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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI G. MANJUNATHA
आयकर अपीलीय अिधकरण, ‘ए’ �यायपीठ, चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI �ी महावीर �संह, उपा�य� एवं �ी जी. मंजुनाथ, लेखा सद�य के सम� BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1161/CHNY/2017 िनधा�रण वष� / Assessment Year: 2009-10 The Asst. Commissioner of M/s. New Santha Stores, Income Tax, v. Cement Stockists, No.9, Circle – 1, Market Building, Tiruchendur Road, Tirunelveli Palayankottai, Tirunelveli – 627 002. PAN: AACFN4870D (अपीलाथ�/Appellant) (��यथ�/Respondent) & CO No.: 74/CHNY/2017 (in ITA No.1161/Chny/2017) िनधा�रण वष� / Assessment Year: 2009-10 M/s. New Santha Stores, The Asst. Commissioner of Income Tax, v. Cement Stockists, No.9, Circle – 1, Market Building, Tiruchendur Tirunelveli Road, Palayankottai, Tirunelveli – 627 002. PAN: AACFN4870D (अपीलाथ�/Appellant) (��यथ�/Respondent) राज� की ओर से /Revenue by : Shri G. Chandrababu, Addl.CIT �नधा�रती क� ओर से/Assessee by : Shri G. Baskar, Advocate सुनवाई क� तार�ख/Date of Hearing : 17.02.2021 घोषणा क� तार�ख/Date of Pronouncement : 10.03.2021
2 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 आदेश /O R D E R Per G. MANJUNATHA, AM:
This appeal filed by the Revenue and cross objections filed by the assessee are directed against order of learned Commissioner of Income Tax (Appeals)-3, Madurai, dated 28.02.2017 and pertains to assessment year 2009-10.
The Revenue has raised the following grounds of appeal:-
The order of the CIT (Appeals) is opposed to law on the facts and in the circumstances of the case. 2. The CIT (A) erred in allowing the assessee’s appeal and deleting the disallowance made by the under section 40a (ia) of the IT. Act 1961. 3. The CIT (A) failed to appreciate the fact that the ITAT had set aside the original order of the CIT(A) dated 27.08.2014 and restored the order of the A.O dated 30.12.2011. 4, The CIT(A) failed to appreciate that since the ITAT had set aside the order of the CIT(A), the issue become afresh and that the A.O had taken a decision considering the directions of the ITAT. 5. The CIT (A) failed to appreciate that the ITAT restored the assessment order of the A.O and therefore the decision taken by the A.O considering the original assessment and the decision of the ITAT is correct. 6. The CIT (A) ought to have consider the fact that provision of section 194C is applicable in the assessee’s case. 7. For these and such other grounds that may be adduced at the time of hearing, it is prayed the order of the CIT (A) mar be reversed and that of the A.O restored.
3 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 3. The brief facts of the case are that the assessee is a partnership firm engaged in the business of transport of limestone from quarries of India Cements Limited. It is also engaged in transport of cement from the factory premises of India Cement Ltd., to various destinations. The assessee has filed return of income for the relevant assessment year on 30.09.2009, declaring total income of Rs.17,15,520/-. The original assessment was made on 30.12.2011, after making addition of Rs.2,57,09,973/- towards hire charges paid for vehicles for non-deduction of tax at source u/s.194C of the Income Tax Act, 1961 (hereinafter the ‘Act’) by invoking provisions of section 40(a)(ia) of the Act. The CIT(A) allowed the appeal of the assessee on the ground that disallowance u/s.40(a)(ia) of the Act is applicable on the amount remained payable and outstanding on the last day of the previous year but if the amount is already paid, disallowances cannot be made u/s.40(a)(ia) of the Act. The CIT(A) also held that provisions of section 194C is not applicable to the impugned payments. The Revenue filed appeal against order of CIT(A) and the Tribunal has set aside the appeal to the file of the AO on the issue of applicability of provisions of section 40(a)(ia) of the Act, by
4 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 holding that provisions of section 40(a)(ia) of the Act is applicable even on amounts paid. The Tribunal further held that although provisions of section 194C has no application for the impugned payments but the amended provisions of section 194I w.e.f. 13.07.2006 covers payment of rent and hence directed the AO to examine the applicability of provisions of section 194I to impugned payment. The AO has taken up the case for examination in light of the directions of the Tribunal and held that the assessee hired lorries, which were owned and maintained by the owners and hence hire charges paid is covered u/s.194C of the Act. He, further observed that irrespective of section 194C / 194I of the Act, the assessee failed to deduct tax at source and therefore, section 40(a)(ia) of the Act is applicable. Accordingly, reaffirmed his findings and made addition towards hire charges for failure to deduct tax at source.
Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee contented that the Tribunal has set aside the appeal to the file of the AO on the issue of applicability of section 40(a)(ia) of the Act on the amount paid or payable, but the issue of
5 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 applicability of section 194C of the Act has not been challenged by the Revenue before the Tribunal and hence, the AO was incorrect in again considering the provisions of section 194C for the impugned payment. The assessee further contented that the Tribunal has directed the AO to consider section 194I of the Act, as amended w.e.f. 13.07.2006 and therefore, the findings of the AO in light of provisions of section 194C of the Act is exceeding his powers. The assessee further contended that provisions of section 194I has no application to the impugned payments because the assessee had not taken lorries on rent, which is evident from the fact that the salary of drivers or cost of running the vehicles is born by the owners. Therefore, it is incorrect to say that hire charges paid for vehicles is coming under the provisions of section 194I of the Act.
The ld.CIT(A) after considering relevant submissions of the assessee deleted addition made by the AO towards hire charges for failure to deduct tax at source on the ground that in earlier round of litigation, the CIT(A) has given categorical finding in respect of hire charges paid to lorry owners does not exceed Rs.20,000/- per day and consequently outside the scope of
6 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 section 194C of the Act. The said finding of the ld.CIT(A) was not challenged before the Tribunal and the contention of the Revenue before the Tribunal was in the context of applicability of provisions of section 40(a)(ia) of the Act on amounts paid and payable and therefore, the AO was incorrect in once again considering the issue in light of provisions of section 194C of the Act. As regards applicability of provisions of section 194I of the Act, the ld.CIT(A) held that during the fresh assessment proceedings, the assessee has filed necessary evidences to prove that lorry owners / agents placed the vehicles at the disposal of the assessee and the lorries were hired along with drivers. Further, as seen from the profit & loss accounts, there is no claim of expenditure towards cost of petrol / diesel / driver salary. If the assessee had taken lorries on rent for a specific period and engaged them for transport of cement, the assessee would have incurred the cost of driver salary and the cost of fuel. The very fact that such expenses are not claimed in the profit & loss account proves that assessee did not take lorries on rent but only paid hire charges for which section 194I of the Act is not applicable, accordingly deleted addition made by the AO towards hire charges u/s.40(a)(ia) of the Act for failure to deduct tax at
7 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 source. Aggrieved by the CIT(A), the Revenue is in appeal before us.
The ld.DR submitted that the ld.CIT(A) erred in allowing the assessee’s appeal and deleting the disallowance made u/s.40(a)(ia) of the Act, without appreciating the fact that once appeal is set aside to the AO, the issue becomes fresh and that the AO can take decision based on the facts of the case. Therefore, the findings of the CIT(A) that applicability of provisions of section 194C of the Act, was become final and the same cannot be considered in the reassessment proceedings is incorrect. The ld.DR further submitted that when the Tribunal has restored the assessment to the AO, the decision taken by the AO considering the original assessment and the decision of the Tribunal is correct in the given facts and circumstances of the case.
The ld.AR for the assessee supporting order of the ld.CIT(A) submitted that the ld.CIT(A) has rightly deleted the disallowance made by the AO invoking the provisions of section 40(a)(ia) of the Act, on the ground that the AO has travelled beyond the
8 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 directions of the Tribunal. The AR further submitted that the issue of applicability of provisions of section 194C of the Act, has become final in the first round of litigation before the first appellate authority, which is evident from the fact that the findings of the ld.CIT(A) was never challenged before the Tribunal. The issue challenged before the Tribunal was applicability of provisions of section 40(a)(ia) of the Act on amounts paid / payable and under those facts, the Tribunal has set aside the issue to the file of the AO by holding that provisions of section 40(a)(ia) of the Act is applicable even on amounts already paid and further directed the AO to examine the applicability of provisions of section 194I of the Act in light of the amended provisions of section 194I of the Act. Therefore, the action of the AO in examining the issue once again in light of provisions of section 194C of the Act, is beyond the scope of his powers and exceeding the authority. The ld.CIT(A) after considering relevant facts has rightly deleted additions made by the AO by holding that provisions of section 194I of the Act is not applicable on the impugned payment and his order should be upheld.
9 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. Admittedly, in the first round of litigation, the ld.CIT(A) has recorded categorical finding that provisions of section 194C of the Act has no application to the impugned payment towards lorry hire charges and said finding was based on the fact that the assessee has simply hired lorry from the agents and the same cannot be considered as formal contract between the assessee and the lorry owners to invoke the provisions of section 194C of the Act. It is also an admitted fact that when further appeal was filed by the Revenue before the Tribunal, the said finding was not challenged, which is evident from the fact that the Tribunal has set aside the appeal to the file of the AO on the issue of applicability of provisions of section 40(a)(ia) of the Act on amounts paid and payable at the end of financial year. The Tribunal while remanding the issue had further directed the AO to examine the applicability of provisions of section 194I of the Act. Therefore, when the issue of applicability of provisions of section 194C of the Act, has become final at the first appellate level and the said finding was not challenged before the Tribunal, then reconsidering the issue in the light of provisions of section 194C
10 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 of the Act by the AO is beyond the scope of his powers, which is not permissible under law. Therefore on this count, the finding of the ld.AO cannot be accepted.
As regards applicability of section 194I of the Act, the ld.CIT(A) has recorded categorical finding that the impugned payments does not come under the provisions of section 194I of the Act, because the assessee has simply hired lorries from the owners and the cost of running the vehicles including salary and diesel expenses were borne by the owners of the vehicles. The ld.CIT(A) has also recorded categorical finding that the assessee had paid only hire charges and the lorry owners met the cost of fuel, driver salary and other maintenance expenses. It is also a finding of fact from the ld.CIT(A) that the assessee has not debited any expenditure relating to running and maintenance cost of vehicles in its books of accounts. The said findings of the ld.CIT(A) were uncontroverted. The Revenue has failed to bring on record any evidences to prove that the impugned payments come under the provisions of section 194I of the Act. Therefore, we are of the considered view that there is no error in the finding recorded by the CIT(A) to delete additions towards disallowance
11 I.T.A. No. 1161/Chny/2017 & C.O No.74/Chny/2017 of hire charges u/s.40(a)(ia) of the Act, for failure to deduct tax at source. Hence, were are inclined to upheld the findings of the CIT(A) and dismiss appeal filed by the Revenue.
The assessee has filed cross objection in support of order of ld.CIT(A). Since, we have dismissed the appeal filed by the Revenue and confirmed the findings of the CIT(A), the cross objection filed by the assessee becomes infructuous. Therefore, the cross objection filed by the assessee is dismissed as not maintainable.
In the result, the appeal filed by the Revenue and the cross objection filed by the assessee are dismissed.
Order pronounced in the court on 10th March, 2021 at Chennai.
Sd/- Sd/- (महावीर �सह ) (जी. मंजुनाथ) (Mahavir Singh) (G. Manjunatha) उपा�य� /Vice President लेखा सद�य /Accountant Member चे�ई/Chennai, �दनांक/Dated, the 10th March, 2021 RSR आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. िनधा�रती/Assessee 2. राज�व/Revenue 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.