Income Tax Appellate Tribunal - Chandigarh
Acc Ltd., Chandigarh vs Department Of Income Tax on 29 October, 2015
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IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES, CHANDIGARH
BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT &
MS. RANO JAIN, ACCOUNTANT MEMBER
ITA Nos. 651 & 652/Chd/2015
Assessment Years: 2012-13 & 2013-14
The AC IT (TDS), Vs. M/s ACC Limited,
Chandigarh (Chandigarh Sales Unit),
Chandigarh
&
C.O. Nos. 33 & 34/Chd/2015
(In ITA Nos. 651 & 652/Chd/2015)
Assessment Years: 2012-13 & 2013-14
M/s ACC Limited, Vs. The AC IT (TDS),
(Chandigarh Sales Unit), Chandigarh
Chandigarh
(Appellant) (Respondent)
Appellant By : Ms. Rajinder Kaur
Respondent By : S/Sh. Soumen Adak & Prakash Singh
Date of hearing : 28.09.2015
Date of Pronouncement : 29.10.2015
ORDER
PER H.L.KARWA, VP These two appeals by the Revenue and Cross Objections filed by the assessee involving common issues were heard together and are being dispose of by this common order for the sake of convenience.
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2. Firstl y, we will take up appeal in ITA No. 651/Chd/2015 relating to assessment year 2012-13. The onl y effective ground raised by the Revenue in this appeal reads as under:-
"The CIT(A) Chandigarh has erred in law by holding that the definition of goods carriage as provided in section 44AE(7) is also applicable u/s 194C(6) since the payment have been made to the agencies not to persons who plied the trucks."
3. In this case, the Assessing officer passed order u/s 201(1) read with section 201(1A) of the Income-tax Act, 1961 (in short 'the Act') on 11.3.2014 creating a demand of Rs. 3,54,02,834/-. The assessee is engaged in the business of cement manufacturing. The Assessing officer noticed that assessee was not deducing tax at source while making the payments to transporters on account of freight charges, as required u/s 194C of the Act. The Assessing officer also noticed that assessee had made payment to the transporter namely Bilaspur District Truck Operators to the tune of Rs. 1,42,75,33672/- on account of freight charges without deducting the tax at source. The Assessing officer issued a show cause notice u/s 201(1) and 201(1A) of the assessee dated 5.3.2014 and in response to the said notice the assessee submitted the detailed reply dated 10.3.2014 which was not acceptable to the Assessing officer. According to Assessing officer, exemption from TDS in the case of transport contract is contained in section 194C(6) of the Act which reads as under:-
"No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of contractor during the course of business of plying, hiring, or leasing goods carriages on furnishing of his Permanent Account Number. to the person paying or crediting such sum."3
4. According to the Assessing officer as per the above provisions, two basic conditions are required to be satisfied to become eligible for non deduction of tax at source i.e. (i) person must be contractor, and (ii) such persons receives payments during the course of business of plying, hiring or leasing of goods carrier. The Assessing officer has also stated that goods carriers have been explained in Explanation (II) to sub section (7) of section 194C which provides that "goods carrier shall have the meaning assigned to it in the Explanation to Sub section (7) to section 44AE. The Assessing officer further observed that the expression 'goods carriage' and heavy goods vehicles shall have the meaning practically assigned to them to of Motor Vehicle Act, 1988. He further observed that explanation to sub section (7) of section 44AE also provides that assessee who is in possession of goods carrier whether taken on hire, purchase or on installment for which the whole or part of amount payable is still due. The Assessing officer took the view that the concerns who is undertaking job of procuring business for its members to transport of products of the company, do not own any goods carriers and as such cannot be termed as contractors. He further held that the assessee is not engaged in the business of hiring, plying or leasing out of goods carriers. He further stated that the assessee deductor has entered into an agreement with the above concern so that work to the individual truck operators is given strictly in turn and that so every truck operator has an equal opportunity to carry goods and earn income. The Assessing officer concluded that the above concerns do not do any transportation work and it does not own any goods carrier and the concern has been found with a view to obtain the work of carriage from assessee company. The Assessing officer concluded that transport concerns do not own goods carriage. The Assessing 4 officer therefore held that the assessee is not eligible for claiming immunity of deduction of tax at source under the provisions of section 194 C of the Act. Consequently, the assessee was treated as assessee in default within the meaning of section 201(1) of the Income-tax Act, 1961 (in short 'the Act') Act with regard to the freight payments made to the transport concern without deduction of tax at source. The Assessing officer also held that the assessee company is liable for interest u/s 201(1A) of the Act. Thus, the Assessing officer created a demand of Rs. 3,54,02,834./- u/s 201(1) and 201(1A) of the Act.
