Income Tax Appellate Tribunal - Mumbai
The Income Tax Officer (Tds) vs Bhoruka Roadlines Ltd. on 3 July, 2007
Equivalent citations: [2008]300ITR193(MUM), (2008)115TTJ(MUM)383
ORDER
R.K. Gupta, Judicial Member
1. This is an appeal by the department against the order of the CIT(A) relating to assessment year 2002-03.
2. The department is objecting in deleting the demand raised Under Section 201(1) and 201(1A) of the Act.
2.1 While objecting the deletion of demand, the department has mentioned in the grounds of appeal that the ld CIT(A) erred in not appreciating that the suppliers/brokers of the trucks are sub contractors within the meaning of the provisions of Section 194C in as much as the assessee negotiates the rate with the suppliers/brokers of the trucks and payments are also made to them.
2.2 Briefly stated facts of the ease are that the assessee company is engaged in the business of transportation of goods for various clients all over India on contract basis. A survey action Under Section 133A was carried out at the business premises of the assessee company on 21.1.2002. On the basis of material gathered in the course of survey action, the Assessing Officer concluded that the appellant had not deducted taxes properly on payment made to truck owners or agents in accordance with the provisions of Section 194C. After taking into consideration the submissions filed on behalf of the assessee, the Assessing Officer passed order Under Section 201(1) and 201(1 A) by treating the assessee to be in default for non deduction/short deduction of taxes. The assessee had made total payment of Rs. 17,08,39,1 19/- to various parties whose trucks were engaged for transportation of goods. The Assessing Officer estimated 90% of this payment, which comes to Rs. 1 5,37,55,207/ as payment exceeding Rs. 20,000/- each and on this amount he computed tax liability of Rs. 15,68,303/- Under Section 194C (a) 1% plus 2% surcharge. The Assessing Officer also levied interest Under Section 201(1 A) of Rs. 1,07,820/-. While holding that the assessee in default for non deduction/short deduction of taxes, the Assessing Officer has taken into consideration the statement of one Shri Rahul Agrawal, Chief Executive Officer of the assessee company. Various questions put by the Survey Officer which were answered by Shri Rahul Agrawal which are also reproduced by the AO in his order while passing order Under Section 201(1) & 201(1A) along with the details of payments made to various truck owners. After considering the statement of Shri Rahul Agrawal and the explanations, the Assessing Officer found that the truck hired and payments made by the assessee are clearly as per sub contractor payment agreement made by the assessee and each one is in excess of Rs. 20,000/- in a year. Therefore, the assessee is liable to deduct tax at source as required Under Section 194C while making the said payments to the truck owners/suppliers. Assessee preferred appeal before the CIT(A). Detailed written submissions were filed before the CIT(A). Remand report was sought from the Assessing Officer by the CIT(A). Thereafter, the CIT(A) found that the provisions of Section 194C are not applicable on the facts of the present case. Accordingly, he deleted the demand raised by the Assessing Officer. The findings of the ld CIT(A) are given in para 7 & 8 at pages 14 & 15 of his order which are as under:
7. I have carefully considered the written submissions and comments on Assessing Officer's reports as submitted by the appellant and its authorized representative and also the facts as per the impugned order and as per Assessing Officer's reports. I have also gone through the judgments relied upon by the appellant and CBDT"s circulars cited by it. I find that the appellant has a good case in its favour on the following grounds:
i) The Income tax Act provides for estimation of salary income of employees by the employer for the purpose of deduction of tax at source Under Section 192 but it does not provide under other provisions to estimate any payment on which tax is to be deducted as per law. In fact except in case of salary income, other payments are well defined in as much as the nature and quantum are concerned. The Assessing Officer has estimated 90% of the gross payment as an amount liable to deduction of tax Under Section 194C. In act the AO has failed to point out the specific payments during the assessment proceedings law well as while offering comments on the documents and details furnished by the appellant during appellate proceedings. The estimation made by the Assessing Officer is not permitted Under Section 194C.
