Karnataka High Court
Smt J Rama vs The Commissioner Of Income Tax on 19 July, 2010
Bench: N.Kumar, B.V.Nagarathna
IN THE HIGH COURT OF KARNATAKA AT BANOALONE DATED THIS THE 19th DAY OF JULY 20 PRESENT L' L 3 THE HON'BLE MR.JUSTI_CE.._N A AND 1, 4. A. THE I-ION'BLE MRs.JUsTI:C.I; BOV- ITA NO.4I8%O'1§_2%0,09 O' O I L BETWEEN: O O SMT.J.RAI\/IA, L PROP. M/S £I.K;«TRAVELS,--:.~~': * T NO.1, 1ST1\.f[AlN,'l,fZ_T;H CR§_)"SS. . S.R.NAGAR, _ V «_ L BANGALOR1fV{g O ...APPELLANT (BY SI§£.ASHOK"Il§~.KLI_Li£I?\RNI, COUNSEL FOR M/S K.R.PRASAD AD'-f_s'.A],. A _ ~ 1; CONIIITISSIONER OF INCOME TAX I I I3,A.NOIAI;.OI1E: A1 , CENTRAIQREZVENUE BUILDING, QUAEENS ROAD.
BANGALORE M 500001.
- INCOME--TAX OFFICER,
'~WA1"{I) - 1(3),
OETH FLOO R, I-{MT BUILDING.
-No.59, BELLARY ROAD.
GANGANAGAR,
BANGALORE -- 560032. ...RESPOND ENTS (BY SR1. K.V.ARAViND, COUNSEL FOR 1\/I.V.SESHACHALA ADVs.] 'Ps;18_, 273240 /9,;
_ Section 146(1) THIS ITA FILED UNDER SECTION 260A OF THE INOCME TAX ACT, 1961 ARISING OUT OF ORDER DATED 2 1- 1 1-2008 PASSED IN I'1'A.NO. 1204/BANG/2008 FOR THE ASSESSMENT YEAR 2005-2005 PRAYING THAT THIS HONBLE COURT .-AY BE PLEASED TO:
THIS APPEAL COMING ON EOR HEARING DAY, N KUMAR J .. DELIVERED THE FOLLOVVIDK}: V ' 'r. JUDGMEN'I'L_ This appeal is by the»t'a-ssessee"i:.haiiAe'10gingV th§.euVt orders passed by the authorities the additions made by the
2. The 5!'aCts"?.of "case are that the assessee is an individualé d'eVriVingVinc"O;'ne from hiring of Vehicies. For the Assessrnent Year 2005~06, return of income
30.Vjt'0.2005 declaring an income of The return was processed under On 23.3.2006 and a refund of it - was issued to the assessee. Thereafter, .0 case was selected for scrutiny under CASS.
"Notice under Section 143(2) was served on the assessee on 2.9.2006. In reply to the same, the assessee appeared, produced books of accounts and 1/"
other details. It is seen from the said books and from the income and expenditure statement, the assessee had debited a sum of Rs.88,l2,432/-- as \fe1l1:i"c]_e running expenses. When she was called explain the said expenses, she had gi_v~eri--u.:"
accounts of vehicle running accounts disclosed thatl l deducted the tax deducted the provisions of Sectio1l]*~2,,:i::§)4[tT)' thleiplncome Tax Act. 1961 (For short', ._herein'afterl'referredas "the Act"). in granted the assessee did not Ilgroducejnl'th.e".Iiarticu1ars of the TDS, if any. However, tltieilass'essee"contended in writing that the l aslselssiee i"s.__not 'liable to deduct TDS as there is no writtenljor" ofral~*contract and that the assessee is not liable Section 194C as individuai charges for PI?iYate~-'service Vehicle wiil not exceed Rs.20,000/--~. l'$he'lalso referred to Circular No. 93 dated 26.9.2002 ll 'stating that the liability to TDS would not arise. The said circular was superceded by a clarification issued by the Board which made it obiigatory to deduct tax. T he Assessing Officer held the contract entered into between the assessee and the persons who the vehicle is a transport contract and not . machinery and therefore, she "
deduct res. As the said dedij«ctio_n'~ Section 40(A){1a] is attracted:~..ftccoi'dir1giyf;:dedtictilon on the amount paidVt0_.a sub:co_ntra,Aetor 'onuwhiich tax has not been deducted" disallowed. Therefore, a:..surri.of "representing the said There was a discrefpancy,T,in "7'ft1*1e_"'aCcount'sV relating to amount covered under_Tf)S_ffeertifieates and therefore, a sum of vsffasfaiso added. Thus, a sum of a A§ass;<§4i;t"55,s.3t3/-- ixfasfvheld to be taxable. Aggrieved by 'the Asaid._assce,ssment order, the assessee preferred an ap'pea1"to,the Commissioner of Income Tax.
