Income Tax Appellate Tribunal - Delhi
Green Carriers And Contractors (Delhi) ... vs Inspecting Assistant Commissioner on 19 April, 1988
Equivalent citations: [1988]27ITD519(DELHI)
ORDER
Anand Prakash, Accountant Member
1. An interesting point has been raised in this appeal. To appreciate it, let us note the facts first. The assessee is a private limited company, carrying on the business of plying trucks for carrying the goods from one place to the other in India. Its accounting period for the asst. year under consideration commenced on 1-7-1979 and ended on 30th June, 1980. It filed its return of income on 30th June, 1981 declaring total loss of Rs. 10,97,817 which was later revised upwards to Rs. 11,04,421.
2. While scrutinising the various claims made by the assesses for deduction from the gross receipts for the year under consideration, he noted that the assessee had made claim of Rs. 11,56,106 on account of accident to a truck belonging to the assessee bearing No. RSY 6367. One of the sister concerns of the assessee-company namely M/s. Green Roadways Ltd. and hired the aforesaid truck of the assessee for carrying the goods; of its customers which it had booked in Gujarat. The said truck met with an accident and was completely gutted along with the goods kept therein. The parties who had booked their goods through M/s. Green Roadways Ltd. and which were being carried by the aforementioned truck belonging to the assessee-company, they preferred claims of compensation against M/s. Green Roadways Ltd., who in turn asked the assessee-company to pay the compensation which was payable by Green Roadways Ltd. to its customers. The assessee-company disputed the claim of M/s. Green Roadways Ltd., inter alia, on the ground that the accident was on account of an act of God and that there was no negligence of the driver of the assessee-company with the truck. The matter was, thereupon, referred to an arbitrator on 27-6-1980 who gave his award on 1-3-1982 stating that the assessee-company owed an amount of Rs. 11,56,101 to M/s. Green Roadways Ltd. and that the accident was not on account of, an act of God. The award was ultimately approved by the Hon'ble Delhi High Court as per their order dated 28-7-1983.
3. On the basis of the aforesaid facts, the ITO held that the liability to pay the aforesaid amount did not crystallise against the assessee-company during the accounting period under consideration and, therefore, it was not deductible out of the total income of the year under consideration.
4. On appeal, the learned CIT(A) has upheld the above finding of the ITO and he observed that: "The liability of the appellant...became ascertained and payable only on 28-4-1983. The claim is, therefore, not allowable in the year under consideration.
5. It is the above finding of the learned CIT(A) which is being challenged by the assessee before us. According to the assessee's learned counsel, the assessee's case was governed by The Carriers Act, 1865, that the assessee was a common carrier inasmuch as it was engaged in carriage and transport of goods as a business from place to place and that, therefore, under Section 6 of the aforementioned Act, the liability of the assessee as a common carrier arose as soon as the loss in question of the property delivered to him was caused and this liability being statutory liability, could not be postponed to a later year merely because its quantification was postponed.
6. In support of it, the learned counsel placed reliance on the legal opinion of Nasaud Mirza placed in the paper book at pages 39 to 44. According to the said opinion, it was not only the owners of goods who could claim compensation under Section. 6 of the Carriers Act, 1865 but the agent of the owner or another carrier could also put in the claim for compensation against the person in whose truck the goods in "question were being carried. Reliance has been placed in this connection, inter alia, on Vidya Ratan v. Kota Transport Co. Ltd. AIR 1965 Raj. 200. From the facts of the said case, it is seen that in the opinion of their Lordships of the Hon'ble Rajasthan High Court, the liability of the common carrier to deliver the goods was absolute and that the common carrier could be excused from the delivery of the goods at the proper destination only if the loss was caused by an act of God or an act of the enemies of the realm; and that to limit the said liability of the common carrier there had to be an enabling provision by special contract and that the contract had to be by the owner of the goods or by a person authorised by him in this behalf and the carrier of the goods and that in a suit against a common carrier in respect of loss of goods delivered to him for transport there need not be any privity of contract between the owner of the goods and the carrier and that it was sufficient if the carrier had accepted the goods for transmit and had failed to deliver them. It was further pointed out by their Lordships that under Section. 9 of the said Act, it was not necessary for the owner of the goods to prove negligence in a suit against the common carrier for loss of goods delivered to him for transport and that the liability of the carrier could not be limited by a special contract if the person contracting with the carrier was not authorised by the owner of the goods to enter into such contracts. Our attention was also invited by the learned counsel for the assessee to some other authorities placed at page 21 of the paper book, in support of his plea that the liability of the common carrier was absolute and statutory and that, therefore, as soon as the loss took place the claim against the carrier accrued and arose and it should be allowed in that very year.
7. On behalf of the revenue, the above plea was resisted and reliance was placed on the order of the CIT(A). It was urged by the learned DR that the assessee's liability in the present case did not arise under the Carriers Act, 1865 because the owners of the goods were not putting in the claim against the assessee and that the claim in question was by Green Roadways Ltd. The owners were claiming compensation from Green Roadways Ltd. who were liable under the Carriers Act, 1865. The liability between the assessee and M/s. Green Roadways Ltd. was by virtue of a contract and such contractual liability would crystallise only when the dispute raised by the assessee was sorted out by reference to the arbitration and by the confirmation of the Arbitration Award by the Hon'ble Delhi High Court in 1983. In this connection, our attention was invited to the award of the arbitrator placed at pages 12 to 15 of the paper book herein in paragraph 1, the arbitrator has observed, inter alia, as below:
Both the parties are common carriers but the goods of the second party under a contract for hire and reward and thus the second party had a contractual obligation for consideration to effect the transportation of the consignment in safe and sound condition. . . .
In paragraph 2, the arbitrator noted the dispute raised by the assessee by observing, inter alia, as follows:
... What has been disputed is that this accident may be regarded as an act of God and as such the first party is to be absolved from all liabilities.
The above argument was rejected by the arbitrator by pointing out as below:
Mechanical failure of the vehicle which directly or indirectly results in any loss to consignments and the vehicle itself cannot be termed act of God inasmuch as this is a term of art and has specific connotation in law. There is nothing, in the circumstances, therefore, which would absolve the first parby of its liability to compensate the second party for the injury caused and I hold accordingly.
On the basis of the aforesaid observations of the arbitrator, it is urged by the learned DR that the liability of the assessee in the present case is contractual and not statutory and it arose under the Indian Contract Act and not under the Carriers Act, 1865 and that, therefore, the liability to pay the compensation did not accrue or arise against the assessee-company in the year under consideration and that the CIT(A) was right in pointing out that the liability in question arose in 1983 and the Hon'ble High Court confirmed the award of the arbitrator.
8. We have given careful consideration to the facts of the case and the rival submissions. Under the Carriers Act, 1865, the person who can claim the compensation for the loss of the goods in transit is the owner or the agent of the owner. In the present case, the owners of the goods which were being carried in the truck in question have not claimed any compensation from the assessee-company. They have lodged their claim under the Carriers Act, 1865 against M/s. Green Roadways Ltd. The liability under Section. 6 of the Carriers Act, 1865 thus arises against Green Roadways Ltd. and not against the assessee-company. The liability of the assessee-company is to the sister concern namely M/s. Green Roadways Ltd. who had contracted to pay to the assessee-company for the carriage of their goods at stipulated rates. It is true that the agreement which was entered into between the assessee-company and the Green Roadways Ltd. made it clear vide Clause 4 of the agreement dated 1st July, 1976 that "the company shall be fully responsible for the safe custody and transit of the consignments and shall be subject to all the obligations under the provisions of the Carriers Act, 1865 in this behalf apart from contractual obligations which may arise under the provisions of the Contract Act, 1872, till such time the consignments are handed over to the representative of the firm." This clause only clarifies that the provisions of the Carriers Act, 1865, would continue to apply, despite the contract between the parties, and, so, where the owner is putting in the claim or where the owners could show that they had authorised M/s. Green Roadways Ltd. to contract on their behalf for the carriage of their goods with the assessee-company, the assessee would not be able to deny their claims on the basis of this agreement. But no evidence has been placed on record by the assessee-company to show that M/s. Green Roadways Ltd. was authorised by the owners to contract for the carriage of their goods on their behalf with the assessee-company The Green Roadways is, thus, not the agent of the owners. The owners themselves did not put in claims against the assessee-company. So there is, in fact, no claim against the assessee-company under the Carriers Act, 1865.
9. So far as the assessee-company and Green Roadways Ltd. are concerned, they were having their independent contract and, therefore, their relations inter se would be governed by the aforesaid contract and not under the Carriers Act, 1865. That is what the arbitrator has also held. Therefore, according to us, the liability of the assessee to pay compensation to M/s. Green Roadways Ltd. is contractual and not statutory in nature. This being so, it would be payable only in the year in which the dispute raised by the assessee was finally settled and it was in 1983 and, therefore, the CIT(A) was justified in holding that the assessee's claim became ripe for consideration in the accounting period in which the date of the decree of the Hon'ble High Court confirmed the award would fall. As such, we reject the present appeal.