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TMI Blog2010 (9) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act, 1961, being payments made to the truck owners in their capacity as Sub-Contractors." Briefly stated the facts of the case are that the Sirmour Truck Operators Union, is an un-registered Association of persons constituted by the Truck Operators. This Society enter into contracts with the Companies such as Cement Manufacturers for transport of the goods of the Companies. In this case the Sirmour Truck Operators Union, the assessee, had entered into a 1 Whether the reporters of the local papers may be allowed to see the Judgment? yes contract with the H.P. State Civil Supplies Corporation for carriage of goods. The Company which has entered into contract with the assessee deducts 2% of the amount paid on account of TDS i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprised therein." The Assessing Officer decided the case in favour of the Revenue. However, the Commissioner Income Tax as well as the Tribunal have decided the matter in favour of the assessee. According to the Commissioner as well as the Income Tax Appellate Tribunal the assessee Society has not given any subcontract to any member of the society and in fact the society was created for the sole purpose of obtaining contract from the Company. According to both the authorities since there is no sub contract between the Society and its members the provision of Section 194C(2) is not attracted at all. We have heard Sh.Vinay Kuthiala, learned counsel for the Revenue and Ms.Jyotsna Rewal Dua, counsel for the Assessee. Sh.Kuthial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt contends that in view of the law laid down by the Apex Court in Chelmsford Club vs. Commissioner of Income-tax, (2000) 243 ITR 89, the income of the society arises out of mutual transactions and the principle of mutuality is applicable and therefore the income of the assessee is not assessable to income tax. This judgment is also not applicable to the facts of the present case. In the Chelmsford Club Case the question before theApex Courtwas whether the principle of mutuality applies to property income and the same is not taxable income of the assessee. TheApex Courtheld that the principles of mutuality applies even to the deemed income from the property of the club. To apply the principles of mutuality the basic premise is that the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is urged on behalf of the Revenue that since the assessee being a person is paying a sum to the member truck operator who is a resident within the meaning of the Act, TDS is required to be deducted. This argument does not take into consideration the heading of the Section noted hereinabove and the entire language of Section 194C(2) which clearly indicates that the payment should be made to the resident who is a sub contractor. The concept of Sub Contract is intrinsically linked with Section 194C(2). If there is no sub contract then the person is not liable to deduct tax at source even if payment is being made to a resident. To understand the nature of the contract, it would be relevant to mention that in the present cases the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission that the Society has an independent legal status and is also contractor within the meaning of Section 194C. It is also not disputed that the members have a separate status but there is no sub-contract between the society and the members. In fact if the entire working of the society is seen it is apparent that the societies have entered into a contract on behalf of the members. The society is nothing but a collective name for all the members and the contract entered by the society is for the benefit of the constituent members and there is no contract between the society and the members. For the foregoing reasons we are of the considered view that Section 194C(2) of the Act is not attracted and the assessee Society(s) is not liable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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