TaxTMI 
TaxTMI 
2017 (1) TMI 441
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....he very existence of an "oral contract", and thereby arriving at a wrong conclusion that no relationship of a contractor between the appellant and the small contractor exists. 2. Brief facts of the case are as under : The assessee derives income from transport contract business. As a contractor, it provides contractual trucking services to manufacturing companies such as ACC Ltd., Maratha Cement Works, Lloyds, CMPL, GIPL, SSIL and SVS. While it owns some trucks, it also hires trucks from the market to fulfil its contractual obligations. While expenditure on its own trucks is debited under heads such as diesel, tyres, repairs and maintenance, payments to its subcontractors whose trucks its hires are debited as 'transport expenses', 3. During the previous year relevant to the assessment year under consideration, the assessee debited transport expenses to the tune of Rs. 15,70,00,465/-. The AO was of the opinion that this payment is clearly covered by the provisions of section 194C of Income-tax Act, 1961. Vide Explanation III(c) to section 194C of the Act, "carriage of goods and passengers by any mode of transport other than by railways" has been covered. That the assessee w....
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....iture of Rs. 15,70,00,456/- in terms of provisions of section 40(a)(ia) of the Act and added it back. 5. Upon assessee's appeal learned CIT(Appeals) elaborately considered the issue. He observed as under : "5.Decision - I have carefully considered the entire material including the order of the AO and the submissions of the appellant: Before proceeding further, it is important to take into account certain observations made by the AO in his order about the noncompliance of the appellant. On page no. 15, at paragraph no. 3.9.2 of his order, the AO has observed that the appellant has not been able to explain the basis of the transport expenses incurred it, the bills and vouchers in support of the said expenses not having been filed by it. The AR contended that copies all the bills and vouchers were filed before the AO with a summary during the assessment proceedings. While the AO has reproduced that five-page summary in his order in a tabular form (with details of the sub-contractors, the amounts of payment made and the principals on whose behalf the goods had been transported), he has stated that no bills and vouchers had been produced. An entire set of the copies of the b....
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....individual truck owners. The large companies obviously wood seek to ensure a contractual obligation on part of the large operators, lest they are left with a large inventory which cannot be moved in the absence of transportation. The AR emphasized that the appellant's business was no exception to this industry-wide scenario. 5.3 Before proceeding any further, it would instructive to adjourn to take a look at the provisions of sections 40(a)(ia) and 194(2) of the Act. Their relevant extracds read as under : "40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession" (i) . . . . . . . (ii) Any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid - (A) in a case where t....
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....on the instructions of the appellant's staff. As only the first condition as spelt out in the previous sub-paragraph has been met, prima facie it would appear that the provisions of section 194C(2) of the Act have not been attracted in this case. 5.6 Coming to the contracts entered into by the appellant with the large companies, a few samples have been put forth by the AR, they having been produced before the AO as well. Broadly, the contracts have been so structured as to cast certain responsibilities on the appellant. While the appellant is required to make a certain number of vehicles available, he is expected to have actual ownership of at least half of them. The trucks are expected to be properly roadworthy in terms of both fitness and statutory documentation. The- transit risk is of the appellant, who has to indemnify the large companies against any governmental/third party action arising during transit. The drivers are expected to follow all rules and regulations in transit. On the other hand, there is no evidence on record to suggest that there are any similar responsibilities cast on or any similar liabilities fastened to any of the truck- owners by the appell....
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....the contractor in the cited decision had not devolved into a sub-contractual relationship further. Respectfully following the ratio laid down by the various benches of the Hon'ble Tribunal in the aforescited decisions, it is held in the case under consideration that there was no sub-contractual relationship between the appellant and the small and individual truck owners and that in the absence of any such sub-contract, it is further held that the provisions of section 194C(2) of the Act cannot be invoked against the appellant. As the appellant was under no obligation to deduct tax in terms of provisions of section 194C(2) of the Act, the question of subjecting such non-deduction to disallowance under section 40(a)(ia) of the Act does not arise. The addition of Rs. 15,70,00,465/- is hence deleted in its entirety. The appellant hence succeeds on its sole ground of appeal." 7. Against the above order, the Revenue is in appeal before us. 8. We have heard both the counsel and perused the records. Learned D.R. placed reliance upon the order of the AO. 9. Per contra learned counsel of the assessee submitted that the issue is covered in favour of the assessee by the decis....
