TMI Blog2012 (8) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee is in appeal before us against the order of Ld. CIT(A) dated 23rd August, 2010 passed for asstt. year 2007-08. The grounds of appeal taken by the assessee are not in consonance with Rule 8 of ITAT Rules. They are descriptive and argumentative in nature. In brief the solitary grievance of the assessee is that Ld. CIT(A) has erred in confirming the disallowance of ₹ 6,77,46,176/- on the ground that assessee failed to deduct the TDS while making payments to the transporters. Hence the expenses deserves to be disallowed u/s 40(a) (ia) of the Income Tax Act, 1961. 2. The brief facts of the case are that assessee is an individual. He is running a proprietorship concern in the name and style of M/s K.S. Freight Carrier. He has filed his return of income on 29.10.2007 declaring total income of ₹ 4,70,700/-. The case of the assessee was selected for scrutiny assessment a notice u/s 143(2) was issued on 17th September, 2008 which was duly served upon the assessee. On scrutiny of the accounts it revealed to the AO that assessee has claimed freight paid at ₹ 6,77,46,176/- in the trading account. The AO had issued a questionnaire on 8th October, 2009 inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore be made only in respect of payments which constitutes amount payable to a contractor or sub contractor for carrying out any work, as provided u/s 194C of the Income Tax Act. According to the Ld. Counsel the alleged sum of ₹ 6,77,46,176/- representing the payments to various truck owners do not represent payments liable to deduct tax at source u/s 194C of the Act. He also took us through section 194(c) and pointed out that this section contemplates that there must be a contract between the person responsible for making the payment and the contractor. The contract must be of supply of labour or for carrying out any work. The contractor must have engaged sub contractor for carrying out the whole or any part of the work undertaken or supply of labour. He emphasized that in this case there is no material evidence to allege or hold that assessee had engaged various truck owners for carrying out the whole or any part of the work. According to the Ld. Counsel the AO failed to appreciate the real nature of the business of the assessee. He pointed out that this issue has come up for consideration before the ITAT well as before Hon'ble High Court on a number of occasion. He re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT Visakhapatnam bench in the case of Mythri Transport Corporation v. Asstt. CIT [2010] 124 ITD 40. In this case also assessee is a transport contractor. It entered into an agreement with parties whereby the assessee undertook to transport bitumen from the principals to various points as per their directions. For carrying out contract business so obtained, the assessee claims to have not maintained sufficient number of tanker lorries and engaged the lorries belonging to various people apart from using its own tanker, lorries. The issue arose whether section 194C (2) is applicable on the payment made to the drivers of such truck owners whose services were availed by the assessee for transporting the goods. Tribunal observed that 194C(2) is not applicable. The next judgment replied upon by the Ld. Counsel for the assessee is of ITAT Cuttak Bench rendered in the case of R.R. Carrying Corporation vs. Asstt. CIT [2009] 126 TTJ 240. Ld. Counsel for the assessee thereafter placed on record copy of the order passed by ITAT Cuttak Bench in the case of Nasib Singh v. Asstt. CIT [2012] 19 taxmann.com 160. On the strength of these decisions he pointed out that principal while mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to - (i) one per cent in case of advertising (ii) in any other case two per cent, of such sum as income-tax on income comprised therein. (2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax on income comprised therein. 7. Bare perusal of section 40(a)(ia) would suggest that disallowance under this section can be made in respect of amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he confirmation suggest that constructively payments were received by the assessee. It was received after deduction of tax at the end of M/s. Jai Prakash Associates. The next area of dispute is whether there exist a sub contractor ship between the assessee and the transporter whose trucks have been used by the assessee we find that this issue has directly been dealt more precisely by the ITAT Visakhapatnam Bench in the case of Mythri Transport Corporation ( supra ). The discussion made by the Tribunal including the question read as under :- 8. We have heard the rival contentions and perused the record. The issue before us may be decided if we answer following question: 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 under section 194C(2) of the Act? In the instant case, the Assessing Officer has invoked the provisions of section 40(a)(ia) to disallow the payments made for hired lorries as according to him, such payments represent payment to 'sub-contractors' liable for tax deduction at source und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-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 above said 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, which is stated in para 8.3 supra, 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 veh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
