TMI Blog2015 (7) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial condition is that there should be a sub-contract for carrying out the whole or any part of the work undertaken by the contractor and the payment should be made for carrying out the whole or any part of such work. It is a well accepted principle of law that the contract can either be oral or written. In the present case, the Revenue has not been able to establish the existence of any contract between the assessees and the individual vehicle owners. Therefore, in the facts of the case we hold that the assessees have not entered into any subcontract with individual vehicle owners for supplying vehicles to the contractee companies. Since, the first question has been answered in negative, the payments made by the assessees to the third parties/individual vehicle owners do not fall within the ambit of section 194C. Thus, we hold that the payments made by the assessees are not subject to TDS provisions. Hence, the assessees have not violated the provisions of section 194C. - Decided in favour of assessee. Disallowance on vehicle expenses - CIT(A)restricted addition - Held that:- Ad-hoc disallowance of ₹ 17,930/- @ 20% of total vehicles expenses. The Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the companies in accordance with the contract agreement executed between the assessees and the contractee companies. In lieu of services provided by the assessees, the companies make payment after deducting tax at source. The assessees further make payments to the third parties from whom the vehicles are arranged. On the said payments, the assessees did not deduct tax at source (TDS). The assessees in their respective return of income show the receipts from contractee companies as commission . 3. During the course of scrutiny assessment, the Assessing Officer held that the assessees are providing vehicles to the companies under contract agreement therefore, they are contractors. The Assessing Officer further held that, the assessees hired vehicles from various persons and make payments to them without deducting TDS. The relationship between the assessees and the persons from whom vehicles are hired are in the nature of sub-contract. Therefore, the assessees are liable to deduct tax at source under the provisions of section 194C/194I of the Act on the payments made for hiring the vehicles. Since, the assessees have violated the provisions of section 194C/194I of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted the same, as the addition was made merely on assumptions without rejecting or raising any suspicion over the books of account. Against these findings of the Commissioner of Income Tax (Appeals), both, the Revenue and the assessees have come in appeal before the Tribunal. 4. Shri P.S. Naik appearing on behalf of the Revenue submitted that the Commissioner of Income Tax (Appeals) has rightly come to the conclusion that the vehicle owners who had supplied vehicles to the contractee companies according to the instructions of the assessee were in fact sub-contractees of the assessee. Thus, the payments made to them were subject to TDS u/s. 194C of the Act. However, the Commissioner of Income Tax (Appeals) has erred in applying the ratio of decision in the case of M/s. Merilyn Shipping Transport Co. (supra). The Hon'ble Gujarat High Court in the case of CIT Vs. Sikandar Khan N. Tunvar reported as 357 ITR 312 and the Hon'ble Calcutta High Court in the case of CIT Vs. Crescent Export Syndicate reported as 216 Taxman 258 have held that the decision rendered by the Special Bench in the case of M/s. Merilyn Shipping Transport Co. (supra) is not a good law. Thus, the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing vehicles to the contractee companies. The payments made by the assessees to the supplier of the vehicles are subject to TDS provisions u/s. 194C. Since, the assessees have not complied with the provisions of section 194C, the payments made by the assessees are disallowed u/s. 40(a)(ia) of the Act. In first appeal, the Commissioner of Income Tax (Appeals) granted partial relief to the assessees by placing reliance on the decision of Special Bench of the Tribunal in the case of M/s. Merilyn Shipping Transport Co. (supra). 7. Before we proceed further, let us first ascertain, whether the assessees are providing vehicles to the companies under contract? A sample purchase order, and terms and conditions attached thereto for Vehicle hire Services by Idea Cellular Ltd. is placed on record at page 27 of the Paper Book. The terms and conditions as set out therein are as under: 1. The validity of this contract is from 01st July, 2008 to 30th June, 2009. 2. The above rates are inclusive of fuel and maintenance charges of the vehicles. 3. The readings in for distance and time (Kilometres Hrs.) will be measured from our office at Beed. Vehicle will be provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of the terms and conditions of the contract shows that it is the responsibility and liability of the assessees to provide vehicles in good condition as and when required by the company. The assessees have to ensure all compliances viz payment of road taxes, insurance, pollution control etc. with respect to the vehicles. In case of any break down the assessees have to provide alternate vehicle within specified time, from the time of reporting of break down. It is the duty of assessees to maintain the drivers. Thus, from the terms and conditions mentioned above, it is evident that it is the duty, responsibility and liability of the assessees to provide the vehicles with drivers to the contractee companies. A perusal of the terms and conditions make it amply clear that it is a contract between the company and the assessees for providing vehicles. Therefore, the contention of the assessees that they are not contractors but commission agents is not tenable. The Commissioner of Income Tax (Appeals) after analyzing similar agreement entered into between the assessees and China Petroleum Pipe Line had come to the conclusion that the assessees are contractors and not commission agents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Mukesh Travels Company (supra). Wherein, under similar circumstances where no sub-contract was established between the assessee and transporters, the Tribunal deleted the disallowance u/s. 40(a)(ia) of the Act. The Revenue went in appeal before the Hon'ble High Court. The Hon'ble High Court upheld the findings of the Tribunal and dismissed the appeal of the Revenue. 13. The Visakhapatnam Bench of the Tribunal in the case of Kranti Road Transport (P.) Ltd. Vs. ACIT (supra) has held that where assessee has hired lorries/trucks for his own use and are under his own control and supervision, TDS is not required to be deducted on payments made to truck/lorry owners. In the said case the assessee had hired the trucks/lorries for transporting of the consignment booked by it under its own supervision and control with all responsibility and liabilities. The Tribunal held that the assessee is not liable for deduction of TDS for lorry/truck owners as per section 194C. In the present case also the liability and responsibility of providing vehicles as per agreed terms and conditions has not been passed on to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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