MRS Roadways, Trivandrum v. DCIT, Trivandrum

ITA 74/COCH/2013 | 2009-2010
Pronouncement Date: 18-07-2013

Appeal Details

RSA Number 7421914 RSA 2013
Assessee PAN AAQFM2993L
Bench Cochin
Appeal Number ITA 74/COCH/2013
Duration Of Justice 5 month(s) 6 day(s)
Appellant MRS Roadways, Trivandrum
Respondent DCIT, Trivandrum
Appeal Type Income Tax Appeal
Pronouncement Date 18-07-2013
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 18-07-2013
Date Of Final Hearing 27-05-2013
Next Hearing Date 27-05-2013
Assessment Year 2009-2010
Appeal Filed On 11-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE S/SHRI N.R.S.GANESAN JM AND B.R.BASKAR AN AM I.T.A. NO. 74/COCH/2013 ASSESSMENT YEAR : 2009-10 M/S. MRS ROADWAYS T.C. 31/123 CHACKAI TRIVANDRUM [PAN: AAQFM 2993L] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-1(2) TRIVANDRUM. (ASSESSEE-APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI D.S. SREEKUMARAN ADV. REVENUE BY SMT. S. VIJAYAPRABHA JR. DR AND SHRI M. ANIL KUMAR CIT(DR) DATE OF HEARING 27/05/2013 DATE OF PRONOUNCEMENT 18/07/2013 O R D E R PER B.R.BASKARAN ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 13-12-2012 PASSED BY THE LD. CIT(A) TRIVANDRUM AND IT RELATES TO THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS CHALLENGING THE DECISION OF TH E LD. CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 40A (3) OF THE ACT. 3. THE FACTS RELATING TO THE SAID ISSUE ARE STATED IN BRIEF. THE ASSESSEE A PARTNERSHIP FIRM IS A TRANSPORT CONTRACTOR UNDERTA KING TRANSPORTATION OF GOODS FOR VARIOUS ORGANISATIONS THOROUGH VEHICLES BY IT. DUR ING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SPENT A SUM OF RS.4.77 CRORES TOWARDS LORRY HIRE CHARGES. THE ASSESSING OFFICER EXAMINED THE EXPENDITURE INCURRED ON LORRY HIRE CHARGES DURING THE COURSE OF I.T.A. NO. 74/COCH/2013 2 ASSESSMENT PROCEEDINGS AND NOTICED THAT THE ASSESSE E HAD PAID A SUM OF RS.1 06 69 600/- IN CASH IN VIOLATION OF THE PROVIS IONS OF SEC. 40A(3) OF THE ACT. 4. AFTER HEARING THE ASSESSEE THE ASSESSING OFFICE R DISALLOWED THE ABOVE SAID AMOUNT IN TERMS OF SEC. 40A(3) OF THE ACT. THE SAI D DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A) AND HENCE THE ASSESSEE HAS FILED THIS A PPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS MAINTAINING HIS ACCOUNTS METICULOUSLY AND HENCE THE ASSESSING OFFIC ER COULD NOT FIND OUT ANY DEFICIENCY IN IT. THE ASSESSEE IS UNDERTAKING TRANSPORT CONTRA CT WORKS FROM PUBLIC SECTOR UNDERTAKINGS LIKE FOOD CORPORATION OF INDIA KERALA CIVIL SUPPLIES CORPORATION ETC. SINCE THE ASSESSEE-FIRM DOES NOT OWN ANY FLEET OF LORRIES IT USUALLY HIRES LORRIES FROM THE MARKET FOR CARRYING OUT TRANSPORTATION WORK THOUGH THE HELP OF BROKERS ON A DAY TO DAY BASIS. THE LORRY FREIGHT AMOUNT IS