Income Tax Appellate Tribunal - Ahmedabad
Kataria Movers, Ahmedabad vs Assessee on 6 October, 2016
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ ।
IN THE INCOME TAX APPELLATE TRIBUNAL,
"B" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI AMARJIT SINGH, ACCOUNTANT MEMBER
Sr. ITA No. and Appellant Respondent
No. Asstt.Year Vs
1-2 1988/Ahd/2012 with DCIT, Cir.9 Vs. M/s.Kataria Movers
CO 227/Ahd/2012 Ahmedabad. Kataria Premises
A.Y.2005-2006 Nr. Prem Darwaja,
Dariapur, Ahmedabad.
PAN : AAEFK 1481 D
3-4 1990/Ahd/2012 with DCIT, Cir.9 Vs. M/s.Kataria Transport
CO 228/Ahd/2012 Ahmedabad. Kataria Premises
A.Y.2005-2006 Nr. Prem Darwaja,
Dariapur, Ahmedabad.
PAN : AAIFM 5900 B
5-6 2004/Ahd/2012 with ITO, Ward-9(4) Vs. M/s.Kataria Logistic
CO 229/Ahd/2012 Ahmedabad. Service
A.Y.2005-2006 Kataria Premises
Nr. Prem Darwaja,
Dariapur, Ahmedabad.
PAN : AAEFK 6542 K
Revenue by : Shri Jagdish, CIT-DR
Assessee by : Shri T.P. Hemani, AR
सन
ु वाई क तार ख/ Dateof Hearing : 06/09/2016
घोषणा क तार ख / Date of Pronouncement: 06/10/2016
आदे श/O R D E R
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.
ITA No.1988/Ahd/2012 (6 Appeals) 22. 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 Rs.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 Rs.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 that the order of the Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.
ITA No.1990/Ahd/2012 (Kataria Transport & Co.)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 Rs. 1,65,64,178/-.
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 Rs.2,42,15,122/-.
3) The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the disallowance of interest expenses u/s. 40(a)(ia) of the Act amounting to Rs. 52.800/-.
4). 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.
5). It is therefore, prayed that the order of the Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.
ITA No.2004/Ahd/2012 (Kataria Logistics Services)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 Rs.1,11,73,780/-
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 Rs.1,65,77,280/-
ITA No.1988/Ahd/2012 (6 Appeals) 33. 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 that the order of the Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.
3. Facts on all vital points are common. For the facility of reference, we take up the facts from ITA No.1988/Ahd/2012 i.e. in the case of M/s.Kataria Movers, because parties have advanced their arguments mainly on this appeal.
4. Brief facts of the case are that the assessee has filed its return of income on 30.10.2015 declaring total income at Rs.49,44,230/-. The case of the assessee was selected for scrutiny assessment and assessment order was passed on 26.12.2007. The ld.AO has determined the taxable income of the assessee at Rs.4,40,99,680/-, as against returned income of Rs.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 Rs.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 Rs.3,06,11,221/-.
ITA No.1988/Ahd/2012 (6 Appeals) 45. Brief facts of the case, with regard to this issue are that the assessee has carried out transportation business at Bellary in Karnataka. It has debited freight charges in the profit & loss account at Rs.27,98,77,049/-. In the assessment order, the ld.AO has observed that the assessee failed to deposit TDS amount deducted by it in the government treasury, and also failed to deduct TDS on freight charges paid by it to other transporters. Before the ld.CIT(A), in the original proceedings, the assessee has field written submissions vide letter dated 10.11.2008. In this letter, the assessee has bifurcated the amounts of freight. This bifurcation reads as under:
" Total Freight debited in Profit and Loss Account Rs. 27,98,77,049 Less : Freight on which assessee deducted TDS Rs. 24,84,28,538 Rs. 3,14,48,511 Freight on which assessee did not deducted tax at source in view of the fact that the assessee had no contract with the said truck owners and payments being less than Rs 50,000 in respect of individual trucks Rs. 3,08,31,940 Balance freight representing debit notes on account if weight difference / claims etc. subsequent to issue of LR Rs. 6,16,571 Similarly, Freight of Rs 3,08,31,940 being paid less than Rs. 50,000 in respect of individual trucks for which there was no contract by the assessee and Rs. 6,16,571 debited to freight account on account of various claims subsequent to issue of LR such as claim on account of weight difference etc. are not required to be considered for disallowance u/s. 40a(ia) of the Act. Only freight of Rs. 24,84,28,538 is required to be considered for the allowability or disallowability u/s. 40a(ia) of the Act....."
