TMI Blog2011 (1) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... e, an individual, a transport contractor and contractor for cutting and preparation of wood for paper mills, furnished his return of income for the AY under dispute, admitting an income of ₹ 17,61,554/-, besides agricultural income of ₹ 2.45 lakhs. During the course of assessment proceedings, it was noticed by the AO that the assessee had debited ₹ 1,34,49,861/- under the head transportation charges . Being queried, the assessee had furnished a list of parties along with lorry numbers and payments made, according to which, each payment was separate to the lorry driver which was below ₹ 20000/- in one payment and, thus, it was claimed that no TDS was effected from those payments. However, analyzing the details furnished, the AO noticed that the assessee had made payments of ₹ 98,78,494/- out of ₹ 1.34 crores to the various lorries in aggregate of more than ₹ 50,000/- during the period under scrutiny. After deliberating the issue in depth and also considering the replies given by the assessee on various occasions as recorded in his impugned order, the AO had observed thus (on page 5) ..The assessee has filed confirmation from the West ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was more or less what was portrayed before the AO during the course of assessment proceedings. After due consideration of (i) lengthy submission of the assessee, (ii) analyzing the Board s Circular No.715 and also the finding of the Hon ble Tribunal in ITA No.491/Bang/2008 in the case of Janani Tours Resorts Pvt. Ltd on which the assessee placed strong reliance; (iii) the proposition laid down by the Hon ble High Court of Madras in the case of ITO v. Poompuhar Shipping Corporation Limited and (iv) the remand report of the AO, the Ld. CIT (A) had arrived at a conclusion that 4.2. In view of the findings given in para 4 above and the distinction of facts as brought out in para 4.1. above, it become obvious that the ratio of the judgment of the Hon ble I.T.A.T., Bangalore given in the case of M/s. Janani Tours Resorts (P) Ltd. is not applicable to the facts of the appellant. The material facts discussed in para 4 amply prove that there was an oral agreement/contract between the truck operators/drivers in whose cases the aggregate amount of payment exceeded ₹ 50,000/- in each case in view of the provisions of section 194C(2) of the Act, which the appellant has failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the hire charges were paid by the assessee, that in most of the cases, advances were paid to the drivers of the vehicles to facilitate them to meet the expenses towards fuel and incidentals; that the drivers and owner of the such vehicles look for better transportation charges and also frequency of hiring of vehicles; - since the assessee was paying more transportation charges comparatively, and normally transporting the goods frequently from the forest area to the paper mills, the lorry drivers with a hope of, getting commensurate hire charges will always be accessible at a short notice; - relies on the case laws of: (a) M/s. Janani Tours Resorts (P) Ltd. v. ACIT ITA No.491/Bang/2008 dt.13.2.2009; (b) R.R. Carrying Corporation V. ACIT 126 TTJ 240; (c) DCIT v. Satish Aggarwal Co., - 124 TTJ 542 - since the assessee had not entered into any sort of agreements with the lorry owners, either invoking of the provisions of s.194C or the applicability of s.40(a)(ia) of the Act have no relevance under the facts and circumstances of the issue on hand; - the assessee had provided to the AO the names and addresses as furnished to him by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all cannons of proportionality as enunciated in a number of rulings by the Apex Court. - Relies on Om Kumar v. Union of India 2001 (2) SCC 386 - without prejudice, the disallowance was permissible only if the deduction was claimed u/s 30 to 38 and in the instant case, all payments to drivers of vehicles it had the character of diversion by over-riding title at source in favour of the drivers and, hence, the same was allowable u/s 28 itself as a trading loss and, hence, the applicability of the provisions of s.40(a)(ia) was itself in doubt. 5.2. To buttress his arguments, the Ld. A R had furnished a paper book containing 1 104 which chiefly consist of various case laws, besides a list containing the details of payments made towards transportation charges during the period under dispute. 5.3. On the other hand, the Ld. D R was very emphatic in his resolve that the assessee had grossly failed to deduct TDS from the payments made to sub-contractors u/s 194C(2) of the Act and his failure has been cohesively brought to light by the AO which has been substantiated by the well reasoning of the Ld. CIT (A). It was, therefore, earnestly pleaded that the stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e forest area to their mill premises. As the materials brought on record, the assessee had not hired the vehicles from the owners by entering into any contract. However, some of the vehicles which were hired by the assessee, for which, the aggregate rents paid in a year exceeded ₹ 50,000/-. In this situation, the provisions of s.194C(3) would also have a vital role to play as claimed by the assessee. Section 194C(3) of the Act is reproduced herebelow for reference: S.194C (3) No deduction shall be made under sub-section (1) or sub-section (2) from:- (i) . Provided that .. 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, hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum, in the prescribed form and verified in the prescribed manner and within s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A), the AO had maintained that 5.2 out of the 11 parties only two parties, appearing in sl.Nos: 5 11, namely, Ankabhovi and Rafiq Sahi have filed the reply and the letters in the remaining 8 cases have come back unserved. In his subsequent report dt.2.6.09, the AO states that fresh letters were again issued to 9 parties u/s 133(6) out of which 7 parties have responded except 2 parties, namely, Sri Suresh and Sri Somanna. He, however, has pointed out that in the 7 replies received the amounts shown by the appellant and in the confirmation letters does not tally. The AO further states that assessee has filed confirmation from 15 drivers showing total payment of ₹ 2,54,833/-. The AO in his subsequent report dt: 29.06.09 has stated that all the 11 parties have confirmed the transportation charges, hence, may be considered From the above assertion of AO s, one could safely arrive at an unbiased conclusion that the entire issue has been handled inconsistently and in a half- baked manner. 6.7. Let us now turn our attention to the reasoning of the Ld. CIT (A) wherein he had stated that 4.1. Section 194C stipulates that tax is required to be deducted at sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing neither any oral or written agreement between the assessee and the transporters for carriage of goods not it is proved that any freight charges were paid to them in pursuance of a contract for a specific period, quantity or price, the assessee was not liable to deduct tax under s.194C from the payments made to the transporters. (ii) In a similar issue the Hon ble Tribunal in the case of R.R. Carrying Corporation v. ACIT reported in (2009) 126 TTJ (CTK)240 had held that The assessee was a transporter executing various contracts by engaging its own vehicles and transporter s vehicles. The AO disallowed the payments by taking payments made to the transporter as sub-contract. There was nothing on record to suggest that any contract existed between the assessee and the alleged transporter as sub-contractor. There was neither written nor oral agreement in this regard. There was no dispute to the settled legal proposition that written agreement was not compulsory. Even oral agreement can be inferred in the facts and circumstances of the case. The AO had not made out any case that on the basis of the contract of the business by the assessee, there existed contractor and sub-con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for exemption and cannot be taxed. No authority is shown providing that such taxation is not permissible in law and is bad even otherwise. Moreover, despite repeated query, the counsel for the petitioner could not show as to how and in what manner it claims s.40(a)(ia) to be ultra vires. It could not show any legislative incompetence in enacting such provision. Vires of an statute can be challenged on the ground of legislative incompetence. It is not shown that s. 40(a)(ia) is not within the legislative competence of the Parliament and further counsel for the petitioner also could not show that the said provision, in any manner, is violative of any provision of the Constitution including fundamental rights. There is thus no merit in the writ petition and same is liable to be dismissed. (ii) The issue before the Hon ble High Court of Rajasthan in the case of Shree Choudhary Transport Company v. ITO reported in (2009) 225 CTR (RAJ) 125 was that the assessee having executed a cement transportation contract hired the services of truck owners, there existed sub-contracts between the assessee and the truck owners, and therefore, the Hon ble Court held that s.194C was applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the amended section 194C(3) of the Act and claim benefit accordingly, if found eligible. 7. With regard to the assessee s grievance that the AO was not justified in disallowing carting charges of ₹ 1,84,424/- u/s 40(a)(ia) of the Act, we find that the assessee had deducted in the P L account ₹ 11.54 lakhs being carting and road work. The stand of the AO was that These are nothing but the labour payment for preparation of road in the jungle . When the assessee was queried to furnish the names and addresses of the persons along with amount paid/payable for the entire period, it was noticed by the AO that assessee had paid ₹ 1,84,424/ to one Chinnappa on 2.5.2005, for which no TDS was deducted and, thus, the AO had resorted to disallow this sum u/s 40(a)(ia) of the Act. 7.1. As could be seen from the grounds of appeal before the CIT (A), this issue had not been raised for adjudication and there was also no trace of any mention of this amount in the impugned order of the Ld. CIT (A). 7.2. During the course of hearing before this Bench too, no details or the justification of such a claim were forth-coming. In the absence of any details, we are of the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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