TMI Blog2012 (11) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - there is no violation of section 40a(ia) of the Act and therefore this ground of the assessee is also allowed - ITA no.2633/Ahd/2009 - - - Dated:- 25-1-2012 - SHRI D. K. TYAGI AND SHRI A. MOHAN ALANKAMONY, JJ. Assessee by :- Shri S N Soparkar, AR Revenue by:- Shri Vinod Tanwani, Sr. DR ORDER PER D K TYAGI (JM): - This is assessee s appeal against the order of the learned CIT(A) dated 22-07-2009 for the Assessment Year 2005-06. 2. During the appellate proceedings, the assessee filed Concise Grounds of Appeal. 3. Ground no.1 reads as under:- 1. The learned CIT(A) erred in law and on facts in confirming the disallowance u/s 40a(ia) of Rs.37,98,977/- [Rs.27,83,670 + Rs.10,15,307] holding that the appellant should have made deduction of TDS @ 2% as against 1% deducted by the appellant from freight payments. Your appellant submits that payment made by it to the truck operators was in the nature of sub contract and hence was rightly subjected to TDS @ 1%. It is submitted that it be so held now. 4. At the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carries out transportation of goods from Ahmadabad 10 destinations. For the work of transportation they are paid transport charges (motor Bhada) by GMR. The parties who book the consignments with GMR also deduct Income-tax at the rate of 2% u/s 194C(1) from payment of freight to GMR treating GMR as contractor, wherever applicable. Thus GMR being a contractor, when it engages the truck operators for transportation of the goods. The truck operators are sub-contractors only. We like to being to your kind notice the circular issued by the Bombay Goods Transport Association wherein it is clearly mentioned that the truck owner is being considered as a sub-contractor. The payment of freight paid to the truck owners will be fall u/s 194C(2) and not u/s 194C(1). We like to bring to your kind notice also the subsequent amendment made in the law by Finance Act 2005 by way of insertion of second proviso to clause(l) to section 194C which read as under: - "provided further that no deduction shall be made under subsection (2) from the amount of any sum credited or paid or likely to be paid or credited during the previous year to the account of the sub-contractor during the course of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractors only and the payments made will be covered by section 194c(2) of the Act, and subsequently attract deduction of TDS @ 1% only. 7. Since the AO in proceedings u/s 201(1A), after detailed inquiries of the issue, has held that the assessee was required to deduct TDS at the rate of 1% only as in assessee s case the provisions of section 194C(2) are attracted, we feel no need to send the matter back again to the file of the AO and allow this ground of the assessee, as there is no violation of section 40a(ia) on the part of the assessee. This ground of the assessee is allowed. 8. Ground nos.2 and 3 read as under:- 2. The learned CIT(A) erred in law and on facts in disallowing an amount of Rs.32,21,551/- paid towards Crossing Bhada [Secondary Freight] u/s 40a(ia) on the ground that no TDS has been deducted by the delivery agent to the trucks owners while making payment to them. It is submitted that it be so held now. 3. The learned CIT(A) erred in law and on facts in disallowing an amount of Rs.7,64,737/- towards previous freight u/s 40a(ia) of the Act on the ground that required TDS has not been made from the said payments. 9. These grounds have been dealt with by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eight payment by a sum of Rs.64,82,238/- paid by the appellant during the period 1-4-2004 to 30-9-2004. The learned CIT(A) failed to appreciate that the law was amended in respect of TDS for transport contract u/s 194C w.e.f. 1-10-2004 and prior to that TDS was applicable only for transport contracts which exceeded Rs.20,000/-per contract. It is submitted that it be so held now and additions made for Rs.64,82,238/- u/s 40a(ia) by way of enhancement by the learned CIT(A) be deleted. 12. At the time of hearing before us, the learned counsel of the assessee submitted that the same issue came up before the Tribunal and the matter was restored to the file of the AO for fresh adjudication. In the order passed u/s 201(1A) in pursuance to the order of the Tribunal, the AO, after detailed inquiries, has come to the conclusion that the payments made were covered by the First Proviso to section 194C(3) as it stood prior to its substitution by the Finance Act, 2004 and the payments were not liable to deduction of tax at source, therefore, there was no violation of section 40a(ia) of the Act on the part of the assessee and therefore this ground of the assessee also deserves to be allowed. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee being issued and served upon the assessee. 20-01-2010.In response to show cause Shri Bharat C. Mehta C.A. of the assessee firm attended along with Shri Nazir Patni the accountant and submit the details and explanations called for. I have care fully considered the contentions and also books of accounts, vouchers and records of the assessee placed before me for verifications. My findings on the above three issues are as under:- (1) ------ -------- (2) Cases where total payment of freight during the FY exceeded Rs.50,000/- but payments made prior to 1st October, 2004. Rs.64,82,238/- The assessee was also asked to furnish the party wise details of payment of freight' made to truck owners totaling to Rs.64,82,238/- alongwith the relevant vouchers. The details of the payments made alongwith the books of accounts an vouchers produced are examined. The payments of Rs.64,82,238 were to the true, owners are prior to dt.30-09-2004. The submission made by the assessee in connections to this an reproduced as under:- "We like to bring to your kind notice that the amount of Rs. 64,82,238/- comprises of small payments made to the truck owners which are less than Ra. 20,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined the order passed by the Ld. CIT(A) and have come to the conclusion that the addition is mainly on the ground that the details of payments made as submitted by the assessee was truck wise and not party wise. The Ld. CIT(A) has not made the addition on the ground that the substituted first proviso to the sec. 194C(3) was applicable retrospectively from the 1st April, 2004 and not from 1st Oct. 2004. The assessee was asked to submit the details of payments of freight totaling to Rs.64,82,238/- and the details called for are submitted along with the relevant vouchers. The details, regarding vouchers, produced before me has been examined and I am satisfied that the expenses were made prior to 30th Sept. 2004. The submission made by the assessee have been considered vis- -vis the provision of the law and come to the conclusion that the first proviso to the sec. 194C(3) was substituted with effect from 1st October, 2004 which provided for a financial limit of Rs.50,000/- for the total payments during the FY to attract the provision of sec. 194C(1) and 194C(2). The contention of the assessee is found correct. In view of the above discussion, I am of the opinion that the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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