6. The ld.CIT(A) made an analysis of submissions given by the assessee. According to the ld.CIT(A), the assessee has contended that only a sum of Rs.24,84,28,538/- could have considered for allowability or disallowability 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 ITA No.1988/Ahd/2012 (6 Appeals) 5 deposited TDS amount in the government account, before the date of filing of return. This amount was quantified by the assessee at Rs.21,45,17,315/-. The ld.CIT(A) has debited this amount from total amount on which TDS deducted by the assessee i.e. Rs.24,84,28,538/-. In this way, an amount of Rs.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, tax has been deducted at source and deposited before due date of filing of the return of income, no disallowance could be made under section 40(a)(ia). Difference between the position of law, when the ld.CIT(A) has passed the order on 12.12.2008 in the first round, and in the present round when the CIT(A) has passed the impugned order on 21.6.2012 is that earlier TDS was deducted in the month of March, but was deposited in the government account before due date of filing of return, then disallowance cannot be made. In other words, earlier exemption was granted for the payment made in the month of March, on which TDS was deducted. But after 2010, it has been provided that even if TDS of any month is being paid before the due date of filing of return, then also disallowance under section 40(a)(ia) would not be made. The ld.CIT(A), following the decision of the ITAT, Ahmedabad Bench in the case of Shri Kanubhai Ramjibhai Makwana Vs. ITO, 44 SOT 264 (Ahd) has deleted disallowance of Rs.3,39,11,223/-. This deletion has been challenged by the Revenue in ground no.1.
7. In the second ground, the Revenue has pleaded that the ld.CIT(A) has erred in deleting the addition of Rs.3,06,11,221/-. The ld.CIT(A) in the first ITA No.1988/Ahd/2012 (6 Appeals) 6 round of appeal had issued a notice to the assessee inviting its explanation as to why an amount of Rs.3,14,48,511/- should not be disallowed under section 40(a)(ia) of the Act. The assessee has given its explanation which was not accepted. In the set aside proceedings, the assessee has again given its explanation, which has been reproduced by the ld.CIT(A) on page no.12 of the impugned order. We deem it appropriate to take note of this submission which read as under:
"(7.2) (a) In respect of ground related to disallowance u/s 40(a)(ia) of the Act, the following disallowance were made :
Sr. Particulars Amount in Rs.
No.
1 Disallowance made by the Id. AO 3,39,11,223/-
confirmed by the CIT(A)
2 Enhancement made by Your Honours in 3,14,48,511/-
first round
Total 6,53,59,734/-
(b) The appellant submitted that:
"So far as Sr. No. 1 i.e disallowance of Rs. 3,39,11,223/- 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 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 Rs.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 ITA No.1988/Ahd/2012 (6 Appeals) 7 nature and therefore the same is applicable for the year under consideration and accordingly no disallowance can be made in this count also. Reliance is placed on the order of Jurisdictional Ahmedabad Tribunal in the case of ShriKanubhaiRami'ibhaiMakwana vs. ITO reported in 44 SOT 264 (Ahd.)"
"So far as Sr.No.2 of above table i.e enhancement of disallowance of Rs.3,14,48,5117-is concerned, the Appellant submits as under:
> Freight on Individual Trucks - Rs.3,08,31,940/-
For the year under consideration, the Appellant has incurred freight amount of Rs.3,08,31,940/-paid to Individual Trucks. The Appellant submits that as per the provisions of sub-section (3) of S.194C of the Act applicable to the year under consideration, the Appellant was not required to deduct tax at source on any sum credited or paid in pursuance of any contract the consideration of which does not exceed Rs.20,000/-.
For ready reference, provisions of sub-section (3) to Section 194C of the Act is reproduced hereunder:
"(i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees"
However, with effect from 01/10/2004, the law has undergone a change by the Finance Act, 2004 which provides as under:
"(1) the amount of any sum credited or' paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees:
Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited 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, sub- section (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 Rs.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 ITA No.1988/Ahd/2012 (6 Appeals) 8 Rs.20,000/- in single transaction and Rs.50,000/- in aggregate, than the Appellant was not required to deduct tax at source.
Therefore, the Appellant has bifurcated an amount of Rs.3,08,31,940/- in to two periods viz. period from 01/04/2004 to 30/09/2004 and 01/10/2004 to 31/03/2005, which is Rs.1,55,86,430/- and Rs.1,52,45,510/- respectively.
The Appellant further submits out of an amount of Rs.1,55,86,430/- for the period of 01/04/2004 to 30/09/2004, an amount of Rs.47,54,720/- is pertaining to an amount which is in excess of Rs.20,000/- per contract on which the Appellant has not deducted tax at source, whereas balance amount of Rs.1,08,31,718/- is aggregate of an amount which is not exceeding an amount of Rs.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 Rs.1,52,45,510/-, an amount of Rs.1,12,54,970/- is pertaining to aggregate amount which is in excess of Rs.50,000/- on which tax is not deducted at source, where the balance amount of Rs.39,09,540/- is pertaining to aggregate amount which is not in excess of Rs.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 Appellant submits as under:
Particulars 01/04/2004 to 01/10/2004 to
30/09/2004 31/03/2005
Aggregate of an amount 47,54,720/- ---
which is in excess of
Rs.20,000/- per contract
on which tax is not
deducted at source. (Pl.
refer Annexure- I)
Aggregate of an mount -- 1,12,54,970/-
which is in excess of
Rs.50,000/- per
contractor on which tax
is not deducted at
source. (Pl. refer
Annexure - K)
ITA No.1988/Ahd/2012 (6 Appeals)
9
Aggregate of an amount 1,08,21,710/- --
which is not in excess of
Rs.20,000/- per contract
on which tax is not
required to be deducted
at source.
Aggregate of an amount 39,09,540/-
which is not in excess of
Rs.50,000/- per
contractor on which tax
is not required to be
deducted at source.
Total 1,55,86,430/- 1,52,45,510/-
Balance freight representing debit notes - Rs.6,16,571/-.
Copy of details of freight representing debits notes of Rs.6,16,571/-.is enclosed herewith marked as "Annexure - I", on which the tax is not required to be deducted at source under the scheme of the Act"
8. Now, we take the facts from ITA No.2004/Ahd/2012 in the case of Kataria Logistic Service. In this case also a total disallowance of Rs.2,77,51,060/- was sought to be made under section 40(a)(ia) of the Act. Out of this amount, a sum of Rs.1,65,77,280/- is the amount which was intended to be enhanced by the ld.CIT(A) in its order dated 12.12.2008. Explanation of the assessee in this case also reproduced by the ld.CIT(A) at page no.12 in para 7.12. It reads as under:
"(7.2) (a) In respect of ground related to disallowance u/s 40(a)(ia) of the Act, the following disallowance were made :
Sr. Particulars Amount in Rs.
No.
1 Disallowance made by the Id. AO 1,11,73,780/-
confirmed by the CIT(A)
2 Enhancement made by Your Honours in 1,65,77,280/-
first round
Total 2,77,51,060/-
ITA No.1988/Ahd/2012 (6 Appeals)
10
(b) The appellant submitted that:
"So far as Sr. No. 1 i.e disallowance of Rs. 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 Rs. 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 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 also. Reliance is placed on the order of Jurisdictional Ahmedabad Tribunal in the case of ShriKanubhaiRami'ibhaiMakwana vs. ITO reported in 44 SOT 264 (Ahd.)"
"So far as Sr.No.2 of above table i.e enhancement of disallowance of Rs.1,54,61,412/-is concerned, the Appellant submits as under:
> Freight on Individual Trucks - Rs.1,54,71,412/-
For the year under consideration, the Appellant has incurred freight amount of Rs.1,54,61,412/- paid to Individual Trucks. The Appellant submits that as per the provisions of sub-section (3) of S.194C of the Act applicable to the year under consideration, the Appellant was not required to deduct tax at source on any sum credited or paid in pursuance of any contract the consideration of which does not exceed Rs.20,000/-.
For ready reference, provisions of sub-section (3) to Section 194C of the Act is reproduced hereunder:ITA No.1988/Ahd/2012 (6 Appeals) 11
"(i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees"
However, with effect from 01/10/2004, the law has undergone a change by the Finance Act, 2004 which provides as under:
"(1) the amount of any sum credited or' paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees:
Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited 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, sub- section (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 Rs.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 Rs.20,000/- in single transaction and Rs.50,000/- in aggregate, than the Appellant was not required to deduct tax at source.
Therefore, the Appellant has bifurcated an amount of Rs.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 Rs.41,77,926/- and Rs.1,12,83,486/- respectively.
The Appellant further submits out of an amount of Rs.41,77,926/- for the period of 01/04/2004 to 30/09/2004, an amount of Rs.8,86,602/- is pertaining to an amount which is in excess of Rs.20,000/- per contract on which the Appellant has not deducted tax at source, whereas balance amount of Rs.32,91,324/- is aggregate of an amount which is not exceeding an amount of Rs.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 Rs.1,12,83,486/-, an amount of Rs.4,18,442/- is pertaining to aggregate amount which is in excess of Rs.50,000/- on which tax is not deducted at source, where the balance ITA No.1988/Ahd/2012 (6 Appeals) 12 amount of Rs.1,08,65,044/- is pertaining to aggregate amount which is not in excess of Rs.50,000/- on which the tax is not required to be deducted at source. Copy of such details is enclosed herewith marked as "Annexure - I and J". In summary, the Appellant submits as under:
Particulars 01/04/2004 to 01/10/2004 to
30/09/2004 31/03/2005
Aggregate of an amount 8,86,602/- ---
which is in excess of
Rs.20,000/- per contract
on which tax is not
deducted at source. (Pl.
refer Annexure- I)
Aggregate of an mount -- 4,18,442/-
which is in excess of
Rs.50,000/- per
contractor on which tax
is not deducted at
source. (Pl. refer
Annexure - K)
Aggregate of an amount 32,91,324/- --
which is not in excess of
Rs.20,000/- per contract
on which tax is not
required to be deducted
at source.
