The Income tax Offier,Vapi Ward-4,, Nani Daman v. M/s. Sri Venkateshwara Polythene, Nani Daman

ITA 3210/AHD/2009 | 2006-2007
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 321020514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 3210/AHD/2009
Duration Of Justice 1 year(s) 7 month(s) 29 day(s)
Appellant The Income tax Offier,Vapi Ward-4,, Nani Daman
Respondent M/s. Sri Venkateshwara Polythene, Nani Daman
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-07-2011
Assessment Year 2006-2007
Appeal Filed On 30-11-2009
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI M. K. SHRAWAT JM AND A. K. GARODIA AM INCOME-TAX OFFICER VAPI WARD-4 DAMAN. VS. M/S SRI VENKATESHWARA POLYTHENE GALA NO.2 SURVEY NO.53/A RINGANWADA NANI DAMAN. (APPELLANT) (RESPONDENT) REVENUE BY :- SHRI S. K. MEENA SR.DR ASSESSEE BY:- NONE AND CO NO.298/AHD/2009 A.Y. 2006-07 (ARISING OF ITA NO.3210/AHD/2009) M/S.SRI VENKATESHWARA POLYTHENE VS. ITO VAPI WARD-4 NANI DAMAN NANI DAMAN (CROSS OBJECTOR) (RESPONDENT) O R D E R PER M. K. SHRAWAT JUDICIAL MEMBER REVENUES APPEAL AND THE RESPONDENT ASSESSEES CRO SS OBJECTION BOTH HAVE ARISEN FROM THE ORDER OF CIT(A) VALSAD D ATED 31.08.2009. WE SHALL FIRST TAKE UP REVENUES APPEAL AND THE EFFECTIVE GROUND IS AS UNDER: (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION OF RS.8 02 936/- U/S 40(A)(IA) OF THE ACT. 2. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED U/S 143(3) DATED 19.11.2008 WERE THAT THE ASSESSEE FIRM IS IN ITA NO.3210/AHD/2009 ASST. YEAR 2006-07 ITA NO.3210/AHD/2009 ALONG WITH C.O. NO.298/AHD/2009 ASST. YEAR 2006-07 2 THE BUSINESS OF MANUFACTURING OF RUBBER GRANULES. O N PERUSAL OF PROFITS AND LOSS ACCOUNT IT WAS NOTICED THAT TRANSPORTATION EXPENSES OF RS.7 02 936/- WERE DEBITED. THE ASSESSEES EXPLANAT ION WAS THAT PLASTIC GRANULES WERE PURCHASED FROM HALDIA PETRO CHEMICALS LTD. THE SAID PARTY HAS RAISED BILLS INCLUSIVE OF TRANSPORT CHARG ES. IT WAS EXPLAINED THAT THE ASSESSEE HAD MADE THE FULL PAYMENT AS PER THE S AID BILLS. IT WAS FURTHER CLAIMED THAT NO TRANSPORT CHARGES WERE PAID SEPARAT ELY OR DIRECTLY. HOWEVER THE AO WAS NOT CONVINCED AND SINCE TRANSPO RTATION CHARGES WERE SEPARATELY DEBITED TO P & L ACCOUNT THEREFORE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) THE EXPENDITURE WAS DISALLOWED. THE MATTER WAS CARRIED IN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY. 3. AFTER HEARING THE SUBMISSIONS THE LD. CIT(A) HA S HELD AS UNDER :- 5.2 THE LD. AR OF THE APPELLANT SUBMITTED THAT THE APPELLANT HAD PURCHASED THE RAW MATERIALS FROM ONLY ONE PARTY VIZ . HALDIA PETRO CHEMICALS LTD . AND THAT THE SAID PARTY HAS RAISED THE BILLS INCL UDING THE TRANSPORT CHARGES AND THAT THE PAYMENT HAS BEEN MAD E IN FULL TO THE PURCHASING PARTY ITSELF. NO SEPARATE PAYMENT IS MAD E TO THE TRANSPORTER. THEREFORE IT JUSTIFIES THAT WHEN THE BILL IS INCLUSIVE OF TRANSPORT CHARGES AND ALSO WHEN THE PAYMENT IS MADE TO THE BILLING PA RTY ONLY THERE IS NO REQUIREMENT OF THE TAX TO BE DEDUCTED AT SOURCE ON SUCH TRANSPORT CHARGES BY TREATING THE SAME AS