DETERMINED THRO UGH NEGOTIATIONS WITH THE CONCERNED LORRY DRIVERS AND HENCE THE ASSESSEE DOES NOT HAVE ANY DIRECT CONTRACT WITH THE LORRY OWNERS. FURTHER IT IS NOT KNOWN TO THE ASSESSEE W HETHER THE CONCERNED LORRY OWNERS ARE HAVING BANK ACCOUNTS OR NOT. SINCE THE SAID LO RRY DRIVERS ARE REQUIRED TO MAKE PAYMENTS TO THE CONCERNED LORRY OWNERS IN CASH THE Y INSIST ON PAYMENT OF LORRY FREIGHT CHARGES IN CASH ONLY. HENCE THE ASSESSEE WAS CONS TRAINED TO MAKE PAYMENTS IN CASH OUT OF BUSINESS EXPEDIENCY AND THE OTHER SURROUNDIN G CIRCUMSTANCES. 6. THE LD. COUNSEL INVITED OUR ATTENTION TO THE FOL LOWING PROVISO TO SECTION 40A(3) OF THE ACT WHICH WAS EXISTING IN THE ACT AT THE RE LEVANT POINT OF TIME: PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND N O PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESS ION UNDER THIS SUB-SECTION. WHERE ANY PAYMENT IN A SUM EXCEEDING TWENTY THOUSA ND RUPEES IS MADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT IN SUCH CASES AND UNDER SUCH CIRCUMSTA NCES AS MAY BE PRESCRIBED HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER R ELEVANT FACTORS. THE LD. COUNSEL SUBMITTED THAT THE ABOVE SAID PROVI SO LISTS OUT EXEMPTION FROM THE RIGOURS OF SEC. 40A(3) OF THE ACT ON THREE SITUATIO NS VIZ. :- I.T.A. NO. 74/COCH/2013 3 (A) NATURE AND EXTENT OF BANKING FACILITIES AVAILA BLE. (B) CONSIDERATION OF BUSINESS EXPEDIENCY. (C) OTHER RELEVANT FACTORS. THE ASSESSEE IN THE INSTANT CASE WAS REQUIRED TO PA Y LORRY FREIGHTS BY WAY OF CASH ONLY DUE TO BUSINESS COMPULSIONS AND OUT OF BUSINESS EXP EDIENCY AND HENCE EXEMPTION PROVIDED BY THE PROVISO TO SEC. 40A(3) SQUARELY APP LIES TO THE FACTS OF THE CASE. 7. THE LD A.R FURTHER SUBMITTED THAT RULE 6DD(K) O F THE INCOME TAX RULES PROVIDES THAT THE PAYMENTS MADE THROUGH THE AGENTS ARE NOT H IT BY THE PROVISIONS OF SEC. 40A(3) OF THE ACT. HE SUBMITTED THAT THE LORRY DRIVERS AC T AS AGENT OF BOTH THE LORRY OWNERS AS WELL AS ASSESSEE HEREIN. ACCORDINGLY THE LD A.R S UBMITTED THAT THE EXEMPTION GIVEN UNDER RULE 6DD(K) ALSO APPLIES TO THE ASSESSEE. 8. THE LD A.R SUBMITTED THAT THE ASSESSEE IS SQUA RELY COVERED BY THE EXEMPTION GIVEN UNDER THE PROVISO TO SEC. 40A(3) OF THE ACT. BY PL ACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DIRECTORATE OF INCOME TAX VS. POORANMALL AND SONS (96 ITR 390) THE LD. COUNSEL SUBMITTED THAT T HE INCOME TAX RULES CANNOT OVERRIDE THE PROVISION OF THE ACT. 9. THE LD. DR HOWEVER CONTENDED THAT LORRY DRIVER S CANNOT BE CONSIDERED AS AGENT OF THE ASSESSEE AND HENCE THE EXEMPTION PROV IDED UNDER RULE 6DD(K) OF THE INCOME TAX RULES IS NOT APPLICABLE TO THE FACTS OF THE CASE. THE LD. DR FURTHER SUBMITTED THAT THE LORRY DRIVERS ARE JUST COLLECTIN G PAYMENTS FOR CARRYING OUT THE WORK OF TRANSPORTATION AND HENCE IT CANNOT BE SAID THAT TH ERE IS PRINCIPAL-AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND THE LORRY DRIVERS. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC. 194C A LSO BY NOT DEDUCTING TAX AT SOURCE. 10. IN THE REJOINDER THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE LORRY DRIVERS ARE TREATED AS AGENT UNDER THE KERALA SALES TAX ACT AND HENCE EXEMPTION PROVIDED UNDER RULE 6DD(K) SHALL APPLY TO THE ASSES SEE. I.T.A. NO. 74/COCH/2013 4 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFUL LY PERUSED THE RECORD. ADMITTEDLY THE ASSESSEE HAS PAID LORRY FREIGHT CH ARGES TO THE TUNE OF RS. 1 06 69 600/- IN CASH IN VIOLATION OF PROVISIONS OF SEC. 40A(3) O F THE ACT. THE DISALLOWANCE IS PRESCRIBED UNDER SEC. 40A(3) UNDER A LEGAL FICTION AND HENCE THE TAX AUTHORITIES HAVE TO NECESSARILY COMPLY WITH IT UNLESS IT IS SHOWN BY TH E ASSESSEE THAT THE IMPUGNED PAYMENTS FALLS WITHIN ANY OF THE EXCEPTIONS GIVEN U NDER THE ACT OR RULES. THE LD. COUNSEL FOR THE ASSESSEE BY PLACING RELIANCE ON TH E PROVISO TO SEC. 40A(3) SUBMITTED THAT ANY PAYMENT MADE IN VIOLATION OF SEC. 40A(3) O F THE ACT ON CONSIDERATIONS OF BUSINESS EXPEDIENCY IS EXEMPTED FROM SUCH DISALLOWA NCE. HOWEVER ON A CAREFUL PERUSAL OF THE SAID PROVISO WE FIND THAT THE CONTE NTIONS RAISED BY THE LD. AR ARE NOT CORRECT. IN OUR VIEW THE PROVISO STATES THAT THE RIGOURS OF SEC. 40A(3) SHALL NOT APPLY TO THE PAYMENT MADE ONLY IN SUCH CASES AND UNDER S UCH CIRCUMSTANCES AS MAY BE PRESCRIBED AND FOR PRESCRIBING SUCH CASES OR SUCH CIRCUMSTANC ES THE GOVERNMENT SHALL TAKE INTO ACCOUNT THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. 12. THE GOVERNMENT HAS PRESCRIBED RULE 6DD IN T HE INCOME TAX RULES BY CONSIDERING THE NATURE AND EXTENT OF BANKING FACILI TIES CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. HENCE IN O UR VIEW THE ASSESSEE IS REQUIRED TO SHOW THAT ITS CASE FALLS UNDER ANY OF THE CIRCUMSTA NCES/CASES PRESCRIBED UNDER RULE 6DD OF THE INCOME TAX RULES IN ORDER TO ESCAPE FROM THE RIGOURS OF SEC. 40A(3) OF THE ACT. 13. THE ASSESSEE HAS FURTHER CONTENDED THAT ALL THE LORRY DRIVERS ARE ACTING AS ITS AGENT AND FURTHER THEY ARE REQUIRED TO MAKE PAYMENT S IN CASH TO THE CONCERNED LORRY OWNERS. ACCORDINGLY IT WAS CLAIMED BY THE ASSESSE E THAT THE IMPUGNED PAYMENTS ARE COVERED BY THE EXCEPTION GIVEN IN RULE 6DD(K) OF TH E INCOME TAX RULES. THIS CONTENTION HAS BEEN ADDRESSED BY THE LD. CIT(A) AS UNDER: I.T.A. NO. 74/COCH/2013 5 11.0 THE ASSESSEE HAS FURTHER STATED THAT HIS CAS E IS COVERED UNDER RULE 6DD(K). THE SAID RULE IS REPRODUCED AS UNDER: (K) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVI CES ON BEHALF OF SUCH PERSON. IT IS CLEAR FROM THE ABOVE THAT ONLY THE CASH PAYME NTS MADE TO HIS AGENT BY A PERSON AND THAT TOO IN A CASE WHERE THE AGENT IS RE QUIRED TO MAKE PAYMENT IN CASH FOR GOODS AND SERVICE ON BEHALF OF THE PRINCIP AL ARE COVERED. LORRY DRIVER IS NOT AN AGENT OF THE ASSESSEE. HE IS EMPLOYED BY TH E PERSON OWNING THE LORRY AND RECEIVE PAYMENTS OF LORRY DRIVER CHARGES (SIC. LORRY CHARGES) ON BEHALF OF THE LORRY OWNER ONLY. COMING TO THE SECOND REQUIREMENT THERE IS NO CONDITION IN LAW OR OTHERWISE THAT A LORRY DRIVER HAS TO MAKE PAYMEN T IN CASH ONLY TO THE LORRY OWNER. IN VIEW OF THE ABOVE IT IS HELD THAT THE C ASE OF THE ASSESSEE IS NOT COVERED UNDER RULE 6DD(K) ALSO. IN OUR OPINION THE LD. CIT(A) HAS TAKEN AN ACCEPTA BLE VIEW ON THIS ISSUE. IT IS THE CASE OF THE ASSESSEE THAT IT IS ENGAGING LORRIES ON HIRE FROM THE MARKET THROUGH BROKERS. IT IS ALSO STATED THAT THE ASSESSEE DOES NOT HAVE ANY CON TACT WITH THE CONCERNED LORRY OWNERS AND THE LORRY FREIGHT RATES ARE FINALISED WI TH THE LORRY DRIVERS. IN THIS FACTUAL SCENARIO WE ARE INCLINED WITH THE VIEW TAKEN BY TH E ASSESSING OFFICER THAT THE LORRY DRIVERS ARE COLLECTING PAYMENTS ON BEHALF OF THE LO RRY OWNERS AND THEY CANNOT BE CONSIDERED AS THE AGENTS OF THE ASSESSEE. THE LD A.R FURTHER SUBMITTED THAT UNDER KERALA SALES TAX ACT THE LORRY DRIVERS ARE TREATED AS AGENTS. HE HAS ALSO FURNISHED COPIES OF SEC. 46 47 AND 67 OF THE SALES TAX ACT. THE SAID RULES ARE CONCERNED WITH THE INSPECTION OF GOODS IN TRANSIT AT THE CHECK POST AN D FOR LIMITED PURPOSE CERTAIN RESPONSIBILITIES/LIABILITIES FIXED ON OWNER OF THE VEHICLE OR OWNER OF GOODS ARE ALSO FIXED UPON THE DRIVER. THE ASSESSEE HEREIN IS NEITHER T HE OWNER OF THE VEHICLE NOR THE OWNER OF THE GOODS CARRIED THEREIN. HENCE IN OUR VIEW THE CONTENTION OF THE ASSESSEE THAT THE LORRY DRIVERS ARE ACTING AS THE AGENT OF THE AS SESSEE IS NOT CORRECT. 14. IN VIEW OF THE FOREGOING DISCUSSIONS WE ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO SHOW THAT THE PAYMENTS MADE BY IT IN VIOL ATION OF THE PROVISIONS OF SEC. 40A(3) OF THE ACT IS COVERED BY ANY OF THE EXCEPTIONS PROV IDED UNDER RULE 6DD OF THE INCOME TAX RULES. ACCORDINGLY WE ARE OF THE VIEW THAT TH E LD. CIT(A) WAS JUSTIFIED IN I.T.A. NO. 74/COCH/2013 6 CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER U/S. 40A(3) OF THE ACT. ACCORDINGLY WE UPHOLD HIS ORDER. 15. IN THE RESULT THE APPEAL FILED BY THE ASSESS EE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 18-07-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 18TH JULY 2013 GJ COPY TO: 1. M/S. MRS ROADWAYS T.C. 31/123 CHACKAI TRIVAND RUM 2. THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-1( 2) TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS) TRIVAND RUM. 4. THE COMMISSIONER OF INCOME-TAX TRIVANDRUM. 5. D.R. I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T COCHIN