TMI Blog2016 (8) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... drivers who were arranged through brokers by the assessee were involved in carrying out any part of the work undertaken by the assessee by spending their time, energy and by taking the risk associated with the main contract work. No contract, either verbal or written, is entered into with the owners / drivers in these cases of purely temporary transporting arrangements. - Decided in favour of assessee Tax on trade credits in respect of balance outstanding in three creditors - Held that:- A.O.'s action implies that a part of the transaction, in fact the major part judging by the amount paid, has been held to be genuine whereas the outstanding balances are not. No logic behind allowing payments made during the year as genuine while simultaneously holding outstanding credit balances due to the same parties as ingenuine. Furthermore, the A.O. is not seen to doubt the identity of these parties or the genuineness of the transactions. Details of the parties were available with him. On that there is no dispute. If the A.O.has any doubt regarding the creditworthiness of these parties he could have made requisite enquiries. No such enquiry appears to have been done. In view thereof , wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of ₹ 4,98,86,642/- were made to a large number of such parties throughout the year. The assessee did not have any contract with such parties, but simply entered into some sort of temporary arrangements for transportation of goods in the vehicles of such owners/drivers separately for each occasion. Thus, it was argued before the AO that in absence of any contract with the parties concerned, there was no obligation on the part of the assessee to deduct tax at source from the payments made to those parties. The ld AO observed that it would be worthwhile to analyze whether the activities of the assessee of taking the vehicles /Trucks on hire constituted a contract. The said analysis is as under:- a) An offer- As offer by the assessee or his employees or brokers to the vehicle operators for taking on hire subject to payment of consideration and other conditions. b) Acceptance of that offer - The vehicle operators accepts the offer. c) Promise to perform - The vehicle operator agrees to transport from Point X to Point Y. d) Agreement regarding consideration is agreed upon by the both parties. e) A time or event when performance must be made that is meeting comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld AO had clearly brought on record that all the elements of a valid contract were fulfilled by the assessee in the instant case and thereby there is a contract entered into by the assessee and hence, the provisions of section 194C have been violated by the assessee warranting disallowance u/s 40(a)(ia) of the Act. In response to this, the ld AR argued that the provisions of contract act are not applicable to transporters and only the provision of public carriers Act 1865 are applicable to transporters. Hence even if the elements of contract as stated by the ld AO are fulfilled, the same would not automatically fasten the assessee with the TDS obligation in terms of section 194C. He placed reliance on the decision of the Hon ble Calcutta High Court in the case of CIT vs Stumn India in ITA No. 127 of 2009 dated 16.8.2010 in support of his arguments. 2.4. We have heard the rival submissions and perused the materials available on record. The facts stated hereinabove remain undisputed and hence, the same are not reiterated for the sake of brevity. We find from the facts and circumstances of the case that the provision of section 194C(2) could not be made applicable as there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue to be decided in this appeal of revenue is as to whether trade credits in respect of balance outstanding in three creditors could be brought to tax in the facts and circumstances of the case. 3.1. The brief facts of this issue is that the assessee had shown the current liabilities and provisions to the tune of ₹ 7,81,73,883 and out of that, the current liabilities for the vehicle hire charge is ₹ 6,93,29,686. The ld AO issued notices u/s 133(6) of the Act to the following three parties:- Sl. No. Name of the person Opening Balance Transaction Paid during the year TDS deducted Amount as shown as on 31.03.2008 1. Priyanka Transport Nil 1,56,89,951 1,09,42,038 1,62,169 45,65,744 2. Rita Sarkar Nil 37,12,168 29,25,484 38,306 7,48,378 3. Raj Kr. Wadhawa Nil 55,24,875 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. Consequently, he has added back the credit balances due to them. The appellant's case is that the A.O. has treated these balances as cash credits and while doing so he has allowed the amounts paid to these parties during the year and has added back only the outstanding balances. The appellant has also mentioned that TDS was made on the payments given to these parties during the year and this fact was also noted by the A.O. in his assessment order. The A.O. has relied on the cases of: a) Baisnab Charan Mohanty [212 ITR 199 (Ori.)] b) Precision Finance (P.) Ltd. [208 ITR 465 (Cal.)] Both these cases deal with cash credits whereas, in the case of the appellant, balances due to trade creditors have been added back. Thus, in my opinion, the facts of these cases being different the decisions relied by the A.O. cannot be applicable in this case. I find from a perusal of the assessment order that the A.O. on page 9 of his order has given the details of the opening balances, transactions, payments during the year, TDS on such payments and closing balances of these trade creditors. Closing balances only have been added back by the A.O. whereas the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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