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....014 in the case of M/s Chadda Transport, Chandrapur, vide order dated 25/02/2016. (P-1-15)(Vol.I) F) Perusal of Balance Shee/Profit & Loss Account would indicate that no amount of freight claimed is payable as on 31/03/2006. All freight amount claimed is paid by assessee 'and no amount is payable at the close of accounting year. Provisions of sec. 40(a)(ia) are inapplicable to amount paid as business expenditure. Reliance on: i) ITAT Order, Nagpur Bench, Nagpur in ITA No. 333/Nag/2014 in the case of M/s* Chadda Transport, Chandrapur, vide order dated 25/02/2016. ii) SLP CC No(s).8068/2014 (Supreme Court) CIT vs. M/s. Vector Shipping Services (Pvt.) Ltd. dated 02/07/2014. iii) (2013) 357 ITR 642(AII.) CIT vs. Vector Shipping Services (P) Ltd. G. PAN of payees were placed on record. Provisions of sec. 194C(6) introduced are of clarifications nature and are applicable to pending proceedings. Considering no obligation to deduct tax at source and consequent no disallowance u/s 40(a)(ia) of I.T. Act, 1961 sustainable. Reliance on : 1) 319 ITR 306 (SC) CIT vs. Alom Extrusions Ltd. 2) 224 ITR 677 (SC) Alli....
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....in CC No. 8068/2014 vide order dated 02-07-2014. The Hon'ble Apex Court has held as under : " Heard Mr. Mukul Rohatgi, learned Attorney General, for the petitioner. Delay in filing and refilling special leave petition is condoned. Special leave petition is dismissed." We are also aware that there are certain other Hon'ble High Court decisions wherein this proposition has not been upheld that provisions of section 40(a)(ia) are attracted only when the amount is payable. However, we note that there is no jurisdictional High Court decision on this issue. In such a situation we now have a Hon'ble Allahabad High Court decision which is in favour of the assessee. Revenue Department's petition for special leave to appeal has been dismissed by the Hon'ble Apex Court by condoning the delay in filing the leave petition. In such a situation, in our considered opinion, the decision of Hon'ble Apex Court in the case of CIT vs. Vegetable Products Ltd. 188 ITR 192 has to be followed. In the said decision the Hon'ble Apex Court has expounded that in case there are two views possible, the view in favour of the assessee should be followed. Accordingly in absence of any jurisdiction....
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....us destinations as per the agreement entered into by the said company. The appellant was solely responsible for executing the contract on behalf of its principal for fulfilling its transportation commitment, the appellant besides using its own tankers was also hiring the tankers from outside parties as and when required. In such a case of hiring from outside, the responsibility of successful completion of transportation work rested upon the appellant. From the record or the findings of the authorities below no where it is borne out that there was any kind of written or oral contract with the principals by such outside tank owners that they will share the risk and responsibility with the appellant. 8.1 At this stage, it is not dispute that the department's case is that in the present case provisions of section 194C(1) are applicable and not section 194C(2). Once it is held that it is a case of 194C(1) they it would be sent that this section applies to any payment made to a person for carrying out any work in pursuance of a contract between the contractor and the person making the payment. If the condition of "Carrying out any work in pursuance of a contract" is not fulfille....
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....tactor. It was awarded a contract of Oil Transportation to various locations of Bharat Petroleum Corporation Ltd., and other companies. The Assessee received during the year in question Rs. 2,83,06,986/- towards freight charges. The Contract document shows the Assessee along was responsible for transportation of oil from one destination to other. The contractual liability was discharged by transporting oil mostly through the Assessee's own tankers and also from some hired tankers belonging to outside parties. An amount of Rs/.1,79,03,198/- was paid to various parties and the Assessee furnished the details. The amounts paid and summary thereof is noted and what the Assessing Officer, the First Appellate Authority and Tribunal fond that TDS (Tax deducted at a source) had not been remitted or there is no deduction in cases of third parties. The Tribunal noted the rival contentions and rendered a finding of fact by referring to the legal provisions that the risk and responsibility for carrying out the contract work was solely that of the Assessee. There is no material to suggest that there was any contract of sub-contract, whether written or oral with the outside tanker owners and the ....