Sri G.T. Vishwanathan, Bangalore v. ITO, Bangalore

ITA 1103/BANG/2009 | 2005-2006
Pronouncement Date: 27-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 110321114 RSA 2009
Bench Bangalore
Appeal Number ITA 1103/BANG/2009
Duration Of Justice 8 month(s) 7 day(s)
Appellant Sri G.T. Vishwanathan, Bangalore
Respondent ITO, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 27-07-2010
Date Of Final Hearing 22-07-2010
Next Hearing Date 22-07-2010
Assessment Year 2005-2006
Appeal Filed On 20-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE DR. O.K NARAYANAN VICE PRESIDENT AND SMT. P MADHAVI DEVI JUDICIAL MEMBER ITA NO.1103 / BANG/2009 (A SST. YEAR - 2005-06) SRI G.T VISHWANATHAN NO.4 MARY VILLA PARANJYOTHY ROAD FRAZER TOWN BANGALORE. . APPELLANT VS. THE INCOME-TAX OFFICER WARD - 1(2) BANGALORE. . RESPONDENT AND ITA NO.4 /BANG/2010 (ASST. YEA R - 2005-06) THE INCOME-TAX OFFICER WARD - 1(2) BANGALORE. . APPELLANT VS. SRI G.T VISHWANATHAN NO.4 MARY VILLA PARANJYOTHY ROAD FRAZER TOWN . RESPONDENT APPELLANT BY : SHRI V SRINIVASAN CHARTERED ACCOUNTANT RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI ADDL. COMMISSIONER OF INCOME-TAX ITA NOS.1103/B/09 & 4/B/10 2 O R D E R PER DR. O.K NARAYANAN VICE PRESIDENT THIS IS A SET OF CROSS APPEALS; FILED BY THE ASSES SEE AND BY THE REVENUE. THESE APPEALS ARE DIRECTED AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) - I AT BANGALO RE DATED 12.10.2009 AND ARISES OUT OF THE ASSESSMENT COMPLET ED U/S 143(3) OF THE INCOME-TAX ACT 1961. 2. THE ASSESSEE IS AN INDIVIDUAL CARRYING ON THE BU SINESS OF RUNNING VEHICLES ON HIRE. HE HAS RETURNED AN INCOM E OF RS.1 31 300/- FOR THE ASSESSMENT YEAR UNDER APPEAL. THE BUSINESS CARRIED ON BY THE ASSESSEE PREDOMINANTLY RELATED TO TRANSPORTING THE EMPLOYEES OF SOFTWARE CORPORATES. THE ASSESSEE HAS ENTERED INTO AGREEMENTS WITH THOSE CORPORATES UNDERTAKINGS TO PROVIDE TRANSPORT FACILITIES TO THEIR STAFF AT SPECIFIED FREQUENCIES. AS THE ASSESSEE IS UNDERTAKING THE ABOVE RESPONSIBILITY ON THE BASIS OF AGREEMENT/CONT RACTS ALL PAYMENTS RECEIVED BY THE ASSESSEE ARE AFTER TAX DEDUCTED AT SOURCE BY PAYEE CORPORATES. ITA NOS.1103/B/09 & 4/B/10 3 3. THE ASSESSEE FOR MEETING HIS TRANSPORTING OBLIGA TION USES VEHICLES OWNED BY HIM AND ALSO AVAILS VEHICLES ON H IRE FROM OTHERS. IN THE CASE OF VEHICLES AVAILING ON HIRE FROM OTHER S THE ASSESSEE WAS PAYING HIRE CHARGES TO THEM BUT WITHOUT DEDUCTING ANY TAX. THERE WAS A SURVEY IN THE BUSINESS PREMISES OF THE ASSESS EE AND ALL THESE FACTS WERE BROUGHT TO LIGHT. ON PROPOSITION OF THE OFFICERS OF THE DEPARTMENT THE ASSESSEE AGREED TO DEDUCT TAX WHILE PAYING HIRE CHARGES TO OTHERS AND HE HAS DEDUCTED THE TAX AFTER THE CLOSE OF THE IMPUGNED PREVIOUS YEAR. 4. NOW IN THE COURSE OF ASSESSMENT PROCEEDINGS AND IN THE LIGHT OF ABOVE CIRCUMSTANCES THE ASSESSING OFFICER FOUND TH AT A PAYMENT OF RS.39 80 500/- WAS MADE BY THE ASSESSEE TO OTHER VE HICLE OWNERS AS HIRE CHARGES WITHOUT DEDUCTING TAX AT SOURCE. ACC ORDING TO THE ASSESSING AUTHORITY THE ASSESSEE WAS BOUND TO DEDU CT TAX AT SOURCE U/S 194C(1). AS A RESULT HE DISALLOWED THE SAID AMOUN T OF RS.39 80 500/- U/S 40(A)(IA) AND ADDED THE SAME TO THE INCOME OF T HE ASSESSEE. THIS DISALLOWANCE WAS CONFIRMED IN FIRST APPEAL. THIS I S THE FIRST ISSUE RAISED IN THE APPEAL FILED BY THE ASSESSEE. ITA NOS.1103/B/09 & 4/B/10 4 5. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER FURTHER FOUND THAT CERTAIN ITEMS OF EXPENSES DEDUCT ED UNDER THE HEAD VEHICLE RUNNING AND MAINTENANCE EXPENSES WERE NOT SUPPORTED BY PROPER VOUCHERS AND EVIDENCES. THE ASSESSEE HAS CL AIMED AN EXPENSE OF RS.1 07 65 689/- UNDER THE ABOVE HEAD. FOR THE REASONS STATED ABOVE THE ASSESSING OFFICER DISALLOWED RS.16 49 45 0/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. IN FIRST APPEA L THE CIT(A) MODIFIED THE ADDITION AT RS.5 72 881/-. THE ASSESS EE IS AGGRIEVED BY THE AMOUNT OF ADDITION SUSTAINED BY THE CIT(A) TO T HE ABOVE EXTENT. THIS IS THE SECOND ISSUE IN THE APPEAL FILED BY THE ASSESSEE. 6. WHEN THE MATTER WAS CONSIDERED BY THE CIT(A) TH E ASSESSEE HAD CLAIMED A FURTHER DEDUCTION OF RS.96 440/- RELA TING TO THE INTEREST PAID ON THE LOANS AVAILED BY THE ASSESSEE FOR PROCU RING VEHICLES. THIS ADDITIONAL CLAIM OF DEDUCTION MADE BY THE ASSESSEE IN THE COURSE OF APPELLATE PROCEEDINGS WAS REJECTED BY THE CIT(A) ON THE GROUND THAT THIS ISSUE DOES NOT ARISE OUT OF THE ASSESSMENT ORD ER. ACCORDING TO THE ASSESSEE THE CIT(A) SHOULD HAVE CONSIDERED THE SAI D BONAFIDE CLAIM MADE BY THE ASSESSEE. THIS IS THE THIRD ISSUE RAI SED IN THIS APPEAL. ITA NOS.1103/B/09 & 4/B/10 5 7. THE LAST GROUND RAISED BY THE ASSESSEE RELATES T O THE ISSUE OF INTEREST LEVIED U/S 234A 234B AND 234D. 8. AS FAR AS THE APPEAL FILED BY THE REVENUE IS CON CERNED THE FIRST ISSUE IS AGAINST THE RELIEF GRANTED BY THE CIT(A) T O THE DISALLOWANCE MADE BY THE ASSESSING AUTHORITY UNDER THE HEAD VEH ICLE MAINTENANCE AND REPAIRS. 9. THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS .3 39 874/- U/S 40A(3) RESULTING OUT OF DISALLOWANCE OF 20% MAD E IN THE CASE OF CASH PAYMENTS IN EXCESS OF RS.20 000/- EACH. THE S AID ADDITION HAS BEEN MODIFIED BY THE CIT(A) AT RS.75 915/-. THIS IS THE SECOND GROUND RAISED BY THE REVENUE IN ITS APPEAL. 10. WE HEARD SMT. JACINTA ZIMIK VASHAI THE LEARNED ADDL. COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENU E AND SHRI V SRINIVASAN THE LEARNED CHARTERED ACCOUNTANT APPEAR ING FOR THE ASSESSEE. 11. THE ASSESSEE HAS BEEN TAKING VEHICLES ON HIRE F ROM DIFFERENT PERSONS AS AND WHEN EXIGENCIES AROSE IN DISCHARGIN G HIS CONTRACTUAL ITA NOS.1103/B/09 & 4/B/10 6 DUTIES TOWARDS SOFTWARE CORPORATES. AS THE NUMBER O F VEHICLES REQUIRED TO BE AVAILED ON HIRE AND THE TIME AND ROU TE FOR WHICH THE VEHICLES WERE REQUIRED ALL DIFFERED FROM DAY TO DA Y AND FROM TIME TO TIME. THOSE MATTERS SQUARELY DEPENDED ON THE EXIGE NCIES OF A PARTICULAR DAY. IF ALL THE VEHICLES