9911796707
TMI Blog2012 (8) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 6,77,46,176/- in the trading account. The AO had issued a questionnaire on 8th October, 2009 inviting explanation of the assessee to file details to whom the payment of freight was made and mode of such payment should also be disclosed. He also directed the assessee to explain whether TDS has been deducted on freight paid and if yes then the proof of deposit of such tax be also submitted. In response to the query of the AO it was contended by the assessee that he is a transport contractor for M/s. Jaiprakash Associate Ltd. and M/s. Jaiprkash Hydra Power Ltd. The assessee has enclosed photo state copy of register of trade account, detailed GR No. truck No. station, consignors name and address, consignee's name and address for the ready reference of AO. He also enclosed copies of the original GR and submitted that payments made to truck owner and driver by M/s. Jai Prakash Associate Ltd. on behalf of K S. Fright Carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relied upon the decision of Hon'ble Himachal Pradesh High Court rendered in the case of CIT v. Ambuja Darla Kashlog Mangu Transport Co-op. Society [2010] 188 Taxman 134. By way of this judgment Hon'ble High Court has disposed off five appeals of different societies which were registered societies or AOP constituted by the truck operators. These societies enter into contracts with the companies such as cement manufacture for transport of the goods of the companies. The company which has entered into contracts with the assessee deducted 2% of the amount paid on account of TDS in terms of section 194(c)(1) of the Income Tax Act, 1961. Thereafter the assessee society paid the amount received by it to the members of the society who have actually carried the goods. The society out of the amount paid, a normal amount of Rs. 10 or Rs. 20 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 making the payment to the truck owner have deducted the tax. The assessee is not obliged to deduct it again. 5. Ld. DR on the other hand placed on record a written note wherein, he emphasized that common thread between all the decisions referred by the Ld. Counsel for the assessee is that either written or oral contract between the assessee and the truck owner whose trucks were hired by him for transporting the goods is missing. According to the Ld. DR there may not be a written contract but oral contract would always be there. Therefore it cannot be said that there was no agency of sub contractor-ship between the assessee and the transporters. He made reference to the circular No. 433 dated 25.9.1985 and the decision of Hon'ble Allahabad High Court reported in CIT v. Kamal Bhai Ismilji [2007] 288 ITR 297/[2005] 149 Taxman 558. He also relied upon the order of IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier, 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 payable to a contractor or sub contractor for carrying out any work on which tax is deductible under chapter 17B and such tax has not been deducted or paid during the previous year or in the subsequent year before the expiry of the time period prescribed u/s 200(1) of the Act. Section 194C(2) provides that where a contractor , not being an individual or a Hindu undivided family engaged for carrying out any work or for supplying labour for carrying out such work by Central or State Government, a local authority or a corporation has in terms engaged any sub contractor for carrying out the whole or any part of the work undertaken by the contractor or for supply of labour undertaken by the contractor to supply, he will be required to deduct tax at source from the payment made to the sub contractor. Thus it contemplates three conditions namely (1) there must be a contract between the persons responsible for making the payment and the contractor (B) the contract must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 194C(2) of the Act and the assessee has failed to deduct TDS 194C(2). Section 194C(2) of the Act, which is relevant in this context, reads as under :- "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 the 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." 8.1 According to our understanding, section 194C(2) is attracted if all the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect and not based on relevant considerations. Hence, in our considered opinion, it cannot be said that the payments made for hired vehicles would fall in the category of payment towards a sub-contract with the lorry owners. In that case the assessee is not liable to deduct tax at source, as per the provisions of section 194C(2), on the payments made to the lorry owners for lorry hire. Consequently, the provisions of section 40(a)(ia) shall not apply to such payments. 8.7 As we have decided the issue in favour of the assessee for the reasons stated above, in our opinion, consideration of other contentions of the assessee as well as the Revenue is not necessary." 11. The other decision referred by the Ld. Counsel for the assessee are to the similar effect. Ld. DR has emphasized on the point that there always exist an implied contract either oral or in writing. But neither in the asstt. Order nor in the CIT's order it is discernable that assessee had entered into a contract with the alleged truck owners for part performance of its works with joint liability. He simply hired the trucks under his own obligation. Therefore there are no distinguished feature of the case of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
