Income Tax Appellate Tribunal - Ahmedabad
Pragati Trading Co., vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL AT
AHMEDABAD
AHMEDABAD "B"BENCH
Before Shri G.D. Agarwal, Vice-President (AZ) and
Shri Mahavir Singh, Judicial Member
ITA No.3478/ Ahd/2008
[Asstt.Year 2005-06]
M/s. Pragati Trading Co. -vs- Income Tax Officer
Nr. Sardar Patel Statue W ard-2, Anand
At Valsan-388326
Dist. Anand
P AN No. AACFP2381B
(Appellant) (Respondent)
Revenue by : Shri H.P. Meena, SR-DR
Assessee by: Shri N.C. Amin, AR
ORDER
PER Mahavir Singh, Judicial Member:-
This appeal by assessee is arising out of the order of Commissioner of Income-tax (Appeals)-IV, Baroda in appeal No.CAB/IV-A-134/07-08 dated 19- 09-2008. The assessment was framed by ITO, Ward-2, Anand u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') vide his order dated 30-09-2007 for the assessment year 2005-06.
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of expenditure of transport and carting expenses at Rs.8,87,012/- for non-deduction of TDS in view of the provisions of Section 40(a)(ia) of the Act. For this, assessee has raised the following effective ground No.1-8:-
"1. That the learned CIT(A) has erred both in law and on the facts of the case in confirming the order of the learned A.O. ITA No.3478/Ahd/2008 A.Y. 2005-06 M/s. PRagati Trading Co. v. ITOWd-2, Anand Page 2
2. On facts and circumstances of the case of the appellant there is no oral or written contract and as such Sec. 194C is not applicable and therefore Sec.40(a)(ia) applied and carting expenditure of Rs.8,87,012/- disallowed by the learned A.O and confirmed by CIT(A) is not legal and valid in law.
3. That the appellant has filed Paper Book with documentary evidences and decision of High Court and Tribunal, without considering it, in proper perspective, the order of learned A.O confirmed by CIT(A) is contrary to the provisions of the Act.
4. That the learned A.O on presumption of contract U/s 194C and has disallowed carting expenditure of Rs.8,87,012/- Us 40(a)(ia) and confirmed by CIT(A) holding it as oral contract is against the documentary evidences lying on record which deserves to be deleted.
5. On facts and in law there is o violation of Sec. 194C and as such Sec. 49\0(a)(ia) is not applicable. In this regard the appellant has filed rectification application to the learned CIT(A)-IV, Baroda. The additions of Rs.8,87,012 confirmed by CIT(A) be deleted.
WITHOUT PREJUDICE
6. That the learned CIT(A) has confirmed the disallowance of opening Credit Balance of Rs.1,24,014/- in the Account of Bharat Roadlines, Kolkatta which is bad in law, illegal and void deserves to be deleted.
7. That the learned A.O as well as learned CIT(A) has failed to appreciate the facts that the consignor itself is arranging for transportation of goods to Valasana and as such there is no contract U/s 194C and hence question does not arise for disallowance U/s 40(a)(ia) of the I.T. Act 1961.
8. That the interest charged U/s 234B & 234C by the learned A.O and confirmed by CIT(A) is contrary to the provisions of the Act. The appellant has not committed default of Sec. 207 to 219 of the I.T. Act 1961."
3. The brief facts leading to the above issue are that the return of income was field on 14-10-2005 declaring total income at Rs.11,457/-. The Assessing Officer noted that the assessee had paid the following amounts for transportation on goods.
Name of the Transporter Payment (in Whether TDFS
deducted u/s
ITA No.3478/Ahd/2008 A.Y. 2005-06
M/s. PRagati Trading Co. v. ITOWd-2, Anand Page 3
Rs) 194C of the Act.
