TaxTMI 
TaxTMI 
2014 (6) TMI 632
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....enses Lorry Hire which TDS deducted Lorry hire on which 15 I taken Balance lorry hire not subjected to TDS & 15 I Total lorry hire 26,13,54,516 19,87,29,963 18,48,00,229 38,37,51,327 102,86,36,035 Having noticed that the assessee has deducted TDS on hire charges to the extent of Rs. 19,87,29,963/-, excluding the Hire Charges of Rs. 26,13,54,516/- relatable to the. own vehicles/Lorries of the assessee, and the amounts of Rs. 56,85,51,556/- [Col. (c) + Col (d)] on which no TDS was made, the A.O has asked the assessee to show cause as to why expenditure of Rs. 56,85,51,556/- should not be disallowed u/s. 40(a)(ia) of IT Act and for not furnishing the details of forms 15I collected from Lorry Owners along with the dates of submission of such forms to the IT Department. In the process, the A.O did not accept the contention of the assessee that provisions of Sec. 194C not applicable to his case for the following reasons: a) There was no written or oral agreement between the assessee and Lorry Owners, presupposing existence of contractual obligation, b) The conditions as stipulated u/s. 194C are conspicuously absent in the case, as he never entered in t....
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....s with the principal customers and supplied trucks to them on demand, for which assessee has his own fleet of vehicles and the trucks hired from market. The complete process of transportation of goods has been explained through three stages/ steps namely (i) indent and placement of vehicles, (ii) delivery of goods and receipt of Proof of Delivery (POD) and (iii) bill preparation and collections from the customers. Regarding the insurance on the goods transported, it was submitted that insurance was generally taken by the consignee except on few occasions by the consigner, but never by the vehicle owner. Thus, based on the procedure involved in transport of the goods and payment of the insurance related to the same, it was contended by the assessee that there is no contractual obligation between assessee and the lorry owner. It was clarified further that lorries were hired on random basis, to fulfil the commitments towards his principals and the material available on record does not indicate that the assessee shifted his responsibility towards the principals, to the lorry owners, in transportation of the goods. In this regard, the assessee relied on the decision of ITAT, Mumbai '....
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....plete in few cases, and were submitted before the CIT though belatedly. Therefore, it was argued by the assessee that it was not hit by the provisions of Sec. 40(a)(ia) and further relied on the following judicial decisions: i) Ratnakar Sawant, Dinesh Shah & Co Vs. ITO, ITAT Mumbai D Bench (supra) ii) Prashanth H Shah Vs. CIT Gujarat in ITA No. 1591 of 2011 dated 09.10.2012. 5. After considering the submissions of the assessee and the observations of the A.O, the CIT(A) noted that the assessee an individual carrying on the business of transport of goods, in the name and style of "M/s. Road Carriers of India, the proprietary concern of the assessee. The assessee undertake contracts for his principals which include major companies like HUL etc. and execute the contracts of transporting the goods, by hiring the services of individual truck owners. For the year under reference, the gross receipts of the business were shown at Rs. 126.00 crores (approximately) and major expenditure included the lorry hire charges which was put at Rs. 102.86 crores. On verification of such expenses, it was found that the 'amount include the payments made to various parties/truck owners apart....
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....c. 194C(2) are applicable to the facts of the case as per the observations of the Assessing Officer. In this process, the A.O disregarded the submissions of the assessee who relied upon series of judicial decisions wherein it has been generally and consistently held that the provisions of See. 194C(2) are not applicable to the payments made to individual truck owners, who cannot be treated as sub-contractors in absence of contract between the contractors and the individual truck owners, holding further that the facts of the case are distinguishable. Further, the A.O relied on the decisions of Hon'ble Rajasthan High Court in the case of Sri Choudhury Transport Company Vs. ITO (225 CTR 125) wherein it has been *held that in a contract between the contractor and the cement factory where the contractor's responsibility was to transport the cement, f6r which the contractor hired the service of truck owners, obviously as sub-contractors. 5.2 The CIT(A) observed that in light of the aforesaid situation of conflicting judicial decisions on the subject matter/issue under reference, the assessee shown to have preferred to deduct the taxes on the amounts paid as hire charges to the....
