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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA [Before Shri A. T. Varkey, JM & Dr. A. L. Saini, AM] I.T.A No.1561/Kol/2010 Assessment Year: 2005-06 Income-tax Officer, Wd-3(3), Kolkata. Vs. Calcutta Ahmedabad Carriers Pvt. Ltd. (PAN: AACCC2260P) (Appellant) (Respondent)
Date of hearing: 19.01.2017 Date of pronouncement: 22.03.2017 For the Appellant: Md. Ghayas Uddin, JCIT, Sr. DR For the Respondent: N o n e
ORDER Per Dr. A. L. Saini, AM: The captioned appeal filed by the Revenue pertaining to Assessment Year 2005-06, is directed against the order passed by the Ld. CIT(A)-I, Kolkata in appeal No. 444/CIT(A)- I/Wd-3(3)/09-10,dated 21.05.2010, which in turn arises out of assessment order passed by the ITO, Ward-3(3), Kolkata u/s.144/254/251/143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 14.12.2009.
The brief facts of the case qua the assessee are that the return of income for A.Y. 2005-06 was filed by the assessee on 31.10.2015 declaring a total loss of Rs.5,91,674/- and the same was processed u/s. 143(1) of the Act. The case was selected for scrutiny and notices under sections 143(2) and 142(1) of the Act were issued. Finally, the then AO had passed an order u/s. 143(3) of the Act at Rs.2,21,33,550/- on 31.12.2007. The main addition was Rs.2,27,02,728/- on account of truck hire and route charges for non deduction of TDS. Aggrieved, the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A) observed that the arguments of the assessee are two fold – (i) that the assessee had no liability to deduct tax at source out of payments made to truck operators because such payment did not exceed Rs.20,000/- as provided in section 194C(3) of the Act and hence, the assessee’s case does not fall within the ambit and scope of Section 40(a)(ia) of the Act; and (ii) that there was no contract between the truck operators and the assessee for carrying goods to various destinations as contemplated by section 194C(1) of the Act. The Ld. Counsel for the assessee thus contended that the assessee was not liable to deduct tax from the payments made to truck operators, on account of freight charges. The AO made the addition on
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account of non-deduction of TDS on truck hire and route charges. The assessee filed an appeal against the original assessment u/s. 143(3) of the Act before the Ld. CIT(A). The Ld. CIT(A) has allowed the appeal of the assessee admitting the additional evidence. The Ld. CIT(A) accepted the additional evidence and adjudicated the case without giving an opportunity to the AO and without asking remand report from the AO. Therefore, the revenue has filed the appeal before the ITAT, Kolkata and the Hon’ble ITAT, Kolkata decided the appeal and set aside the appeal of the assessee and sent the issue back to the file of the AO to examine the additional evidence filed by the assessee before the Ld. CIT(A). As per the order of the Hon’ble Tribunal, the case was restored to the file of the AO and then AO issued notice u/s. 142(1) of the Act and asked the assessee to file the details and explanation regarding non-deduction of TDS on truck hire charges. Again this time also the assessee did not produce any evidence and any explanation before the AO, therefore the AO has added Rs.2,27,02,728/-. Aggrieved from the addition made by the AO, the assessee filed again an appeal before the Ld. CIT(A), who has deleted the addition by observing the following:
“15. On plain reading of section 194C it clearly indicates that section 194C authorizes deduction of income tax at source while making payments to contractors or sub-contractors. Interpreting the same, the Bombay High Court in Bombay Goods Transport Association vs. CBDT (211 ITR 136) took the view that the substantive provisions in section 194C do not make mere transportation of goods eligible to deduction at source. The Supreme Court in Birla Cement Works v. CBDT (248 ITR 216) affirmed the view taken by the Bombay High Court (Supra). In CIT v. Esskay Construction Co. (267 ITR 618) it is held that once a finding has been recorded that there was no contract between the assessee as its sister concerns, there shall be no applicability of section 194C( 2) of 1961 Act. 16. Reference can be made to the decision of the ITAT, Ahmedabad (Special Bench) (113 !TD 539). A question was raised whether on the facts and in the circumstances of the case the ingredients of section 194C of the Income-tax Act, 1961 are attracted to make the applicants liable to deduct the tax at source from the payments made to Mukadams and Transporters who are members. It is observed vide para 28 that section 194C applied when the payments are made for carrying out any work including supply of labour for carrying out any such work in pursuance of a contract between the contractor and the persons stated therein. 16. In the case of Income-tax Officer, TDS 1(4), Mumbai v. BhorukaRoadlines Ltd. (117 ITD 311) the assessee-company was engaged in the business of transportation of goods for various clients on contract basis. It had engaged through agents and suppliers for each truck it had made separate payment because each truck was for separate destination. The Assessing Officer, however, held that assessee had made payments to suppliers and not directly to truck owners, and that suppliers / brokers of trucks being sub-contractors within the meaning of the provisions of section 194C, it was liable to deduct tax at source on such payments. The
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assessee contended that the payments were made directly to the truck drivers / owners accepted said contention and held the assessee case and deleted the section 194C were not applicable to the facts of the instant case. 17. The scope and content of the provisions of section 194C was considered by the ITAT, Amritsar Bench in Delhi CIT, Hoshiarpur Range, Hoshiarpur v. Satish Aggarwal & CO. (122 ITD 35). It is held (para 13) that when the assessee entered into a contract for the purpose of taking temporary possession of trucks from the truck owners, it did not amount to the assessee entering into any contract for carrying out any work. Once the contract was not for carrying out any work, as per Poompuhar Shipping Corporation Ltd.'s case (282 ITR 3) the provisions of section 194C are not attracted. 18. It is the explanation of the appellant right from original assessment proceedings that the payments were made to the truck operators on the basis of each trip to different destination without entering into contract and truck operators were hired from common places or stands as and when the appellant required their services. I find that the ITO has not brought anything on record controverting the submission of the appellant that the payments were made to the truck operators without any contract. In the backdrop of analysis of section 194C, I shall revert to the written submissions made before me and am of the considered view that the ITO erred in holding that TDS was required to be deducted by the appellant u/s. 194C. I, therefore, hold that the ITO was not correct in disallowing the expenditure of Rs.2,27,02,728 u/s. 40(a)(ia) in this case. Accordingly, the ITO is directed to delete the addition of Rs. 2,27,02,728.”