5. On appeal, the C IT(A) deleted the demand created u/s 201(1) and 201(1A) of the Act, observing as under:-
"5. I have considered facts of the case. As the demand created u/s 201(1)/(1 A) in respect of payments made to H.P. Ex-Servicemen Corporation has been reduced to 'nil', the dispute remains only in respect of payments made to Bilaspur District Truck Operators Co- operative Transport Society Ltd. For appreciating the issue in proper prospective, it would be appropriate to reproduce relevant provisions of this Act. Hence, for the sake of ready reference, provisions of section 194C(6) and Explanation-(ii) below section 194C(7), provisions of section 44AE{1) and Explanation below section 44AE(7) of the Act are reproduced below:
"194C. Payments to contractors.
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 a specified person 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--5
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(6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum.
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Explanation - For the purposes of this section, -
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` (ii) "goods carriage" shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE;"
"44AE. Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages.
(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee, who owns not more than ten goods carnages at any time during the previous year and who is engaged in the business of plying, hiring or leasing such goods carriages, the income of such business chargeable to tax under the head "Profits and gains of business or profession" shall be deemed to be the aggregate of the profits and gains, from all the goods carnages owned by him in the previous year, computed in accordance with the provisions of sub-section (2).
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Explanation - For the purposes of this section,-
(a) the expression "goods carriage" shall have the meaning assigned to it in section 2 of the Motor Vehicles Act, 1988 (59 of 1988);
(b) an assessee, who is in possession of a goods carriage, whether taken on hire purchase or on installments and for which the whole or part of the amount payable is still due, shall be deemed to be the owner of such goods carriage."
5.1 From the above provisions, it is evident that for claiming benefit of provisions to section 194C(6), following conditions have to be satisfied:
• The contractor should be in the business of plying, hiring or leasing of goods carriage.6
• The term 'goods carriage' is assigned meaning as per section 2(14) of the Motor Vehicles Act, 1988. Section 2(14} of Motor Vehicles Act, 1988 defines goods carriage as - "'goods carriage 1 means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods".
• PAN is furnished by the contractor to the payer i.e. deductor.
• The deductor furnishes before the Income Tax Authority the details pertaining to the above contractor in the prescribed form.
5.2 In the instant case, the appellant had obtained PAN from the payee and furnished the same before the prescribed authority.
Further, the goods carriages involved also satisfied the definition given in the Motor Vehicles Act. Therefore, the only issue to be decided is whether the payee i.e. Bilaspur District Truck Operators Co-operative Transport Society Ltd (hereinafter referred to as 'Society 5 ) was engaged in the business of plying, hiring or leasing of goods carriage. The appellant has filed a copy of bye-laws of this Society, a perusal of which reveals that the main object of this Society is to provide goods and passenger carriages on hire and lease to anyone. This clearly implies that it is engaged in the business of plying, hiring and leasing of goods carriage. As per clauses of the agreement between the appellant and the Society, it was the responsibility of the Society to honour the commitment and obligation, which arose from the said agreement and to bear all risks arising therefrom 5.3 It is noteworthy that Explanation--(ii) below section 194C(7) refers to the definition of 'goods carriage', to have the same meaning as in Explanation (a) below sub-section (7) of section 44AE and so the reference is only in context of definition of goods carriage. Explanation-(a) below section 44AE(7) is applicable to section 194C, but Explanation-(b) below section 44AE{7) is applicable only to section 44AE. Therefore, the 7 inference drawn by the Assessing Officer that for the purposes of claiming the benefit of sub-section (6) of section 194C, the appellant is required to satisfy the ownership criteria mentioned in Explanation-(b) below section 44AE(7) is not correct. 5.4 In view of the above, it is held that the Assessing Officer was not right in treating the person responsible as 'assessee in default' for not deducting tax on the payments made to the Society and the demand created u/s 201(1)/ (1A) is accordingly deleted. Grounds of appeal taken by the appellant are allowed."
