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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Puducherry, dated 31.03.2016 and pertains to assessment year 2012-13.
The only issue arises for consideration is with regard to disallowance of hire charges for hiring vehicles by the assessee.
Shri S. Elambharathi, the Ld. counsel for the assessee, submitted that the assessee is engaged in the business of distribution of milk and dairy products. The Ld. counsel further submitted that the assessee is having a processing unit at Puducherry. The assessee purchases raw milk and processing the same in Puducherry unit and selling the same in pouches and also in bulk. A part of milk purchased by the assessee was processed into skimmed milk, butter milk, processed milk and curd, etc. In the course of business activity, the assessee hired van for procuring the raw milk from the farmers and also hired van for distribution of milk to various distribution centres. The assessee paid hire charges for hiring the van for procuring milk and also for distribution of the same. The assessee claimed the hire charges as expenditure while computing the taxable income. The Assessing Officer, however, disallowed the claim of the assessee mainly on the ground that tax was not deducted at the time of payment as required under Section 194C of the Income-tax Act, 1961 (in short "the Act"). According to the Ld. counsel, Section 194C of the Act is applicable only in respect of sub-contract and not for hiring of vehicles for the assessee’s business. The Ld. counsel clarified that no part of the assessee’s work was given on sub-contract to anyone. It is a case of simply hiring of van / vehicle for transporting the milk procured and distribution of the processed milk. Therefore, there is no question of sub-contract come into operation. Since there is no sub-contract of work to any third party, according to the Ld. counsel, provisions of Section 194C of the Act is not applicable at all.
However, the CIT(Appeals) simply found that the provisions of Section 194C of the Act is applicable. According to the Ld. counsel, the CIT(Appeals) is not justified in disallowing the claim of the assessee without considering actual transaction made by the assessee.
Referring to the observation made by the CIT(Appeals) that the expenditure is not allowable under Section 37 of the Act, the Ld. counsel for the assessee submitted that when the assessee incurred expenditure for hiring of van for procuring the milk from the farmers and also distribution of the processed milk, it cannot be said that the expenditure incurred by the assessee is not for business.
Therefore, the expenditure claimed by the assessee is allowable expenditure under Section 37 of the Act. Referring to the observation made in the assessment order that the address and PAN of the parties to whom the payments were made, are not available, the Ld. counsel submitted that the assessee in fact furnished entire address and details of the payment before the Assessing Officer. Majority of the payments were made through banking channel and the amounts were credited into respective bank accounts. The assessee has furnished the statement and bank account where the amounts were credited. Therefore, the Assessing Officer can very well find out whether the payments were made to the respective persons. When the assessee has given bank a/c numbers and names of bank and address, it could very well be verified through bank accounts given by the assessee.
Therefore, it is not correct to say that the assessee has not furnished address and other particulars of the parties to whom the payments were made.
The Ld. counsel for the assessee further submitted that with regard to so-called suppression of sales to the extent of `2,10,19,491/-, the CIT(Appeals) deleted the addition made by the Assessing Officer after calling for the remand report from the Assessing Officer and the Revenue has not filed any appeal against the order of the CIT(Appeals). Therefore, when the purchase and sale of milk were increased, the hire charges were also equally increased. Hence, it cannot be said that the expenditure incurred by the assessee is not for business purpose.
On the contrary, Shri Shiva Srinivas, the Ld. Departmental Representative, submitted that the Assessing Officer made addition towards suppressed sales to the extent of `2,10,19,491/-. The assessee claimed that there was increase in the purchase and sale of milk. The Assessing Officer found that the average sale price of the milk during the year was `40.42. The Assessing Officer found that the assessee has suppressed the sale of milk to the extent of 25% of condensed milk which was mixed with bulk milk. On appeal by the assessee, the CIT(Appeals) called for remand report and ultimately the addition made to the extent of `2,10,19,491/- was deleted. However, in respect of payment of hire charges, the CIT(Appeals) confirmed the addition made by the Assessing Officer on the ground that the assessee has not deducted tax under Section 194C of the Act. The CIT(Appeals) has also placed his reliance on the decision of this Bench of the Tribunal in DSM Soft Pvt. Ltd. v. ACIT in & 1898/Mds/2015 dated 13.11.2015. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer.
We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer disallowed a sum of `2,10,19,491/- towards suppression of sale of milk. The CIT(Appeals), however, deleted the addition made by the Assessing Officer and the Department has not filed any appeal before this Tribunal.
The only issue arising for consideration in the present appeal is with regard to disallowance made by the Assessing Officer for non-deduction of tax under Section 194C of the Act in respect of hire charges paid for hiring van / motor vehicle for procuring and sale of milk. It is not in dispute that the assessee hired van for transportation of milk purchased and to sell or distribute the processed milk. It is nobody’s case that the transport of milk itself was given to the van owner on sub-contract basis. It is a simple case of hiring of van for the purpose of business of the assessee.
Therefore, it is a case of hiring of vehicle and not a case of sub- contract.
We have carefully gone through the provisions of Section 194C of the Act. The provisions of Section 194C of the Act is applicable only in respect of sub-contract given to the third parties for carrying out the work. Therefore, this Tribunal is of the considered opinion that the provisions of Section 194C of the Act is not applicable at all. Hence, the assessee is not required to deduct tax in respect of hire charges paid to van owners.
The Assessing Officer has also disallowed the claim of the assessee under Section 37 of the Act. We have carefully gone through the provisions of Section 37 of the Act. Section 37 of the Act clearly says that when the expenditure was laid out wholly and exclusively for the purpose of business or profession, shall be allowed in computing the income chargeable under profits and gains of business or profession. In this case, hiring charges is only for the purpose of transportation of milk procured and distribution of processed milk. Therefore, the expenditure is only for the purpose of business and not for anything else. Therefore, the expenditure claimed by the assessee has to be allowed under Section 37 of the Act.
The next contention of the Revenue appears to be that the assessee has not filed the details of persons to whom the payments were made. The assessee has furnished the details of payments and address of most of the individuals to whom the payments were made. The assessee has also given the bank name and account numbers of the persons in which the hire charges were credited.
Only in respect of the payment made to Shri V. Mahalingam and Shri Arulraj, the bank account was not given. However, the address was very much available. In respect of other persons, the assessee has given name of the bank, a/c nos. to which the amounts were credited. Therefore, the Assessing Officer can very well find out the actual payment made by the assessee to the van owners. The Assessing Officer has not taken any pain to examine the details furnished by the assessee. Hence, it cannot be said that the assessee has not furnished any particulars with regard to whom the money was paid. When the assessee has furnished relevant details along with bank account to which the amounts were credited, before the Assessing Officer, this Tribunal is of the considered opinion that the disallowance made by the Assessing Officer is not justified. It is for the Assessing Officer to examine the details furnished by the assessee and find out the genuineness or otherwise of the claim.
Remanding back the matter at this stage to the file of the Assessing Officer would amount to giving second innings to the Revenue to fill up the lacuna. The matter would stand in different footing, if the assessee has not filed the details. In view of the above discussion, we are unable to uphold the orders of the lower authorities. Accordingly, the orders of the lower authorities are set aside and the disallowance made by the Assessing Officer towards payment of hire charges is deleted.
In the result, the appeal filed by the assessee is allowed.