Not being satisfied with the order of the Ld. CIT(A), the Revenue is in appeal before us in second round and has taken the following grounds of appeal:
“1 The Ld. CIT(A) has erred both on the facts and in law in directing the A.O. to delete the addition of Rs.2,27,02,728/- made U/S 40(a)(ia) of the I.T. Act, 1961, merely relying on the assessee's submission without supporting evidences adduced by the assessee before him and/or before the AO during assessment proceeding. 2. The Ld. CIT(A) has erred both on the facts and in the circumstances of the case, in directing the AO to delete the addition of Rs.2,27,02,728/- made U/S.40(a)(ia) of the I.T.Act,1961, without appreciating the fact that the assessee did not produce evidence/details before the AO as directed by the ITAT while setting aside the original assessment U/S.143(3) dated 31-12-2007. 3. The Ld. CIT(A) has erred both on the facts and in the circumstances of the case, in directing the AO to delete the addition of Rs.2,27,02,728/- made U/S.40(a)(ia) of the I. T. Act, 1961, without obtaining from the assessee the evidences/ details of the payments made from April to September,2004 from the freight memos which were already provided to the tax Auditors as per the direction of the ITAT, either on his own accord or by way of seeking a remand report from the AO.” 4. Although in this appeal, the Revenue has raised three grounds of appeal but at the time of hearing the solitary grievance of the Revenue has been confined to the issue that the Ld. CIT(A) deleted the addition of Rs.2,27,02,728/- made by the AO u/s.
4 ITA No.1561/Kol/2010 M/s. Calcutta Ahmedabad Cariers P. Ltd., AY.2005-06 40(a)(ia) of the Act because of non-deduction of TDS by the assessee on truck hire charges and route charges.
We noticed from the order of ld CIT(A) that the assessee has deducted the TDS and paid to the Central Govt. account. The relevant documents and evidence were submitted by the assessee before the Ld. CIT(A). In addition to this, section 194C of the Act clearly authorizes deduction of income tax at source while making payment to contractor/sub- contractors. While interpreting the same, the Hon’ble Bombay High court in Bombay Goods Transport Association Vs. CBDT 211 ITR 136 took the view that the substantive provisions in section 194C of the Act do not make mere transportation of goods eligible to deduction at source. The Hon’ble Supreme Court in Birla Cement Works Vs. CBDT 248 ITR 216 affirmed the view taken by the Hon’ble Bombay High Court cited supra. In CIT Vs. Esskay Construction Co. 267 ITR 618 it is held that once a finding has been recorded that there was no contract between the assessee as its sister concern there shall be no applicability of section 194C(2) of the Act. The assessee also relied on the judgment in the case of ITO, TDS-1(4), Mumbai Vs. Bhoruka Roadlines Ltd. 117 ITD 311, the assessee company was engaged in the business of transportation of goods for various clients on contract basis. It had engaged through agents and suppliers for each truck which had made separate payment because each truck was for separate destination. The AO, however, held that assessee had made payment to suppliers and not directly to truck owners, and that suppliers/brokers of trucks being sub-contractors within the meaning of the provisions of section 194C of the Act, it was liable to deduct tax at source on such payments. The assessee submitted that the payments were made directly to the truck drivers/owners and not the suppliers and, therefore, it was not liable to deduct tax on such payments. The Ld. CIT(A) accepted such contention and held that section 194C of the Act was not applicable to the assessee’s case and deleted the demand raised by the AO. Therefore, considering the provisions of the law, the Ld. CIT(A) has rightly deleted the addition as made by the AO.
On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the AO, which we have already noted in our earlier para and is not being repeated here for the sake of brevity.
5 ITA No.1561/Kol/2010 M/s. Calcutta Ahmedabad Cariers P. Ltd., AY.2005-06 7. Having heard the rival submissions and perused the material available on record, we are of the view that there is merit in the submission of the assessee, as the proposition canvassed by the Ld. AR for the assessee are supported by the facts narrated by him above. As has been explained by the Ld. AR for the assessee that it was the explanation of the assessee right from the original assessment proceedings that the payments were made to the truck operators on the basis of each trip to different destination without entering into contract and truck operators were hired from a common place or stand as and when the assessee required their services. The AO did not bring anything on record controverting the submissions of the assessee that the payments were made to the truck operators without any contract. Therefore, considering the factual position, we do not hesitate to confirm the order of the Ld. CIT(A). The appeal of the Revenue is dismissed.
In the result, the appeal filed by the Revenue, is dismissed.
Order pronounced in the open court on 22.03.2017
Sd/- Sd/- (A. T. Varkey) (Dr. A. L. Saini) Judicial Member Accountant Member 22nd March, 2017 Dated : Jd. Sr. P.S Copy of the order forwarded to: 1. Appellant – ITO, Ward-3(3), Kolkata. 2. Respondent – M/s. Calcutta Ahmedabad Carriers Pvt. Ltd., 7, Tara Chand Dutta Street, Kolkata-700 073. 3. CIT(A), Kolkata 4. CIT, Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,
Asstt. Registrar.