DY CIT, CENTRAL CIRCLE,, VIJAYAWADA vs. CONZUG LOGISTICS PVT. LTD.,, VISAKHAPATNAM

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the revenue is directed against order of the

Commissioner of Income Tax (Appeals)-3, {CIT(A)}, Visakhapatnam vide

ITA No.42/2015-16/CIT(A)-3/VSP/2017-18 dated 30.6.2017 for the

assessment year 2005-06. The cross objection filed by the assessee is

in support of the order of the Ld. CIT(A).

engaged in the business of handling and transport contractors

at Visakhapatnam and consignment agent of RINL, Nagpur. The

assessee filed its return of income for the A.Y.2005-06

originally on 01.10.2005 admitting the total income of

Rs.1,33,430/-. Consequent to search and seizure operations in

the case of M/s. Maha Maruthi Logistics Private Limited, a notice

u/s.153A of the Income Tax Act, 1961 (hereinafter called as 'the

Act') was issued on 29.12.2010 and in response to the notice,

the assessee filed the return of income on 14.2.2011 admitting

the total income of Rs.1,33,430/-. The assessment was

completed u/s. 143(3) r.w.s. 153A of the Act vide order

dt.29.12.2011 wherein the income of the assessee was

ITA No.507 /Vizag/2017 & CO 79/Vizag/2017 M/s. CONZUG Logistics Pvt. Ltd., Visakhapatnam assessed at Rs. 1,33,430/-. Vide order dt.03.03.2014. u/s.

263 of the Act, the Commissioner of Income Tax (Central) held

that the assessment order dt.29.12.2011 is erroneous and

prejudicial to the interest of Revenue on the ground that the Assessing

Officer did not properly examine some of the issues relating to bank

deposits and TDS. Consequently the Assessing Officer has taken

up the case for reassessment as per the direction of the order

passed under section 263 of the act and given effect to the

revision order by passing assessment order dt.26.03.2015 u/s.

143(3) r.w.s. 263 of the Act. Thus the total income was assessed

at Rs.74,50,790/- by making an addition of Rs.27,00,000/-

towards unexplained cash credit and addition of Rs.46,17,360/-

towards disallowance of expenditure u/s. 40(a)(ia) of the Act.

before the CIT(A) and the Ld. CIT(A) allowed the appeal of the

assessee deleting both the addition of ` 27,00,000/- in respect of cash

credits and the addition made in respect of disallowance u/s 40(a)(ia)

of the Act.

ITA No.507 /Vizag/2017 & CO 79/Vizag/2017 M/s. CONZUG Logistics Pvt. Ltd., Visakhapatnam 4. Aggrieved by the order of the Ld.CIT(A), the revenue is in

appeal before us against the addition u/s 40(a)(ia) of the Act. All

the grounds of appeal are related to the deletion of addition for

made u/s 40(a)(ia) of the Act. During the appeal hearing, the Ld.

D.R. argued that the payment was made to CONCOR, a company

which is engaged in the carriage of goods. Since the payment was

not directly made to the Railways, the Ld. D.R. contended that the

payment attract the TDS u/s 194C of the Act. Since the assessee

failed to deduct the TDS, the A.O. has rightly made the addition,

hence, requested to confirm the order of the A.O.

194C of the Act, in explanation (iv)(c), work shall include carriage

of goods or passengers or any mode of transport, other than by

Railways. Since the CONCOR is a subsidiary organization of the

Indian Railways and the Railways have carried the goods, there is

no case for TDS u/s 194C of the Act. He relied on the order of the

coordinate bench of ITAT, Hyderabad in the case of Ras Polybuild

Product Pvt. Ltd. Vs. DCIT (2016) 48 CCH 254 (Hyd) (Trib).

ITA No.507 /Vizag/2017 & CO 79/Vizag/2017 M/s. CONZUG Logistics Pvt. Ltd., Visakhapatnam 6. We have heard both the parties, perused the materials

available on record and gone through the orders of the authorities

below. The assessee has transported the goods by Railways

through CONCOR, there is no dispute with regard to the fact that

goods were carried by the Indian Railways. As per sub clause (c)

of explanation (iv) of section 194C of the Act from the definition of

“work”, the carriage of goods by Railways is excluded for the

purpose of deduction of tax at source u/s 194C of the Act. The Ld.

CIT(A) has dealt the issue in detail in para No.6.3 of the CIT(A)

order, which is extracted for the sake of clarity and the same reads

as under:

6.3) Ground No.2: This ground is directed against addition of ` 46,17,360/- towards disallowance u/s 40(a)(ia) of the Act. The short dispute is whether the amount paid by the appellant to CONCOR towards railway freight attracts the provisions of Section 194C of the Act or not. In this regard, it is pertinent to consider the relevant provisions of Section 194C of the Act, which are extracted as under:

194C. Payment to contractors – (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- one per cent where the payment is being made or credit is being (i) given to an individual or a Hindu undivided family; two per cent where the payment is being made or credit is being (ii) given to a person other than an individual or a Hindu undivided family, 5

ITA No.507 /Vizag/2017 & CO 79/Vizag/2017 M/s. CONZUG Logistics Pvt. Ltd., Visakhapatnam

of such sum as income-tax on income comprised therein. ……………………………..

EXPLANATION: For the purposes of this section:

……………………………..

“work” shall include- advertising; (a) broadcasting and telecasting including production of (b) programmes for such broadcasting or telecasting; carriage of goods or passengers by any mode of transport (c) other than by railways; catering; (d) manufacturing or supplying a product according to the requirement (e) or specification of a customer by using material purchased from such customer. From the above explanation, it is very much clear that the expression 'work' does not include carriage of goods by railways. Further, the provisions of Section 194C are applicable only for sum paid for carrying out a work. A simple reading of the provisions makes it very clear that when the amount paid is for carrying out a job which includes carriage of goods by railways, then such amount paid to any person shall not be treated as a payment for work in terms of Section 194C of the Act. It is nowhere stipulated in this section that the payment has to be made directly to Railways. The appellant has rightly placed reliance in the decision of Hyderabad Bench of ITAT in the case of RasPotybuild Products Pvt Ltd. Vs. DCII (2016) 48 CCH 254 (Hyd)(Trib). The Hon'ble Tribunal held as under in their order: 6. We have carefully considered the rival contentions and perused the record. As rightly pointed out by the Learned Counsel appearing on behalf of the assessee, Section 194C speaks of payment made to contractors with an exception that even payments made to contractors would stand outside the purview of that provision if such payment is made tyiards carnage charges. In the instant case, the assessee categorically submitted that the payment was made to M/s. Exim Services towards freight charges that too for corn goods_by rail. This claim of the assessee is not disputed by the tax authorities except stating that the payment is not made directly to the railways but to the Agent. In our considered opinion the opening part of Section 194C refers to payments made to contractors but at the some time makes 6

ITA No.507 /Vizag/2017 & CO 79/Vizag/2017 M/s. CONZUG Logistics Pvt. Ltd., Visakhapatnam an exception to the payments made to such contractors if that amount has to be utilised for payment of rail fares. if the intention of the legislature was to make the payment directly to the railway authorities, then the exception provided in the Explanation should not have been introduced in Section 194C of the Act. Thus, on a conspectus of the matter, we are of the view that even if payment is made to an Agent so long as the payment is meant for meeting the expenditure in the form of payment to the railways, t stands excluded from the provisions of Section 194C of the Act. Under these circumstances, we accept the plea of the assessee by holding that there was no need to deduct tax at source with respect to the impugned payment to the contractor. Even otherwise, in the light of decision of the ITAT, Hyderabad Bench in the case of ACIT, Central Circle-2, Hyderabad vs., MIs. Janapriya Properties Pvt. Ltd., Hyderabad (supra) Section 40(a)(ia) cannot be invoked in respect of payments already made before the end of the accounting year. We direct the A.O. accordingly. Respectfully following the above decision of ITAT, Hyderabad Bench, I hold that the impugned payment does not fall within the scope of the provisions of Section 194C of the Act and consequently the disallowance provided in Section 40(a)(ia) is also not applicable. The Assessing Officer is directed to delete the disallowance of Rs.46,17,360/-.”

of Hyderabad and the facts are not disputed by the Ld. D.R., The

Ld. D.R. also did not bring any other decision in favour of the

revenue. Therefore, respectfully following the view taken by the

coordinate bench, we hold that the impugned payment does not

attract the TDS u/s 194C of the Act and no disallowance is called

for u/s 40(a)(ia) of the act. Hence the order of the Ld. CIT(A) is

upheld and the appeal of the revenue is dismissed.

ITA No.507 /Vizag/2017 & CO 79/Vizag/2017 M/s. CONZUG Logistics Pvt. Ltd., Visakhapatnam 8. CO/79/Viz/2007: CO is supportive of the order Ld.CIT(A).

Since we have upheld the order of the Ld. CIT(A) cross objection of

the assessee is sustained.

the CO is allowed. The above order was pronounced in the open court on 4th Apr’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 04.04.2018 VG/SPS

आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-