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....ending the signature on the G.R. (goods receipts) and challans by the truck owner, for delivering the goods in time and in shape, were amounting to subcontracts, as per the conclusions drawn by the AO. It is also relevant to mention that AO has recorded the statements of the employees of the assessee during the course of the assessment proceedings in ascertaining the correct nature of job / process involved in transporting the goods through * the truck owners. In this regard, it is relevant to mention that even G.R. and challan by the truck owners along with the other ancillary services such as loading; unloading etc. rendered in the process may indicate the multiplicity of the works done by the truck owners but the same cannot convert the act of transport into a sub contract and the said transaction alone may not bring it under the purview of the TDS provisions, unless the same truck owner repeats the act and deeds of transport with the contractor, the assessee, so as to receive the amounts which will fall under the meaning of Sec. 194C on account of the monetary limits. Hence, based on the facts of the case, the assessee may not come under the purview of See. 194C(2) unless it is....
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.... applies. Hence, on these lines, the assessee case deserves the benefit of ratio of the judicial decision in this regard. 5.6 The CIT(A) observed that the assessee has already undertaken to comply with the provisions of the said sections and has deducted the TDS on payment of hire charges to the individual truck owners. However, such deduction was confined to few cases with the Form 15I obtained in few of the other cases by act of which, it can be said that provisions of Sec. 194C are applicable to the facts of the case, with the exemption from deduction of taxes available in the specific cases, for which the procedure is prescribed in sub-section (3) of Sec. 194C of IT Act, 1961 along with its proviso read with Rule 29D of IT Rules, 1962. In the instant case, the assessee shown to have obtained Form 15I from the parties to whom the amounts of Rs. 18,48,00,229/- was paid or payable as lorry hire charges to the truck owners in case of whom it was presumed that the provisions of TDS are applicable to them but are not liable to tax, individually. There is no dispute in this regard that the assessee filed Form 15I for the said amounts in the prescribed format. However, it was observ....
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....ntractor referred 0 in the second proviso $hall furnish to the prescribed income tax authority or the person authorised, by it such particulars as may be prescribed in such form and within such time as may be prescribed. Rule 29D : "Form of declaration under second proviso/third proviso to clause(i) of sub-section (3) of Sec. 194C- (1) the declaration under the second proviso to clause (i) of sub-section (3) of section 194C by a sub-contractor shall be in form No. 15-I and shall be verified in the manner indicated therein by such sub-contractor. (2) the declaration referred to in sub-rule(l) may be furnished to the contractor responsible for paying or crediting any sum to the account of the sub-contractor before the event of such sum being credited or paid to such sub-contractor. (3) the particulars under the third proviso to clause-1 of subsection 3 of See. 194C to be furnished by a contractor responsible for paying any sum to such sub-contractor shall be in form No. 15J. (4) The particulars referred to in sub-rule (3) shall be furnished, (i) the commissioner of income-tax, so designated by the Chief Commissioner of Income-tax, within whose area of jurisdiction, ....
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....is point of time second proviso would come into play and when Form No. 15-I is submitted by the sub-contractors to the contractor then contractor is not required to deduct tax from such payments. Once deductibility of tax depends upon submission or non-submission of Form No. 15-I from the sub-contractor to the assessee then non-compliance of third proviso becomes merely technical without affecting in substance the deductibility or non-deductibility of tax on payments made by the assessee to the sub 'contractors. Therefore, in our considered view, non-compliance of third proviso becomes merely a technical default, which even if, remained non-complied would not affect the operation of section 40(a)(ia)." 5.10 The CIT(A) observed that this view was also fortified by the decision of Addl.C1T Vs. Meerut Rubber Factory, 1TAT, Delhi 'E' Bench( ITA No. 5114/De/2010, dated 13/07/2012), wherein it was held that for allowance of deduction u/s. 40(a)(ia), assessee either should have obtained Form 15G/H on or before the last day of the relevant financial year or should have deducted tax at source. 5.11 The CIT(A) held that as could be seen from the above findings and the decis....
