Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2015 (10) TMI 825

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... bunal did not deem it necessary to call upon the assessee to demonstrate the said fact, but proceeded to accept the statement as a proven fact. It appears that the Tribunal has diverted itself from addressing the core issue, that is whether the assessee has paid any sums, the aggregate of which exceeds ₹ 50,000/- in the assessment year to any single entity. The Tribunal has not addressed itself to any of the findings of fact rendered by the Assessing Authority. In particular, several instances of the aggregate of payments have exceeded ₹ 50,000/- in the assessment year have been placed on record. It does not render any reasoning to unsettle the finding of the original authority, that even the agreement can also be an oral and that the transactions with the lorry owners/transporters is within the purview of the provisions of the Act as it amounts to carriage of goods other than the railways. The transportation of goods was from its premises to the port and in the course of its export. In the present case, the facts and details are not only hazy but are obfuscated due to lack of clarity. Apart from stating that the ore was required to be transported from point (a) to p .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ntract of entire work as held by ITAT and also ovelooking Uttaranchal High Court decision in 290 ITR 530 wherein, it is held that once agents are appointed by contractor liability to TDS arises under Sectiion 194C? 3. Whether the ITAT is right in deleting the addition made on the ground that entire work undertaken by contractor was not sub-contracted to transporters ignoring provisions of Section 194C(2) which clearly provides that, even sub-contracting part of work by contractor also attracts T.D.S.? 4. The brief facts of the case are as follows: The assessee, who is the respondent herein claims to be in the business of transportation. It is the further claim by the assessee that he had entered into a contract with one M/s.Infrastructures Logistics Pvt. Ltd., Goa for transportation of iron ore from Sandur Mines to a place called Redi. It is further asserted that under the contract, the assessee has claimed to have paid a sum of ₹ 5,10,16,407/-. In the books of account of the said assessee, the amount mentioned supra was described as Freight Paid . It is the case of the Revenue that the Assessing Authority at the time of scrutinizing the returns for the assess .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... he contention of the assessee that the entry freight paid is on account of the mistake committed by the accountant and in fact such amount represent the hire charges only. It is the admitted case of the assessee that there are no written contract nor bills issued by the transporters and the entire case is sought to be demonstrated and supported only by the vouchers maintained by the assessee. 6. The other undisputed fact is that the asseessee has described the payments in the vouchers as freight charges (though it is alleged to be the result of error by the assesseee s accountant) in its books of accounts. 7. In the above background of facts the assessee aggrieved by the order of the Commissioner (Appeals) preferred the appeal before the Income Tax Appellate Tribunal impugning the conclusion of the assessing officer and its confirmation by the Commissioner (Appeals) concluding that the provisions of Section 194C(2) of the Act was attracted and the assessing authority invoked consequential provisions of Section 40(a)(ia) of the Act. 8. The learned counsel for the appellant would take the Court through the order rendered by the appellate Tribunal. He would state that the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... anything that has not been proved. 13. The learned counsel for the appellant would submit that the vouchers and entries in the books of accounts are the evidence of contract entered into and executed on behalf of the assessee. He would submit that it is the case of the assessee that he owned only five trucks and that the trucks of third party has been used to transport the materials, that is to execute the contract entered into between the assessee and his principal. He would submit that the same are evidence of an implied agreement and agreements include oral agreement also. He would state that it is an undisputed fact that no material has been placed by the assessee to either (a) demonstrate that no written contract has been executed between the truck owners and the assessee; (b) no material is placed by the assessee to demonstrate that the element of risk remained with the assessee only and was not transferred to the transporter; (c) no material was placed before the original authority or the Tribunal to demonstrate that the payments are hire charges only and not freight charges; and (d) no material is placed either before the Tribunal or the authorities to corroborate and de .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... provisions of Section 194C of IT Act, are culled out for reference purpose only. 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) XXXXX (b) XXXXX (c) XXXXX (d) any company; or (e) XXXXX (f) XXXXX (g) XXXXX (h) XXXXX (i) XXXXX (j) XXXXX (k) XXXXX 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 in case of advertising, (ii) in any other case two per cent, of such sum as income-tax on income comprised therein: Provided that no individual or a Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.] (2) Any per .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... n 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 XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200: 19. A perfunctory reading of the provisions of Section 194C of the Act obviates the necessity for any interpretational exercise as the provisions are unambiguous. A reading of the provisions of Section 194C mandates that any person who is involved in executing any contract or carrying out any work under a contract between any individual and company etc., and where the aggregate of payments to such person/s or agency engaged by a contractor exceeds ₹ 20,000/-, a mandate is cast on such persons making payments to deduct a sum of one percent or two percent at the time of making payments to the person, who carries out the work or such portion of the wo .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... .2007. It was pointed out to the assessee that his explanation vide letter dated 19.11.2007 was self contradictory. It was pointed out that in one breath he has stated that the amounts paid to the lorry owners is not freight charges but hire charges and in next breath, he admits that there are no contracts. It was further pointed out that there is no hire agreement presented before the Assessing Officer. It was further pointed out that except for a few cases, the aggregate of amounts paid to each lorry owners was in excess of ₹ 50,000/- and as noted supra only those payments of aggregate which do not exceed ₹ 50,000/- are exempted under sub-section 3 of Section 194 of the Act and where no single payment of ₹ 20,000/-, the same are exempted from the purview of sub-section 3 of Section 194C and failure attracts the consequences under Section 40(a)(ia) of the Act. 23. In reply, the assessee has reiterated that the word freight paid has been mistakenly used by his accountant and that there are no contracts with the lorry transporters and that even if it is assumed that there is implied contract, then the contract is for one trip and that the second trip will be an .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ntion, the provision is clear and unambiguous and the word aggregate has been specifically used. In that view of the matter, the assertion on behalf of the assessee, that only in respect of payment which exceeds ₹ 50,000/- is liable to be deducted at source is liable to be rejected and is accordingly rejected. Accordingly, the substantial questions of law as framed by the appellant/revenue is answered in favour of the revenue. 25. The simple issue has been approached by the Tribunal in an erroneous manner. The Tribunal under the guise of broad principles has misdirected itself resulting in adjudication of the dispute on the basis of inferences and assumption, contrary to law. The Tribunal has rendered a finding without reference to the basic and critical facts which were necessary for adjudication. The Tribunal has gravely erred in trying to adjudicate the appeal merely on the basis of broad principles. The Tribunal gravely erred in inferring that, there ought to be a sub-contract in writing and only in a such an event the provisions of the Act can be invoked. It further seriously erred in holding the factual issue in favour of the assessee, when not even a shred as eviden .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ase of Commissioner of Income Tax Vs. United Rice Land Limited reported in (2010) 322 ITR 594 (P H) is erroneous. Therein the finding of fact, that the amounts paid to the transporter is by way of hire charges, was rendered on the basis of evidence furnished by the alleged transporters. The assessee therein was in the manufacturer and export of rice and there was an identified route, quantity etc., in view of which certain facts could be easily identifiable. The transportation of goods was from its premises to the port and in the course of its export. In the present case, the facts and details are not only hazy but are obfuscated due to lack of clarity. Apart from stating that the ore was required to be transported from point (a) to point (b), no details are provided as to whether the point (b) was a licenced or registered place, where minerals could be stored there, etc., It is seen that a huge sum amounting to ₹ 5=00 crorers is spent merely for transportation of iron ore from point (a) to point (b), no details are forth coming whether the transportation is in the course of business or is being transported to the hands of end user. In such situation, this Court finds it hard .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates