TMI Blog2008 (8) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee merely acted as an independent contractor while carrying on the aforesaid works contract awarded to it by M/s Grasim Industries Ltd. Admittedly, the appellant did not own trucks of its own for carrying out such transportation contract and has engaged the services of other truck owners/operators for lifting goods from the premises of M/s Grasim Industries Ltd. and transporting the same to various sites in Rajasthan. Goods receipt/bilty were prepared and the same was to be taken as a contract between the appellant and such truck owners/operators. In the light of clear provisions contained in s. 194C of the Act and having regard to the fact that both the amounts actually paid or credited or likely to be paid on account of each contract exceeded Rs. 20,000 on a single day, s. 194C has rightly been found applicable. We, therefore, do not find any wrong committed by the ld CIT(A) in holding that the assessee has committed default in making deduction with respect to clubbing of payments without deduction of tax at source. Keeping in view the overall conspectus of the case and finding no merit in the grounds raised in the appeal by the assessee, the same stand rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o undertaken to have been handled by the assessee. The register also shows that every truck was sent to one destination/trip only under one challan/bilty. If one truck was hired again, it was sent to the same or other destination/trip as per separate bilty/challan. The assessee was found to have made payments exceeding Rs. 20,000 without deduction of tax at source. Total payment made during the year were Rs. 1,37,71,206 out of which payments made exceeding Rs. 20,000 were taken to be Rs. 57,11,625 as against total receipts of the assessee at Rs. 1,43,90,632. The AO, therefore, required the assessee to show the details of tax at source so deducted to the truck operators/owners whose trucks it had hired for handling the goods under contract with him. In response thereto, the assessee explained that the provisions of Section 40(a)(ia) of the IT Act, 1961 (hereinafter referred to as the Act), are not applicable in his case. The truck operators/owners are not his sub-contractors because they are different persons and as such, the assessee has no liability to deduct tax at source on payments made to them. Furthermore, the goods have been transported under same bilty and no fresh bilty wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source at prescribed rate and the assessee cannot be presumed to be ignorant of the provisions of law. He also placed reliance on the judgment rendered by the Hon'ble jurisdictional High Court in the case of Birla Cement Works v. CBDT (1997) 139 CTR (Raj) 540 wherein it has been opined that: Clause (c) of Expln. 3 to Section 194C is merely clarificatory in nature and the same has been inserted merely in order to remove the doubt and to clarity the position that the provisions of Section 194C are applicable to contracts for transfer of goods. The decision of the Hon'ble jurisdictional High Court is binding and, therefore, the appellant was required to deduct tax at source of payments made to truck owners. 5. The learned CIT(A) also made reference to the provisions contained in Section 194C(3) of the Act which reads as under: No deduction shall be made under Sub-section (1) or Sub-section (2) from -- (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. 6. On the perusal of aforesaid provisions, he was of the considered opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under Sub-section (1) of Section 200, such sum shall not be allowed as deduction while computing the total Income. As can be seen, the provisions are mandatorily to be complied with in case a default and the question of existence of any reasonable cause has got no meaning. Accordingly, the disallowance made for Rs. 57,11,625 stood upheld. 8. The assessee's counsel Shri B.L. Khatri. while assailing the order of the learned CIT(A) filed written submissions and contends that the learned CIT(A) has erred in holding that the assessee has committed a default in not deducting tax at source. It was reiterated that the assessee is only an agent of M/s Aditya Cement Ltd. and truck operators/owners and had merely received commission for rendering services. The same bilty has been forwarded for transportation of goods under which these goods were lifted from the principal's place. He also made reference to the terms of agreement where the scope of work, rate and other terms and conditions are duly spelled out and in specific made reference to the following: Scope of wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income will reveal that it has credited only commission income to its account and payments so made to truck operators/owners are not debited to the P L a/c and as such, the question of application of provisions of Section 40(a)(ia) does not apply to the assessee's case. Reference was also made to Board's Circular No. 5 of 2005, dt. 15th July, 2005 [(2005) 197 CTR (St) 1] contending thereby that the Board's circular has been Issued on 15th July, 2005 making it applicable to asst. yr. 2005-06 and this being not practically possible to apply to that year as the time to deposit TDS stood already expired on 31st May, 2005, the circular explaining the amendment is to be taken as applicable for asst. yr. 2006-07 only. 10. The assessee also placed reliance on the judgment rendered by the Hon'ble Punjab Haryana High Court in the case of CIT v. United Rice Land Ltd. (2008) 217 CTR (P H) 332 wherein it was held that there being neither any oral nor written agreement between the assessee and transporters for carriage of goods and there being no material on record to prove that any sum or money relating to freight charges was made to them in pursuance of a contract for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as that judgment was with respect to parties who were acting as principal to principal and no payments were found to be exceeding Rs. 20,000. It was, therefore, contended that the assessee's ground in appeal being devoid of any merit needs to be rejected and appeal be dismissed. 12. We have heard the parties and have carefully perused the material on record with reference to precedents cited at Bar. In this case, the assessee vide application dt. 16th July. 2008 sought to adduce additional evidence in the shape of agreement executed between him and M/s Grasim Industries Ltd. on 1st April, 2003 as the same was not available with the authorities below, but goes to decide the issue under consideration. The learned Departmental Representative was afforded due opportunity and state objections, if any, for permitting admission of such additional evidence. He, however, raises no objection and accordingly, after hearing the parties, additional evidence in the shape of agreement resting between the assessee and M/s Grasim Industries Ltd. was duly admitted vide Bench order dt. 17th July, 2008 and taken on record. The assessee's counsel also moved another application filed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 20,000 on a particular day amounted to Rs. 57,11,625. In the light of clear provisions contained in Section 194C of the Act and having regard to the fact that both the amounts actually paid or credited or likely to be paid on account of each contract exceeded Rs. 20,000 on a single day, Section 194C has rightly been found applicable. We, therefore, do not find any wrong committed by the learned CIT(A) in holding that the assessee has committed default in making deduction with respect to payments aggregating to Rs. 57,11,625 without deduction of tax at source. 14. The judgment rendered by the Hon'ble Punjab Haryana High Court in case of United Rice Land Ltd. (supra), is not found applicable in the attendant facts of the appellant's case. In that case the Tribunal has found that each payment of transportation charges was not exceeding Rs. 20,000 and the AO has held the assessee liable to deduction of tax under Section 194C of the Act only on the presumption that the assessee was having agreement with the party through whom trucks were arranged for transportation of goods, whereas as per the finding recorded by the learned CIT(A) not controverted by the Revenue, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not charged the amount of expenditure to the P L a/c as the transaction of payment of freight charges and receipt of freight by it are reflected in two separate accounts and only commission is shown as income. On the mere reflection by the appellant in two separate distinct accounts in his books do not by itself qualify for distinct and different treatment and since both, i.e., freight paid and freight charged partake of same character, the said accounting assumed by the assessee by reflecting only commission income will not change the character of payment as expenditure. This view finds support from the judgement rendered by the Hon'ble Orissa High Court in Tata Sponge Iron Ltd. v. CIT (2007) 292 ITR 175 (Ori) at p. 187as under-- ...the mere reflection of transactions in two separate or distinct accounts in the books of the company do not by itself qualify for distinctly different treatment and since both, i.e., the interest earned and interest paid partake of the same character, set off as claimed is permissible under law. In this respect, reliance is placed on the judgement of the apex Court in the case of Keshavji Ravji Co. v. CIT (1990) 82 CTR (SC) 123 : (1990) 183 ..... 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