2016 (10) TMI 715

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....ds raised by assessee per its appeal are as under:- "(1) That the Ld. CIT(A) has erred on the facts and circumstances of the case in holding that hiring of lorries from local market on spot basis to carry cargo from part of assessee's clients destination falls within the definition of sub-contract and thereby confirming the addition made by AO to the extent Rs. 51,49,020/- against total addition of Rs. 52,82,320/- made by applying provision of section 40(a)(ia) read together with section 194(c) of Income Tax Act, 1961. (2) That the considering the nature of assessee's business, the facts and circumstances of the case the Ld. CIT(A) ought to have held that there being no contract, oral or written or implied as envisaged under section 1....

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....ce to escape from the provisions of the TDS. Assessee has made mostly payments to five parties with whom he has already entered into the contract. The ld. CIT(A) also observed that while making the payments to these parties on some amount TDS has been deducted and on some payment no TDS was deducted. The ld. CIT(A) dismissed the appeal of the assessee. Being aggrieved by the order of ld. CIT(A), assessee came in second appeal before us. 5. Before us Ld. AR submitted that the assessee has contract to transport its clinent's goods to Port and assessee has on its own only three trailers. Hence, trailers are hired by the assessee to execute its contract jobs. For such execution, no sub-contract, oral or written is ever given to any party ....

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.... the provisions of Explanation-II below Sec. 194C(2) (as relevant for AY 2006-07), carriage of goods and passengers by any mode of transport other than by railways is included in the definition of work. As per Circular No. 715 dated 08.08.1995 issued by CBDT (Question No.9) each GR is considered as a contract. It is, therefore, clear that the work of transportation under taken by the assessee squarely falls under the TDS provision of Section.194C and since the assessee did not deduct the tax at source, the provisions of Sec. 40(a)(ia) are attracted. Ld. DR further stated that during the course of hearing a statement field by assessee during the course of assessment proceedings, regarding lorry hire charges paid during FY 2005-06 relevant fo....

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...., this in itself is a contract of transportation. Unless the assessee has certain amount of assurance of reaching the goods safely, in reasonable time, the assessee will not entrust these goods to the transport. In essence this is nothing but a contract and therefore, as mentioned above, the Board Circular No. 715 clearly states that a GR is a contract. 6. We have heard rival contentions and perused the materials available on record. From the foregoing discussion, we find that the lorry owners are not connected with the party who is giving transportation work to the assessee. The assessee hired the lorries from outside as he was not able to manage the work with his own lorry. Therefore the assessee hired the lorries from outside on sub-c....