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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI RAMIT KOCHAR
आदेश / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER:
These two appeals, filed by the assessee, being ITA Nos.1790 & 1791/Chny/2018, are directed against common appellate order dated 15th March, 2018 passed by the learned Commissioner of Income Tax (Appeals)-8, Chennai (hereinafter called “the CIT(A)”) in ITA No. 90 & 265/16-17, for assessment years(ay’s) 2013-14 & 2014-15 respectively, the appellate proceedings before learned CIT(A) had arisen from separate assessment order(s) dated 09th March, 2016 and 21st November 2016
ITA Nos.1790 & 1791/Chny/2018 :- 2 -:
respectively passed by learned Assessing Officer (hereinafter called “the
AO”) u/s. 143(3) of the Income-tax Act,1961 (Hereinafter called “the
Act”).
The grounds of appeal raised by assessee in memo of appeal filed with
the Income-Tax Appellate Tribunal, Chennai (hereinafter called “the
Tribunal”) for both the ay’s read as under:-
In ITA No.1790/Chny/2018 for the AY 2013-14:
The appellant submit the following grounds of appeal in addition to various others which will be put forth at the time of hearing:-
The authorities below erred in disallowing Rs.53,18,606/- being interest paid to Non banking financial institutions (NBF) under section 40(a)(ia) for want of TDS.
The appellant submits that these non banking financial institutions are reputed companies who would have discharged their tax obligations by offering the interest received from the appellant and therefore the appellant is not required to deduct TDS on such payments in the light of the decision of the Supreme Court in the case of Hindustan Coco Cola and also in view of the second proviso to section 40(a)(ia) of the Act.
The authorities below erred in disallowing Rs.1,06,20,450/- being payments made to other travels u/s.40(a)(ia) for want of TDS.
The appellant submits that the other travels are employed whenever the appellant could not honour its commitment to the customers in providing the bus and on such emergency circumstances the other travels are called upon to provide the bus to the appellant's customers. The appellant therefore submits that there was no contract as such between the appellant and other travels and therefore there is no requirement to deduct any TDS u/s.194C of the Act.
The assessing officer erred in disallowing Rs.1,34,677/- being audit fees and Rs.67,000/- as professional fee for non deduction of TDS.
The appellant submits that the Auditor has provided certificate to show that he has accounted for the audit/professional fee received in his return of income and thus he has discharged his tax obligation by offering the audit fees received from the appellant. The appellant therefore is not required to deduct TDS on the audit fees and the disallowance is liable to be deleted.
The authorities below erred in invoking the provisions of section 40(a)(ia) on vehicle maintenance expenses of Rs.57,84,247/-.
The appellant submits that the vehicle maintenance expenses are normal repairs and maintenance expenses and there are no contract as such entered into by the appellant with the persons carrying the repairs and therefore the provisions of section 194C has no application and the appellant is not required to deduct any TDS on such vehicle maintenance expenses. The disallowance made by the assessing officer is therefore liable to be deleted.
The appellant therefore prays that the disallowance made u/s.40(a)(ia) on interest paid to NBFCs (Rs.53,18,606), payments to other travels (Rs.1,06,20,450), auditors
ITA Nos.1790 & 1791/Chny/2018 :- 3 -:
(Rs.2,01,677) and on vehicle maintenance expenses (Rs.57,84,247) may be deleted and render justice.
In ITA No.1791/Chny/2018 for the AY 2014-15:
The appellant submit the following grounds of appeal in addition to various others which will be put forth at the time of hearing:-
The authorities below erred in disallowing Rs.57,64,891/- being interest paid to Non banking financial institutions (NBF) under section 40(a)(ia) for want of TDS.
The appellant submits that these non banking financial institutions are reputed companies who would have discharged their tax obligations by offering the interest received from the appellant and therefore the appellant is not required to deduct TDS on such payments in the light of the decision of the Supreme Court in the case of Hindustan Coco Cola and also in view of the second proviso to section 40(a)(ia) of the Act.
The authorities below erred in disallowing Rs.1,45,68,958/- being payments made to other travels u/s.40(a)(ia) for want of TDS.
The appellant submits that the other travels are employed whenever the appellant could not honour its commitment to the customers in providing the bus and on such emergency circumstances the other travels are called upon to provide the bus to the appellant's customers. The appellant therefore submits that there was no contract as such between the appellant and other travels and therefore there is no requirement to deduct any TDS u/s.194C of the Act.
