Income Tax Appellate Tribunal - Amritsar
The Assistant Commissioner Of Income ... vs M/S J&K Co-Operative Supply & Marketing ... on 14 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND
SH.N.K.CHOUDHRY, JUDICIAL MEMBER
I.T.A No.100(Asr)/2017
Assessment Year: 2008-09
The Assistant Commissioner of Vs. M/s. J & K Co-operative Supply &
Income Tax, Circle-2, Marketing Federation Ltd.,
Rail Head Complex, B. C. Road, Jammu.
Panama Chowk, Jammu.
PAN:AAAAT-088IB
(Appellant) (Respondent)
Appellant by: Sh. Rahul Dhawan (DR.)
Respondent by: None.
Date of hearing: 04.05.2017
Date of pronouncement:14.07.2017
ORDER
PER T. S. KAPOOR (AM):
This is an appeal filed by Revenue against the order of Ld. CIT(A)-
Jammu dated 28.10.2016, for Asst. Year: 2008-09.
2. The Revenue has taken the following grounds of appeal.
• Whether the Ld. CIT(A) was right in law and fact in deleting the addition amounting to Rs.59,28,667/- made by the AO for violation of provisions of section 40(a) (ia) of the I.T. Act, 1961.
• Whether the Ld. CIT(A) was right in law and fact in applying the decisions of the Hon'ble Punjab & Haryana High Court in case of CIT Vs. United Rice Land Mills Ltd., 217 CTR 332 (P&H) and ITAT, Amritsar decision in the case of ITO Vs. Indian Road Lines in ITA No.80/(Asr)/2010 reported in 45 DTR (Asr)/(Trib)49 and CBDT circular No. 715.
• The department has already filed an appeal before the Hon'ble High Court of J&K on the same issues in the case of the assessee itself for the A.Y. 2006-07.
2 ITA No.100(Asr)/2017Asst. Year: 2008-09
3. No one was present on behalf of assessee, however, vide letter dated 03.05.2017, the assessee had filed written submissions whereby it had submitted that the case of the assessee was squarely covered by the order of Amritsar Bench in its own case in ITA No.527(Asr)/2014 for Asst. Year:2006-07 wherein similar issue has been decided in favour of assessee. It was submitted that since the issue under appeal was squarely covered by the judgment of this Bench, therefore, it was prayed that the appeal of the Revenue may be dismissed.
4. The Ld. DR was confronted with these facts. The Ld. DR however, heavily placed his reliance on the order of Assessing Officer.
5. We have heard the Ld. DR and has gone through the material placed on record. We find that the appeal of Revenue was earlier decided by Hon'ble ITAT, Amritsar Bench and Hon'ble Bench had restored the issue to Assessing Officer by holding as under:
"Therefore, the fact remains that the assessee is required to produce the details along with GRs and copy of account of each individual to whom payments have been made and the AO has to find out whether it is a continuing contract strictly in accordance with the Circle No.715 dated 08.08.1995 of CBDT and provisions contain in the section 194C of the Acts and accordingly decide the issue de novo but by affording adequate opportunity of being heard to the assessee. Thus, the whole issue is set aside to the file of AO to decide the same de novo as per our directions hereinabove."
