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2015 (12) TMI 399 - ITAT MUMBAI

2015 (12) TMI 399 - ITAT MUMBAI - TMI - TDS u/s 194C - Addition made by the AO u/s 40(a)(ia) - non deduction of tds on the transportation charges - CIT(A) deleted the addition - Held that:- The contracts envisages in Section 194C of the Act are not limited to written contracts and all payments made in pursuance of written, oral, implied or quasi contracts are covered u/s 194C of the Act. Thus, a contract need not be in writing; even an oral , implied or quasi contract is good enough to invoke th .....

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transporting the goods by carriage for the assessee and these sub-contractors are paid for by the intermediaries out of money collected from the assessee. Thus, the assessee has given work contract to intermediaries for hiring of transport for carriage of goods for the assessee which itself is a contract covered under Section 194C of the Act and in our considered view, the assessee was liable to deduct TDS u/s 194C of the Act on payments for carriage of goods through intermediaries as there was .....

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, filed by the Revenue, being ITA No. 1687/Mum/2011, is directed against the order dated 16-12-2010 passed by the learned Commissioner of Income Tax(Appeals) - 34, Mumbai (Hereinafter called the CIT(A) ), for the assessment year 2007-08 whereby the CIT(A) deleted the additions made by the learned assessing officer (Hereinafter called the A.O. ) u/s 40(a)(ia) of the of the Income Tax Act, 1961 (Hereinafter called the Act ). 2. The Grounds of Appeal raised by the Revenue in the memo of appeal file .....

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A) on the above ground may be set aside and that of the Assessing Officer restored. The appellant craves leave to amend or alter any ground or add new ground which may be necessary. 3. The Brief facts of the case are that the assessee is engaged in the business of transportation under the name and style of M/s Express Transport. During the course of assessment proceedings, the assessee was called upon by the A.O. to file the details of various expenses claimed and details of tax deducted at sour .....

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2 Prashant Sitaram Patil 14,61,810 13 Pravin Gavad 3,10,920 14 Pundalik Patil 1,26,660 15 Purnima Parekh 1,00,000 16 Shri Sai Stone Pvt Ltd. 6,60,840 17 Sikarwala Transport Co. 2,25,000 18 Trimurti Enterprises 3,50,000 19 Vishal Transport 1,00,000 20 B.D. Ahrawal & Co. 1,00,000 It was observed by the A.O. that no tax has been deducted at source on the above mentioned transportation charges although the same are covered u/s 194C of the Act. The assessee was show caused about the default w.r.t .....

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143(3) read with Section 143(2) of the Act, the assessee went in appeal before the first appellate authority i.e. the CIT(A) and submitted that the payments have not been made by the assessee in pursuance of a contract within the meaning of section 194C of the Act. To this effect, the assessee relied on the judgment of Hon ble Punjab & Haryana High Court in the case of CIT (TDS) vs. M/s United Rice Land Limited in ITA No. 633 of 2007 dated 12-05-2008 which is also reported in (2008) 174 Tax .....

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nsporters. 2. That I have hired all the transport from outsiders who were around me and managed transporters for me whom I do not recognize. In fact, I have debited such persons only in my books of accounts and sum paid by me actually to the outsiders who were arranging the transport for me on SOS basis. 3. That, these persons appearing in my books of accounts had in turn handed over the sum paid by me for carriage of goods and services to various parties stranger to me but called by these perso .....

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aid through account payee cheque only. WHATEVER STATED hereinabove is true and correct to the best of my knowledge and belief. The CIT(A) accepted the contentions of the assessee and held that the A.O. has not given any finding of fact as to whether there is any contract, written or oral between the assessee and the individual parties to whom the payment was made and hence in absence of such finding of the AO and also assertion of the assessee that there is no contract written or oral, between t .....

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ult of the assessee in not deducting tax at source u/s 194C of the Act. 5. Aggrieved by the orders of the CIT(A), the Revenue has preferred this appeal before the Tribunal. 6. At the time of hearing, none appeared on behalf of the assessee despite several opportunities been given to the assessee since May 2014 , therefore, we proceed to dispose of the appeal after hearing the ld. D.R. The Ld. DR also stated before us that notice is also served through affixture. 7. The ld. D.R. relied upon the o .....

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sportation and the assessee has paid transportation charges to various parties for which tax has to be deducted at source as per Section 194C of the Act and the A.O. has rightly disallowed the amount of ₹ 94,61762/- being payment of Transport charges u/s 40(a)(ia) of the Act for the default made by the assessee of not deducting tax at source u/s 194C of the Act and the CIT(A) erred in deleting the additions by holding that there is no contract between the assessee and the individual person .....

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rties during the assessment year which was claimed as an expense by the assessee ( The details of Transport charges of ₹ 94,61,762/- paid by the assessee is produced in the chart in the preceding para s ) . As per the A.O., no tax has been deducted at source by the assessee against these payments of transport charges of ₹ 94,61,762/- made during the assessment year and no details for such default because of non-deduction of tax at source were furnished and hence addition of ₹ 9 .....

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e of such finding of the AO and also assertion of the assessee that there is no contract written or oral, between the assessee and the individual parties , the provisions of section 194C of the Act is not attracted in this case. The assessee has filed an affidavit before the CIT(A) which is reproduced in the preceding para s whereby the main averment of the assessee is that the assessee has paid transportation charges to various parties(Hereinafter called the intermediaries ) who themselves are .....

