Bimal Biswas, Uttar Dinajpur vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH: KOLKATA [Before Shri P. K. Bansal, AM & Shri Mahavir Singh, JM]

I.T.A No. 1853/Kol/2012 Assessment Year: 2009-10 Income-tax Officer, Wd-1, Raiganj Vs. Shri Bimal Biswas (PAN:AFGPB9634Q) (Appellant) (Respondent)

Date of hearing: 27.05.2015 Date of pronouncement: 11.06.2015

For the Appellant: Shri K. L. Kanak, Sr. DR For the Respondent: Shri Subash Agarwal, Advocate

ORDER Per Shri Mahavir Singh, JM:

This appeal by revenue is arising out of order of CIT(A), Jalpaiguri in appeal No. 93/RNJ/CIT(A)/JAL/11-12 dated 18.09.2012. Assessment was framed by ITO, Ward-1, Raiganj u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2009-10 vide his order dated 29.12.2011.

2. The only issue in this appeal of revenue is against the order of CIT(A) deleting the disallowance of truck hire/carriage payment charges amounting to Rs.44.33 lac for non-deduction of TDS u/s. 194C of the Act by the AO thereby invoking the provisions of section 40(a)(ia) of the Act. For this, revenue has raised following three grounds:

"1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A), Jalpaiguri was justified in law in allowing the appeal of the assessee on the ground that the trucks were not hired by the assessee as he had no scope to engage the truck owners.

2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A), jalpaiguri was justified in deleting the entire addition of Rs.44,33,000/- without appreciating the fact that the AO had made the addition after being satisfied that the assessee had violated the provision of section 194C of the I. T. Act, 1961.

3. Whether the Ld. CIT(A), Jalpaiguri was justified in the ignoring the fact that the assessee could not produce any documentary evidence to substantiate his claim and could not offer plausible explanation both at the assessment and the appellate stage."

3. Briefly stated facts are that the assessee derives income from wholesale egg trading and truck plying business. During the year under consideration i.e. FY 2008-09 2 ITA No.1853/K/2012 Bimal Biswas AY 2009-10

relevant to AY 2009-10, the assessee has debited a sum of Rs.44.33 lac on carriage hire charges for hiring of various trucks but did not deduct TDS on the payment of Rs.44.33 lac made to different truck owners for carrying goods. The assessee before the AO contended that there is no contract for carriage of goods between the suppliers and the lorry owners. But the AO was not convinced, and he made disallowance of carriage hire charges for non-deduction of TDS u/s. 194C of the Act by invoking provisions of section 40(a)(ia) of the Act. Aggrieved, assessee preferred appeal before CIT(A), who deleted the disallowance by holding that there cannot be any contract between the truck owners and the assessee whether written or oral, so the question of TDS on such payment u/s. 194 C of the Act cannot arise. Accordingly, the CIT(A) deleted the disallowance. Aggrieved, now revenue is in appeal before us.

4. We have heard rival submissions and gone through the facts and circumstances of the case. We find that on the aspect of contract whether written or oral the issue is covered against the assessee and in favour of revenue by the decision of Coordinate Bench in the case of DCIT Vs. Kamal Mukherjee & Co. (Shipping) (P) Ltd. ITA No. 199/Kol/2010, wherein it is held as under:

(From H ea d not es)

"...... .Und ou bt edly , t hese de cisi on s do in dica te t hat th er e is a wor kman e m plo yer r el atio ns hi p betw een t he d ock wor kers and the ste v edor e s li ke a s ses see when the y emp loy tho se wor k ers , b ut be t ha t as it may , the fac t re ma ins tha t the ass e ssee ha s m ade p a ym e nts t o the CD LB for sup ply o f la b our , ev en w hen t his l abo ur m a y b e tre at ed as emp loye d by t h e ass esse e for a ll p r act ical p urpo ses, t he pro visi on s o f se ctio n 19 4 C ar e cl e arl y at trac t ed. In s uch a sit ua ti on, i .e. wh e n la b our h ired b y the a ss es see thr ough CD LB is c o nsi der e d to be in ass esse e's emp loym en t, t he pa y ment s m ade t o C DLB ca nno t b e trea t ed as p ayme nts for any wo rk, but nev e rth eles s th e se p ayme n ts cou ld st ill b e co v ered by th e pr ov isio ns of sect ion 1 94C bec ause the s e are pay ment s ma d e for supp ly o f la b our whi ch are sp eci f ical l y cov e red by s ecti on 194 C(1 ) . C DL B is an ag en t of th e stev e dor es lik e t he ass e sse e i n the sen se tha t t he labo ur is re c ru it ed by t he a ss es see thr ough CDL B , bu t wh en t his fa ct does not aff ect the nat ure of pa ymen t by th e as ses s ee to the C D LB wh ic h is adm itte dl y in th e na tu re o f p a yme n t f or s uppl y of labo ur. The r ea so ning ad op te d b y the C o mmis sio n er ( Ap peal s), tho ugh s omew h at im pres sive at fir st gl ance , is fal laci ou s. T her e is no c ause a nd eff e ct r elat io ns hip bet ween w ork e rs as sig n ed by t he CD LB hav ing e mplo yer wor kman re lat ion s hip w i th t he a ss e sse e, an d t he p aym e nts 3 ITA No.1853/K/2012 Bimal Biswas AY 2009-10

