TMI Blog2011 (6) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer applying the provisions of section 40(a)(ia) of the I.T. Act, 1961. 2. Allowing the relief of ₹ 2,65,687/- against the addition made by the Assessing Officer on account of disallowances of unverifiable expenses. 2. Brief facts relating to ground No. 1 are that the assessee derives income from the business of transportation of goods, which are received in bulk from its customers for transportation from one place to another. For this purpose, apart from his own trucks, the assessee used to engage the trucks of other owners to carry the goods at various destinations, for which the transportation charges are paid by assessee to different truck owners at various occasions. As per Assessing Officer, the assessee has shown gross receipt of ₹ 9,71,42,887/- and claimed freight paid to subcontractors/ truck owners amounting to ₹ 9,43,81,547/-, on which no TDS was deducted by assessee u/s. 194C of the Act. The Assessing Officer, therefore, after invoking the provisions of section 40a(ia), held the freight payments of ₹ 9,43,81,547/- made to sub-contractors, on which TDS was not deducted by the assessee, as liable to be taxed in the hands of assessee u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, the provisions as contained in section 40(a)(ia) of the I.T. Act did not apply in case of the appellant individual, since the tax was not deductible at source under Chapter XVII-B of the I.T. Act. The addition, therefore, based on the assumption of agreements entered into does not survive and the same is hereby deleted. 4. The learned DR, relying on the order of the Assessing Officer specially page 2 5, pointed out that the assessee owns only five trucks while the other trucks were hired by the assessee from other parties. Therefore, the assessee has entered into a contract. The contract may be oral or written as per the Contract Act. It need not be in writing for the applicability of section 194-C. 5. The learned AR, on the other hand, reiterated the submissions made before the CIT(A) and it was contended that the Revenue has not submitted any evidence which is contrary to the finding given by the CIT(A) that there was no contract between the other truck owners and the assessee to carry out the transportation agreement. The assessee himself has executed the contract and arranged the trucks of other parties. The truck freights were invoiced by the assessee. Attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this case, there is neither any agreement nor contract with the truck owners for execution for any contract undertaken by the assessee. Attention was also invited towards section 194-C(3) and it was pointed out that the assessee has neither paid any amount exceeding ₹ 20,000/- to any truck owner nor has pad any amount more that ₹ 50,000/- in the whole year, which is apparent from the details of payment furnished in form 15J filed before the department. Thus, it was contended that section 194C was not applicable. It was also pointed out that even though the provision of section 194C were not applicable but the assessee, as a abundant precaution duly obtained prescribed form 15 I from the truck owners and has filed forms 15J in time before the prescribed authority. The Assessing Officer s objection that it was filed before the ITO (TDS) and not before the CIT, Gwalior for the convenience of the department. Further, it was submitted that the objection of the Assessing Officer that most of the form 15I were collected after the payment made to sub-contractors and not before payment as per proviso of Rule 29D is also not sustainable for want of any evidence placed on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Assessing Officer has invoked the provisions of s.40(a)(ia) to disallow the payments made for hired lorries as according to him, such payments represent payment to sub-contractors liable for TDS under s.194C(2) of the Act and the assessee has failed to deduct TDS under s.194C(2). Section 194C(2) of the Act, which is relevant in this context, reads as under : Any person (being a contractor and not being an individual or an HUF) responsible for paying any sum to any resident (hereafter in the section referred to as the sub-contractor) in pursuance of a contract with the subcontractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-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 one per cent of such sum as income-tax on income comprised therein. 8.1 According to our understanding, s. 194C{2) is attracted if all the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant to execute the contract work. 8.4 The assessee has placed a copy of work order dt. 12th Feb., 2005 issued by a company named RBM-Pati Joint Venture . We have gone through the said work order and notice the following points: (a) The scope of work includes loading of Bitumen 60/70 at Vizag, transportation and delivering at RBMP camp site at 56 kms. and 35 kms. on NH-6. As such three types of work are included in the scope of work. (b) Tanker lorry shall have proper heating arrangement. The company reserves the right to arrange any other means of transportation in case of non-placement/delay in placement of lorry. Any extra payment made for execution of such work will be recovered from the assessee. (c) The assessee shall not engage and/or allow its personnel in any fraudulent activity in performing the work order. The company is at liberty to deduct any reasonable amount, if any fraud or cheating is discovered. (d) The assessee, in any circumstance, should not divulge or make public, in any way, any of the business transactions to other parties. (e) In the event of any unreasonable delay or if the consignment is not delivered, the company shall be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the reasoning of the tax authorities, which is stated in para 8.3 supra, to hold that the payment made for hired vehicles is a sub-contract payment, in our opinion, is not correct end not based on relevant considerations. Hence, in our considered opinion, it cannot be said that the payments made for hired vehic1es would fall in the category of payment towards a sub-contract with the lorry owners. In that case the assessee is not liable to deduct tax at source, as per the provisions of s. 194C(2), on the payments made to the lorry owners for lorry hire. Consequently, the provisions of s. 40(a)(ia) shall not apply to such payments. 8.7 As we have decided the issue in favour of the assessee for the reasons stated above, in our opinion, consideration of other contentions of the assessee as well as the Revenue is not necessary. 9. In the result, the appeal of the assessee is allowed. 5. Similar view has been taken by this Tribunal in the case of Govind Singh, Mathura vs. ITO, Mathura in TDSA No.13/Agr/2007 for the Assessment Year 2005-06 in which also this Tribunal, after discussing the provisions of section 194C, has held as under :- The contention of ld. A.R. is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded by the Tribunal. The appeal, being without merit, was to be dismissed. 8. Respectfully following the aforesaid decision of the Tribunal as well as the decision of High court, in our opinion, no interference is called for in the order of CIT(A). Even no contrary decision was brought to our knowledge by the learned DR which may compel us to take a view different from the view taken by the co-ordinate Bench. We cannot disagree with the decision of the Co-ordinate Bench, which is binding on us. Respectfully following the same, we confirm the order of CIT(A) on this issue. Thus, ground No.1 of Revenue stands rejected. 9. The facts relating to ground No. 2 are that the assessee had shown net income from trucks at ₹ 26,56,870/-. The Assessing Officer observed that the assessee could not give details and documentary evidence in respect of the said net income shown by him. He further observed that the details of expenses incurred on finance charges, interest on borrowed funds and vehicle running maintenance expenses of trucks were also not filed. He, therefore disallowed 20% of the net income shown at ₹ 26,56,870/-, i.e., ₹ 5,31,374/-, as the net income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation in the books (which is deemed as allowed under section 44AE of the Income Tax Act). Hence, income returned from all trucks ₹ 1,79,945/- was more than income computed as per section 44AE of the Income Tax Act. The authorities below have erred in making the addition of ₹ 10,10,055/- in respect of depreciation on the returned income shown at ₹ 1,79,945/- which was already more than income computed u/s. 44AE of the Income Tax Act. 14. We have heard the rival submissions and carefully considered the same. We noted that the assessee was owning five trucks during the assessment year and as per the provisions of section 44AE, the income from five trucks @ ₹ 3500/- per month each will come to ₹ 1,26,000/-. The assessee has returned income from these trucks at ₹ 1,79,945/- which is much more than the income as may be computed in accordance with eh provisions of section 44AE. We noted that the Assessing Officer had disallowed the depreciation to the assessee merely on the basis that the assessee is deriving income from various sources and it is wrong to claim benefit of section 44AE separately on the part of the assessee with other income formi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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