Therefore, in view of the above directions of Hon'ble Tribunal, the Assessing Officer again issued notices to the assessee and required the assessee to file reply to the questionnaire issued and assessee was also required to file details in respect of Freight charges paid and was asked 3 ITA No.100(Asr)/2017 Asst. Year: 2008-09 as to whether TDS was deducted on these payments. In response to this, the Ld. AR of the assessee filed the party wise details of freight paid in excess Rs.50,000/- and also filed written submissions. The Assessing Officer, however, after noting down the written submissions made addition u/s 40(a)(ia) by recording as under:
"6. After considering the submissions made on behalf of the assessee society with reference to the facts of the case, I hold that the assessee was required to deduct the Income Tax at source where ever payment in excess of Rs.50,000/- was made to Truck owners in a year. Total Freight payments paid in excess of Rs.50,000/- to the Truck Owners comes to Rs.59,28,667/- which has been worked as per details given in the Annexure "A" forming part of the assessment order, on which tax was required to be deducted neither deducted under section 194C of the Income Tax Act, 1961 but assessee had neither deducted the tax nor deposited the same in the Central Government account within the prescribed period of time. Therefore, the payment of Rs.59,28,667/- made by the assessee society in contravention of the provisions of section 194C of the Income Tax Act, 1961 does not quality for deduction and as such, same is disallowed, keeping in view the provisions of section 40(a)(ia) of the Income Tax Act, 1961 which would result in disallowance of Rs.59,28,667/- under this head. Penalty proceedings u/s 271(1)(c) are being initiated separately u/s 271(1)(c) of the Income Tax Act,1961 for furnishing inaccurate particulars of income."
The Ld. CIT(A) deleted the disallowance by holding that there was no specific contract and AO had not brought anything on record any specific contract with Truck Owners. We further find that the findings of the Ld. CIT(A) are correct as the Assessing Officer did not comment on the detailed reply filed by assessee wherein it has stated that there was no specific contract and the society had arranged individual trucks as per its requirement, keeping in view the load to be transported at different destinations. The reply filed by the assessee as reproduced by Assessing Officer is reproduced herein below.
4 ITA No.100(Asr)/2017Asst. Year: 2008-09 "The Assessee Society has paid Freight on account of transportation of fertilizer on behalf of Government of India to different locations of Jammu & Kashmir. The racks of Fertilizers unloaded at Railway station is to be transported to different locations within the prescribed stipulated period of time. For transportation of the same the Assessee Society arranges individual trucks as per its requirement keeping in view the load to be transported at different destinations. Since the Society engaged in the transportation business of fertilizer does not own any truck, it has to hire the truck from the local market every time as and when there is requirement for the same. The Society has paid the freight only to the said hired individual truck drivers/ truck owners. The freight paid to the truck drivers/ owners vary from time to time which fluctuates due to demand and supply as the society has not entered into in any specific contract for any specific period with any of the truck owners/ drivers. Neither the assessee society has made any sought of requisition for hiring truck to any truck union, nor any contract either orally or written has been executed by the Society with any Transport Co. or Transport Contractor for any specified period or for any specified quantity or any pre agreed specified rate hence each trip is a separate contract.
The very fact that different rates of transportation are paid to same truck driver/ owners in any given financial year shows there cannot be a continuous contract for the year under consideration. Hence the rated fixed with any truck driver/ owner was restricted to any single trip only after which a fresh rate would be negotiated depending on the prevailing market condition and the Society may or may not hire the said truck owner again depending on the rate quoted by him. It is to further submit that the challans are very voluminous, however, complete challan for transporting the goods for produce for your verification and sample challans numbering from page 1 to page no. 389 are enclosed herewith for your kind perusal.
On the perusal of the provisions of Sec. 194C reveals that tax is to be deducted at source where any sum is paid for carrying out any work in pursuance of contract between the contractor and various persons mentioned in various clauses under sub s.1 of Sec. 194C. Sub s. (3) provides that no deduction shall be made where the amount to be paid or credited does not exceed Rs.20,000/-. It has been clearly clarified by CBDT vide Circular No. 715 dated 08-08/1995 in answer to:
"Question 9. In the case of payments to transporters, can each GR be said to be separate contract, even though payments for several GRs are made under one bill ?
