TaxTMI 
TaxTMI 
2016 (10) TMI 1297
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....)(ia) of the Act amounting to Rs. 3,39,11,223/-. 2. The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the enhancement of Freight expenses made u/s. 40(a)(ia) of the Act amounting to Rs. 3,06,11,221/-. 3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XV. Ahmedabad ought to have upheld the order of the Assessing Officer. It is therefore, prayed that the order of the Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored. ITA No.1990/Ahd/2012 (Kataria Transport & Co.) 1) The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the disallowance of Freight expenses u/s. 40(a)(ia) of the Act amounting to Rs. 1,65,64,178/-. 2). The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the enhancement of freight expenses made u/s. 40(a)(ia) of the Act amounting to Rs. 2,42,15,122/-. 3) The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the disallowance of interest expenses u/s. 4....
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....nue, which has two parts, as canvassed in ground no.1 and 2, which are only substantial grounds of appeal. At the cost of repetition we take note of the grounds no.1 and 2again, as under: 1. The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the disallowance of Freight expenses u/s. 40(a)(ia) of the Act amounting to Rs. 3,39,11,223/-. 2. The Ld. Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in deleting the enhancement of Freight expenses made u/s. 40(a)(ia) of the Act amounting to Rs. 3,06,11,221/-. 5. Brief facts of the case, with regard to this issue are that the assessee has carried out transportation business at Bellary in Karnataka. It has debited freight charges in the profit & loss account at Rs. 27,98,77,049/-. In the assessment order, the ld.AO has observed that the assessee failed to deposit TDS amount deducted by it in the government treasury, and also failed to deduct TDS on freight charges paid by it to other transporters. Before the ld.CIT(A), in the original proceedings, the assessee has field written submissions vide letter dated 10.11.2008. In this letter, the assessee has bif....
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....amended provision, it has been provided that even if in any month of the accounting, if expenditure was incurred, tax has been deducted at source and deposited before due date of filing of the return of income, no disallowance could be made under section 40(a)(ia). Difference between the position of law, when the ld.CIT(A) has passed the order on 12.12.2008 in the first round, and in the present round when the CIT(A) has passed the impugned order on 21.6.2012 is that earlier TDS was deducted in the month of March, but was deposited in the government account before due date of filing of return, then disallowance cannot be made. In other words, earlier exemption was granted for the payment made in the month of March, on which TDS was deducted. But after 2010, it has been provided that even if TDS of any month is being paid before the due date of filing of return, then also disallowance under section 40(a)(ia) would not be made. The ld.CIT(A), following the decision of the ITAT, Ahmedabad Bench in the case of Shri Kanubhai Ramjibhai Makwana Vs. ITO, 44 SOT 264 (Ahd) has deleted disallowance of Rs. 3,39,11,223/-. This deletion has been challenged by the Revenue in ground no.1. 7. In t....
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....n the case of ShriKanubhaiRami'ibhaiMakwana vs. ITO reported in 44 SOT 264 (Ahd.)" "So far as Sr.No.2 of above table i.e enhancement of disallowance of Rs. 3,14,48,5117-is concerned, the Appellant submits as under: > Freight on Individual Trucks - Rs. 3,08,31,940/- For the year under consideration, the Appellant has incurred freight amount of Rs. 3,08,31,940/-paid to Individual Trucks. The Appellant submits that as per the provisions of sub-section (3) of S.194C of the Act applicable to the year under consideration, the Appellant was not required to deduct tax at source on any sum credited or paid in pursuance of any contract the consideration of which does not exceed Rs. 20,000/-. For ready reference, provisions of sub-section (3) to Section 194C of the Act is reproduced hereunder: "(i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees" However, with effect from 01/10/2004, the law has undergone a change by the Finance Act, 2004 which provides as under: "(1) the amount of any sum credited or' paid or likely to be credited or paid to t....
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....source. (Pl. refer Annexure- I) 47,54,720/- --- Aggregate of an mount which is in excess of Rs. 50,000/- per contractor on which tax is not deducted at source. (Pl. refer Annexure - K) -- 1,12,54,970/- Aggregate of an amount which is not in excess of Rs. 20,000/- per contract on which tax is not required to be deducted at source. 1,08,21,710/- -- Aggregate of an amount which is not in excess of Rs. 50,000/- per contractor on which tax is not required to be deducted at source. 39,09,540/- Total 1,55,86,430/- 1,52,45,510/- Balance freight representing debit notes - Rs. 6,16,571/-. Copy of details of freight representing debits notes of Rs. 6,16,571/-.is enclosed herewith marked as "Annexure - I", on which the tax is not required to be deducted at source under the scheme of the Act" 8. Now, we take the facts from ITA No.2004/Ahd/2012 in the case of Kataria Logistic Service. In this case also a total disallowance of Rs. 2,77,51,060/- was sought to be made under section 40(a)(ia) of the Act. Out of this amount, a sum of Rs. 1,65,77,280/- is the amount which was intended to be enhanced by the ld.CIT(A) in its order dated 12.12.20....
