Income Tax Appellate Tribunal - Hyderabad
Cosmos Carrying Private Limited,, ... vs Department Of Income Tax on 18 September, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A'(SMC), HYDERABAD
BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER
ITA No.1382/Hyd/2014 : Assessment Year 2006-07
ITA No.1383/Hyd/2014 : Assessment Year 2007-08
ITA No.1384/Hyd/2014 : Assessment Year 2008-09
Asstt. Commissioner of Income- V/s M/s. Cosmos Carrying Private
tax Circle 14(1), Hyderabad Limited, Hyderabad
(PAN - AAACC 8374 N )
(Appellant) (Respondent)
Appellant by : Shri Ramakrishna Bandi DR
Respondent by : Shri S.Rama Rao DR
Date of Hearing 28. 08.2015
Date of Pronouncement 18.09.2015
ORDER
These are Revenue appeals for the assessment years 2006-07 to 2008-09. In all these appeals, Revenue is aggrieved by the orders of the Commissioner of Income-tax(Appeals) in holding that TDS was not deductible on the expenses incurred by the assessee and thereby deleting the penalty levied under S.271C of the Income Tax Act,1961.
2. Brief facts of the case are that the assessee company is engaged in the business of transportation. A survey operation under S.133A was conducted in the business premises of the assessee at Hyderabad on 24.3.2009 to verify compliance with TDS provisions. During the course of survey, it was noticed that the assessee has not effected TD S on payments made towards the following items of expenses-
2 ITA No.1382 to 1384/Hyd/2014M/s.Cosmos Carrying Private Limited, Hyderabad Items involved in all the three years
1. Lorry hire chares
2. Truck Operating expense
3. Business promotion expenses
4. Postage
5. Printing & stationery
6. Rent
7. Consultancy charges
8. Legal expenses Items involved only in assessment year 2006-07
9. Repairs and maintenance
10. Advertisement Expenses
3. The Assessing Officer held that TDS was deductible under S.194C, 1904J, 194H and 194I of the Act on the above payments. Therefore, the assessee was treated as an assessee in default under S.201(1) and demand was raised both towards TDS amount under S.201(1) and interest under S.201(1A) of the Act. The assessee accepted the demand raised by the Assessing Officer under S.201(1) and 201(1A) and remitted the amounts as per the demands raised.
4. Thereafter, the Assessing Officer initiated penalty proceedings under S.271C of the Act for failure to deduct TDS. In reply to the notice under S.271C of the Act, the assessee submitted that the assessee bona-fidely believed that the TDS provisions were not applicable to the payments made by the assessee, as enumerated in the orders under S.201(1) of the Act. Further, it was submitted that under S.194C of the Act, only payments above Rs.20,000 each were liable to TDS provisions and further, that none of the payments made by the assessee to any lorry supplier or towards lorry hire charges 3 ITA No.1382 to 1384/Hyd/2014 M/s.Cosmos Carrying Private Limited, Hyderabad were under a contract. It was submitted that the transactions were never meant to be regular and often no payment has exceeded permitted financial limit. As regards the other payments also, it was submitted that they did not attract TDS provisions. It was further submitted that the assessee had complied with the demand under S.201(1) of the Act in order to buy peace only and therefore, it does not amount to there being a liability to make TDS and failure on the part of the assessee to deduct taxes at source. The Assessing Officer, however, held that it is a fit case for levy of penalty as per the orders passed under S.201(1) and S.201(1A) of the Act.
5. Aggrieved, the assessee preferred appeals before the CIT(A), giving detailed head-wise reasons as to why TDS provisions are not applicable or were not complied with. After considering the assessee's contentions, the CIT(A) observed that the assessee was operating in an unorganized sector and was dealing with truck operators and therefore, had not deducted TDS when the payments were made. It was further observed that the assessee as remitted the demand raised by the Assessing Officer under S.201(1), and though the TDS was not reduced from the amounts paid to the payees, the assessee paid he TDS amount from its own sources and that the assessee has also not issued any TDS certificates to t e deductees, who also did not claim the credit for the TDS, as the time for the filing of return in their cases was already over. She observed that the TDS remittances made by the assessee lie with the Department, as the deductees could not claim credit for the same, and therefore, there is no loss to the Revenue. She further observed that in most of the cases, as submitted by the assessee, there was no liability of TDS at all. She accordingly, deleted the penalty levied by the Assessing Officer under S.271C of the Act, for all the three years under consideration.
4 ITA No.1382 to 1384/Hyd/2014M/s.Cosmos Carrying Private Limited, Hyderabad
6. Aggrieved by the relief granted by the CIT(A) for all the three years under consideration, Revenue is in appeal before this Tribunal.
7. The Learned Departmental Representative supported the orders of the Assessing Officer, while the learned counsel fo the assessee reiterated the submissions made before the lower authorities.
