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2015 (6) TMI 106 - JHARKHAND HIGH COURT

2015 (6) TMI 106 - JHARKHAND HIGH COURT - TMI - TDS u/s 194C - Disallowance of 'Vehicle Hire Charges' and 'Loading and Unloading Charges' - there was no contract - Tribunal deleted the entire addition - Held that:- The respondent-assessee is a transporter and engaged in transporting of goods mainly through hired vehicles. Heavy vehicles have been hired by the respondent. It further appears that the respondent-assessee is not only paying vehicles hire charges, but, he is paying entire vehicles ru .....

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-200 per truck as argued out by the respondent-assessee.

Huge amount has been paid in cash for vehicle hire charges.All the aforesaid payments are exceeding the limits of ₹ 20,000/- per day and ₹ 50,000/- during the financial year 2008-2009. This payment is also in breach of section 40(A)(3) of the Income Tax Act, 1961.

The assessee is seeking deduction of this amount from taxable Income u/s 37 of the Income Tax Act, which is not permissible, looking to Section .....

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body, for leaf spring etc. during the financial year 2008-09. Looking to this aspect of the matter, no error was committed by the Income Tax Commissioner, while dismissing the appeal preferred by the respondent-assessee. Income Tax Appellate Tribunal, Ranchi Circuit Bench, Ranchi has failed to appreciate the cumulative effect of the evidences on record.

The respondent-assessee has paid loading and unloading charges of ₹ 17,60,600/- to various parties on different dates. The afo .....

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harges in one year and also towards loading and unloading charges huge amounts is paid in cash. TDS ought to have been deducted before making such payments by the respondent to his sub contractors and as this TDS has not been deducted, the amount paid towards vehicle hire charges and amount paid towards loading and unloading charges which are at ₹ 98,76,419/- and at ₹ 12, 76,700/- is not deductable from the taxable amount u/s 40(a)(ia) of the Income Tax Act. Tribunal was not justifie .....

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dv., Mr. M.K. Choudhary, Adv. and Ms. Amrita Sinha, Adv. JUDGMENT Per D N Patel,J. 1. In this appeal following substantial questions of law have been raised: "(i) Whether on the facts and in the circumstances of the Case the Learned Tribunal is justified in deleting the entire addition of ₹ 96,78,419/- on account of 'Vehicle Hire Charges' by holding that there was no Contract? (ii) Whether on the facts and in the circumstances of the Case the Learned Tribunal is justified in d .....

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on delivered in the case of Bhagwati Steel reported in (2011) 198 TAXMAN 275 (P&H) which was not at all applicable in the instant Case? (v) Whether on the facts and in the circumstances of the Case the impugned Order is perverse?" 2. This matter has been taken up for its final hearing by the consent of the learned counsel for both the sides and have argued out the case at length. 3. Counsel for the appellant on behalf of the Commissioner Income Tax, Jamshedpur has submitted that the res .....

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dated 31st December, 2012 mainly on the ground that the assessee has not deducted TDS, as required u/s 194 C of the Income Tax Act, 1961 and, therefore, deductions are not permissible u/s 40(a) (ia) of the Income Tax Act, 1961. Against this order, the respondent had approached Income Tax Appellate Tribunal, Ranchi Circuit Bench, Ranchi. The appeal preferred by the assessee bearing I.T.A. No. 16/Ran/2013 for the assessment year 2009-10 having been allowed by Income Tax Appellate Tribunal, Ranchi .....

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n is not applicable, disallowance made u/s 40(a)(ia) cannot be made. Thus, both the deductions from the income of the respondent-assessee was allowed without appreciating the fact that:- (a) Section 194 C of the Income Tax Act, 1961 is also applicable to the oral contract. (b) Assessee will never prove the contract even if it is in writing available nor they will produce. This is a fact within the specific knowledge of the assessee. Oral contract may be deduced from several facts available with .....

