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TMI Blog2015 (6) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... re charges.All the aforesaid payments are exceeding the limits of ₹ 20,000/- per day and ₹ 50,000/- during the financial year 2008-2009. This payment is also in breach of section 40(A)(3) of the Income Tax Act, 1961. The assessee is seeking deduction of this amount from taxable Income u/s 37 of the Income Tax Act, which is not permissible, looking to Section 194C of the Act, 1961 to be read with Section 40(a)(ia) of the Act , 1961. The respondent-assessee looking to the books of accounts have made the payment towards labour charges, repair and maintenance as well as towards the loading and unloading. Thus, the assessee is not a broker at all, but, is more than a broker. Broker will never pay the repair and maintenance as happened in this case. Payments have been made for spare parts, tyres and tubes, batteries, for engine, for motors auto body, for leaf spring etc. during the financial year 2008-09. Looking to this aspect of the matter, no error was committed by the Income Tax Commissioner, while dismissing the appeal preferred by the respondent-assessee. Income Tax Appellate Tribunal, Ranchi Circuit Bench, Ranchi has failed to appreciate the cumulative effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Tribunal is justified in ignoring the categorical finding of the CIT(A) that there was a contract between the parties and Assessee was liable to deduct TDS? (iv) Whether on the facts and in the circumstances of the Case the Learned Tribunal is justified in relying upon the decision delivered in the case of Bhagwati Steel reported in (2011) 198 TAXMAN 275 (P H) which was not at all applicable in the instant Case? (v) Whether on the facts and in the circumstances of the Case the impugned Order is perverse? 2. This matter has been taken up for its final hearing by the consent of the learned counsel for both the sides and have argued out the case at length. 3. Counsel for the appellant on behalf of the Commissioner Income Tax, Jamshedpur has submitted that the respondent has claimed deduction of ₹ 98,76,419/-, which is paid to the sub contractor for transportation. Similarly, the respondent-assessee has also claimed deduction of ₹ 17,60,600/- under the heading of loading and unloading charges . These deductions not having been allowed , appeal was preferred by the respondent before the Commissioner, Income Tax (Appeals) Jamshedpur bearing Appeal No. 525/JSR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 2009-10 and financial year 2008-09. Looking to the repairs and maintenance charges, the amount has also been paid by this assessee over and above vehicle hire charges. There is also huge payments for loading and unloading charges. There is also payments for labour charges. There is an oral contract between this assessee and transporters, who are transporting goods of M/s Rungta Mines Ltd. It is submitted by the counsel for the appellant that looking to the payments made on different dates to the same party of more than ₹ 20,000/- in cash as stated in para 3.4 of the Assessment Order passed by the Assessing Officer dated 20th December, 2011 (Annexure 1 to the memo of the Tax Appeal). It appears that gross error has been committed by the ITAT that Section 194C of the Income Tax Act, 1961 is not applicable and consequently the deductions disallowed under Section 40 (a) (ia) should have been allowed by the Income Tax Department. This is an error on the face of the record committed by the ITAT, which is not permissible. (e) Similarly, learned counsel for the appellant submitted that for loading and unloading charges, deductions claimed by the respondent-as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that he is only a broker and earning ₹ 150-200 per truck. In fact, he is a transporter and he is giving sub contract for transportation of goods of M/s Rungta Mines Ltd. and, therefore, as per Section 194 C of the Income Tax Act, 1961, TDS ought to have been deducted by the respondent-assessee before making huge payment to the sub contractors and hence, this tax deduction at source has not been carried out. The deductions claimed from the total income by the assessee of ₹ 98,76,419/- for vehicle hire charges is not permissible under Section 40 (a) (ia) of the Income Tax Act, 1961. Similar is the position with respect to the loading and unloading charges for ₹ 17,60,600/-. Learned counsel for the appellant has relied upon the decision rendered in the case of Raja and Company vs. Commissioner of Income Tax reported in (2011) 335 ITR 381 (Kerala). In view of the aforesaid decision, it is submitted by the counsel for the appellant that the conclusion arrived at by the Income Tax Appellate Tribunal, Ranchi Circuit bench, Ranchi deserves to be quashed and set aside and the order passed by the Commissioner of Income Tax (Appeals), Jamshedpur in Appeal No.525/JSR/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears that the respondent-assessee is a transporter and engaged in transporting of goods mainly through hired vehicles. Heavy vehicles have been hired by the respondent . It further appears that the respondent-assessee is not only paying vehicles hire charges, but, he is paying entire vehicles running expenses such as cost of diesel and lubricants, labour charges, repair and maintenance charges which mainly comprising replacement of spare parts, tyres and tubes, batteries, engines, motors auto body, leaf spring and other general repairs and maintenance and also towards loading and unloading charges. These are the payments made under the different major heads by the respondents during the financial year 2008-2009. Thus, it appears that he is not a broker at all who is earning ₹ 150-200 per truck as argued out by the respondent-assessee. (III) Huge amount has been paid in cash for vehicle hire charges. Looking to the profits and loss accounts the said payment reads as under:- Sl. No. Name of the Party (S/Sri) Date of Payment Amounts paid without deduction of tax 1. (i) Sudhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19/04/2008 3,32,748 (ii) 30/04/2008 2,89,000 (iii) 12/05/2008 4,27,600 (iv) 07/06/2008 1,61,530 (v) 16/06/2008 2,40,000 (vi) 27/06/2008 94,518 (vii) 08/07/2008 95,000 (viii) 29/07/2008 90,300 (ix) 29/07/2008 2,77,000 (x) 01/08/2008 48,190 (xi) 14/08/2008 3,67,590 (xii) 02/09/2008 1,23,430 Sub-total 25,46,906 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 Sub-total 1,30,000 10. Lucky Roadways 12/02/2009 2,00,000 11.