Aggregate of an amount 1,08,65,044/-
which is not in excess of
Rs.50,000/- per
contractor on which tax
is not required to be
deducted at source.
Total 41,77,926/- 1,12,83,486/-
Balance freight representing debit notes - Rs.10,96,067/-
ITA No.1988/Ahd/2012 (6 Appeals) 13Copy of details of freight representing debits notes of Rs.10,96,067/- .is enclosed herewith marked as "Annexure - K", on which the tax is not required to be deducted at source under the scheme of the Act"
9. The facts in the case of Kataria Transport i.e. ITA No.1990/Ahd/2012 on this issue can be gathered from the explanation given by the assessee before the ld.CIT(A). It reads as under:
"(7.2) (a) In respect of ground related to disallowance u/s 40(a)(ia) of the Act, the following disallowance were made :
Sr. Particulars Amount in Rs.
No.
1 Disallowance made by the ld. AO 1,65,64,178
confirmed by the CIT(A)
2 Enhancement made by Your Honours in 2,42,15,122
first round
Total 4,07,79,300
(b) The appellant submitted that:
"So far as Sr. No. 1 i.e disallowance of Rs. 1,65,64,178/- 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 Rs. 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 ITA No.1988/Ahd/2012 (6 Appeals) 14 consideration and accordingly no disallowance can be made in this count also. Reliance is placed on the order of Jurisdictional Ahmedabad Tribunal in the case of ShriKanubhaiRami'ibhaiMakwana vs. ITO reported in 44 SOT 264 (Ahd.)"
"So far as Sr.No.2 of above table i.e enhancement of disallowance of Rs.2,42,15,122/- is concerned, the Appellant submits as under:
Particulars Amount in Rs.
a) Freight on own trucks 1,30,86,314
b) No TDS made on individual trucks 1,08,22,029
c) Balance freight representing debit notes 3,06,779
2,42,15,122
Freight on own truck - Rs.1,30,85,814/-
Under the circumstances, the appellant has utilized own trucks for the purpose of transportation on which freight has been paid Therefore, the appellant submits that provisions of section 194C cannot made applicable in the absence of any contract work.
Copy of details of freight on own truck along with RC book is enclosed herewith marked as "Annexure-F"
> Freight on Individual Trucks - Rs.1,08,22,029/-
For the year under consideration, the Appellant has incurred freight amount of Rs.1,08,22,029/- paid to Individual Trucks. The Appellant submits that as per the provisions of sub-section (3) of S.194C of the Act applicable to the year under consideration, the Appellant was not required to deduct tax at source on any sum credited or paid in pursuance of any contract the consideration of which does not exceed Rs.20,000/-.
For ready reference, provisions of sub-section (3) to Section 194C of the Act is reproduced hereunder:
"(i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees"ITA No.1988/Ahd/2012 (6 Appeals) 15
However, with effect from 01/10/2004, the law has undergone a change by the Finance Act, 2004 which provides as under:
"(1) the amount of any sum credited or' paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees:
Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited 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, sub- section (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 Rs.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 Rs.20,000/- in single transaction and Rs.50,000/- in aggregate, than the Appellant was not required to deduct tax at source.
Therefore, the Appellant has bifurcated an amount of Rs.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 Rs.46,73,017/- and Rs.61,49,012/- respectively.
The Appellant further submits out of an amount of Rs.46,73,018/- for the period of 01/04/2004 to 30/09/2004, an amount of Rs.24,18,866/-is pertaining to an amount which is in excess of Rs.20,000/- per contract on which the Appellant has not deducted tax at source, whereas balance amount of Rs.22,54,151/- is aggregate of an amount which is not exceeding an amount of Rs.20,000/- on which tax is not required to be deducted at source. Copy of such details is enclosed herewith marked as "Annexure - H & I".
Similarly, for the period 01/10/2004 to 31/03/2005, the Appellant submits that out of an amount of Rs.61,49,812/-, an amount of Rs.12,53,039/- is pertaining to aggregate amount which is in excess of Rs.50,000/- on which tax is not deducted at source, where the balance amount of Rs.48,95,973/- is pertaining to aggregate amount which is not in excess of Rs.50,000/- on which the tax is not required to be deducted at source. Copy of such details is enclosed herewith marked as "Annexure -J".
