TMI Blog2016 (10) TMI 1297X X X X Extracts X X X X X X X X Extracts X X X X ..... before 31.3.2005. Therefore, ground no.1 in all three years is rejected. TDS on the payments made to truck owners for hiring the trucks - Revenue authorities have assumed existence of either contractor-ship between the assessee and other truck owners, whose trucks were hired by the assessee for transport. There is no evidence on record. The assessee has ever entered into any contract or created any subcontract-ship with any of the truck owners. Assessee could be fastened with the obligations to deduct TDS, if it has entered into a contract with truck owners. The assessee has only availed services of the contractor for transporting the goods from point A to B . All risk and reward for transporting the goods remain with the assessee. Therefore, the ld.Revenue authorities have failed to appreciate that relationship of contractor and contractee was not existed between the assessee and the alleged truck owners. On this reason, amongst other, we are of the view that the orders of the CIT(A) are not deserve to be interfered with, though by way of different reasons. e assessee cannot be held in default for non-deducting the TDS on the payments made to truck owners for hiring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Assessee : Shri T.P. Hemani, AR ORDER PER SHRI RAJPAL YADAV, JUDICIAL MEMBER In this bunch of six appeals, common issues are involved. Therefore, we heard them together and deem it appropriate to dispose of all these appeals by this consolidated order. First, we will deal with the appeals filed by the Revenue against separate orders of the ld.CIT(A)-XV, Ahmedabad dated 21.6.2012 passed on the respective appeals of the assessees. 2. Grounds of appeal taken by the Revenue in all three appeals are as under: ITA No.1988/Ahd/2012 (Kataria Movers) 1. The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the disallowance of Freight expenses u/s. 40(a)(ia) of the Act amounting to ₹ 3,39,11,223/-. 2. The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the enhancement of Freight expenses made u/s. 40(a)(ia) of the Act amounting to ₹ 3,06,11,221/-. 3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XV. Ahmedabad ought to have upheld the order of the Assessing Officer. It is therefore, prayed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment and assessment order was passed on 26.12.2007. The ld.AO has determined the taxable income of the assessee at ₹ 4,40,99,680/-, as against returned income of ₹ 49,44,230/-. Dissatisfied with the assessment order, the assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) has decided the appeal of the assessee vide order dated 12.12.2008. The ld.CIT(A) has made enhancement of income and the assessee challenged the order of the CIT(A) in ITA No.418/Ahd/2009. The Tribunal has allowed the appeal of the assessee partly, and set aside the issues to the file of the ld.CIT(A) for re-adjudication vide its order dated 15.10.2010. The ld.CIT(A) has re-adjudicated the issues by way of impugned order passed on 21.6.2012. There is only one issue agitated by the Revenue, which has two parts, as canvassed in ground no.1 and 2, which are only substantial grounds of appeal. At the cost of repetition we take note of the grounds no.1 and 2again, as under: 1. The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the disallowance of Freight expenses u/s. 40(a)(ia) of the Act amounting to ₹ 3,39,11,223/-. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty under section 40(a)(ia) of the Income Tax Act, 1961. It was pointed out to the ld.CIT(A) that amendment carried out in section 40(a)(ia) by way of Finance Act, 2008, the freight amount on which TDS was deducted in March, but was deposited in Government account before the filing of return is allowable as deduction. Thus, the assessee has pointed out that it has deducted TDS and deposited TDS amount in the government account, before the date of filing of return. This amount was quantified by the assessee at ₹ 21,45,17,315/-. The ld.CIT(A) has debited this amount from total amount on which TDS deducted by the assessee i.e. ₹ 24,84,28,538/-. In this way, an amount of ₹ 3,39,11,223/- was quantified as disallowable under section 40(a)(ia) of the Act. The ld.CIT(A), thereafter, has made various discussion about inclusion and exclusion of certain amounts. In the fresh round of litigation, when this amount was quantified, then, the ld.CIT(A) has observed that vide Finance Act, 2010, changes have been effected in section 40(a)(ia) in the Income Tax Act. In the amended provision, it has been provided that even if in any month of the accounting, if expenditure was incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, the Appellant submits that it is admitted facts that the Appellant has deducted tax at source, however, not deposited within the prescribed time limit but in any case has been duly deposited before the due date of filing return of income. Please refer para 2.1 of the assessment order wherein the details of tax deducted at source has been given. As a matter of facts, the tax has been deducted at source and has been paid before the due date of