Sh. Manak Chand Tyagi,, Delhi v. ITO, New Delhi

CO 364/DEL/2010 | 2007-2008
Pronouncement Date: 23-12-2010 | Result: Dismissed

Appeal Details

RSA Number 36420123 RSA 2010
Assessee PAN ACDPT3439R
Bench Delhi
Appeal Number CO 364/DEL/2010
Duration Of Justice 1 month(s) 19 day(s)
Appellant Sh. Manak Chand Tyagi,, Delhi
Respondent ITO, New Delhi
Appeal Type Cross Objection
Pronouncement Date 23-12-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 23-12-2010
Assessment Year 2007-2008
Appeal Filed On 03-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO. 3083/DEL/2010 ASSESSMENT YEARS: 2007-08 ITO WARD 36(3) VIKAS BHAWAN NEW DELHI. VS. MANAK CHAND TYAGI S-562 SCHOOL BLOCK SHAKAR PUR DELHI. ACDPT3439R (APPELLANT) (RESPONDENT) & CROSS OBJECTION NO. 364/DEL/2010 ASSESSMENT YEAR: 2007-08 MANAK CHAND TYAGI S-562 SCHOOL BLOCK SHAKAR PUR DELHI. ACDPT3439R VS. ITO WARD 36(3) VIKAS BHAWAN NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. N.K. CHAND SR. DR RESPONDENT BY : SH. S.A. SIDIGUI ADV. O R D E R PER I.P. BANSAL J.M. THE APPEAL IS FILED BY THE DEPARTMENT AND CROSS OBJECTION BY THE ASSESSEE. BOTH OF THEM ARE DIRECTED AGAINST THE OR DER PASSED BY CIT(A) DATED 16.04.10 FOR A.Y. 2007-08. GROUNDS OF APPEAL AND G ROUNDS OF CROSS OBJECTION READ AS UNDER: - 2 ITA NO. 3083/DEL/2010 & CO NO. 364/DEL/2010 GROUNDS OF APPEAL : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 44 28 177/- MADE BY TH E AO U/S 40(A)(IA) OF THE I.T. ACT. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND MODIFY ALTER ADD OR FOREGO ANY GROUNDS OF APPEAL AT ANY T IME BEFORE OR DURING THE HEARING OF THIS APPEAL. GROUNDS OF CROSS OBJECTION : - 1. THAT THE AO WARD 36(3) FILED APPEAL WITHOUT CO NSIDERING SETTLED LAW THAT THE HIRING CHARGES OF TRANSPORT/TRUCKS WITHOUT EXEC UTION OF WORK IS NOT LIABLE TO DEDUCT TAX U/S 194C OF INCOME TAX ACT 19 61 BY THE HONBLE SUPREME COURT OF INDIA DIFFERENT HONBLE HIGH COUR TS AND HONBLE INCOME TAX APPELLATE TRIBUNALS. THEREFORE APPEAL IS LIABLE TO DISMISS. 2. THAT THE LD. CIT(A) DECIDE APPEAL IN FAVOUR OF A SSESSEE AFTER CONSIDERING LONG LIST OF JUDGMENTS FURNISHED DURING THE PROCEED ING IN WHICH IT IS SQUARELY HELD THAT SINCE THE ASSESSEE EXECUTED ALL HIS WORK HIMSELF MERELY HIRING OF TRUCK IS NOT LIABLE TO DEDUCT TDS U/S 194C OF INCOME TAX ACT 1961. THEREFORE IT IS COVER MATTER AND T HE APPEAL IS LIABLE TO DISMISS. HONBLE DELHI HIGH COURT APPRECIATED SAME IN THE MATTER OF CIT VS. BMR & ASSOCIATES ITA NO. 619/2010 DATED 12. 4.2010. 3. THAT LD.CIT(A) GIVEN AN OPPORTUNITY TO CALL REMA ND REPORT FROM AO IN REPLY AO REMAIN FAIL TO FURNISH ANY CONCLUSIVE EVID ENCE OR CAE LAW TO STRENGTHEN HIS POINT OF VIEW EXPRESSED IN ASSESSMEN T ORDER AND CREATED FABULOUS DEMAND AGAINST ASSESSEE OR CAN BE ESTABLI SH THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX U/S 194C OF INCOME TAX ACT 1961. 