2015 (7) TMI 152

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...., as and when required. The assessee has been getting Form No. 15I from the hired truck owners, therefore, on the payments made to them no tax was deducted u/s. 194C. In the return of income the assessee claimed following expenditure towards transportation: i. Transport expenses amount Rs.2,12,93,888/- ii. Paid Transport charges Rs.5,06,71,901/- iii. Transport payable Rs.2,83,27,080/-   Total  Rs.10,02,92,869/-   During the course of scrutiny assessment, the Assessing Officer observed certain discrepancies in Form No. 15I furnished by the truck owners. The discrepancies as pointed out by the Assessing Officer were with respect to non-mentioning of date of registration of vehicle and nonfurnishing of copy of Registration certificate. The Assessing Officer further held that the transport expenses claimed by the assessee were not supported by documentary evidence in the form of trip register, purchase vouchers for diesel, tyre tubes and toll tax receipts etc. On the basis of discrepancies observed by the Assessing Officer an ad-hoc disallowance of 5% of the total transport expenses (including freight payment) Rs. 10,02,92,869/- was made. Aggrieved by the ....

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....ficiencies/shortcomings pointed out by the Assessing Officer and the Commissioner of Income Tax (Appeals) on the basis of which disallowance u/s. 40(a)(ia) has been made are very minor. Merely for non-mentioning of PAN and date of registration of vehicle on Form No. 15I disallowance u/s. 40(a)(ia) of the Act cannot be made. A perusal of Form No. 15I would show that mentioning of PAN of the owner of the truck is not mandatory and there is no requirement to furnish the copy of Registration certificate of the truck. Disallowance u/s. 40(a)(ia) can be made only in the following two circumstances: i. Where the assessee is liable to deduct tax has not deducted the tax; ii. Where the assessee has deducted the tax and has not deposited the same within the time prescribed under the provisions of Act. Thus, any shortcomings in Form No. 15 I cannot be a valid reason for making disallowance u/s. 40(a)(ia) of the Act. In support of his submissions the assessee placed reliance on the judgment of Hon'ble High Court of Gujarat in the case of CIT Vs. Valibhai Khanbhai Mankad reported as 262 CTR 538 (Guj). 3.2. With respect to disallowance of 2% the ld. AR submitted that the Assessing Office....

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....rs of the hired trucks does not fall within the ambit of section 194C as there is no sub-contract between the assessee and the owners of the hired trucks. The assessee has drawn our attention to the letter at page 12 of the Paper Book vide which the assessee has been assigned the work of transportation of molasses. The relevant extract of the terms and conditions and job assigned to the assessee are as under: 1. "Transportation rate of Rs. 435/- per M.T. will be given to delivery of Molasses from above sugar factory to our site. 2. Payment of transportation charges will be given after every 500/- M.T. Molasses delivery by Demand Draft. 3. You will following all State Excise, Transport Departments Rules and Regulations. 4. We will consider quantity actually received in our Distillery Unit. Hence any wastage, leakage quantity reduced due to accident etc. will be on your account and you will have to contract and complete all the necessary formalities of State Excise Department for write off or any other related work in such cases, your payment considering the necessary default amount will not be released. 5. Karnatka will give diesel on credit to your Tanker and amount will b....

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....efault and directed the assessee to pay the tax under section 201 and also levied interest under section 201(1A). On appeal, the Commissioner (Appeals) held that the agreement in question was for mere hiring of ships and the payment of the hire charges would not be subject to TDS obligation under section 194C. On further appeal, the Tribunal confirmed the order of the Commissioner (Appeals). The Hon'ble High Court in the background of these facts held: "The hired ships were utilised by the assessee in the business of carrying the goods from one place to another in pursuance of an agreement entered into between the assessee and the Tamil Nadu Electricity Board. There was no agreement for carrying out any work or transport any goods from one place to another between the assessee and the other shipping companies. The assessee-company simply hired the ships on payment of hire charges and it was utilised in the business of the assessee at their own discretion. It is not the case of the revenue that the assessee entered into the said contract with the shipping company for transport of coal from one place to another. The hiring of ships for the purpose of using the same in the assess....