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Income Tax Officer, Ward – 1 (1) , Jalgaon and others Versus Shri Bhaurao Gambhir Patil, Prop. of Shri Samarth Tours & Travels and others

2015 (7) TMI 700 - ITAT PUNE

Disallowance u/s 40(a)(ia) - Non deduction of TDS - payments made by assessee to third parties for supply of vehicles the assessees - Commissioner of Income Tax (Appeals) after holding that the assessees are contractors for supplying vehicles to the contractee companies has held that the assessees entered into sub-contract with third parties/owner of vehicles for supply of vehicles on behalf of the assessees to contractee companies. However, in coming to such a conclusion no document has been br .....

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tion 194C(2), the essential condition is that there should be a sub-contract for carrying out the whole or any part of the work undertaken by the contractor and the payment should be made for carrying out the whole or any part of such work. It is a well accepted principle of law that the contract can either be oral or written. In the present case, the Revenue has not been able to establish the existence of any contract between the assessees and the individual vehicle owners. Therefore, in the fa .....

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ns of section 194C. - Decided in favour of assessee.

Disallowance on vehicle expenses - CIT(A)restricted addition - Held that:- Ad-hoc disallowance of ₹ 17,930/- @ 20% of total vehicles expenses. The Commissioner of Income Tax (Appeals) has restricted the same to ₹ 10,000/-. In the absence of any cogent material, we find no reason to disturb this finding of the Commissioner of Income Tax (Appeals)- Decided against revenue.

Addition on account of fall in net prof .....

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e. He has failed to bring any material on record which could warrant increase in NP by 0.25%. AO was not justified in disturbing the book results without assigning any specific defect - Decided against revenue. - ITA No. 2461/PN/2012,ITA No. 2462/PN/2012,ITA No. 2519/PN/2012,ITA No. 2520/PN/2012 - Dated:- 30-6-2015 - Shri R.K. Panda and Shri Vikas Awasthy, JJ. For the Petitioner : Shri Nikhil Pathak For the Respondent : Shri P.S. Naik ORDER PER VIKAS AWASTHY, JM:- These are set of four appeals, .....

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l. The assessee has filed cross appeal in ITA No. 2520/PN/2012 impugning the same order of Commissioner of Income Tax (Appeals). Since, the facts in all the appeals are similar, the appeals are taken up together for adjudication. 2. The facts as emanating from records are : The assessees are engaged in the business of providing vehicles to various companies like Reliance Next-Link Pvt. Ltd., Idea Cellular Ltd., China Petroleum Pipe Line, etc. on contract. The assessees do not own any vehicle of .....

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. The assessees in their respective return of income show the receipts from contractee companies as commission . 3. During the course of scrutiny assessment, the Assessing Officer held that the assessees are providing vehicles to the companies under contract agreement therefore, they are contractors. The Assessing Officer further held that, the assessees hired vehicles from various persons and make payments to them without deducting TDS. The relationship between the assessees and the persons fro .....

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No proper bills and vouchers were maintained by the assessee in support of such expenses. The Assessing Officer made 20% disallowance of the said expenses i.e. ₹ 17,930/-. In the case of Smt. Jyoti Manoj Patil, i.e. ITA Nos. 2462 & 2520/PN/2012, the Assessing Officer disallowed ₹ 1,36,71,346/- u/s. 40(a)(ia) and made ad-hoc addition of ₹ 50,453/- on account of decrease in net profit in impugned assessment year as compared to the previous assessment year. Aggrieved by the ad .....

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t TDS on the payments made to owners of the hired vehicles. The Commissioner of Income Tax (Appeals) upheld the action of Assessing Officer in making disallowance u/s. 40(a)(ia) of the Act. However, the Commissioner of Income Tax (Appeals) restricted the disallowance u/s. 40(a)(ia) to the sums payable by following the decision of Special Bench of the Tribunal in the case of M/s. Merilyn Shipping & Transport Co. 70 DTR (Visakha) (SB) (Trib) 81. Thus, in the case of first assessee i.e. ITA Nos .....

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e the ground raised in the appeal, therefore, the disallowance was restricted to ₹ 10,000/-. In respect of addition of ₹ 50,453/- on account of trading result, the Commissioner of Income Tax (Appeals) deleted the same, as the addition was made merely on assumptions without rejecting or raising any suspicion over the books of account. Against these findings of the Commissioner of Income Tax (Appeals), both, the Revenue and the assessees have come in appeal before the Tribunal. 4. Shri .....

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yn Shipping & Transport Co. (supra). The Hon'ble Gujarat High Court in the case of CIT Vs. Sikandar Khan N. Tunvar reported as 357 ITR 312 and the Hon'ble Calcutta High Court in the case of CIT Vs. Crescent Export Syndicate reported as 216 Taxman 258 have held that the decision rendered by the Special Bench in the case of M/s. Merilyn Shipping & Transport Co. (supra) is not a good law. Thus, the Commissioner of Income Tax (Appeals) has erred in restricting the disallowance u/s. 4 .....