4. THAT THE SECOND GROUND OF APPEAL IS GENERAL BY N ATURE AND THE ASSESSEE HAVE RIGHT TO FILE FRESH CROSS OBJECTION IN ITS OPE RATION. 2. THE ASSESSEE IS IN THE BUSINESS OF TRANSPORTATIO N. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT ASSESSEE DID NOT DEDUCT TAX ON HIRE CHARGES PAID BY HIM TO THE FOLLOWING PARTIES W HO ARE OWNER OF TRUCKS: - 3 ITA NO. 3083/DEL/2010 & CO NO. 364/DEL/2010 I) AMIT TYAGI 1 00 000 II) MOHAN 2 00 000 III) RAJ KUMAR TYAGI 80 000 IV) UMESH KUMAR GUPTA 1 41 000 V) AMIT TEMPO 11 17 200 VI) FARUKH 58 000 VII) JASWANT 62 500 VIII) KIRAN TYAGI TRANSPORT 24 81 097 IX) RAJENDRA TYAGI 60 070 X) RAJ SINGH & CO. 74 110 XI) SURANDRA KUMAR 54 200 TOTAL RS. 44 28 177 /- 3. THE AO BEING OF THE OPINION THAT SINCE THE ASSES SEE DID NOT DEDUCT TAX ON THE AFOREMENTIONED PAYMENTS WHICH CARRY THE OBLI GATION OF DEDUCTION OF TAX U/S 194C OF I.T. ACT 1961 (ACT) THE EXPENDITURE C LAIMED ON THAT ACCOUNT WAS DISALLOWABLE U/S 40(A)(IA). IN RESPONSE TO QUERY R AISED BY THE AO IT WAS SUBMITTED THAT PROVISION OF SEC. 194C WERE NOT APPL ICABLE AS THE NATURE OF THE BUSINESS OF ASSESSEE IS OF A TRANSPORT CONTRACTOR. THE ASSESSEE HAD WORKED FOR GOVERNMENT BODY (DSCSC) FOR CARRYING THE BAGS F ROM ONE PLACE TO ANOTHER PLACE ON PIECE RATE BASIS. WORK TO BE DONE IN A SP ECIFIED TIME SO FAR ASSESSEE IS BOUND TO HIRE THE LAURIE URGENTLY FROM INDIVIDUA LS AT THE SIGHT OF DELAY BASIS WORK AND THUS IT WAS SUBMITTED THAT NO TAX WAS REQ UIRED TO BE DEDUCTED. HOWEVER AO DID NOT ACCEPT SUCH SUBMISSION. ACCORD ING TO AO THE ASSESSEE WAS STATUTORILY REQUIRED TO DEDUCT TAX ON THE LAURI E HIRE CHARGES PAID TO THE ABOVE MENTIONED PARTIES AND IN THIS MANNER THE AFOR EMENTIONED AMOUNT OF RS. 44 28 177/- WAS DISALLOWED U/S 40(A)(IA). LD. CIT( A) HAS DELETED THE ADDITION ON THE BASIS OF FOLLOWING DECISIONS: (I) CIT VS. AM BHUJA DARLA KASHLOG MANGU TRANSPORT CO-OP SOCIETY (2009) 31 DTR (HP) 49; IT W AS HELD THAT HIRE OF THE 4 ITA NO. 3083/DEL/2010 & CO NO. 364/DEL/2010 TRUCKS BELONGING TO TRUCK OWNERS CANNOT BE SAID TO BE CARRYING ON ANY WORK AS USED IN SEC. 194C AND THEREFORE NO TAX WAS DEDUCT IBLE AT SOURCE. (II) DCIT VS. SATISH AGGARWAL & CO. 122 ITD 35 (AS R); IT WAS HELD THAT ASSESSEE TAKING VEHICLES ON HIRE FOR EXECUTING CONT RACTS IS NOT A SUB-CONTRACTOR. TAX WAS NOT NEEDED TO BE DEDUCTED AT SOURCE. 4. LD. CIT(A) HAS ALSO RETURNED A FINDING THAT IN T HE CASE OF THE ASSESSEE THE PAYMENT OF RS. 44 28 177/- IS INCURRED WHOLLY A ND EXCLUSIVELY TOWARDS THE HIRE CHARGES PAID TO TRUCKS EMPLOYED FOR THE PURPOS E OF BUSINESS AND SUCH PAYMENTS WERE MADE TO THE SAID PERSONS DIRECTLY BY THE APPELLANT AND IN THIS MANNER LD. CIT(A) HAS HELD THAT ASSESSEE IS NOT LIA BLE TO DEDUCT TAX AT SOURCE U/S 194C THEREFORE THE AMOUNT COULD NOT BE DISALL OWED U/S 40(A)(IA). THE DEPARTMENT IS AGGRIEVED HENCE IN APPEAL. 