Case Law Details
HP Ex Servicemen Corporation Vs ACIT (ITAT Chandigarh)
Issue– Ld. CIT(A) not granted the credit of TDS of Rs. 1,90,76,546/- (duly reflected in Form no. 26AS) by stating that the assessee had not offered the freight receipts as income for the relevant year under consideration ignoring the fact that the assessee had shown the net of the Gross receipts of the Freight services against the disbursements to the Ex-servicemen truck owners in its audited books of accounts, and thus have fulfilled the requirements as specified in the provisions of Section 199 read with Rule 37BA of The Income Tax Act 1961
It is necessary for us to highlight that under the Scheme of the Income Tax Act, what is to be brought to tax is the specific income arising from the stated activity in the specific period. It has been repeatedly canvassed and we notice that the argument has not been upset by the Tax Authorities.
The assessee society incorporated under the HP Ex-Servicemen Corporation Act, 1970 was created to provide employment/financial benefits to the retired Defence personnel. The cement companies including A.C.C. Ltd., J.P. Cements etc. required the cement to be lifted and transported from the premises entered into an agreement with the assessee.
Admittedly the assessee Society/Corporation did not own any trucks and agreements were entered into with ACC Ltd., Ambuja Cement etc. for transporting cement etc. from the premises. Since the assessee corporation did not own any trucks, these were hired by the Corporation and commission income from the said hiring activity was the income received by the Corporation only.
However, since trucks have been engaged through the assessee by ACC Ltd. etc., the TDS deducted etc. payments by the ACC Ltd. were paid to the truck owners through the assessee, pleadings to this effect, we have noticed have been extracted in the respective orders, however, while passing the order, the AO, we find, has been guided by the fact that credit of TDS of freight receipts cannot be allowed as no freight receipts have been disclosed.
Similarly, the ld. Commissioner is also influenced by this fact has confirmed the order. It is a fact that the freight receipts are not offered as income of the assessee as the income of the assessee was only commission income. The claim on facts needs to be examined by the Tax Authorities.
Accordingly, on a perusal of the record and in the light of the submissions of the parties, we find that in the interest of justice, it is appropriate to set aside the respective orders and restore the issue back to the file of the CIT(A) for a proper consideration on facts. The Agreements entered into by the assessee Corporation with the ACC Ltd. etc. for transportation of cement to various destinations from Barmana, Distt. Bilaspur, Ambuja Cement at Darlaghat and J.P. Cement etc. necessarily need to be looked into. It is an admitted fact that the freight receipt by the Corporation has been paid to the truck owners and it is claimed that TDS deducted by the ACC Ltd. is also as per practice paid to the truck owners after receipt of the same from the Income Tax Department. If the agreements and the facts support such a claim, then the appeal of the assessee, we are of the view, deserves to be allowed. Accordingly, the orders are set aside in the interests of justice and the issue is remanded back for a correct appreciation of facts.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The present appeal has been filed by the assessee assailing the correctness of the order dated 21.09.2021 passed u/s 250 of the Income Tax Act, 1961 by the CIT(A) (NFAC i.e. National Faceless Appeal Centre) Delhi pertaining to 2017-18 assessment year on the following ground :
“1. The Id. CIT(A) has erred in law and on the facts of the case by not granting the credit of TDS of Rs. 1,90,76,546/- (duly reflected in Form no. 26AS) by stating that the assessee had not offered the freight receipts as income for the relevant year under consideration ignoring the fact that the assessee had shown the net of the Gross receipts of the Freight services against the disbursements to the Ex-servicemen truck owners in its audited books of accounts, and thus have fulfilled the requirements as specified in the provisions of Section 199 read with Rule 37BA of The Income Tax Act 1961”.
2. The ld. AR inviting attention to the respective orders of the tax authorities referring to assessment order page 2 para 4 submitted that the assessee is incorporated under the Himachal Pradesh Ex-servicemen Corporation Act, 1979. The aim of the Corporation is to provide employment/financial benefits to the retired Defense personnel and was engaged in various activities as permitted under the Act and Rules. The subject matter for consideration in the present appeal is the TDS deducted on behalf of the transportation activities carried out by the assessee for the cement plant of ACC Ltd., Ambuja JP Cement etc. The assessee corporation, it was submitted, did not own any trucks etc. and these were hired through the Ex-servicemen Corporation and consequently the TDS deducted was passed on by the assessee to the truck owners/pliers. The commission received from the said activity, it was submitted, is the only income of the assessee. The AO ignoring the facts noticed that no freight receipts have been shown in the return filed, proceeded to disallow the claim of refund of TDS. The challenge before the CIT(A) failed as he also failed to consider the facts available on record.
