TaxTMI 
TaxTMI 
2011 (6) TMI 826
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.... 1. Deleting the addition of Rs. 9,43,81,587/- made by the Assessing Officer applying the provisions of section 40(a)(ia) of the I.T. Act, 1961. 2. Allowing the relief of Rs. 2,65,687/- against the addition made by the Assessing Officer on account of disallowances of unverifiable expenses." 2. Brief facts relating to ground No. 1 are that the assessee derives income from the business of transportation of goods, which are received in bulk from its customers for transportation from one place to another. For this purpose, apart from his own trucks, the assessee used to engage the trucks of other owners to carry the goods at various destinations, for which the transportation charges are paid by assessee to different truck owners at various occasions. As per Assessing Officer, the assessee has shown gross receipt of Rs. 9,71,42,887/- and claimed freight paid to subcontractors/ truck owners amounting to Rs. 9,43,81,547/-, on which no TDS was deducted by assessee u/s. 194C of the Act. The Assessing Officer, therefore, after invoking the provisions of section 40a(ia), held the freight payments of Rs. 9,43,81,547/- made to sub-contractors, on which TDS was not deducted by the....
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....to deduct the tax at source u/s. 194C of the IT Act from the payments made to the transporters. Consequently, the provisions as contained in section 40(a)(ia) of the I.T. Act did not apply in case of the appellant individual, since the tax was not deductible at source under Chapter XVII-B of the I.T. Act. The addition, therefore, based on the assumption of agreements entered into does not survive and the same is hereby deleted." 4. The learned DR, relying on the order of the Assessing Officer specially page 2 & 5, pointed out that the assessee owns only five trucks while the other trucks were hired by the assessee from other parties. Therefore, the assessee has entered into a contract. The contract may be oral or written as per the Contract Act. It need not be in writing for the applicability of section 194-C. 5. The learned AR, on the other hand, reiterated the submissions made before the CIT(A) and it was contended that the Revenue has not submitted any evidence which is contrary to the finding given by the CIT(A) that there was no contract between the other truck owners and the assessee to carry out the transportation agreement. The assessee himself has executed the contra....
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....ontractor for carrying out any work or part of the work undertaken by the contractor. In this case, there is neither any agreement nor contract with the truck owners for execution for any contract undertaken by the assessee. Attention was also invited towards section 194-C(3) and it was pointed out that the assessee has neither paid any amount exceeding Rs. 20,000/- to any truck owner nor has pad any amount more that Rs. 50,000/- in the whole year, which is apparent from the details of payment furnished in form 15J filed before the department. Thus, it was contended that section 194C was not applicable. It was also pointed out that even though the provision of section 194C were not applicable but the assessee, as a abundant precaution duly obtained prescribed form 15 I from the truck owners and has filed forms 15J in time before the prescribed authority. The Assessing Officer's objection that it was filed before the ITO (TDS) and not before the CIT, Gwalior for the convenience of the department. Further, it was submitted that the objection of the Assessing Officer that most of the form 15I were collected after the payment made to sub-contractors and not before payment as per provis....
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....ly the assessee is liable to deduct tax from the payment made for such vehicles under s.194C(2) of the Act ?" In the instant case, the Assessing Officer has invoked the provisions of s.40(a)(ia) to disallow the payments made for hired lorries as according to him, such payments represent payment to 'sub-contractors' liable for TDS under s.194C(2) of the Act and the assessee has failed to deduct TDS under s.194C(2). Section 194C(2) of the Act, which is relevant in this context, reads as under : "Any person (being a contractor and not being an individual or an HUF) responsible for paying any sum to any resident (hereafter in the section referred to as the sub-contractor) in pursuance of a contract with the subcontractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one pe....
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....cution of the contract during the entire contract period. . (b) The tanker lorry owners were paid only after receipt of the bills from the contractees, after retaining the commission. (c) The tanker lorry owners enabled the appellant to execute the contract work. 8.4 The assessee has placed a copy of work order dt. 12th Feb., 2005 issued by a company named "RBM-Pati Joint Venture". We have gone through the said work order and notice the following points: (a) The scope of work includes loading of Bitumen 60/70 at Vizag, transportation and delivering at RBMP camp site at 56 kms. and 35 kms. on NH-6. As such three types of work are included in the scope of work. (b) Tanker lorry shall have proper heating arrangement. The company reserves the right to arrange any other means of transportation in case of non-placement/delay in placement of lorry. Any extra payment made for execution of such work will be recovered from the assessee. (c) The assessee shall not engage and/or allow its personnel in any fraudulent activity in performing the work order. The company is at liberty to deduct any reasonable amount, if any fraud or cheati....
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....ssee by spending their time, energy and by taking the risks associated with the main contract work. In the absence of the above said 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. Hence the reasoning of the tax authorities, which is stated in para 8.3 supra, to hold that the payment made for hired vehicles is a sub-contract payment, in our opinion, is not correct end not based on relevant considerations. Hence, in our considered opinion, it cannot be said that the payments made for hired vehic1es would fall in the category of payment towards a sub-contract with the lorry owners. In that case the assessee is not liable to deduct tax at source, as per the provisions of s. 194C(2), on the payments made to the lorry owners for lorry hire. Consequently, the provisions of s. 40(a)(ia) shall not apply to such payments. 8.7 As we have decided the issue in favour of the assessee for the reasons stated above, in our opinion, consideration of other contentions of the assessee as well as the Revenue is not necessary. 9. In the result, the appeal of the asses....
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....ls) even before it. While recording the finding of fact, the Tribunal had clearly stated that nothing had been brought on record by the Assessing Officer to prove that there was any written or oral agreement between the alleged parties for carriage of the goods. In view of that, no interference was called for with the finding of fact recorded by the Tribunal. The appeal, being without merit, was to be dismissed." 8. Respectfully following the aforesaid decision of the Tribunal as well as the decision of High court, in our opinion, no interference is called for in the order of CIT(A). Even no contrary decision was brought to our knowledge by the learned DR which may compel us to take a view different from the view taken by the co-ordinate Bench. We cannot disagree with the decision of the Co-ordinate Bench, which is binding on us. Respectfully following the same, we confirm the order of CIT(A) on this issue. Thus, ground No.1 of Revenue stands rejected. 9. The facts relating to ground No. 2 are that the assessee had shown net income from trucks at Rs. 26,56,870/-. The Assessing Officer observed that the assessee could not give details and documentary evidence in respect of the....
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...."Because during the year the assessee owned 5 trucks. The total income from all trucks as per section 44AE of the Income Tax Act, 1961 come to Rs. 1,26,000/- as per the letter dated 21.7.2008 on record of the Assessing Officer which as per books the assessee has shown net income of Rs. 1,79,945/- after charging the depreciation in the books (which is deemed as allowed under section 44AE of the Income Tax Act). Hence, income returned from all trucks Rs. 1,79,945/- was more than income computed as per section 44AE of the Income Tax Act. The authorities below have erred in making the addition of Rs. 10,10,055/- in respect of depreciation on the returned income shown at Rs. 1,79,945/- which was already more than income computed u/s. 44AE of the Income Tax Act." 14. We have heard the rival submissions and carefully considered the same. We noted that the assessee was owning five trucks during the assessment year and as per the provisions of section 44AE, the income from five trucks @ Rs. 3500/- per month each will come to Rs. 1,26,000/-. The assessee has returned income from these trucks at Rs. 1,79,945/- which is much more than the income as may be computed in accordance with eh prov....