NAYEK & COMPANY, Burdwan v. ACIT, Circle - 2, Burdwan, Burdwan

ITA 1146/KOL/2010 | 2007-2008
Pronouncement Date: 28-01-2011

Appeal Details

RSA Number 114623514 RSA 2010
Assessee PAN AACFN2058F
Bench Kolkata
Appeal Number ITA 1146/KOL/2010
Duration Of Justice 7 month(s) 20 day(s)
Appellant NAYEK & COMPANY, Burdwan
Respondent ACIT, Circle - 2, Burdwan, Burdwan
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Bench Allotted A
Tribunal Order Date 28-01-2011
Assessment Year 2007-2008
Appeal Filed On 08-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH : KOLKATA () BEFORE . . . . . . . . !' !' !' !' /AND . .. . . .. .! !! ! # ) [BEFORE HONBLE SRI D. K. TYAGI JM & HONBLE SRI C . D. RAO AM] '$ '$ '$ '$ / I.T.A NO. 1146/KOL/2010 %&' !() %&' !() %&' !() %&' !()/ // / ASSESSMENT YEAR : 2007-08 NAYAK & CO. -VS- ASSISTANT COMMISSIONER OF INC OME-TAX (PA NO. AACFN 2058 F) CIRCLE-2 BURDWAN ( + /APPELLANT ) (-+ / RESPONDENT ) FOR THE APPELLANT: SRI I. BANERJEE FOR THE RESPONDENT : SRI S. C. JAIN . / ORDER PER D. K. TYAGI JM ( . . . . . . . . ) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A) KOLKATA DATED 29.03.2010 FOR ASSESSMENT YEA R 2007-08. 2. GROUND NO. 1 IS WITH REGARD TO UPHOLDING THE DIS ALLOWANCE OF TRANSPORTATION CHARGES AMOUNTING TO RS.12 57 700/- U/S. 40(A)(IA) READ WITH SECTION 194C. BRIEFLY STATED FACTS OF THE CASE AS OBSERVED BY THE ASSESSI NG OFFICER ARE THAT THE ASSESSEE HAVE DEBITED RS.14 31 567/- AS TRANSPORTATION CHARGES. HOWEVER TAX WAS NOT DEDUCTED AT SOURCE U/S. 194C EVEN THOUGH THE PAYMENTS EXCEEDED RS.20 000/- ON A SINGLE DAY AND RS.50 000/- AGGREGATE DURING THE YEAR. BEFORE THE ASSESSING OFFICER THE ASSESEE EXPLAINED THAT TAX WAS NOT DEDUCTED AT SOURCE AS TH E TRANSPORT OWNERS DID NOT FURNISH THEIR PAN NUMBERS. THIS EXPLANATION WAS NOT ACCEPT ABLE TO THE ASSESSING OFFICER AND HE ADDED BACK RS.12 57 700/- OUT OF RS.14 31 567/- AS THIS WAS THE AMOUNT CONSTITUTING PAYMENTS MADE TO SINGLE PARTIES IN A DAY EXCEEDING RS.20 000/- OR RS.50 000/- AGGREGATE IN A YEAR. IN APPEAL THE LD. CIT(A) HEL D THAT THE ASSESSING OFFICER WAS CORRECT IN DISALLOWING THE TRANSPORT CHARGES AMOUNT ING TO RS.12 57 700/- UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. AGGRIEV ED BY THE SAID ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 2 3. AT THE TIME OF HEARING BEFORE US THE LD. COUNSE L FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LOWER AUTHORITIES FURTHER SUBMITTED THAT THE TRANSPORTERS WERE NOT ENGAGED BY THE ASSESSEE BUT BY THE CONSIGNOR BASED IN DIFFERENT STATE. HE ALSO CONTENDED THAT S ECTION 194C IS APPLICABLE ONLY WHEN THE PAYMENT IS MADE IN PURSUANCE OF A CONTRACT BETW EEN THE CONTRACTOR AND SPECIFIED ENTITIES. IN THIS CASE THERE EXISTED NO CONTRACT BETWEEN THE ASSESEE AND THE TRANSPORTER. IN SUPPORT OF HIS SUBMISSION HE PLACED RELIANCE ON THE FOLLOWING DECISIONS : I) 248 ITR 216 (SC) II) 322 ITR 594 (P&H) III) 113 ITD 539 IV) 134 TTJ 103 (KOL) V) 34 SOT 332 (KOL). HE THEREFORE SUBMITTED THAT THERE BEING NO CONTRA CT BETWEEN THE ASSESEE AND THE TRANSPORTER FOR THE FREIGHT PAYMENT THIS MAY KINDL Y BE UPHELD THAT SECTION 194C IS NOT APPLICABLE AND CONSEQUENTLY THE NON-DEDUCTION DOES NOT ATTRACT DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. 4. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES AND PRAYED BEFORE THE BENCH TO CONFIRM THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATE RIAL PLACED ON RECORD AND THE CASE LAWS CITED BY THE LD. COUNSEL. WE FIND THAT TH E A. O. MADE THE DISALLOWANCE OF PAYMENT OF TRANSPORTATION CHARGES AMOUNTING TO RS.1 2 57 700/- U/S. 40(A)(IA) READ WITH SECTION 194C OF THE I. T. ACT AS THE ASSESSEE DID N OT DEDUCT TAX ON THE GROUND THAT THE TRANSPORTERS DID NOT FURNISH THEIR PAN TO THE ASSES SEE. BEFORE THE LD. CIT(A) ALSO THE CONTENTION OF THE ASSESSEE REMAINED THE SAME BUT BE FORE US FOR THE FIRST TIME THE ASSESSEE HAS TAKEN A NEW PLEA THAT THE TRANSPORTERS WERE ARRANGED BY THE CONSIGNOR AND THEREFORE THERE COULD NOT HAVE BEEN ANY CONTRACT B ETWEEN THE ASSESSEE AND THE TRANSPORTERS AND THEREFORE THERE WAS NO LIABILITY TO DEDUCT TAX U/S. 194C OF THE ACT BY THE ASSESSEE AND THE ADDITION MADE BY APPLYING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT IS NOT JUSTIFIED. FOR MAKING THIS SUBMISSION THE ASSESEE HAS PLACED RELIANCE ON THE CONSIGNMENT NOTE. SINCE BEFORE THE LOWER AUTHORITI ES NO SUCH PLEA WAS TAKEN IT REQUIRES RE-ADJUDICATION AT THE END OF THE A.O WHETHER THERE IS ANY SUBSTANCE IN THE ARGUMENT 3 ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US. FOR THIS PURPOSE THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR R EADJUDICATION AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESEE. THIS GR OUND OF APPEAL OF THE ASSESSEE IS THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NO. 2 IS IN RESPECT OF UPHOLDING THE DISA LLOWANCE OF PAYMENT OF COLD STORAGE RENTAL CHARGES AMOUNTING TO RS.9 21 114/- B Y INVOKING SECTION 40(A)(IA) READ WITH SEC. 194C OF THE I. T. ACT. THE ASSESSEE ALSO TOOK ADDITIONAL GROUND AGITATING THAT THE RENTAL INCURRED IN RESPECT OF COLD STORAGE CONS TITUTING PLANT AND THE SAME BEING BROUGHT UNDER THE PURVIEW OF SEC. 194 I W.E.F. 13.7 .2006. THE EXPENDITURE INCURRED UP TO THE PRECEDING DATE AMOUNTING TO RS.3 51 099/- SH OULD HAVE BEEN EXCLUDED FROM THE AMOUNT OF DISALLOWANCE. BRIEFLY STAGED FACTS OF TH E CASE AS OBSERVED BY THE ASSESSING OFFICER ARE THAT THE ASSESSEE PAID COLD STORAGE REN TAL CHARGES AMOUNTING TO RS.9 21 114/- ON WHICH TDS WAS NOT EFFECTED AS PER PROVISIONS OF SECTION 194 I. BEFORE THE ASSESSING OFFICER THE ASSESSEE SUBMITTED THAT AS PER BOARD C IRCULAR NO. 1/2008 DATED 10.1.2008 TAX WAS NOT DEDUCTIBLE FOR COLD STORAGE RENTAL CHAR GES. THE ASSESSING OFFICER THEN REFERRING TO THE SAME CIRCULAR STATED THAT AS PER PARA 3 OF THE SAID CIRCULAR THE ARRANGEMENT BETWEEN THE CUSTOMERS AND THE COLD STOR AGE OWNERS WAS BASICALLY CONTRACTUAL IN NATURE AND THE PROVISIONS OF SECTION 194C WOULD BE APPLICABLE TO THE AMOUNTS PAID S COOLING CHARGES BY THE CUSTOMERS OF THE COLD STORAGE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS THE MAJOR CU STOMER OF M/S. KALIMATA COLD STORAGE AND OCCUPIED NEARLY HALF OF THE SPACE OF TH AT COLD STORAGE. THE ASSESSEE HAD ALSO RECEIVED COMMISSION FROM THE COLD