Answer: Normally, each GR can be said to be a separate contract, if the goods are transported at one time. But if the goods are transported continuously in pursuance of a contract for a specific period of quantity, each GR will not be a separate contract and all GRs relating to that period or quantity will be aggregated for the purpose of the TDS".5 ITA No.100(Asr)/2017
Asst. Year: 2008-09 From the said clarification by CBDT Circular 715 (supra), it is clear that if contracts are with truck owners/ drivers and GR is a separate then the payment made for that truck has to be treated as a separate payment. The assessee Society has paid freight to the trucks owner/ drivers, for each truck they have made separate payments because each truck was for separate destination. Therefore, it is contended that s. 194C is not applicable since there was no written or oral agreement with any truck owner and no freight charges was paid to them in pursuance of a contract for specified period, quantity or price. Further submitted that the details of the freight paid was filed before the AO at the time of original assessment, there are more than 10000 trips approx were made for transporting the good (Fertilizer). From the said details, it does not indicate the trips were made continuously under a contract. Merely because certain trucks were hired on certain occasion, it does not lead to conclusion that all the trips were made continuously under the specific contract. Admittedly, there is no specific contract.
The case of the assessee is squarely covered by the jurisdictional ITAT Bench Amritsar, in the case oflTO vs Indian Road Lines ITA No. 80/Asr/2010 reported in 45 DTR (Asr)(Trib) 49 in which it is held that CIT(A) rightly accepted the contention of the assessee that each job undertaken by a truck owner is a separate job for the same person, at different rates and terms, hence the different jobs will not turn into single contract. Only if goods are transported continuously in pursuance of a contract for specific period or quantity, that all the GRs relating to that period or quantity will be the truck owners for specified quantity, period or price, there was infirmity in the order of CIT(A) deleting the disallowance under s. 40(a)(ia).
The Assessee has further placed reliance on the following judgments:
COMMISSIONER OF INCOME TAX vs UNITED RICE LAND LTD. (2008) 217 CTR (P&H) 332 wherein it is held that payment to transporters for arranging trucks has recorded a finding of fact that there was neither any oral or written agreement between the assessee and the transporters for carriage of goods nor it has been proved that any freight charges were paid to them in pursuance of a contract for a specific period, quantity or price - Tribunal too has clearly stated that nothing has been brought on record by the AO to prove that there was written or oral agreement between the parties for carriage of goods. Therefore, assessee was not liable to deduct tax under s.194C from payments made to the transporter.
INCOME TAX OFFICER vs. BHOURKA ROADLINES LTD. (2008) 115 TTJ (Mumbai) 383 wherein is held that Assessee engaged trucks through agents and suppliers and for each truck they have made separate payment because each truck was for separate destination, therefore it cannot be said that there was contract between the supplier and not with the truck owners/ drivers. CITY TRANSPORT CORPN vs. INCOME TAX OFFICER (2007) 13 SOT 479 (Mumbai) wherein it is held that there being no material to show that all the trips for transporting goods were under a single contract and payment for each trip being less than Rs. 20,000/-, the provisions of s. 194C were not attracted. This position is made clear by CBDT Circular No. 715 dated 08 Aug. 1995.6 ITA No.100(Asr)/2017
Asst. Year: 2008-09 In view of the aforesaid discussions, the Provisions of sec. 194C could not be invoked since payment for each trip was less than Rs. 20,000/- and the disallowance made under section 40(a)(ia) of the Act may please be deleted. "
4. The facts of the case laws relied upon by the AR are quite different from the facts of the case of assessee society and as such same are distinguishable. The assessee has produced some of the GR from Page No. 1 to Page 389 which have been test cheeked and are placed on record.
5. It was seen from the record that the assessee was transporting mostly fertilizer from Jammu Railway Station. In normal course the vendors are under obligation to engage the trucks from the J&K state transport union .The truck union used to penalize the truck owner who were engaged by the customer from the open market without the knowledge of the union. As per the norms of the truck union, the trucks were sent on the basis of waiting list available with them. As the no of trucks in a union are in thousand nos. and repetition of the same truck is not possible within a short span of time. However, the list of vehicles provided by the assessee , there are many instances in which same truck has been used for carriage purposes by the assessee .It is clear that the assessee company had entered into a contract with the trucks and the transport is being carried by these trucks . Therefore, the contention of the assessee that no contract exists between the owner of the truck is not tenable in the background of these facts. Though, each GR can be said to be a separate contract, if the goods are transported at one time. But if the goods are transported continuously in pursuance of a contract for a specific period of quantity, each GR will not be a separate contract and all GRs relating to that period or quantity will be aggregated for the purpose of the TDS Thus, keeping in view above facts, the assessee was liable to deduction tax on this amount and which has resulted in contravention of section 194 C of the Income Tax Act, 1961."
