ITO (TDS) 3(3), MUMBAI v. STUP CONSULTANTS P. LTD, MUMBAI

ITA 5774/MUM/2010 | 2008-2009
Pronouncement Date: 25-11-2011 | Result: Allowed

Appeal Details

RSA Number 577419914 RSA 2010
Assessee PAN AABCS1945E
Bench Mumbai
Appeal Number ITA 5774/MUM/2010
Duration Of Justice 1 year(s) 4 month(s) 9 day(s)
Appellant ITO (TDS) 3(3), MUMBAI
Respondent STUP CONSULTANTS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted H
Tribunal Order Date 25-11-2011
Date Of Final Hearing 17-11-2011
Next Hearing Date 17-11-2011
Assessment Year 2008-2009
Appeal Filed On 16-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI R.K. PANDA (A M) I.T.A. NOS.5773 & 5774/MUM/2010 (A.YS. 2007-08 & 2008-09) INCOME-TAX OFFICER (TDS)-3(3) ROOM NO.1006 10 TH FLOOR SMT. K.G.MITTAL AYURVEDIC HOSPITAL BLDG. CHARNI RD. (W) MUMBAI-400 002. VS. M/S. STUP CONSULTANTS PVT.LTD. 1004-05 10 TH FLOOR RAHEJA CHAMBERS FREE PRESS JOURNAL MARG NARIMAN POINT MUMBAI- 400 021. PAN: AABCS1945E. APPELLANT RESPONDENT APPELLANT BY SHRI ALEXANDER CHANDY. RESPONDENT BY SHRI S .H. SUBRAMANIAN. DATE OF HEARING 17 - 11 - 2011 DATE OF PRONOUNCEMENT 25 - 11 - 2011 O R D E R PER D.K. AGARWAL JM : THESE TWO APPEALS PREFERRED BY THE REVENUE ARE DIRE CTED AGAINST THE SEPARATE ORDERS DATED 14-11-2008 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09. SINCE FACTS ARE IDENTICA L AND ISSUE INVOLVED IS COMMON BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE EXTRACTED FROM ITA NO.5773/MUM/2010 FOR ASSESSMENT YEAR 2007-08 ARE THAT THE ASSESSEE COMPA NY IS ENGAGED IN THE ITA NOS.5773-5774/M/10 STUP CONSULTANTS P.LTD. 2 BUSINESS OF CIVIL ENGINEERING AND ARCHITECTURE CON SULTANCY. IN THIS CASE A SURVEY U/S.133A OF THE INCOME-TAX ACT 1961 (THE ACT) WAS CONDUCTED AT THE ASSESSEES PREMISES ON 3-3-2008. IT WAS FOUND THAT THE ASSESSE E HAS NOT DEDUCTED/SHORT DEDUCTION OF TAX AT SOURCE ON PROFESSIONAL CHARGES AND HIRING CHARGES. THE AO ISSUED SHOW CAUSE LETTER TO THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSEE SHOULD NOT BE TREATED AS AN ASESSEE IN DEFAULT AND WHY AN ORDER U/S.201(1) SHOULD NOT BE PASSED TREATING THE ASESSEE IN DEFAUL T AND ALSO WHY INTEREST U/S.201(1A) SHOULD NOT BE LEVIED. IN THE ABSENCE OF ANY COMPLIANCE BY THE ASSESSEE THE AO RAISED A DEMAND U/S.201(1) AMOUNTI NG TO RS.9 54 441/- VIDE ORDER DATED 14-10-2008 PASSED U/S.201(1) READ WITH SEC. 192 OF THE ACT. ON APPEAL THE ASSESSEE DID NOT DISPUTE ON THE SHORT D EDUCTION OF TAX ON THE PROFESSIONAL CHARGES PAID RS.17 78 316/- UNDER THE HEAD COMPUTER SOFTWARE (AMC CHARGES). WITH REGARD TO THE PAYMENT OF HIRING CHARGES OF RS.59 05 637/- IT WAS SUBMITTED BY THE ASSESSEE THAT THE SAID PAY MENTS WERE MADE TO VARIOUS PARTIES TOWARDS VEHICLE HIRING. THE ASSESSEE HAS DE DUCTED TDS AS PER PROVISIONS OF SEC. 194C WHEREAS THE AO HAS HELD THAT TAX SHOU LD HAVE BEEN DEDUCTED AS PER PROVISIONS OF SEC. 194-I. THE LD. CIT(A) AFTER CONSIDERING THE