8. Having regard to the rival submissions and the material on record, I find that the assessee has raised the following contentions before the CIT(A).
(i) TDS provisions are not applicable to payments towards lorry charges because the assessee hired the trucks as and when required from any person in the open market and such a person was neither a contractor or a sub-contractor to attract the TDS liability under S.194(2) of the Act.
(ii) As regards the truck operating expenses, these payments include the payments made for repairs, highway tips, diesel expenses and purchase of spare parts from two parties referred to by the Assessing Officer, and therefore, the truck operating expenses do not attract the TDS provisions at all.
(iii) As regards the business promotion expenses, these expenses consist of incentives for employees, sweets, small gifts, festival tips, meetings with customers, review meetings with 5 ITA No.1382 to 1384/Hyd/2014 M/s.Cosmos Carrying Private Limited, Hyderabad branch heads, sales representatives, etc. and that the names of the persons mentioned in the order under S.201(1) were the names of sales representatives of the assessee who visit customers and submit the bills for expenses incurred, and to whom payments were made. It was submitted that the assessee was under bona fide belief that these expenses do not attract TDS under S.194H as commission payments.
(iv) As regards postage expenses, printing and stationery expenses, these payments were made to courier agencies, and there is no contract with them to such postage services. These amounts were spent for purchasing stationery like files, records, memos, sales and purchase registers for all the 22 branches of the assessee, and therefore, the TDS provisions are not applicable.
(v) As regards the payments towards rent, rent was paid to several parties and rent paid to each party was below Rs.1,20,000 per annum and hence, the provisions of S.194I are not applicable.
(vi) As regards consultancy chares, these charges were paid for specialised matters like ESI, PF Accounts etc. and therefore, the assessee was under a bona fide belief that the provisions of S.194J are not applicable.
(vii) As regards legal expenses, the same were incurred on account of reimbursement of 6 ITA No.1382 to 1384/Hyd/2014 M/s.Cosmos Carrying Private Limited, Hyderabad expenses towards filing affidavits, complaints and documentation charges in case of accidents to trucks for all 22 branches and therefore, the assessee was under a bona fide belief that provisions of S.194J are not applicable. As regards the interest on truck finance, it was submitted that it was paid to GE Capital Transport Financial Services, which is a non-banking institution and the assessee was under a bona fide belief that it falls under the exempt category in terms of S.194A(3)(iii) and hence not liable for TDS.
(viii) In addition to the above, for the assessment year 2006-07, it was submitted that expenses towards repairs and maintenance represent mainly expenses incurred towards purchase of machinery and spare parts, which do not fall under S.194C, as there was no contract with the suppliers; and with regard to advertisement expenses, it was below prescribed limit and the aggregate amount is less than Rs.50,000, and therefore, the TDS provisions are not applicable.
8. Thus, I find that the assessee has filed detailed repl to the show cause notice under S.271C of the Act. I find that the provisions of S.271C are subject to the provisions of S.273B of the Act. As per S.273B of the Act, no penalty shall be leviable under the sections mentioned therein, if the assessee proves that there was a reasonable cause for the failure under the said provisions. I find that S.271C finds place in the provisions of S.273B of the Act. In the case before me, the assessee has submitted an explanation for the defaults alleged 7 ITA No.1382 to 1384/Hyd/2014 M/s.Cosmos Carrying Private Limited, Hyderabad against it, and even a perusal of the orders under S.201(1) and 201(1A) make it clear that the Assessing Officer has summarily raised the demands . It appears that assessee's explanation was not called for or was not considered in detail. From the narration of the assessee's explanation as given above, I find that most of the expenses like lorry hire charges, truck operating expenses, business promotion expenses, postage expenses etc. are not subject to TDS provisions. As regards the other payments, the assessee's explanation that it bona-fidely believed that the TDS provisions are not applicable to the assessee seems to be reasonable. In view of the same, I do not find any reason to interfere with the order of the CIT(A) on this issue, particularly, as also there is no loss to the Revenue, as observed by the CIT(A) since the assessee has remitted the TDS from its own sources and the payees have also not claimed the credit for the same. In view of the same, Revenue's appeals for all the three years are dismissed.
9. In the result, Revenue's appeals are dismissed.
Order pronounced in the court on 18th September, 2015 Sd/-
(P.Madhavi Devi ) Judicial Member.
Dt/- 18th September, 2015 \ Copy forwarded to:
1. M/s. Cosmos Carrying Private Limited, 15-1-503/1, Old Feelkhana, Hyderabad 500 012
2. Asstt. Commissioner of Income-tax Circle 14(1), Hyderabad 8 ITA No.1382 to 1384/Hyd/2014 M/s.Cosmos Carrying Private Limited, Hyderabad
3. Commissioner of Income-tax(Appeals) II, Hyderabad
4. Commissioner of Income-tax (TDS), Hyderabad
5. Departmental Representative ITAT, Hyderabad B.V.S.