2012 (1) TMI 167 - AT - Income Tax

Tribunal dismisses appeal on tax disallowance for lack of formal contract. (a)(ia)

Income Tax Officer, Ward-33 (2), Kolkata - Versus Shri Kajal Das, Kolkata

The Tribunal upheld the decision of the ld. CIT(Appeals) in a case concerning disallowance under section 40(a)(ia) for non-deduction of tax at source on ... TDS u/s 194C - non deduction of tds on payment for hiring of lorry/trucks and labour - contractual relationship - Held that:- In view of the decision of the Hon’ble Punjab & Haryana High Court in the case of United Rice Land Ltd. (2008 (5) TMI 142 - PUNJAB AND HARYANA HIGH COURT ), the provisions of section 194C were not applicable. It is not disputed that the assessee had not assigned any of its contractual obligations to the transporters. It was a mere case of hiring the trucks from the market as per the requirements and not as per any contract. Appeal filed by the Department is dismissed. Issues: Disallowance under section 40(a)(ia) for non-deduction of tax at source on payments made for hiring of lorry/trucks.Analysis:1. The appeal was filed by the Revenue against the order of the ld. Commissioner of Income-tax (Appeals)-XX, Kolkata for the assessment year 2008-09. The main issue was the disallowance made by the Assessing Officer under section 40(a)(ia) amounting to &8377; 39,76,640 for non-deduction of tax at source on payments made for hiring of lorry/trucks and labor.2. The Assessing Officer observed that the assessee had debited &8377; 72,19,759 in its Profit & Loss A/c for hiring of lorry/trucks, out of which payments aggregating to &8377; 39,76,640 were made without deducting tax at source as required under section 194C of the Income Tax Act. The Assessing Officer also noted that the assessee failed to obtain and produce declarations from the suppliers of trucks/lorry for non-deduction of tax at source.3. The ld. CIT(Appeals) deleted the disallowance, stating that there was no evidence of any oral or written contract between the assessee and the truck owners. The assessee hired trucks from the open market based on its requirements, made payments through banking channels, and did not assign specific work to the truck owners. The Tribunal upheld the decision of the ld. CIT(Appeals) citing various decisions and emphasizing that the provisions of section 194C were not applicable as there was no contractual obligation assigned to the transporters.4. The Tribunal noted that the assessee's case was merely hiring trucks from the market based on requirements and not as per any formal contract. Relying on the decisions referenced by the assessee and the lack of contradiction by the Department, the Tribunal upheld the order of the ld. CIT(Appeals) and dismissed the appeal filed by the Revenue. The Tribunal found no infirmity in the decision of the ld. CIT(Appeals) and rejected the grounds of appeal put forth by the Revenue.