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TMI Blog2014 (4) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... - (a) Revenue is aggrieved by the order of the Ld. CIT (A) for the assessment year 2007-08 who had held that the amendment to Section 194C (1) (k) of the Act is applicable from 01.06.2007 i.e., for the relevant assessment year 2008-09 onwards, therefore invoking Section 40(a) (ia) of the Act for the assessment year 2007-08 by the Ld. Assessing Officer is erroneous. (b) Similarly the Revenue is aggrieved by the order of the Ld. CIT (A) for the assessment year 2009-10 who had restricted the disallowance U/s. 40(a)(ia) of the Act to Rs. 11,24,684/- out of the total disallowance of Rs. 4,89,75,838/- since the amount paid to the lorry drivers/owners exceeded the threshold limit of Rs. 50,000 during the relevant assessment year. 3. As regards the Cross objections raised by the assessee for both the assessment years, though many grounds were raised, all of them are in supported the order of the Ld. CIT (A), however for the assessment year 2009-10 the assessee has challenged the order of the Ld. CIT (A) who has sustained the addition of Rs. 11,24,684/- because though there was a categorical finding by the Ld. CIT (A) that the provisions of sec 194C are not applicable since there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee because the assessee had made payment to the same parties aggregating to more than Rs. 50,000 in a single year for the transportation of goods amounting to Rs. 3,65,35,570/- without deducting TDS and therefore the entire expenditure of Rs. 3,65,33,570/- was disallowed. 7. The assessee went on appeal before the Ld. CIT (A) for both the assessment years wherein the Ld. CIT (A) decided the issue by passing a common order. Before the Ld. CIT (A), the assessee in a nutshell had made the following submissions:- * "The hire charges paid for trucks to third party were for my business use and the provisions 194C of the Income Tax Act, 1961 are not attracted. * The trucks were obtained on hire and no work as contemplated U/s. 194C of the Income Tax Act, 1961 was * Undertaken in respect of the hire charges so paid and hence provisions of section 194C are not attracted. * The negotiations with drivers of the trucks had taken place independently for each trip and thus the transportation was not made continuously under any specific contract; * There was no contract between me and the truck drivers/owners for carrying goods for specific period/quantity; * The tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT (A) held that even if there is no contractual obligation between the assessee and the lorry owners/drivers, once the aggregate payment to a lorry owner/driver excess Rs. 50,000/-, TDS provisions will get attracted according to Sec. 194C (5) of the Act and the appellant shall be required to deduct tax. Based on such finding the Ld.CIT (A) restricted the disallowance to Rs. 11,24,684/- for the assessment year 2009-10. 9. Before us Ld. D.R., argued in support of the orders of the Ld. Assessing Officer for both assessment years and further emphasized that there was contractual obligation between the assessee and the Lorry Owners/Drivers and therefore the provisions of section 194C & section 40(a)(ia) of the Act would be relevant. Hence the Ld.D.R requested for confirming the order of the Ld. Assessing Officer. The Ld. A.R. vehemently opposed to the submissions of the Ld. D.R and categorically pointed out that there were no contractual relationships between the assessee and the lorry owners/drivers. The Ld. A.R. further submitted that the contract was between the assessee and M/s.Chettinad cement for transporting the goods of M/s.Chettinad Cement at a specified rate for a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, since there is no contractual obligation between the assessee and the lorry owners/drivers provisions of section 194C will not be attracted and accordingly provisions of Section 40(a)(ia) of the Act cannot be invoked. 10.1. The decision cited by the assessee in the case of Ld. CIT vs. Poompuhar Shipping Corporation Ltd. in [2006] 282 ITR 3(Mad.) rendered by the Hon'ble Jurisdictional Madras High Court has also clarified the issue explicitly wherein it was held that:- "U/s. 194C of the Income-tax Act,1961, the tax is to be deducted when a contract is entered into for carrying out any work in pursuance of a contract between the contractor and the entities mentioned in sub-section(1) of section 194C. The term 'hire' is not defined in the Income-tax Act. So, we have to take the normal meaning of the work "hire". Normal hire is a contract by which one gives to another temporary possession and use of property other than money for payment of compensation and the latter agrees to return the property after the expiry of the agreed period. The Explanation to section 194C was introduced with effect from July 1, 1995. There is no principle of interpretation which would justify rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid and not payable, s.40(a)(ia) could not be invoked to disallow the claim.") --- the Ahmadabad Benches of the Tribunal held that :- "In order to execute assignment given by company to assessee, assessee engaged his own truck as well as had hired trucks from other owners. Entire payment of transportation was made by company to assessee after deducting tax. This establishes that there was no nexus between company and owners of truck engaged by assessee. Therefore, it was clearly established that assessee was responsible for entire transportation job assigned by company to assessee. There is nothing on record to show that assessee had sub-let his work to other truck owners. Assessee had hired trucks along with drivers and executed work himself. Therefore, provisions of section 194C will not be attracted. Appeal allowed." 10.3. In the case of Deputy Commissioner of Income-Tax v. Satish Aggarwal and Co. Reported in [2009] 317 ITR (AT) 196(Amritsar), the Amritsar Benches of Tribunal held that:- "The assessee firm made payment on account of hiring charges in respect of hiring of trucks, to the extent of Rs. 17,40,000. The AO held that payments for hiring of trucks would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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