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.... u/s 40(a)(ia) of the IT Act without considering and adjudicating upon the submissions made by the AO in the remand report dated 15/01/2012. He further contended that the CIT(A) ought to have given opportunity to the AO in the further hearings before giving relief to the assessee when a request was made in this regard, hence, the CIT(A) violated the Rule 46A of Income-tax Rules, 1962. It was contended that the CIT(A) was not right in accepting the letter dated 15/02/2012 submitted by the assessee during the appellate proceedings, without verifying whether or not the same forms were furnished before the AO during the scrutiny proceedings and payments made towards the same tallies with an amount of Rs. 18.48 crores, which was claimed exempt. The DR pointed out that the CIT(A) ought to have given an opportunity to AO for verifying genuineness of the same as per Rule 46A of Incometax Rules, 1962. The DR submitted that the CIT(A) without adjudicating upon the issue of whether incomplete and defective forms 15I obtained can be equated with non obtaining of form 15I and gave relief to the assessee relying on decision of ITAT (Ahd) in the case of Khanbai Mankad vs. DCIT(supra), is not prop....
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.... IT Act. We are of the view that filing of Form 15I or 15J belatedly cannot be a reason to deny the deduction claimed by the assessee. If the assessee filed these forms which are duly filled with the details such as full address, PAN, father's name and they are assessed to tax and the same should be considered as filing of these forms are only procedural in nature. 9.1 Coming to the other arguments of the assessee's counsel that provisions of section 194C is not applicable in view of the judgment of the Madras High Court in the case of CIT Vs. Poompuhar Shipping Corporation Ltd. [2006] 282 ITR 3(Madras), we have carefully gone through the Explanation III to sub-section (3)(c) to section 194C, which reads as follows: "For the purpose of this section, the expression 'work' shall also include- (a)............... (b)............... (c) carriage of goods and passengers by any mode of transport other than by railways." 9.2. Being so, the above judgment of the Madras High Court cannot be applied. In our opinion, Explanation III to section 194C being applicable to the assessment year under consideration as the Explanation would be applicable prospectively from 01/07/1995,....
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....udgment dated 27/06/2013 the Hon'ble AP High Court held as follows: "In this case, the learned Tribunal factually found that the assessee had engaged certain lorry owners from open market for execution of the contract undertaken by it for transportation of goods. The revenue wanted to term this transaction as subcontract. The learned Tribunal, on fact, found that it is nothing but hiring of lorries for carrying goods in relation to execution of contractual works. There is no element of sharing of risk or executing the work to term it as sub-contract. On fact, it was found that since it is not a sub-contract, the question of invocation of provisions of section 194C(1) of the IT Act does not arise. The learned Tribunal noted its decision in the case of Mythri Transport Corporation' wherein it was held that mere hiring of trucks cannot be treated as sub-contract unless the lorry owners involved themselves in carryout any part of the work undertaken by the assessee by spending their time, energy and also by taking the risks associated with the main contract. When the factual position is such as above, nonapplication of law would automatically follows. The learned Tribunal has correc....
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....e including the enhancement of the assessment or penalty (whether on his own motion or on the request of the assessing officer). Therefore, this grievance of the revenue is rejected. 9.8 Accordingly, we are of the opinion that due credit be given to the claim of the assessee in terms of Form 15I and 15-J filed by the assessee. In view of the above discussion, we uphold the order of the CIT(A) in deleting the disallowance made by the AO u/s 40(a)(ia) of the Act and the ground raised by the revenue on this issue is dismissed. 10. In the result, appeal of the revenue in ITA No. 781/H/13 is dismissed. ITA No. 718/Hyd/2013 - appeal by assesee 11. Ground No. 1 is with regard to disallowance of Rs. 30,80,336/- being 1/5th of various expenditure. 12. The assessee has claimed the expenditure of Rs. 1,54,01,680/-, the details of which are as follows: 1. Conveyance charges 39,87,152/- 2. General expenses 22,95,196/- 3. Office Maintenance 13,36,847/- 4. Telephone expenses 38,24,084/- 5. Vehicle Maintenance 12,00,439/- 6. Staff Welfare 13,48,760/- 7. Printing & Stationery 14,09,202/- Total 1,54,01,680/- The AO made adhoc disallow....
