINGH VS. AC IT, (2012) 19 TAXMANN.COM 160 WHEREIN IT WAS HELD THAT WHERE T HE ASSESSEE HAD EXECUTED A CONTRACT FOR TRANSPORTATION BY USING HIS OWN LORRIES AND ALSO BY HIRING LORRIES FROM OTHER LORRY OWNERS, WHO SIMPLY PLACED VEHICLES AT THE DISPOSAL OF ASSESSEE WITHOUT INVOLVING THEMSELVES FOR CARRYING ANY PART OF WORK UNDERTAKEN BY THE ASSESSEE, COULD NOT BE MADE LIABLE TO DEDUCT TD S UNDER IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -24- SECTION 194C IN RESPECT OF THE PAYMENTS TO OTHER TR UCK OWNERS. HE FURTHER PLACED RELIANCE ON THE DECISION OF THE H ONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. UNITE D RICE LAND LTD., (2008) 174 TAXMANN 286, WHEREIN IT WAS HELD T HAT THE TRIBUNAL HAD CLEARLY STATED THAT NOTHING HAS BEEN B ROUGHT ON RECORD BY THE AO TO PROVE THAT THERE WAS ANY WRITTE N OR ORAL AGREEMENT BETWEEN THE ALLEGED PARTIES FOR CARRIAGE OF GOODS. IN VIEW OF THAT NO INTERFERENCE IS CALLED FOR WITH THE FINDINGS OF THE FACTS RECORDED BY THE TRIBUNAL. THE APPEAL, BEING W ITHOUT ANY MERIT, WAS TO BE DISMISSED. FURTHER RELIANCE WAS P LACED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. BHORUKA ROADLINES LTD., (2009) 117 ITD 311 (MUM ) WHEREIN IT WAS HELD THAT WHEN THE TRUCK DRIVERS AND TRUCK O WNERS ARE SEPARATELY PAID FOR EACH TRUCK WITHOUT ANY AGREEMEN T WITH THE AGENT SUPPLIER, PROVISIONS OF 194C ARE NOT APPLICAB LE. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE PUNJAB AND H ARYANA HIGH COURT IN THE CASE OF CIT VS. ESS KAY CONSTRUCTION C O. (2004) 267 ITR 618 (P&H) WHEREIN IT WAS HELD THAT THERE WA S NO DIRECT CONTRACT BETWEEN ORIGINAL CONTRACTOR AND THE ULTIMA TE PAYEES, THEREFORE, WOULD NOT RESULT THE CONTRACT BEING EXEC UTED FOR THE APPLICATION OF SECTION 194C(2). FURTHER RELIANCE W AS ALSO PLACED ON THE DECISION IN THE CASE OF CIT VS. D. RATHINAM, (2011) 197 TAXMANN 486, CIT VS. BHAGWATI STEELS, (2011) 198 TA XMAN 275(P&H), MYTHRI TRANSPORT CORP. VS. ACIT, (2010) 1 24 ITD 40 (ITAT VISAKHAPATNAM). IT WAS SUBMITTED THAT IN THESE JUDGMENTS, CHARACTERISTICS OF SUB-CONTRACT HAS BEEN SPELT OUT IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -25- CLEARLY. THE TRUCK OWNERS CANNOT BE CONSIDERED AS SUBCONTRACTOR OF THE ASSESSEE, HENCE THERE WAS NO LIABILITY ON TH E PART OF THE ASSESSEE TO MAKE TDS FROM PAYMENTS MADE TO THEM AND THERE WOULD BE NO QUESTION OF APPLICABILITY OF SECTION 40 (A)(IA). THUS, IT WAS SUBMITTED THAT WHEN IN THE CASE OF THE ASSES SEE CASH PAYMENTS ARE MADE TO THE INDIVIDUAL TRUCK OWNERS FO R HIRING THE TRUCKS FOR TRANSPORTATION OF GOODS FROM ONE POINT T O ANOTHER, THE PAYEE CANNOT BE CONSIDERED AS SUB-CONTRACTOR, AND T HEREFORE, THE PROVISION OF SECTION 194C ARE NOT APPLICABLE, AND H ENCE, DISALLOWANCE CANNOT BE MADE BY INVOKING THE SECTION 40(A)(IA) OF THE ACT. IT WAS FURTHER SUBMITTED THAT BECAUSE OF NATURE OF THE BUSINESS AND VOLUME INVOLVED IN NUMBERS AS WELL AS GEOGRAPHICALLY, THERE IS NO TRACK OF FORM 15I IN SP ITE OF BEST EFFORTS WITH THE RESULT FORM 15I COMPLIANCE IS DONE BY PARTY ONLY, HENCE, THE DISCREPANCY AS TO TDS DEFAULT. IT WAS S UBMITTED THAT THE AO WHILE COMMENTING ON THIS HAS STATED THAT THE CONTENTION OF THE ASSESSEE WAS NOT TENABLE AS SOME PAYMENTS HA VE BEEN CLASSIFIED AS LIABLE TO BE DEDUCTED. IT WAS SUBMIT TED THAT THE PAYMENTS COVERED BY FORM 15I PROVIDED SEPARATELY AR E IN RESPECT OF THOSE 15I WHICH HAVE BEEN AVAILABLE AND PRODUCED FOR VERIFICATION. THEREFORE, THE AMOUNT OF FREIGHT SO PAID MAY HAVE 15I FORMS BUT NOT AVAILABLE, AND HENCE SAME MIGHT H AVE BEEN CLASSIFIED AS NOT LIABLE FOR TDS. IT WAS FURTHER S UBMITTED THAT PROVISIONS OF SECTION 194C WERE NOT APPLICABLE AND DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT TO THE EXTE NT OF FREIGHT EXPENSES PAID WAS NOT JUSTIFIED AND REQUIRED TO BE DELETED, AS THE IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -26- AMOUNTS WERE NOT PAYABLE, BUT ACTUALLY PAID, FOR WH ICH RELIANCE WAS PLACED ON THE DECISION OF THE AHMEDABAD BENCH O F THE TRIBUNAL IN THE CASE OF N.K. JEWELLERS IN ITA NO.63 8/AHD/2009 FOR A.Y.2005-2006 ORDER DATED 27.04.2012 AND DECISI ON OF THE VISHAKAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYIN SHIPPING & TRANSPORTS. VS. ACIT IN ITA NO.477/VIZ/2008 WHEREIN IT WAS HELD THAT THE PROVIS ION OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY IN RESPECT OF AMOUNTS WHICH WERE PAYABLE AS ON 31 ST MARCH OF EVERY YEAR, AND THESE PROVISIONS CANNOT BE INVOKED TO MAKE DISALLOW ANCE IN RESPECT OF AMOUNTS WHICH HAVE BEEN ACTUALLY PAID DU RING THE YEAR WITHOUT TDS. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS VACATED THE DISALLOW ANCE BY OBSERVING AS UNDER: 7.2. FACTS OF THE CASE AND ARGUMENTS OF APPELLANT HAVE BEEN CAREFULLY CONSIDERED. THE APPELLANT COMPANY EN TERED INTO VARIOUS CONTRACTS WITH HINDALCO INDUSTRIES, HI NDUSTAN LEVER LTD. AND STERLITE INDUSTRIES (I) LTD., ETC. F OR TRANSPORTATION OF GOODS. APPELLANT COMPANY ALONE WA S RESPONSIBLE FOR EXECUTING THESE CONTRACTS. IT WAS O NLY FOR FULFILLMENT OF THESE CONTRACTS THAT VEHICLES WERE H IRED FROM OUTSIDE PARTIES. IN SUCH A CASE IT CANNOT BE HELD THAT THESE OUTSIDE PARTIES WERE SUB-CONTRACTORS OF THE APPELLA NT. THIS VIEW DERIVES SUPPORT FROM THE DECISION OF HON'BLE I TAT, MUMBAI IN THE CASE OF RATNAKAR SAWANT, DINESH N. SH AH & CO. VS. ITO IN ITA NO.2941(MUM.) OF 2011. IN THIS C ASE, HON'BLE ITAT MADE THE FOLLOWING OBSERVATION: 'WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO THE FINDINGS GIVEN IN THE IMPUGNED ORDERS. THE ASSESSEE IS AN INDIVIDUAL, WHO HAS UNDERTAKEN A CONTRACT TO PROVIDE FORKLIFT ON HIRE TO HIS PRINCIP ALS, IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -27- ON WHICH HE HAS RECEIVED HIRE CHARGES. BESIDES HIS OWN FORKLIFT VEHICLES, HE HAS ALSO HIRED FORKLIFT VEHICLES FROM THE OUTSIDE PARTIES FOR WHICH HE HAS PAID HIRE CHARGES TO THEM: AND HAS BEEN CLAIMED AS EXPENDITURE. IN SUCH A CASE, THE ASSESSEE IS SOLELY RESPONSIBLE FOR EXECUTING THE CONTRACT WITH THE PERSONS TO WHOM HE HAS GIVEN FORKLIFT VEHICLES ON HIRE AND IT IS ONLY FOR FULFILLMENT OF THIS CONTRAC T THAT HE HAS ALSO ENGAGED THE FORKLIFT VEHICLES FROM THE OUTSIDE PARTIES. IN CASE OF HIRING FROM OUTSIDE PARTIES THE RESPONSIBILITY AND THE RISK INVOLVED FO R PERFORMING THE CONTRACT WORK LIES WITH THE ASSESSEE ONLY AND NO SUCH RISK AND RESPONSIBILITY SEEMS TO HAVE BEEN TRANSFERRED TO OUTSIDE PARTIES VIS-A-VIS HIS PRINCIPALS. THE PROVISIONS OF SECTION 194C APPLIES TO ANY PAYMENT MADE TO A CONTRACTOR OR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE SPECIFIED PERSONS. THE CONTRACT ALSO INCLUDES SUB-CONTRACT. FOR APPLICATION OF PROVISIONS OF SECTION 194C IN THIS CASE IT HAS TO B E SEEN, WHETHER THE ASSESSEE HAS ENTERED INTO ANY KIN D OF SUB-CONTRACT WITH THE OUTSIDE PARTIES FROM WHOM HE HAS HIRED THE FORKLIFT VEHICLES ON RANDOM BASIS TO FULFILL HIS OWN COMMITMENT TOWARDS HIS PRINCIPALS. THERE IS NO MATERIAL ON RECORD TO REMOTELY SUGGEST THAT THERE WAS ANY KIND OF ORAL OR A WRITTEN CONTRA CT OR SUB-CONTRACT WITH THE OUTSIDE PARTIES FROM WHOM HE HAS TAKEN THE FORKLIFT VEHICLES. UNTIL AND UNLES S RISK AND RESPONSIBILITY OF THE CONTRACT UNDERTAKEN BY THE ASSESSEE IS SHIFTED TO THE SUB-CONTRACTORS, IT CANNOT BE HELD THAT THESE PERSONS ARE THE SUB- CONTRACTORS OF THE ASSESSEE. THE JUDGMENTS AS HAVE BEEN RELIED UPON BY THE ASSESSEE BEFORE THE CIT(A) CLEARLY CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSE E.' THIS VIEW ALSO DERIVES SUPPORT FROM FOLLOWING DECIS IONS: (A) NASIB SIGH V. ACIT, 8ERHAMPUR (2012) 19 IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -28- TAXMAN.COM 160 ) CIT V. UNITED RICE LAND LTD. (2008) 174 TAXMAN 286 (PUNJ. & HAR.) ) ITO VS.BHORUKA ROADLINES LTD.(2009) 117 ITO 311 1TAT (MUMBAI) D ) CIT VS. ESS KAY CONSTRUCTION CO. (2004) 2671TR 618/140 TAXMANN 442 (PUNJ. & HAR.) (E) CIT V. D. RATHINAM (2011) 197 TAXMAN 486/9 TAXMAN.COM. 239 (MADRAS) (F) CIT VS. BHAGWATI STEELS(2011) 198 TAXMAN 275/I TAXMAN. CORN. (PUNJ. & HAR.) (G) MYTHRI TRANSPORT CORP. V. ACIT(2010) 124 ITO 40 (ITAT VISAKHAPATNAM) IN VIEW OF THIS LEGAL AND FACTUAL POSITION, AO IS N OT JUSTIFIED TO HOLD THAT DISALLOWANCE U/S.40(A)(IA) NEEDED TO B E MADE IN CASE OF THE APPELLANT. 7.3 IT HAS BEEN FURTHER HELD BY HON'BLE ITAT, AHMED ABAD IN THE CASE OF N.K. JEWELLERS IN ITA NO. 638/AHD/2009 FOR A.Y. 2005-06 THAT PROVISIONS OF SECTION 40(A)(IA) ARE AP PLICABLE ONLY IN RESPECT OF AMOUNTS WHICH WERE PAYABLE AS ON 31ST MARCH OF EVERY YEAR AND THESE PROVISIONS CANNOT BE INVOKED TO MAKE DISALLOWANCE IN RESPECT OF AMOUNTS WHICH HA VE BEEN ACTUALLY PAID DURING THE YEAR WITHOUT TDS. FOR COMING TO THIS CONCLUSION HON'BLE ITAT, AHMEDABAD B ENCH FOLLOWED THE DECISION OF SPECIAL BENCH IN THE CASE OF MERILYIN SHIPPING & TRANSPORTS VS. ACIT IN ITA NO. 477/VI7J2008. I THEREFORE, HOLD THAT AO IS NOT JUST IFIED TO MAKE DISALLOWANCE U/S. 40A(IA) FOR VARIOUS YEARS IN RESPECT OF AMOUNTS WHICH HAVE BEEN ALREADY PAID DURING THE YEAR. RESPECTFULLY FOLLOWING THE ABOVE MENTIONED DECISION OF ITAT, AHMEDABAD BENCH IN THE CAKE OF N.K. JEWELLERS , AO IS DIRECTED TO DELETE DISALLOWANCE OF RS.54,00,379/ - FOR A.Y. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -29- 2007-08. SIMILARLY, THE DISALLOWANCE OF RS.51,55,86 4/- FOR A.Y. 2008-09, RS.1,26,94,479/- FOR A.Y. 2009-10 AND RS.76,08,948/- FOR A.Y. 2010-11 ARE ALSO DIRECTED T O BE DELETED. GROUND NO.5 OF THE APPEAL IS ALLOWED FOR A LL THE 4 YEARS. 13. THE LEARNED DR FULLY JUSTIFIED THE ORDER OF THE AO. HE ALSO PLACED RELIANCE ON THE DECISION OF THE ITAT, AHMEDA BAD BENCH IN THE CASE OF MUKESH TRAVELS CO. VS. ITO, (2011) 1 0 TAXMANN.COM 143 (AHD) WHEREIN IT WAS HELD THAT AS A SSESSEE WAS NOT HAVING SUFFICIENT VEHICLES OF ITS OWN FOR PROVI DING CONTRACTED SERVICE, IT OBTAINED SERVICES OF OTHERS TO COMPLETE ASSIGNMENT. THE ASSESSEE DID NOT DEDUCT ANY TDS FROM PAYMENT MA DE TO SUCH VEHICLES OWNERS. THE AO DISALLOWED SAID PAYMENT UN DER SECTION 40(A)(IA) ON THE GROUND THAT THE ASSESSEE HAD NOT D EDUCTED TAX OUT OF THAT PAYMENT UNDER SECTION 194C. IT WAS HELD TH AT WHETHER VEHICLES HIRE CHARGES PAID BY ASSESSEE TO VARIOUS V EHICLES OWNERS FOR CARRIAGE PASSENGERS BY BUSES ON MINI BUSES WOUL D AMOUNT TO WORK WITHIN MEANING OF SECTION 194C AND, AND THEREF ORE, THE ASSESSEE WAS LIABLE TO DEDUCT TDS THEREFROM UNDER P ROVISIONS OF SECTION 194C, AND DISALLOWANCE MADE UNDER SECTION 4 0(A)(IA) WAS CONFIRMED BY THE TRIBUNAL. 14. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESS EE SUBMITTED THAT THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE COMPANIES WITH WHOM THE ASSESSEE ENTERED INTO CONTR ACT FOR CARRIAGE OF GOODS, LIKE HUL, KALPATHARU POWER, RELI ANCE ETC.., THAT ARRANGEMENT BETWEEN THE ASSESSEE AND THE AFORE SAID IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -30- COMPANIES IS SUCH THAT THE ASSESSEE ALONE IS RESPON SIBLE FOR EXECUTING SUCH CONTRACTS WITHOUT ANY RIGHT OF SUB-C ONTRACT. SUCH GOODS ARE TRANSPORTED THROUGH TRUCKS OWNED BY IT AS WELL AS THROUGH TRUCKS HIRED FROM OTHER TRUCK OWNERS. THE ASSESSEE HAS NOT ENTERED INTO ANY CONTRACT WITH TRUCK OWNERS/DRI VERS WHOSE TRUCKS HAVE BEEN TAKEN ON HIRE BY IT. THE ASSESSEE AVAILS SERVICES OF SUCH OTHER TRUCKS ONLY FOR THE PURPOSE OF TRANSP ORTATION OF GOODS AND DUTY OF SUCH TRUCK OWNERS/DRIVERS IS REST RICTED MERELY TO CARRY OFF THE CONCERNED GOODS FROM ONE POINT TO ANOTHER AS DIRECTED TO THEM. SUCH TRUCK OWNERS/DRIVERS ARE NE ITHER CONFRONTED WITH COMPANIES WITH WHICH THE ASSESSEE H AS ENTERED INTO THE CONTRACTS NOR DO THEY STEP INTO THE SHOES OF THE ASSESSEE WHILE CONCLUDING THE TASK ENTRUSTED ON THEM. THE A SSESSEE AVAILS SERVICES OF VARIOUS SUCH TRUCK OWNERS/DRIVERS DEPEN DING ON THE AVAILABILITY OF SUCH PERSONS AS AND WHEN NEED ARISE S. SUCH TRUCK OWNERS/DRIVERS ARE INDEPENDENT PERSONS AND NOT AT A LL SUB- CONTRACTORS OF THE ASSESSEE. DURING THE TRANSIT OF GOODS THROUGH SUCH TRUCKS NOT OWNED BY THE ASSESSEE, ENTIRE RISK AND REWARDS LIE WITH THE ASSESSEE. SUCH TRUCK OWNERS/DRIVERS HAVE NOT CONTRIBUTED TO ANY WORK, OVER AND ABOVE, RENDERING THEIR TRUCKS ON HIRE ALONG WITH DRIVERS, AND THEREFORE, THE PROV ISION OF SECTION 194C DO NOT COME INTO PLAY AND CONSEQUENTLY, NO DIS ALLOWANCE UNDER SECTION 40(A)(IA) IS CALLED FOR. RELIANCE WA S PLACED ON THE FOLLOWING JUDGMENTS: IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -31- I) CIT VS. POOMPUHAR SHIPPING CORPN LTD., 282 ITR 3 (MAD); II) CIT VS. UNITED RICE LTD., 322 ITR 594 (P&H); III) CIT VS. ESS KAY CONSTRUCTION CO., 267 ITR 618 (P&H); IV) M/S. PARISHRAM TRANSPORT VS. ITO, ITA NO.351/AHD/2009 AND 255/AHD/2010; V) GUJARAT ROADLINES VS. ITO, ITA NO.3023/AHD/2008. 15. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, THE AO HAS OBSERVED THAT THE ASSESSEE HAD MADE FOLLOWING PAYMENT OF FREIGHT CHARGES, DURING THE YE AR IN WHICH NO TDS WAS DEDUCTED BY THE ASSESSEE. ASSTT.YEAR AMOUNT ( ` `` ` ) 2007-2008 1,03,968/- 2008-2009 3,62,609/- 2009-2010 6,38,067/- 2010-2011 10,07,915/- THE CONTENTION OF THE ASSESSEE WAS THAT THE ASSESSE E HAD ENTERED INTO CONTRACT WITH COMPANIES SUCH AS HINDUSTAN LEVE R LTD., RELIANCE, KALPATARU ETC. FOR WHOM THE TRANSPORTING OF GOODS WAS DONE BY THE ASSESSEE UNDER CONTRACT. THE ASSESSEE WAS LIABLE TO CARRY OUT THE WORK OF TRANSPORTATION OF GOODS ITSEL F, AND WAS NOT ALLOWED TO SUB-CONTRACT THE SAME TO OTHER PERSONS. IT WAS EXPLAINED THAT THE ASSESSEE USED ITS OWN TRUCKS AND IN CASE OF NEED, ALSO TOOK TRUCKS OF OTHER TRUCK OWNERS FOR TH E PURPOSE OF TRANSPORTING GOODS. SINCE THE RESPONSIBILITY WAS O F THE ASSESSEE IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -32- FOR TRANSPORTING THE GOODS, LOSS OR DAMAGE TO THE G OODS WAS TO BE BORNE BY THE ASSESSEE, THEREFORE, IT WAS ONLY HIRIN G OF THE TRUCKS OF OTHER TRUCK OWNERS BY THE ASSESSEE, AND THUS, TH ERE WAS NO SUB- CONTRACT OF THE WORK, AND HENCE, THE ASSESSEE HAS N O LIABILITY TO DEDUCT TDS UNDER SECTION 194C FROM THE PAYMENT MADE TO THE TRUCK OWNERS, WHOSE TRUCKS WERE HIRED BY THE ASSESS EE. THIS EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR WIT H THE AO, WHO MADE THE DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS. 16. ON APPEAL, THE LEARNED CIT(A) DELETED THE DISAL LOWANCE ON THE GROUND THAT THE COMPANY HAD ENTERED INTO VARIOU S CONTRACTS HINDALCO INDUSTRIES, HINDUSTAN LEVER LTD. AND STERL ITE INDUSTRIES LTD. FOR TRANSPORTATION OF GOODS, AND THE ASSESSEE ALONE WAS RESPONSIBLE FOR EXECUTING THESE CONTRACTS. IT WAS ONLY FOR FULFILLMENT OF THESE CONTRACTS THAT THE VEHICLES WE RE HIRED FROM OUTSIDE PARTIES, AND IN SUCH A CASE, IT CANNOT BE H ELD THAT THESE OUTSIDE PARTIES WERE SUB-CONTRACTORS OF THE ASSESSE E. HE PLACED RELIANCE ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RATNAKAR SAWANT, DINESH N. SHAH & CO. V S. ITO, IN ITA NO.29412(MUM) OF 2011 AND HELD THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE DISALLOWANCE UNDER SE CTION 40(A)(IA) WAS REQUIRED TO BE MADE IN THE CASE OF THE ASSESSEE . HE ALSO HELD THAT THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CAS E OF N.K. JEWELLERS (SUPRA) HAS HELD THAT NO DISALLOWANCE UND ER SECTION 40(A)(IA) OF THE ACT COULD BE MADE IN RESPECT OF AM OUNTS WHICH IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -33- WERE PAYABLE AS ON 31 ST MACH OF EVERY YEAR AND THESE PROVISIONS CANNOT BE INVOKED TO MAKE DISALLOWANCE IN RESPECT O F AMOUNTS WHICH HAVE BEEN ACTUALLY PAID DURING THE YEAR WITHO UT TDS. 17. WE FIND THAT THE AHMEDABAD BENCH OF THE TRIBUNA L IN THE CASE OF M/S.PARISHRAM TRANSPORT VS. ITO (SUPRA), RE LIED UPON BY THE LEARNED AR OF THE ASSESSEE, HAS HELD AS UNDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIAL ON RECORD. FROM THE FACTS OF T HE CASE IT IS APPARENT THAT THE ASSESSEE WAS HIRING TRUCKS FOR THE PURPOSE OF HIS BUSINESS OF PROVIDING TRANSPORTATIO N SERVICES TO HIS CLIENT M/S. HPCL. SECTION 194 C