The assessing officer erred in disallowing Rs.1,80,000/- being audit fees for non deduction of TDS.
The appellant submits that the Auditor has provided certificate to show that he has accounted for the audit/professional fee received in his return of income and thus he has discharged his tax obligation by offering the audit fees received from the appellant. The appellant therefore is not required to deduct TDS on the audit fees and the disallowance is liable to be deleted.
The authorities below erred in invoking the provisions of section 40(a)(ia) on vehicle maintenance expenses of Rs.94,83,080/-.
The appellant submits that the vehicle maintenance expenses are normal repairs and maintenance expenses and there are no contract as such entered into by the appellant with the persons carrying the repairs and therefore the provisions of section 194C has no application and the appellant is not required to deduct any TDS on such vehicle maintenance expenses. The disallowance made by the assessing officer is therefore liable to be deleted.
The appellant therefore prays that the disallowance made u/s.40(a)(ia) on interest paid to NBFCs (Rs.57,64,891), payments to other travels (Rs.1,45,68,958), auditors (Rs.1,80,000) and on vehicle maintenance expenses (Rs.94,83,080) may be deleted and render justice.”
First we will take up assessee’s appeal for ay:2013-14 . The brief
facts of the case are that the assessee is engaged in business of travel
agency running and plying buses to various routes for picking and
dropping of their employees for various organizations and companies on
ITA Nos.1790 & 1791/Chny/2018 :- 4 -:
contract basis. The assessee had made payments towards interest to the
tune of Rs 76,15,294/- during previous year relevant to ay: 2013-14 to
various financial institutions and banks on vehicle hire purchase loans
availed by it for carrying out its business. The total amount borrowed
towards vehicle hire purchase loans was to the tune of Rs.6,09,97,869/-,
and the assessee had paid interest to the tune of Rs.53,18,606/- to
various financial institutions during previous year relevant to ay: 2013-
14, as detailed below:
Name of the Financial Amount Borrowed Closing Amount Institutions balance as on 31.03.2013 of Interest paid Cholamandalam DBS Finance 13,73,050/- 3,94,164/- Ltd. HDB Finance Ltd. 51,30,989/- 2,25,131/- India Bulls Ltd. 77,72,456/- 9,02,249/- L&T Finance Ltd. 19,13,280/- 11,27,773/- Mahindra Finance Ltd. 72,68,060/- 6,50,533/- Reliance Capital 73,50,033/- 8,56,347/- Sundaram Finance Ltd. 65,41,526/- 5,00,372/- Tata Finance Ltd. 64,23,139/- 6,62,037/- Total 4,37,72,533/- 53,18,606/-
The AO observed that the assessee has not deducted income-tax at source on the aforesaid interest payments u/s.194A of the 1961 Act.
3.2 The AO also observed that the assessee has made other payments
during previous year relevant to ay: 2013-14 as detailed hereunder,
against which no income-tax was deducted at source under Chapter XVII-
B of the 1961 Act :
TDS not Expenses Amount claimed deducted u/s. Interest paid to 53,18,606/- 194A financial Institutions Payment to other travels 1,06,20,450/- 194C Audit fee 1,34,677/- 194J Professional fee 67,000/- 194J Vehicle Maintenance 57,84,247/- 194C Expenses
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Total 2,19,24,980/-
3.3 The AO show-caused assessee as to why the additions be not made
for non compliance of provisions of Section 40(a)(ia) read with Chapter
XVII-B of the 1961 Act . As per AO, the assessee did not filed proper
reply, which led the AO to invoke provisions of Sec.40(a)(ia) of the 1961
Act and made additions to the tune of ` 2,19,24,980/- by disallowing
expenses for non-deduction of income-tax at source under relevant
provisions of Chapter-XVIIB of the 1961 Act, vide assessment order dated
09.03.2016 passed by the AO u/s. 143(3) of the 1961 Act.
