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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI D.T. GARASIA & SHRI N.K. PRADHAN
O R D E R
Per D.T. GARASIA, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 19.03.2014 of the Commissioner of Income Tax [hereinafter referred to as the CIT] relevant to assessment year 2009- 10.
The short facts of the case are that assessee is a proprietary concern engaged in the business of tours and travels. Assessee has 2 Mr. Nayeem Noor Khan Momin derived the income from rent a car business. For A.Y. 2009-10 the assessee has filed the return of income declaring total income of Rs.9,54,242/-. Order of assessment under section 143(3) of the Act was passed on 09.12.11 after making addition by some disallowance.
The Ld. CIT in his exercise of power under section 263 of the Act was of a view that assessee has paid hire charges amounting to Rs.73,67,114/- to various parties and on verification of the record it was observed by the Assessing Officer (hereinafter referred to as the AO) that on debit side of P & L account an amount of Rs.73,67,114/- was even claimed as vehicle rent paid on TDS has not been deducted under section 194-I of the Act. According to Ld. CIT, under section 194-I of the Act, any person, being an individual or a Hindu undivided family who is responsible for paying to a resident any income by way of rent shall be at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by way of any other mode, whichever is earlier, TDS @ 2% for use of machinery or plant be 10% for use of land and building provided that no deduction be made under this section where amount of such income as the case may be aggregate amount of such income should not exceed Rs.1,80,000/- and assessee is liable to pay the TDS. Therefore, the Ld. CIT was of a view that in audit report in form No.3CD at column No.17F that an amount of Rs.73,67,114/- is inadmissible under section 40(a)(ia) of the Act. It means that assessee has not deducted TDS which was required to be done under section 194-I of the Act. Hence, entire expenses on 3 Mr. Nayeem Noor Khan Momin which the TDS was deductable has to be disallowed under section 40(a)(ia) of the Act. In response to that assessee submitted that by mistake there was non deduction of TDS due to ignorance. The Ld. CIT proposed to set aside this issue and to decide the issue afresh after due verification of the above direction.
During the course of hearing, Ld. A.R. has filed the copy of payment made to various persons. The Ld. A.R. submitted that the assessee is running the business of providing vehicle on hire. The assessee is having office at Kurla (West). The Ld. A.R. submitted that whenever any need of vehicle arose assessee used to divert the requirement of providing cars on hire to various persons and that persons used to provide the cars with driver and fully loaded to assessee’s clients. In turn, the assessee was paying the payment to various car owners through cheque. The Ld. A.R. submitted that assessee and the car owners had no written agreement for providing the vehicles but there was an arrangement between assessee and car owners that assessee has to collect the rent from the persons who hire the vehicles and he was giving this rent to the car owners after deducting his commission. The Ld. A.R. submitted that as per section 194-I the rent has been explained by explanation wherein it is explained that rent means any payment by whatever name called, under any lease, sub lease, tenancy or any other agreement or arrangement for use of either separately or together or any machinery or plant. The Ld. A.R. submitted that as per section 194-I of the Act where there should be a payment of carrying out any work in 4 Mr. Nayeem Noor Khan Momin pursuance to the contract, the Ld. A.R. submitted that it is the duty of the Revenue to establish that before provision of section 194-I is invoked the burden is upon the Revenue to show that the payment in respect of hiring vehicles wherein consequences of any written or oral agreement before provisions of section 194-I would be invoked.
Keeping in mind the principles laid down in many cases like in the case of CIT vs. United Rice Land Ltd. 322 ITR 594 (P&H) wherein it was held that wherever the trucks were taken on hire by the assessee on as and when basis it was held that section 194(c) would not be applicable. We find that assessee’s plea is that assessee hires the vehicles from various persons. We find that assessee has hired vehicles from 56 persons which reads as under:
From the above chart it is clear that the assessee has paid rent for various vehicles from 01.04.08 to 31.03.09 to various owners. Out of which sl. no.1 to 32 the payment is less than Rs.1,20,000/- lakhs. Therefore, in our opinion section 194-I is not applicable to above payments. Moreover, in respect of sl.no.33 to 56 the assessee has made payment above Rs.1.20,000/- to various persons but there no any contract between assessee and those persons. They have made an arrangement for providing vehicles on hire and in our opinion section 194-I is not applicable. We find that similar issue has been decided by Tribunal in in case of Devi Dayal Stainless Steel vs. ACIT wherein the Tribunal has dealt this similar issue in para 8 wherein it is held that the law with regards to applicability of provisions of section 194(c) of the Act, there should have been payment for carrying out any work in pursuance of a contract. In the case of CIT vs. United Rice Land Ltd. (supra) it was held that wherever the trucks were taken on hire by the assessee on as and when basis it was held that section 194(c) would not be applicable. In the case of Chandrakant Thacker vs. ACIT 129 TTJ 1 it was held that the burden is on the Revenue to show that payment in respect of hired vehicles were in consequence of any written or oral
6 Mr. Nayeem Noor Khan Momin agreement before provisions of section 194(c) would be invoked. Respectfully following the decision of Tribunal and keeping in mind the principle laid down in aforesaid cases, we analyze the present facts and find that merely presuming that there was an oral agreement for carrying out the work between assessee and various parties, Ld. CIT brushed aside the belief of assessee that there was an oral contract between the assessee and other parties and the cars were taken on hire as and when it was required by the assessee. In our view, Ld. CIT has not brought any evidence to show that there was any oral contract or written agreement between the assessee and the other parties. Therefore, vehicles were used on requirement basis. Therefore, any payment made in pursuance of the requirement the provision of section 194-I is not applicable. Therefore, consequent to this direction disallowance under section 40(a)(ia) would not be sustained. Therefore, we quash the order of Ld. CIT under section 263 of the Act.
We find that the mere fact that adopting some other alternative method fetch more revenue or Commissioner is not in agreement with the method adopted by AO would not render the assessment order erroneous and prejudicial to the interest of revenue. We find that in this case the AO has also verified the payment and some of the payments were below Rs.1,20,000/- in INR. Therefore one the possible views as stated above is taken by the AO. Therefore, we allow the appeal of the assessee.
Order pronounced in the open court on 07.02.2018.