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....ts. 16. Briefly the facts relating to this ground are that during the assessment proceedings, it was observed by the AO that an amount of Rs. 1,27,59,797/- represent the outstanding amounts against the names of the sundry creditors, with the amount exceeding of Rs. 50,000/- in each case, out of the total sundry creditors of Rs. 8,54,74,272/-, as on 31.03.2009. The AO has treated the amount of Rs. 1,27,59,797/- as unexplained credits, invoking the provisions of Sec. 68 of IT Act, holding that assessee failed to furnish the confirmations with respect to the said creditors. While treating the creditors as unexplained, the AO made further observation that the assessee failed to adduce any material that would go on to prove the genuineness, identity and creditworthiness of subject sundry creditors, and there are plethora of case laws where in the decision to add the amounts of sundry creditors on similar grounds have been upheld by various Courts. The AO did not accept the submissions of assessee, but the addition made was confining to the amounts of creditors as indicated and consented by the assessee, vide his letter dated 29/12/2011. Aggrieved, the assessee carried the matter in a....
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....planation. It was contended that the A.O. never suspected the genuineness of purchases/services obtained by the assessee from those parties and all requirements of establishing the creditor, such as identity, genuineness of transaction and the creditworthiness/capacity for advancing amount/credit, were complied with, to claim that the credits are explainable. Hence, there is no scope for treating the trade creditors of Rs. 80,86,191/- as bogus/unexplained credits, u/s. 68 of the IT Act. 17.3 Regarding the credits of Rs. 46,73,606/- (Rs. 1,27,59,707 - Rs. 80,86,191) for the hire charges, it was submitted as under: i. "The hire charges and the payments (expenditures) are supported by proper evidence. ii. The hire charges for each trip are properly recorded in the lorry hire challan which contains hire charges as well as details of the truck and the consignment. iii. The hire charges outstanding in the respective parties accounts appeared as sundry creditors in the balance sheet. iv. The outstanding hire charges as on 31.03.2009 were cleared by the assessee in the financial year 2009-10 " It was also submitted that the identity of the parties, the nature of service r....
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.... than Rs. 50,000/- that fall in to two categories, with one of the category of the creditors for supplies stood at Rs. 80,86,191/- and balance amounts of Rs. 46,73,606/- representing the creditors for Lorry Hire Charges, as on 31.03.2009. On the other hand, the sundry creditors with amounts of less than Rs. 50,000/- in each case, stood at Rs. 7,27,14,475/- with the number of such creditors running into few thousands. As indicated, the sundry creditors for goods and others with the outstanding amount of Rs. 50,000/- and more, stood at Rs. 80,86,191/-and all such creditors represent the repeated and established suppliers who are in the running businesses and confirmations were obtained, where the amounts for purchases were made mostly through banks and such creditors stand on a different footing compared to the creditors for lorry hire charges of Rs. 46,73,606/- in the same category with the outstanding amounts of Rs. 50,000/- and above. Such creditors represent the creditors for services, mainly for the lorry hire charges, for which the payments were mostly made in cash. The confirmations from the major creditors for supplies of goods (Rs. 80,86,191/-) indicate that the purchases ar....
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....ndry creditors was neither withdrawn nor controverted by the assessee at any time during the post assessment proceedings except raising the ground of appeal before the appellate authority, if such admittance was linked to the completion of the assessment by confining to the adhoc additions, as alleged by the assessee. Under the circumstances, the CIT(A) was of the opinion that the amounts of unexplained credits stand quantified and confirmed at Rs.1,27,59,797/-, for the reasons that such amounts represent the sundry creditors for lorry hire charges, which are not supported by proper bills and paid in cash and the amounts of sundry creditors as admitted by the assessee before the Assessing Officer at the stage of assessment proceedings vide his letter dated 29.12.2011. Hence, the addition of Rs. 1,27,59,797/- sustained by the CIT(A). 19. Aggrieved, the assessee is in appeal before us. 20. We have heard both the parties, perused the material on record and gone through the orders of the revenue authorities. Out of disallowance of Rs. 1,27,59,797/-, an amount of Rs. 80,86,191/- represents trade creditors for supply of material such as diesel, tyres etc., and the balance amount of....