TaxTMI 
TaxTMI 
2018 (7) TMI 293
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....cting section 194C r.w.s. 40(a)(ia) of the Act for the purpose of making disallowance in question. 3. Mr. S.Dasgupta, Addl. CIT(DR) thereafter takes us to the CIT(A)'s findings on the instant issue reading as under :- "I have carefully considered the submissions of the appellant and the assessment order. I find force in the submissions of the appellant. The details submitted clearly show that payments were made to different owners of the trucks that the appellant had hired and very clearly does not amount to any sort of contract or sub contract as envisaged in "Section 40. Which reads ......Amounts not deductible. Notwithstanding anything to the contrary in sections 30 to 38, the following amount shall not be deducted in computing the "income chargeable under the head "Profits and gains business or profession", - i) ... (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or a sub contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at s....
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....eld that the provision of section 40(a)(ia), which came although came into force w.e.f 01-04-2005 by the Taxation Laws (Amendment) Act, 2004 w.e.f 01-10-2004, could not be applied for the credits in the accounts made before 01-10-2004. Hence for reasons discussed above, .the disallowance by the AO is deleted and the appellant gets a relief of Rs. 1,43,01,395/-. " 4. The Revenue's case therefore is that the impugned disallowance deserves to be restored as it has been wrongly deleted during the course of lower appellate proceedings. We find no merit in the instant former substantive ground. We notice first of all that the assessee had merely hired the corresponding 429 lorries whose details have already been given in assessment order. There is no iota of evidence in the case file indicating the assessee firm to have delegated its liability of transportation of goods by way of any contract or sub-contract or that the payees concerned had undertaken such a liability while transporting the relevant goods. This tribunal's co-ordinate bench's decision in Bhail Bulk Carriers vs ITO in 3536/Mum/2011 decided on 07.03.2012 declines Revenue's similar arguments as follows :- "8. We ....
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....ibility or liability towards the principal, then it cannot be held that these outside parties were privity to the contract between the appellant and its principal. Thus the payment made to the outside parties do not come or fall within the purview of section 194C, as the "carrying out any work" indicates doing something to conduct the work in pursuance of contract and here in this case, it was solely between appellant and its principal. 8.2 The judgment of Hon'ble Madras High Court in the case of CIT vs. Pompuhar Shipping Corporation Ltd. (supra) also fortifies the case of the appellant. In this case the assessee which was a Tamil Nadu Government undertaking was engaged in the business of transportation of coal from the ports of Haldia, Visakhapatnam and Paradeep to Chennai and Tuticorin under contracts executed with the Tamil Nadu Electricity Board. The assessee owned three ships. Since three ships were not sufficient to carry out the contracts entered into with Tamil Nadu, the assessee hired ships belonging to other shipping companies and paid hire shipping charges for using the ships. The assessee, however, did not deducted tax under section 194C before the making p....
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....to have deducted tax at source under section 194C of the Act. Further, the other argument of counsel was, section 194C was amended with effect from July 1, 1995, incorporating the Explanation and the said Explanation clarifies the existing provision of section 194C of the Act. Hence, it would be applicable retrospectively. We are concerned with the assessment year 1994-95. In a recent judgment, the Supreme Court in the case of Sedco Forex International Drill Inc. v. CIT [2005] 279 ITR 310, considering the scope of the Explanation, held that there is no principle of interpretation which would justify reading the Explanation as operating retrospectively, when the Explanation comes into force with effect from a future date. In this case, the Explanation introduced is with effect from July 1, 1995. Hence it will be applicable only for the future assessment orders and it ITA No : 3536/Mum/2011 M/s. Bhail Bulk Carriers will not be applicable to the assessment year in consideration. The Tribunal also considered the fact that the shipping companies which received the hire charges are also income-tax assessees and they had shown the hire charges in their respective income-tax returns and pa....