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TMI Blog2012 (11) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that same issue came up before the Tribunal in proceedings u/s 201 / 201(1A) of the Act and the Tribunal had restored the mat ter back to the file of the AO for fresh adjudication. The AO has passed the order in pursuance of this Tribunal's order and after making detailed inquiries, has held that the truck owners from whom the assessee hires the trucks are sub-contractors only and, therefore the payments made by the assessee to them are covered by section 194C(2) of the Act and accordingly the assessee was required to deduct TDS at the rate of 1% only, therefore, the ground taken by the assessee may kindly be allowed as there is no violation of section 40a(ia) on the part of the assessee. 5. The learned DR, on the other hand, submitted that in the proceedings u/s 201(1A), the matter has been restored back by the Tribunal to the file of the AO, in this appeal also the matter should be restored back to the file of the AO for fresh adjudication for necessary verification. 6. We find that in pursuance to the order of the Tribunal in proceedings u/s 201/201(1A), the AO has passed the following order. "(3) Payment of freight to truck operators during the year above Rs.50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the person concerned paying or crediting such sum, in the prescribed form and verified in the prescribed manner and within such time as may be prescribed, if such sub-contractor individual who has not owned more than two goods carnages at any time during the previous year" In pursuance of the above proviso, Form No 15 I is prescribed. The title Form No. 151 and the contents thereof read with the above proviso make it amply clear that the truck owners are sub-contractor only and as has been pointed out that in the proviso they are governed by sub sec.(2) of section" 194C. The payments in such circumstances attract tax deduction At 1 % and not 2%. It is agreed that the declaration can be furnished by only an individual and not by others. However it does not charge the status of the truck owners. They remain subcontractors only, whether they can furnish declaration or not." The submission made by the assessee is considered. The assessee's submission that as per CBDT circular in form of Question and answer, 'each GR is a contract and accordingly the assessee having issued GR at the time of accepting the parcel becomes the contractor is found to be acceptable. I have also noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condary freight debited in the P&L account of Rs.32,21,551: The freight charges paid by the delivery agents and recovered back by the delivery agents from the appellant have been debited as expense under the nomenclature of Secondary freight in the P&L account reproduced in para 5 above. I agree with the AO when she states that this is just an arrangement between the booking and the delivery agent or in other words this is just an arrangement between the appellant and the delivery agent. And as the appellant is paying freight to the delivery agent finally, this payment does attract TDS liability and on the sum of Rs.32,21,551 TDS at 2% should have been deducted by the appellant whereas no TDS has been made at all on this freight by the appellant. The addition is confirmed. 5. No TDS on Previous freight of Rs.7,64.737: Besides the four parties like ARCO Transport Company etc. who deliver goods in the interior parts of Maharashtra the appellant has parties in Saurashtra, to whom commission is paid and as well as freight is reimbursed, hi the background of the factual position of the modus operandi adopted by the appellant for running its business, entering into agreements wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursuance of the Tribunal's order, the AO has dealt with the issue as under:- "The assessee is partnership firm involved in at the business of transport contractor and booking agents. The assessee firm is hiring trucks from the truck owners and uses them for their business of transportation and paid them transportation charges. A survey was conducted on 11-03-05 on the business premises of the firm at above address. During the survey it was observed that the assessee did not deduct tax at source from the service charges paid to their counterparts in the state of Maharashtra. The payments is found to be in the nature of payments to contractors and or subcontractors and hence was subject to the deduction u/s 194C(1) or 194C(2) of the Act. The 1TO (TDS) had passed order determining the total amount of Rs3,54,81,832/-(Rs.2,88,88,221+Rs.65,93,61l) on which the tax was not deducted at source u/s 194C(1) of the Act. Total tax u/s 201(1) and 201(1A) comes to Rs.7,52,214/- Aggrieved to the order assessee prefer an appeal to the CIT(A). The Hon'ble CIT(A) vide order dt.5-01-06 directed ITO (TDS) to verify the claim of the assessee for r.s. 31,00694/-. The A.O has passed order dt.20-06-06 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggregate in the financial year 2004-0-5 did exceed Rs.50,000/-. However, as the amendment in section 194C(3) is effective from 1st October, 2004 and hence these payments are not covered by the first proviso to clause (1) of section 194C(3). For your kind reference we are reproduced the proviso post amendment and the pre-amendment as under:- Clause (1) in sub-section 194C(3) has been substituted by the finance (No.1) Act.2004, with effect from 1st October,2004 which read as under10 (i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to the contractor or subcontractor, if such sum does not exceed twenty thousand rupees. Provided that where the aggregate of the amounts or such sum. credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) or as the case may be of sub. sec.(2) shall be liable to deduct income-tax (Under this section) Prior to its subsection as above, the clause stood as under:- (i) any sum credited or paid in pursuance of any contract the contribution for which does not exceed twenty thousand rup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the payments were not liable to deduction of tax at source." In view of the clear finding of the AO which has been arrived at after making detailed inquiries that the payments of Rs.64,82,238/- related prior to 1s t October, 2004, are covered by the first proviso to section 194C(3) as it stood prior to substitution by the Finance (No.2) Act,2004 and were not therefore liable to deduction of tax at source, we find that there is no violation of section 40a(ia) of the Act and therefore this ground of the assessee is also allowed. 14. Ground no.5 reads as under:- 5. The learned CIT(A) erred in law and on facts in failing to appreciate that provisions of section 40a(ia) are applicable only to the amount payable at the year end and not in respect of the payments which are already paid off before year end. Under the circumstances, it is submitted that the disallowances made by the learned A.O. as confirmed by CIT(A) for Rs.77,85,265/- and also the disallowances made by way of enhancement by the CIT(A) for Rs.64,82,238/- are not in accordance with provisions of law and the same be directed to be deleted. At the time of hearing, this ground was not pressed by the learned counsel of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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