filing of return of income. Copy of the details of deduction of tax at source on amount of ₹ 3,39,11,223/- alongwith the bank statement showing clearance of amount of IDS is enclosed herewith marked as Annexure - D . In this connection, The Appellant further submits that the provisions of S.40(a)(ia) has undergone a change by the Finance Act, 2010 whereby it has been amended in a manner that even if for any month of expenditure, tax has been deducted and deposited before the due date of filing return of income, disallowance cannot be made u/s 40(a)(ia) of the Act. The Appellant submits that this amendment is curative in nature and therefore the same is applicable for the year under consideration and accordingly no disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30/09/2004 and 01/10/2004 to 31/03/2005, which is ₹ 1,55,86,430/- and ₹ 1,52,45,510/- respectively. The Appellant further submits out of an amount of ₹ 1,55,86,430/- for the period of 01/04/2004 to 30/09/2004, an amount of ₹ 47,54,720/- is pertaining to an amount which is in excess of ₹ 20,000/- per contract on which the Appellant has not deducted tax at source, whereas balance amount of ₹ 1,08,31,718/- is aggregate of an amount which is not exceeding an amount of ₹ 20,000/- on which tax is not required to be deducted at source. Copy of such details is enclosed herewith marked as Annexure - E, F and G . Similarly, for the period 01/10/2004 to 31/03/2005, the Appellant submits that out of an amount of ₹ 1,52,45,510/-, an amount of ₹ 1,12,54,970/- is pertaining to aggregate amount which is in excess of ₹ 50,000/- on which tax is not deducted at source, where the balance amount of ₹ 39,09,540/- is pertaining to aggregate amount which is not in excess of ₹ 50,000/- on which the tax is not required to be deducted at source. Copy of such details is enclosed herewith marked as Annexure - H . In summary, the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) The appellant submitted that: So far as Sr. No. 1 i.e disallowance of ₹ 1,11,73,780/- u/s 40(a)(ia) is concerned, the Appellant submits that it is admitted facts that the Appellant has deducted tax at source, however, not deposited within the prescribed time limit but in any case has been duly deposited before the due date of filing return of income. Please refer para 3 of the assessment order wherein the details of tax deducted at source has been given. As a matter of facts, the tax has been deducted at source and has been paid before the due date of filing of return of income. Copy of the details of deduction of tax at source on amount of ₹ 1,11,73,780/- alongwith the bank statement showing clearance of amount of IDS is enclosed herewith marked as Annexure - D . In this connection, The Appellant further submits that the provisions of S.40(a)(ia) has undergone a change by the Finance Act, 2010 whereby it has been amended in a manner that even if for any month of expenditure, tax has been deducted and deposited before the due date of filing return of income, disallowance cannot be made u/s 40(a)(ia) of the Act. The Appellant submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source. Therefore, the Appellant has bifurcated an amount of ₹ 1,54,61,412/in to two periods viz. period from 01/04/2004 to 30/09/2004 and 01/10/2004 to 31/03/2005, which is ₹ 41,77,926/- and ₹ 1,12,83,486/- respectively. The Appellant further submits out of an amount of ₹ 41,77,926/- for the period of 01/04/2004 to 30/09/2004, an amount of ₹ 8,86,602/- is pertaining to an amount which is in excess of ₹ 20,000/- per contract on which the Appellant has not deducted tax at source, whereas balance amount of ₹ 32,91,324/- is aggregate of an amount which is not exceeding an amount of ₹ 20,000/- on which tax is not required to be deducted at source. Copy of such details is enclosed herewith marked as Annexure - F, G and H . Similarly, for the period 01/10/2004 to 31/03/2005, the Appellant submits that out of an amount of ₹ 1,12,83,486/-, an amount of ₹ 4,18,442/- is pertaining to aggregate amount which is in excess of ₹ 50,000/- on which tax is not deducted at source, where the balance amount of ₹ 1,08,65,044/- is pertaining to aggregate amount which is not in excess of ₹ 50,000/- on which the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits that it is admitted facts that the Appellant has deducted tax at source, however, not deposited within the prescribed time limit but in any case has been duly deposited before the due date of filing return of income. Please refer para 3 of the assessment order wherein the details of tax deducted at source has been given. As a matter of facts, the tax has been deducted at source and has been paid before the due date of filing of return of income. Copy of the details of deduction of tax at source on amount of ₹ 1,65,64,178/-alongwith the bank statement showing clearance of amount of IDS is enclosed herewith marked as Annexure - D . In this connection, The Appellant further submits that the provisions of S.40(a)(ia) has undergone a change by the Finance Act, 2010 whereby it has been amended in a manner that even if for any month of expenditure, tax has been deducted and deposited before the