(i) Prasanna Kumar Prusty 27/02/2009 38,000 (ii) 18/03/2009 50,790 Sub-total 88,790 12. Radhey Shaym Sahu 27/02/2009 65,150 13.(i) Raj Roadways 04/03/2009 19,000 (ii) 26/03/2009 29,181 Sub-total 48,181 14. (i) Md. Khlim 02/01/2009 50,000 (ii) 05/03/2009 1,00,000 Sub-total 1,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98,76,419 All the aforesaid payments are exceeding the limits of ₹ 20,000/- per day and ₹ 50,000/- during the financial year 2008-2009. This payment is also in breach of section 40(A)(3) of the Income Tax Act, 1961. (IV) The aforesaid amount of ₹ 98,76,419/- has been paid in cash. The assessee is seeking deduction of this amount from taxable Income u/s 37 of the Income Tax Act, which is not permissible, looking to Section 194C of the Act, 1961 to be read with Section 40(a)(ia) of the Act , 1961 (V) For the ready reference Sections 194C and 40(a)(ia) read as under:- 194C. Payments to contractors (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to - (i) one per cent where the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed. Explanation.- For the purposes of this section,- (i) specified person shall mean,- (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under Section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or (k) any firm; or (l) any person, being an individual or a Hin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um on the date of furnishing of return of income by the resident payee referred to in the said proviso. Explanation.- For the purposes of this sub-clause,- (i) commission or brokerage shall have the same meaning as in clause (i) of the Explanation to Section to section 194H; (ii) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of subsection (1) of section 9; (iii) professional services shall have the same meaning as in clause (a) of the Explanation to section 194J; (iv) work shall have the same meaning as in Explanation III to section 194C; (v) rent shall have the same meaning as in clause (i) to the Explanation to section 194-I; (vi) royalty shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; Repeatedly, it has been argued out by the counsel for the respondent that there is no existence of the contract between the respondent and the so called transporters or between the assessee and so called sub contractors. If there is no evidence on record as to the existence of the contract between the respondents-assessee and the parties to whom ₹ 98,76,419/- is paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence in this case. The respondent-assessee looking to the books of accounts have made the payment towards labour charges, repair and maintenance as well as towards the loading and unloading. Thus, the assessee is not a broker at all, but, is more than a broker. Broker will never pay the repair and maintenance as happened in this case. Payments have been made for spare parts, tyres and tubes, batteries, for engine, for motors auto body, for leaf spring etc. during the financial year 2008-09. Looking to this aspect of the matter, no error was committed by the Income Tax Commissioner, while dismissing the appeal preferred by the respondent-assessee. Income Tax Appellate Tribunal, Ranchi Circuit Bench, Ranchi has failed to appreciate the cumulative effect of the evidences on record. (VI) The respondent-assessee has paid loading and unloading charges of ₹ 17,60,600/- to various parties on different dates. Few of such cases are as under: Sl. No. Name of the Party Date of Payment Amounts paid without deduction of tax 1. Magma Finance 27/05/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payments of freight having been made pursuant to a contract of transportation of goods for specific period, quantity or price. There is also observations in the said para 3, while quoting para no. 25 of the Income Tax Appellate Tribunal s decision that the freight expenses incurred by Tata Steel are added to the cost of goods in the invoice raised, it cannot be inferred that assessee has paid any amount separately. Looking to the aforesaid peculiar facts of the case, the decision was rendered in favour of assessee, whereas, in the facts of the present case, vehicle hire charges have been paid by the respondent-assessee. Moreover, looking to the totality of the evidence on record it cannot be said that there is no evidence on record for oral agreement. (VIII) Learned senior counsel for the respondent has relied upon the decision reported in (2008) 174 Taxman 286 (Punjab and Haryana). The fact of this case is also remarkably different from the fact of the present case. It has been observed in para 2 of the said decision that there is no repetition of the payments to the same truck owners or truck operators, whereas, in the facts of the present case as stated hereinabove one Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kably different than the facts of the present case. The present respondent-assessee is a transporter and transporting the goods through sub contractors and as stated hereinabove on different dates in cash more than ₹ 20,000/- have been paid to a single party namely Sri. Sudhir Kumar Sinha. Similarly, two other persons also on more than one occasions the payments have been made not only for the vehicles hire charges, labour charges, repair and maintenance, but also loading and unloading charges have been made. Looking to the books of accounts of the respondent-assessee, it can be safely deduced that there is existence of oral agreement enforceable by law between the respondent-assessee and sub contractors to whom the payments have been made. (XI) It has also been argued out by the counsel for the respondent that an explanatory note has been issued by the respondent- Department by way of Circular No. 5/2005 dated 15th July 2005. It has been observed that to curb the bogus payment this provision of Section 40(a)(ia) of the Income Tax Act has been incorporated and it is submitted by the counsel for the respondent that the payment has already been made by the respondent-assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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