Bhim Chandra Das, Purba Medinipur vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH: KOLKATA [Before Shri Mahavir Singh, JM & Shri Shamim Yahya, AM]

I.T.A No. 1887/Kol/2012 Assessment Year: 2009-10 Income-tax Officer, Wd-1, Haldia. Vs. Shri Bhim Chandra Das (PAN: AJDPD4999B) (Appellant) (Respondent)

Date of hearing: 25.02.2015 Date of pronouncement: 27.02.2015

For the Appellant: Shri Sanjay, ACIT For the Respondent: N o n e

ORDER Per Shri Mahavir Singh, JM :

This appeal by revenue is arising out of order of CIT(A)-XXXIII, Kolkata in Appeal No. 198/CIT(A)-XXXIII/ITO/Wd-1,Hal/11-12 dated 01.10.2012. The assessment was framed by ITO, Wd-1, Halida, Kolkata u/s. 144 of the Income-tax Act, 1961 (hereinafter referred to as the "Act" ) for AY 2009-10 vide his order dated 27.12.2011.

2. The first issue in this appeal of revenue is against the order of CIT(a) deleting the disallowance made by AO being transportation charges claimed as deduction amounting to Rs.27,14,190/- for non-deduction of TDS u/s. 194C of the act thereby invoking the provisions of section 40(a)(ia) of the Act. For this, revenue has raised following three grounds i.e. ground nos. 1 to 3:

"1. That the CIT(A) has erred in deleting the disallowance U/s.40(a)(ia) of the I. T. Act by not treating aggregate of transactions as contractual payment in contravention to Board's Circular No.71S dated 08.08.95.

2) That on the facts and in circumstances of the case the CIT(A) erred in reducing the disallowance u/s. 40(a)(ia) of the IT Act of Rs. 27,14,190/- read with section 194C of the Act to the amount actually payable at the end of the year and not to the part which has already been paid.

3) That on the facts and in circumstances of the case the CIT(A) erred in deleting the disallowance u/s.40(a)(ia) of the IT Act relying on the judgement in the case of Mls Merilyn Shipping and Transport Ltd vs ACIT, ITA No.477/ VIZAG/2008 of Special bench of ITAT, Vishakhapatnam and other decisions."

3. At the outset, it is seen that despite service of notice, the acknowledgment card is kept on record, the assessee did not represent this case. The AO, during the course of 2 ITA No.1887/K/2012 Bhim Chandra Das, AY 2009-10

assessment proceedings, made disallowance of transportation charges for non-deduction of TDS u/s. 194C of the Act. The AO invoking the provisions of section 40(a)(ia) of the Act made disallowance by observing as under:

"Violation of section 40(a)(ia) read with section 194C: Rs.20,212/- in respect of single lorry payment and Rs.26,93,978/- in respect of aggregate payment (lorry wise) exceeding Rs.50,000/-, i.e. Rs.27,14,190/- in total is disallowed as deduction as per provision of section 40(a)(ia) read with section 194C of the Income Tax Act, 1961.

Aggrieved, assessee preferred appeal before CIT(A), who deleted the disallowance only on the premise that there is no independent contract whether oral or written for hiring of lorry. For this, he recorded his findings in paras 3.2, 3.3, 3.4 and 3.6 as under:

"3.2. Thus the primary argument of the appellant is that there was no contract with the providers of lorries and therefore provisions of section 194C do not come into picture. Here it may be mentioned that whether any payment was contractual in nature is essentially a question of facts. Therefore the facts of the appellant's case were examined from that perspective. The documents maintained in respect of transportation charges were carefully gone through. They did not indicate existence of any running contract with any provider of lorries. It appears that the lorries were hired for a trip as and when required at mutually negotiated rates. There is no indication that there was any contract for some prefixed duration, quantity etc. The assessing officer has also not brought any material to this effect on record. At most, it could be said that each trip constituted an independent oral contract. This being the position, various payments to a provider of lorry made throughout the year cannot be clubbed together for purpose of determining liability to deduct tax at source. Reference in this regard is to be made to the Circular No.715 dated 08/08/1995 issued by CBDT.

In reply to question no.9 mentioned in the circular, it was clarified that normally each GR should be treated as a separate contract but if the goods are transported continuously in pursuance of a contract for specific period or quantity all the GRs related to that period or quantity should be aggregated for the purpose of periods. In light of this circular, it has been held by Punjab & Haryana High Courts in the case of ClT vs. United Rice Land Ltd. (supra) that since there was no contract for specific period, quantity, price etc. and, therefore, various GRs could not be clubbed together. This, coupled with the fact, that no individual GR in that case was amounting to more that Rs.20,000/-, led to the decision in the said case that the assessee was not liable to deduct tax at source in respect of freight charges paid to the truck owner/operator. It logically follows that if amount of a single GR is exceeding Rs.20,000/-, payment for the same would be towards a contract with contract value exceeding Rs.20,000/- and hence tax would be deductible at source. It may be mentioned here that almost all the other cases cited by the appellant, including that of jurisdictional bench of tribunal in the cases of Rakshit Transport (Supra) have followed the decision in the case of United Rice Land Ltd. (supra).

3.3 It may also be mentioned here that when the provisions of section 194C were introduced in the statute, CBDT had come up with clarification vide Circular no. 93 dated 26.9.1972. In this it was clarified in the answer to question no.4 that there is no requirement of making TDS if there are several contracts and total payments exceed the prescribed monetary limit, but consideration for the individual contract is below the limit. Though the said circular has been subsequently withdrawn, there is no change in position on the above aspect. Therefore, all the payments made to a truck owner throughout the year are not required to be clubbed to ascertain applicability of TDS provisions. This is 3 ITA No.1887/K/2012 Bhim Chandra Das, AY 2009-10

so because various payments do not pertain to a single contract, but constitute independent contracts, as discussed earlier. It also follows that whenever value of such independent contract exceeds the monetary limit of Rs. 20,000/-, the payer was liable to deduct tax u/s 194C.

3.4. This view finds further support from the decision of in the case of Bhoruka Roadlines Ltd. (supra) cited by the appellant. In that case the appellant was held not to be a defaulter in respect of non-deduction of tax at payments to truck owners because in every case where payment to individual was exceeding RS.20,000/-, tax was duly deducted. Even in the cases of Bhagawati Steels (supra) as well as City Transport Corporation vs. ITO- TDS-2(5), Mumbai 13 SOT 479(Mum.), the same view has been taken that TDS is not required on the payments to truck owners if the individual payments do not exceed RS.20,000/- in absence of contract for any specific period, quantity or price. Other decisions referred to by the appellant are silent on the aspect as to whether any payment for individual trip was exceeding Rs.20,000/- and have therefore not dealt with the matter. They have also not taken into account Board's Circular No.715 dated 08/08/1995, which states that each GR is to be taken as a contract. However, none of the cases have overruled the position mentioned above that tax is deductible in case of payment for single trip exceeding RS.20,000/-.

3.6. In light of the above discussion, it is held that provision under section 194C and accordingly section 40(a)(ia) are not attracted in respect of payment of Rs.26,93,978/-, where no single payment exceeded Rs.20,000/-. The provisions of TDS under section 194C are however, as discussed above, applicable for transport charge of Rs. 20,212/- which is single payment exceeding Rs. 20,0001-. Though the appellant has relied upon the decision in the case of Merilyn Shipping & Transports vs. ACIT, (supra) in the matter, when he was asked to give details of the actual payment, he could not provide such details. Thus, the appellant has not been able to establish that the said amount was actually paid before end of the previous year and it did not remain payable. Therefore, it is held, that the provisions of section 40(a)(ia) are attracted in respect of the payment of Rs.20,212/-. Considering the above discussion the disallowance made under section 40(a)(ia) is reduced to Rs.20,212/-."

Aggrieved against the deletion of disallowance, revenue came in second appeal before Tribunal.

4. We have heard Ld. DR and gone through facts and circumstances of the case. We find that the entire premise of the CIT(A) for deleting the disallowance is that there is no contract and individual GR (which is meant for hiring of truck) is to be taken for the purpose of deduction of TDS u/s. 194C of the Act. Accordingly, he held that there is no contract exists. But we have gone through the provisions of section 194C of the Act, which has specifically provided in sub-section (5) the limits and the relevant sub- section (5) of section 194C of the Act reads as under:

"(5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed (thirty) thousand rupees.

4 ITA No.1887/K/2012 Bhim Chandra Das, AY 2009-10

Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds (seventy five) thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income tax under this section."

In term of the clear provision as reproduced above, the aggregate payment is to be seen and not the individual GR in respect to the same lorry for hiring of the lorry. As the CIT(A) has not examined the issue in proper perspective and to do justice with the assessee, we feel that this issue needs re-verification at the level of CIT(A). The CIT(A) has not gone into sub-section (5) of section 194C of the Act while deleting the disallowance. Hence, we feel that let this issue be re-examined by the CIT(A) in the light of this provision. This issue of revenue's appeal is allowed for statistical purposes.

5. The second issue in this appeal of revenue is against the order of CIT(A) deleting the disallowance of fuel and lubricant, repair and maintenance expenses of Rs.4,15,710/- . For this, revenue has raised following ground nos. 4 and 5:

"4. That on the facts and in circumstances of the case the CIT(A) erred in reducing the disallowance of Rs.4,16,710/- made on account of fuel & lubricants and repairs and maintenance based on details produced by the assessee.

5. That on the facts and in circumstances of the case the CIT(A) erred in considering the additional evidences submitted before him by the assessee which is in violation of Rule 46A and thus bad in law. "

6. We have heard Ld. Sr. DR. and gone through facts and circumstances of the case. We find that the AO made disallowance on account of fuel and lubricants, repair and maintenance and soil purchase expenses by noting that the assessee has debited expenses on account of soil purchase at Rs.6,88,320/-, fuel and lubricants at Rs.8,75,670/- and repair and maintenance at rs.1,02,851/-. As the assessee could not produce documentary evidence in respect to these expenses, the AO disallowed ad-hoc 25% of the said expenses, which comes to Rs.4,16,710/-. We find that the CIT(A) after going through the comparative figures of earlier years and future year deleted the disallowance and restricted the addition at Rs.1,72,080/- by observing in para 5.2 as under:

"5.2. I have considered the facts of the case. It has been categorically stated by the assessing officer that documentary evidence in respect of the said expenses were not produced for verification. Under these circumstances the plea of the appellant that 5 ITA No.1887/K/2012 Bhim Chandra Das, AY 2009-10

accounts are audited and therefore be accepted in toto as correct cannot be accepted. In order to ascertain reasonableness of expenses claimed, the appellant was asked to furnish comparative figures for the earlier and subsequent years. He has furnished comparative figures for assessment years 2007-08, 2008-09 and 2010-11. On going through the same it is seen that the expenses on fuel and lubricant and repairs and maintenance, as percentage of turnover, are in line with the expenses debited in preceding and subsequent years. So far as expenses on purchase of soil are concerned, there are no comparable figures available as such expenses were claimed neither in preceding nor in subsequent year. It is also seen that expenses claimed in respect of purchase of soil at Rs. 6,88,320/- are substantial and have been incurred in cash. As stated earlier the supporting evidence for the same was not produced before the assessing officer. Considering the above discussion, the ad hoc disallowances are deleted in respect of fuel and lubricant and repairs and maintenance and confirmed in respect of purchase of soil. The addition is accordingly reduced to Rs.1,72,080/-."

Since CIT(A) after going through the comparative figures of earlier years and future year deleted the disallowance and restricted the addition at Rs.1,72,080/-, we find no infirmity in his order and the same is hereby upheld. This issue of revenue's appeal is dismissed.

7. In the result, appeal of revenue is partly allowed for statistical purposes.

8. Order is pronounced in the open court on 27.02.2015 Sd/- Sd/-

(Shamim Yahya) (Mahavir Singh) Accountant Member Judicial Member

Dated :27th February, 2015

Jd.(Sr.P.S.)

Copy of the order forwarded to:

1. APPELLANT - ITO, Ward-1, Haldia.

2 Respondent - Shri Bhim Chandra Das, C/o New Bargabhima Transport, Durgachak, Haldia, Purba Medinipur-721602. . 3. The CIT(A), Kolkata 4. CIT Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,

Asstt. Registrar.