Aggrieved by an assessment framed by the AO vide assessment
order dated 09.03.2016 passed u/s 143(3) of the 1961 Act, the assessee
filed first appeal with learned CIT(A) who was pleased to grant relief
w.r.t.disallowance made towards interest payments to the tune of `
23,94,552/- made by assessee to five banks which was earlier disallowed
by the AO for ay: 2014-15 , keeping in view exemption provided u/s
194A(3)(iii)(a) read with section 40(a)(ia) of the 1961 Act , while rest of
the additions as were made by the AO for ay: 2014-15 were confirmed by
Ld.CIT(A) vide common appellate order dated 15.03.2018 passed by
learned CIT(A). The learned CIT(A) provided relief to the assessee for
interest payments made to banks for ay: 2014-15, as detailed
hereunder:-
Interest on loan paid to Dhanalaxmi Bank Rs. 1,88,513/- Interest on loan paid to ICIC1 Bank Rs. 7,57,048/- Interest on loan paid to ING Vysya Bank Rs. 75,189/-
ITA Nos.1790 & 1791/Chny/2018 :- 6 -:
Interest on loan paid to Kotak Mahindra Bank Rs. 5,19,195/- Interest on loan paid to Yes Bank Rs. 8,54,607/- Total Rs. 23,94,552/-
4.2 While for ay: 2013-14, the entire additions as were made by the AO
stood confirmed by learned CIT(A) vide common appellate order dated
15.03.2018 passed by learned CIT(A).
Aggrieved by common appellate order dated 15.03.2018 passed by
learned CIT(A), the assessee has filed these two appeals for ay(s): 2013-
14 and 2014-15 respectively before the tribunal. At the outset, the
Ld.Counsel for the assessee prayed that one more opportunity be granted
to the assessee and the assessee will produce all relevant
evidences/prescribed certificates from the auditors of the payees to prove
that all these payees to whom payments under various heads were made
by the assessee had included aforesaid income in their return of income
filed with Revenue and paid due income-tax to the Department. The
learned counsel for the assessee stated that no disallowance u/s 40(a)(ia)
of the 1961 Act is warranted keeping in view ratio of decision of Hon’ble
Delhi High Court in the case of CIT v. Ansal Land Mark Township Private
Limited reported in (2015) 377 ITR 635(Delhi). It was submitted that
second proviso to Section 40(a)(ia) of the 1961 Act which was inserted by
Finance Act, 2012 w.e.f. 01.04.2013 shall come into play for rescue of the
assessee, which was held to be retrospective by Hon’ble Delhi High Court
w.e.f. 01.04.2005. It was submitted that in light of decision in the case of
Hindustan Coca Cola Beverage Private Limited v. CIT reported in (2007)
293 ITR 226(SC) , the revenue can at best recover interest as per ratio of
ITA Nos.1790 & 1791/Chny/2018 :- 7 -:
decision in the case of Hindustan Coca Cola(supra) and it was prayed that
issue may accordingly be restored back for readjudication.
5.2 The Ld.DR objected to the grant of one more opportunity to the
assessee and submitted that the assessee has not filed
evidences/certificates as are required to evidence that these payees have
included aforesaid payments made by the assessee to them under various
heads in their return of income filed with Revenue and paid due taxes to
the credit of Central Government.
5.3 So far as the payment made for vehicle maintenance is concerned, the
Ld.Counsel for the assessee submitted that these payments were made
under an oral contract and there is no written contract signed by the
assessee with said parties/payees and Section 194C of the 1961 Act has
no applicability to oral contracts. On the other hand, the Ld.DR submitted
that these are in any case contracts and provisions of Section 194C gets
attracted and the assessee is liable to deduct income-tax at source under
the provisions of Section 194C of the 1961 Act.
We have considered rival contentions and perused the material on
record including cited case laws. We have observed that the assessee is
engaged in business of travel agency running and plying buses to various
routes for picking and dropping of their employees for various
organizations and companies on contract basis. We have observed that
the assessee had made payments under various heads to payees without
deduction of income-tax at source within provisions of Chapter XVII-B of
the 1961 Act, for previous years relevant to ay’s: 2013-14 and 2014-15.
ITA Nos.1790 & 1791/Chny/2018 :- 8 -:
The payments were made by assessee for previous year relevant to ay:
2013-14 under following heads on which no income-tax was deducted by
assessee while making payments within Chapter XVII-B of the 1961 Act:-
TDS not Expenses Amount claimed deducted u/s. Interest paid to 53,18,606/- 194A financial Institutions Payment to other travels 1,06,20,450/- 194C Audit fee 1,34,677/- 194J Professional fee 67,000/- 194J Vehicle Maintenance 57,84,247/- 194C Expenses Total 2,19,24,980/- The provisions of Section 40(a)(ia) of the 1961 Act were clearly hit on
aforesaid payments made for ay: 2013-14 and the AO has rightly invoked
provisions of Section 40(a)(ia) for making disallowance of expenses to the
tune of ` 2,19,24,980/- , which stood later confirmed by learned CIT(A).
So far as ay: 2014-15 is concerned, the learned CIT(A) has rightly
excluded interest payments made by assessee to banks keeping in view
exemption provided u/s 194A(3)(iii)(a) read with section 40(a)(ia) of the
1961 Act. The contention of the assessee that payments made for vehicle
maintenance are not hit by Section 194C of the 1961 as the payments are
made under oral contact cannot be accepted as provisions of Section 194C
of the 1961 Act stipulates that payments to contractors/sub-contractors
are covered by Section 194C of the 1961 Act . It did not distinguish
between oral and written contracts. The Indian Contract Act, 1872 also
recognized oral as well written contract as an agreements which are
enforceable at law. There is no distinction made by Indian Contract Act,
1872 between oral and written contract so far as enforceability of these
contracts at law is concerned. Thus, we donot accept this contention of the
ITA Nos.1790 & 1791/Chny/2018 :- 9 -:
assessee that payments made for vehicle maintenance is to be excluded
from the ambit of Section 194C read with Section 40(a)(ia) of the 1961
Act. The decision of ITAT, Mumbai in the case of ITO v Gopal S. Rajput
(2016) 156 ITD 827(Mum-trib) , in which one of us being ld. Accountant
Member was part of the Division Bench who pronounced the aforesaid
order. The decision of Hon’ble Karnataka High Court in the case of Smt. J.
Rama v. CIT (2012) 344 ITR 608(Kar. HC) is relevant.
Now, coming back , we are of the considered view that the issue of
disallowance of expenses by invoking provisions of Section 40(a)(ia) read
with provisions of Chapter XVII-B for both the ay’s : 2013-14 and 2014-15
needs to be restored to the file of Ld.CIT(A) for fresh adjudication . The
Ld.Counsel for the assessee has made statement before us that if given
one more opportunity, the assessee will produce all the necessary and
relevant evidences/ certificates as required under the statute/rules to
substantiate that the payees have duly included the aforesaid amounts as
income in their return of income filed with Revenue and paid due taxes to
the credit of Central Government. Now, the onus is entirely on the
assessee to produce all relevant evidences/ certificates as are required
under the law before learned CIT(A) in set aside proceedings for both the
ay’s to justify that no additions are warranted in the case of the assessee
u/s 40(a)(ia) of the 1961 as these payees have included aforesaid
amounts paid by the assessee in return of income filed with Revenue as
their income and paid due taxes to the Credit of Central Government. The
Ld.CIT(A) is directed to verify these evidences/certificates and accordingly
ITA Nos.1790 & 1791/Chny/2018 :- 10 -:
adjudicate the issue on merits in accordance with law , keeping in view ratio of decision of Hon’ble Delhi High Court in the case of Ansal Land Mark Township(supra) and decision of Hon’ble Supreme Court in the case of Hindustan Coca Cola(supra). Needless to say that the powers of the Ld.CIT(A) are co-terminus with powers of the AO. The assessee is directed to appear before Ld.CIT(A) and produce all the relevant and applicable evidences/ certificates in support of its contentions. Needless to say that learned CIT(A) shall provide proper and adequate opportunity of being
heard to the assessee in accordance with principles of natural justice in accordance with law. Our aforesaid decision shall be applicable for both the ay’s :2013-14 and 2014-15 respectively . We order accordingly. 7. In the result, both the appeals filed by the assessee for ay: 2013-14 and 2014-15 respectively are allowed for statistical purposes.
Order pronounced on the 22nd October, 2019, in Chennai.
Sd/- Sd/- (एन.आर.एस. गणेशन) (र"मत कोचर) (N.R.S. GANESAN) (RAMIT KOCHAR) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER
चे�नई/Chennai, 2दनांक/Dated: 22nd October, 2019. TLN
आदेश क. ,�त"ल3प अ4े3षत/Copy to: 1. अपीलाथ+/Appellant 4. आयकर आयु5त/CIT 5. 3वभागीय ,�त�न�ध/DR 2. ,-यथ+/Respondent 6. गाड( फाईल/GF 3. आयकर आयु5त (अपील)/CIT(A)