OF THE ACT MAKES IT CLEAR THAT TDS IS DEDUCTIBLE ONLY IN THE C ASE WHEN THE RECIPIENT CONTRACTORS RENDERS THE WORK OF CARRI AGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN RAILWAYS. IN THE CASE BEFORE US, IT IS EVIDENT THAT THE ASSESSEE HAD ONLY HIRED OUT THE VEHICLES AND RENDER ED THE SERVICES OF TRANSPORTATION OF GOODS I.E. LPG CYLIND ERS BY ITSELF AT ITS OWN RISK AND REWARD. AT THIS JUNCTURE WE MAY PEEP INTO THE DECISION OF THE HONBLE MADRAS HIGH C OURT IN THE CASE OF CIT VS POOMPUHAR SHIPPING CORPORATION LTD. [2006] 282 ITR 3 (MAD). THE GIST OF THE AFORESAID D ECISION IS REPRODUCED HEREIN UNDER: UNDER SECTION 194C OF THE INCOME-TAX ACT, 1961, THE TAX IS TO BE DEDUCTED WHEN A CONTACT IS ENTERED INTO FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE ENTITIES MENTIONED IN SUB-SECTION (1) OF SECTION 194C. THE TERM HIRE IS NOT DEFINED IN THE INCOME-TAX ACT. S O, WE HAVE TO TAKE THE NORMAL MEANING OF THE WORD HIRE. NORMAL HIRE IS A CONTRACT BY WHICH ONE GIVE S TO ANOTHER TEMPORARY POSSESSION AND USE OF PROPERTY OTHER THAN MONEY FOR PAYMENT OF COMPENSATION AND IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -34- THE LATTER AGREES TO RETURN THE PROPERTY AFTER THE EXPIRY OF THE AGREED PERIOD. THE EXPLANATION TO SECTION 194C WAS INTRODUCED WITH EFFECT FROM JULY 1, 1995. THERE IS NO PRINCIPLE OF INTERPRETATION WHICH WOULD JUSTIFY READING THE EXPLANATION AS OPERATING RETROSPECTIVEL Y, WHEN THE EXPLANATION COMES INTO FORCE WITH EFFECT FROM A FUTURE DATE. THE ASSESSEE, A TAMIL NADU GOVERNMENT UNDERTAKING, WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF COAL FROM THE PORTS OF HALDIA, VISAKHAPATNAM AND PARADEEP TO CHENNAI AND TUTICORIN UNDER CONTRACTS EXECUTED WITH THE TAMIL NADU ELECTRICITY BOARD. THE ASSESSEE OWNED THREE SHIPS. SINCE THREE SHIPS WERE NOT SUFFICIENT TO CAR RY OUT THE CONTRACTS ENTERED INTO BY THE ASSESSEE WIT H TAMIL NADU ELECTRICITY BOARD, THE ASSESSEE HIRED SHIPS BELONGING TO OTHER SHIPPING COMPANIES AND PAID HIRE CHARGES TO THE OTHER SHIPPING COMPANIES F OR USING THEIR SHIPS. THE ASSESSEE, HOWEVER, DID NOT DEDUCT TAX UNDER SECTION 194C OF THE INCOME-TAX ACT BEFORE MAKING PAYMENT OF HIRE CHARGES TO THE SHIPPING COMPANIES. THE ASSESSING OFFICER TREATED THE ASSESSEE AS IN DEFAULT AND DIRECTED THE ASSESSE E TO PAY THE TAX UNDER SECTION 201(1) OF THE INCOME-TAX ACT AND ALSO LEVIED INTEREST UNDER SECTION 201(1A). THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HELD THAT SECTION 194C WAS NOT APPLICABLE. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEAL, THAT THE PAYMENT OF HI RE CHARGES FOR TAKING TEMPORARY POSSESSION OF THE SHIP S BY THE ASSESSEE-COMPANY WOULD NOT FALL WITHIN THE PROVISION OF SECTION 194C AND HENCE NO TAX WAS REQUIRED TO BE DEDUCTED. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -35- THE HIRING OF SHIPS FOR THE PURPOSE OF USING THEM I N THE ASSESSEES BUSINESS DID NOT AMOUNT TO A CONTRAC T FOR CARRYING OUT ANY WORK AS CONTEMPLATED IN SECTIO N 194C. 8. FROM THE ABOVE DECISION IT IS EVIDENT THAT THE PROVISIONS OF SECTION 194C OF THE ACT WILL NOT BE APPLICABLE WHEN VEHICLES ARE HIRED OUT FOR CONDUCTING ONES BUSINESS OF TRANSPORTATION BY ITSEL F AND WHEN NO WORK OF TRANSPORTATION IS ASSIGNED TO T HE OWNERS OF THE VEHICLES. THE OWNER OF THE VEHICLES ROLE EXTENDS ONLY TO THE LIMITED FUNCTION OF PROVID ING THE VEHICLES ALONG WITH STAFF TO THE APPELLANT FOR HIRE CHARGES. THE MOVEMENTS OF THE VEHICLES WITH THE GOODS ARE AT THE COMMAND OF THE APPELLANT. THE APPELLANT ALSO UNDERTAKES THE RISK INVOLVED IN THE WORK OF TRANSPORTATION IT RENDERS WITH THE HELP OF THE HIRED VEHICLES. ALL THESE FACTS CAN BE CLEARLY ESTABLISHED IN THE PRESENT CASE BEFORE US FROM THE CONTRACT EXECUTED BETWEEN THE APPELLANT AND M/S. HPCL CONTAINED IN PAGE NO.2 TO 27 OF THE PAPER BOOK. THIS CONTRACT IN PARA 9 ALSO SPECIFICALLY PROVIDES THAT THE APPELLANT SHALL NOT SUB-LET ANY W ORK ENTRUSTED TO HIM. FURTHER, RELEVANT INGREDIENTS IN THE CONTRACT TO ESTABLISH THAT THE APPELLANT IS ASSIGN ED THE JOB OF TRANSPORTATION AND IT HAD PERFORMED THE JOB OF TRANSPORTATION BY ITSELF CAN BE SUMMARIZED AS UNDER:- ITEM NO.1 VEHICLE FOR TRANSPORTATION:- THE APPELLANT IS ASSIGNED WITH THE WORK OF TRANSPORTATION BY M/S. HPCL AND IT HAS TO PROVIDE THE DETAILS OF THE VEHICLES PRESSED FOR THE OPERATI ON. THE APPELLANT HAS TO TRANSPORT THE CYLINDERS ACCORDING TO THE SCHEDULE AND ROUTE STIPULATED BY M/S.HPCL. THE APPELLANT HAS TO ENSURE THAT THE TRUCKS PROVIDED FOR TRANSPORTATION OF LPG CYLINDERS IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -36- SHALL COMPLY WITH ALL LEGAL FORMALITIES. THE APPELL ANT SHALL ALSO ARRANGE FOR THE APPLICABLE INSURANCE POLICIES. THE APPLICANT SHALL ALSO ENSURE THE DRIVE RS OF THE VEHICLES HAVE PROPER AUTHORIZATION TO DRIVE THE TRUCKS WITH SUCH HAZARDOUS PRODUCTS AS PER THE MOTOR VEHICLES ACT. THE APPELLANT SHALL ALSO ENSURE THAT THE TRUCKS PRESSED FOR OPERATION ARE ROAD-WORT HY COMPLYING WITH ALL SPECIFICATIONS FOR PERFORMING SU CH HAZARDOUS WORK. ITEM NO.2 DELIVERY CARRIAGE OF GOODS: THE APPELLANT SHALL MAKE ARRANGEMENT FOR DELIVERY O F THE CYLINDERS WITHIN THE STIPULATED TIME AND SHALL DELIVER THE CYLINDERS ACCORDING TO THE INSTRUCTIONS OF M/S. HPCL. ALL THE SPECIFICATIONS DIRECTED BY M/S. HPCL SHALL BE FOLLOWED BY THE APPELLANT. ITEM NO.3 OPERATION OF TRUCKS: THE APPELLANT SHALL OBTAIN THE REQUISITE ROAD PERMI TS AND OTHER PERMITS APPLICABLE FOR TRANSPORTATION OF GOODS. THE APPELLANT SHALL BEAR THE ENTIRE OPERATIONAL COST OF THE TRUCKS ETC. ITEM NO. 4 LOSS/DAMAGES OF CYLINDERS THE APPELLANT SHALL BE SOLELY RESPONSIBLE FOR THE S AFE CUSTODY OF THE CYLINDERS. ITEM NO.5: UTILIZATION OF TRUCKS THE APPELLANT SHALL OPERATE ALL THE TRUCKS FOR ALL THE STATIONS AWARDED TO IT AND IT SHALL INFORM M/S. HPC L IF ANY TRUCK IS WITHDRAWN. ITEM NO.6: LOADING/UNLOADING/HANDLING OF CYLINDERS IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -37- LOADING/UNLOADING OF THE CYLINDERS SHALL BE PERFORMED BY THE APPELLANT. ITEM NO.7: TRANSSHIPMENT THE APPELLANT SHALL UNDERTAKE THE MOVEMENT OF THE PRODUCE ENTRUSTED TO HIM BY M/S. HPCL WITHOUT TRANSSHIPPING. HOWEVER, IS THE TRANSSHIPMENT IS INEVITABLE, THE TRANSPORTER SHALL ADVISE M/S. HPCL BEFOREHAND AND ALSO ENSURE THAT ADEQUATE CARE AND PRECAUTION IS TAKEN TO ENSURE THE SAFE HANDLING OF THE PRODUCT. NO ADDITIONAL CHARGE WILL BE PAID BY M/S. HPCL FOR TRANSSHIPMENT. ITEM NO.8: SECURITY DEPOSIT/BANK GUARANTEE THE APPELLANT IS TO PROVIDE TO M/S. HPCL BANK GUARANTEE FOR A SPECIFIC AMOUNT FOR A SPECIFIC PERI OD IN ORDER TO COVER LOSSES, DAMAGES, EXPENSES ETC. ARISING OUT OF THE APPELLANTS NEGLIGENCE TO OBSERV E ANY TERMS AND CONDITIONS IN THE CONTRACT. ITEM NO.9: SUBLETTING THE APPELLANT SHALL NOT SUBLET ANY WORK ENTRUSTED T O HIM EXCEPT WITH THE WRITTEN CONSENT OF M/S. HPCL. 8. THUS, FOLLOWING THE DECISION OF THE HONBLE MADR AS HIGH COURT REFERRED SUPRA AND BASED ON OUR ABOVE DISCUSS IONS, WE ARE OF THE CONSIDERED VIEW THAT IN THE PRESENT C ASE BEFORE US, IT IS CLEARLY ESTABLISHED THAT THE APPEL LANT HAD PERFORMED THE WORK OF TRANSPORTATION BY ITSELF BY H IRING OF VEHICLES AND WITHOUT SUBLETTING THE WORK AND THEREF ORE, THE PROVISIONS OF SECTION 194C OF THE ACT IS NOT APPLIC ABLE AND ACCORDINGLY PROVISIONS OF SECTION 40(A) (IA) OF THE ACT CANNOT BE INVOKED. THE REVENUE HAS NOT BROUGHT OUT ANY MATERIAL TO ESTABLISH THAT THE OWNER OF THE VEHICLE S HAVE PERFORMED ANY WORK OTHER THAN HIRING THEIR VEHICLES TO THE IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -38- APPELLANT. FOR THE ABOVE SAID REASONS WE ALLOW THE APPEAL OF THE ASSESSEE IN ITS FAVOUR AND DELETE THE ADDITI ON OF RS.1,05,83,555/- MADE BY THE LEARNED AO WHICH WAS FURTHER CONFIRMED BY THE LEARNED CIT(A). 18. FURTHER, THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF GUJARAT ROADLINES VS. ITO (SUPRA) HAS HELD AS UN DER: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL ON RECORD. ON PERUSING THE ASSESSMENT ORDER IT IS E VIDENT THAT THE ASSESSEE HAD HIRED THE VEHICLES IN ORDER T O TRANSPORT THE GOODS OF ITS CLIENTS. THE ASSESSEE AP PARENTLY IS A TRANSPORT CONTRACTOR WHO TRANSPORTS THE GOODS OF ITS CLIENTS TO THE DESTINATION PREFERRED BY THE CLIENTS . IN ORDER TO CARRY OUT SUCH WORK THE ASSESSEE ENGAGES TRUCKS OF VARIOUS OTHER ORGANIZATIONS AND TRUCK OWNERS BY HIR ING OF THE VEHICLES ALONG WITH THE INFRASTRUCTURE. THUS, T HE WORK OF TRANSPORTATION HAS BEEN CARRIED OUT BY THE ASSESSEE AND NOT BY THE OWNERS OF THE TRUCKS. THE OWNERS OF THE TRUC KS HAD ONLY HIRED THEIR VEHICLES TO THE ASSESSEE BY RECEIV ING HIRE CHARGES WHILE AS THE WORK OF TRANSPORTATION HAS BEE N CARRIED ON BY THE ASSESSEE. THE RISK AND REWARD FOR THE PERFORMANCE OF THE JOB LIES WITH THE ASSESSEE AND N OT WITH THE OWNERS OF THE TRUCKS. IN SUCH CIRCUMSTANCES, PR OVISIONS OF SECTION 194 C OF THE IT ACT WILL NOT BE ATTRACTE D AND CONSEQUENTLY PROVISIONS OF SECTION 40(A) (IA) OF TH E IT ACT ALSO NOT APPLICABLE. SECTION 194 C OF THE IT ACT RE QUIRES TDS ON PAYMENTS TO CONTRACTOR FOR WORK. WHERE AN ASSESSEE UTILIZES THE TRUCKS TAKEN ON HIRE FOR ITS OWN USE, THERE IS NO AGREEMENT FOR CARRYING OUT ANY WORK BY THE OWNER TO THE HIRER. THERE IS NO SCOPE IN SUCH CASE FOR APPLICATION OF SEC.194C WHICH IS APPLICABLE TO PAYM ENTS TO TRANSPORTER FOR CARRYING OF GOODS. IT WAS SO HELD I N THE CASE OF DCIT VS SATISH AGARWAL & CO., 317 ITR (AT) 196 (AMRITSAR). IN HOLDING SO, THE TRIBUNAL HAD ALSO RE LIED ON THE DECISION IN THE CASE OF CIT VS POOMPUHAR SHIPPI NG IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -39- CORPORATION LTD. 282 ITR 3. ON PERUSING THE ASSESSM ENT ORDER, THE DECISIONS CITED BY THE LEARNED AR AND FR OM HER ARGUMENTS, WE DO NOT HAVE ANY HESITATION TO HOLD FR OM THE FACTS AND CIRCUMSTANCES OF THIS CASE THAT THE ASSES SEE HAS ONLY HIRED THE VEHICLES FOR CARRYING OUT ITS JOB OF TRANSPORTATION OF GOODS FOR ITS CLIENTS AND THEREF ORE, THE ADDITION MADE BY THE LEARNED AO FOR RS.7,57,740/- DESERVES TO BE DELETED. IT IS ORDERED ACCORDINGLY. IN THE INSTANT CASE ALSO, THE ASSESSEE HAS CARRIED OUT THE CONTRACT FOR TRANSPORTATION OF GOODS FOR VARIOUS COMPANIES B Y USING ITS OWN VEHICLES AS WELL AS HIRED VEHICLES OF OTHER TRU CK OWNERS. THE ROLE OF THE OWNERS OF THE VEHICLES IS LIMITED TO PR OVIDING VEHICLES ALONG WITH STAFF TO THE ASSESSEE ON PAYMENT OF HIRE CHARGES. THE MOVEMENT OF THE VEHICLES WITH GOODS WAS IN THE CONT ROL OF THE ASSESSEE. THE ASSESSEE UNDERTAKES THE RISK INVOLVE D IN THE WORK OF TRANSPORTATION WITH THE HELP OF HIRED VEHICLES. FURTHER, RELEVANT INGREDIENTS IN THE CONTRACT TO ESTABLISH T HAT THE ASSESSEE WAS ASSIGNED THE JOB OF TRANSPORTATION AND IT HAD P ERFORMED THE JOB OF TRANSPORTATION OF ITS OWN TRUCKS, CAN BE SUM MARIZED AS UNDER AS PER THE CONTRACT ENTERED INTO BY THE ASSES SEE. I. TRANSPORTATION / FREIGHT RATES: 1. RR PROVIDES VEHICLE WISE MINIMUM GUARANTEED RUNNING OF 3000 KM PER MONTH FOR ALL THE VEHICLE ATTACHED TO DC. RATES AGREED ARE AS PER THE FOLLOWING TABLE : II. 12 RS 37200 (RS 12.40 PER KM) MONTHLY MINIMUM GUARANTEE RUN 3000 KMS IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -40- 16 RS 42500 (RS 14.17 PER KM) 18 RS 48000 (RS 16.00 PER KM) THOUGH WE HAVE COMMITTED A MINIMUM GUARANTEE MILEAGE OF 3000 KMS A MONTH, IN THE EVENT OF VEHICL E RUNS <3000 KMS, THE TRANSPORTER GETS PAID FOR THE ACTUA L KMS RUN BY HIM I.E. FOR VEHICLE 12 VEHICLE @ RS 12.40 PER KM, FOR 16 VEHICLE @ RS 14.17 PER KM AND 18 VEHIC LE @ RS 16.00 PER KM. FOR THE BALANCE KMS, HE GETS PAID AT THE FIXED COST I.E. FOR 12VEHICLE @ RS 7.00 PER KM, FOR 16 VEHICLE @ RS 7 .50 PER KM AND FOR 18 VEHICLE @ RS 8.50 PER KM. 2. THE RATES AGREED WOULD BE APPLICABLE FOR A PERIOD O F ONE YEAR FROM DATE OF SIGNING OF CONTRACT. 3. THE FREIGHT RATES ARE INCLUSIVE OF ALL COST I.E. D IRECT, INDIRECT AND INCIDENTAL TO TRANSPORTATION & OPERATION OF BUSINESS INCLUDING WAY EXPENSES DEPRECIATION ETC. HOWEVER SERVICE TAXES IF APPLICAB LE WILL BE PAID EXTRA. 4. APPLICABLE TRANSPORTATION/ FREIGHT SHALL BE DERIVED AS TOTAL RUNNING DURING THE MONTH I.E MIN RUNNING COMMITMENT + EXTRA KM RUN DEDUCTIONS/PENALTY APPLICABLE DUE TO NON-COMPLIANCE (TRANSIT DELAY, SHORTAGES/DAMAGES IN TRANSIT & NON- AVAILABILITY/NON-REPORTING,) 5. DE-ESCALATION OR ESCALATION IN TRANSPORTATION COST WILL BE CONSIDERED IN CASE OF CHANGE IN HSD PRICES BEYOND RS1/LITER COMPARED TO RATES PREVAILING ON ABOVE 3000 KMS 12 RS 7.00 PER KM 16 RS 7.50 PER KM 18 RS 8.50 PER KM IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -41- LAST REVISION. THIS EFFECT IN TRANSPORTATION COST S HALL BE CONSIDERED FROM THE DATE OF REVISION OF THE HSD RATES ABOVE DE-ESCALATION OR ESCALATION WILL BE LOCATION SPECIFIC. DECREASE/ INCREASE IN TRANSPORTATION RATES I.E. RS. KLKM SHALL BE DERIVED BY FOLLOWING FORMULA: - DECREASES/INCREASE IN HSD RSP (NEW RSP-OLD RSP AT DC LOCATION) = ----------------------------------------- ---------------------- KM RUN PER LITER (REFER BELOW TABLE FOR A VG RUNNING KM PER LITER) 6. SECURITY DEPOSIT/BANK GUARANTEE- TRANSPORTATION WILL HAVE TO PROVIDE A REFUNDABLE SECURITY DEPOSIT OF MIN RS 1.0 LAC (UP TO 20 VEHICL ES ) AND MAX RS 2.5 LACS ( MULTIPLE OF RS 5000/- PER VEHICLE BUT MAXIMUM AMOUNT IS VALID UP TO 100 VEHICLES ) OR A BANK GUARANTEE OF MIN RS 2.0 LACS AND MAX BANK GUARANTEE OF RS 5.0 LACS . ANY LOSS OR DAMAGE TO RELIANCE RETAIL DUE TO ANY REASON WOULD BE RECOVERED FROM SAME AT THE TIME OF SUSPENSION OF THE SERVICES IF THE TOTAL AMOUNT TO BE RECOVERED FR OM THE TRANSPORTER WOULD BE MORE THAN THE PAYMENT DUE TO HIM. (II) TRANSPORTATION/ FREIGHT BILLING AND PAYMENT MODEL NUMBER DRY 407 8.75 709 7.75 1109/909 7 1613 4.5 2515 3.5 IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -42- 1. TRANSPORTER WILL RAISE TRANSPORTATION BILL ON MONTHLY BASIS AND SUBMIT ON OR BEFORE 10TH OF FOLLOWING MONTH IN DESIRED FORMAT ALONG WITH PODS. 2. RELIANCE WILL PAY WITHIN 30 DAYS OF RECEIPT BILL. 3. PAYMENT WILL BE SUBJECT TO TDS AND OTHER SUMS PAYABLE BY TRANSPORTER TO RRL IF ANY. (III) AVAILABILITY & UTILIZATION OF VEHICLES: 1. TRANSPORTER WOULD BE RESPONSIBLE FOR ENSURING THE AVAILABILITY OF TOTAL NO OF VEHICLES WITH RR SPECIFICATION ON EACH DAY. 2. THE VEHICLES ENGAGED AS DEDICATED FOR RR SHOULD NOT BE USED FOR ANY OTHER PURPOSE TILL IT IS ENGAGED WITH RR. 3. THE DAILY OPERATING HOURS WILL BE 24 HRS/DAY, 2 SHIFTS A DAY. THE VEHICLES WILL BE OPERATING ON ALL 7 DAYS IN A WEEK. THE VEHICLES WILL BE USED FOR SECONDARY DISTRIBUTION (FROM DC TO STORES), PICKUP FROM STORES FOR LOCAL PRIMARY MOVEMENTS FROM NEARLY SOURCING LOCATIONS. 4. VEHICLE WILL ALSO HAVE TO PERFORM MULTI-STOP DELIVERIES AS AND WHEN REQUIRED AND ADVISED BY THE RR DC OR CPC. 5. IF REQUIRED TRANSPORTER MUST ARRANGE 10% EXTRA VEHICLES FROM MARKET. THE RATES APPLICABLE TO THEM WOULD BE SAME AS THOSE OF DEDICATED VEHICLES. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -43- 6. TRANSPORTER NEEDS TO PROVIDE A DEDICATED KEY ACCOUNT MANAGER/CO-COORDINATOR AT DC TO ENSURE THE SMOOTH AND EFFICIENT RUNNING OF VEHICLE. ON TIME AVAILABILITY & REPORTING OF DRIVERS AND VEHICLES. 7. EACH VEHICLE MUST HAVE TWO DRIVERS. 8. TRANSPORTER TO ENSURE THAT ALL DRIVERS ASSIST AND ENSURE COUNTING OF MATERIAL WHILE LOADING AND UNLOADING AT VARIOUS PLACES. 9. TRANSPORTER WOULD ALSO BE RESPONSIBLE FOR ENSURING SAFE HANDLING & SAFETY OF THE EQUIPMENT (TAIL LIFTS, TROLLEYS, DOLLIES) ATTACHED TO THE VEHICLES. 