Gautam Roadways (P) Ltd., Kolkata vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH : KOLKATA

[Before Hon'ble Sri Rajpal Yadav, JM & Hon'ble Sri B.P.Jain, AM]

I.T.A No. 1290/Kol/2011 Assessment Year : 2008-09 I.T.O., Ward-9(2) -vs.- Gautam Roadways (P) Ltd., Kolkata Kolkata [PAN : AACCG 9242 R) (Appellant) (Respondent)

For the Appellant : Shri S.M.Surana & Shri P.K.Himmatsinghka, Advocate For the Respondent : Shri Saboorul H.Usmani, JCIT, Sr.DR

Date of Hearing : 06.05.2015 Date of Pronouncement : 07.05.2015. ORDER

Per Shri B.P.Jain, AM

This appeal of the Revenue arises from the order of ld.CIT(A)-VIII, Kolkata dated 13.07.2011 for Assessment Year 2008-09.

2. The revenue has raised the following grounds of appeal :

"1. That on the facts and circumstances of the case, the Ld.CIT(A), Kolkata erred in law and in fact in deciding the appeal in favour of the assessee by deleting the addition made u/s 40(a)(ia) of the Income tax Act, 1961 on account of payment against freight charges of Rs.2,65,48,566/-, where the assessee failed to deduct tax at the time of payment/credit of the same on which the tax was deductible at source under Chapter XVII B of the Act.

2. That the appellant craves leave to add, alter, adduce or amend any ground or grounds of appeal at the time of hearing."

3. The brief facts of the case are that the assessee is engaged in the business of transportation/carriage of goods as transport contractor. The assessee has debited in its profit and loss account an amount of Rs.3,28,45,317/- on account of freight payment. AO observed that the assessee was required to deduct tax at source u/s 194C of the Act on the total payment of Rs.2,65,48,566/-. The assessee submitted party wise details and 2 ITA No.1290/Kol/2011 Gautam Roadways (P)Ltd..

A.Yr.2008-09 submitted that no TDS is required to be deducted because the truck owners transport the goods without assuming any responsibility as sub-contractor and collect the payments against the delivery. Moreover, the assessee has collected specific forms 15I from various truck owners. The necessary explanation vide letter dated 27.12.2010 which is at pages 4 and 5 of the AO's order is reproduced herein below :

"We are transport contractor transporting the goods within the specified time limit mentioned in the contract and earned freight from them. Trucks owned by the company were not sufficient to complete the contract and therefore hired the trucks from various truck owners available in open market/.truck depot as & when basis on day-to-day requirement without assigning/sub contracting the works order allotted to us. We did not pay hire charges (freight payment) in pursuance to contract for a specific period, quantity or price. Since we did not assign/sub-contract with any truck owner, work order and did not enter either oral or written sub-contract with any truck owner, provision contained in section 194C are not applicable to assessee company.

(c) Moreover, as a matter of abundant precaution, we had also collected specified form 15I from various truck owners, details of which are mentioned in form 15J. since the receiving clerk in CIT office could not be found in seat as informed by A/R and being last date of deposit, the assessee dispatched form 15J accompanies with respective copies of 15I to CIT's office by post on dated 30.06.2008, Xerox copy of postal dispatch document is enclosed as an evidence. Since all form 15 I along with form 15J were sent to jurisdictional CIT within 30.06.2008, provision of section 40(a)(ia) is not applicable in our case."

3.1. The AO did not accept the explanation of the assessee and observed that the assessee received freight/transportation charges from various parties and for this, the assessee made payment to various truck owners/operators/drivers for transporting the goods so undertaken to have been handled by the assessee, whose trucks it had hired for handling the goods under contract with them. The assignment of work by the assessee to the truck owners/operators for carrying out the job for transportation of goods is nothing but sub-contract and provisions of section 194C of the Act are duly applicable in the case of the assessee. Section 194C of the Act casts a legal duty on the person responsible for paying any sum to another for carrying out any contract in pursuance of a contract between the contractor and contractee to deduct tax at source at prescribed rate and the assessee cannot be presumed to be ignorant of the provisions of law.

2 3 ITA No.1290/Kol/2011 Gautam Roadways (P)Ltd..

A.Yr.2008-09 3.2. As regards the submission of Form 15 J and 15I the AO observed that it is a preposterous statement by the assessee just to evade its legal obligation to furnish particulars in Form 15J to the jurisdictional Commissioner of Income Tax by 30th June, 2008. It was further observed from Form 15J filed in the assessment proceedings that they were collected by the assessee in the April, May and June, 2007 but the assessee had claimed to have sent Form 15J to Commissioner of Income tax, Kolkata by under postal certificate on 30.06.2008 after a gap of one year from the month of collecting the alleged declarations in Form 15 I. On verification by the Inspector in the office of Commissioner of Income Tax, Kolkata it was found that no such documents as claimed by the assessee has been received by the CIT's office. Accordingly AO observed that there is no substance in the pleadings of the assessee and it was required to deduct tax at source u/s 194C of the Act and therefore provision of section 40(a)(ia) of the Act are attracted and accordingly an amount of Rs.2,65,48,566/- was disallowed and added back to the total income of the assessee.

3.3. The ld. CIT(A) accepted the explanation of the assessee and in view of the decision of the Hon'ble Rajasthan High Court in the case of Chhogmal Chiranjilal 257 ITR 51 where it has been held that if the declarations are received before credit or before payment within the financial year the appellant is not liable to deduct the tax. It is only if such declaration are received after the close of the financial year then tax deduction has to be made under the provisions contained in respective provisions of the Act. The ld. CIT(A) also followed the decision of ITAT Mumbai Bench in the case of Vipin P.Mehta in ITA No.3317/M/2010 dated 20th May, 2011 and accordingly the ld. CIT(A) reversed the order of AO and held that the assessee was not liable to deduct tax and the provisions of section 40(a)(ia) of the Act were not applicable.

4. The ld. DR relied upon the order of AO whereas the ld. Counsel for the assessee relied upon the submissions made before the AO and ld. CIT(A) and order of ld.

3 4 ITA No.1290/Kol/2011 Gautam Roadways (P)Ltd..

A.Yr.2008-09 CIT(A) and further argued that the case is covered by the decision of ITAT, Kolkata Benches in a number of cases i.e. in the case of M/s. Capital Transport Corporation vs ITO in ITA NO.1753/Kol/2009 dated 11th August, 2011, in the case of ITO vs Rajesh Kr.Garg in ITA NO.532/Kol/2011 dated 5th August, 2011 and also in the case of ITO vs M/s. S.S.Impex in ITA No.977/Kol/2011 dated 23.09.2011 and by the decision of ITAT, Mumbai in the case of Vipin P.Mehta in ITA NO.3317/M/2010 (supra) Accordingly the ld. AR prayed to confirm the order of ld. CIT(A).

5. We have heard the rival contentions and perused the facts of the case. The undisputed fact in the present case are that assessee has submitted Form 15I to the AO in the month of April, May and June, 2007 as observed by the AO at page 6 of his order. It was further observed by the AO at the same page 6 that form 15J has been submitted to the Commissioner of Income Tax on 30th June, 2008 under certificate of posting being the last date/due date of submission of form 15J to the Jurisdictional Commissioner of Income tax. The objection of the AO is that the Inspector verified from the office of the jurisdictional Commissioner of Income Tax that no such Form 15J/I was found as claimed by the assessee. As against the assessee has filed the postal despatch documents with the AO which has not been proved false by the AO. The same is on record before both the authorities below as well as before us. The non submission before the Commissioner of Income tax was explained by the assessee before AO as well as CIT that the receipt clerk of the CIT's office was not found in the seat on 30th June, 2008. The assessee chose to send Form 15J under postal certificate. However the fact remains that Form 15I was available with the assessee and was submitted to the AO in the month of April to June, 2007 much before the due date i.e. 30th June, 2008 in the present case. Therefore in our view once the specified forms have been collected under Rule 29D(4)(ii) by the assessee even if the same is not submitted to the CIT for one reason or another, the assessee is not required to deduct tax at source u/s 194C of the Act and therefore provisions of section 40(a)(ia) cannot be made applicable. The issue is

4 5 ITA No.1290/Kol/2011 Gautam Roadways (P)Ltd..

A.Yr.2008-09 covered by the decisions of ITAT, Kolkata Benches in the case of ITO vs Rajesh Kumar Garg (supra), Valibhai Khanbhai Mankad, Ahmedabad in ITA No.2228/Ahd/2009 dated 29th April, 2011 and in the case of ITO vs SS Impex (supra) and in the case of Vipin Mehta of ITAT, Mumbai (supra). The relevant decision in the case of Vipin P.Mehta which had been followed by various Kolkata Benches is reproduced herein below for the sake of convenience :-

" 6. We have carefully considered the facts and the rival contentions. Section 194A provides for deduction of tax from the interest paid by the assessee, at the appropriate rate. Section 197A(lA) provides that notwithstanding anything contained in section 194A no deduction of tax shall be made under the section if the payee of the interest furnished to the person responsible for paying the interest, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which the interest is to be included will be nil. Sub-section (2) provides that the person responsible for paying interest shall deliver or cause to be delivered to the CCIT or CIT one copy of the declaration submitted by the payee of the interest to the assessee on or before the seventh day of the month next following the month in which the declaration was furnished to him. If the person responsible for paying the interest (i.e. the assessee) does not comply with sub- section 2 of section 197A, he is liable to pay penalty of Rs.100/- for every day during which the failure continues. Such penalty can be imposed only by the Commissioner or Chief Commissioner of Income Tax as stated in clause (b) of sub-section 3 of Section 272A and sub-section 4 requires that an opportunity shall be given to the assessee before any penalty order is passed.

