TaxTMI 
TaxTMI 
TaxTMI 
2015 (2) TMI 321
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.... were that the assessee-firm has filed the return declaring an income at Rs. 2,334/- The firm is engaged in the business of transportation. It was informed that the assessee was not owning trucks. The trucks are hired from the open market. On verification of the balance sheet, it was found by the AO that no trucks were reflected in the balance sheet. It was confirmed that the assessee-firm was hiring the trucks and paying the freight charges to the truck owners. Towards freight expenses, an expenditure of Rs. 16,6800/- was debited. On verification of the details of freight expense, it was noted by the AO that the assessee-firm had paid freight expenses on four trucks amounting to Rs. 11,07,400/- to alleged sub-contractors without deducting TDS. The AO has invoked the provisions of section 40(a)(ia) r.w.s. 194C of IT Act and proposed to disallow the claimed expenditure of Rs. 11,07,400/-. A show cause was issued wherein it was informed that the impugned payment was made to Mr. Maheshchandra Agrawal. In compliance of show cause notice, the assessee has submitted the following reply:- "The assessee has paid/cred....
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....sis of each trip was paid hence it was pleaded that the provisions of section 194I would have been attracted if at all that too from A.Y. 2007-08. An another argument has also been raised that the payee, Mr. Agrawal, had already paid the tax, therefore, there was no obligation on the assessee-firm to again deduct the tax. For this legal proposition, reliance was placed on Hindustan Coco Cola Beverages Ltd vs. CIT 293 ITR 226 (SC). 3.1 However Ld. CIT(A) was not convinced and decided the issue against the assessee as under. Relevant portion reproduced below:- "2.3 The facts show that Shri Maheshchandra Agrawal, partner of the firm had acted in his individual capacity in providing his trucks to the firm. The trucks are registered in individual name and income from the said contracts has been offered by him in his individual returns of income under the head "profits of business". He has therefore not acted in his capacity as a partner of the firm but as in individual, distinct from the firm, when entering into transactions with the firm. Shri Maheshchandra Agarwal in his individual capacity had a contractor sub....
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....recedents and noted that only the constitutional validity was challenged; but in the present appeal the question is about the applicability of the provisions of sec. 40(a)(ia) to be decided in the light of few latest decisions. 4. From the side of the appellant Ld. AR, Shri Manish Kr. Malpani, appeared and pleaded that Mr. Agrawal was not a sub-contractor but he has provided his assets to the firm as a partner and in lieu received a fixed rent on the basis of trips undertaken. It was not an agreement as a contractor or sub-contractor hence there was no question of deduction of TDS. It was not a contract payment but it was a rent payment hence the provisions of section 194I could be attracted but not for the year under consideration. He has also pleaded that the said partner had already filed the income tax return and paid tax thereon. In support, he has furnished a copy of income tax return of Shri Maheshchandra Agrawal for A.Y. 2006- 07. He has also drawn our attention that the particulars of those four trucks were duly informed along with the return. Ld. AR has also informed that the business income from trucks was offered as prescribed u/s. 44AE of IT Act. In support of these c....
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....rgument is that Mr. Agrawal has paid the tax on trucks given on hire to the assessee-firm. Since the payee had already deposited the tax by filing his return, therefore, there was no responsibility of the assessee to again deduct the tax as held in the case by Hindustan Coco Cola Beverages 293 ITR 226 (SC). In support of this argument, our attention has been drawn on an order of ITAT Ahmedabad Bench "C" pronounced in the case of Prashant H. Shah vs. ACIT 21 taxmann.com 263/52 SOT 69, Ahmedabad wherein it was held as under:- "7.1 On account of the above discussion, the issue confines to the residual sub-section i.e. the applicability of provisions of sub-section (2) of section 194C of the Act. The peculiarity of this case is that a contract was awarded to M/s. Petronet LNG Ltd. New Delhi for construction work of peripheral and approach roads at LNG terminal Dahej. Thereafter, the said contractor had entered into a subcontract with M/s. A.N.S. Construction Ltd., who in turn, had entered into an another sub-contract with the assessee. The work to be carried out by the assessee, therefore pertained to constructio....
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....act" is assigned, generally the clauses are stringent that the contractor is to be responsible for all the acts and defaults committed. In the present case as well, when the M/s A.N.S. Construction Ltd. had granted sub-contract dated 30-1-2006 to M/s, Sakhi construction,( prop. Appellant) then vide clause (1) the assessee was to deploy his awn resources in terms manpower & machinery. Further vide clause (2) assessee had undertaken the responsibility of any legal or financial liability. The assessee has indemnified the first party, i.e. M/s. A.N.S. Construction Ltd. against any legal or financial liability if arise in future pertaining to the said contract. Assessee was made solely responsible for the execution of the job. These clauses, therefore, suggested that the assessee was wholly and exclusively responsible for the acts as also for the defaults, if committed. On the other hand, the lorry owners or the transporters who had been given "transportation charges" have not been fastened with any of above liabilities, meaning thereby the transporters were not the part of the said agreement and the assessee had an independent arrangement with them. In other words, peculiarity of this ....