3. After referring to the aforesaid facts and the f if "ease law on the point, the appeilate authority held that the assessee is the owner of the hired vehicle. It was a transport contract. Section 194C mandates R/, T DS and therefore, he held that disallowance by the Assessing Officer is proper and accordingly;'~.t:'i1e"y_ confirmed the same. Insofar as the discre'p--ancy~ii'1i ' the TDS Certificate is concerned, it -was the balance amount was received'.in:<sl1ibse'qL1ent which was duly reflected the assessee was maintaining"'th_e4 b'ool«:s of"acceunts on mercantile basis tlherefoive: ::'thé.:'V:_é@/lorinting and reflecting on order and therefore, the assessing officer confirmed.
',4. the said two orders, the V.,.fi9Sé5é¢é"l'd"P1'€f¢r1'€dv"Han appeal to the tribunal. The ire-{appreciation of the entire facts and after'-««heai*ii1g§'~"both the parties, held hiring of vehicles k if the assessee is definitely in the nature of transport and hence, the disallowance under Section if .:l_4:"4'O{a)(ia] on vehicle maintenance claim of it Rs.79/15,225/-- on which as of now the payment of tax also had not been deducted and paid before the expiry of the prescribed time as per Sub--section (1) of Section 200 was to be disallowed. With reference to the second issue, it was held that there "ea difference in receipt disclosed by the assesse"e'*«in~ Profit and Loss Account on account.-of "
contract and the figure as per said sum was not disclos_ed__.asd books of accounts had but the receipt as per the therefore, no case for interfei"e_nce;'in"t-hie said addition was made out. to be dismissed.
Aggrieiked the assessee is in appeal before. us. "
hearing the parties, this appeal is admitted consider the following substantial V questions of law:
i ll)' 'When the material on record do not disclose the contract entered into by the assessee with the sub--contractor, for supply of vehicles to perform the contract entered into with the customers, \s/ whether the liability under Section 194© is attracted. d (2) Whether the deduction on discrepancy in the vehicles " "
is justified that the said paid in the subsequent -years?
6. Learned contended that the to supply vehicles other companies under dates. It is only to perforni the said contracts, after he A.-hired Xrehiclesfrom sub--contractors under a d c"on_tractv,%the liability to deduct TDS arises :vunderi.VSectviVori.1~*194(C](2} of the Act. In this case, such a"'««..materi,a'lA is not available and therefore, the i.a,u_.thorities were not justified in disallowing the "ydedductions claimed by the assessee.
