Dipti Engineering Co.,, Baroda vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL " C " BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA Kr. YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.)

I.T. A. No.148/AHD/2011 (Assessment Year: 2005-06)

M/s. Dipti Engineering Co., V/S The I.T.O., Ward-2(3), 32, Nilkamal Society, Baroda Nizampura, Baroda

(Appellant) (Respondent)

PAN: AABFD 7659L

Appellant by : Shri Anil R. Shah, Respondent by : Shri M.K. Singh, Sr. D.R.

(आदेश )/ORDER

Date of hearing : 06-02-2015 Date of Pronouncement : 19-02-2015

PER SHRI ANIL CHATURVEDI,A.M.

1. This appeal filed by the Assessee is against the order of CIT(A)-II, Baroda dated 06.10.2010 for A.Y. 2005-06.

2. The relevant facts as culled out from the material on record are as under.

3. Assessee is a partnership firm stated to be engaged in the business of civil and road construction. Assessee filed its return of income for A.Y. 05-06 on 26.10.2005 declaring total income of Rs. 79,390/-. The case was selected for 2 ITA No 148/AHD/2011 . A.Y. 2005-06

scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 05.12.2007 and the total income was determined 7,87,289/- Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who vide order dated 06.10.2010 granted partial relief to the Assessee. Aggrieved by the aforesaid order of CIT(A) Assessee is now in appeal before us and has filed the grounds which have been later on concised and amended vide letter dated 5.02.2015 and the revised grounds reads as under:-

1.The CIT(A) has erred both in Law and in fact in confirming applicability of Sec.40(a)(ia) of the Act and thereby confirming disallowance of Rs.7,00,316/-made for the Assessing Officer.

Without prejudice, it is submitted that Rs.7,00,316/- is not correctly worked out and payment below Rs.50,000/- has also been disallowed.

2.Your Appellant further submitted that the Recipient of Carting Charges are Income Tax payers and therefore no disallowance u/s.40(a)(ia) is called for.

Alternatively, it is submitted that Appellant has paid TDS on 7-3-2012 and therefore Deduction of Rs. 7,00,316/- be allowed in A.Y.2012-13.

4. Before us, ld. A.R. submitted that the only issue is with respect to the disallowance u/s. 40(a)(ia) of the Act.

5. During the course of assessment proceedings, A.O noticed that Assessee had debited carting expenses of Rs. 12,94,881/- which included aggregate amount of Rs. 7,00,316/- paid to various transport companies on which no TDS was deducted by the Assessee. A.O was of the view that in view of the default of non deduction of tax, the expenditure was not allowable u/s. 40(a)(ia) of the Act. He accordingly disallowed the aggregate payment of Rs. 7,00,316/- on which the TDS was not deducted by the Assessee. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who upheld the order of A.O by holding as under:-

3.3. I have considered the submissions of the learned Authorized Representative and the order of the Assessing Officer. The facts in respect of this issue is that the appellant firm had purchased metal, machinery metal from M/s. RJ. Patel and Co. It is contended by the appellant that Shree Alka Transport Company is the agent of RJ. Patel & Co and the appellant has given transportation charges as per the 3 ITA No 148/AHD/2011 . A.Y. 2005-06 instructions from RJ. Patel & Co. the appellant had paid totally Rs.2,74,800/- to Shree Alka Transport in 19 installment. It is further contended that Shree Alka Transport does not have its own truck and is merely a commission agent of RJ. Patel & Co. It is also contended that there is no payment in excess of Rs.50,000/- was paid. Certificate in Form No. 15-1 was collected from that party. It is stated that since the goods were supplied through different trucks and there was no contract agreement with the transport company the payment was made only to the truck drivers. In respect of Mahalaxmi Transport Co. it is stated that the transporter had issued two bills for the sand and other for the carting charges and the appellant had paid amount of purchases and transport charges as per the directions of the supplier. It is stated the was made for the purchase of goods by the appellant and therefore there was no liability to deduct tax. The appellant also relied on decision of the Hon'ble Mumbai ITAT in the case of Bhoruka Roadlines Ltd. (117 ITD 311).

I have given careful consideration to the submissions made and facts on record. I do not find the contention of the appellant satisfactory. The undisputed fact is that the appellant has made payment of transportation charges to the above referred transporters. There is no ambiguity that provision of section 194C would apply to the facts of the instant case. The payment has been made to various transporters. It is totally irrelevant whether the transporter owns all the trucks are not. The appellant has made the effort to bring irrelevant factors to circumvent the provision of Chapter VIIB. The very fact that same transporter is engaged for delivery of one kind of material for example Alka Transport for the purpose of black metal Reliance Transport for sand carting shows that there has been some kind of contract with the appellant and the transporter. It is really inconsequential that the payment had been made as per the instructions of the supplier. The crucial fact is that transport expenditure has been debited by the appellate in its account and actual payment has been made by the appellant. The appellant's contention that there was no liability to deduct tax is self-contradictory because in the same breath it is also contended that it had acquired Form No. 15-1 from the transporters. If there was no liability to deduct tax there was no question of acquiring Form No. 15-1. However, merely acquiring if at all Form No. 15-1 is not sufficient to discard the liability for TDS. In any case is not in dispute that the proper law and process has not been followed.

The present case as noted above it is the appellant who made the payment and has claimed the payment as expenditure. It is also undisputed that this payments in the hand of these transporters are their income. How the income is applied would not determine the tax liability of either the appellant or the recipient of the amount. If the argument of the appellant is accepted the provisions of Chapter VIIB would become obtiose and unworkable. The appellant has relied on the Hon'ble ITAT decision in the case of Bhoruka Roadlines Ltd. In that case it has been found that payment for each truck was made separately because truck was for a separate destination. In that case the assessee was engaged in business of transportation of goods of various kinds. The appellant's case is entirely different. It is not in the business of transportation. It has rather engaged the services of transporter and in appellant's case all the trucks come to one destination that is, to the appellant himself, and the payments have been made to an identifiable transporter and it is clearly irrelevant whether the payment has been made after each trip or in bulk. Looking into the totality of fact I am of the considered opinion that there has been violation of provision of section 194C and therefore the Assessing Officer was justified in making the disallowance.

6. Aggrieved by the order of CIT(A), Assessee is now in appeal before us.

7. Before us, ld. A.R. reiterated the submissions made before A.O and ld. CIT(A). He further submitted that the amount of disallowance of Rs. 7,00,316/- has not been correctly worked out it includes certain payments below 50,000/- during the year and therefore not liable to deduct TDS in view of the proviso to Section 194(C)(5) of the Act. As an alternate 4 ITA No 148/AHD/2011 . A.Y. 2005-06

contention he submitted that the TDS has been deposited by the Assessee on 07.03.2012 and therefore no disallowance u/s. 40(a)(ia) was called for. He further placed reliance on the decision of Agra Tribunal in the case of Rajivkumar Agarwal vs. ACIT (2014) 34 ITR Tribunal 479 Agara. The ld. D.R. on the other hand supported the order of A.O and ld. CIT(A).

8. We have heard the rival submissions and perused the material on record. The dispute in the present case is of disallowance u/s 40 (a)(ia) on account of non deduction of TDS. Before us, ld. A.R has submitted that the total payment which has been disallowed u/s. 40(a)(ia) included payment to certain parties where the aggregate payment during the year to them was less than Rs. 50,000/- and therefore as per the proviso to Section 194C(5), Assessee was not liable to deduct TDS. It is also assessee's submission that the TDS has been deposited on 07.03.2012 and therefore if the disallowance is made in the year under consideration, then the same should be allowed in A.Y. 2012- 13 as it has been paid in the previous year ending 31st March, 2012 relevant to A.Y. 2012-13. We find that there is no finding of the lower authorities with respect to the aggregate payments to some of the parties being below 50,000/- and the applicability of proviso to Section 194(C)(5). Further it is submitted before us that the TDS that has been deducted has been deposited to the Government's account on 07.03.2013 on which also there is no finding by the lower authorities. Considering the aforesaid facts, we are of the view that the factual aspect submitted by the Assessee before us needs re-examination at the end of A.O. We therefore set aside the issue to the file of A.O to decide the issue de novo after considering the submissions of the Assessee and in accordance with law. Needless to state that A.O shall grant adequate opportunity of hearing to the Assessee. We also direct the Assessee 5 ITA No 148/AHD/2011 . A.Y. 2005-06

to co-operate with the Revenue authorities by promptly filing and submitting all the details called for by them. In the result, this ground of Assessee is allowed for statistical purposes.

9. In the result, the appeal of Assessee is allowed for statistical purposes.

Order pronounced in Open Court on 19- 02 - 2015.

Sd/- Sd/- (SHAILENDRA Kr. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad. Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad