M/s. Chang Hing Tannery, Kolkata v. DCIT, Circle - 33, Kolkata

ITA 1921/KOL/2009 | 2006-2007
Pronouncement Date: 16-12-2010

Appeal Details

RSA Number 192123514 RSA 2009
Assessee PAN AACFC4080C
Bench Kolkata
Appeal Number ITA 1921/KOL/2009
Duration Of Justice 1 year(s) 1 month(s)
Appellant M/s. Chang Hing Tannery, Kolkata
Respondent DCIT, Circle - 33, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2010
Appeal Filed By Assessee
Bench Allotted A
Tribunal Order Date 16-12-2010
Date Of Final Hearing 08-07-2010
Next Hearing Date 08-07-2010
Assessment Year 2006-2007
Appeal Filed On 16-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA () BEFORE . . . . . . . . !'# !'# !'# !'# /AND . .. . . .. .' '' ' $ [BEFORE HONBLE SRI D. K. TYAGI JM & HONBLE SRI C. D. RAO AM] #% #% #% #% / I.T.A NO. 1921/KOL/2009 &'( ')* &'( ')* &'( ')* &'( ')*/ // / ASSESSMENT YEAR : 2006-07 M/S. CHANG HING TANNERY -VS- DEPUTY COMMISSIONER OF INCOME-TAX (PA NO. AACFC 4080 C) CIRCLE-3 KOLKATA. ( - / APPELLANT ) (. -/ RESPONDENT ) FOR THE APPELLANT: SRI S. P. CHOUDHURY FOR THE RESPONDENT : SRI PIYUSH KOLHE / / ORDER PER D. K. TYAGI JM ( . . . . . . . . ) THE APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE LD. CIT(A) KOLKATA DATED 26.08.2009 FOR THE ASSESSMENT YEAR 2 006-07 ON THE SOLE GROUND OF CONFIRMING THE DISALLOWANCE OF RS.23 21 083/- U/S. 40(A)(IA) O N THE GROUND OF NON-DEDUCTION OF TAX AT SOURCE. 2. BRIEFLY STATED FACTS AS OBSERVED BY THE ASSESSIN G OFFICER IN THE ASSESSMENT ORDER ARE THAT THE ASSESEE FAILED TO DEDUCT TAX ON FREIG HT CHARGES AGGREGATING TO RS.23 70 881/- AND ALSO ACCORDING TO HIM THE ASSES EE FILED NO EXPLANATION BEFORE HIM. HE THEREFORE MADE THE ADDITION OF RS.23 70 881/- FOR NON-DEDUCTION OF TAX AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE I. T. ACT. BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED THAT THE FREIGHT CHARGES WERE NOT PAID UN DER ANY CONTRACT AND THEREFORE WERE NOT LIABLE FOR DEDUCTION OF TAX. IT WAS ALSO SUBMI TTED THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY IN THOSE CASES WHERE TAX HAS BEEN DEDUCTED BUT HAS NOT BEEN PAID. IT DOES NOT APPLY IN A CASE WHERE NO TA X HAS BEEN DEDUCTED AT ALL. THE RELEVANT PORTION OF THE SUBMISSIONS AS REPRODUCED B Y THE LD. CIT(A) IN HIS ORDER AT PAGES 5 AND 6 ARE AS UNDER : THE ASSESSEE PURCHASES RAW MATERIAL CONSISTING OF HIDE AND CHEMICAL FROM SUPPLIERS MANY OF WHOM ARE LOCATED AT DISTANT PLACE S. WITH THESE SUPPLIERS IT IS ARRANGED THAT THE GOODS SUPPLIED WILL BE DELIVERED AT THE FACTORY OF THE ASSESSEE. 