STORAGE FOR STORING POTATOES. BOTH WERE SISTER CONCERNS ALSO. ANALYZING THE FACTS THE A.O. CAME TO THE CONCLUSION THAT THE ARRANGEMENT WAS CONTRACTUAL IN NATURE AND HENCE TAX SHOULD HAVE BEEN DEDUCTED U/S. 194C. SINCE THIS HAS NOT BEEN DONE THE ASSESSING OFFICER DISALLOWED THE PAYMENT IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. IN APPEAL THE LD. CIT(A) CONFIRMED THIS ACTION OF THE ASSESSING OFFICER. BE ING FURTHER AGGRIEVED THE ASSESSEE IS NOW IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING BEFORE US THE LD. COUNSE L FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LOWER AUTHORITIES FURTHER SUBMITTED THAT COLD STORAGE RENTAL IS IN THE NATURE OF RENTAL FOR USE OF PLANT AND THE SAME 4 BEING BROUGHT UNDER THE PURVIEW OF SECTION 194 I WI TH EFFECT FROM 13.7.2006 ONLY THEREFORE THE EXPENDITURE INCURRED UPTO THE PRECED ING DATE AMOUNTING TO RS.3 51 099/- SHOULD HAVE BEEN EXCLUDED FROM THE AMOUNT OF DISALL OWANCE. 8. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES AND PRAYED BEFORE THE BENCH TO CONFIRM THE SAME. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE LD. CIT(A) WHILE CONFIRMING THE AC TION OF THE ASSESSING OFFICER HAS HELD AS UNDER : COMING TO THE ISSUE REGARDING NON-DEDUCTION OF TAX AT SOURCE FROM THE COLD STORAGE CHARGES I AGREE WITH THE LD. A.RS CONTENTION THAT AS PER CIRCULAR NUMBER 1/2008 DATED 10.01.2008 TAX WAS NOT DEDUCTIBLE AT SOURCE UNDER THE PROVISIONS OF SECTION 194I. HOWEVER I AM OF THE OPINION THAT THE ASSESSEE HAD CLEAR CUT CONTRACTUAL ARRANGEMENT WITH THE COLD STORAGE FOR KEEPING THE POTATOES IN T HE COLD STORAGE. THERE WAS AN AGREEMENT REGARDING THE WORK TO BE DONE THE TERMS AND CONDITIONS THEREOF THE CONSIDERATION TO BE PAID BY THE ASSESEE AND THE TIM E PERIOD. ALL THIS WOULD NOT BE POSSIBLE WITHOUT AN ARRANGEMENT AKIN TO A CONTRACT. HERE IT MAY BE POINTED OUT THAT EVEN AN ORAL CONTRACT IS VALID CONTRACT UNDER THE I NDIAN CONTRACT ACT AND SECTION 194C ALSO SPECIFICALLY PROVIDES FOR TDS IN RESPECT OF OR AL CONTRACTS ALSO. THE ASSESSEE WAS THEREFORE LIABLE TO DEDUCT TAX AT SOURCE U/S. 194C AND SINCE THIS HAS NOT BEEN DONE THE PAYMENT CANNOT BE ALLOWED AS A DEDUCTION IN VIEW OF THE PROVISIONS OF SECTION 40(A))(IA). THE LD. CIT(A) HAS HELD THAT THERE WAS ARRANGEMENT BETWEEN THE ASSESSEE AND THE COLD STORAGE OWNER OF CONTRACTUAL NATURE THEREFORE PRO VISIONS OF SECTION 194C ONLY ARE APPLICABLE IN THIS CASE AND NOT THE PROVISIONS OF S ECTION 194I OF THE ACT. SINCE THIS FINDING HAS REMAINED UNCONTROVERTED ON BEHALF OF TH E ASSESSEE WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREFORE DIS MISSED. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28.1.2 011 SD/- SD/- . . ! # . . (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( # # # #) )) ) DATED : 28 TH JANUARY 2011 !/0 %&12 %3! JD.(SR.P.S.) 5 . 4 -%%5 65(7- COPY OF THE ORDER FORWARDED TO: 1 . + / APPELLANT M/S. NAYEK & CO. P.O. MEMARI BURDWAN PIN-713 146. 2 -+ / RESPONDENT ACIT CIRCLE-2 BURDWAN. 3 . %.& / THE CIT ASANSOL. 4. %.& ( )/ THE CIT(A) ASANSOL. 5 . !=% -%& / DR KOLKATA BENCHES KOLKATA 5 -%/ TRUE COPY .&>/ BY ORDER ? '2 /DEPUTY REGISTRAR .