NATURE OF THE TRANSACTIONS AND THE CBDT CIRCULAR NO.713 DATED 2-8 -1995 AND CIRCULAR NO.715 DATED 8-8-1995 HELD THAT THE ASSESSEE HAS RIGHTLY DEDUCTED TAX AS PER PROVISIONS OF SEC. 194C AND THERE IS NO CASE OF SHO RT DEDUCTION AND ACCORDINGLY ALLOWED THE CLAIM OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF APPEAL : (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT VEHICLE HIRING FALLS UNDER SECTION 1941 AFTER HE A MENDMENT OF SECTION 194I W.E.F. 13/07/2006. ITA NOS.5773-5774/M/10 STUP CONSULTANTS P.LTD. 3 (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING ASSESSEES APP EAL ON THE ISSUE OF SHORT DEDUCTION OF TDS ON PAYMENT MADE FOR HIRING OF VEHICLES ON RS.7 71 276/- WITHOUT CONSIDE RING CBDTS CIRCULAR NO.4/2008 DATED 28.04.2008. 4. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS TH E ORDER OF THE AO. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE SUBMITS THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASESSEE BY THE VARI OUS DECISIONS OF THE TRIBUNAL NAMELY : 1. ACIT (TDS)- 1(1) V. ACCENTURE SERVICES P.LTD. 44 SOT 290 (MUM); 2010-TIOL-618-ITAT-MUM. 2. TATA AIG GENERAL INSURANCE CO. V. ITO (OSD)-3(2 ) 43 SOT 215 (MUM) (MUM TRIB ITA 6282 TO 6285 AND 6410 6413/MUM/2009). 3. MUKESHS TRAVELS CO. V. ITO (2011) 39((II) ITCL 583 (AHD B TRIB ITA NO.2594/AHD/2010 ). 4. AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. THE AC IT (2011) 39(II) ITCL 591 (AHD A-TRIB ITA NO.1637/AHD/2010 . THE LD. COUNSEL FOR THE ASSESSEE AFTER FILING THE COPY OF THE ABOVE ORDERS OF THE TRIBUNAL FURTHER SUBMITS THAT EVEN THE INCOME-TAX DEPARTMENT ON SIMILAR PAYMENTS IS DEDUCTING TDS FOR THE FINANCIAL YEARS 2006-07 AND 2007-08 @ 2% AND 2.06% RESPECTIVELY AND IN SUPPORT HE ALSO PLACE D ON RECORD COPY OF THE ORDER DATED 29-01-2010 U/S.7(1) OF THE RTI ACT 2005 APP EARING AT PAGE 106 OF THE ASESSEES PAPER BOOK. HE THEREFORE SUBMITS THAT T HE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE ASSE SSEE HAS MADE PAYMENTS AMOUNTING TO RS.59 05 637/- TO VARIOUS PARTIES TOWA RDS HIRING OF VEHICLES ITA NOS.5773-5774/M/10 STUP CONSULTANTS P.LTD. 4 PROVIDED TO STAFF TO VISIT AND SUPERVISE VARIOUS PR OJECT SITES ON A DAILY BASIS. WE FURTHER FIND THAT BEFORE THE LD. CIT(A) IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT THE TRANSPORT CONTRACTORS ARE SELECTED AND THE SER VICES OF THEIR TAXIS ARE AVAILED FOR DAY TO DAY USE. SOME OF THE CARS ARE USED CONTI NUOUSLY ON MANY WORKING DAYS AND THROUGHOUT THE MONTH ALSO. THESE VEHICLES ARE JUST A MEANS OF TRANSPORT. SUCH VEHICLES ARE REQUIRED ON REGULAR BA SIS FROM TRANSPORT CONTRACTORS RATES OF TARIFF ARE BARGAINED ON MONTHLY BASIS ON T HE PRESUMPTION OF 30 DAYS USE LIKE RS. X PER DAY FOR Y KILOMETERS AND FOR 8 TO 12 HOURS WITH ADDITIONAL CHARGES FOR EXTRA TIME AND/OR MILEAGE. THE CONTRACTORS MOS TLY RAISE PERIODIC MONTHLY BILLS FOR CONVENIENCE SAKE SHOWING HIRE CHARGES FOR NUMBER OF DAYS USED AND FOR OVERTIME/ADDITIONAL KM. CHARGES. NO SEPARATE RATE I S PAID OR BARGAINED FOR DRIVER SERVICES. THE RUNNING OF VEHICLES IS LOOKED AFTER B Y THE TRANSPORT CONTRACTORS INCLUDING CLEANING AND MAINTENANCE ETC. AFTER DUTY HOURS THE DRIVER TAKES AWAY THE CAR AND REPORT BACK ON NEXT DAY AT GIVEN TIME IF REQUIRED AND FOR THIS A LOG BOOK IS ALSO MAINTAINED. WE FURTHER FIND THAT THE P OSSESSION OF THE VEHICLE IS ALSO WITH THE SERVICE PROVIDER. IT IS NOT THE CASE OF TH E REVENUE THAT THE VEHICLE HAS BEEN TRANSFERRED TO THE ASSESSEE OR THE SAME IS NOT IN THE POSSESSION OF THE SERVICE PROVIDER. THE LD. CIT(A) AFTER CONSIDERING THE ABOVE FACTS HAS HELD VIDE PARA 9.4 OF HIS ORDER AS UNDER : 9.4 IN VIEW OF THE ABOVE FACTS I FIND MERIT IN TH E SUBMISSION OF THE APPELLANT THAT IN ITS CASE THE T AX SHOULD HAVE BEEN DEDUCTED AS PER PROVISIONS OF SECTION 194 C AND NOT AS PER SECTION 194 I AS THE VEHICLE IS NOT AT T HE DISPOSAL OF THE APPELLANT. IT IS IN THE POSSESSION OF THE CO NTRACTOR. THE APPELLANT HAS AVAILED TRANSPORT SERVICES ONLY AND C AME INTO CONTRACT WITH THE CONTRACTOR FOR PROVIDING VEHICLE S FOR CARRYING OUT ITS STAFF. THE APPELLANT HAS NOT ENTER ED INTO A CONTRACT FOR VEHICLE ONLY BUT THE ENTIRE SERVICES L IKE DRIVER DIESEL/PETROL MAINTENANCE ETC. I FIND CONSIDERABLE FORCE IN THE ARGUMENT OF THE APPELLANT THAT WHERE THE ARRANG EMENTS ARE PREDOMINANTLY FOR HIRE OF THE VEHICLES OR WHERE THE PAYMENTS FOR SERVICES OF DRIVERS ARE MADE SEPARATEL Y THE PAYMENTS WILL BE COVERED BY SECTION 194-I. THERE IS A DISTINCTION BETWEEN HIRING/LEASING A CAR AND ENGAGI NG A TRANSPORT CONTRACTOR TO PROVIDE VEHICLES/TAXI FOR T RANSPORTING ITA NOS.5773-5774/M/10 STUP CONSULTANTS P.LTD. 5 PASSENGERS FROM ONE PLACE TO OTHER. IN HIRING/LEASI NG A CAR THERE IS A CONDITIONAL TRANSFER OF PROPERTY RIGHTS WHEREAS IN CASE OF ENGAGING THE TRANSPORT CONTRACTOR TO PROVI DE THE FACILITY OF TRANSPORT BY WAY OF SUITABLE VEHICLE T HERE IS NO TRANSFER OF PROPERTY RIGHTS. CONSIDERING THE FACTS OF THE CASE AND LEGAL POSITION AS WELL AS CBDT CIRCULAR NO.713 DATED 2-8- 1995 & CIRCULAR NO.715 DATED 8-8-1995 IN THIS REGAR D I AM OF THE VIEW THAT THE APPELLANT HAS RIGHTLY DEDUCTED TA X AS PER PROVISIONS OF SECTION 194C AND THERE IS NO CASE OF SHORT DEDUCTION. ACCORDINGLY THIS GROUND OF APPEAL IS DE CIDED IN FAVOUR OF THE APPELLANT. 7. IN ALL THE CASES RELIED ON BY THE LD. COUNSEL FO R THE ASSESSEE IT HAS BEEN HELD THAT THE PAYMENT OF VEHICLE HIRE CHARGES CLEAR LY FALLS WITHIN THE SCOPE OF SEC. 194C OF THE ACT. IN A RECENT DECISION IN THE CASE O F AHMEDABAD URBAN DEVELOPMENT AUTHORITY V. ACIT IN ITA NO.1637/AHD/20 10 FOR ASSESSMENT YEAR 2009-10 DATED 10-3-2011 THE TRIBUNAL AFTER CONSID ERING THE PROVISIONS OF SECTIONS 194C AND 194-I RELIED ON THE DECISION IN THE CASE OF MUKESH TRAVEL CO. V. ITO IN ITA NO.2594/AHD/2010 DATED 25-2-2011 AND OBSERVED AND HELD THAT PASSENGERS WERE TRANSPORTED BY THE