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TMI Blog2014 (11) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the amount should be payable and not which had been paid by the end of the year - there was no contract between the assessee and the agents/relatives to whom payment for hiring the vehicles had been made and nothing was payable at the end of the year - the disallowance made by the AO and sustained by the CIT(A) was not justified – Decided in favour of assessee. Sustenance of disallowance out of the godown repair expenses – Non-deduction of TDS – Held that:- CIT(A) categorically stated that the provisions of section 40A(3) of the Act were not applicable to the amount, therefore, the AO was not justified in holding that the provisions of section 40A(3) of the Act were applicable because payment was made on Sunday, the banks were closed on account of holiday - since the amount was not payable as on 31/03/2009, the provisions of section 40(a)(ia) of the Act were not application as decided in CIT Vs. Vector Shipping Service (P) Ltd. [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] thus, the order of the CIT(A) is set aside – Decided in favour of assessee. - ITA No. 85/Jodh/2014 - - - Dated:- 28-8-2014 - Hari Om Maratha, JM And N. K. Saini, AM,JJ. For the Petitioner : Shri Dinesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 to the assessee to show-cause as to why the amount of ₹ 5,16,000/- may not be disallowed u/s. 40(a)(ia) of the Act. The assessee submitted that the said payment had been made to some jeep drivers and helpers through agents and relatives, who themselves where the head of the group. The Assessing Officer, however, did not accept the explanation of the assessee and observed that payments of ₹ 86,000/-, ₹ 43,000/-, ₹ 86,000/- and ₹ 3,01,000/- to Shri Shriniwas, Shri Munnalal, Shri Karim Bux and Shri Shivpal Singh respectively, were made by the assessee himself and covered u/s. 194C of the Act, therefore, the TDS was deductable. He also pointed out that payments made to those persons were in cash exceeding the limit specified in section 40A(3) of the Act. Accordingly, a sum of ₹ 5,16,000/- was disallowed u/s. 40(a)(ia) of the Act, however, no further addition u/s. 40A(3) of the Act was made. 4. Being aggrieved, the assessee carried the matter to the ld. CIT(A) and the submissions as incorporated in para 3.2 of the impugned order were as under:- The Ld AO has disallowed the Delivery Supply Expenses of ₹ 5,16,000/- arbitrarily and jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opies of affidavits also filed. The detail of payments made to those persons and the payment made by them to different jeep drivers and helpers are also furnished. Without prejudice to the above, even otherwise the payment made to the alleged persons cannot be disallowed u/s 40a(ia) of the IT Act because sec. 40a(ia) is applicable only in respect of TDS defaults if amount is payable. If amount is actually paid and tax is not deducted under the above sections, section 40(a)(ia) is not applicable. Section 40(a)(ia) has to be subjected to strict interpretation. Going by the rule of strict interpretation, the default with reference to actual payment of expenditure would not entail disallowance. This observation has now been upheld by a few Tribunal's rulings in Merilyn Shipping Transports v. CIT [2012] 136 ITD 23 (Visakhapatnam)(SB), S.S. Warad v CIT[2012] 19 ITR (Trib.) 35 (Bang.) T.T. Kuruvilla v. CIT[2012] 149 TTJ (Coch.) 533, Emdee Apparels v. CIT[2012] 54 SOT 600 (Bang), Bartronics India Ltd. v. CIT [2012] 52 SOT 188 (Hyd.), Teja Constructions v. CIT [2010] 39 SOT 13 (Hyd.). As the assessee has already made the payment to those persons and no any amount is payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and his said trustworthiness persons. The Ld. CIT(A) did not accept the contention of the assessee that it had not entered into any contract with the transporters and therefore, the TDS was not deductable and observed that each lorry receipt was a separate contact in itself and the contract could not be in writing. Reference was made to the CBDT Circular No. 715 443. The Ld. CIT(A) did not accept this contention of the assessee that the decision of the ITAT, Special Bench, Vishakhapatnam in the case of Merilyn Shipping Transports Vs. ACIT reported in 136 ITD 23, was applicable to the assessee's case by observing that the said decision had been distinguished by the Calcutta High Court and Gujarat High Court in the following cases. 1. CIT Vs. Crescent Export Syndicate [85 CCH 056 Kol HC] 2. CIT Vs. Md. Jakir Hossain Mandal (Cal); and CIT Vs. Sikandarkhan N. Tunvar [87 DTR (Guj.) 137] 6. The Ld. CIT(A) also mentioned that the Hon'ble Allahabad High Court in the case of Vector Shipping Services (P) Ltd. without dealing with the decision of Calcutta Gujarat High Court had held that for making the disallowance of expenditure on which tax had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, to whom the assessee called head- helper and therefore the payment was made to jeep drivers and helpers through that person. 4. As such those persons have acted as a cashier of the assessee and not as contractor. This is a similar case where an organisation's office delivers cash to his cashier/factory manager for incurring of different expenditure at its factory. The said cashier/factory manager incurs different expenditure, makes payment to different persons or even he charges his own salary and submits the account to the office/owner of the organization. In such type of the transaction, that cashier/factory manager cannot be said the contractor. He will remain the employee of the organization. Same was the case here. 5. The said persons while making payments to jeep drivers and helpers got signatures of such payees on the printed payment vouchers of the assessee's proprietary firm M/s Vishnu Gas Agency and returned back such payment vouchers to the assessee. As such in the books of account though the payment has been shown as to have been made to the alleged persons but in actual the payment have been made to different jeep drivers and helpers and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Commissioner of Income-tax [2013] 024 ITR (Trib) 0042 ITAT (Kolk) has also been held that the sardar of labourer (Head- labourer) cannot be said to be a contractor and therefore the provisions of sec 194C are not applicable in that case. The facts of our case are also more or less identical with the said case. 9. The Ld. CIT(A) has erred in concluding that the agents or so called trustworthy persons to whom payment in cash has been made are not the Sardar or labourer-head, that is to say, that they are not the ones from jeep or delivery lorry drivers or labourers. Whereas in actual the said persons were among the helpers and on their payment vouchers they have been clearly shown as Helper-head. The said helper- heads were not paid ₹ 5000/- separately for arranging delivery vehicles for the appellant as concluded by the Ld. CIT(A) but they have been paid for their delivery and supply services as helper/worker. 10. As such on the facts of the case it is clear that all those persons through whom the assessee made the payment of Delivery and Supply charges were helpers/workers/employees of the assessee and not any contractors. The assessee made the payment through them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer stated that there was oral contract between the assessee and his trustworthy persons. In the present case, it is noticed that the assessee made the payments on account of hiring of the vehicles for transportation and nothing was payable at the end of the year. 10. On a similar issue, the Hon'ble Allahabad High Court in the case of CIT Vs. Vector Shipping Service (P) Ltd. reported at (2013) 357 ITR 642 held that for disallowing expenses from business and profession on the ground that TDS had not been deducted the amount should be payable and not which had been paid by the end of the year. Against the said judgment of the Hon'ble Allahabad High Court, the Department filed an SLP before the Hon'ble Supreme Court which had been dismissed vide order dated 02/07/2014 in C.C.No. 806/2014. In the present case, it is an admitted fact that there was no contract between the assessee and the agents/relatives to whom payment for hiring the vehicles had been made and nothing was payable at the end of the year. Therefore, the disallowance made by the Assessing Officer and sustained by the Ld. CIT(A) was not justified. Accordingly, the same is deleted. 11. The next is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances where payment exceeding ₹ 20,000/- is allowable as per law. The clause (j) of Rule 6DD speaks that where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike. The assessee had to make the payment as the said person was required urgently the money to purchase the building material like cement etc. for the repairing work. In view of the above it is clear that the said payment of Godown Repairs Expenses cannot be disallowed u/s 40a(ia) as the same has already been paid and not payable. The cash payments of the said expense is also clearly covered under clause(j) of Rule 6DD of the IT Rules, therefore the payment is also not disallowable u/s 40A(3) of the IT Act. Thus under the above facts and circumstances the disallowance of Godown Repairs Expenses of ₹ 26,000/- is unjustified, illegal, unwarranted and be deleted. 14 The learned CIT(A), after considering the submissions of the assessee, sustained the addition made by the Assessing Officer by observing that section 40(a)(ia) of the Act was applicable in respect of all the expenses paid, however, Ld. CIT(A) held that the said payment wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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