ITA No.1988/Ahd/2012 (6 Appeals) 16In summary, the Appellant submits as under:
Particulars 01/04/2004 to 01/10/2004 to
30/09/2004 31/03/2005
Aggregate of an amount 24,18,866 ---
which is in excess of
Rs.20,000/- per contract
on which tax is not
deducted at source. (Pl.
refer Annexure- I)
Aggregate of an mount -- 12,53,039
which is in excess of
Rs.50,000/- per
contractor on which tax
is not deducted at
source. (Pl. refer
Annexure - K)
Aggregate of an amount 22,54,151 --
which is not in excess of
Rs.20,000/- per contract
on which tax is not
required to be deducted
at source.
Aggregate of an amount 48,95,973
which is not in excess of
Rs.50,000/- per
contractor on which tax
is not required to be
deducted at source.
Total 46,73,017 64,49,012
Balance freight representing debit notes - Rs.3,06,779/-
Copy of details of freight representing debits notes of Rs.3,06,779/- .is enclosed herewith marked as "Annexure - K", on which the tax is not required to be deducted at source under the scheme of the Act"
ITA No.1988/Ahd/2012 (6 Appeals) 1710. The ld.DR while impugning the orders of the ld.CIT(A) contended that in the case of M/s.Kataria Movers, the ld.CIT(A) has relied upon the order of the ITAT, Special Bench decision in the case of Merilyn Shipping & 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 Rs.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 Rs.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 Rs.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. Out of this total amount, the ld.CIT(A) has observed that a sum of Rs.2,34,30,157/- representing the amount on which the assessee has already deducted TDS and deposited in the government treasury. Thus, the ld.CIT(A) has worked out a sum of Rs.7,30,50,000/- as payable on 31.3.2005 on which it is to be seen whether TDS was deductible or not deductible. On this amount, the ld.CIT(A) has applied threshold limit of Rs.20,000/- and Rs.50,000/- i.e. payment required to be made by the assessee to a single truck owner during that year. According to the ld.CIT(A), if the payment of Rs.20,000/- was made as freight charges during the period of 1.4.2004 to ITA No.1988/Ahd/2012 (6 Appeals) 18 31.9.2004, then, the assessee was not required to deduct TDS. Similarly, if aggregate payment does not exceed Rs.50,000/- from 1.10.2004 upto 31.3.2005, then also, the assessee was not required to deduct TDS. In this way, the ld.CIT(A) has confirmed the disallowance at Rs.8,37,290/-. According to the ld.DR, his analysis is inherently wrong, because, it is based on the order of the ITAT, Special Bench decision which has been overruled by the Hon'ble Gujarat High Court. He prayed that this order of the ld.CIT(A) be set aside.
11. On the other hand, the ld.counsel for the assessee has raised three fold submissions. He pointed out that as far as quantification of the total amount in the case of M/s.Kataria Movers at Rs.6,53,59,734/- agitated in both grounds raised by the Revenue, and ground no.1 in the CO of the assessee are concerned, not in dispute. The ld.CIT(A) while making an analysis of this amount has divided it into two parts. The first part pertains to the sum on which the assessee has deducted TDS, but deposited after 31.3.2005. This amount was deposited in the Government treasury before the due date of filing of the return. Therefore, after the amendment carried out in section 40(a)(ia) by way of Finance Act, 2010 no disallowance can be made from this amount. This amount has been quantified at Rs.3,39,11,223/-. This has been impugned in Ground no.1 in the case of M/s.Kataria Movers. Similarly, an amount of Rs.1,11,73,780/- and Rs.1,65,77,280/- have been worked out in the case of Kataria Logistic Service and Kataria Transport Co. respectively. As far as these amounts are concerned, the issues are not in dispute. He relied upon the judgment of the Hon'ble Gujarat 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 ITA No.1988/Ahd/2012 (6 Appeals) 19 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 the accounting year i.e. before 31.3.2005. Therefore, ground no.1 in all three years is rejected.
13. With regard to ground no.2 in all three appeals, the ld.counsel for the assessee has submitted that his rest of two fold submission are relevant. In his first fold of submission, he contended that Hon'ble Calcutta High Court in ITA No.191 of 2009 has held that section 40(a)(ia) is not applicable in the Asstt.Year 2005-06. He placed on record copy of the decision of the Hon'ble High Court. On the strength of this decision, it was contended that the Hon'ble Calcutta High Court has observed that Finance Act, 2004 got Presidential assent on 10.9.2004 and the assessee could not foresee prior to 10.9.2004 that any amount paid to the contractor without deducting tax at source was likely to become non-deductible. In other words, according to the ld.CIT(A) if the amendment carried out in section 40(a)(ia) by way of Finance Act, 2004 was not to be applicable in accounting year relevant to the Assttt.Year 2004-05, then, no disallowance can be made. In his second fold ITA No.1988/Ahd/2012 (6 Appeals) 20 of submission, he contended that the assessee is engaged in the business of transportation. During the course of which, it requires to hire trucks from various persons for transportation. The assessee did not enter into any agreement either oral or written with the truck owners or drivers whose trucks were taken on hire by it. It avails services of such other truck owners only for transportation of goods. The duties of such truck owners or driver is restricted merely to carrying goods from one point to another as directed to them. In other words, there is no relationship of contractor and contractee between the assessee and truck owners. For buttressing his contentions, he relied upon the following decisions:
i) CIT Vs. Poomphuhar Shipping Corporation Ltd., 282 ITR 3 (Mad);
ii) CIT Vs. United Rice Ltd., 322 ITR 594 (P&H);
iii) CIT Vs. Ess Kay Construction Co., 267 ITr 618 (P&H);
iv) ACIT Vs. Amir Traders, ITA No.563/Ahd/2009 & Co.
No.171/Ahd/2011;
v) Ismailbhai I. Gandhi Vs. ACIT, ITA No.3445/Ahd/2009
14. We also appraised him the order of the ITAT, Delhi Bench in the case of Kuldeep Kumar Sharma Vs. ITO, ITA No.5672/Del/10. He further contended that before the ld.CIT(A), the assessee has filed complete details exhibiting the payments made by the assessee. He took us through submissions 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 Rs.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 Rs.20,000/- in a single transaction and Rs.50,000/- in ITA No.1988/Ahd/2012 (6 Appeals) 21 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 Rs.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 (Rs.36,71,905/- in the case of Kataria Transport Co., and Rs.13,05,044/- in Kataria Logistic Services). It was demonstrated before us that if other explanation of the respondents, to support the order of CIT(A) is not being accepted, then, to the extent of above working, at the most disallowance can be made in all three cases. In this way, the assessee contended that no disallowance deserves to be made section 40(a)(ia) in the cases of the assessee and the appeals of the Revenue deserve to be dismissed.
15. In rebuttal, the ld.DR contended that the assessee failed to deduct TDS, and therefore, the ld.CIT(A) ought to have disallowed the amounts pleaded in ground no.2 in respective appeals.
16. We have duly considered rival contentions and gone through the record carefully. As far as submission of the ld.DR is concerned that the ld.CIT(A) has made analysis of issue regarding enhancement of disallowance on the strength of ITAT, Special Bench decision in the case of Merilyn Shipping & Transports (supra) is concerned, we find force. The ld.CIT(A) in the case of Kataria Movers has committed an error by working out a sum of Rs.3,07,35,157/- as an amount which remained payable on 31.3.2005. The ld.CIT(A) has made analysis whether any amount can be disallowed from this amount. In our opinion, this appreciation of fact is not in accordance with the ITA No.1988/Ahd/2012 (6 Appeals) 22 proposition laid down by the Hon'ble Gujarat High Court in the case of Sikhandarkhan M. Tanvar (supra). Nevertheless, it is not direct on the issue.
17. We are called upon to decide whether the assessee being a transporter was required to deduct TDS on hiring of trucks or not. Section 194C and 40(a)(ia) have the direct bearing on the controversy. Therefore we deem it appropriate to take note of the relevant clauses.
"40. Notwithstanding anything to the contrary in sections 30 to [38], the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession" -
(a) in the case of any assessee xxxxxxxxx (ia) any interest, commission or brokerage, [rent, royalty] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or , after deduction, [has not 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.
ITA No.1988/Ahd/2012 (6 Appeals) 23(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 credit of such sum to the account of the sub-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 one per cent of such sum as income-tax on income comprised therein."
18. Bare perusal of section 40 (a) (ia) would suggest that disallowance under this section can be made in respect of amounts payable to a contractor or sub contractor for carrying out any work on which tax is deductible under chapter 17B and such tax has not been deducted or paid during the previous year or in the subsequent year before the expiry of the time period prescribed u/s 200 (1) of the Act. Section 194C(2) provides that where a contractor , not being an individual or a Hindu undivided family engaged for carrying out any work or for supplying labour for carrying out such work by Central or State Government, a local authority or a corporation has in terms engaged any sub contractor for carrying out the whole or any part of the work undertaken by the contractor or for supply of labour undertaken by the contractor to supply, he will be required to deduct tax at source from the payment made to the sub contractor. Thus it contemplates three conditions namely 1) there must be a contract between the persons responsible for making the payment and the contractor (B) the contract must be for supply of labour or for carrying out any work (c) contractor must have engaged a sub contractor for carrying out the whole or any part of the work undertaken or supply of labour."