5. DURING THE COURSE OF HEARING LD. DR RELYING UPON THE ORDER OF AO SUBMITTED THAT ASSESSEE DID NOT DISCHARGE HIS OBLIG ATION U/S 194C THEREFORE THE AO WAS RIGHT IN DISALLOWING THE SAID AMOUNT U/S 40(A)(IA) AND LD. CIT(A) HAS WRONGLY DELETED THE ADDITION. 6. ON THE OTHER HAND LD. AR APART FROM RELYING UPO N THE ORDER OF CIT(A) HAS PRODUCED BEFORE US COPY OF THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BMR & ASSOCIATES (ITA NO. 619/2010 DECISION DATED 12.4.2010) AND SUBMITTED THAT WHERE VEHICLES WERE T AKEN MERELY ON LEASE THE PAYMENTS WILL BE IN THE NATURE OF LEASE RENTAL AND THERE WILL BE NO OBLIGATION ON 5 ITA NO. 3083/DEL/2010 & CO NO. 364/DEL/2010 THE ASSESSEE TO DEDUCT TAX AT SOURCE U/S 194C. THE COPY OF THE SAID DECISION WAS ALSO GIVEN TO LD. DR. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. IN THE PRESENT CASE FAC TS ARE CLEAR THAT ASSESSEE HAS HIRED TRUCKS TO CARRY OUT ITS TRANSPORT CONTRAC T WITH GOVERNMENT BODY. THESE TRUCKS WERE HIRED FROM VARIOUS PARTIES WHICH HAVE BEEN LISTED IN THE ABOVE PART OF THIS ORDER. THERE IS NO AGREEMENT OF THE ASSESSEE WITH THOSE LAURIE/TRUCK OWNERS FOR CARRYING OUT ANY WORK OR TO TRANSPORT ANY GOODS OR PASSENGERS FROM ONE PLACE TO ANOTHER. THE ASSESSEE HAS SIMPLY HIRED THE TRUCKS ON PAYMENT OF HIRE CHARGES. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE DEPARTMENT TO SHOW THAT THE ASSESSEE HAD ENTERE D INTO ANY CONTRACT WITH THE TRUCK OWNERS FOR TRANSPORTATION OF GOODS OR PAS SENGERS FROM ONE PLACE TO ANOTHER. THE HIRED TRUCKS WERE USED FOR THE PURPOS E OF ASSESSEES BUSINESS AND SUCH USE WOULD NOT AMOUNT TO A CONTRACT FOR CAR RYING OUT ANY WORK AS CONTEMPLATED IN SEC. 194C. THEREFORE WE FOUND THA T THE PRESENT ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE AFOREMENTIONED DECISION OF ITAT AMRITSAR IN THE CASE OF DCIT VS. SATISH AGGARWAL & COMPANY (SUPRA) WHEREIN ASSESSEE WAS HELD BY THE AO TO BE LIABLE FOR DEDUCT ION OF TAX AT SOURCE U/S 194C AND THE PAYMENTS OF RS. 70 40 000/- WERE DISAL LOWED U/S 40(A)(IA). IN THE SAID CASE IT WAS HELD THAT ASSESSEE WAS NOT UNDER A N OBLIGATION TO DEDUCT TAX AT SOURCE. THE RELEVANT OBSERVATIONS OF THE TRIBUN AL FROM THE SAID DECISION ARE REPRODUCED BELOW: - 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE LD. CIT(A) WHILE DELETING THE ADDITION HAS OBSERVED AS FOLLOWS: - 6 ITA NO. 3083/DEL/2010 & CO NO. 364/DEL/2010 THE AO ALSO EFFECTED ADDITION OF RS. 17 40 000/- ON ACCOUNT OF HIRE CHARGES IN RESPECT OF HIRING OF TRUCKS. IT WAS THE PLEA OF THE APPELLANT THAT NO TAX WAS DEDUCTIBLE ON HIRE CHARGES BUT AO TREATED THE PAYMENT FOR HIRING OF TRUCKS AS PARTAKING THE CHARACTER OF WORK I.E. INVOLVING THE CARRIAGE OF GOODS FOR THE APPELLANT AS PER EXPLANATION III TO SEC. 194C OF THE INCOME TAX ACT. IT WAS THUS HELD THAT SEC. 194C IS ATTRACTABLE READ WITH SEC. 40(A)(IA) OF THE I.T. ACT AND ADDITION OF RS. 17 40 000/- WAS EFFECTED BY THE AO. THE FACTS OF THE CASE ON THE OTHER HAND REVEAL THAT IN THE CASE OF APPELLANT WHICH WERE USED BY THE APPELLANT FOR ITS OWN BUSINESS. THERE WAS NO CONTRACT BETWEEN THE APPELLANT AND THE TRUCK OWNERS FOR CARRYING GOODS OR PASSENGERS. THE HIRE CHARGES PAID TO TRUCK OWNERS WERE THEREFORE NOT SUBJECTED TO TDS U/S 194C OF THE INCOME TAX ACT. IT WAS A PAYMENT FROM HIRE OF MACHINERY/PLANT I.E. CAPITAL ASSET AND SEC. 194- I WAS AMENDED WITH EFFECT FROM 1.6.2007 AS PER WHICH THE TDS WAS MADE APPLICABLE ON PAYMENTS MADE FOR USE OF CAPITAL ASSETS. THE HIRE CHARGES PAID FOR USE OF THE CAPITAL ASSET ARE NOT COVERED U/S 194C OF THE I.T. ACT AND TDS WAS NOT REQUIRED TO BE DEDUCTED WHICH RULES OUT THE APPLICABILITY OF SEC. 40(A)(IA) OF THE I.T. ACT. THE HIRE OF TRANSPORT IS DIFFERENT FROM TRANSPORT CONTRACT FOR CARRIAGE OF GOODS AND THE SAID HIRE CHARGES WILL NOT REQUIRE TAX DEDUCTION AT SOURCE. THE SAID VIEW GETS SUPPORTED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. POOMPUHAR 7 ITA NO. 3083/DEL/2010 & CO NO. 364/DEL/2010 SHIPPING CORPN. LTD. (2006) 282 ITR 3 (MAD.)AS THE ASSESSEE THEREIN TOOK TEMPORARY POSSESSION TO SHIPS FROM THE SHIPPING COMPANY IT COULD NOT BE CONSTRUED AS IF THE ASSESSEE ENTERED INTO ANY CONTRACT FOR CARRYING OUT ANY WORK AND BEING SO THE REVENUE CANNOT INSIST THAT THE ASSESSEE OUGHT TO HAVE BEING SO THE REVENUE CANNOT INSIST THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE U/S 194C. SIMILAR WAS THE DECISION OF HONBLE ITAT OF PUNE BENCH IN THE CASE OF DATTA DIGAMBER SAHAKARI KAMGAR SANSTHA LTD. VS. ACIT DATED 25.9.2000 AND CITED AS (2002) 77 ITJ (PUNE) 540 WHEREIN TANKER OWNERS MERELY ENTRUSTED THEIR TANKERS TO THE ASSESSE SOCIETY AND IT WAS THE SOCIETY WHO TOOK ALL THE WORK RELATING TO EXECUTION OF TRANSPORT CONTRACT. THE PROVISION OF SEC. 194C WAS HELD NOT APPLICABLE. THEREFORE IN THE LIGHT OF THE FACTS OF THE CASE OF APPELLANT AND THE DECISIONS (SUPRA) THE ADDITION EFFECTED BY THE AO CANNOT BE SUSTAINED. AT THE SAME TIME I DO NOT FIND STRENGTH IN THE ARGUMENTS OF THE APPELLANT THAT SEC. 40(A)(IA) WILL BE APPLICABLE FROM AY 06-07 BEING INTRODUCED WILL EFFECT FROM 1.4.2005 BECAUSE THE RELEVANT CLAUSE OF THE INTRODUCTION OF FINANCE BILL HAVE MADE IT APPLICABLE FROM 1 ST APRIL 2005. IN VIEW OF THE SAID PROVISION THE OTHER ARGUMENTS OF THE APPELLANT THAT IT WILL NTO EFFECT THE TRANSACTIONS BEFORE 21.9.2004 AS IS GOT THE ASSENT OF THE HONBLE PRESIDENT ON21.9.2004 ARE ALSO REJECTED. 8. THE QUESTION HERE IS AS TO WHETHER THE ADDITION MADE BY THE AO HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A) HOLDING 8 ITA NO. 3083/DEL/2010 & CO NO. 364/DEL/2010 THAT THE PROVISIONS OF SEC. 194C OF THE ACT ARE NOT ATTRACTED. UNDISPUTEDLY THE TRANSACTION HEREIN IS TAKING OF T RUCKS ON HIRE BY THE ASSESSEE. AS PER THE AO EXPLANATION I II TO SEC. 194C OF THE ACT IS SQUARELY APPLICABLE TO SUCH A TR ANSACTION. EXPLANATION III TO SEC. 3(C) TO SEC. 194C OF THE AC T READS AS UNDER: - FOR THE PURPOSE OF THIS SECTION THE EXPRESSION WORK SHALL ALSO INCLUDE: - (A) (B) (C) CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; 9. IN CIT VS. POOMPUHAR SHIPPING CORPN. LTD. (2006 ) 282 ITR 3 (MAD.) THE ASSESSMENT YEAR INVOLVED WAS 1994 -95. EXPLANATION III TO SEC. 194C OF THE ACT WAS INCORPO RATED WITH EFFECT FROM 1.7.2005. IN POOMPUHAR SHIPPING CORPN. LTD. (SUPRA) THE HONBLE HIGH COURT HELD THAT THE EXPLA NATION IS PROSPECTIVE AND NOT RETROSPECTIVE. THE YEAR UNDER CONSIDERATION IS 2005-06. THEREFORE THE EXPLANATI ON III TO SEC. 194C OF THE ACT IS DIRECTLY APPLICABLE. AS PE R THE EXPLANATION WORK SHALL ALSO INCLUDE CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORTATION OTHER THAN RAILWAYS. THE EXPRESSION USED IN SEC. 194C(1) IS ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK. THE WORK IN THE PRESENT CASE FOR WHICH PAYMENTS W ERE MADE BY THE ASSESSEE WAS HIRING OF TRUCKS. IN POO MPUHAR SHIPPING CORPN. LTD.S CASE (SUPRA) PAYMENT OF HIR E CHARGES FOR TAKING TEMPORARY POSSESSION OF SHIPS WAS HELD N OT TO FALL WITHIN THE PROVISIONS OF SEC. 194C OF THE ACT. IT WAS HELD THAT HIRING OF SHIPS FOR THE PURPOSE OF USING THEM IN TH E ASSESSEES BUSINESS DID NOT AMOUNT TO A CONTRACT FO R CARRYING OUT ANY WORK AS CONTEMPLATED IN SEC. 194C OF THE ACT. 9 ITA NO. 3083/DEL/2010 & CO NO. 364/DEL/2010 10. EXPLANATION III TO SEC. 194C OF THE ACT NOT BE ING APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATI ON BEFORE THE HONBLE HIGH COURT IN POOMPUHAR SHIPPING CORPN. LTD.S CASE (SUPRA) THE APPLICABILITY THERE OF WAS NOT GONE INTO BY THEIR LORDSHIPS HOLDING THAT THESAID EXPLANATION WOULD BE APPLICABLE PROSPECTIVELY WITH EFFECT FROM 1.7.1995 THE DATE ON WHICH IT WAS INTRODUCED. 8. IN VIEW OF ABOVE DISCUSSION WE FOUND THAT LD. CI T(A) WAS RIGHT IN HOLDING THAT SEC. 194C WAS NOT APPLICABLE. HENCE ASSESSEE WAS NOT UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE. THE PAYMENTS C OULD NOT BE DISALLOWED U/S 40(A)(IA). WE FIND NO INFIRMITY IN SUCH FINDINGS R ECORDED BY LD. CIT(A). WE DISMISS THE APPEAL FILED BY THE REVENUE. SINCE CO FILED BY THE ASSESSEE IS SUPPORTING THE ORDERS OF LD. CIT(A) THEREFORE THE SAME HAS BECOME INFRUCTUOUS IN VIEW OF THE FACT OF DEPARTMENTAL APPEAL BEING DI SMISSED. THEREFORE THE CO IS ALSO DISMISSED. 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE A ND CO FILED BY THE ASSESSEE BOTH STAND DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23.12.10 ( K.G. BANSAL ) ACCOUNTANT MEMBER (I.P . BANSAL) JUDICIAL MEMBER DATED: *KAVITA 10 ITA NO. 3083/DEL/2010 & CO NO. 364/DEL/2010 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT NEW DELHI. TRUE COPY BY ORDER DEPUTY REGISTRAR