10. NON-AVAILABILITY OF VEHICLE WITHOUT ANY WRITTEN PERMISSION OF RR FROM 6-12 HOURS WILL BE CONSIDERED AS NON-AVAILABILITY FOR HALF AND > 12 HOURS WOULD BE CONSIDERED AS FULL DAY. THE SAME WOULD BE DEDUCTED WITH PENALTY WHILE PROCESSING THE PAYMENTS. DELAY < 6 HOURS WOULD BE CALCULATED AS PAR THE FORMULA MENTIONED BELOW EXAMPLE FORMULA FOR CALCULATING DELAY MIN MONTHLY KM PER VEHICLE = 45, 000 TOTAL MONTHLY RUNNING HOURS = 24 *30 = 720 HOURS PER HOUR COST = 45000/720 = RS. 62.5/- PER HOUR IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -44- IF THE VEHICLE DELAYED BY 4 HOURS IN TRANSIT WITHOUT A VALID REASON, ` 250/- (4X 62.5) WOULD BE ADJUSTED WHILE PROCESSING PAYMENTS. IF VEHICLE DELAYED BY 10 HOURS IN TRANSIT A VALID REASON RS750/- (12X 62.5) WOULD BE ADJUSTED WHILE PROCESSING PAYMENTS. THE WAIVER OF THE PENALTY WOULD BE SUBJECT TO DOCUMENTARY EVIDENCE OF DELAY AND CONFIRMED BY DC/CPC IN CHARGE. SAME FORMULA WOULD BE USED FOR NON- AVAILABILITY OF VEHICLE & DRIVER ON TO DAY BASIS. (IV) REPAIR & MAINTENANCE: 1. REPAIR AND MAINTENANCE OF THE VEHICLE WOULD SOLELY BE THE RESPONSIBILITY OF TRANSPORTER. ANY VEHICLE BREAKDOWN IN TRANSIT NEED TO BE HANDLED BY TRANSPORTER. 2. VEHICLE MAINTENANCE AND IMAGE ARE CRITICAL TO MEETING OUR OBJECTIVES. VEHICLES MUST BE AVAILABLE AND IN GOOD OPERATING CONDITION ALL THE TIME. TRANSPORTER NEED TO ENSURE THE ON-TIME MAINTENANCE OF SAME. 3. OPERATIONS WOULD BE 24X7 HOURS AND WOULD BE MORE CRITICAL ON WEEKDAYS ANY OTHER PUBLIC HOLIDAYS AND FESTIVAL SEASON. ALL THE MAINTENANCE SHOULD BE PLANNED ONLY ON WEEKDAY (MON TO THURSDAY) EXCLUDING PUBLIC HOLIDAYS. 4. TRANSPORTER NEEDS TO ARRANGE REPLACEMENT OF VEHICLES GOING OUT FOR SCHEDULED MAINTENANCE OR EMERGENCY REPAIR. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -45- (IV) TRANSIT DELAY, DAMAGES & SHORTAGES: 1. RR WILL PUBLISH TRANSIT TIME FOR EACH ROUTE BASED ON SHORTEST MOTOR ABLE ROUTE AND RUNNING CONDITIONS OF THE ROUTE ON 24 HOURS BASIS FOR FORWA RD & RETURN JOURNEY. EXCESS TIME TAKEN OVER THE PUBLISHER TRANSIT TIME WOULD BE MONITORED AND SHALL BE TREATED AS TRANSIT DELAY. 2. IN CASES OF MOVEMENT OF FRUITS % VEGETABLE OR ANY OTHER MOISTURE SENSITIVE PRODUCT. SHORTAGE IN VOLUME/WEIGHT > TOLERANCES DEFINED AND AGREED WITH TRANSPORTER WOULD BE IN TRANSPORTERS ACCOUNT. 3. FOR ALL OTHER SHORTAGE, THEFTS & DAMAGE DUE TO ANY OTHER REASON MENTIONED, RECOVERY WILL BE MADE A T APPLICABLE RETAIL SELLING PRICE AT DESTINATION. 4. IN CASE OF DETERIORATION IN QUALITY DUE TO TRANS IT DELAYS, VEHICLE BREAKDOWN, RR AT DISCRETION MAY DISPOSE OF THE CONTAMINATED PRODUCT. ALL EXPENSES/LOSSES AND COST OF PRODUCT IN THIS CONNECTION AS DETERMINED BY THE COMPANY SHALL BE RECOVERABLE FROM TRANSPORTER. 5. IN CASE OF DETERIORATION IN QUALITY DUE TO TRANS IT DELAYS, VEHICLE BREAKDOWNS, RR AFTER CONSIDERING TH E LOCAL FACTORS, TRANSPORTERS CONTENTIONS MAY DISPOSE OF THE CONTAMINATED PRODUCT. ALL EXPENSES/LOSSES AND COST OF PRODUCT IN THIS CONNECTION AS DETERMINED BY THE COMPANY SHALL BE ADDRESSED ON A CASE TO CASE BASIS. (VII) INSURANCE: RR WILL FACILITATE INSURANCE OF MATERIAL IN TRANSIT . HOWEVER LIABILITY AND RESPONSIBILITY OF ANY DAMAGES IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -46- IN TRANSIT WILL BE WITH TRANSPORTER ONLY. RR SHALL RECOVER THE COST OF GOODS DAMAGE IN TRANSIT WHICH COULD NOT BE CLAIMED THROUGH INSURANCE. THE RESPONSIBILITY OF LODGING OF AN FIR AND SURVEY OF THE GOODS DAMAGED IN TRANSIT LIES WITH THE CONCERNE D TRANSPORTER. (VIII) VEHICLE/SHIPMENT TRACKING: TRANSPORTER MUST PROVIDE MOBILE PHONES ALONG WITH ALL THE VEHICLES. (IX) SUSPENSION/BLACK LISTING OF VEHICLES AND TRANSPORTER: SUSPENSION/BLACK LISTING OF VEHICLES/DRIVERS: 1. IF ANY VEHICLE IS FOUND DEFAULTER IN CONFORMING STATUTORY RULES/REGULATIONS. 2. IF VEHICLES BECOME ROAD UNWORTHY. 3. IF VEHICLE OR ITS DRIVER FOUND INDULGED IN ANY KIND OF MALPRACTICE. 4. IF VEHICLE IS BREAKING DOWN FREQUENTLY. 5. DRIVERS WHO HAD BROKEN THE SEAL WITHOUT INFORMATIONS. SUSPENSION/BLACK LISTING OF TRANSPORTER: 1. IF TRANSPORTER BREACHES ANY TERMS AND CONDITIONS OF THIS ARRANGEMENT AGREEMENT. 2. IF TRANSPORTER FOUND INDULGED IN ANY KIND OF MAL PRACTICE/ADULTERATION OF FUEL. 3. IF TRANSPORTER FAILS TO PERFORM AS PER RR REQUIREMENT. 4. IF TRANSPORTER FOUND DEFAULTER IN COMPLIANCE OF APPLICABLE RULES/REGULATIONS. 5. IF TRANSPORTER ENGAGES VEHICLE FOR ANY OTHER PURPOSE DURING ANY TIME OF THIS IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -47- AGREEMENT/ARRANGEMENT WITHOUT OBTAINING SPECIFIC APPROVAL/CONSENT FROM RELIANCE. RELIANCE DECISION SHALL BE FINAL IN ALL CASES. (X) VEHICLE SPECIFICATIONS: 1. DEPLOYED TRUCKS SHOULD BE BETWEEN 0 TO 5 YEARS OF AGE, HOWEVER VEHICLES UP TO 8 YEARS AGE WILL ALSO BE CONSIDERED ON THEIR ROAD WORTHY CONDITION. 2. VEHICLES MUST MEET REQUIREMENT IN RESPECT OF ATTACHED CHECKLIST (ANNEXUREL) IN FULL, AND MUST BE MAINTAINED IN A CONFORMITY STATUS AT ALL TIMES. (XII) KEY PERFORMANCE INDEXES: BELOW ARE THE KEY PERFORMANCE PARAMETERS WHICH ARE ESSENTIAL FOR RUNNING THE SMOOTH AND EFFICIENT TRANSPORT OPERATION. THESE WOULD BE FOLLOWED STRICT LY AND THE TRANSPORTER PERFORMANCE WOULD BE MAJORED ON THIS BASIS ONLY. 1. ON TIME STORE DELIVERY 2. ON-TIME DC DEPART AND ARRIVAL TIME 3. GOOD QUALITY OF TRAINED DRIVERS 4. STORE/PUBLIC DRIVER COMPLAINTS 5. TRIPS PER TRUCK PER DAY- MINIMUM 2 6. ON-TIME PLACEMENT OF VEHICLE AND AVAILABILITY OF DRIVERS 7. VEHICLE BREAKDOWNS 8. TRANSIT TIME 9. SHORTAGES & DAMAGES (IIX) TRANSPORT OPERATIONS: 1. IT IS AGREED THAT THE TRUCKS COVERED BY THIS ARRANGEMENT SHALL OPERATE AT THE SOLE RISK OF THE TRANSPORTER. IN NO CASE, RR WOULD BE HELD IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -48- RESPONSIBLE FOR ANY LOSS OF DAMAGE DONE TO THE TRUC K WHILE ON THE RRS WORK OR PARKED IN THEIR PREMISES OF RR OR RRS PRINCIPALS. 2. TRANSPORTERS WILL PROVIDE A HISTORY/PERSONAL DA TA SHEET OF ALL DRIVERS ALONG WITH PHOTOGRAPHS AND COP Y OF DRIVING LICENSE AND A SET OF FINGERPRINTS OF EAC H OF THE FINGERS (IN THE PRESENCE OF RR STAFF). SET OF T WO DRIVERS AND ONE CLEANER WILL BE ATTACHED TO ONE TRU CK ONLY WITHOUT BEING ON OTHER TRUCKS UNLESS CIRCUMSTANCES WARRANT. 3. TRANSPORTERS WILL POSITION AT LEAST ONE MANAGER/SUPERVISOR AT THE BASE CPS/DC FOR CARRYING OUT CO-ORDINATION/ADMINISTRATIVE DUTIES. CREDENTIAL S OF SUCH A PERSON WILL BE MADE AVAILABLE TO THE LOCATION IN CHARGE. 4. THE TRANSPORTER SHALL BE RESPONSIBLE FOR THE QUANTITY & QUALITY OF THE PRODUCTS RECEIVED BY HIM FOR TRANSPORTATION. 5. THE TRANSPORTER SHALL BE RESPONSIBLE FOR MAINTAINING THE SEALS PLACED ON THE VEHICLE, ANY DAMAGE/TAMPERING OF SEAL WOULD BE TREATED SERIOUSLY AND WOULD BE PENALIZED TO THE TRANSPORTER. 6. TRANSPORTER WILL BE RESPONSIBLE FOR ENSURING TH AT: A. WORKING RULES AND REGULATION OF THE RR ARE FOLLOWED BY HIM AND CREW OF THE TRUCKS. B. TRUCK DRIVERS DELIVER THE PRODUCT TO THE CORRECT & SPECIFIED LOCATION. C. THE CREW HAS COLLECTED THE CORRECT DELIVERY DOCUMENTS AND CARRIES ALL THE NECESSARY TRANSPORT RELATED DOCUMENTS WHENEVER IN TRANSIT. D. TRUCK DRIVER FOLLOWS THE RELIANCE APPROVED & SPECIFIED ROUTE ANY DEVIATION DUE TO GENUINE IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -49- REASONS SHOULD BE INFORMED IMMEDIATELY BEFORE DIVERSIONS. TRUCK FOLLOWING DIFFERENT ROUTE WITHOUT INFORMATION & APPROVAL WOULD NOT BE PAID EXTRA AND DELAY DUE TO THAT WOULD BE PENALIZED AS PER THE FORMULA MENTIONED EARLIER. E. SIGNATURE OF RECIPIENT ON DELIVERY DOCUMENT OR POD IS OBTAINED AFTER COMPLETING THE DELIVERY. F. HAND OVER RECEIPTED DELIVERY DOCUMENTS AND REMITTANCES PERTAINING TO DELIVERIES MADE, TO RR ON THE DAY AND BEFORE ACCEPTING NEXT LOAD. IN CASE, RETURN OF TRUCK IS DELAYED FOR ANY REASON WHATSOEVER, SUCH DOCUMENTS AND REMITTANCE ARE REACHED TO THE DC POINT WITHIN 24 HOURS OF COMPLETING THE DELIVERY. 7. IN CASE OF THE TRUCK MEETS WITH AN ACCIDENT OR BREAKDOWNS WHILE IT IS LOADED WITH RRS PRODUCT, TH E TRANSPORTER SHALL:- A. INFORMATION TO DC TRANSPORT CONTROL ROOMS AND ALSO TO NEAREST POLICE STATION IF REQUIRE. B. GUARD THE TRUCK AND, SECURE THE GOODS INSIDE TILL ARRIVAL OF REPLACEMENT VEHICLE AND RESCUE AGENCIES. C. ARRANGE ANOTHER FIT TRUCK TO TRANSFER THE PRODUCT FROM ACCIDENT TRUCK. D. BRING SUCH TRANSSHIPPED PRODUCT TO DC OR DELIVERY LOCATION AS DIRECTED BY THE RR AT TRANSPORTERS COST. E. BE RESPONSIBLE FOR LOSS AS DETERMINED BY RR. 8. TRANSPORTER NEEDS TO ENSURE ONE MOBILE WITH EAC H VEHICLE AND NEED TO ENSURE THAT ALL THE DRIVERS KEE P TELEPHONIC CONTACT WITH RR TRANSPORT CONTROL ROOM WHENEVER IN TRANSIT. TRANSPORTER WOULD BE RESPONSIB LE FOR ENSURING THAT ALL THE DRIVERS COMMUNICATE ALL THE C ORRECT INFORMATION & DETAILS AS INSTRUCTED BY RR DC IN-CHA RGE WHILE IN TRANSIT. IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -50- 9. A LOG-BOOK HAS TO BE MAINTAINED WITH EVERY V EHICLE (FORMAT AS BELOW) TO TRACK AND MONITOR EACH TRIP, S HIPMENT AND VARIOUS ACTIVITIES PERFORMED WHILE IN TRANSIT. TRANSPORTER NEED TO ENSURE THAT ALL THE DRIVERS FOL LOW THIS STRICTLY AND ENSURE THE COMPLETION OF ALL THE FIELD CARIOUS LOCATIONS. DRIVER NEED TO HANDOVER THE LOG BOOK AFT ER COMPLETING EACH TRIP AT CPC/DC TO THE CONCERNED PER SON. 19. A READING OF THE ABOVE CLAUSES OF THE AGREEMENT FOR TRANSPORTATION OF GOODS ENTERED INTO BY THE ASSESSE E SHOWS THAT THE FACTS OF THE PRESENT CASE OF THE ASSESSEE ARE S IMILAR TO THE FACTS OF THE CASE IN THE CASE OF M/S.PARISHRAM TRANSPORT VS. ITO (SUPRA), THEREFORE, THE SAID DECISION SQUARELY APPL IES TO THE FACTS OF THE CASE OF THE ASSESSEE. RESPECTFULLY FOLLOWI NG THE SAME, WE CONFIRM THE ORDER OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCES OF ` 1,03,968/- FOR A.Y.2007-2008, FOR A.Y. 2008-2009 ` 3,62,609/-, FOR 2009-2010 ` 6,38,067/- AND FOR A.Y 2010-2011 OF ` 10,07,915/-UNDER SECTION 40(A)(IA) OF THE ACT AND DISMISS THE GROUNDS OF THE APPEAL OF THE REVENU E. 20. BEFORE PARTING WITH THE ISSUE, WE LIKE TO BRING ON RECORD THE FACT THAT THE DECISION RELIED UPON BY THE LEARNED D R IN THE CASE OF MUKESH TRAVELS CO. (SUPRA) IS DISTINGUISHABLE ON FA CTS AND IS NOT APPLICABLE IN THE FACTS OF THE INSTANT CASE. IN TH AT CASE, THE TRIBUNAL FOUND THAT VARIOUS PERSONS TO WHOM THE PAY MENTS WERE MADE BY THE ASSESSEE CARRIED OUT THE WORK OF CARRYI NG PASSENGERS, WHEREAS IN THE INSTANT CASE, THE TRANSPORTATION WOR K WAS DONE BY THE ASSESSEE AND VARIOUS PERSONS TO WHOM THE PAYMEN TS WERE IT(SS)A NO.41 TO 44/AHD/2013 IT(SS)A NO.111 TO 114/AHD/2013 ACIT VS.GYANCHAND GANDHI HUF -51- MADE BY THE ASSESSEE SIMPLY HIRED OUT THEIR VEHICLE S TO THE ASSESSEE. THEREFORE, THE ABOVE CASE DOES NOT SUPPO RT THE CASE OF THE REVENUE IN THE INSTANT CASE. 21. IN THE RESULT APPEALS OF THE ASSESSEE ARE ALLOW ED AND THAT OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( ' #$ ' #$ ' #$ ' #$ /KUL BHARAT /JUDICIAL MEMBER . .. . . . . . /N.S. SAINI /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD
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