7. In the present case the claim of the assessee is that at the time of paying the interest to the 34 persons mentioned in the assessment order, he had before him the appropriate declarations in the prescribed form from the payees stating that no tax was payable by them in respect of their total income and therefore tax need not be deducted from interest under section 194A, and in the light of these declarations he had no option but to make the payment of interest without any tax deduction. If the claim is true then the contention must be accepted because under sub-section (lA) of section 197A, if such a declaration is filed by the payee of interest, no deduction of tax shall be made by the assessee. The revenue authorities have doubted the assessee's version because according to them it is only when the Assessing Officer proposed the disallowance of the interest by invoking the section 40(a)(ia) in the course of the assessment proceedings that the assessee filed the declarations claimed to have been submitted to him by the payees of the interest, in the office of the CIT(TDS) as required by sub-section 2 of section 197A. Apart from this inference, there is no other evidence in their possession to hold that the 5 6 ITA No.1290/Kol/2011 Gautam Roadways (P)Ltd..

A.Yr.2008-09 declarations were not submitted by the payees of the interest to the assessee at the time when the payments were made. Without disproving the assessee's claim on the basis of other evidence, except by way of inference, it would not be fair or proper to discard the claim. The Assessing Officer has not recorded any statements from the payees of the interest to the effect that they did not file any declarations with the assessee at the appropriate time or to the effect that they filed the declarations only at the request of the assessee in September /October, 2008. In the absence of any such direct evidence, we are unable to reject the assessee's claim. The Assessing Officer has stated in para 4.4 of the assessment order that he found that some of the loan creditors were having taxable income but still the assessee had submitted declarations from them in form no. 15G. Unless it is proved that these forms were not in fact submitted by the loan creditors, the assessee cannot be blamed because at the time of paying the interest to the loan creditors, he has to perforce rely upon the declarations filed by the loan creditors and he was not expected to embark upon an enquiry as to whether the loan creditors really and in truth have no taxable income on which tax is payable.

That would be putting an impossible burden on the assessee. That apart sub-section lA of Section 197A merely requires a declaration to be filed by the payee of the interest and once it is filed the payer of the interest has no choice except to desist from deducting tax from the interest. The sub-section uses the word "shall" which leaves no choice to the assessee in the matter. In the case of payment of leave travel concession and conveyance allowance to employees who are liable to deduct tax from the salary paid to the employees under section 192, the Supreme Court has held in CIT Vs. Larsen & Toubro Ltd. (2009) 313 ITR 1, that the assessee was under no statutory obligation under the Act or Rules to collect evidence to show that the employee had actually utilized the money paid towards leave travel concession/conveyance allowance. The position is stronger under section 197A which does not apply to section 192, but which provides in sub-section (lA) that if the payee of the interest has filed the prescribed form to the effect that he is not liable to pay any tax in computing his total income, the payer shall not deduct any tax.

The sub-section does not impose any obligation on the payer to find out the truth of the declarations filed by the payee. Even if the assessee has delayed the filing of the declarations with the office of the CIT / CCIT (TDS) within the time limit specified in sub-section (2) of section 197A, that is a distinct omission or default for which a penalty is prescribed. Section 273B provides that no penalty shall be imposed under any of the clauses of sub- section (2) of section 272A for the delay, if the assessee proves that there was reasonable cause for the same. We have already seen that under sub-section (4) of section 272A, no penalty can be imposed unless the assessee is given an opportunity of being heard. All these provisions indicate that the failure on the part of the assessee, who is the payer of the interest, to file the declarations given to him by the payees of the interest, within the time limit specified in sub- section (2) to section 197A is distinct and separate and merely because there is a failure on the part of the assessee to submit the declarations to the income- tax department within the time limit, it cannot be said that the assessee did not 6 7 ITA No.1290/Kol/2011 Gautam Roadways (P)Ltd..

A.Yr.2008-09 have declarations with him at the time when he paid the interest to the payees. That would be a separate matter and separate proof and evidence is required to show that even when the assessee paid the interest, he did not have the -- declarations from the payees with him and therefore he ought to have deducted the tax from the payment. No such evidence or E,roof has been brought by the department.

8. For the aforesaid reasons, we accept the assessee's claim that since he had the declarations of the payees in the prescribed form before him at the time when the interest was paid, he was not liable to deduct tax there from under section 197A. If he was not liable to deduct tax, section 40(a)(ia) is not attracted."

5.1. Accordingly in the circumstances and facts of the case and in view of the decisions cited herein above, we find no infirmity in the order of ld. CIT(A), who has rightly held that the assessee is not liable to deduct tax at source in the present circumstances and facts of the case and provisions of section 40(a)(ia) of the Act are not applicable. Thus the sole ground of the revenue is dismissed.

6. In the result the appeal of the revenue is dismissed.

Order pronounced in the Court on 07.05.2015.

Sd/- Sd/- [ Rajpal Yadav ] [ B.P.Jain ] Judicial Member Accountant Member

Dated : 07.05.2015. [RG PS]

Copy of the order forwarded to:

1.Gautam Roadways (P)Ltd., 149, M.G.Road, Kolkata-700007.

2. I.T.O., Ward-9(2), Kolkata

3. CIT(A)-VIII, Kolkata 4. CIT Kolkata.

5. CIT(DR), Kolkata Benches, Kolkata.

True copy By Order

Asstt.Registrar, ITAT, Kolkata Benches 7 8 ITA No.1290/Kol/2011 Gautam Roadways (P)Ltd..

A.Yr.2008-09

8