bei ng ma de b y t he ass es se e to C DLB bei ng no t in the nat ure of ' paym ent fo r supp ly o f la bour '".

4. Sin ce the fa cts a nd c ircu ms ta n ces are exac tly ide ntic al , wh at wa s b efor e us in K amal M ukh j erje e & Co.

(Sh ippi ng ) (P. ) Ltd . (su pra) and a lso tha t in the c ase o f Smt . J. Ram a o f Ho n' ble Ka rnat ak a High C ou rt ( supr a) , res pect fu ll y fol l owi ng th e sa m e, w e a re of the v iew t hat eve n o ral co n tra ct is s uf fici en t an d a dmit te dl y the ass esse e h as tak en the du mper s on hir e a nd he ha s p aid cha rges for the sam e . Res pec t ful ly fo llow ing the same , we con firm the d i sall o wan ce made by the As s ess in g Off i cer and reve rse the ord e r of CIT( App e a ls) . Ho weve r , as reg ard to a lter nat i ve ar gu me nts ma de by ld . cou nse l fo r the ass esse e re g ard in g a ppli c abi lit y o f t he d ecis io n o f IT AT, Spe cial B en ch, V ish a khap a tna m in the ca se of Merilyn Shipping & Transports Vs. Addl. CIT (Visakhapatnam) (SB) reported in (2012) 136 ITD 23 (SB), wh ere in it is h eld that th e dis allo wa nc e w il l be re st ri cted to th e amo unt p a yabl e at the end of y ea r and not o n th e am o unt alr e ady pa id dur ing the rele v ant yea r. Ld. counsel for the assessee before us stated that this payment was made within the due date and nothing remains payable and he relied on the decision of Special Bench of this Tribunal in the case of Merilyn Shipping & Transports Vs. Addl. CIT (Visakhapatnam) (SB) reported in (2012) 136 ITD 23 (SB), wherein it is held that the TDS is to be deducted only in relation to payments which remains payable at the end of the year i.e. 31st March of the relevant financial year. It was pointed out to Ld. counsel that the operation of the order of Special Bench of this Tribunal in the case of Merilyn Shipping & Transports (Supra), is stayed by Hon'ble Andhra Pradesh High Court in I.T.T.A.M.P. No.908 of 2012 in I.T.T.A. No.384 of 2012 wherein Hon'ble High Court observed, "Interim suspension. Notice." Vide dated 8th October, 2012.

5. On this, the Ld. counsel for the assessee argued that effect of the order staying a pending appeal before any High Court does not amount to any declaration of law but is only binding upon the parties to that proceedings and such interim order does not destroy the binding effect of the principals as laid down in the order as a precedent because the interim order had no occasion to lay down any proposition of law. For this proposition, he relied on the case law of Hon'ble Calcutta High Court in the case of Pijush Kanti Chowdhury Vs. State of West Bengal & Ors (2007) 2 CALLT 577 dated 14th May, 2007 wherein, at para 10 and 13, it has been held as under:

"10. After hearing the learned counsel for the parties and after going through the aforesaid provision we find that the Supreme Court by those interim orders has no doubt stayed the operation of the order of the Division Bench of this court by directing the parties to maintain status quo and at the same time, even restrained the State from inducting third parties on the lands which were the subject-matters before the Apex Court. Such interim order is binding upon the parties to the proceedings but the law is equally settled that by mere passing of an interim order staying the operation of a judgment with certain further conditions, the existence of the said judgment is not wiped out and at the same time, for such interim orders inter parties, the authority of a decision as a precedent is never undermined. Unless a decision is set aside 4 ITA No.1853/K/2012 Bimal Biswas AY 2009-10

by the Superior Court, the said decision remains binding as a precedent though may not be binding upon the parties to the proceedings where the Superior Court has granted interim order. Moreover, once a provision has been declared ultra vires the Constitution of India, the State cannot invoke the said ultra vires proceeding against the citizens of the country simply because an interim order of stay of operation order declaring the provision as ultra vires has been passed in an appeal against such order. The object of granting interim order iš to see that the relief claimed in the appeal may not become inappropriate or the appeal does not become infructuous for not granting such interim order; but by mere grant of interim stay, the effect of a binding precedent is not destabilized. Over and above, the interim orders of the stay granted by the Supreme Court clearly indicate that the said Court never intended that notwithstanding the decision of the High Court declaring a part of the provisions of vesting as ultra vires the State would nevertheless be free to proceed with the process of vesting during the pendency o the proceedings before the Supreme Court and that is why status quo as regards possession has been maintained and even, the State has been restrained from creating any third party interest in the lands in question.

13. Therefore, the effect of the order of stay in a pending appeal before the Apex Court does not amount to any declaration of law but is only binding upon the parties to the said proceedings and at the same time, such interim order does not destroy the binding effect of the judgment of the High Court as a precedent because while granting the interim order, the Apex Court had no occasion to lay down any proposition of law inconsistent with the one declared by the High Court which is impugned."

6. Even, Hon'ble Supreme Court in the case Shree Chamund Mopeds Ltd. vs. Church of South India Trust Association, Madras, AIR 1992 SC 1439, 1444 has analysed the difference between "stay of operation" of an order and "quashing" of an order" and held that 'stay of order' of an appellate authority / court by a higher court means that the order passed by the appellate authority / lower court still continues to exist in law inspite of the 'stay' and its existence is not destroyed. But where the order of the appellate / lower court is quashed and the matter is remanded back, it means that the appeal disposed of by the said order of the appellate authority/lower court would be restored and it can be said to be pending before the said authority/lower court.

7. In view of the above, particularly the decision of the Hon'ble Jurisdictional High court in the case of Pijush Kanti Chowdhury (supra), as also in obedience to decision of the Hon'ble Supreme Court in the case of Shree Chamund Mopeds Ltd. (supra), we are of the view that the decision of the special bench of this tribunal in the case of Merilyn Shipping & Transports (supra) still holds ground and accordingly, TDS provisions will apply, for the purpose of invocation of the provisions of section 40(a)(ia) of the Act, only on the amounts remained payable at the end of financial year and not on the paid amounts. Hence, we direct the AO to recompute the disallowance accordingly. Appeal of assessee is partly allowed for statistical purposes."

5 ITA No.1853/K/2012 Bimal Biswas AY 2009-10

5. Before us Ld. Counsel for the assessee made alternative argument/plea that let the issue be set aside to the file of AO for applying the second proviso to section 40(a)(ia) of the Act as inserted by Finance Act, 2012. We have held this proviso to be retrospective in the case of Santosh Kumar Kedia Vs. ITO, I.T.A. No.1905/Kol/2014 for Assessment Year: 2007-08 dated 04.03.2015, wherein the Tribunal finally directed the AO vide para 10, which reads as under:

"10. Secondly, I am of the view that the insertion of second proviso to sec. 40(a)(ia) of the Act is curative and it has retrospective effect w.e.f. 1st April, 2005, being a date from which Sec. 40(a)(ia) of the Act was inserted by the Finance (No. 2) Act, 2004. In view of this, I am of the view that matter needs fresh adjudication in the light of the fact that the AO will carry out necessary verification in regard to related payments having been taken into account by the recipient in computation of its income and verification of payment of taxes in respect of such income and also filing of income tax return by the recipient. In term of the above, the second aspect argued by Ld. counsel is restored back to the file of the AO and assessee will provide all the details in terms of second proviso to sec. 40(a)(ia) of the Act."

6. In terms of the decision of Coordinate Bench in the case of Santosh Kumar Kedia, supra, we set aside the issue to the file of AO and direct the assessee to produce the relevant evidence in respect payees of carriage charges whether they have included the carriage receipts in the respective returns of income and paid taxes on the said income. The AO will decide accordingly. Appeal of revenue is allowed for statistical purposes.

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

8. Order is pronounced in the open court on 11th June, 2015.

Sd/- Sd/- (P. K. Bansal) (Mahavir Singh) Accountant Member Judicial Member

Dated : 11th June, 2015

Jd.(Sr.P.S.) 6 ITA No.1853/K/2012 Bimal Biswas AY 2009-10

Copy of the order forwarded to:

1. APPELLANT - ITO, Ward-1, Raiganj.

2 Respondent - Shri Bimal Biswas, Collegepara, N. H. 34, Raiganj, Uttar Dinajpur-733134 3. The CIT(A), Jalpaiguri 4. CIT , Jalpaiguri 5. DR, Kolkata Benches, Kolkata /True Copy, By order, Asstt. Registrar.