TMI Blog2012 (4) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... 194C(1) for payments made to the outside parties and consequently the disallowance made u/s.40(a)(ia) by the authorities below are deleted. The appellant thus gets relief of ₹ 56,03,210/-. - IT APPEAL NO. 3536 (MUM.) OF 2011 - - - Dated:- 7-3-2012 - G.E. VEERABHADRAPPA, AMIT SHUKLA, JJ. Vijay Mehta for the Appellant. S.K. Mohanty for the Respondent. ORDER Amit Shukla, Judicial Member The aforesaid appeal has been preferred filed by the appellant against order dated 15.02.2011 passed by the learned Commissioner of Income Tax (Appeals)-33, Mumbai for the quantum of assessment passed u/s.143(3) for the Assessment Year 2007-08. The only issue as had been raised in grounds of appeal is with regard to the disallowance of Rs. 56,03,210/- made u/s.40(a)(ia) for the failure to deduct tax u/s.194C. 2. The facts in brief are that the appellant is a partnership firm engaged in the business of transport contractor, whereby it undertakes contract work of transportation of oils through oil tankers to various locations of BPCL and other companies. In pursuance of the said contract from BPCL and other companies, the assessee company during the year has received fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions were made which have been reproduced in para 4.1 of the appellate order :- "4.1 During the appellate proceedings the appellant has furnished written submission and also relied on case laws of Kavita Chug v. ITO [2010] 45 DTR 146 (Kol) (Tribunal.) and ITO v. Indian Roadlines [2010] 45 DTR 49 (Asr.) (Tribunal.). I have gone through the same. In para 2 the appellant has submitted as under : "Thus the appellant was a contractor for transporting the oils to various locations of BPCL. As per the terms and conditions of the tender the appellant entered into an agreement with BPCL. The said agreement as well as tender document provided various terms and conditions liabilities and responsibilities on the appellant being a contractor. Similar type of minor contracts was taken by the appellant from other parties also. The appellant executed the contract of transport of oils of BPCL and others by its own tank lorries as well as the tank lorries hired from other parties. The contract was between BPCL and the appellant. The appellant hired the lorries of other persons but did not give any sub contract to those parties. The other parties whose trucks were taken on hire had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 40(a)(ia) is justified. 5. Before us, the learned Counsel for the appellant contented that there was only one contract which was with the main company, "BPCL", by whom the appellant was given a contract for transportation of oil. Thus, there was only one Contractee and one Contractor. The appellant has no contract for carriage of the goods with the outside party, as no risk and responsibility was passed upon to the other tank owners. After referring to the various provisions of section 194C(1) and 194C(2), he contented that neither the provisions of section 194C(1) nor 194C(2) will be applicable in this case. Lastly, he relied upon the judgment of Hon'ble Madras High Court in the case of CIT v. Poompuhar Shipping Corpn. Ltd. [2006] 282 ITR 3/153 Taxman 486, wherein on similar set and circumstances the Hon'ble High Court held that hiring of ships from outsiders for the purpose of using them in the assessee's business for contract does not come within the purview of section 194C. 6. The learned Sr. D.R. strongly relied upon the findings of the learned CIT (Appeals) that it is a case of 194C(1), as the appellant had entered into some kind of oral contract with the out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act" is not fulfilled then the provisions of this section will not be applicable at all. Here in this case, the contract for carrying out the work was between the BPCL and the appellant. The appellant alone had risk and responsibility for carrying out the contract work as per the agreement entered into by it with its principal i.e. BPCL. There is no material on record to suggest that there was any contract or sub-contract whether written or oral with the outside tank owners and the appellant, whereby the risk and responsibility which is associated with a contract has also been passed on to these outside parties. Once the CIT (Appeals) has accepted the fact that the outside tank owners do not had any responsibility or liability towards the principal, then it cannot be held that these outside parties were privity to the contract between the appellant and its principal. Thus the payment made to the outside parties do not come or fall within the purview of section 194C, as the "carrying out any work" indicates doing something to conduct the work in pursuance of contract and here in this case, it was solely between appellant and its principal. 8.2 The judgment of Hon'ble Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. So, we have to take the normal meaning of the word "hire". Normal hire is a contract by which one gives to another temporary possession and use of the property other than money for payment of compensation and the latter agrees to return the property after the expiry of the agreed period. Therefore, in our view, when the assessee entered into a contract for the purpose of taking temporary possession of ships in the shipping company it could not be construed as if the assessee entered into any contract for carrying out any work, and when the contract is not for carrying out any work, the Revenue cannot insist the assessee ought to have deducted tax at source under section 194C of the Act. Further, the other argument of counsel was, section 194C was amended with effect from July 1, 1995, incorporating the Explanation and the said Explanation clarifies the existing provision of section 194C of the Act. Hence, it would be applicable retrospectively. We are concerned with the assessment year 1994-95. In a recent judgment, the Supreme Court in the case of Sedco Forex International Drill Inc. v. CIT [2005] 279 ITR 310, considering the scope of the Explanation, held that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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