DRIVER AND VEHIC LES OF THE VEHICLE OWNER/CONTRACTOR AND IN CONSIDERATION OF THAT THE V EHICLE OWNER/CONTRACTORS WERE PAID BY THE ASSESSEE THE FIXED AMOUNT. THEREFORE SUB-CLAUSE (C) TO EXPLANATION (III) OF THE PROVISIONS OF SEC.194C OF THE ACT WOUL D APPLY IN THE CASE OF THE ASSESSEE. THE TRIBUNAL AFTER CONSIDERING THE PROVI SIONS OF SEC. 194-I AND THE RELEVANT DEFINITION FURTHER HELD THAT THE DEFINITI ON OF RENT DOES NOT PROVIDE ANY ITEM FOR VEHICLE HIRE CHARGES. THEREFORE THE PROVI SION OF SEC. 194-I HAS BEEN WRONGLY APPLIED BY THE AO IN THE MATTER. SIMILAR VI EW HAS BEEN TAKEN BY THE TRIBUNAL IN OTHER CASES CITED SUPRA. 8. IN THE ABSENCE OF ANY CONTRARY MATERIAL/DECISION BROUGHT ON RECORD BY THE REVENUE AGAINST THE DECISIONS CITED BY THE LD. COUN SEL FOR THE ASSESSEE WE RESPECTFULLY FOLLOWING THE ABOVE DECISIONS HOLD TH AT THE ASSESSEES CASE FALLS UNDER SUB-CLAUSE (C) TO EXPLANATION (III) OF SEC. 1 94C OF THE ACT AND THE AO HAS WRONGLY APPLIED THE PROVISION OF SEC.194-I OF THE A CT AND ACCORDINGLY WE ARE ITA NOS.5773-5774/M/10 STUP CONSULTANTS P.LTD. 6 INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN HOLDING THAT THE ASSESSEE HAS RIGHTLY DEDUCTED TAX AS PER PROVISIONS OF SEC. 194C AND THERE IS NO CASE OF SHORT DEDUCTION. THE GROUNDS TAKEN BY THE REVENUE ARE TH EREFORE REJECTED. ITA NO.5774/MUM/2010 : AY 2008 ITA NO.5774/MUM/2010 : AY 2008 ITA NO.5774/MUM/2010 : AY 2008 ITA NO.5774/MUM/2010 : AY 2008- -- -09 (REVENUES APPEAL): 09 (REVENUES APPEAL): 09 (REVENUES APPEAL): 09 (REVENUES APPEAL): 9. AT THE TIME OF HEARING IT HAS BEEN AGREED BY BO TH THE PARTIES THAT THE FACTS AND ISSUE INVOLVED IN THIS APPEAL ARE THE SAME AS I N THE APPEAL FOR THE ASSESSMENT YEAR 2007-08. THEREFORE THE PLEA TAKEN BY THEM IN THE SAID APPEAL MAY BE CONSIDERED WHILE DECIDING THE PRESENT APPEAL . 10. AFTER HEARING THE RIVAL PARTIES AND PERUSING TH E MATERIAL AVAILABLE ON RECORD AND IN THE ABSENCE OF ANY DISTINGUISHING FEA TURE BROUGHT ON RECORD BY THE REVENUE WE KEEPING IN VIEW OF OUR FINDING RECORDE D IN THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-08 HEREINABOVE DECLINE TO INT ERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) ON THIS ACCOUNT. THE GROUNDS TAKE N BY THE REVENUE ARE THEREFORE REJECTED. 11. IN THE RESULT THE REVENUES APPEALS STAND DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 25TH DAY OF NOVEMBER 2011. SD/- SD/- (R.K. PANDA) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 25TH NOVEMBER 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-14 MUMBAI. 4 CIT(TDS) MUMBAI. ITA NOS.5773-5774/M/10 STUP CONSULTANTS P.LTD. 7 5.DR H BENCH MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR ITAT MUMBAI. ITA NOS.5773-5774/M/10 STUP CONSULTANTS P.LTD. 8 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 17-11-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 18-11-2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER