TaxTMI 
TaxTMI 
2014 (2) TMI 738
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....dered the rival submissions, perused the record available before us and also gone through the orders of authorities below and the Tribunal decision cited by the ld AR of the assessee. Since in the balance sheet submitted by the ld AR as on 31.03.2007, no amount is outstanding as payable in respect of Truck freight expense disallowed by the AO u/s 40(a)(ia), no disallowance could be made as per this decision of the Special Bench of the Tribunal cited by the ld AR of the assessee having been rendered in the case of Merilyn Shipping & Transport (supra). Respectfully following the decision of the Special Bench of the Tribunal, we decline to interfere in the order of the ld. CIT(A)." 3. The aforesaid order passed by this Tribunal was challenged by the Revenue before the Hon'ble High Court. By its judgment dated 02.05.2013 in CIT v. Rajesh A Boricha, Tax Appeal No.832 of 2012, the Hon'ble High Court has set aside the aforesaid order passed by this Tribunal and restored the matter to the file of this Tribunal "for fresh consideration of other issues, if any, regarding disallowance under Section 40(a)(ia) of the Act." Pursuant to the aforesaid directions given by the Hon'ble High Court,....
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....ource out of the payments aggregating to Rs.80,41,529/- made by the assessee to them. He therefore invoked section 40(a)(ia) and disallowed the impugned expenditure with the following observations:- "5.2 It may be mentioned that TDS is mandatory u/s 40(a)(ia) of the Act and under the said section, the amount of expenditure is not deductible as expenditure in computing the income chargeable under the profit and gain from business or profession. Therefore, sub-clause (ia) of clause (a) of section 40 of the IT Act provides that amounts payable to a contractor or sub-contractor, being resident, for carrying out any work, on which tax is deductible at source under chapter XVII-B and if such tax has not been deducted or, after deduction has not been paid, during the previous year or in the subsequent year before expiry of time prescribed under sub section (1) of section 200, the said amounts shall not be deducted in computing the income chargeable under the head 'profit & gains of business or profession'. 5.3 It may be mentioned that during the year under consideration, the assessee has received transport receipt of Rs.84,13,357/- f....
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.... said letter dated 28.07.2010 sent by the ld. CIT(A) to the Assessing Officer reads as under:- "2. In this case, major addition has been made u/s 40(a)(ia) for non-deduction of tax from transport payments. Addition was made because no reply was received from the assessee. 3. At the appellate stage, a new Advocate appeared and he has filed a reply stating that the assessee is only a transport commission agent and his income is from commission only and entries for payment and receipts were made simply for the purpose of reconciling the TDS certificates. Case records and past records of the assessee also show that he was basically a commission agent for arranging vehicles for others and the assessee himself does not own any vehicle. 4. In view of the above, submissions of the assessee are being sent to you along with the details for submission of a factual report by you regarding the claim of the assessee and nature of business of the assessee. 5. For the purpose of sending this report, you are authorized to make enquiries, as deemed fit by you." 6. In reply, the Assessing Officer su....
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....) decided the issue in favour of the assessee with the following observations:- "3.3 I have carefully considered the issue. As stated in the letter addressed to the A.O., the records of the assessee clearly illustrates that the appellant is a transport agent, who works on commission basis and arranges transports for others. The freight payment is made by the consignee, i.e. the person to whom goods are sent, and the assessee gets only his commission. In the books of accounts, the assessee has shown gross receipts and payments made by various consignees with a view to reconcile the amount of tax deducted at source. But, that, in itself, would not change the nature of business of the assessee, which remains of a commission agent. It has been held by the Apex Court in the case of Chowringhee Sales Bureau (P) Ltd. v. CIT [1973] 87 ITR 542 that the entries in books of accounts do not determine the character and nature of receipt and the character of transaction must in every case depend upon all relevant facts and circumstances. If the same is properly examined, it is apparent from the records of the case that the assessee is actually working as a transport c....
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....The ld. Authorized Representative for the assessee also relied upon the written submissions filed before the ld. CIT(A), a copy of which has been filed before this Tribunal also. He has filed copy of the assessment order for Assessment Year 2010-11 in which the nature of the business of the assessee has been mentioned as "Commission business in Transport". He has also filed sample copies of goods consignment notes issued by the assessee and copy of audited accounts along with Audit Report for the year under appeal. In support of his submissions, he has relied upon following authorities: i. ITO v. Rama Nand & Co., 163 ITR 702 (HP) ii. Mythri Transport Corp. v. ACIT, TTJ (Vishakha) 970 iii. Datta Digmber Sahakari Kamgar Sanstha v. ACIT, 77 TTJ(Pune) 540 iv. DCIT v. Satish Agrawal & Co., 124 TTJ (Asr) 542 v. R.R. Carrying Corp. Vs. ACIT, 126 TTJ (Ckt) 240 vi. CIT v. United Rice Land Ltd., 217 CTR (P&H) 332 vii. Paras Transport Co. v. ITO, 92 TTJ (Agra) 607 viii. Te....