2 THE FREIGHT CHARGES ARE TO BE PAID BY THE ASSESSEE IN SOME CASES AGAINST BILL RAISED BY THE SUPPLIER OF GOODS ALONGWITH THE VALUE OF GOODS AND IN SOME OTHER CASES SEPARATELY ON PRODUCTION OF BILL BY TRANSPORT ER. HOWEVER IN NO CASE THE ASSESSEE ENTERS INTO ANY WRITTEN VERBAL OR OTHER C ONTRACT FOR PAYMENT OF THESE TRANSPORT CHARGES. THUS THERE IS NO CONTRACT BETWE EN THE ASSESSEE AND THE PAYEES OF TRANSPORT CHARGES AND ACCORDINGLY THE PAY MENTS SHOWN UNDER FREIGHT INWARD EXPENSES OF RS.23 70 881 ARE NOT LIABLE FOR TAX DEDUCTION AT SOURCE AND HENCE CAN NOT BE DISALLOWED U/S 40(A)(IA). WITHOUT PREJUDICE TO THE GENERALITY OF THIS SUBMISSION IT IS ALSO CONTENDED THAT TAX IS N OT REQUIRED TO BE DEDUCTED U/S 194C FOR OTHER REASONS ALSO. IN SOME CASES THE PAY MENTS WERE MADE ALONGWITH BILLS FOR SUPPLY OF GOODS WHERE THE GROSS BILL IS FOR DELIVERY OF GOODS AT THE FACTORY AND THE TOTAL PAYMENT IS COVERED BY SUPPLY OF GOODS. IN SOME CASES THE PAYMENTS DID NOT EXCEED THE MAXIMUM LIMIT FOR APPLI CABILITY OF S 194C. FURTHER PAYMENTS OF 1 26 580/- WERE MADE TO CHEMCR OWN EXPORT LTD TOWARDS FREIGHT INWARD. IT WAS ARGUED THAT THE APPELLANT PURCHASED RAW MATERIALS FROM THE SAID PARTY AND THE FREIGHT CHARGES WERE INCLUDED IN THE PURCHA SE BILLS AND THEREFORE THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE ON SUCH PAYMENTS . THE RELEVANT PORTION OF THE SUBMISSION IS AS UNDER : THE ASSESSEE PURCHASED RAW MATERIALS FROM CHEMCROW N EXPORT LTD AND THE ARRANGEMENT WAS THAT THE MATERIALS WILL BE DELIVERE D AT THE FACTORY OF THE ASSESSEE. THE SUPPLIER BILLED THE ASSESSEE SHOWING VALUE OF GOODS AND FREIGHT CHARGES SEPARATELY IN THE SAME BILL. AS PER SALE OF GOODS ACT 1930 THE SALE IS COMPLETE ONLY WHEN THE ASCERTAINED GOODS ARE DELIVE RED TO THE BUYER AND TILL SUCH DELIVERY THE OWNERSHIP OF GOODS DO NOT PASS FR OM THE SELLER TO THE BUYER. FOR THIS REASON UNDER THE ERSTWHILE SALES TAX LAWS AND THE PRESENT VALUE ADDED TAX LAWS THE CHARGES MADE FOR SERVICES RENDERED BY A SELLER TILL THE TIME OF DELIVERY OF GOODS IS MADE EXIGIBLE TO SALES TAX & V AT AS SALE PRICE OF GOODS. IN OTHER WORDS THE CHARGES MADE FOR DELIVERY OF GOODS TILL THE OWNERSHIP OF GOODS PASSES TO BUYER IS TAXABLE ALONGWITH VALUE OF GOODS UNDER SALES TAX/VAT LAWS. THUS WHERE PAYMENT FOR TRANSPORT OF GOODS IS MADE IN THE SAME BILL ALONGWITH VALUE OF GOODS THEN SUCH PAYMENT FOR TRANSPORT BEC OMES A PAYMENT FOR SALE OF GOODS AND NOT FOR ANY CONTRACT OF SERVICE OR WORKS. IN THIS VIEW OF THE MATTER THE PAYMENTS MADE TO CHEMCROWN EXPORT LTD OF RS.1 26 58 0 IS NOT A PAYMENT FALLING UNDER 194C. THE CONTRACT WITH CHEMCROWN EXP ORTS LTD IS FOR SALE OF GOODS AND