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ng commission for supplying vehicles. The assessees do not own any vehicles of their own for supplying them on hire. The assessees are hiring vehicles from third parties and are providing the same to the companies. There is no contact or sub-contract between the assessees and the third parties from whom vehicles are hired. Therefore, the provisions of section 194C will have no application viz-a-viz assessees and the owners of the vehicles. In support of his submissions the ld. AR placed reliance .....

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e ld. AR has placed reliance. The case of the assessees is, that the assessees are providing transport vehicles to the companies on the terms and conditions set out by the companies and accepted by the assessees. For the services rendered by the assessees, the companies make payment after deducting tax at source. According to the assessees the amount received by them is a commission. On the payments made by assessees to third parties for supply of vehicles the assessees are not liable to deduct .....

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the provisions of section 194C, the payments made by the assessees are disallowed u/s. 40(a)(ia) of the Act. In first appeal, the Commissioner of Income Tax (Appeals) granted partial relief to the assessees by placing reliance on the decision of Special Bench of the Tribunal in the case of M/s. Merilyn Shipping & Transport Co. (supra). 7. Before we proceed further, let us first ascertain, whether the assessees are providing vehicles to the companies under contract? A sample purchase order, .....

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s service. 4. This contract can be terminated by giving thirty (30) days prior notice in writing without assigning any reason by Idea Cellular Limited. 5. The driver under no circumstances would be treated as our employee, however you shall ensure that all statutory obligation in any consequent to that employment are fully complied by you at your cost. 6. You shall provide the vehicle as required and intimated to you by our office at Beed for use of Idea Cellular Limited personnel within 1 hour .....

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st and expense. 11. You shall provide the vehicles with up to date RTO Papers, Insurance & Pollution Control Certificates and any such statutory documents. 12. Your drivers must carry the valid driving license while on duty and shall be proficient in driving. 13. All the vehicles shall have good condition stepney and necessary took kit for the purpose of minor maintenance/repair as and when required. 14. All vehicles shall be with proper interior work and shall have good quality music system .....

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total bill amount shall be paid extra. 18. All incidental expenses such as penalty due to traffic rules violation or any other duties shall be at your cost. 19. Please sign the duplicate copy of this contract as a token of your acceptance of all the terms and conditions given above. 8. A perusal of the terms and conditions of the contract shows that it is the responsibility and liability of the assessees to provide vehicles in good condition as and when required by the company. The assessees hav .....

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companies. A perusal of the terms and conditions make it amply clear that it is a contract between the company and the assessees for providing vehicles. Therefore, the contention of the assessees that they are not contractors but commission agents is not tenable. The Commissioner of Income Tax (Appeals) after analyzing similar agreement entered into between the assessees and China Petroleum Pipe Line had come to the conclusion that the assessees are contractors and not commission agents as claim .....

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fter holding that the assessees are contractors for supplying vehicles to the contractee companies has held that the assessees entered into sub-contract with third parties/owner of vehicles for supply of vehicles on behalf of the assessees to contractee companies. However, in coming to such a conclusion no document has been brought on record to show that the assessees have passed on the strings of responsibility and liability to vehicle owners from whom vehicles are hired. The Revenue has not br .....

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should be made for carrying out the whole or any part of such work. It is a well accepted principle of law that the contract can either be oral or written. In the present case, the Revenue has not been able to establish the existence of any contract between the assessees and the individual vehicle owners. Therefore, in the facts of the case we hold that the assessees have not entered into any subcontract with individual vehicle owners for supplying vehicles to the contractee companies. 11. Sinc .....

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ar circumstances where no sub-contract was established between the assessee and transporters, the Tribunal deleted the disallowance u/s. 40(a)(ia) of the Act. The Revenue went in appeal before the Hon'ble High Court. The Hon'ble High Court upheld the findings of the Tribunal and dismissed the appeal of the Revenue. 13. The Visakhapatnam Bench of the Tribunal in the case of Kranti Road Transport (P.) Ltd. Vs. ACIT (supra) has held that where assessee has hired lorries/trucks for his own u .....

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hicles as per agreed terms and conditions has not been passed on to the individual vehicle owners. Therefore, it is not a case of sub-contract. 14. The Revenue in its appeal has assailed the order of Commissioner of Income Tax (Appeals) in restricting the disallowance u/s. 40(a)(ia) by applying the decision of Special Bench of the Tribunal in the case of M/s. Merilyn Shipping & Transport Co. (supra). Since, we have already held that the payments made by the assessee to the individual vehicle .....

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