ITO, CHENNAI vs. GLOBE TRANSPORT CORPORATION PVT LTD., CHENNAI

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

ITA No.1783/Mds/2015. :- 2 -: passed under sections 143(3) and 250 of the Income Tax Act (in short ‘’the Act’’).

The Revenue has raised only one substantive ground with 2. respect to deduction of TDS on lorry high charges and also applicability of provisions of sec.40(a)(ia) of the Act on such payments.

The brief facts of the case are that the assessee is a private 3. limited company is in the business of transportation and filed return of income on 30.11.2006 admitting total income of �17,970/- and the return was processed u/sec. 143(1). Subsequently, the case was selected for scrutiny under CASS and the Assessing Officer issued notice. In response to the notice ld. Authorised Representative for assessee submitted necessary details and also evidences in support of the financial statements. The Assessing Officer based on the information of Profit and Loss account restricted the preliminary expenses to 1/5th of total expenses and disallowed �28,640/-. Further, the Assessing Officer found that the company has claimed expenditure of �66,19,771/- on lorry high charges payments and the ld.AR produced evidences to the extent of payment of �33,23,095/- and also submitted that remaining amount of �32,96,674/- are not sub- contractors covered under preview of Sec 194C of the Act. Considering the aspect of non deduction of TDS the Assessing Officer has ITA No.1783/Mds/2015. :- 3 -: disallowed �32,96,674/- and assessed total income of �33,43,284/- and raised demand. Aggrieved by the order of the Assessing Officer, the assessee company has preferred an appeal before the Commissioner of Income Tax (Appeals)-6, Chennai.

In the appellate proceedings, the ld.AR has submitted that 4. out of total expenditure of �66,19,771/- TDS was deducted for �33,23,095/- and for the balance amount the company has obtained Form 15I from the sub-contractors alongwith For No.15J and filed with the ITO, TDS Ward, Chennai. Further, the ld.AR submitted his claim with above documents and mentioned that such payments to truck owners have already been paid before 31.03.2006 and hence provisions of sec. 40(a)(ia) of the Act are not applicable and relied on the decisions of Special Bench of Vizag Bench in the case of Merilyn Shipping and Transports vs. Addl. CIT (136 ITD 23) Vizag(SB) and also judgment of Allahabad High Court in the case of CIT vs. Vector Shipping Services P. Ltd 357 ITR 642 (All). The ld. Commissioner of Income Tax (Appeals) after perusing Form No.15I and 15J filed before the Income Tax Officer, TDS ward, Chennai on 04.04.2006 and also list of truck drivers to whom truck charges was paid has held that provisions of u/sec 40(a)(ia) cannot be invoked since above amount was already paid and there are no outstanding payable as on 31.03.2006 and further emphasized the definitions of ‘’paid’’ and ITA No.1783/Mds/2015. :- 4 -:

‘’payable’’ supported with various Tribunals decisions and High Court decisions and also relied on the decision of Apex Court allowed the appeal of the assessee observing in his order at para 4.1.8:-

‘’Further recently, the Hon’ble Supreme Court of India vide CC No.8068/2014 dated 02.07.2014 has upheld the decision of the Allahabad High Court (in the case of Vector Shipping Services P. Ltd) by dismissing the SLPL filed by the Revenue. Therefore, in view of the decisions of the Allahabad High Court in the case of Vector Shipping Services P. Ltd (357 ITR 642) (All) which has also been upheld by the Apex Court, and also the jurisdictional ITAT in the case of ITOVS. m/S. Theekathir Press, Madurai (ITA No.2076/Mds/2012, Dated 18.09.2013), I hold that the provisions of Sec.40(a)(ia) are applicable only if the amounts are ‘’payable’’ and outstanding as on 31st March of the financial year. In the present case, since the assessee has already paid the above mentioned transport expenses as on 31.03.2006, the same cannot be disallowed u/s.40(a)(ia) of the Act. Therefore, the Assessing Officer is directed to allow the above transport expenses of ₹32,96,674/- as allowable deductions. The disallowance made by the Assessing Officer stands deleted. The assessee succeeds in its appeals in this regard’’.

Aggrieved by the order of the Commissioner of Income Tax 5.

(Appeals) the Revenue has filed appeal before the Tribunal by raising grounds on various issues and supported with the judicial decisions.

Ld. DR has argued that the assessee has only deducted TDS in respect of one part of lorry hire charges and not supported with any material evidence before the Assessing Officer further submitted that as per the provisions of Sec. 40(a)(ia) of the Act tax has to be ITA No.1783/Mds/2015. :- 5 -: deducted by the assessee irrespective of amount paid or payable and made an distinction of the decision of Vector Shipping Services P. Ltd (supra) is on different ground applicable for salary payment and therefore cannot be considered and relied on judicial decisions and CBDT Circular. Further, submitted that the Commissioner of Income Tax (Appeals) has not put the materials for any verification or called for the remand report in respect of evidences filed by way of from 15I and form 15J in the appellate proceedings and prayed the Tribunal to set aside the order of the Commissioner of Income Tax (Appeals).

On the other hand, the ld. Counsel relied on the order of the 6.

Commissioner of Income Tax (Appeals) and submitted that the said information was filed before the Assessing Officer and was not considered in assessment order and prayed for dismissal of Revenue Appeal.

We have heard rival submissions of both the parties, orders 7. of lower authorities and also material perused on record. The company is in the business of transportations and in the assessment proceedings, the Assessing Officer has disallowed the lorry hire charges without making any inquiry. The assessee has substantiated his grounds by submitting details filed in Form 15I and Form 15J before the ITO, TDS Ward on 04.04.2006 alongwith list of truck

ITA No.1783/Mds/2015. :- 6 -: owners name and transport charges and there is no amount outstanding payable as on 31st March 2006. The ld.CIT(A) accepted the evidences filed and relied upon the supporting decisions of Tribunal observed at page 4.1.5as under;-

”The words ‘paid’ and ‘payable’ for the purpose of section 40(a)(ia) have been deliberated by various Tribunals and High Courts. The Special Bench of ITAT (Vizag Bench) in the case of Merilyn Shipping and transporters vs. Addl.CIT 136 ITD 23 (Viz.Spl) has held that the provisions of Sec.40(a) (ia) are applicable only to the expenses that are ‘’payable’’ and outstanding as on 31st March of the relevant financial year in which the expenses are claimed. This view has also been endorsed by the High Court of Allahabad in the case of Vector Shipping Services P.Ltd 357 ITR 642 (All) where it has clearly been held that for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year.’’ We are of the opinion that the provisions of Sec.40(a)(ia) of the Act are applicable only when the amount of expenditure is payable and outstanding as on 31st March of the previous year in which the assessee has claimed expenditure. The additional information was filed before the Commissioner of Income Tax (Appeals) and no remand report was called for from Assessing Officer. It is apparent that such statements and information’s was not available to the Assessing Officer at the time of assessment. Therefore, we are inclined to set aside the order of the CIT(A) and remit the disputed issue to the Assessing Officer with the direction to verify whether any amount is ITA No.1783/Mds/2015. :- 7 -: outstanding or payable as on 31st March of previous year relevant to assessment year so as to attract the provisions of sec 40(a)(ia) of the Act. It is needless to state that the assessee shall be provided with adequate opportunity of being heard before adjudicating the issue on merits.

Order pronounced on Friday, the 6th day of November, 2015, at Chennai.