6. We have heard the rival submissions and have also perused the materials available on record. The Ld. CIT(A) has reproduced the provisions of section 194C(6) read with Explanation (ii) to section 194C of the Act in his order. On perusal of these provisions it is clear that following conditions are required to be satisfied for claiming the benefit of section 194C(6) of the Act:-
i) The contractor should be engaged in the business of plying, hiring or leasing goods carriage.
ii) The contractor shall furnish its PAN No. to the deductor
iii) The deductor furnishes before the I.T. Authorities the details of amount paid to the contractor
iv) Goods Carriage shall have the same meaning as assigned in Section 2(14) of the Motor Vehicle Act, 1988 Before us, the assessee has submitted a photocopy of the bye-laws of the Bilaspur District Truck Operators Co-operative Transport Societies Ltd. wherein the main object of the societ y is to provide goods and passenger carriages on hire or lease. The transport co-operative societ y has also furnished its PAN number to the assessee, a copy of the same is available at page 44 of the assessee's paper book. It is claimed that in terms of Rule 31A(4)(v), the assessee has also furnished particulars of amount paid or credited to the 8 transport cooperative societ y on which tax has not been deducted in its quarterl y TDS return. Shri Soumen Adak, Ld. Counsel for the assessee submitted that the goods carriage involved also satisfies the definition of 'goods carriage' given in Section 2(14) of the Motor Vehicle Act, 1988. The term 'goods carriage' means any motor vehicle construed or adopted for use solel y for the carriage of goods or any motor vehicle not so constructed or adapted when used for the carriage of goods.
7. In our view, the Ld. CIT(A) has correctl y observed that the inference drawn by the Assessing officer that for the purpose of claiming the benefit of sub section (6) of section 194C, the assessee is required to satisfy the ownership criteria mentioned in Explanation (b) below section 44AE(7) is not correct. In our view, reference of Explanation to section 44AE(7) in section 194C is onl y in the context of definition of 'goods carriage'. Clause (a) of Explanation to Section 44AE(7) defines 'goods carriage' and clause (b) defines 'deemed ownership'. The Ld. C IT(A) has correctly held that clause (a) is applicable to both sections i.e. section 194C and 44 AE, clause (b) is applicable onl y to section 44AE, since for the benefit of presumptive taxation the assessee should not own more than ten goods carriages. Therefore, the assessee is not required to satisfy the ownership criteria as mentioned in clause (b) of Explanation to section 44AE (7). On a perusal of section 194C (6) read with Explanation (II) to section 194C, it is crystal clear that the transport contractor is not required to be the owner of goods carriage for applicabilit y of section 194C(6) of the Act. At this stage, we may observe here that an amendment has been made vide Finance Act, 2015 in section 194C (6) wherein it is specificall y stated that w.e.f. 1.6.2015, the benefit of non deduction of tax on payment made to transport contractors would be applicable onl y if the transport contractor owns ten or less goods carriages at any time of the previous year and a declaration to 9 this effect is furnished. In our opinion, the Legislature has intentionall y inserted the ownership condition for claiming the benefit of non deduction of tax which was not existing in the erstwhile section 194C(6) of the Act. In view of the above discussion, the assessee (Person responsible) cannot be treated as 'assessee in default' for not deducting tax on the payments made to the Bilaspur District Truck Operators Co-operative Societ y thus, we do not find any infirmit y in the order of C IT(A) and accordingl y we uphold the same. The appeal of the Revenue is dismissed.
C.O. No. 33/Chd/2015
8. At the time of hearing , Shri Soumen Adak, Ld. Counsel for the assessee did not press for grounds raised in the Cross objection. Hence, we dismiss the Cross Objection as not pressed.
9. In the result, Cross objection is dismissed.
ITA No. 652/Chd/2015:
10. In this appeal an identical issue has been raised by the Revenue which reads as under:-
"The CIT(A) Chandigarh has erred in law by holding that the definition of goods carriage as provided in section 44AE(7) is also applicable u/s 194C(6) since the payment have been made to the agencies not to persons who plied the trucks."
11. We find that the facts of the present year are similar to that of assessment year 2012-13 in ITA No. 651/Chd/2015, therefore, the decision given in ITA No. 651/Chd/2015 shall also appl y to this appeal with equal force. For the detailed reasons given therein, we do not find any merit in this appeal of the Revenue. Accordingl y, we dismiss the appeal of the Revenue.
10C.O No. 34/Chd/2015
12. At the time of hearing, Ld. Counsel for the assessee did not press for the grounds raised in the Cross objection and hence the same is dismissed as not pressed.
13. In the result, the Cross objection is dismissed.
14. In the result, both the appeals field by the Revenue and Cross objections submitted by the assessee are dismissed.
Order pronounced in the Open Court on 29.10.2015 Sd/- Sd/-
(RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT Dated : 29 t h October, 2015 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR