TMI Blog2016 (4) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case are that the assessee is an individual engaged in the business of transport contract of Bitumen and petroleum products, filed his return of income for the assessment year 2005-06 on 30.10.2005 declaring total income of ₹ 2,92,938/-. The case was selected for scrutiny and accordingly, notice u/s 142(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act') was issued. In response to notice, the authorized representative of the assessee appeared from time to tome and furnished books of accounts and other details. The Assessing Officer after considering the details furnished by the assessee completed the assessment u/s 143(3) of the Act and determined the total income of ₹ 74,48,453/- by disallowing amount of ₹ 66,84,347/- u/s 40(a)(ia) of the Act, for failure to deduct TDS u/s 194C of the Act. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). The CIT(A) has confirmed the additions made by the Assessing Officer. On further appeal before the ITAT, Visakhapatnam bench vide ITA No.364/Vizag/2008 dated 12.6.2009, the ITAT, set aside the assessment order to the file of the Assessing Officer with a dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the Assessing Officer. The assessee further submitted that there is no contract between the vehicle owners and the principals. The agreement is between himself and his principals for carriage of goods. The vehicle owners have provided the vehicles on fixed rental basis and the risk associated with the transport of goods is vested with the contractor. Therefore, the Assessing Officer was not correct in coming to the conclusion that there exist a contract between the vehicle owners and the assessee and consequential payment attracts TDS u/s 194C(2) of the Act. The assessee further submitted that in this case, he had entered into agreement with his clients for carriage of goods. In the process, he has hired the vehicles from the owners on fixed price. The Goods Consignment Notes (GCNs) were issued by himself and not by the vehicle owners. The Goods Consignment Note is a document that acknowledges the receipt of goods by the customers and mentions the vehicle registration number through which the goods mentioned in the Goods Consignment Note are to be tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volve in making the lorries ready to transport the assessee s goods for which purpose, he has to deploy necessary capital, necessary man power, necessary time and be ready to solve all the problems that arise in transportation of goods such as stoppage by Government authorities like sales tax, excise, forest, marketing department, etc. which tantamount to positive involvement in the execution of whole or part of the main contract by spending time, money and energy. The Ld. D.R. further submitted that the CIT(A) was erred in applying the ratios laid down by the ITAT, in the case of Shri M. Seetaramaiah (supra) and M/s. Mythri Transport Corporation (supra), as the same were rendered under different set of facts. In the present case on hand, the assessee has sub contracted the transport work to two different transport operators and the transport operators have undertaken the work with positive involvement in the work by spending their money, energy and resources. The vehicle owners have paid the salary of the drivers on their own and incurred necessary expenditure towards diesel and maintenance of the vehicles. Therefore, the arrangement between the assessee and the transport operator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work, consequently TDS provisions u/s 194C of the Act would not apply. 10. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. invoked the provisions of section 40(a)(ia) of the Act and disallowed hire charges paid for hiring vehicles to be used in the transport contract. The A.O. was of the opinion that the contract between assessee and vehicle owners is in the nature of sub contract as defined u/s 194C(2) of the Act. The assessee hired the vehicles along with drivers and other maintenance expenses to be borne by the vehicle owners, therefore, the arrangement between the assessee and the vehicle owners is nothing but a contract. Consequently, the payments are covered u/s 194C(2) of the Act. It was the contention of the assessee that it is a mere hiring of vehicles not a sub contract. The assessee further contended that he is involved in the business of transport contract and entered into a contract for carriage of goods with its clients. In the process, he has hired the vehicles in the open market on fixed hire charges and the vehicle owners has provided vehicles without any risk associated wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould enter into a contract with a subcontractor for carrying out the whole or any part of the work undertaken by the contractor; (c) the sub-contractor should carry out the whole or any part of the work undertaken by the contractor; (d) payment should be made for carrying out the whole or any part of the work The stringent clauses in the work order suggest that the assessee is solely responsible for all the acts and defaults committed by the assessee and/or its employees. It is not established by the Revenue that other lorry owners, from whom the vehicles were hired, have also been fastened with any of the above said liabilities. In a sub-contract, s prudent contractor would include all the liability clauses in the agreement entered into by him with the sub-contractor. The assessee has also claimed before the tax authorities that the responsibility in the whole process lies with it only. Though the passing of liability is not the only criteria to decide about the existence of sub-contract, yet this contention of the assessee read with the liability clauses of the work order supports its submission that the individual vehicle owners are simple hirers of the vehicles. As per the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase also, the contention of the assessee is that it has merely hired the lorries from the open market. It is not shown by the revenue that the lorry owners, from whom the lorries were hired, undertook the risks associated with the main contract. In that case, mere hiring of lorries would not come under the category of Sub-Contract as held in the case of Mythri Transport Corporation (supra). Accordingly the provisions of sec. 194C(2) shall not apply to the assessee. 14. Considering the facts and circumstances of the case and also respectfully following the coordinate bench decision of this Tribunal, we are of the opinion that mere hiring of vehicle without any risk associated with the carriage of goods does not amount to carrying out any work or sub contract as defined u/s 194C(2) of the Act. Consequently, hire charges paid for hiring the vehicles are not liable for TDS u/s 194C(2) of the Act. The CIT(A) rightly deleted the additions made by the A.O., by following coordinate bench decision of this Tribunal, in the cases mentioned (supra). We do not find any error or infirmity in the order passed by the CIT(A). Therefore, we are inclined to uphold the order of the CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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