7. Per contra, learned counsel for the income tax department submits that the material on record V. clearly discloses that the vehicles are hired by the assessee from various owners of vehicles discharge their obligations under . between the assessee and other View of the matter, the authoritiesdvverel*_§iis.tified'i_i"'in77i disallowing the deduction. V» 'V
8. In order to apépreciateitliejjrived.'contentions, it is necessaryfto' facts:
The ual deriving income from Un_'de'riV:a written agreement the asseTs'seVe' vehicles to one of its custoxnersi' 'la/lahindra Transport Solutions C1.auseiv5WoVf the written agreement entered intop1l3etWeeri~.V.them stipulates that the provision of services' would involve providing vehicles owned by V the assessee or associates of assessee or agents, for llltrangsportation of the Employees of Thomson "Corporation [International] Private Limited. The material on record discloses that the assessee is owning a fleet of vehicles. That is not sufficient to who meet their obiigations. Therefore, the assessee hired vehicles from the owners of the Vehicles. Therex written agreement entered into between the . and such individual owners. v_.~~lt__is hired in the aforesaid manner performing the contract thinto' the assessee and its cuvs~to.mers'."" they absence-diof any material placed by inference that can be case is that the yehicles taken on lease to pe:,tfori9Iii* wdfitteriflcontrlactllzentered into between the asses'see ' customers. Out of the transportation 'charges: received under the aforesaid x2sr'ri'tteii'l:tcol11tract,VHamsubstantial portion has been paid to] tl1e4:"'-.yario.us owners of the vehicles towards tra'nsp_ortation charges. Though a ground is taken that such payment is not in excess of Rs.20,000/-- arid: therefore, there is no obligation to deduct T DS. 2 "the material on record discloses that total amount paid towards transportation charges is roughly about Rs.79,45,225/~. in the absence of any particulars, it 13/ i0 cannot be said that there was no liability to deduct tax on that score. Law does not stipulateVl_i'-the_ existence of a written contract as a precedent for payment of TDS. __Th.e_coritra(:t'_':ni'a§rV"be "
in writing or it may be oral but arises when the recipient l:a1n_ourif«:,fecei'<}e\ payment in excess of"~-l?royis'o~{2)...t§o Sub--
sec 194(C] which is of this case makes it or Hindu Undivided from the business or in excess of the Clause [a] or Clause
(b) {of S4e"ct_ion..f' during the financial year .ini'inediately preceding the financial year in which it lliislcredited or paid to the account of the Sub~c.or1tractor. shall be liable to deduct income tax i.u.nder'~*the sub~section. It is not in dispute that the turnover of the assessee exceeds the monetary limit "lspecifieci under Clause (a) or Clause {b} of Section KMLAB. Therefore, the liability to deduct tax arises under the said proviso to the sub--contractor from be H whom the vehicles are hired and the said amount payable to the sub--contractor is in excessvV.,V_o~f4»d'-.. Rs.20,000/--. Therefore, the three autho1'iti_ct§'~'''14A1:3:+;ii(§;. ;. concurrently held that the transactionin transport contract. The liability money paid to the subwc0.r:itr_actors:__ Immediately, TDS is V z-not amount is not paid to herefore, the claim for d€d31.!C+tVig0L_11 is not attracted justified in disalloujindg treating the said amountdasydd the assessee and claiming tax on -that a'r'r;oVunt;
the second substantial question of _ law is conc.e.rned, the facts are not in dispute. The H :TDSe_certificates enclosed with the return amounted to 70,89,004/-- whereas the receipt disclosed in the ~ .. V' income and Expen diture Account, was it Rs.1,64,06,036/--. This discrepancy is admitted. The explanation offered is that a portion of the said TDS ls»/' L2- cieductions are claimed in the subsequent year. The amount of Rs.6,82,968/-- was received by the in the following year. As rightly pointed o1_.it;V---- . authorities, when the assessee fc$_11o\V2V\4fi'11Vg maintenance of books of accounts. on in_er.c_antiIe._. basis, accounting and reflectuig on"1'»ecei.pt_:
not proper and iherefoimj, rigti'tIyAt:I1e'57~ have' upheld the deductions made.
10. In do not see any merit in this of law raised are the assessee and in favour of the Appfeal is :"dis1n'is--sed.
Sd/-3 JUDGE Sé/=3 JUDGE brn