ii) The various circulars issued by the CBDT as referred to in the appellant's submissions particularly the circular No. 715 supports the contention of the appellant that each GR has to be treated as a separate contract even though the bill amount is paid in two installments or there is a single payment of more than one GR. The details furnished by the appellant clearly indicate that there is no running account in the name of any payee whether it is a truck owner or an agent.
iii) Wherever the appellant had a written agreement for a specific period, it. has deducted taxes as per law. But, in all those cases, which are covered by this appeal, the appellant had not entered into any specific contract for any specific period or for any specific agreed rate. Therefore, each trip where payment was fully made by way of advance and/or partly after completion of the trip, is a separate contract and since for each such separate contract the transportation charges are less than Rs. 20,000 the same are exempt from tax deduction as per provisions of Section 194C(3).
8 In view of the aforesaid facts and reasons given by me I hold that the Assessing Officer is not justified in treating the appellant to be in default and raising demand towards short deduction of tax and interest thereon. Consequently, the entire demand raised as per the impugned order is directed to be deleted.
3. Now, the department is in appeal here before the Tribunal.
4. The ld DR, who appeared before the Tribunal strongly placed reliance on the order of the Assessing Officer. Attention of the Bench was also drawn on the order passed Under Section 201(1) and 201(1A). On the other hand, the ld counsel of the assessee strongly placed reliance on the order of the CIT(A). Attention of the Bench was drawn on various details placed in the paper book. Reliance was also placed on the decision reported in 13 SOT 479 (Mum) and it was submitted that the ratio of this decision is directly applicable on the facts of the present case as in this case also identical facts were involved.
5. We have heard rival submissions and considered them carefully. After considering the submissions and details, we find no infirmity in the findings of the ld CIT(A). The main reason for holding that the assessee is in default for non deduction of taxes in view of the provisions of Section 194C was that the assessee hired trucks through suppliers and the Assessing Officer was of the view that the assessee had made payments to suppliers and not directly to the truck owners. The Assessing Officer was also of the view that if the cumulative figures of payment are taken into consideration then the payments exceed Rs. 20,000/- Since no details in regard to suppliers/agent were filed, therefore, the Assessing Officer estimated 90% of the total payment and held that they are in violation of the provisions of Section 194C.
5.1 We have seen the details and explanations filed before the Assessing Officer and before the ld CIT (A) and found that from the day one the assessee is explaining that the payments were made directly to the truck drivers/owners and not to the suppliers. From the day one it has been stated that for reference purposes the agents/supplies were contacted and for a particular destination, truck were hired and negotiations were made with the truck drivers or owners and not with the suppliers. We have seen the correspondence and confirmation from various suppliers who helped the assessee in getting the truck hired by which it has been stated that they have no contract with the assessee as they helped to get truck hired only and all the payments are made directly to the drivers or truck owners by the assessee and not through them. It has been clearly certified that they are charging their commission from truckvalas and not from the assessee. Confirmations from some of the suppliers are placed at page 99 to 103 of the paper book.
5.2 In the confirmation it has been clearly certified by M/s Satyadevi Roadliens Corporation that "freight is paid by way of advance to driver/owner of the truck and final freight charges is some time paid to us on behalf of truck owners/drivers for making payment by us to them". It has been further certified that "we received our commission from truck owner/driver for the same. We do not receive any commission/brokers on your side."
5.3 Similar certificates are issued by various other suppliers/agents. From the contents of the certificates issued by various agents/suppliers it. became crystal clear that no contract was between the assessee and the suppliers but the contract was entered with each truck owner/driver. Complete details of the truck drivers/owners were filed during the proceedings Under Section 201(1) & 2(1)(1A). The Assessing Officer has stated that no details of suppliers were filed; therefore, he estimated 90% of the payments. Once if is found that there was no contract between the assessee and the agent but the contract was between the assessee and the truck owners/drivers, therefore, the details has to be filed in regard to payments made to truck owners/drivers and not of the suppliers. Nothing has been brought on record by the Assessing Officer that the certificates issued by these agents/ suppliers are not correct. The statement of one Shri Rahul Agrawal was recorded during the survey proceedings and from the day one it has been stated, that;
As soon as we have any requirement for a lorry or truck we contact in the market where according to destination trucks are available. The rate are negotiated and after deciding the rates, the truck is hired.
This answer was given in question No. 4 at the time of survey. This is the part of the order of the Assessing Officer also. Again question was put that;
how do you determine the requirement of trucks on any given date?
It was replied that;
the requirement of truck are decided on the basis of requisition from client Normally these clients are those to whom we have written agreement in a few cases adhoc requirement is there.
Thereafter, it was enquired by question No. 9 that;
Are there any instance in which you have hired more than one truck from a single party for executing a transport obligation of your client with whom you are having contractual agreement? If so kindly le me know how the payments are made to the truck suppliers in such instances?
It was replied that;
No there is no such instances so far as to the best of my knowledge.
Thereafter, it was further enquired by question No. 10 that;
It is seen from your debit vouchers there are several such instances as stated in. question No. 9. How you can deny that there are no such instances? Please clarify?
It was replied that;
With reference to debit voucher No. 00193 dated 13.4.2001 and 00216 dated 14.4.2001 of New Bombay Chandigarh Roadways, the name has been mentioned as reference point only.... The lorries and their respective owners to whom the freight being paid are totally separate entities as in the case of lorry owner Shri Barbel Singh for lorry No. HR 11/F-3216 for debit voucher No. 00193 and lorry owner Shri Madarilal of lorry No. HR 37/8621 of debit vouhcer No. 00216.
5.4 Thereafter in reply to question No. 13, it was again staled that;
M/s New Bombay Chandigarh Roadways being reference points as the truck was arranged by him.
From these replies, it. is clearly seen that the trucks were engaged through the parties who were dealing in arranging the trucks and it is also clear from the statement of Shri Rahul Agrawal that no truck contract was entered between the assessee and the agents but the contracts were between the assessee and the truck drivers/owners. It is also seen that no payment exceeding Rs. 20,000/ paid to truck owners or drivers and where the payment exceeds Rs, 20,000/ the tax has been deducted by the assessee and had deposited in the treasury as per rules.
5.5 The CBDT circular No. 715 dated 8.8.1995 has clarified under question No. 9 as under:
Q No. 9: In the case of payments to transporters, can each GR be said to be a separate contract, even though payments for several GRs are made under one bill?
Ans: Normally each GR can be said to be a separate contract if the goods are transported at one time. But if the goods are transported continuously in pursuance of a contract for a specific period or quantify, each GR will not be a separate contract and all GRS relating to that period or quantity will be aggregated for the purpose of the TDS.
5.6 From this clarification by CDBT circular No. 715 (supra), it became clear that if the contract are between the truck owner/driver and GR is a separate then the payment made for that truck has to be treated as separate payment. In the present case, it is seen that the assessee engaged trucks through agents and suppliers and for each truck they have made separate payment because each truck was for separate destination. Therefore, in our considered view it cannot be said that there was contract between the suppliers and not with truck owners/drivers. From the above discussion, it clearly seen that the contract was with the truck owners/drivers and not with the agents or suppliers. Therefore, in our considered view, the CIT(A) was justified in holding that the provisions of Section 194C are not applicable on the facts of the present case. The decision relied upon by the ld counsel of the assessee is also in favour of the assessee.
5.7 We have seen the detailed submissions filed on behalf of the assessee before the ld CIT(A) as the same has been reproduced by the ld CIT(A) in his order and found that the assessee has clarified each and every point and have met with the objections raised by the Assessing Officer successfully. Therefore, after considering the details submissions, and other materials on record, we confirm the findings of the ld CIT(A).
In the result, the appeal filed by the department is dismissed.
Order pronounced in the Open Court in the date of hearing i.e. on 27.6.07.