OWNED BY THE A SSESSEE WERE IN RUNNING CONDITION THE NUMBER OF VEHICLES REQUIRED BY THE ASSESSEE WOULD BE LESS. ON THE OTHER HAND IF SOME OF THE VEHICLES OF ASSESSEE ARE OUT OF ORDER THE ASSESSEE WOULD REQUIRE MORE V EHICLES TO BE AVAILED ON HIRE. ALL THESE MATTERS DEPEND ON THE D AY TO DAY REQUIREMENTS. IT MAY BE FOR THOSE REASONS THAT THE ASSESSEE HAD NOT ENTERED INTO ANY FORMAL AGREEMENTS OR CONTRACTS WIT H ANY VEHICLE OWNERS. THE ASSESSEE WAS MAKING PAYMENTS OF HIRE C HARGES AS AND WHEN NECESSARY. 12. A SIMILAR CASE WAS CONSIDERED BY THE ITAT AT IT S CUTTACK BENCH IN THE CASE OF R.R CARRYING CORPORATION VS. ACIT 1 26 TTJ (CTK) 240. IN THAT CASE ALSO THE ASSESSEE WAS A TRANSPO RTER ENGAGED IN EXECUTING VARIOUS CONTRACTS IN ENGAGING ITS OWN VE HICLES AS WELL AS VEHICLES FROM OTHER TRANSPORTERS. THERE WAS NOTHIN G ON RECORD TO SUGGEST THAT ANY CONTRACT EXISTED BETWEEN THE ASSES SEE AND OTHER TRANSPORTERS. THERE WAS NO WRITTEN OR ANY ORAL AGR EEMENT. IN SUCH ITA NOS.1103/B/09 & 4/B/10 7 CIRCUMSTANCES THE TRIBUNAL HELD THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX U/S 194C AND THEREFORE THERE WAS NO JU STIFICATION FOR MAKING ANY DISALLOWANCE U/S 40A(IA). THE ITAT AMIR TSAR BENCH ALSO HAD AN OCCASION TO DECIDE A SIMILAR ISSUE IN THE CA SE OF DCIT VS. SATISH AGGARWAL AND CO. 124 TTJ (ASR) 523. THE TR IBUNAL HELD ON SIMILAR SET OF FACTS THAT HIRING OF TRUCKS FOR THE PURPOSE OF USING THEM FOR ASSESSEES BUSINESS DID NOT AMOUNT TO CONTRACT FOR CARRYING OUT ANY WORK AS CONTEMPLATED U/S 194C. 13. THE ITAT BANGALORE IN A BENCH ALSO HAD AN OC CASION TO EXAMINE AN EXACTLY SIMILAR CASE IN THE MATTER OF M/ S JANANI TOURS & RESORTS (P) LTD. VIDE THEIR ORDER DATED 13.2.2009 PASSED IN ITA NO.491/B/08. AFTER EXAMINING THE ISSUE IN A VERY D ETAILED MANNER THE TRIBUNAL HELD THAT IN A SIMILAR CIRCUMSTANCES THERE WAS NO OPERATION OF CONTRACTS AND HIRE CHARGES COULD NOT B E BROUGHT UNDER TDS REGIME. 14. WE FIND THAT ALL THE ABOVE THREE CASES DO REALL Y SUPPORT THE CONTENTIONS ADVANCED BY THE LEARNED CHARTERED ACCOU NTANT APPEARING FOR THE ASSESSEE. ITA NOS.1103/B/09 & 4/B/10 8 15. THE LEARNED ADDL. COMMISSIONER ON THE OTHER HAN D HAS RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF UTTRAN CHAL IN THE CASE OF KUMAON MANDAL VIKAS NIGAM LTD. NO. VS. ITO 290 ITR 538 WHERE COURT HAS HELD THAT PAYMENTS MADE TO TOUR OPE RATORS WORKING ON THE BASIS OF CONTRACT ENTERED INTO WITH TRAVEL A GENTS AT THE INSTANCES OF CENTRAL GOVERNMENT ARE LIABLE FOR DEDUCTION OF T AX AT SOURCE AS PROVIDED U/S 194C. THE LEARNED ADDL. COMMISSIONER HAS ALSO RELIED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ASSOCIATED CEMENT CO. LTD. VS. CIT 201 ITR 435 WHERE THE AP EX COURT HELD THAT THE EXPRESSION IN ANY WORK PROVIDED IN SUB SEC . (1) OF SEC. 194C MEANS ANY WORK UNLESS OTHERWISE SPECIFIED AND THERE FORE ANY WORK UNDERTAKEN IN THE COURSE OF OBLIGATIONS WOULD BE CO VERED BY SEC. 194C. SHE HAS ALSO RELIED ON THE DECISION OF RAJAS THAN HIGH COURT IN THE CASE OF SHREE CHOUDHARY TRANSPORT CO. VS. ITO 225 CTR (RAJ) 125. 16. IN THE LIGHT OF THE ABOVE JUDGMENTS THE LEARNE D ADDL. COMMISSIONER FURTHER ARGUED THAT THE CONTRACT FOR T HE PURPOSE OF EXECUTING SUCH OBLIGATION NEED NOT BE WRITTEN CONTR ACTS BUT AN UNDERSTANDING IN THE NATURE OF CONTRACT ITSELF IS S UFFICIENT. ITA NOS.1103/B/09 & 4/B/10 9 17. ON EXAMINING THE CASE IN HAND WE ARE OF THE CO NSIDERED VIEW THAT THE DECISIONS OF THE TRIBUNAL CITED BY THE LEA RNED CHARTERED ACCOUNTANT DO REALLY SUPPORT HIS ARGUMENTS AS FAR A S THE ISSUE INVOLVED IN THE PRESENT CASE IS CONCERNED. IN THE PRESENT CASE THERE IS NO SUCH STANDING AGREEMENT OR EVEN AN UNDERSTATING WITH THE VEHICLE OWNERS. IN THE PRESENT CASE THE CONTRACT IS BETWE EN THE ASSESSEE AND CORPORATE CLIENTS. THE ASSESSEE HIMSELF OWNED NUMB ER OF VEHICLES. HE NEEDS VEHICLES ON HIRE ONLY TO MAKE DEFICIENCIES. THE DEGREE OF THE DEFICIENCY IS ASCERTAINABLE ONLY ON A DAILY BASIS. THEREFORE HE HIRES VEHICLE AS AND WHEN REQUIRED AT THE PREVAILING MARK ET RATE. THERE IS NO CASE FOR THE REVENUE TO SAY THAT THE HIRE CHARGE S PAID BY THE ASSESSEE ARE ON AN AGREED RATE DETERMINED BY BOTH T HE PARTIES. THEREFORE IN SUCH CIRCUMSTANCES EVEN AN UNDERSTAND ING CANNOT IMPLIED IN THE MATTER AGITATED BEFORE US. WHEN TH E ASSESSEE IS PAYING HIRE CHARGES ON THE BASIS OF AVAILABLE MARKET RATE THERE IS NO QUESTION OF SOME BODY EXECUTING ANY WORK IN FAVOUR OF THE AS SESSEE. IN SUCH CIRCUMSTANCES IT IS NOT POSSIBLE TO HOLD THAT SEC. 194C HAS ANY APPLICATION. 18. IN THE CASE RELIED ON BY THE ADDL. COMMISSIONER IN KUMAON MANDAL VIKAS NIGAM LTD. THE FACTS ARE SO DIFFERENT THAT IN THE SAID ITA NOS.1103/B/09 & 4/B/10 10 CASE THE ACTIVITIES ARE CARRIED OUT IN AN ORDINARY MANNER ON THE BASIS OF MULTIPLE ARRANGEMENTS AMONG MORE THAN TWO PARTIE S. IN THE CASE OF ASSOCIATED CEMENT COMPANY AGAIN THE FACTS RELATED T O DEPLOYMENT OF LABOUR IN A CONSISTENT MANNER ON THE BASIS OF WORKI NG ARRANGEMENT CONTEMPLATED BY THE PARTIES. THEREFORE THE CASES RELIED ON BY THE LEARNED ADDL. COMMISSIONER CANNOT BE RELIED ON TO D ECIDE THE MATTER IN HAND. 19. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE HOLD THAT THE PAYMENTS OF RS.39 80 500/- MADE BY WAY OF HIRE CHAR GES DO NOT COME UNDER THE PURVIEW OF SEC 194C(1). ACCORDINGLY THE DISALLOWANCE U/S 40A(IA) IS NOT CALLED FOR. THE SAID DISALLOWANCE I S DELETED. 20. REGARDING DISALLOWANCE IN RESPECT OF VEHICLE MA INTENANCE THE CIT(A) HAS RIGHTFULLY HELD THAT IT IS NOT POSSIBLE TO OBTAIN FORMAL VOUCHERS AND BILLS EVERY TIME THE ASSESSEE INCURS S UCH EXPENSES. IN THE NATURE OF VEHICLE REPAIR ACTIVITIES WE FIND TH AT THE VIEW OF THE CIT(A) CANNOT BE HELD AS PERVERSE. IT IS NOT POSSIB LE TO OBTAIN FORMAL BILLS AND VOUCHERS IN THE CASE OF REPAIR AND MAINTE NANCE WORK. IN SUCH CIRCUMSTANCES THE CIT(A) HAS JUSTIFIED IN GIV ING CERTAIN MODIFICATIONS. THE QUANTUM OF MODIFICATION GRANTED BY THE CIT(A) IS ITA NOS.1103/B/09 & 4/B/10 11 REASONABLE. IT IS UPHELD. THE CONTENTION OF THE A SSESSEE FAILS ON THIS POINT. 