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2009 (1) TMI 337 - AT - Income TaxDisallowance u/s 40 (a)(ia) - payments for hired vehicles - failure to deduct TDS u/s 194C has on the sub-contract payments - Whether the vehicles hired by the assessee in execution of the transport contract can be termed as a 'sub-contract' and consequently the assessee is liable to deduct tax from the payment made for such vehicles u/s.194C(2)? - Assessee 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 - contention of the assessee before ld CIT(A) was that the payments made for hired lorries cannot be said to be contractual payments and hence s. 194C will not apply to such payments. HELD THAT:- In the decision of High Court in the case of ITO vs. Rama Nand & Co. [1984 (3) TMI 6 - HIMACHAL PRADESH HIGH COURT] held the meaning of the words 'sub-contractor' as under: "A 'sub-contractor' would mean any person who enters into a contract with the contractor for carrying out or for the supply of labour for carrying out the whole or part of the work undertaken by the contractor under a contract with any of the authorities named above or for the supply in terms of his contract with any of the aforesaid authorities." As per the provisions of s. 194C(2), the sub-contractor should carry out the whole or any part of the work undertaken by the assessee. The dictionary meaning of the words "carry out" is to 'carry into practice'; 'to execute'; 'to accomplish'. It signifies a positive involvement in the execution of the whole or any part of the main work by spending his time, money, energy, etc. and further taking the risks in carrying on the said activity. In the instant case, there is no material to suggest that the other lorry owners involved themselves in carrying out any part of the work undertaken by the assessee by spending their time, energy and by taking the risks associated with the main contract work. In the absence of the abovesaid characteristics attached to a sub-contract in the instant case, the payment made to the lorry owners stands at par with the payments made towards salaries, rent, etc. Hence the reasoning of the tax authorities, to hold that the payment made for hired vehicles is a sub-contract payment, in our opinion, is not correct and not based on relevant considerations. Hence, in our considered opinion, it cannot be said that the payments made for hired vehicles 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. Decided the issue in favour of the assessee. In the result, the appeal of the assessee is allowed.
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