Bharat Road Line 3,82,824/- Nil
Arvind Roadways 32,811/- Nil
Sharma Roadways 4,42,456/- Nil
Roadco (India) Corpt. 82,921/- Nil
Total 8,87,012/-
The assessee stated that it is a partnership firm doing business in trading in old and new gunny bags and it had shown purchase of bardan with carting expenses in the trading account but Assessing Officer has presumed that the assessee has entered into a contract with the above four parties and since such is not the situation, TDS has not been deducted. Ld. counsel for assessee submitted individual explanations for each of the transporters for failure to deduct tax at source. The common reason submitted by Ld counsel for the assessee is that none of the parties who have been transporting goods is owning any truck and there is no oral or written contract with them and if a contract existed, then the freight at different rates would not have been paid. Since the amount paid to each truck owner does not exceed Rs.50,000/- and provisions of sub-section (1) of Section194C are not attracted. According to Assessing Officer the provisions of Section 194C are applicable to the assessee and accordingly he disallowed the entire amount of transportation expenses by invoking the provision of u/s.40 (a)(ia) of the Act. Aggrieved, assessee preferred appeal before CIT(A) and CIT(A) also confirmed the action of Assessing Officer by giving following finding in para-5 of his appellate order:-
"5. I have considered the submissions of the A.R and the assessment order. The appellant is transporting goods from Calcutta to Valasan. Transportation of goods takes place through the four parties i.e. Bharat Road Line, Calcutta, Roadco 9India) Corporation, Kolkota, Arvind Roadways, Siliguri and Sharma Roadways, Siliguri. It is only through these transporters that he goods are transported from Kolkata to Valasana. Therefore, it is established that the assessee has a contract be it oral with the above four parties. Section 194C states that any ITA No.3478/Ahd/2008 A.Y. 2005-06 M/s. PRagati Trading Co. v. ITOWd-2, Anand Page 4 person responsible for paying any sum to any resident hereafter in this section referred to as the contractor for carrying out any work including supplying of labour in pursuance of a contract shall at the time of credit of such sum to the account of the contractor, or at the time of payment thereof which ever is earlier deduct income tax on such amounts. It is a fact that the appellant was responsible for paying a sum to the above transporters who are residents and who have carried out work for the appellant. This work has been carried out in pursuance of an oral contract for transporting the goods from Kolcota to Valasan. The fact that they are at the owner of the trucks is not material. The appellant should have deducted tax at source on transportation expenses. Since he failed to do so, the provisions of section 40(a)(ia) become applicable. The Assessing Officer was justified in holding that the assessee had contravened the provisions of section 194C and making an addition of Rs.8,87,012/- under section 40(a)(ia) of the Income tax act. The addition is confirmed."
4. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the above facts that it is a partnership firm doing business in trading in old and new gunny bags and it had shown purchase of bardan with carting expenses in the trading account but Assessing Officer has presumed that the assessee has entered into a contract with the above four parties and since such is not the situation, TDS has not been deducted. We find that the assessee before the lower authorities have filed individual explanations for each of the transporters for failure to deduct tax at source. The common reason stated by the assessee is that none of the parties who have been transporting goods is owning any truck and there is no oral or written contract with them and if a contract existed, then the freight at different rates would not have been paid. We further find that Tribunal in assessee's sister concern's case in ITA No.3422/Ahd/2008 dated 18-09-2009 in the case of M/s Pramukh Jute Traders v. ITO Ward-2, Anand, wherein vide para-3 has allowed the claim of assessee, which is being reproduced as under:-
"3. It is the contention of the assessee that the transporters were engaged by agents in Calcutta and the assessee was merely paying the transport charges to them and that there was no transport contract between the assessee and the transporters named above. It was therefore submitted that there was no liability to deduct tax under ITA No.3478/Ahd/2008 A.Y. 2005-06 M/s. PRagati Trading Co. v. ITOWd-2, Anand Page 5 Section 194C. We find that the contention is correct. At page 9 of the paper book the assessee has placed a copy of the account of Bharat Roadlines for the period ended 31-3-2005. which shows that there was four payments aggregating to Rs.1,27,408/-. The bills of Bharat Roadlines placed pages 11 to 15 of the paper book show the names of the jute mills in Calcutta from where the jute goods were transported. From these bills it appears to us that it was the jute mills which engaged the transporters through agents in Calcutta and the assessee was required to pay the transport charges. The material on record does not show the existence of any transport contract between the assessee and the transporters. The same is the case with Roadco (India) Corporation, Calcutta to whom the assessee has paid the transport charges of Rs.44,792/-. The bills at pages 18 and 19 do not show that there was any contract for transport between the assessee and the transporters. These the single trips. Circular No.715 dated 8-8-1995 issued by the CBDT shows that each goods receipt can be considered to be a separate contract if the goods are transported at one time. This requirement is satisfied as can be seen from the bills issued by the transporters. The order of the Mumbai Bench of the Tribunal in City Transport Corporation Vs. ITO dated 12-9-2006 in ITA Nos.7708 to 7711/Mum/2003 (copy placed at page 46 of the paper book) and the judgment of the Punjab and Haryana High Court in CIT Vs. United Rice Land Limited dated 12-45-2008 in IT Appeal No.638 of 2007 (copy filed at page 41 of the paper book) support the assessee's case. In these circumstances we hold that the assessee was not liable to deduct tax under Section 194C from the transport charges. Consequently, section 40(a)(ia) is not attracted. The transport charges of Rs.1,72,200/- is accordingly, directed to be allowed. The transport charges of Rs.1,72,200/- is accordingly directed to be allowed. The grounds are allowed."
We find that facts are exactly similar in the present case, what was before the Tribunal in the case of M/s.Pramukkh Jute Traders (supra). Respectfully following the same, we allow the claim of assessee and this issue of the assessee's appeal is allowed.
5. In the result, assessee's appeal is allowed.
Order pronounced on this day of 26th Nov, 2010
Sd/- Sd/-
(G.D.Agarwal) (Mahavir Singh)
(Vice President) (Judicial Member)
Ahmedabad,
Dated : 26/11/2010
ITA No.3478/Ahd/2008 A.Y. 2005-06
M/s. PRagati Trading Co. v. ITOWd-2, Anand Page 6
*Dkp
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-IV, Baroda
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
/True copy/
Deputy/Asstt.Registrar
ITAT, Ahmedabad