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and tubes, batteris, engine, motors auto body, leaf spring and other general repairs. IV. Loading & Unloading charges. (d) On the basis of the aforesaid cash payments made for huge amounts under one of the headings, namely, vehicle hire charges ₹ 98,76,419/- have been paid in cash during the assessment year 2009-10 and financial year 2008-09. Looking to the repairs and maintenance charges, the amount has also been paid by this assessee over and above vehicle hire charges. There is als .....

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the Tax Appeal). It appears that gross error has been committed by the ITAT that Section 194C of the Income Tax Act, 1961 is not applicable and consequently the deductions disallowed under Section 40 (a) (ia) should have been allowed by the Income Tax Department. This is an error on the face of the record committed by the ITAT, which is not permissible. (e) Similarly, learned counsel for the appellant submitted that for loading and unloading charges, deductions claimed by the respondent-assesse .....

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he nature of the payments made by this assessee repeatedly, in cash for vehicle hire charges, labour charges, repairs and maintenance charges and loading and unloading charges etc. It should have been kept in mind by the ITAT that whenever these provisions are brought into operation, especially Section 194C of the Income Tax Act, 1961 to be read with Section 40 (a) (ia), in not a single case there will be a written contract, looking to the tendency of the tax payers to avoid the payment of the t .....

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2008, 01st September 2008, 16th September 2008, 30th October 2008, 16th December 2008, 02nd January 2009, 05th January 2009, 28th January 2009, 12th February 2009, 27th February 2009, 14th March 2009 and 25th March 2009. All these payments have been made repeatedly to only one party and that to in cash and every time the amount is exceeding ₹ 20,000/-. These facts have been stated in para 3.4 of the Assessment Order passed by the Assessing Officer dated 20th December, 2012. There are other .....

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giving sub contract for transportation of goods of M/s Rungta Mines Ltd. and, therefore, as per Section 194 C of the Income Tax Act, 1961, TDS ought to have been deducted by the respondent-assessee before making huge payment to the sub contractors and hence, this tax deduction at source has not been carried out. The deductions claimed from the total income by the assessee of ₹ 98,76,419/- for vehicle hire charges is not permissible under Section 40 (a) (ia) of the Income Tax Act, 1961. Sim .....

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rder passed by the Commissioner of Income Tax (Appeals), Jamshedpur in Appeal No.525/JSR/2011-12 dated 31st December, 2012 may be upheld by this Court. 4. Learned senior counsel appearing for the respondent submitted that no error has been committed by the ITAT, Ranchi Circuit Bench, Ranchi in allowing the appeal preferred by the respondent-assessee as the existence of the contract is not proved between the respondent and the so called sub contractors. There is neither oral or documentary eviden .....

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ncome Tax Act, 1961 is not applicable. Similar is the case with regard to loading and unloading charges. Learned senior counsel for the respondent has relied upon (2008) 174 TAXMAN 286 (PUNJ. & HAR.), (2011) 198 TAXMAN 275 (Punj. & Har.), (2006) 282 ITR 3 (Madras), (2013) 350 ITR 427 (Delhi) and (2013) 218 TAXMAN 93 (Allahabad) and on the basis of the aforesaid decisions, it is submitted by the senior counsel for the respondent-assessee that in absence of any contract between the respond .....

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rd counsel for both the sides and looking to the facts and circumstances of the case, we hereby allow this tax appeal mainly for the following facts and reasons:- (I) The respondent is an assessee who has filed income tax return on 30th September, 2009 for the Financial Year 2008- 2009, with the total income of ₹ 11,18,250/- which was selected for scrutiny and notices u/s 143 (2) and 142 (1) of the Income Tax Act, 1961 were served upon the assessee. (II) It further appears that the respond .....

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ther general repairs and maintenance and also towards loading and unloading charges. These are the payments made under the different major heads by the respondents during the financial year 2008-2009. Thus, it appears that he is not a broker at all who is earning ₹ 150-200 per truck as argued out by the respondent-assessee. (III) Huge amount has been paid in cash for vehicle hire charges. Looking to the profits and loss accounts the said payment reads as under:- Sl. No. Name of the Party ( .....

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Sub-total 15,70,000 2(i) Govind Pathak 12/04/2008 1,00,000 (ii) 30/04/2008 50,000 (iii) 28/05/2008 87,000 (iv) 21/08/2008 34,500 (v) 08/12/2008 1,00,000 (vi) 05/01/2009 1,00,000 Sub-total 4,71,500 3(i) Shatrughan Mishra 19/04/2008 3,32,748 (ii) 30/04/2008 2,89,000 (iii) 12/05/2008 4,27,600 (iv) 07/06/2008 1,61,530 (v) 16/06/2008 2,40,000 (vi) 27/06/2008 94,518 (vii) 08/07/2008 95,000 (viii) 29/07/2008 90,300 (ix) 29/07/2008 2,77,000 (x) 01/08/2008 48,190 (xi) 14/08/2008 3,67,590 (xii) 02/09/2008 .....

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,10,000 (v) 25/03/2009 29,600 Sub-total 8,98,400 8(i) Ganesh Sahoo 06/01/2009 39,000 (ii) 28/01/2009 30,000 (iii) 11/02/2009 43,086 Sub-total 1,12,086 9(i) Md. Samsuddin 10/01/2009 80000 (ii) 09/03/2009 50000 Sub-total 1,30,000 10. Lucky Roadways 12/02/2009 2,00,000 11.(i) Prasanna Kumar Prusty 27/02/2009 38,000 (ii) 18/03/2009 50,790 Sub-total 88,790 12. Radhey Shaym Sahu 27/02/2009 65,150 13.(i) Raj Roadways 04/03/2009 19,000 (ii) 26/03/2009 29,181 Sub-total 48,181 14. (i) Md. Khlim 02/01/2009 .....

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0 19/05/2008 17,850 Sub-total 66,251 23. M/s. Astha Enterprises 06/10/08 75,000 24. I.S. Movers 22/01/2009 85,000 25.(i) Brij Bhushan Dubey 05/01/09 70,000 (ii) 21/01/2009 40,000 (iii) 28/01/2009 59,000 (iv) 09/02/2009 61,350 GRAND TOTAL 98,76,419 All the aforesaid payments are exceeding the limits of ₹ 20,000/- per day and ₹ 50,000/- during the financial year 2008-2009. This payment is also in breach of section 40(A)(3) of the Income Tax Act, 1961. (IV) The aforesaid amount of ͅ .....

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any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the 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 - (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent whe .....

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tion shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on th .....

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during the financial year exceeds [seventy five thousand rupees], the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or cred .....

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r 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 .....

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ividuals, if such person,- (A) does not fall under any of the preceding sub-clauses; and (B) is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor; (ii) "goods carriage" shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE; (iii) "contract" shall include sub-contract; (iv) " .....

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of a customer by using material purchased from a person, other than such customer." (Emphasis Supplied) "40. (a) (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVIIB and such tax has not be .....

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o deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this subclause, it shall be deemed that the assessee had deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. Explanation.- For the purposes of this sub-clause,- (i) "c .....

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ave the same meaning as in clause (i) to the Explanation to section 194-I; (vi) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;" Repeatedly, it has been argued out by the counsel for the respondent that there is no existence of the contract between the respondent and the so called transporters or between the assessee and so called sub contractors. If there is no evidence on record as to the existence of the contract between .....

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act between the contractor and specified person shall.......". The words in pursuance of a contract "also includes the oral contract". (b). The oral contract has to be deduced from the existing evidence. (c). Every time there cannot be a written contract and the tax payers tendency specially, those who want to evade the tax will never prove or assist the authorities in giving evidence of the contract, especially when huge amount of cash is involved. Therefore, whenever any assesse .....

