TMI Blog2018 (7) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... its payees as per the scheme of the Act vide amendment through Finance Act, 2009 w.e.f. 01.10.2009 along with the corresponding quarterly form 27A; although belatedly. This is not the Revenue’s case that such a belated filing of details entails any penal disallowance. We therefore affirm the CIT(A)’s findings under challenge qua this issue of disallowance of hire charges Disallowance assessee’s repair and maintenance charges - tds liability - Held that:- An amount of ₹ 32,71,562/- represents assessee’s spare parts on outright sale purchase basis which does not require any TDS deduction since not attracting any of the specified clauses in Chapter XVII of the Act. Learned Departmental Representative fails to dispute that all the remaining payments are very well below the threshold limit of ₹ 20,000 in each case wherein the relevant TDS provision does not apply. The assessee’s ledger enclosed as marked –A7 to this effect has nowhere been rebutted during the course of hearing before us. We therefore see no reason to disturb the CIT(A)’s reasoning Adding the salary paid to drivers and khalas - Held that:- Assessing Officer has made both these two components of additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, it would not apply to the facts of the instant case. This was so because the provisions of section 194C are applicable to payments for carrying out any work in pursuance of a contract. In the case of CIT v. Poompuhar Shipping Corpn, Ltd. [2006] 282 ITR 3/153 Taxman 486 (Mad.), it was held that under section 194C, tax was to be deducted when a contract was entered into for carrying out any work. In the instant case, like therein, there was no contract between the appellant and the owners of the trucks to carry out any work. The appellant' had hired the trucks belonging to the truck owners for a fixed period on payment of hire charges. The hired trucks were utilized by the appellant for running them on hire. There was no agreement for carrying out any worker to transport any goods or passengers from one place to another. Like in CIT v. Poompuhar Shipping Corpn. Ltd.ts case (supra), with instant case also, it was not the case of the department that the appellant had entered into any contract with the truck owner for transportation of goods or passengers from one place to another. Thus, the hiring of trucks for the purpose of using them in the appellant's business would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituation not amounting to a contract for carrying out any work as contemplated in section 194C, and entering into a contract for hiring of trucks is not equivalent to entering into a contract for carrying out any work. Therefore the Explanation III to section 194C was not attracted to the facts of the instant case. It is also noted that the Sec 194C is applicable only in case of any person responsible for paying any sum to any resident (hereafter referred to as the 'contractor') for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a 'specified person' will be liable to deduct tax at source at the prescribed rates. The term 'contract' will include a sub-contract also. The 'specified person' include such person who is liable to audit of accounts under clause (a) or (b) of Sec 44AB during the financial. Year immediately preceding the financial year in which the sum is credited or paid to the account of the contractor. The appellant had paid ₹ 80,84.588/= to the various individuals (list enclosed) who were not under the category of specified person. Hence, Sec 194C is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or crediting such sum, The payer shall furnish to the prescribed income-tax authority or the person authorized by such authority, such particulars in such form and within such time as may be prescribed. In the instant case the appellant informed the PAN details of the payees to the concerned income tax. authority by filling quarterly Form - 27 A belatedly and thereby complied the conditions laid down therein, Hence, the disallowance of Hire Charges paid for the period from 01.10.2009 to 31.03.2010 aggregating to ₹ 1,52,81,163/- is deleted. 3. We have given our thoughtful consideration to the rival submissions. Mr.Dasgupta, Addl. CIT(DR) vehemently contends that the Assessing Officer had rightly made the impugned disallowance on account of assessee s failure in deducting TDS upon the impugned hire charges of various lorries engaged for transporting of goods in question. We find no substance in Revenue s instant grievance. It seeks to apply section 194C of the Act to treat the assessee s hire charges in question to be contractual payments made for transportation of goods. We make it clear that there is no dispute about assessee being a firm engaged in transportatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e condition of carrying out any work in pursuance of a contract is not fulfilled then the provisions of this section will not be applicable at all. Here in this case, the contract for carrying out the work was between the BPCL and the appellant. The appellant alone had risk and responsibility for carrying out the contract work as per the agreement entered into by it with its principal i.e. BPCL. There is no material on record to suggest that there was any contract or ITA No : 3536/Mum/2011 M/s. Bhail Bulk Carriers sub-contract whether written or oral with the outside tank owners and the appellant, whereby the risk and responsibility which is associated with a contract has also been passed on to these outside parties. Once the CIT(Appeals) has accepted the fact that the outside tank owners do not had any responsibility or liability towards the principal, then it cannot be held that these outside parties were privity to the contract between the appellant and its principal. Thus the payment made to the outside parties do not come or fall within the purview of section 194C, as the carrying out