A SEPARATE COST. THE APPELLANT HAS NOT PAID TRANSPORT CHARGES SEPARATELY TO HALDIA PETRO CHEMIC ALS LTD. AND THAT NO CHARGES WERE PAID DIRECTLY TO THE TRANSPORTER AS WE LL. 5.3 THE AR OF THE APPELLANT FURTHER SUBMITTED THAT THE ASSESSEE HAD NOT MADE ANY TRANSPORT SERVICE CONTRACT WITH THE TRANSP ORTER AND THE TRANSPORT EXPENSES IS RECOVERED BY HALDIA PETRO CHE MICALS LTD. AND NO SEPARATE PAYMENT WAS MADE FOR TRANSPORT EXPENSES AS AGAINST PURCHASE OF MATERIALS. HENCE ALL THE PAYMENT MADE TO HALDIA PETRO CHEMICALS ITA NO.3210/AHD/2009 ALONG WITH C.O. NO.298/AHD/2009 ASST. YEAR 2006-07 3 LTD. IS INCLUSIVE OF TRANSPORTATION CHARGES AND THE REFORE THE PROVISIONS OF SECTION 194C COULD NOT BE INVOKED. 5.4 IT IS FURTHER SUBMITTED BY THE AR OF THE APPELL ANT THAT THE COPY OF PURCHASE BILLS OF HALDIA PETRO CHEMICALS LTD. ARE A LSO PRODUCED FOR VERIFICATION OF TRANSPORTATION EXPENSES PAYMENT DUR ING THE YEAR UNDER CONSIDERATION. ALL THE PAYMENT MADE TO HALDIA PETRO CHEMICALS LTD. IS INCLUSIVE OF TRANSPORTATION EXPENSES AND NO PAYMENT MADE SEPARATELY FOR RELATED EXPENSES. 5.5 THE APPELLANT HAS CITED A CASE OF CITY TRANSPOR T CORPORATION VS. ITO (IT APPEAL NOS.7708 TO 7711 (MUM) OF 2003 12 SE PTEMBER 2006 ASST. YEAR 1999-2000 TO 2002 -03) WHEREIN THE ASSES SEES APPEAL STANDS ALLOWED ON THE SAME GROUNDS. 5.6 I HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT THE AO IS NOT JUSTIFIED IN DISALLOWING THE DEDUCTION OF RS.7 02 936/- U/S 40(A)(IA) OF THE ACT. CONSIDERING THE FACTS OF THE CASE I AM OF THE CONSIDERED VIEW THAT THERE IS NO REQUIREMENT FOR DEDUCTING TDS ON S UCH TRANSPORTATION EXPENSES. THUS THE APPELLANT SUCCEEDS IN THIS GROU ND OF APPEAL. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES WE ARE OF THE VIEW THAT CERTAIN FACTS OF THE CASE ARE REQUIRED TO BE FURTHER ASCERTAINED BECAUSE OF THE REASON THAT THE FINDINGS ON FACTS WE RE EITHER NOT CLEAR OR CONTRADICTORY IN RESPECT OF THE ORDERS RESPECTIVELY PASSED BY THE AO AND CIT(A). ON ONE HAND THE AO HAS NOTED THAT TRANSPOR TATION CHARGES HAVE BEEN SEPARATELY DEBITED TO P & L ACCOUNT. THE PROVI SIONS OF SECTION 40(A)(IA) HAVE BEEN INVOKED ONLY ON DETECTION FROM THE P & L ACCOUNT THAT THE IMPUGNED TRANSPORTATION CHARGES HAVE BEEN DEBITED. CONTRARY TO THIS THE ASSESSEES CONTENTION IS THAT NO TRANSPOR TATION CHARGES HAVE SEPARATELY BEEN PAID TO M/S HALDIA PETRO CHEMICALS LTD. SUPPLIER OF THE PLASTIC GRANULES. THE ASSESSEES CONTENTION IS THAT NO VEHICLES HAVE BEEN ITA NO.3210/AHD/2009 ALONG WITH C.O. NO.298/AHD/2009 ASST. YEAR 2006-07 4 HIRED FOR THE TRANSPORTATION OF THE SAID MATERIAL A ND THERE WAS NO BIFURCATION OF THE PURCHASE VALUE ON ONE HAND AND T HE FREIGHT CHARGES ON THE OTHER HAND. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY THERE WAS NO SPECIFIC FACTUAL FINDING ABO UT THE SAID METHOD OF ACCOUNT OF THE TRANSPORTATION CHARGES AND ALSO IN R ESPECT OF THE PURCHASES MADE AND ACCOUNTED FOR IN THE ACCOUNT OF M/S HALDIA PETRO CHEMICALS LTD. BEFORE THE INVOCATION OF THE PROVISION OF SECT ION 40(A)(IA) IT IS NECESSARY TO STREAMLINE THIS FACT. AFTER ASCERTAINI NG THE CORRECT FACTS THIS ISSUE IS REQUIRED TO BE DECIDED AS PER ONE OF THE L ATEST DECISION OF RESPECTED CO-ORDINATE ITAT C BENCH AHMEDABAD IN THE CAS E OF SHRI PRASHANT H SHAH VS. ACIT (BY WAY OF ITA NO.17/ AHD/2011 FOR A.Y. 2007-08) VIDE ORDER DATED 8 TH JULY 2011 WHEREIN IT WAS HELD AS UNDER (RELEVANT PARA REPRODUCED BELOW) :- 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. W E HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE US IN THE L IGHT OF THE PROVISIONS OF THE ACT AS ALSO THE CASE LAW CITED. BEFORE WE PROCEED FURTHER WE MAY LIKE TO POINT OUT THAT THE PROVISIONS OF SECTION 194C OF THE ACT HAD UNDERGONE CERTAIN VI TAL CHANGES IN THE RECENT PAST. THE MAIN PURPOSE OF INTRODUC TION OF THIS SECTION IN THE ACT IS TO MAKE PROVISIONS FOR DEDUCT ION OF TAX AT SOURCE FROM PAYMENTS MADE TO CONTRACTORS AND SUB- CONTRACTORS IN CERTAIN CASES. INCOME TAX IS DEDU CTIBLE AT SOURCE FROM INCOME COMPRISED IN PAYMENTS MADE BY TH E PERSONS SPECIFIED IN THIS SECTION. AS PER THE OR IGINAL SECTION 194C(1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM T O ANY CONTRACTOR FOR CARRYING OUT ANY WORK IN PURSUANCE O F A CONTRACT IS REQUIRED TO DEDUCT 2% TDS. HOWEVER AS PER ITA NO.3210/AHD/2009 ALONG WITH C.O. NO.298/AHD/2009 ASST. YEAR 2006-07 5 SECTION 194C(2) ANY PERSON BEING A CONTRACTOR RE SPONSIBLE FOR PAYING ANY SUM TO ANY SUB-CONTRACTOR IN PURSUAN CE OF A CONTRACT WITH THE SUB-CONTRACTOR FOR CARRYING OUT A NY WORK IS REQUIRED TO DEDUCT TAX @ 1% AT THE TIME OF PAYMENT. SUB SECTION (2) HAS LATER ON MADE A PROVISION ACCORDIN G TO WHICH AN INDIVIDUAL OR HUF WHOSE TOTAL SALES EXCEEDS THE MONITORY LIMIT PRESCRIBES U/S.44AB SHALL BE LIABLE TO DEDUCT INCOME TAX AT THE TIME OF PAYMENT TO A SUB-CONTRACTOR. IT I S FURTHER IMPORTANT TO MENTION THAT VIDE AN AMENDMENT WITH EF FECT FROM 1/6/2007 AN INDIVIDUAL OR HUF HAVE ALSO BEEN INDUCT ED VIDE SUB-CLAUSE (K) IN SECTION 194C(1) OF THE IT ACT. A T THIS JUNCTURE IT IS WORTH TO HOLD THAT AS FAR AS THE AY IN HAND IS CONCERNED I.E. AY 2007-08 THIS LATEST AMENDMENT OF SECTION 194C(1)(K) OF THE ACT BEING INTRODUCED WITH EFFECT FROM 01/06/2007 HAS NO APPLICABILITY. WE THEREFORE H OLD THAT IF THE REVENUE DEPARTMENT HAD MADE AN ENDEAVOUR TO INV OKE THE PROVISIONS OF SECTION 40(A)(IA) FOR THE INFRINGEMEN T OF THE PROVISIONS OF SECTION 194C OF THE ACT BY HOLDING TH AT THE ASSESSEE BEING AN INDIVIDUAL GOT COVERED BY SUB-SEC TION(1) THEN ACCORDING TO US IT WAS AN INCORRECT APPLICATI ON OF LAW. WE THEREFORE HOLD THAT FOR THE ASSTT.YEAR UNDER CON SIDERATION 2007-08 THE PROVISIONS OF SUB-CLAUSE(K) OF 194C(1) ARE NOT APPLICABLE BEING INTRODUCED W.E.F. 1.6.2007 AND THE ASSESSEE BEING AN INDIVIDUAL IS CONSEQUENTLY OUT OF THE CLUT CHES OF THIS CLAUSE. 