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f ₹ 98,76,419/- is to be added in the income of the respondent-assessee as deduction is not permissible under Section 40(a) (ia) of the Income Tax Act, 1961. When any assessee is paying once in a blue moon for a transportation charges, Section 194C of the Income Tax Act may not be applicable. But, looking to the totality of the evidence, in the facts of the present case as stated in the assessment order para 3.4 passed by Assessing Officer dated 20th December, 2011 (Annexure 1 to the memo .....

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s case. The respondent-assessee looking to the books of accounts have made the payment towards labour charges, repair and maintenance as well as towards the loading and unloading. Thus, the assessee is not a broker at all, but, is more than a broker. Broker will never pay the repair and maintenance as happened in this case. Payments have been made for spare parts, tyres and tubes, batteries, for engine, for motors auto body, for leaf spring etc. during the financial year 2008-09. Looking to this .....

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out deduction of tax 1. Magma Finance 27/05/2008 1,11,700 2 Khanuja Earth Movers 28/07/2008 1,20,000 3. Magma Shrachi 19/08/2008 1,65,000 4. Khanaja Earth 14/11/2008 60,000 5. I.S. Earth Movers 25/11/2008 50,000 6. Magma Shrachi 26/11/2008 1,65,000 7. Magma Shrochi Finance 16/12/2008 1,10,000 8. Magma Shrochi Finance 21/01/2009 1,75,200 9. Suresh Prasad 02/02/2009 20800 10. Chotan Kumar 10/02/2009 25,000 11. Ch. No. 256415 12/02/2009 62,000 12. I.S. Earth Movers 02/03/2009 70,000 13. I.S. Earth .....

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man 275 (Punjab and Haryana) is not applicable to the facts of the present case, mainly for the reason that looking to para 2 of the said decision, it has been observed by the Punjab and Haryana High Court that there was no material on record to prove any written or oral agreement between the assessee and the recipient of goods for transportation or carriage thereof. It has also been observed in the said decision in para no.2 that there is no material to prove the payments of freight having been .....

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n the facts of the present case, vehicle hire charges have been paid by the respondent-assessee. Moreover, looking to the totality of the evidence on record it cannot be said that there is no evidence on record for oral agreement. (VIII) Learned senior counsel for the respondent has relied upon the decision reported in (2008) 174 Taxman 286 (Punjab and Haryana). The fact of this case is also remarkably different from the fact of the present case. It has been observed in para 2 of the said decisi .....

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f the present case, the respondent-assessee as stated hereinabove, not only paid vehicle hire charges but also labour charges, repair and maintenance as well as loading and unloading charges. One type of payment may not prove sufficiently the oral agreement, but, payment of several types of charges under major heads is a sufficient evidence of the oral agreement between the respondent-assessee and sub contractors to whom huge amount is paid in cash. Thus, on facts the present case is remarkably .....

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roperly by the said company. This was sufficiently explained by the assessee who is M/s Vector Shipping Services (P) Ltd. Thus, TDS was deducted and was paid also to the Department, whereas, in the facts of the present case no TDS has been deducted by the respondentassessee and hence, deductions are not allowed under section 40(a)(ia) of the Income Tax Act, 1961. (IX) Similarly, the decision upon which heavy reliance has been placed by the counsel for the respondent reported in (2013) 350 ITR 42 .....

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on reported in (2006) 282 ITR 3 (Madras) are also remarkably different than the facts of the present case. The present respondent-assessee is a transporter and transporting the goods through sub contractors and as stated hereinabove on different dates in cash more than ₹ 20,000/- have been paid to a single party namely Sri. Sudhir Kumar Sinha. Similarly, two other persons also on more than one occasions the payments have been made not only for the vehicles hire charges, labour charges, rep .....

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. It has been observed that to curb the bogus payment this provision of Section 40(a)(ia) of the Income Tax Act has been incorporated and it is submitted by the counsel for the respondent that the payment has already been made by the respondent-assessee for vehicle hire charges and towards loading and unloading charges and, therefore, these are not the bogus transactions and, therefore, the order passed by the Income Tax Appellate Tribunal, Ranchi Circuit Bench, Ranchi may not be disturbed by th .....

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