any work indicates doing something to conduct the work in pursuance of contract and here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same in the assessee's business would not amount to a contract for carrying out any work as contemplated in section 194C. The term hire is not defined in the Incometax Act. So, we have to take the normal meaning of the word hire . Normal hire is a contract by which one gives to another temporary possession and use of the property other than money for payment of compensation and the latter agrees to return the property after the expiry of the agreed period. Therefore, in our view, when the assessee entered into a contract for the purpose of taking temporary possession of ships in the shipping company it could not be construed as if the assessee entered into any contract for carrying out any work, and when the contract is not for carrying out any work, the Revenue cannot insist the assessee ought to have deducted tax at source under section 194C of the Act. Further, the other argument of counsel was, section 194C was amended with effect from July 1, 1995, incorporating the Explanation and the said Explanation clarifies the existing provision of section 194C of the Act. Hence, it would be applicable retrospectively. We are concerned with the assessment year 1994-95. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charges of ₹ 58,52,497/- as deleted during the course of lower appellate proceedings as under :- 6.1. The appellant has stated the following in his submission :- Claim of Repairs Maintenance ₹ 58,52,497/- Most of the repairing expenses were made on the road side small repairing workshop with a cash payment of below ₹ 20,000/- in each case. Hence the question of deduction of TDS need not required at all (copy of ledger enclosed marked as 7). Moreover, out of the above, an amount of ₹ 32,71,562/- were paid to M/s Bhandari Motors (P)Ltd/French Motor Car Co.(P)Ltd/Appolo Motors (P)Ltd/Saini Engineering/Mazhar Khan/Rabindranath Samanta /Munuzir Hussin/S.D.Udyog for purchase of Spare Parts the details of which are as follows : Date Amount (Rs.) Paid to 21.4.09 1,00,000/- Bhandari Motors (P)Ltd. 27.4.09 1,17,343/- Bhandari Motors (P)Ltd. 18.6.09 50,000/- Bhandari Motors (P)Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts submitted by the appellant. The appellant has claimed that most of these expenses related to petty cash payments below ₹ 20,000/- used mainly during the trip of transportation. The appellant has also claimed that out of ₹ 58,52,497/-, an amount of ₹ 32,71,562/- was spent on spare parts from the enclosed list as given above, necessary evidence has been filed and verified. There is no question of deducting TDS on purchase of spare part consumables. The AO has not brought out on record as to which specific transaction was in violation of section 194C. The AO has only stated that From the aforesaid list of sundry creditors which includes outstanding sum on account of repairs, it is clear that assessee firm repairs its trucks and trailers on contract basis from these parties and therefore assessee firm was liable to make payment to contractor after deduction of tax u/s 194C of the Act. There is nothing on record to support this conclusion by the AO. After perusing the documents filed by the appellant, I find force with their submissions and delete the disallowance of ₹ 58,52,497/-. 6. We make it clear that first of all the assessee s detail compilation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not mentioned nor was such aggregation of heads explained before the A.O. during assessment stage. It is only when the A.O. applied his mind and detected undisclosed source that the assessee came with such frivolous logic of' debiting a portion of drivers salary and khalasis' salary exist in the P/L A/c. 4.3. I have carefully considered the submissions of the appellant and perused the assessment records as well as the documents submitted by the appellant. I have also perused the AO's comments .on this matter in his remand report. It is very clear from the submissions and details submitted by the appellant that the amount under the head salaries was related to their permanent drivers and khalasis. The profit and loss account filed by the appellant also clearly reveals that salary for drivers was ₹ 4,95,000/- and for Khalasis,it was ₹ 1,08,000/-. The AO has estimated that since there were 32 trucks owned by the assessee, they must have employed at least 32 drivers and 32 khalasis There is no basis for this estimation. The AO further went on to estimate that each driver and khalasi should have been paid salary of ₹ 7,000 .m and ₹ 1,000 p.m re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be in active. 8.2. I have considered the submissions of the appellant and the facts of this ground. The fund utilized for advance given to Telecom 'Steels (P) Ltd Dayal Auto Finance were out of own capital of the partners in the firm. The total capital balance of the partners in the firm were ₹ 1,24,21,710/-. . Hence, the advance were given out of its own capital and not from borrowed fund. The firm has no loan in the nature of cash credit or overdraft (except term loan against purchase of trucks) the proportionate interest of which was also not debited to P/L A/c as an expense to reduce the Net Profit. It is seen from the ledger copies submitted by the appellant that the amount was given as advance for purchase of land and other assets of the company viz. M/s Telecom Steels (P) Ltd. It is also noted that the advance to Dayal Auto Finance was given in the course of business for purchase of trucks and not for profit. It is not a fact that it advanced money to the,party mentioned by Ld.ITO is free of interest. What the appellant states is that advances are given so that there is immediate supply of required trucks without any delay. The earlier they get ..... X X X X Extracts X X X X X X X X Extracts X X X X
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