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s out of the money collected from the assessee. The assessee relied upon the decision of Hon ble Punjab and Haryana High Court in the case of CIT(TDS) v. United Rice Land Limited in (supra) during proceedings before the CIT(A) while the Revenue is relying on the decision of the Tribunal in the case of ITO v. Rajesh A Boricha (supra). It is important at this stage to refer to relevant provisions of Section 194C of the Act of the Act as applicable for assessment year 2007-08 which are reproduced b .....

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] [(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 India; or (h) any trust; or (i) any University .....

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ase two per cent, of such sum as income-tax on income comprised therein.] (2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any l .....

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ed the monetary limits specified 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 sub-contractor, shall be liable to deduct income-tax under this sub-section.] ……. …….. [Explanation III.-For the purposes of this section, the expression work shall also include- (a) advertising; (b) broadcasting and telecasting including production of programmes f .....

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credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) or, as the case may be, sub-section (2) shall be liable to deduct income-tax [under this section:] [Provided further that no deduction shall be made under sub-section (2), from the amount of any sum credited or paid or likely to be credited or paid during the previous year to the account of the sub-contractor during the course of business of plying, .....

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e prescribed income-tax authority or the person authorised by it such particulars as may be prescribed in such form and within such time as may be prescribed; or] (ii) any sum credited or paid before the 1st day of June, 1972; [or] [(iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the sub-contractor in relation to any work (including supply of lab .....

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ncome under head Profits and gains of business or profession . The relevant extract of Section 40(i)(ia) of the Act as applicable for the assessment year 2007-08 is reproduced below : 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- …….. …….. (ia) any in .....

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prescribed under sub-section (1) of section 200 : Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Explanation.-For the purposes of this sub-clause,- ……. (iv) work shall .....

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are also covered under the provisions of Section 194C of the Act for deduction of tax at source provided the stipulated conditions are fulfilled as detailed in the proviso. The Section 194C of the Act further provides that payments to sub-contractor by the contractors shall also be liable for deduction of tax at source u/s 194C of the Act. It also provide that the work shall also include carriage of goods or passenger by any mode of transport other than railways. The assessee in the instant app .....

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ollected from the assessee. The main contention of the assessee is that the payments have not been made in pursuance of a contract between the assessee with any of the person or the actual transporters. Now the question arises before us is that whether there is contractual relationship between the assessee and the persons to whom the assessee had made the payments in the nature of transportation charges for carriage of goods for the assessee who in turn have independently arranged actual transpo .....

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to refer to the meaning of contract as used in commercial parlance which drew its source from Indian Contract Act,1872 whereby it is stipulated according to Section 2 of the Indian Contract Act,1872 , every promise and every set of promises , forming the consideration for each other , is an agreement while contract as defined in the same section means an agreement enforceable by law. Section 9 of the Indian Contract Act , 1872 provides that contracts can be either express or implied. An express .....

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cts and circumstances that indicate a mutual intention to contract . Circumstances may exist which, according to the ordinary course and common understanding , demonstrate such an intent that is sufficient to support the finding of an implied contract . Chapter V of the Indian Contract Act,1872 treats certain relations resembling those created by a contract as contracts enforceable in law. The Indian Contract Act,1872 thus envisages four types of contracts, namely (1) contracts made in writing ( .....

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served in the case of Smt. J. Rama v. CIT [2012] 344 ITR 608/[2010] 194 Taxman 37, "Law does not stipulate the existence of a written contract as a condition precedent for (invoking the provisions of section 194C with respect to) payment of TDS". Contract need not be in writing. It may infer from the conduct of the parties. It may be oral or implied also. Our aforesaid view is duly supported by the decision of ITAT, 'A' Bench, Kolkata in the case of Dy. CIT v. Kamal Kr. Mukherj .....

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ual transporters but are arranging actual transporters independently from open market for carriage of goods for assessee and these payments made by the assessee to the intermediaries are consolidated payment which include two components/elements i.e. charges for actual transporters hired independently by the intermediaries for carriage of goods for the assessee and service charges of these intermediaries for arranging actual transporters from open market for carriage of goods for the assessee . .....

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by Justice G.P.Singh 12th Edn.2010, Page 179-180). The contract also include sub-contract as it could be seen from coverage of payments to subcontractors by contractors within the ambit of Section 194C of the Act . In the instant case under appeal, the contractors i.e. intermediaries are transporting the goods by carriage for the assessee not themselves but through appointing sub-contractors independently i.e. actual transporters who are hired independently by contractors as sub-contractor for t .....

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ediaries as there was a contract covered u/s 194C of the Act between the assessee and these intermediaries for the work of carriage of goods through transport which was executed by these intermediaries through sub-contractors i.e. actual transporters appointed independently by these intermediaries . The assessee has relied upon the decision of Hon ble Punjab and Haryana High court in the case of ITO(TDS) v. United Rice Land Limited(supra) but the facts of that case are quite different and distin .....

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vice charges of ₹ 250-200 was collected from the truck owners/operators . In the case of United Rice Land Limited (supra) , there was uncontoverted finding of fact that the assessee therein was instructing for payment of truck charges and whatever charges were instructed by the assessee therein was paid by these C&F agents which was later reimbursed by the assessee and these C&F agents to whom the assessee therein made the payments have not independently appointed truck operators f .....

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