21. THE THIRD ISSUE IS REGARDING THE INTEREST EXPEN DITURE OF RS.96 440/-. THIS CLAIM WAS MADE BY THE ASSESSEE F OR THE FIRST TIME BEFORE THE CIT(A). THE AUTHORITY OF THE CIT(A) IS CO-TERMINUS WITH THAT OF ASSESSING AUTHORITY. IT MEANS THE SCOPE OF DUTY CAST ON CIT(A) IS ALSO CO-TERMINUS. ONLY FOR A TECHNICAL DEFECT T HAT THE ASSESSEE COULD NOT MAKE A CLAIM BEFORE THE ASSESSING AUTHORITY IT IS NOT POSSIBLE TO HOLD THAT THE CLAIM OF THE ASSESSEE SHOULD NEVER BE EXAMINED. IF ASSESSEE HAS A GENUINE CASE IT IS THE DUTY OF THE REVENUE AUTHORITIES TO ACT POSITIVELY AND IN ACCORDANCE WITH LAW AND GRAN T RELIEF WHEREVER THE ASSESSEE IS ENTITLED INSTEAD OF REJECTING THE CLAIM OF THE ASSESSEE OUT RIGHT. THE CIT(A) OUGHT TO HAVE EXAMINED THE CL AIM BY HIMSELF OR HE SHOULD HAVE REMANDED THE MATTER TO THE ASSESSING AUTHORITY OR HE SHOULD HAVE CALLED FOR A REMAND REPORT FROM THE ASS ESSING AUTHORITY. AN OUT RIGHT DISMISSAL IS NOT JUSTIFIED. THEREFORE WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS POINT AND REMIT BACK TH E ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE C LAIM OF THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LA W. ITA NOS.1103/B/09 & 4/B/10 12 22. THE GROUND RAISED BY THE ASSESSEE IN RESPECT OF LEVY OF INTEREST IS CONSEQUENTIAL IN NATURE AND DOES NOT CALL FOR AN Y ADJUDICATION PERSE . 23. THE ASSESSEE IS PARTLY SUCCESSFUL IN HIS APPEAL . 24. AS FAR AS THE APPEAL FILED BY THE REVENUE IS CO NCERNED THE FIRST GROUND IS AGAINST THE MODIFICATION GRANTED BY THE C IT(A) IN THE MATTER OF VEHICLE MAINTENANCE AND REPAIRS. THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY US WHILE CONSIDERING THE CROSS APPE AL FILED BY THE ASSESSEE. WE HAVE UPHELD THE ORDERS OF THE CIT(A) O N THIS POINT. AS A RESULT THIS GROUND RAISED BY THE REVENUE FAILS. 25. THE NEXT GROUND IS THE RELIEF GRANTED BY THE CI T(A) IN THE MATTER OF DISALLOWANCE MADE U/S 40A(3). IN FACT T HE CIT(A) HAS AGREED THAT THE CASH PAYMENT IN EXCESS OF RS.20 000 /- MADE TO A PERSON IN A PARTICULAR DAY EVEN IF MULTIPLE SMALL AMOUNTS WOULD BE COVERED BY SEC. 40A(3). BUT HE HAS RIGHTLY OBSERVE D THAT THIS POSITION WAS BROUGHT IN BY THE AMENDMENT CARRIED THROUGH BY FINANCE ACT 2008 WHICH IS NEITHER RETROSPECTIVE NOR CLARIFICAT ORY. THEREFORE THE EXTENDED POSITION WILL NOT APPLY TO THE IMPUGNED AS SESSMENT YEAR ITA NOS.1103/B/09 & 4/B/10 13 2005-06. IN VIEW OF THE ABOVE LEGAL PROPOSITION W E UPHOLD THE DECISION OF THE CIT(A) ON THIS POINT. 26. THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 27. IN RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON TUESDAY THE 27TH DAY OF JULY 2010 AT BANGALORE. SD/- SD/- (P MADHAVI DEVI) (DR. O.K NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT VMS. COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF 7..GF ITAT NEW DELHI. BY ORD ER ASST. REGISTRAR ITAT BANGALORE.