TaxTMI 
TaxTMI 
2010 (1) TMI 882
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.... Indian Oil Corporation Ltd. in the balance sheet and was also showing the amount payable to the transport contractor. The assessee obtained a contract from Indian Oil Corporation Ltd. for the transportation of LPG cylinders and in turn, such transportation was being done through another contractor. The assessee has claimed TDS with respect to TDS made by the Indian Oil Corporation Ltd. on the transportation receipts. No profit and loss account has been drawn up for the transport income and the assessee has taken only fixed percentage of gross receipts as income. The AO was of the view that the assessee has obtained transport contract from IOC but has given the same as subcontract to some of the truck owners. The assessee was retaining a percentage of receipts and the balance amount was being paid to the truck owners with whom the assessee was having agreements. The AO concluded that the assessee was having sub-contract and therefore, the assessee was required to deduct tax at source in respect of payments made to the subcontractors. Since the assessee has not deducted tax at source, therefore, the expenditure is not allowable in view of section 40(a)(ia). Before the Assessing Offi....
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.... assessee entered into agreement with truck owners in respect of 5 trucks. In the agreement, the assessee was treated as transporter and the truck owner was treated as contractors. Hence in respect of agreement with the truck owners, the assessee was a contractor and has given sub-contract to the truck owners and the learned CIT(A) held that 194C(2) is applicable. The learned CIT(A) further held that the amounts paid to the truck owners represented sub-contract payment and therefore, the same was required to be considered for the purpose of tax deduction at source u/s 194C. The assessee was receiving the payment from the IOC and therefore, the payments made to truck owners was part of the expenditure incurred for the purpose of income from transport business. The IOC was not making any direct payment to the truck owners. Hence, it cannot be said that the assessee was receiving commission in respect of payments being made by IOC through him to the truck owners. The learned CIT(A) further held that tax was required to be deducted at source because the payments made to the truck owner exceeded Rs.50,000/-. Section 44AE cannot be invoked because the assessee is not owning more than 10 ....
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....IOCL. We are aware that the learned AR made a contention that the assessee was registered with IOCL and the truck owner was not registered and therefore, the contract was taken for the benefit of the person who was owning the truck. This may be a defacto relationship. However, one has to consider the legal agreements between the assessee and the IOCL and also considering the MoU between the assessee and the truck owner and from such agreements, one has to draw a conclusion that dejure relationship of the appellant with IOCL was in the form of a person who has been awarded contract. The appellant was required to abide with the conditions mentioned in the agreement. It is also a fact that the assessee has not got the accounts audited for transport business. As per the agreement with the truck owner, the assessee became owner of two trucks for the period of contract. The original truck owner became a manager for the transport business of the assessee. In respect of contract with IOC, the assessee was owner of two trucks. Since there was no tax audit report in respect of transport contract business, therefore, the income was to be ascertained as per section 44AE of the IT Act. Section ....
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.... to the extent of Rs.5,14,725/-. In respect of gross payments receivable from IOCL, the assessee received net payment to the extent of Rs.5,14,725/-. The deductions were in respect of diesel, TDS and others. A sum was deducted by IOCL in respect of diesel made available for plying of truck and therefore, the same was deducted and paid to IOCL and not to the so-called sub-contractor. Hence, we also hold the alternative submission of the learned AR that disallowance u/s 40(a)(ia) should have been restricted to Rs.5,14,725/-. We had already upheld that section 40(a)(ia) is not applicable because the income of the assessee is to be determined u/s 44AE(2). 3. The second grievance of appellant is that the learned Assessing Officer has erred in making disallowance of Rs.2,25,300/- u/s 40A(3). 3.1. We have heard both the parties on this issue. The assessee has filed a certificate from State Bank of Mysore which shows the payments made to Shri Athaulla Khan. There are 13 payments as available in pages 33 of the paper book. Except the payments mentioned at serial no.1 and 13, all other payments are less than Rs.20,000/-. Disallowance u/s 40A(3) could not have been made in....