TaxTMI 
TaxTMI 
2011 (1) TMI 1418
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....er section 40(a)(ia) of the Act." 3. Briefly stated, the assessee, an individual, a transport contractor and contractor for cutting and preparation of wood for paper mills, furnished his return of income for the AY under dispute, admitting an income of Rs. 17,61,554/-, besides agricultural income of Rs. 2.45 lakhs. During the course of assessment proceedings, it was noticed by the AO that the assessee had debited Rs. 1,34,49,861/- under the head 'transportation charges'. Being queried, the assessee had furnished a list of parties along with lorry numbers and payments made, according to which, each payment was separate to the lorry driver which was below Rs. 20000/- in one payment and, thus, it was claimed that no TDS was effected from those payments. However, analyzing the details furnished, the AO noticed that the assessee had made payments of Rs. 98,78,494/- out of Rs. 1.34 crores to the various lorries in aggregate of more than Rs. 50,000/- during the period under scrutiny. After deliberating the issue in depth and also considering the replies given by the assessee on various occasions as recorded in his impugned order, the AO had observed thus - "(on page 5).....The....
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.... was more or less what was portrayed before the AO during the course of assessment proceedings. After due consideration of (i) lengthy submission of the assessee, (ii) analyzing the Board's Circular No.715 and also the finding of the Hon'ble Tribunal in ITA No.491/Bang/2008 in the case of Janani Tours & Resorts Pvt. Ltd on which the assessee placed strong reliance; (iii) the proposition laid down by the Hon'ble High Court of Madras in the case of ITO v. Poompuhar Shipping Corporation Limited and (iv) the remand report of the AO, the Ld. CIT (A) had arrived at a conclusion that - "4.2. In view of the findings given in para 4 above and the distinction of facts as brought out in para 4.1. above, it become obvious that the ratio of the judgment of the Hon'ble I.T.A.T., Bangalore given in the case of M/s. Janani Tours & Resorts (P) Ltd. is not applicable to the facts of the appellant. The material facts discussed in para 4 amply prove that there was an oral agreement/contract between the truck operators/drivers in whose cases the aggregate amount of payment exceeded Rs. 50,000/- in each case in view of the provisions of section 194C(2) of the Act, which the appellant has failed....
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....he destination, the hire charges were paid by the assessee, that in most of the cases, advances were paid to the drivers of the vehicles to facilitate them to meet the expenses towards fuel and incidentals; that the drivers and owner of the such vehicles look for better transportation charges and also frequency of hiring of vehicles; - since the assessee was paying more transportation charges comparatively, and normally transporting the goods frequently from the forest area to the paper mills, the lorry drivers with a hope of, getting commensurate hire charges will always be accessible at a short notice; - relies on the case laws of: (a) M/s. Janani Tours & Resorts (P) Ltd. v. ACIT - ITA No.491/Bang/2008 dt.13.2.2009; (b) R.R. Carrying Corporation V. ACIT - 126 TTJ 240; & (c) DCIT v. Satish Aggarwal & Co., - 124 TTJ 542 - since the assessee had not entered into any sort of agreements with the lorry owners, either invoking of the provisions of s.194C or the applicability of s.40(a)(ia) of the Act have no relevance under the facts and circumstances of the issue on hand; - the assessee had provided to the AO the names and ....
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....nsertion of s. 40(a)(ia) of the Act is against all cannons of proportionality as enunciated in a number of rulings by the Apex Court. - Relies on - Om Kumar v. Union of India - 2001 (2) SCC 386 - without prejudice, the disallowance was permissible only if the deduction was claimed u/s 30 to 38 and in the instant case, all payments to drivers of vehicles it had the character of diversion by over-riding title at source in favour of the drivers and, hence, the same was allowable u/s 28 itself as a trading loss and, hence, the applicability of the provisions of s.40(a)(ia) was itself in doubt. 5.2. To buttress his arguments, the Ld. A R had furnished a paper book containing 1 - 104 which chiefly consist of various case laws, besides a list containing the details of payments made towards transportation charges during the period under dispute. 5.3. On the other hand, the Ld. D R was very emphatic in his resolve that the assessee had grossly failed to deduct TDS from the payments made to sub-contractors u/s 194C(2) of the Act and his failure has been cohesively brought to light by the AO which has been substantiated by the well reasoning of the Ld. CIT (A)....
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....or supply (transportation) of Bamboos from the forest area to their mill premises. As the materials brought on record, the assessee had not hired the vehicles from the owners by entering into any contract. However, some of the vehicles which were hired by the assessee, for which, the aggregate rents paid in a year exceeded Rs. 50,000/-. In this situation, the provisions of s.194C(3) would also have a vital role to play as claimed by the assessee. Section 194C(3) of the Act is reproduced herebelow for reference: "S.194C (3) No deduction shall be made under sub-section (1) or sub-section (2) from:- (i).................................................................................................................................................................................... ............................ Provided that................................................................................................................................................................................. ........ Provided further that no deduction shall be made under sub-section (2) from the amount of any sum credited or paid or li....
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....to nail the assessee. Instead, the AO made a sweeping remark that 'the name and addresses of the persons given in the list are not genuine and it is just created to save himself from the clutches of the provisions of section 40(a)(ia) of the I.T. Act, 1961'. 6.6. However, in his remand report dt.5.4.2009 to the CIT(A), the AO had maintained that "5.2............out of the 11 parties only two parties, appearing in sl.Nos: 5 & 11, namely, Ankabhovi and Rafiq Sahi have filed the reply and the letters in the remaining 8 cases have come back unserved. In his subsequent report dt.2.6.09, the AO states that fresh letters were again issued to 9 parties u/s 133(6) out of which 7 parties have responded except 2 parties, namely, Sri Suresh and Sri Somanna. He, however, has pointed out that in the 7 replies received the amounts shown by the appellant and in the confirmation letters does not tally. The AO further states that assessee has filed confirmation from 15 drivers showing total payment of Rs. 2,54,833/-. The AO in his subsequent report dt: 29.06.09 has stated that all the 11 parties have confirmed the transportation charges, hence, may be considered..." From the above ass....
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....through other channels etc., 6.9. Let us have a glimpse of what judicial pronouncements say on a similar issue. Case laws relied on by the assessee: (i) In the case of CIT v. United Rice Land Ltd. reported in (2008) 217 CTR (P&H) 332, the Hon'ble Punjab & Haryana High Court was pleased to observe that "There being neither any oral or written agreement between the assessee and the transporters for carriage of goods not it is proved that any freight charges were paid to them in pursuance of a contract for a specific period, quantity or price, the assessee was not liable to deduct tax under s.194C from the payments made to the transporters." (ii) In a similar issue the Hon'ble Tribunal in the case of R.R. Carrying Corporation v. ACIT reported in (2009) 126 TTJ (CTK)240 had held that The assessee was a transporter executing various contracts by engaging its own vehicles and transporter's vehicles. The AO disallowed the payments by taking payments made to the transporter as sub-contract. There was nothing on record to suggest that any contract existed between the assessee and the alleged transporter as sub-contractor. There was neither written nor oral agre....
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....ion of total income and shall be treated to be the income of the assessee. Once a deduction of a particular amount is not allowable under the Act, it is liable to be taxed and merely because some other person may also be liable to tax after receiving the said amount in one or the other manner, it cannot be said that former assessee is entitled for exemption and cannot be taxed. No authority is shown providing that such taxation is not permissible in law and is bad even otherwise. Moreover, despite repeated query, the counsel for the petitioner could not show as to how and in what manner it claims s.40(a)(ia) to be ultra vires. It could not show any legislative incompetence in enacting such provision. Vires of an statute can be challenged on the ground of legislative incompetence. It is not shown that s. 40(a)(ia) is not within the legislative competence of the Parliament and further counsel for the petitioner also could not show that the said provision, in any manner, is violative of any provision of the Constitution including fundamental rights. There is thus no merit in the writ petition and same is liable to be dismissed." (ii) The issue before the Hon'ble High Court of....