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J. Rama Versus ITO

ITA No. 1204(Bang)/08 - Dated:- 21-11-2008 - P. Mohanarajan, Judicial Member And K.K. Gupta, Accountant Member. Anirudh for the Appellant K.P. Rao for the Respondent ORDER K.K. Gupta:- 1. The assessee is in appeal agitating mainly on two issues regarding confirmation of disallowance by the learned Commissioner of Income Tax (Appeals) amounting to ₹ 79,45,225 under the provisions of section 40(a)(ia) and ₹ 6,82,968 being the difference in the total receipts as per the TDS Certificate .....

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0(a)(ia) to amounts payable and still remaining unpaid would not apply to amounts which are paid actually within the accounting year on which no TDS was effected. The last additional ground raised by the assessee is with respect to the difference in TDS Certificate pending reconciliation renders the amount sought to be brought to tax by the AO only on the income thereon and not the entire receipt as was considered in the case law reported in 258 ITR 654. 2. The learned counsel for the assessee w .....

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contention was that since it was only a clarification by CBDT and not a circular not binding even on the Assessing Officer the vehicle falls to be clarified as a 'machinery' as per section 32 of the Income Tax Act and also as given in table of depreciation chart and thus the clarification is legally incorrect and since there is no either contract or sub-contract for transportation of goods for passenger between the assessee and owners of the car there is no transportation contract withi .....

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e the transportation contract and there was no such contract between the assessee and owner of the car or between customer of the assessee and owner of the car. There was no privity of contract between owners of the car and the customer of the assessee. The assessee submitted that a contract for even purchase or hire purchase of a car becomes a transportation contract if the view taken by the learned CIT(A) was accepted and tax will have to be deducted u/s. 194C even on such transaction. The lea .....

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ell as Assessing Officer but still the learned CIT(A) has erroneously affirmed the action of the Assessing Officer in disallowing vehicle running expenses of ₹ 79,45,225 u/s. 40(a)(ia) of the Act. He submitted that a transport contract for the purpose of section 194C of the Act as per Expln.III(c) means a contract for transportation of goods or passengers. The persons from whom the assessee hires the vehicle has contract only with the assessee and not with the customers of the assessee. Th .....

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icles, the customers also pay to the assessee and not to the owner of the hired vehicle. Thus the AO had grossly erred in simply relying on an answer to Q.No.54 by CBDT in compilation in a book form, without showing how it is a transport contract as per provisions of Expln. III(c) to Section 194C of the Act. 3. The learned counsel for the assessee further argued that the authorities below erred in holding that a contract for hire of vehicle for use in the business of the assessee was a transport .....

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siness was a transportation contract within the meaning of explanation III(c) to section 194C of the Act. The authorities failed to appreciate that as per section 194C, transportation contract means a contract for transportation of goods or passenger other than by railway vide explanation III(c) to section 194C of the Act and the contract between owner of vehicle and assessee does not involve any goods or passenger but only availment of vehicle to the assessee. The authorities failed also to app .....

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virtue of section 194C(3)(iii) of the Act. The lower authorities having not disputed the facts that the contract between the assessee and her customer is a transport contract which is executed by the assessee itself and the contract between the owner of vehicle and assessee is for hire of vehicles and the assessee carries on its business by using her own vehicles and also hired vehicles could not, in law or any ground or principle come to a conclusion that the owner of vehicles undertakes trans .....

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were not applicable for vehicle running expenses of ₹ 79,45,225 and hence the assessee was eligible deduction of the entire sum as business expenditure for the purposes of arriving at income from business. Likewise the TDS Certificates for a gross amounting for ₹ 682968 were issued during the relevant previous year i.e. 31.3.2005 and hence these certificates ought to be considered for the AY 2005-06 only even though the gross amount covered by these TDS certificates were included in .....

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the Assessing Officer for charging interest u/s. 234B. The learned authorities failed to appreciate that in the view taken by them even a contract for purchase of vehicle or for hire purchase of vehicle becomes transport contract just because it was entered into by a transport operator and liable to TDS u/s.194C which leads to absurd results. 4. The learned Departmental Representative has submitted a paper book containing documents being part of the assessment records such as copy of Balance Sh .....

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.40(a)(ia) when the amount is being paid to a resident for the work rendered by the payee in accordance with the Expln.III to section 194C. The Expln. in section 40(a)(ia) also clarifies the position with respect to any amount of tax deducted at source on such payment whether in the end of the financial year or subsequent to the previous year only when the assessee's claim of having deducted the tax, therefore, the additional grounds raised by the assessee do not have a bearing on the facts .....

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ing Officer proceeded to verify the ledger copies of the payees (Paper Book pages 5 to 20) wherein each individual account has been shown exceeding ₹ 50,000 totalling to ₹ 79,45,225 which has been disallowed from the total amount of vehicle maintenance expenses claimed at ₹ 88,12,432. On the second issue regarding additionofRs.6,82,968, he pointed out that on the basis of mercantile system of accounting, the gross receipts as indicated in the TDS Certificate has to be accounted .....

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the rival contentions and perused the material available on record. On our careful perusal of the facts and circumstances, we are inclined to uphold the learned CIT(A) order on both the issues raised before us. The additional grounds with respect to the question of applicability of section 194C for machinery taken on rent being a car where applicable has already been dealt with on facts reiterated before us by the authorities exclusively which the assessee now cannot raise as an additional groun .....

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by the learned counsel do not relate to the issue on hand and therefore when a direct application of law has been put to the assessee by the Assessing Officer, the assessee cannot deviate on the facts as has been brought on record by the Assessing Officer and confirmed by the learned CIT(A). Considering the facts and circumstances of the case, hiring of vehicles by the assessee is definitely in the nature of transport contract and hence the disallowance u/s.40(a)(ia), on vehicle maintenance clai .....

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