NOT FOR ANY SERVICE OR WORKS. THIS IS AVA ILABLE IN CIRCULAR NO.681 DATED 08.03.94 WHERE IT IS SPECIFICALLY PROVIDED TH AT THE PROVISIONS OF THIS SECTION (S. 194C) WILL NOT COVER CONTRACT FOR SALE OF GOODS (CHATURVEDI & PITHISARIA PG. 6601 FIFTH ED. VOL. 4). THIS IS T RUE EVEN WHEN THE ACCOUNTING OF VALUE OF GOODS IS DEBITED UNDER PURCHASE AND FREIGH T PAID INCLUDED IN BILL FOR VALUE OF GOODS IS INCLUDED UNDER FREIGHT A/C. OF TH E BUYER BECAUSE ACCOUNTING ENTRIES DO NOT GUIDE TAXATION LAWS AND IF LEGALLY A SUM IS NOT EXIGIBLE TO TAX THEN ACCOUNTING OF SUCH SUM IN A PARTICULAR MANNER CAN NOT MAKE IT TAXABLE. MOREOVER THE PAYMENT OF FREIGHT INCLUDED IN BILL O F CHEMCROWN EXPORT LTD. IS A REIMBURSEMENT OF COST TO THE PAYEE. THE PAYEE (CHEM CROWN EXPORT LTD) ACTUALLY ENTERED INTO A CONTRACT OF CARRYING GOODS TO THE AS SESSEE AND PAID FOR SUCH SERVICE. SO THE LIABILITY TO DEDUCT TAX U/S. 194C R ESTS ON THEM AND NOT THE ASSESSEE IN THESE CASES. 3 FINALLY IT WAS SUBMITTED THAT THE PROVISIONS OF SE CTION 194C ARE CLEARLY NOT APPLICABLE ON FOLLOWING PAYMENTS WHICH DO NOT EXCEED RS.20 000 /-. DATE OF PAYMENT RECIPIENT OF PAYMENT AMOUNT 14-07-2005 DEEPAK TRANSPORT AGENCY RS.17 600/ - 24-01-2006 A R C INDIA LTD RS.14 198/- 22-02-2006 RAGHAV BULK MOVER RS.18 000/- RS49 798/- CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE THE LD. CIT(A) HAS HELD AS UNDER : THE LD. AR APPEARED ON BEHALF OF THE APPELLANT AND FILED WRITTEN SUBMISSIONS. I FIND NO SUBSTANCE IN THE SUBMISSIONS OF THE APPELLANT. T HE APPELLANT WAS LIABLE TO DEDUCT TAX ON FREIGHT CHARGES AS PER THE PROVISIONS OF SECTION 194C EXCEPT FOR SINGLE PAYMENTS NOT EXCEEDING RS.20 000/- TOTALING TO RS.49 798/- AS MENTIONED ABOVE IN PARA 5.2. AND THEREFORE THE PROVISIONS OF SECTION 40(A)(IA) ARE CLEARLY APPLICABLE IN THE CASE OF THE APPELLANT ON FREIGHT CHARGES OF RS.23 21 083/- (RS. 23 70 881 RS.49 798). IN VIEW OF THE ABOVE DISALLOWANCE OF RS.23 21 083/- IS CONFIR MED.. THE APPELLANT GETS RELIEF OF RS.49 798/-. GROUND NO. 4 IS PARTLY ALLOWED. AGGRIEVED BY THE SAID ORDER NOW THE ASSESSEE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US THE LD. COUNSE L FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE LOWER AUTHORITI ES AND HE LAID EMPHASIS ON THE FACT THAT THE ASSESEE PURCHASED RAW MATERIAL CONSISTING OF HIDE AND CHEMICALS WITH THE UNDERSTANDING THAT GOODS WILL BE DELIVERED AT THE F ACTORY OF THE ASSESEE BY THE SUPPLIER. FREIGHT CHARGES WERE TO BE PAID BY THE ASSESSEE IN SOME CASES AGAINST BILL RAISED BY THE SUPPLIER OF GOODS ALONG WITH THE VALUE OF GOODS AND IN SOME CASES SEPARATELY ON