7.1. ON ACCOUNT OF THE ABOVE DISCUSSION THE ISSUE CONFINES TO THE RESIDUAL SUB-SECTION I.E. THE APPLICABILITY OF PROVISIONS OF SUB-SECTION(2) OF SECTION 194C OF THE ACT. THE PECULIARITY OF THIS CASE IS THAT A CONTRACT WAS AWARDED TO M/S.PET RONET LNG LTD. NEW DELHI FOR CONSTRUCTION WORK OF PERIPHERAL AND APPROACH ROADS AT LNG TERMINAL DAHEJ. THEREAFTER THE SAID CONTRACTOR HAD ENTERED INTO A SUB-CONTRACT WITH M/S .A.N.S. CONSTRUCTION LTD. WHO IN TURN HAD ENTERED INTO AN ANOTHER SUB- CONTRACT WITH THE ASSESSEE. THE WORK TO BE CA RRIED OUT BY THE ASSESSEE THEREFORE PERTAINED TO CONSTRUCTION O F PERIPHERAL APPROACH ROADS. TO CARRY OUT THE ABOVE WORK THE A SSESSEE HAD TO PURCHASE CONSTRUCTION MATERIAL VIZ. SAND G RAVELS ETC. IN ORDER TO BRING THE CONSTRUCTION MATERIAL AT THE CONSTRUCTION ITA NO.3210/AHD/2009 ALONG WITH C.O. NO.298/AHD/2009 ASST. YEAR 2006-07 6 SITE AT DAHEJ THE ASSESSEE HAS AVAILED THE SERVICE S OF SEVERAL TRANSPORTERS. THE ASSESSEE HAD MADE PAYMENT UNDER THE HEAD TRANSPORT CHARGES. THE VIEW OF THE AO WAS THAT ON PAYMENT OF TRANSPORT CHARGES THE ASSESSEE BEING A SUB- CONTRACTOR WAS REQUIRED TO DEDUCT THE TAX AT SOURCE AS PRESCRIBED UNDER SUB-SECTION (2) OF SECTION 194C OF THE ACT. ON THE OTHER HAND THE ASSESSEES CONTENTION IS THA T ALTHOUGH THE ASSESSEE COULD BE A SUB-CONTRACTOR M/S.A.N.S. CONSTRUCTION LTD. BUT VIS--VIS TRANSPORTERS THE A SSESSEE HAS NOT ACTED AS A SUB-CONTRACTOR BUT ONLY AS A CONTRAC TOR. AS PER ASSESSEES CONTENTION IT WAS A PRINCIPAL TO PRINCIP AL ARRANGEMENT OF TRANSPORTATION OF GOODS SO NOT COV ERED BY ANY OF THE SAID CONTRACTS. IN SUPPORT OF THIS SUBM ISSION THE ASSESSEE HAS PLACED RELIANCE ON A BOARDS CIRCULAR NO.715 DATED 8/08/1995 [215 ITR (STATUTE 12)] WHEREIN THE CHANGES INTRODUCED IN THE PROVISIONS REGARDING TAX DEDUCTIO N AT SOURCE HAVE BEEN CLARIFIED AND THEREIN ONE OF THE QUESTION S WAS ABOUT THE PAYMENT TO TRANSPORTS AND THE CLARIFICATION WAS AS UNDER:- QUESTION 9: IN CASE OF PAYMENTS TO TRANSPORTS CA N EACH GR BE SAID TO BE A SEPARATE CONTRACT EVEN THO UGH PAYMENTS FOR SEVERAL GRS ARE MADE UNDER ONE BILL? ANSWER : NORMALLY EACH GR CAN BE SAID TO BE A SEPARATE CONTRACT IF THE GOODS ARE TRANSPORTED AT ONE TIME. BUT IF THE GOODS ARE TRANSPORTED CONTINUOUSLY IN PURSUANCE OF A CONTRACT FOR A SPECIFIC PERIOD OF QU ANTITY EACH GR WILL NOT BE A SEPARATE CONTRACT AND ALL GRS RELATING TO THAT PERIOD OR QUANTITY WILL BE AGGREGA TED FOR THE PURPOSE OF THE TDS. 4.1 IN THE LIGHT OF THE ABOVE DISCUSSION W E HEREBY RESTORE THIS GROUND BACK TO THE STAGE OF FIRST APPELLATE AUTHORI TY TO DECIDE DE NOVO AFTER ASCERTAINING THE FACTS AS INDICATED ABOVE. RE SULTANTLY THIS GROUND OF THE REVENUE MAY BE TREATED AS ALLOWED FOR STATISTIC AL PURPOSES. ITA NO.3210/AHD/2009 ALONG WITH C.O. NO.298/AHD/2009 ASST. YEAR 2006-07 7 5. THROUGH THE CROSS OBJECTION THE RESPONDENT HAS SUPPORTED THE ORDER OF LD. CIT(A) HOWEVER THE MATTER HAS NOW BE EN RESTORED FOR FRESH CONSIDERATION THEREFORE THIS CROSS OBJECTION HAS NO FORCE AND ACCORDINGLY DISMISSED. 6. IN THE RESULT REVENUES APPEAL MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION FI LED BY THE ASSESSEE IS DISMISSED. ORDER IS PRONOUNCED IN OPEN COURT ON 29 TH JULY 2011 SD/- SD/- (A. K. GARODIA) (M. K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 29/07/2011 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD