TMI Blog2014 (2) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... t accepted by the Tribunal - The Tribunal, was perfectly justified in holding that liability to deduct tax at source in the present case do not arise - Decided against Revenue. - Tax Appeal No. 937 of 2013 - - - Dated:- 7-1-2014 - Akil Kureshi And Sonia Gokani,JJ. For the Petitioner : Mr. Varun K. Patel, Advocate For the Respondent : Mr. Tej Shah, Advocate ORDER (Per : Honourable Mr. Justice Akil Kureshi) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal, Ahmedabad { Tribunal for short} dated 12th April 2013. Issue pertains to assessment year 200708. Revenue has presented following question for our consideration : Whether in the facts and circumstances of the case, the learned ITAT has erred in law in deleting the disallowance of Rs. 42,84,497/= under section 40(a)(ia) of the Incometax Act made by the Assessing Officer and confirmed by the CIT [A] ? 2. Briefly stated, the facts are that the respondent assessee had undertaken a contract of transporting the employees of Institute of Plasma Research { IPR for short} by supplying vehicles for the purpose. In the course of executing the contract, the assessee hired certain v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judicial interpretation, it is amply clear that the assessee was under obligation to deduct tax from the payments made. Submission of the assessee extracted above with regard to interpretation that carriage of passengers implies plying of vehicle at fixed destination at fixed rate, there cannot be a deviation of destination, etc is uncalled for and incorrect. 3.3 It is to be evident from the details submitted by the assessee and its submission that assessee is a contractor, subcontractor is one who takes portion of contract from principal contractor or another subcontract. 3.4 In view of the above, it is quite clear that assessee is liable to deduct TDS as per Section 194C. It is admitted fact that the assessee has not deducted tax from payment to other to the extent of Rs. 42,84,497/=, though he was liable to do so. In view of this, the assessee has not complied with the provisions of section 194C of the I.T Act and as such the provisions of section 40 (a)(ia) of the I.T Act are clearly attracted in the assessee s case. 3. The assessee went in appeal. Before the appellate authority, assessee additionally relied on the terms of the agreement between the assessee and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal and opposed the appeal. 5. From the record, it clearly emerges that the Assessing Officer desired to bring the payment made by the assessee within the net of subsection (2) of section 194C of the Act. Though not specifically stated so in the order itself, the tenor of the order is clear that he treated the relationship between the assessee and the third party [private agency] as that of contractor and subcontractor. It was precisely on the said premise, he based his observations and conclusions and held that the payments were covered under section 194C of the Act. Merely because he did not refer to subsection (2) thereof, would not change this position. A short question therefore is was there relationship between the assessee and the supplier of the vehicles as one of contractor and subcontractor ? In this respect, in addition to perusing the judgment of the Tribunal, we have also examined the terms of the agreement dated 15th September 2005 entered into between the assessee and the IPR. 5.1 Clause (1) thereof pertains to scope of work and includes providing, operating and maintaining in good condition six buses having 52 or more seat capacity and 2 minibuses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. He should verify the antecedents of the persons employed by him before deploying them to IPR. (n) The contractor shall bear the full and exclusive liability for payment of Government taxes, comprehensive insurance, registration, RTO licences, etc., which may be in force and may come into force from time to time during the pendency of contract. The contractor shall produce copy of receipts issued by the concerned authorities in proof of having complied with the above statutory obligations. 5.2 Clause (6) requires contractor to maintain sufficient number of drivers with valid driving licence, cleaners, conductors, supervisors, etc., as approved by IPR for smooth and efficient running of vehicles at all times. Clause (8) provides that the contractor shall be required to pay remuneration to such persons deployed with minimum wages assured. Clause (10) pertains to rates at which the contractor would receive the payment. Clause (11) pertains to mode of payment . Clause (12) pertains to Penalty . Clause (14) pertains to price escalation . Clauses (16) to (20) pertain to dispute resolution mechanism. The last clause of importance is clause (13), which pertains to subcontrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork or supply of labour is executed through a subcontractor and in pursuance of execution of such work, the payment is being made either in cash or in any other manner or the same is being credited in the account of the subcontractor. Only under such circumstances, the requirement of deducting tax at source on such payment would arise on the part of the contractor. 10) The Tribunal, upon detailed examination of the nature of relationship between the assessee and the transporter, came to the conclusion that this is not a case of subcontract. The Tribunal noted that none of the responsibilities of the contractor visavis the execution of the work were fastened on the transporters. The Tribunal noted that the assessee had indemnified ANS Construction against any legal or financial liability if such liability arises in future out of such contract. The assessee was solely responsible for execution of the work. No part of such liability was fastened on the transporters. The assessee had only availed of the services of such transporters for carrying out the material to the site. The Tribunal, therefore, concluded and rightly so in our opinion that this was not a case of relationship betw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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