TMI Blog2014 (7) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... tract between him and the truck owners. The freight charges were being paid by the appellant to the three persons in respect of the sub-contract u/s 194C (2) following the assessee’s own contract with IOC, Baddi, it was evident that the assessee was trying to take undue benefit of the amendment brought about in Section 194C (1) w.e.f. 1.6.2007 by taking the plea that the transaction with the three truck owners was in the nature of a contract - the society does not retain any profits - It only retain as nominal amount as “parchi charges” which is used for meeting the administrative expenses of the society - the Society has an independent legal status and is also contractor within the meaning of Section 194C - the members have a separate status but there is no sub-contract between the society and the members - The society is nothing but a collective name for all the members and the contract entered by the society is for the benefit of the constituent members and there is no contract between the society and the members - The provisions of Section 40 (a) (ia) of the Act were applicable not only to the amount which were shown as outstanding on the closing of the relevant previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O., CIT and ITAT as being against the facts and circumstances of the case besides being based merely on conjectures and surmises. It is further contended that in this case the provisions of Sections 147/148 were not applicable as the audit objection was against the well settled position of law. The further case of the appellant is that the other provisions of the Income Tax Act, particularly Section 40 (a) (ia) and Section 194C of the Act have been completely misconstrued by the authorities below. 5. We have heard Mr. Ajay Vaidya, learned counsel for the appellant and Mr. Vinay Kuthiala, Senior Advocate, assisted by Mr. Diwan Singh Negi, learned counsel for the respondent and have also gone through the records carefully. 6. Section 40 (a) (ia) of the Act reads as under: Amounts not deductible. 40. Notwithstanding anything to the contrary in sections 30 to [38], the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession ,- (a) in the case of any assessee (1) any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as in clause (a) of the Explanation to section 194J; (iv) work shall have the same meaning as in Explanation III to section 194C . 7. Section 194C of the Act as prevailing at the relevant time reads as follows: Payments to contractors and sub-contractors. 194C.(1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and- (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; [or] (e) any co-operative [society; or]] (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] [Explanation III.] For the purposes of this section, the expression work shall also include - (a) advertising ; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods and passengers by any mode of transport other than by railways; (d) catering.] 8. It may be noticed that even before the authorities below the specific case of the appellant was that the provision of Section 194C(2) is not applicable to the appellant s case as the payments were made by him under an independent contract between him and the truck owners. Therefore, according to him his case fell within the purview of Section 194C (1) of the Act and imposed no liability of TDS on the appellant being an individual. It was also submitted that no findings had been recorded by any of the authorities with respect of there being any oral or written agreement between the assessee and the three partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndependent contract between him and the truck owners/ transporters and thus covered under Section 194C (1) and not under Section 194C (2). 12. The CIT as also the ITAT found this submission of the appellant to be not tenable as it was admitted fact that the tender for carriage of LPG from IOC Baddi was in the name of the appellant himself and that he had hired the trucks from the aforesaid three persons for the purpose of carrying out the work undertaken by him as a Contractor from the IOC, Baddi. While insofar as the transportation work carried out by the said three persons is concerned, the appellant had no liability to provide anything such as the drivers, fuel, accessories etc. rather the truck owners had incurred all the expenses related to the transportation of the LPG and the appellant had made the payment to them not on the basis of individual trips of the trucks but for the entire deal work. The nature of transportation between the appellant and the three persons was self explanatory as the appellant had himself submitted that the payments were made under an independent contract between him and the truck owners. On such basis, the authorities below recorded a pure fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter deductions was paid to the members of the truck operators who had carried the goods after deducting a nominal sum as parchi charges . The question which arises is whether the members are sub-contractors or not. 12. The main contention of the Revenue is that since the assessee has a separate juristic identity and each of the truck operators who are members of the assessees have separate juristic identity they are covered with the meaning of Section 194C(2). It is urged on behalf of the Revenue that since the assessee being a person is paying a sum to the member truck operator who is a resident within the meaning of the Act, TDS is required to be deducted. This argument does not take into consideration the heading of the Section noted hereinabove and the entire language of Section 194C(2) which clearly indicates that the payment should be made to the resident who is a sub contractor. The concept of Sub Contract is intrinsically linked with Section 194C(2). If there is no sub contract then the person is not liable to deduct tax at source even if payment is being made to a resident. 13. To understand the nature of the contract, it would be relevant to mention that in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly decided in favour of the assessees and against the Revenue. Therefore, the reliance placed by the learned counsel for the appellant on judgment of this Court on M/s Ambuja Darla s case (supra) is totally misplaced. 15. Lastly, insofar as the plea taken by the appellant that no disallowance can be made under Section 40 (a) (ia) as the freight charges had been paid and were not payable. Suffice it to state that the provisions of Section 40 (a) (ia) of the Act were applicable not only to the amount which were shown as outstanding on the closing of the relevant previous year, but to the entire expenditure which became liable for payment at any point of time during the year under consideration and which was also paid before the closing of the year as rightly held by the authorities below. 16. All the aforesaid findings recorded by the learned authorities below are pure findings of fact which normally cannot be interfered with in the present appeal save and except if the findings of the Court on a fact is vitiated by reasons of having relied upon conjectures, surmises and suspicion not supported by any evidence on record or partly upon evidence and partly upon inadmiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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