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TMI Blog2020 (11) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciated that the provisions of Section 194C had no application to the aforesaid payments discursively labeled as hire charges in as much as these payments represented the revenue shared by the appellant with third party vehicle owners for providing their vehicles to the appellant to discharge the appellant's contractual obligations with M/s.Orix Infrastructure Pvt. Ltd., under the facts and in the circumstances of the appellant's case. 2.2 The learned CIT[A] ought to have appreciated that there was a contract for transportation of employees between M/s Orix Infrastructure India Pvt. Ltd. and the appellant and there was no contract, either written or oral between the appellant and the third party vehicle owners for transportation and hence, the provisions of section 194C of the Act was not applicable. The learned CIT[A] ought to have appreciated that the substance of the arrangement / transaction had to be considered and it was apparent that the appellant had borne the fuel charges for the vehicles provided by third party vehicle owners and the revenue received by the appellant was shared between the appellant and the third parties vehicle owners and the said paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On appeal, CIT(A) observed that the assessee is liable to deduct TDS u/s 194C of the Income-tax Act,1961 ['the Act' for short] on the vehicle hire charges and the assessee failed to deduct the TDS hire charges the disallowance u/s made by AO u/s 40(a)(ia) of the Act is justified. Against this, the assessee is in appeal before us by way of above grounds. The Ld. A.R. submitted that the appellant firm carries on the business of providing vehicles to M/s. Orix Infrastructure India Pvt. Ltd., [hereinafter for short "Orix Company"]. The aforesaid Orix Company is itself in the said business i.e., providing vehicles on hire to the end user corporate companies, who are the ultimate users of the service provided by the Orix Company. The appellant is one of the vendors of the said company and entered into a Transport Service Agreement with the said company on 30/07/2014, a copy of which is placed at page 25 of the Paper book No.2 filed alongwith the written submissions. 4.1 Ld. A.R. further submitted that the appellant is also an aggregator of vehicles i.e., the appellant itself does not own sufficient number of vehicles required by it for fulfilling its obligations under the Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act would be attracted to the facts of the appellant's case in respect of the payments made by the appellant to such third party vehicle owners since the aforesaid payment have been made by one Joint Venturer to another. Reliance for this proposition is placed on the decision of the Hon'ble 1TAT, Hyderabad in the case of MEIL-SEWMAYTAS BHEL, a copy of which is placed at page 27 of the Paper book. Reliance is also placed on the decision of the Hon'ble ITAT Pune Bench, in the case of MUNICIPAL CORPORATION, a copy of which is placed at page 60 of the Paper book. Accordingly, the Ld. A.R. prayed that the disallowance made requires to be deleted. 5. On the other hand, Ld. D.R. submitted that assessee has paid the hire charges to the vehicle owners which falls under the purview of section 194C of the Act on which payment, assessee is liable to deduct TDS, which is not deducted by the assessee mainly the applicability of section 40(a)(ia) of the Act is justified. Accordingly, invoking of provisions of section 40(a)(ia) of the Act is justified is supported by the order of the lower authorities. 6. We have heard the rival submissions and perused the material on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed 17[thirty] thousand rupees : Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds [seventy five] thousand rupees, the person responsible for paying such sums referred to in subsection (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. Explanation.-For the purposes of this sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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" is required to deduct tax at source under section from the amounts so paid or payable. There is no doubt that the assessee in this case has made the payments as hire charges to cab owners. The main contention of the assessee is, however, that the payments have not been made in pursuance of a contract between the assessee and the cab owners. Now the question arises before us, whether there is contractual relationship between the assessee and the persons to whom the assessee had made the payments in the nature of hiring of vehicles. In our opinion, a contract need not be in writing; even an oral contract is good enough to invoke the provisions of Section 194C. As Hon'ble Karnataka High Court has observed in the case of Smt J Rama V s CIT (236 CTR 105), "Law does not stipulate the existence of a written contract as a condition precedent for (invoking the provisions of Section 194 C with respect to payment of TDS". The cab owners have received the payments from the assessee towards the hiring char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se where the payee in receipt of the income had paid tax. According to him, it has for long been the legal position that if the payee has paid tax on his income, no recovery of any tax can be made from the person who had failed to deduct the income tax at source from such amount. In Grindlays Bank v CIT, (1992) 193 ITR 457 (Cal) decided on September 5, 1989, it was held by the Hon'ble Calcutta High Court as follows at pages 469-470 of the reports: "A point has been made by the assessee that as a result of this deduction the department is realizing the tax twice on the same income. It does not appear that this point was agitated before the Tribunal. We, however, make it clear that if the amount of tax has already been realised from the employees concerned directly, there cannot be any question of further realisation of tax as the same income cannot be taxed twice. If the tax has been realised once, it cannot be realised once again, but that does not mean that the assessee will not be liable for payment of interest or any other legal consequence for their failure to deduct or to pay tax in accordance with law to the revenue." (emphasis supplied) That such was the legal position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of payment of tax by the resident payee. Under the existing provisions of Chapter XVII-B of the Incometax Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified threshold. In case of non-deduction of tax in accordance with the provisions of this Chapter, he is deemed to be an assessee in default under section 201(1) in respect of the amount of such non-deduction. However, section 191 of the Act provides that a person shall be deemed to be assessee in default in respect of non/short deduction of tax only in cases where the payee has also failed to pay the tax directly. Therefore, the deductor cannot be treated as assessee in default in respect of non/short deduction of tax if the payee has discharged his tax liability. The payer is liable to pay interest under section 201(1A) on the amount of non/short deduction of tax from the date on which such tax was deductible to the date on which the payee has discharged his tax liability directly. As there is no one-to-one correlation between the tax to be deducted by the payer and the tax paid by the payee, there is lack of clarity as to when it can be said th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, the, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee had deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee. These beneficial provisions are proposed to be applicable only in the case of resident payee. These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years." 6.4 We restore this issue to the file of the Assessing officer with the direction that the assessee shall provide all the details to the Assessing Officer with regard to the recipients of the income and taxes paid by them. The Assessing Officer shall carry out necessary verification in respect of the payments and taxes of such income and al so filing the return by the recipient. In case, the Assessing Officer finds that the recipient has duly paid the tax es on the income, the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS get attracted even in the case of reimbursement. The assessee has taken vehicle on hire along with the drivers and the payment made to the cab owners includes that for petrol and diesel. This is not the claim of the assessee that expenses of petrol and diesel are to be borne by him and he is just making payment to the cab owners for filling petrol / diesel in their vehicles. Besides the above argument, the learned DR also relied on the orders of the Income tax Authorities. 9. After considering the rival submissions and perusing the relevant material on record, it is observed that as agreed by and between the assessee and the cab owners, a vehicle was to be provided by the assessee to the parties and thus, the assessee was to bear the vehicle expenses actually incurred by the said cab owners and which will be reimbursed by the parties concerned. If bills for such expenses incurred by the said cab owners were separately raised by them on the assessee in addition to bills for hire charges and since the amount of bills so raised was towards the actual expenses incurred by them, there was no element of any profit involved in the said bills. It was thus a clear case of reimbursement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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