TaxTMI 
TaxTMI 
2014 (11) TMI 438
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....own Repairs expenses made by the Assessing Officer on account of non-deduction of TDS. The Ld. CIT(A), Jodhpur has also erred in facts and in law sustaining the Assessing Officer's action covering the said payments for disallowance u/s. 40A(3) of the I.T. Act. 3. The assessee craves the right to add, amend and alter the ground on or before the hearing." 2 Vide Ground No. 1, the grievance of the assessee relates to the sustenance of addition of Rs. 5,16,000/- made by the Assessing Officer u/s. 40(a)(ia) of the I.T. Act, 1961 (hereinafter referred to as 'the Act' in short). 3. Facts relating to this issue, in brief, are that the assessee filed the return of income on 30/09/2009 declaring an income of Rs. 2,27,821/- besides agricultural income of Rs. 85,800/-. The assessee was engaged in the business of supply of LPG being agent of Indian Oil Corporation. The Assessing Officer noticed that the assessee had made payment amounting to Rs. 5,16,000/- for delivery and supply of gas to various persons, details of which is given by the Assessing Officer at page No.2 of the assessment order, for the cost of repetition, the same is not reproduced herein. The Assessing Officer no....
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....ivers and helpers through that person. As such those persons have acted as an agent of the assessee and not as contractor. The said persons while making payments to jeep drivers and helpers got signatures of such payees on the printed payment vouchers of the assessee's proprietary firm M/s Vishnu Gas Agency and returned back such payment vouchers to the assessee. As such in the books of account though the payment has been shown as to have been made to the alleged persons but in actual the payment have been made to different jeep drivers and helpers and the assessee kept such vouchers in his record as proof of such payment. The alleged persons has not raised their own bill to the assessee which also establishes that they have not worked as contractor to the assessee but as an agent of the assessee. Therefore the provisions of sec 194C of the IT Act are not applicable on such payments. They have been paid the amount to be paid to the jeep drivers and the helpers. Rs. 5000/- has been paid to those persons towards their services as head-helper. During the course of assessment proceedings the assessee furnished some affidavits from jeep drivers before the Ld. AO in which also the ....
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....S is not required to be deducted on such payments. Even otherwise the said payments cannot be disallowed u/s 40a(ia) as the same has already been paid and not payable. The cash payments of the said expenses are clearly covered under clause(k) of Rule 6DD of the IT Rules and no payments to a single person is made in excess of 20,000/-, therefore the payment is also not disallowable u/s 40A(3) of the IT Act. Thus, it was submitted under the above facts and circumstances the disallowance of Delivery & Supply Expenses of Rs. 5,16,000/- is unjustified, illegal, unwarranted and be deleted." Reliance was also placed on the following case-laws:- Aristocon Engineers Co-operative Society Ltd. Vs. DCIT 024 ITR (Trib.) 0042 (Kolk) 5. The learned CIT(A), after considering the submissions of the assessee, observed that the fundamental conditions which deserved to be satisfied for application of section 194C r.w.s. 40(a)(ia) was that a contractual liability must be existing between two persons at the time of payment of money as a Principal and an agent where liability to deduct the TDS rests upon the principal. According to him, in the present case there was a contractual liability between th....
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....ers/workers. The relation between the assessee and those persons were of employer-employee relation and not of the awarder-contractor. The assessee has to distribute the LPG cylinders in the different villages/tahsils or the different parts of Nagaur district and for that purpose he appointed different jeep drivers and helpers and made 4-5 teams of such workers to distribute the cylinders in different areas. All persons were appointed by the assessee separately in the capacity of helpers/workers and the assessee did not execute any type of oral or written contract or agreement with any single person to execute the supply work in a composite manner therefore the relationship between them was of employer-employee and not the awarder-contractor, as such the said payment was not covered u/s 194C of the IT Act and therefore the TDS was not deductible on the same. 3. The assessee has made the payment to different persons but as the different teams of those persons were located in different parts of Nagaur district, while making the payment, he handover the cash to his head helpers who were his trustworthy persons among those helpers/workers to distribute the payment to different jeep dr....
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.... head-helpers and they have received payments from the firm. The expenses of diesel was born by the firm. The copies of affidavits are at PB No.21-25. 7. The detail of payments made to those persons and the payment made by them to different jeep drivers and helpers is at PB No.26-27. The copies of vouchers of such payments are at PB No.28-57. Your honour may observe from the statement at PB No.26 at S.No.1 that Mr. Shrinivas the head helper was paid Rs. 43,000/- for distributing the payment to jeep drivers and other helpers. The account of Rs. 43,000/- was submitted by Mr. Shrinivas to the assessee with payment vouchers of firms. He submitted his own voucher in support of receipt of delivery and supply charges of Rs. 5000/-. From the vouchers itself your honour may observe that for payment to jeep drivers and other helpers the detail mentioned on the vouchers clearly shows "payment through Shrinivas". On such vouchers Mr. Shrinivas has signed as "cashier/manager". Please refer the vouchers at PB No.28-29. On payment voucher of Mr. Shrinivas the fact is clearly mentioned that he is head helper. Please refer the copy of voucher at PB No.30. Similarly the other head-helpers have also....
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....ayment has been made to a single person in violation of sec 40A(3) of the IT act. Please refer the vouchers at PB No.28-57. As such the payment can also not be disallowed u/s 40A(3) of the Act. Thus under the above facts and circumstances the disallowance of Delivery & Supply Expenses of Rs. 5,16,000/- is unjustified, illegal, unwarranted and be deleted." 8. In his rival submissions, learned D.R. strongly supported the order of the authorities below. 9. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is an admitted fact that the Assessing Officer disallowed the impugned amount by invoking the provisions of section 40(a)(ia) of the Act and no disallowance had been made u/s. 40A(3) of the Act, therefore, we are concerned only to the disallowance made by the Assessing Officer by invoking the provisions of section 40(a)(ia) of the Act. In the instant case, it is noted that the Ld. CIT(A) himself admitted in the impugned order that there was no formal contract between the assessee and his agents/relatives, but there was an oral contract. However, it is not clear how the Ld. CIT(A) came to the ....
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....tually paid and tax is not deducted under the above sections, section 40(a)(ia) is not applicable. Section 40(a)(ia) has to be subjected to strict interpretation. Going by the rule of strict interpretation, the default with reference to actual "payment" of expenditure would not entail disallowance. This observation has now been upheld by a few Tribunal's rulings - in Merilyn Shipping & Transports v. CIT [2012] 136 ITD 23 (Visakhapatnam)(SB), S.S. Warad v. CIT[2012] 19 ITR (Trib.) 35 (Bang.), Kuruvilla v. CIT[2012] 149 TTJ (Coch.) 533, Emdee Apparels v. [2012] 54 SOT 600 (Bang.), Bartronics India Ltd. v. CIT [2012] 52 SOT 188 (Hyd.), Teja Constructions v. CIT [2010] 39 SOT 13 (Hyd.). As the assessee has already made the payment to that person and no any amount is payable as on 31.03.2009, the disallowance u/s 40a(ia) of the Act cannot be made. 3. It may further be submitted that the Ld. AO has also erred in disallowing the above payments u/s 40A(3) of the Act considering the payment made in excess of limits specified u/s 40A(3) i.e. Rs. 20,000/-. It may be submitted that the said payment has been made on 28.12.2008 which is Sunday and as such bank holiday and therefore the same....