ITA No.1988/Ahd/2012 (6 Appeals) 2419. An analysis of account, we find that 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. In the order of the ITAT, Delhi Bench in the case of Kuldeep Kumar Sharma (supra), a reference was made to the order of the ITAT, Visakhapatnam Bench in the case of Mythri Transport Corporation Vs. ACIT, 124 ITD 40. Relevant discussion by the ITAT, Visakhapatnam is worth to note. It reads as under:
"8.2 As stated earlier, the assessee herein is a transport contractor and has entered into an agreement with parties whereby the assessee undertook to transport bitumen to various 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.
xxxxxxxxxxxx 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 work undertaken by the assessee by spending their time, energy and by taking the risks associated with the main contract work. In the absence of the above said characteristics attached to a sub-contract in the instant case, the payment made to the lorry owners stands at par with the ITA No.1988/Ahd/2012 (6 Appeals) 25 payments made towards salaries, rent etc. Hence the reasoning of the tax authorities, which is stated in para 8.3 supra, to hold that the payment made for hired vehicles is a sub-contract payment, in our opinion, is not correct and not based on relevant considerations. Hence, in our considered opinion, it cannot be said that the payments made for hired vehicles would fall in the category of payment towards a sub-contract with the lorry owners. In that case the assessee is not liable to deduct tax at source, as per the provisions of section 194C(2), on the payments made to the lorry owners for lorry hire. Consequently, the provisions of section 40(a)(ia) shall not apply to such payments.
8.7 As we have decided the issue in favour of the assessee for the reasons stated above, in our opinion, consideration of other contentions of the assessee as well as the Revenue is not necessary."
20. Similar logic is available in the present case. As observed earlier, the 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.
21. In the next fold of submission, it was contended by the assessee that section 40(a)(ia) is not applicable during the Asstt.Yar 2005-06. This argument was raised on the strength of Hon'ble Calcutta High Court's decision in the case of Piu Ghosh Vs. DCIT, rendered in ITA No.191 of 2009. The ld.counsel for the assessee submitted that this is the solitary decision on the point and Tribunal is bound to follow. He pointed out that solitary decision of non-jurisdictional High Court is required to be followed until an ITA No.1988/Ahd/2012 (6 Appeals) 26 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 shall become operative on 1st April, 2005. Any other interpretation shall amount to "punishing the assessee for no fault of his" following the judgment in the case of Hindusthan Elector Graphites Ltd. [supra].
On the top of that, Section 4 relied upon by Mr.Agarwal merely provides for an enactment as regards rate of tax to be charged in any particular assessment year which has no application to the case before us. Section 11 of the Finance Act by which Clause (ia) was added to Section 40 of the Income Tax Act does not provide that the same was to become effective from the assessment year 2005-06. It merely says it shall become effective on 1st April, 2005 which for reasons already discussed should mean to refer to the financial year. There is, as such, no scope for any ambiguity nor is there any scope for confusion. Even in a case where there is any ambiguity, law in that regard was noticed by the Supreme court in the case of CIT (Central)-I vs. Vatika Township Pvt.Ltd., reported in (2014) 367 ITR 466 (SC), as follows :
"Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and any ambiguity must be resolved against ITA No.1988/Ahd/2012 (6 Appeals) 27 imposition of the tax. In Billings v. U.S. (232 U.S. 261, S.Ct. 421 (1914)), the Supreme Court clearly acknowledged this basic and longstanding rule of statutory construction :
" Tax Statutes ... should be strictly construed, and, if any ambiguity be found to exist, it must be resolved in favor of the citizen. Eidman v. Martinez, 184 U.S. 578, 583; United States v. Wigglesworth, 2 Story, 369, 374; Mutual Benefit Life Ins. Co.7 v. Herod, 198 F. 199, 201, aff'd 201 F. 918; Parkview Bldg. Assn. v. Herod, 203 F. 876, 880; Mutual Trust Co. v. Miller, 177 N.Y. 51, 57."
Again, in United States v. Merriam (263 U.S. 179, 44 S. Ct.69 (1923), the Supreme Court clearly stated at pp. 187-88: '' On behalf of the Government it is urged that taxation is a practical matter and concerns itself with the substance of the thing upon which the tax is imposed rather than with legal forms or expressions. But in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used. If the words are doubtful, the doubt must be resolved against the Government and in favor of 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 Rs.4,30,386/- to a contractor without deducting TDS during the financial year 2004-05, corresponding to assessment year 2005-
06. 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) ITA No.1988/Ahd/2012 (6 Appeals) 28
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 Rs.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 not applicable to the Asstt.Year 2005-06. Similarly, we have held that there is no contractor-contractee relationship exists between the assessee and the truck owners, therefore, no TDS is required to be deducted. On these reasons, we allow first ground of CO and delete disallowance.
26. In the next ground, the grievance of the assessee is that the ld.CIT(A) has erred in confirming adhoc disallowance of Rs.69,274/-. The assessee has debited expenditure under the head car expenses and depreciation. The ld.CIT(A) confirmed the disallowance at the rate of 1/5th of this expenses. The ld.counsel for the assessee has contended that there cannot be any personal element involved in the incurring of the expenses of a company, and therefore, no disallowance deserves to be made. He relied upon the decision of the Hon'ble Gujarat High Court in the case of Sayaji Iron & Engg. Co. Vs. CIT, 253 ITR 749 (Guj).
27. At the time of hearing, the ld.counsel for the assessee has agreed that decision of the Hon'ble Gujarat High Court in the case of Sayaji Iron & Engg. Co. (supra) is not applicable to the case of the assessee, as the assessee is a registered and firm and not a company. Since assessee failed to submit complete details, therefore, adhoc disallowance is made. We do not find any merit in this ground of appeal. It is rejected.
ITA No.1988/Ahd/2012 (6 Appeals) 2928. Next ground of appeal, grievance of the assessee is that the ld.CIT(A) has erred in confirming the disallowance of Rs.3,21,275/- in respect of bad debts.
29. Brief facts of the case are that the assessee has debited a sum of Rs.3,21,275/- under the head "bad debts". The ld.AO has called for explanation of the assessee in support of this claim. Vide letter dated 20.12.2007 the assessee contended that it has paid certain amounts to staff for the business purpose, but employees did not return the balance and left the job without intimating the assessee. Thus, there was no option but to write them off. The expenditure, if cannot be allowed as a bad debt, then it should be allowed as business loss. The ld.AO has rejected the claim of the assessee on the ground that it cannot be allowed as bad debt, because, it was not offered for taxation in any earlier years. Similarly, it was given as an advance to the employees, therefore, it cannot be allowed as business loss. On appeal, the ld.CIT(A) concurred with the AO by observing 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 ITA No.1988/Ahd/2012 (6 Appeals) 30 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 have not appreciated the fact in right perspective. We allow this ground of appeal and delete disallowance.
31. Now we take up CO No.228/Ahd/2012(Kataria Transport Company).
32. Only ground taken by the assessee relates to ad hoc disallowance made by the AO out of various expenses debited by the assessee under the head telephone expenses, vehicle expenses, depreciation on car and travelling expenses. We find that the AO has made disallowance at the rate of 10% of the total expenditure out of telephone and vehicle expenses, 20% on car expenses and depreciation on car and 15% on travelling expenses. The ld.CIT(A) has confirmed the disallowance at the rate of 10% of the total expenses. After going through the finding of the ld.CIT(A), we do not find any merit in this ground of CO. It is rejected. Accordingly, CO of the assessee in the case of Kataria Transport Company is rejected.
CO No.229/Ahd/2012 (Kataria Logistics Services)
33. As far as first ground of this CO is concerned, the grievance of the assessee is that the ld.CIT(A) has erred in confirming the disallowance of Rs.73,100/- with the aid of section 40(a)(ia). As observed in the case of Kataria Movers, we have followed the decision of the Hon'ble Calcutta High Court and held that the section 40(a)(ia) is not applicable to the present case. Similarly, we have observed that relationship of contractor and contractee was not existing between the assessee and other truck owners, and therefore, the assessee was not under obligation to deduct TDS. Following the observation ITA No.1988/Ahd/2012 (6 Appeals) 31 of the Hon'ble Calcutta High Court, we allow this ground of CO and delete disallowance of Rs.73,100/-.
34. In the next ground of CO, the grievance of the assessee is that the ld.CIT(A) erred in confirming disallowance made by the AO out telephone, travelling, conveyance and car expenses. We have discussed this issue in the case of Kataria Movers as well as Kataria Transport Services, where we have observed that the assessee failed to give complete details in support of these expenses incurred by it. The ld.AO has made ad hoc disallowance at different rates against different expenditure. The ld.CIT(A) confirmed adhoc disallowance at the rate of 10% and we do not find any error in the order of the ld.CIT(A). Accordingly, this ground of CO is rejected.
35. In the result, appeals of the Revenue and CO of the assessee in the case of Kataria Logistic are dismissed, whereas, CO of the assessee in the case of Kataria Movers and Transport Services are partly allowed. Order pronounced in the Court on 6th October, 2016 at Ahmedabad.
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER