TaxTMI 
TaxTMI 
2011 (2) TMI 78
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....ported at (2007) 293 ITR 226 (SC). 3. The Learned Commissioner of Income Tax (Appeals) failed to consider the ratio of following decisions cited before him:- (1) Mythri Transport Corporation v. ACIT reported at (2010) 1 ITR 290 (ITAT -Visakhapatnam Bench). (2) CIT v. Ambuja Darla Kashlog Transport Co-op. Society Reported at (2009) 31 DTR 49 (HP) 3. Since the facts and issue involved in all the three grounds of appeal taken by the assessee are common they are being disposed of together as under. 4. On verification of books of account and details filed by the assessee the Learned Assessing Officer observed that the assessee has paid higher charges to various parties and has not deducted TDS from those payments. He issued show-cause notice to the assessee to explain why the payments made should not be disallowed under section 40(a)(ia) of the Income Tax Act. 5. The assessee submitted that it is engaged in the business of providing services of renting out vehicles specifically for taking human beings from one place to another chosen by the hirer for a number of days as required by the hirer. The services of the assessee are not in the nature of carriage of....
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....It is an admitted fact that assessee had not deducted tax from payments to others of Rs. 42,84,497/- though he was liable to do so. Thus, assessee has not complied with the provisions of section 194C of the IT. Act and thus provisions of section 40(a)(ia) of the IT. Act are applicable. Hence he disallowed deduction for Rs. 42,84,497/- and added the same to the income of the assessee. 7. In appeal the Learned Commissioner of Income Tax (Appeals), confirmed the order of the Learned Assessing Officer by observing as under:- "5. The addition has been made as per the narration given in para-3 of the assessment order. The Learned Assessing Officer has given a table in para 3.1 giving names of the parties to whom payments were made with amounts, but from the payments no TDS was deducted. Sr. No. Name of the party. Amount (Rs.) 1 Mahavir Travels Co. 6,34,177 2 Pragati Travels. 3,96,522 3 Rushabh Travels 11,97,517 4 Mukesh Travels 14,81,278 5 Rushabh Travels Co. 3,51,104 6 Shah Travels 1,06,676 7 Sangam Travels 46,200 8 Gayatri Travels 53,139 9 Hardik Travels 60,481 10 Mahaveer Travels 6....
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.... (g) of the Agreement stated that proper time schedule had to be maintained. The clauses of the Agreement prove that the appellant had to execute the contract in full earnestness, and if it engaged others with vehicles etc. it cannot escape its responsibility of deducting tax from the payments made to them on the ground that the entire risk of the contract was its and not of the parties from whom vehicles were hired. For attracting the provisions of section 194C it is not necessary that there should be a written contract all the time. Further the reading of the provisions of section 40(a)(ia) makes it clear that the section does not exempt the payments made. The word payable in this section has to be read in conjunction with the provisions of section 194C which are clearly placed under the head "Payments to contractors". Section 194C requires a person to deduct TDS at the time of credit or payment whichever is earlier. In this case as per the Learned Authorised Representative of the assessee there was no credit only payment, but that does not mean that the appellant gets an exemption from not deducting TDS on payments made to the 10 persons mentioned in the table above fro....
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....om other lorry owners who simply placed the vehicles at the disposal of the assessee without involving themselves in carrying out any part of the work undertaken by the assessee, it cannot be said that the payments made for hiring of vehicles fell in the category of payments towards sub-contracts and, therefore, assessee was not liable to deduct tax at source as per the provisions of section 194C(2) from the payments made to the lorry owners and consequently, provisions of section 40(a)(ia) were not applicable to such payments. 9. The Learned Departmental Representative on the other hand supported the orders of the lower authorities. 10. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case the assessee is engaged in the business of transporting of human being by vehicles. During the year the assessee entered into a hiring contract with M/s. The Institute for Plasma Research (in short IPR) where under the assessee was required to providing, operating and maintaining in good condition six Buses having 52 or more seat capacity and 2 Minibuses of 25 seats capacity for 14 hours per day to tra....
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....ion 194-I of the Act. The Learned Authorised Representative of the assessee explained that such vehicles are driven by driver appointed by owners of vehicle and person utilizing such services are not in possession of such vehicle hence consideration for using services of hiring of vehicle is not rent within the meaning of section 194-I of the Income Tax Act, 1961. In view of the above explanation of the assessee that the vehicles were taken on hire together with the drivers and such vehicles were driven by the drivers employed by the vehicle owners and the possession of the vehicle always remains with the vehicle owners we agree with the contention of the Learned Authorised Representative of the assessee that such payments were not rent within the meaning of section 194-I of the Act. As per explanation (i) to section 194-I rent has been defined as under:- "(i) "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or any building (including factory building), together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee ;" 13. ....
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....rtaken by the assessee by spending their time, energy and by taking the risks associated with the main contract work. In the absence of the abovesaid characteristics attached to a sub-contract in the instant case, the payment made to the lorry owners stands at par with the payments made towards salaries, rent, etc., whereas in the instant case the Learned Authorised Representative of the assessee admitted that the vehicles provided by the vehicle owners were driven by the drivers employed by the vehicle owners. In other words, in the instant case the vehicle owners not simply confined themselves to the extent of providing vehicles at the disposal of the assessee in lieu of rent but also engaged their drivers in driving such vehicles and thereby in transporting passengers from one place to the other. In the above facts and circumstances, we find that vehicle hire charges of Rs. 42,84,497/- was paid by the assessee to various vehicle owners for carriage of passengers by buses or mini buses and therefore the payments made by the assessee to the vehicle owners in consideration of above services which is deemed as work within the meaning of section 194C of the Act and therefore, the ass....
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....see was not found to be satisfactory by the Learned Assessing Officer and accordingly, he added Rs. 49,000/- to the income of the assessee. 18. In appeal, the Learned Commissioner of Income Tax (Appeals) confirmed the action of the Learned Assessing Officer by observing as under:- "8. The addition has been made as per narration given in para-5 of the assessment order. During the course of appellate proceedings vide written submission dated 13-5-2010 it was stated that the credit of Rs. 49,000/- is nothing else but the business receipt received in advance only. After going through rival submissions I find that though asked during assessment proceedings supporting evidence towards credit of Rs. 49,000/- none were furnished and neither during the course of appellate proceedings, therefore there I no alternative but to confirm the addition made by the Learned Assessing Officer." 19. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case the Learned Assessing Officer added Rs. 49,000/- to the income of the assessee by invoking provisions of section 68 of the Act on the ground that the ass....