due date of filing return of income, disallowance cannot be made u/s 40(a)(ia) of the Act. The Appellant submits that this amendment is curative in nature and therefore the same is applicable for the year under consideration and accordingly no disallowance can be made in this count a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) or, as the case may be, subsection (2) shall be liable to deduct income-tax under this section Hence, from the above quoted provisions, it is very much clear that the Appellant was not required to deduct tax at source on an amount, upto 30/09/2004, if impugned amount does not exceed ₹ 20,000/- per contract. It is further submitted that from 01/10/2004, if the amount credited or paid to the contractor or sub-contractor does not exceed ₹ 20,000/- in single transaction and ₹ 50,000/- in aggregate, than the Appellant was not required to deduct tax at source. Therefore, the Appellant has bifurcated an amount of ₹ 1,08,22,029/- in to two periods viz. period from 01/04/2004 to 30/09/2004 and 01/10/2004 to 31/03/2005, which is ₹ 46,73,017/- and ₹ 61,49,012/respectively. The Appellant further submits out of an amount of ₹ 46,73,018/- for the period of 01/04/2004 to 30/09/2004, an amount of ₹ 24,18,866/-is pertaining to an amount which is in excess of ₹ 20,000/- per contract on which the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pping Transports Vs. ACIT, 16 ITR (Trib.) 1. He pointed out that analysis made by the ld.CIT(A) on the strength of this decision is not sustainable, because, Hon ble Gujarat High Court in the case of CIT Vs. Sikhandharkhan N. Tanvar, 257 ITR 212 has overruled this decision. He pointed out that in the case of M/s.Kataria Movers, the ld.CIT(A) has observed that total disallowance of ₹ 6,53,59,734/- including enhancement made by the CIT(A) was to be done in this case. Out of this amount, a sum of ₹ 3,39,11,223/- is the amount on which TDS was deducted by the assessee, but was paid late i.e. before the due date of filing of the return. When the ld.CIT(A) has worked out the balance amount, then, this amount was not examined with the angle whether TDS was to be deducted by the assessee or not. The ld.CIT(A) has observed that only a sum of ₹ 3,07,35,157/- remained payable as on 31.3.2005. In a way, on the strength of order of the special Bench of the Tribunal in the case of Merilyn Shipping Transports (supra) has construed that the amount which is not payable on 31.3.2005 allowability or disallowability on account of non-deduction of TDS ought not to be considered. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ujarat High Court in the case of CIT Vs. B.M.S. Projects P.Ltd., 48 taxmann.com 13 (Guj). He placed on record copy of the judgment. The Hon ble Gujarat High Court while putting reliance upon its earlier decision in the case of Gujarat Narmada Valley Fertilizers Co. Ltd., 361 ITR 192 (Guj) and in the case of CIT Vs.Omprakash R. Chaudhary has held that amendment in section 40(a)(ia) by Finance Act, 2010 has retrospective effect, meaning thereby, if the expenditure was incurred by the assessee in any month during the previous year and TDS was deducted, but such TDS was deposited after expiry of accounting year, but before due date of filing of the return, then disallowance under section 40(a)(ia) would not be made. The ld.DR was unable to controvert this contention of the ld.counsel for the assessee. 12. On due consideration of the facts and circumstances, we are of the view that as far as ground no.1 in all these three appeals are concerned, they are devoid of any merit, because, the assessee has deducted TDS on these amounts and TDS was deposited before the due date of filing of the return. The ld.AO has made disallowance on the ground that TDS was not deposited before the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions of the assessee reproduced by the ld.CIT(A) on page no.13 of the impugned order. He pointed out that for the sake of arguments, if it is assumed that section 194C is applicable upon the assessee and it was required to be deducted TDS, then, sub-clause (iii) of section 194C contemplates that upto 30.9.2004, if payment does not exceed ₹ 20,000/- per contract, then, the assessee was not required to deduct TDS. Similarly, after 1.10.2002 upto 31.3.2005, if the amount credited or paid to the contractor or sub-contractor does not exceed ₹ 20,000/- in a single transaction and ₹ 50,000/- in aggregate, then, the assessee was not required to deduct TDS. The assessee has given bifurcation of these amounts, which has duly been reproduced by the ld.CIT(A) on page no.15 of the impugned order. As per working reproduced by us in the foregoing paras, the assessee, in the case of Kataria Movers, required to deduct TDS at ₹ 1,60,09,690/-. Similarly, working submitted by the assessee in rest of two appeals which has also been reproduced on page nos.14 and 15 of the impugned orders (₹ 36,71,905/- in the case of Kataria Transport Co., and ₹ 13,05,044/- in Katar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been paid. xxxxxxxxxx 194C. Payments to contractors and sub-contractors. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and shall at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to (i) one per cent in case of advertising (ii) in any other case two per cent, of such sum as income-tax on income comprised there in. (2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... points as per their directions. According to the assessee, the Lorries used for the said purpose are specially designed with proper heating arrangements . The claim of the assessee is that since it did not have required number of Lorries, it had to hire Lorries from others who simply placed the vehicles at the disposal of the assessee. The assessee alone, under its control and supervision, has executed whole of the contract. According to the assessee, the individual lorry owners have not carried out any part of the work undertaken by the assessee. x x x x x x x x x x x x 8.6 As per the provisions of section 194C(2), as explained in para 8.1 supra, the sub-contractor should carry out the whole or any part of the work undertaken by the assessee. The dictionary meaning of the words Carry out is to carry into practice ; to execute ; to accomplish . It signifies a positive involvement in the execution of the whole or any part of the main work by spending his time, money, energy etc., and further taking the risks in carrying on the said activity. In the instant case, there is no material to suggest that the other lorry owners involved themselves in carrying out any part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed until an unless there is a contrary decision at the end of Hon ble jurisdictional High Court or at the end of the Hon ble Supreme Court. In this decision, the Hon ble High Court has held that section 40(a)(ia) is not applicable in the Asstt.Year 2005-06, therefore, no disallowance can be made. The discussion made by the Hon ble Calcutta High Court read as under: Mr.Agarwal s criticism is not without force but he has not been able to point out as to how could the assessee have come to know that the omission to deduct tax from any payment made to a contractor shall become not deductible under section 40 before the Finance Act 2004 got presidential assent on 10th September, 2004. This question he has not answered because he has no answer to offer. Admittedly, the Finance Act, 2004 got presidential assent on 10th September, 2004. The assessee could not have foreseen prior to 10th September, 2004 that any amount paid to a contractor without deducting tax at source was likely to become not deductible under Section 40. It is difficult to assume that the legislature was not aware or did not foresee the aforesaid predicament. The legislature therefore provided that the act sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the taxpayer. Gould v. Gould, 245 U.S. 151, 153. We are of the opinion that the learned Tribunal erred in applying provision of section 40(a)(ia) in disallowing payment of a sum of ₹ 4,30,386/- to a contractor without deducting TDS during the financial year 2004-05, corresponding to assessment year 200506. In that view of the matter, the question formulated is answered in the affirmative and in favour of the assessee. 22. In the absence of any contrary decision brought to our notice by the ld.DR, we are bound to follow, and therefore, the assessee cannot be held in default for non-deducting the TDS on the payments made to truck owners for hiring the trucks. 23. Now, we take Cross-objection filed by the assessee. CO 227/Ahd/2012 (Kataria Movers) 24. In the first ground of CO, the grievance of the assessee is that the ld.CIT(A) has erred in partly confirming the disallowance of ₹ 8,75,210/- with the aid of section 40(a)(ia) of the Act. 25. Since on two fold of submissions, we have held that the assessee was not under obligation to deduct TDS. We have followed the decision of the Hon ble Calcutta High Court and held that section 40(a)(ia) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the assessee failed to bring evidence demonstrating the fact that the expenditure was incurred for the purpose of business. 30. On due consideration of the above facts, we are of the view that both the Revenue authorities have failed to appreciate the facts and circumstances. The explanation of the assessee was that it was given as advance to the staff for business purpose, i.e. it was to be incurred for hiring trucks. The ld.AO has considered as if it was given to the staff for their personal needs. The AO has considered it as advance to the staff. He has totally changed the meaning of the explanation of the assessee, and even if it is an advance to the staff during the course of employment and staff does not return it, then how it could be allowed as business loss, is not understandable. Similarly, the ld.CIT(A) has observed that the assessee failed to bring any evidence to demonstrate the fact that how it was incurred in day-to-day business activity. The assessee has submitted audited accounts and ledger accounts demonstrating the fact that the amount was given to the staff. What other evidence can be submitted ? Therefore, in our opinion, the ld.Revenue authorities h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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