The Assessing Officer has not commented on these submissions.
We further find that the Ld. CIT(A) has relied on the Amritsar Bench decision for Asst. Year:2006-07 in the case of assessee itself and has also relied on CBDT Circular No.715 dated 08.08.1995 and has also relied on the judgment of Punjab & Haryana High Court in the case of CIT Vs. United Rice Mills Ltd. 217 CTR 332 and we find that ITAT Amritsar Bench in ITA No.527(Asr)/2014 vide its order dated 10.12.2015 in the case of assessee itself has dismissed the appeal of Revenue on 7 ITA No.100(Asr)/2017 Asst. Year: 2008-09 similar grounds. For the sake of completeness, the findings of the Hon'ble Tribunal is reproduced below.
"We have heard the rival parties and have gone through the material placed on record.. As regards the first issue, we find that the Assessing Officer had made an addition of Rs.3,44,20,003/-, on account of payments of freight paid to Truck owners. The learned CIT(A), on the other hand, has recorded a finding of fact that out of said amount the amount exceeding Rs.20,000/- was amounting to only Rs.13,24,344/- on which he had upheld the addition made by Assessing Officer. Regarding the balance amount the leaned CIT(A) has relied upon the case laws of CIT vs. United Rice Land Mills Ltd. 217 CTR 332 and also relied on the case laws of M/s Indian Road Lines 45 DTR 49 decided by ITAT, Amritsar Bench, Amritsar. We further find that the CBDT vide Circular No.715 date 8.8.1995 in an answrer to question no.9 relating to clubbing of separate GRs for the purposes of treating as one contract had replied as under:
"Normally each GR can he said to be a separate contract if the goods are transported at one time but if the goods are transported continuously in pursuance of contract for specific period of quantity, each GR will not be a separate contract and all GRs related to that period or quantity will be aggregated for the purposes of TDS.
From the above said Circular issued by CBDT it is clear that if contract was with different Truck owners/Drivers and the goods are not transported in pursucance of a specific contract then payments to different Truck: owners/ Driver will he treated as separate contracts/'' In the present case the assessee has paid freight to Truck owners for each truck separately as each truck was headed for a separate destination and no payment was made for a consolidated contract. The Hon'be Punjab & Haryana High Court in the case of CIT vs. United Rice Land Mills Ltd, 217 CTR 332(P&H) has recorded a finding of fact that where there was neither any written agreement between the assessee nor where it is proved that freight charges were paid to them in pursuance of a contract for a specific period, quantity or price, the individual payments made to separate Truck owners cannot be said to have been made in pursuance of a contract. The learned CIT(A) has also recorded a finding of fact that the fact of not entering a specific contract was also brought to the notice of AO during the assessment proceedings which he did not consider. He also held that the Assessing Officer could not bring on record anything to prove that the payments to Truck owners were made in pursuance of any agreement. In view of the above, we do not see any infirmity in the order of CIT(A), therefore, the ground Nos.l and 2 are dismissed."8 ITA No.100(Asr)/2017
Asst. Year: 2008-09 In view of the above facts and circumstances and in view of the judicial precedents, we do not find any infirmity in the order of Ld. CIT(A), therefore, the appeal filed by the Revenue is dismissed.
6. In view of the above, the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on 14.07.2017.
Sd/- Sd/-
(N.K.CHOUDHRY ) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated:14.07.2017.
/PK/ Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By order