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....ection (3) of S.194C of the Act applicable to the year under consideration, the Appellant was not required to deduct tax at source on any sum credited or paid in pursuance of any contract the consideration of which does not exceed Rs. 20,000/-. For ready reference, provisions of sub-section (3) to Section 194C of the Act is reproduced hereunder: "(i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees" However, with effect from 01/10/2004, the law has undergone a change by the Finance Act, 2004 which provides as under: "(1) the amount of any sum credited or' paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) or, as the case may be, subsection (2) shall be liable to deduct income-tax under this section" ....
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....contractor on which tax is not required to be deducted at source. 1,08,65,044/- Total 41,77,926/- 1,12,83,486/- Balance freight representing debit notes - Rs. 10,96,067/- Copy of details of freight representing debits notes of Rs. 10,96,067/- .is enclosed herewith marked as "Annexure - K", on which the tax is not required to be deducted at source under the scheme of the Act" 9. The facts in the case of Kataria Transport i.e. ITA No.1990/Ahd/2012 on this issue can be gathered from the explanation given by the assessee before the ld.CIT(A). It reads as under: "(7.2) (a) In respect of ground related to disallowance u/s 40(a)(ia) of the Act, the following disallowance were made : Sr. No. Particulars Amount in Rs. 1 Disallowance made by the ld. AO confirmed by the CIT(A) 1,65,64,178 2 Enhancement made by Your Honours in first round 2,42,15,122 Total 4,07,79,300 (b) The appellant submitted that: "So far as Sr. No. 1 i.e disallowance of Rs. 1,65,64,178/- u/s 40(a)(ia) is concerned, the Appellant submits that it is admitted facts that the Appellant has deducted t....
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....equired to deduct tax at source on any sum credited or paid in pursuance of any contract the consideration of which does not exceed Rs. 20,000/-. For ready reference, provisions of sub-section (3) to Section 194C of the Act is reproduced hereunder: "(i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees" However, with effect from 01/10/2004, the law has undergone a change by the Finance Act, 2004 which provides as under: "(1) the amount of any sum credited or' paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) or, as the case may be, subsection (2) shall be liable to deduct income-tax under this section" Hence, from the above quoted provisions, it is very much clear that the Appellant was not required ....
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....17 64,49,012 Balance freight representing debit notes - Rs. 3,06,779/- Copy of details of freight representing debits notes of Rs. 3,06,779/- .is enclosed herewith marked as "Annexure - K", on which the tax is not required to be deducted at source under the scheme of the Act" 10. The ld.DR while impugning the orders of the ld.CIT(A) contended that in the case of M/s.Kataria Movers, the ld.CIT(A) has relied upon the order of the ITAT, Special Bench decision in the case of Merilyn Shipping & Transports Vs. ACIT, 16 ITR (Trib.) 1. He pointed out that analysis made by the ld.CIT(A) on the strength of this decision is not sustainable, because, Hon'ble Gujarat High Court in the case of CIT Vs. Sikhandharkhan N. Tanvar, 257 ITR 212 has overruled this decision. He pointed out that in the case of M/s.Kataria Movers, the ld.CIT(A) has observed that total disallowance of Rs. 6,53,59,734/- including enhancement made by the CIT(A) was to be done in this case. Out of this amount, a sum of Rs. 3,39,11,223/- is the amount on which TDS was deducted by the assessee, but was paid late i.e. before the due date of filing of the return. When the ld.CIT(A) has worked out the balance a....
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....disallowance can be made from this amount. This amount has been quantified at Rs. 3,39,11,223/-. This has been impugned in Ground no.1 in the case of M/s.Kataria Movers. Similarly, an amount of Rs. 1,11,73,780/- and Rs. 1,65,77,280/- have been worked out in the case of Kataria Logistic Service and Kataria Transport Co. respectively. As far as these amounts are concerned, the issues are not in dispute. He relied upon the judgment of the Hon'ble Gujarat High Court in the case of CIT Vs. B.M.S. Projects P.Ltd., 48 taxmann.com 13 (Guj). He placed on record copy of the judgment. The Hon'ble Gujarat High Court while putting reliance upon its earlier decision in the case of Gujarat Narmada Valley Fertilizers Co. Ltd., 361 ITR 192 (Guj) and in the case of CIT Vs.Omprakash R. Chaudhary has held that amendment in section 40(a)(ia) by Finance Act, 2010 has retrospective effect, meaning thereby, if the expenditure was incurred by the assessee in any month during the previous year and TDS was deducted, but such TDS was deposited after expiry of accounting year, but before due date of filing of the return, then disallowance under section 40(a)(ia) would not be made. The ld.DR was unable to contr....
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....ruction Co., 267 ITr 618 (P&H); iv) ACIT Vs. Amir Traders, ITA No.563/Ahd/2009 & Co. No.171/Ahd/2011; v) Ismailbhai I. Gandhi Vs. ACIT, ITA No.3445/Ahd/2009 14. We also appraised him the order of the ITAT, Delhi Bench in the case of Kuldeep Kumar Sharma Vs. ITO, ITA No.5672/Del/10. He further contended that before the ld.CIT(A), the assessee has filed complete details exhibiting the payments made by the assessee. He took us through submissions of the assessee reproduced by the ld.CIT(A) on page no.13 of the impugned order. He pointed out that for the sake of arguments, if it is assumed that section 194C is applicable upon the assessee and it was required to be deducted TDS, then, sub-clause (iii) of section 194C contemplates that upto 30.9.2004, if payment does not exceed Rs. 20,000/- per contract, then, the assessee was not required to deduct TDS. Similarly, after 1.10.2002 upto 31.3.2005, if the amount credited or paid to the contractor or sub-contractor does not exceed Rs. 20,000/- in a single transaction and Rs. 50,000/- in aggregate, then, the assessee was not required to deduct TDS. The assessee has given bifurcation of these amounts, which has duly been repr....
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....xxxxxxxxx (ia) any interest, commission or brokerage, [rent, royalty] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or , after deduction, [has not been paid. xxxxxxxxxx "194C. Payments to contractors and sub-contractors. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and shall at the time of credit of such sum to the account of the 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 - (i) one per cent in case of advertising (ii) in any other case two per cent, of such sum as income-tax on income comprised there in. (2) Any person (being a contractor and not being an individual or a H....
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....eep Kumar Sharma (supra), a reference was made to the order of the ITAT, Visakhapatnam Bench in the case of Mythri Transport Corporation Vs. ACIT, 124 ITD 40. Relevant discussion by the ITAT, Visakhapatnam is worth to note. It reads as under: "8.2 As stated earlier, the assessee herein is a transport contractor and has entered into an agreement with parties whereby the assessee undertook to transport bitumen to various points as per their directions. According to the assessee, the Lorries used for the said purpose are specially designed with proper heating arrangements . The claim of the assessee is that since it did not have required number of Lorries, it had to hire Lorries from others who simply placed the vehicles at the disposal of the assessee. The assessee alone, under its control and supervision, has executed whole of the contract. According to the assessee, the individual lorry owners have not carried out any part of the work undertaken by the assessee. x x x x x x x x x x x x 8.6 As per the provisions of section 194C(2), as explained in para 8.1 supra, the sub-contractor should carry out the whole or any part of the work undertaken by the assessee. The dictionary me....
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....ia) is not applicable during the Asstt.Yar 2005-06. This argument was raised on the strength of Hon'ble Calcutta High Court's decision in the case of Piu Ghosh Vs. DCIT, rendered in ITA No.191 of 2009. The ld.counsel for the assessee submitted that this is the solitary decision on the point and Tribunal is bound to follow. He pointed out that solitary decision of non-jurisdictional High Court is required to be followed until an unless there is a contrary decision at the end of Hon'ble jurisdictional High Court or at the end of the Hon'ble Supreme Court. In this decision, the Hon'ble High Court has held that section 40(a)(ia) is not applicable in the Asstt.Year 2005-06, therefore, no disallowance can be made. The discussion made by the Hon'ble Calcutta High Court read as under: "... Mr.Agarwal's criticism is not without force but he has not been able to point out as to how could the assessee have come to know that the omission to deduct tax from any payment made to a contractor shall become not deductible under section 40 before the Finance Act 2004 got presidential assent on 10th September, 2004. This question he has not answered because he has no answer to offer. Admitte....
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....a practical matter and concerns itself with the substance of the thing upon which the tax is imposed rather than with legal forms or expressions. But in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used. If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer. Gould v. Gould, 245 U.S. 151, 153.'' We are of the opinion that the learned Tribunal erred in applying provision of section 40(a)(ia) in disallowing payment of a sum of Rs. 4,30,386/- to a contractor without deducting TDS during the financial year 2004-05, corresponding to assessment year 200506. In that view of the matter, the question formulated is answered in the affirmative and in favour of the assessee." 22. In the absence of any contrary decision brought to our notice by the ld.DR, we are bound to follow, and therefore, the assessee cannot be held in default for non-deducting the TDS on the payments made to truck owners for hiring the trucks. 23. Now, we take Cross-objection filed by the assessee. CO 227/Ahd/2012 (Kataria Movers) ....
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....s a bad debt, then it should be allowed as business loss. The ld.AO has rejected the claim of the assessee on the ground that it cannot be allowed as bad debt, because, it was not offered for taxation in any earlier years. Similarly, it was given as an advance to the employees, therefore, it cannot be allowed as business loss. On appeal, the ld.CIT(A) concurred with the AO by observing that the assessee failed to bring evidence demonstrating the fact that the expenditure was incurred for the purpose of business. 30. On due consideration of the above facts, we are of the view that both the Revenue authorities have failed to appreciate the facts and circumstances. The explanation of the assessee was that it was given as advance to the staff for business purpose, i.e. it was to be incurred for hiring trucks. The ld.AO has considered as if it was given to the staff for their personal needs. The AO has considered it as advance to the staff. He has totally changed the meaning of the explanation of the assessee, and even if it is an advance to the staff during the course of employment and staff does not return it, then how it could be allowed as business loss, is not understandable. Simi....