3. Aggrieved by this, the assessee is in appeal before the ITAT. In the said background, it was his submission that the facts in the present case have been completely ignored. The assessee is entitled only to the commission income. The trucks etc. have been engaged through the assessee by ACC Ltd. and the TDS etc. deducted by the ACC etc. is paid to the truck operators and as far as the assessee is concerned, it is only a pass through arrangement. Pleadings to this effect, it was submitted, have been extracted in the impugned order itself (specific attention page 3) which have remained ignored. In the circumstances, it was his limited prayer that the issue may be remanded back to the file of the CIT(A) allowing the assessee to place the necessary facts on record.
4. The ld. DR considering the submissions extracted in the order and the facts agreed that the matter may be remanded back.
5. We have heard the rival submissions and perused the material available on record. A perusal of the record shows that the assessee corporation has came into existence Vide Act “The Himachal Pradesh Ex-servicemen Corporation Act, 1979″ ( as amended vide amendment and validation Act, 1984) with the main objective to provide the welfare and economic uplift of ex-servicemen in the State, to provide financial assistance to ex-servicemen by advancing them in cash or in kind loans under hire purchase system and / or loans towards margin money for any of the purposes specified and to give grants and subsidies to and to guarantee loans taken by the ex-servicemen or their organization etc. It is evident from record that considering the claim of refund filed by the assessee, the AO took note of the fact that no freight receipts have been shown by the assessee and hence required the assessee to explain the same vide office letter dated 18. 1 1.2019. As per record, the assessee in its letter dated 17. 12.2019 found extracted in the assessment order itself is found to have stated that “The HP Ex Servicemen Corporation Hamirpur has been constituted vide Act ” The Himachal Pradesh Ex-Servicemen Corporation Act 1979″ with the objective to provide for the welfare and economic upliftment of Ex-Servicemen in the State. When the demand for trucks has arisen on the installation of Cement Plant by ACC Ltd, Ambuja Cement Limited, JP Cements Limited all the ex-servicemen who were desirous to attach and ply trucks were told to come through their facilitator body i.e. Ex -Servicemen Corporation, as the cement producing ‘ company refused to deal directly with the truck operators. Company was willing to deal with one organization and who further deal with all the truck operators, who are ex-servicemen and members of the Corporation. The Corporation controls the demand for trucks, billing system and collection and payment of freight to truck operators and acted as facilitator. The cement company followed the TDS provisions and deducted the TDS on freight on Corporation PAN and being Corporation is exempt u/s 10(26BBB) of The Income Tax Act 1961 , gets refund of TDS, which is in actual component of freight of truck operators and distribute the same among the Truck Operators. The main business of the Corporation is to carry the cement through trucks from the locations of the clients to different places in India. The Corporation did not own any trucks. Therefore, to provide gain full employment to truck owners i.e. members (Ex-Servicemen) of the corporation, it deployed their trucks for carriage of cement to various destinations and made the payments to truck owners. The members of the Corporation executed the said contract by providing their trucks for transportation. The entire amount received in respect of the transportation charges including the tax deducted at source are paid to the truck owners. Freight received by the Corporation is on behalf of truck operators and the very same amount is paid to truck operators. The Corporation just manage the system and for that Corporation charges purchee fee only. This payment is made on the basis of weekly cycle.”
5. 1 Considering the explanation, the Assessing Officer summed up the facts in the following manner :
5. During the course of assessment proceedings submission of the assessee has been considered and noticed that the main business of the corporation is transportation of cement through trucks from ACC Ltd. Barmana, Distt. Bilaspur, (HP). The corporation did not own any trucks. Therefore, to provide gainful employment to truck owners i.e. members (Ex-servicemen’s) of the corporation, it deployed their trucks for transportation/carriage of cement to various destinations and made payments to the truck owners. The corporation has obtained the contract from ACC Ltd. Barmana, Distt. Bilaspur, Ambuja Cements Ltd. at Darlaghat and JP Cements Limited for transportation of cement. The members (i.e. Ex-servicemen’s) of the corporation executed the said contract by providing their trucks for transportation. The entire amount received in respect of the transportation charges including the tax deducted at source are paid to the truck operators. The corporation is collecting some commission as per charges in case of cement load. The commission / parchee amount are deducted for meeting the administrative expenses of the corporation. The corporation was created for the sole purpose of obtaining contract from ACC Ltd., Ambuja Cements Ltd and JP Cements Limited it is clear that the amount of freight received by the corporation has been paid to the truck owners. The amount of TDS deducted by the ACC Ltd. is also paid to the truck operators after receipt of the same from the IT. Department.
5.2 However, the claim was denied holding as under :
“7. In the profit and loss account the assessee has not disclosed any freight receipts during the year under consideration but in the income tax return the assessee has claimed TDS on freight receipts also. The credit of TDS on freight receipts cannot be allowed as per section 199 of the Income tax Act, 1961 since no freight receipts has been disclosed by the assessee in its return of income. In view of above facts the assessee is not eligible for claiming the TDS credit on the receipts which was not disclosed by the assessee in its income tax return. As such the credit of TDS is not allowed.”
5.3. The ld. AR highlighting the above para has argued that the AO after correctly summing up the facts misdirected himself in para 7. The ld. CIT(A) also similarly in para 6. 1, it has been argued, has misdirected himself. The relevant extract is reproduced hereunder :
6.0) Coming to the TDS disallowance made on Freight Receipts, the AO has stated as under:
“7. In the profit and loss account the assessee has not disclosed any freight receipts during the year under consideration but in the income tax return the assessee has claimed TDS on freight receipts also. The credit of TDS on freight receipts cannot be allowed as per section 199 of me income Tax Act, 1961 since no freight receipts has been disclosed by the assessee in its return of income. In view of above facts the assessee is not eligible for claiming the TDS credit on the receipts which was not disclosed by the assessee in its income tax return. As such the credit of TDS is not allowed.”
6.1) I have gone through the facts of the case and the submissions of the appellant. The Appellant’s grievance is that its claim for grant of credit of TDS was not considered u/s 199 of the Act. In course of appellate proceedings the AR submitted the details of the freight receipts received from various parties of Rs.95,15,45,598/- (as per books), as per 26AS it is Rs.95,25,03,412/- and on this amount, TDS of Rs.1,90,76,546/- was deducted. The contention of the appellant for granting TDS cannot be accepted since it had not offered the freight receipts as income for the year under consideration. The taxation rates for normal income and TDS deductions vary a lot. Further, the judicial decisions relied upon by the appellant indicates the inclusion of income in its computation but not receiving credit for TDS. However, it is not the case with the appellant since the appellant has not at all considered freight receipts as income. Hence the appellant’s claim is not acceptable and the AO was correct in disallowing the TDS credit on freight receipts. In view of the same, the ground of Appeal is dismissed.”
6. Considering the facts and the submissions, we find ourselves unable to confirm the orders passed. The factual matrix as noticed in the orders and as argued has remained unaddressed. It is necessary for us to highlight that under the Scheme of the Income Tax Act, what is to be brought to tax is the specific income arising from the stated activity in the specific period. It has been repeatedly canvassed and we notice that the argument has not been upset by the Tax Authorities. The assessee society incorporated under the HP Ex-Servicemen Corporation Act, 1970 was created to provide employment/financial benefits to the retired Defence personnel. The cement companies including A.C.C. Ltd., J.P. Cements etc. required the cement to be lifted and transported from the premises entered into an agreement with the assessee. Admittedly the assessee Society/Corporation did not own any trucks and agreements were entered into with ACC Ltd., Ambuja Cement etc. for transporting cement etc. from the premises. Since the assessee corporation did not own any trucks, these were hired by the Corporation and commission income from the said hiring activity was the income received by the Corporation only. However, since trucks have been engaged through the assessee by ACC Ltd. etc., the TDS deducted etc. payments by the ACC Ltd. were paid to the truck owners through the assessee, pleadings to this effect, we have noticed have been extracted in the respective orders, however, while passing the order, the AO, we find, has been guided by the fact that credit of TDS of freight receipts cannot be allowed as no freight receipts have been disclosed. Similarly, the ld. Commissioner is also influenced by this fact has confirmed the order. It is a fact that the freight receipts are not offered as income of the assessee as the income of the assessee was only commission income. The claim on facts needs to be examined by the Tax Authorities. Accordingly, on a perusal of the record and in the light of the submissions of the parties, we find that in the interest of justice, it is appropriate to set aside the respective orders and restore the issue back to the file of the CIT(A) for a proper consideration on facts. The Agreements entered into by the assessee Corporation with the ACC Ltd. etc. for transportation of cement to various destinations from Barmana, Distt. Bilaspur, Ambuja Cement at Darlaghat and J.P. Cement etc. necessarily need to be looked into. It is an admitted fact that the freight receipt by the Corporation has been paid to the truck owners and it is claimed that TDS deducted by the ACC Ltd. is also as per practice paid to the truck owners after receipt of the same from the Income Tax Department. If the agreements and the facts support such a claim, then the appeal of the assessee, we are of the view, deserves to be allowed. Accordingly, the orders are set aside in the interests of justice and the issue is remanded back for a correct appreciation of facts.
7. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 24t h May,2022.