PRODUCTION OF BILLS BY THE TRANSPORTERS. UNDER BOT H THESE CIRCUMSTANCES IT WAS EMPHASIZED THAT THERE COULD NOT HAVE BEEN ANY AGREE MENT BETWEEN THE ASSESSEE AND THE TRANSPORTERS AS TRANSPORTERS WERE ARRANGED BY THE S UPPLIER THEMSELVES. SINCE THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTE RS APPLICABILITY OF SECTION 194C(2) OF THE ACT DOES NOT ARISE. HE THEREFORE SUBMITTE D THAT THE ADDITION MADE ON ACCOUNT OF NON-DEDUCTION OF TDS ON THE PAYMENT MADE TO TRANSPO RTERS IS NOT SUSTAINABLE AS THERE IS NO SUCH LIABILITY TO DEDUCT TAX U/S. 194C RESTS ON THE ASSESSEE IN THESE CASES. 4. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES AND SUBMITTED THAT BEFORE THE ASSESSING OFFICER THE ASS ESSEE FAILED TO EXPLAIN AS TO WHY TDS WAS NOT MADE ON THE PAYMENT MADE TO TRANSPORTERS. THEREFORE THE EXPLANATION OFFERED BEFORE THE LD. CIT(A) IS NOTHING BUT AN AFTERTHOUGH T WHICH WAS ALSO NOT FOUND 4 ACCEPTABLE BY THE LD. CIT(A). CONCLUDING HIS ARGUM ENT HE THEREFORE PRAYED THAT THE ORDER PASSED BY THE LD. CIT(A) MAY KINDLY BE UPHELD . 5. AFTER HEARING THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE SUBMISSIONS OF THE ASSE SEE THAT THE GOODS WERE SUPPLIED BY THE SUPPLIERS AT THE FACTORY OF THE ASSESEE WAS NOT DISPUTED BY THE REVENUE. WE THEREFORE ARE OF THE CONSIDERED OPINION THAT THERE COULD NOT HAVE BEEN ANY AGREEMENT/CONTRACT EITHER WRITTEN OR ORAL BETWEEN T HE ASSESSEE AND THE TRANSPORTERS AS TRANSPORTERS WERE ARRANGED BY THE SUPPLIERS THEMSEL VES TO BRING THE GOODS AT DESTINATION. NOTHING WAS BROUGHT ON RECORD BY THE REVENUE TO SUG GEST TO THE CONTRARY. AS THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTE RS PROVISIONS OF SECTION 194C OF THE I. T. ACT ARE NOT APPLICABLE TO THE FACTS OF THIS C ASE AND THE LIABILITY TO DEDUCT TAX ON SUCH PAYMENTS COULD NOT BE VESTED ON THE ASSESSEE. IN TH IS VIEW OF THE MATTER THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) U/S. 40(A)(IA) OF THE ACT IS UNCALLED FOR AND THE SAME IS HEREBY DELETED. TH E APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. 7. THE ORDER IS ANNOUNCED IN THE OPEN COURT ON 16.1 2.10 SD/- SD/- . .. . . .. .' '' ' $ . . (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( $ $ $ $) )) ) DATED : 16TH DECEMBER 2010 '01 &'23 &4' JD.(SR.P.S.) / 5 .&&6 76)8- COPY OF THE ORDER FORWARDED TO: 1 . - / APPELLANT M/S. CHANG HINGH TANNERY 77 MATHESWAR TALA ROAD KOLKATA-46.. 2 . - / RESPONDENT : DCIT CIRCLE-3 KOLKATA. 3 . &/' / THE CIT KOLKATA 4 . &/' ( )/ THE CIT(A) KOLKATA 5 . '?& .&' / DR KOLKATA BENCHES KOLKATA 6 .&/ TRUE COPY /'@/ BY ORDER A #3 /DEPUTY REGISTRAR .