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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 & 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 & 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 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:-
1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. The authorities below erred in invoking the provisions of section 40(a)(ia) on vehicle maintenance expenses of Rs.57,84,247/-.
8. 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.
9. 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 & 1791/Chny/2018 :- 3 -:
(Rs.2,01,677) and on vehicle maintenance expenses (Rs.57,84,247) may be deleted and render justice.
The appellant submit the following grounds of appeal in addition to various others which will be put forth at the time of hearing:-
1. 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.
2. 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.
3. 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.
4. 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.
5. The assessing officer erred in disallowing Rs.1,80,000/- being audit fees for non deduction of TDS.
6. 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.
7. The authorities below erred in invoking the provisions of section 40(a)(ia) on vehicle maintenance expenses of Rs.94,83,080/-.
8. 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.
9. 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 & 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 & 1791/Chny/2018 :- 5 -:
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/- & 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 & 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. & 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 & 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 & 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.
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.