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TMI Blog2012 (7) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, the major customer being M/s Triveni Glass Limited. The assessments of the two years under consideration were initially completed u/s 143(3) of the Act, wherein the book results were rejected and consequently the income was estimated. Subsequently, the assessing officer noticed that the assessee has failed to deduct tax at source u/s 194C of the Act on the freight charges paid by it. Accordingly, the assessing officer reopened the assessment of the two years under consideration by issuing notices u/s 148 of the Act. The assessee challenged the reopening of the assessment before Ld CIT(A) the addition but could not succeed. Hence the assessee is before us challenging the validity of reopening of assessment. 4. The Ld A.R submitted that the assessing officer, in the reassessment proceeding, simply adopted the total income already determined in the regular assessment proceedings, to which he has added the amount disallowed u/s 40(a)(ia) of the Act. He further submitted that the total income of the assessee in the two years under consideration was estimated by rejecting the book results, which means that the assessing officer has applied his mind to all the provisions of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue also. The assessee contended before the assessing officer that he has arranged the lorries on behalf of his principal by charging commission from the lorry owners. However, the assessing officer noticed that the said principals had deducted tax at source on freight payments and issued the TDS certificates in the name of the assessee. Accordingly, the assessing officer rejected the submissions made by the assessee that it has only arranged the lorries on commission basis. Accordingly he held that the assessee is liable to deduct tax at source on the freight payments made to the lorries hired by the assessee. Before the assessing officer, as well as Ld CIT(A), the assessee relied upon the decision of ITAT, Visakhapatnam bench in the case of M/s Mythri Transport Corporation reported in 124 ITD 40. However, the assessing officer observed that the facts of the instant case are different and hence the said decision does not have application. The Ld CIT(A), on the other hand, observed that the Tribunal has examined the question viz., whether the individual vehicle owners have performed the role of subcontractors or not in the case of Mythri Transport Corporation, supra. He fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; (b) Sree Choudhry Transport Co. (225 CTR 125 (Raj)) (c) Vellapalli Bros. (196 Taxmann 269) (d) V.M.Sankar (127 ITD 316) 10. We have heard the rival contentions and carefully perused the record. There is no dispute with regard to the fact that the assessee has hired lorries from the market for execution of the contract undertaken by it for transportation of goods. In the case of Mythri Transport Corporation cited (Supra), it has been held that mere hiring of trucks cannot be treated as giving work on sub-contract, unless the lorry owners involved themselves in carrying out any part of the work undertaken by the assessee by spending their time, energy and also by taking the risks associated with the main contract. In the instant case also, the contention of the assessee is that it has merely hired the lorries from the open market. It is not shown by the revenue that the lorry owners, from whom the lorries were hired, undertook the risks associated with the main contract. In that case, mere hiring of lorries would not come under the category of "Sub-contract" as held in the case of Mythri Transport Corporation, (Supra). Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsignment of different parties for its transportation. Sometimes, the assessee hires the trucks and lorries of others for the transportation of the consignment booked by it. The assessee has made out a case that he has simply hired the lorries and trucks to transport its consignment under its own control and supervision. The movement of trucks and lorries are governed by the assessee itself and not the truck owners. Truck owners simply hire out their trucks for its use by the assessees against certain hire charges. The revenue has not made out a case that the assessee has engaged or hired the trucks for transportation of the consignment booked by it under the control and supervision of truck owners. Therefore, the assessee has not assigned any work to the lorry/truck owners as per provisions of section 194C of the Act. The question involved in this case whether the assessee is required to deduct the TDS on payment of hire charges made to lorry owners was also examined by us in the case of Shri M. Sitaramaiah vs. ACIT, in the light of our finding in the case of M/s. Mythri Transport Corporation and in that case we conclude that the payments made to tanker owner would not fall in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the contractor. c)The sub-contractor should carry out the whole or any part of the work undertaken by the contractor. d)Payment should be made for a carrying out the whole or any part of the work." After considering the reasoning given by the AO as well the Ld CIT (A), the tribunal came to the following conclusion. 8.5 It is not established by the revenue that other lorry owners, from whom the vehicles were hired, have also been fastened with any of the above said liabilities. In a sub-contract, a prudent contractor would include all the liability clauses in the agreement entered into by him with the subcontractor. The assessee has also claimed before the tax authorities that the responsibility in the whole process lies with it only. Though the passing of liability is not the only criteria to decide about the existence of sub-contract, yet this contention of the assessee red with the liability clauses of the work order cited above, supports its submission that the individual vehicle owners area simple hirers of the vehicles. 8.6 As per the provisions of sec.194 (2), as explained in para 8.1 supra, the sub-contractor should ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of 5% is one of the modes of payment. Hence the above said factors can not support the case of the revenue. As pointed out in the case of M/s Mythri Transport corporation, what is required to be seen is whether the tanker owners have made a positive involvement in the execution of whole or any part of the main contract by spending his time, money, energy and further taking the risks involved in execution thereof. Except for giving the tankers on hire to the assessee, there is no material to suggest that they "carried out" whole or any part of the work by spending their time, energy and by taking risks associated with the main contract work. One fine distinction that may be considered is whether a person has actually carried out the whole or part of the main contract or does he enable the assessee to carry out the contract. For example, the salaried employee of the assessee should have carried out the work of lifting the product, transported it and delivered the same to the destination point. It cannot be said, by any stretch of imagination, that the said employee has executed any part of contract for the reason that he is not liable to the rights and liabilities attached wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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