2017 (5) TMI 984 - HC - Income Tax

Court rules lorry hire charges not taxable under Income Tax Act

Commissioner of Income Tax-II Lucknow Versus M/s Shark Roadways Pvt. Ltd.

Commissioner of Income Tax-II Lucknow Versus M/s Shark Roadways Pvt. Ltd. - [2018] 405 ITR 78 (All) Issues Involved:1. Interpretation of Section 40(a)(ia) of the Income Tax Act, 1961 regarding expenses incurred under 'Payment made of lorry hire charges'2. Applicability of Section 194-C of the Income Tax Act, 1961 on the payment made to individual truck owners/drivers without a contractAnalysis:Issue 1: Interpretation of Section 40(a)(ia) of the Income Tax Act, 1961The case involved a dispute regarding the expenses incurred by the Assessee amounting to a specific sum under the head 'Payment made of lorry hire charges' and whether these expenses are covered under Section 40(a)(ia) of the Income Tax Act, 1961. The Assessing Officer initially made an addition based on the perception that Section 194-C applied, as the Assessee was considered a transporter and not a trader. However, the Commissioner of Income Tax (Appeal) found that Section 194-C was not attracted after examining the documents provided by the Assessee. The Commissioner noted that the Assessee's payments to individual transporters were part of direct costs attributable to the receipts of the Assessee company, which are computable under Section 28 of the Income Tax Act, 1961.Issue 2: Applicability of Section 194-C of the Income Tax Act, 1961The Tribunal affirmed the findings that Section 194-C did not apply to the payments made by the Assessee to individual truck owners/drivers without a contract. The Tribunal rejected the Revenue's appeal on this ground, stating that in the absence of evidence to the contrary, the findings that Section 194-C did not apply were confirmed. The Tribunal also noted that the Assessing Officer's findings were based on assumption rather than evidence, which led to the reversal of those findings by the Commissioner of Income Tax (Appeal) and the Tribunal. The Court upheld the concurrent findings of fact by the Commissioner and the Tribunal, concluding that the question at hand was answered against the Revenue, and the appeal lacked merit, leading to its dismissal.In conclusion, the judgment clarified the interpretation of Section 40(a)(ia) and the applicability of Section 194-C in the context of expenses incurred by the Assessee on lorry hire charges, ultimately dismissing the appeal filed under Section 260-A of the Income Tax Act, 1961.