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....ofit and Gains of Business or Profession." Section 29 of the Income-tax Act provides that the income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30-43D of the Income-tax Act. Section 37 of the Income-tax Act provides: "Any Expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". In the statutory framework of section 37, we are unable to accept the submission of the assessee that the impugned expenses in respect of which deduction has been claimed do not fall u/s 37 and therefore they are outside the scope of disallowance contemplated by section 40(a)(ia) for the following reasons: (i) In Indian Molasses Co. (P.) Ltd. v. CIT [1959] 37 ITR 66 (SC), it has been held that expenditure is what is paid out or away and is something which is gone irretrievably. To be a payment which is made irret....
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....ayments made for purchases would also be covered by the word "expenditure" and such payments can be disallowed if they are made in cash in the sums exceeding the amount specified under section 40A(3). On exactly same principles, the impugned payments made by the assessee would constitute "expenditure" within the meaning of section 37 for the purpose of disallowance u/s 40(a)(ia). (iv) Since section 37 specially deals with "Any expenditure", the general provisions of section 28 would not apply to those expenses which are specially covered by section 37. Impugned expenditure is covered by section 37 and hence its deductibility has to be seen u/s 37 read with section 40 and not under section 28. 13. We shall now deal with the other submission of the assessee that the disallowance of expenses contemplated by section 40(a)(ia) is limited to only those expenses which fall under sections 30 to 38. There are three principal reasons which persuade us to hold that the scope of disallowance of expenses contemplated by section 40(i)(ia) is not limited to those expenses alone which fall u/s 30-38 but covers all those expenses which are specifically enumerated in s....
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....for disallowance by it but rather enlarges the same in the sense that the disallowance of such expenses as contemplated by section 40 would be made irrespective of their eligibility for deduction under sections 30 to 38. They simply over-ride the provisions of sections 30 to 38 and not that they restrict the scope of expenses specifically enumerated for disallowance u/s 40 to those expenses alone which fall under sections 30 to 38. (iii) Without prejudice to the aforesaid, the opening words of section 40 cannot be interpreted so as to limit the ambit and scope of SPECIAL provisions contained in clause (a)(ia) of section 40 of the Income-tax Act. It is equivalent to saying that in spite of the provisions in the non-obstante clause contained in section 40, the special provisions contained in clause (a)(ia) of section 40 will still have its full operation or that the provision indicated in the non-obstante clause will not be an impediment for the operation of the aforesaid clause. The aforesaid view is well-supported by the principles emerging from several judgments of the Hon'ble Supreme Court some of which are Smt. Parayankandiyal Eravathkanapravan Kallia....
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....and on behalf of his principal for which he is paid commission. In the matter before us, the assessee has placed no evidence on record to establish that he had the requisite authority to bind the consignors of his dealings with third parties or that the consignors were liable to third parties for the actions of the assessee. There is nothing on record to show that the assessee was acting as agent for and on behalf of the consignors in his dealings with the truck owners/drivers engaged by him. The assessee has entered into contracts in his own right firstly with the consignors to transport their goods and thereafter sub-contracted the said work in his own right to the truck owners/drivers. Besides, there is no privity of contract between the consignors and the truck owners/drivers. Secondly, he has shown the amounts received from consignors as his own contract receipts from transport business and also claimed deduction in respect of amounts paid to truck owners/drivers as his own expenditure. This fact also goes against the submission of the assessee that he is a mere commission agent. Thirdly, the assessee himself has not disclosed any commission income from commission agency busin....
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.... The said expenditure represents amounts paid to the truck owners/drivers for carriage of goods. 17. In the statutory framework of section 40(a)(ia), the relevant issue that deserves to be considered is whether the assessee was required to deduct tax at source out of impugned payments made by him to truck owners/drivers for carriage of goods u/s 194C. If he was required to deduct tax at source out of such payments made to the truck owners/drivers and has failed to deduct such tax at source or, after deduction, has failed to pay the same within the specified period, the disallowance contemplated by section 40(a)(ia) would be attracted in terms of the judgment of the Hon'ble jurisdictional High Court in the assessee's own case. We are concerned with AY 2007-08. First two sub-sections of section 194C as they existed at the relevant point of time are relevant for deciding the issue under appeal. They read as under: Payments to contractors and sub-contractors. 194C. (1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply....
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.... individual or any member of Hindu undivided family. (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: Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum ....
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....an be inferred from the facts and circumstances that indicate a mutual intention to contract. Circumstances may exist which, according to the ordinary course and common understanding, demonstrate such an intent that is sufficient to support the finding of an implied contract. Chapter V of the Indian Contract Act treats certain relations resembling those created by a contract as contracts enforceable in law. The Indian Contract Act thus envisages four types of contracts, namely, (1) contracts made in writing, (2) contracts made orally, (3) contracts by implication or implied contracts and (4) quasi contracts. Thus the contracts envisaged by section 194C are not limited to written contracts alone; they include oral contracts and implied contracts also. All payments made in pursuance of a contract irrespective of whether it is a written contract, oral contract, implied contract and quasi contract are well covered by section194C of the Income-tax Act. The case of the assessee falls within the aforesaid parameters. 20. Definition of "work" as given in section 194C includes carriage of goods and passengers by any mode of transport other than by railways: Explanation III(c). Perusal of....