TaxTMI 
TaxTMI 
2018 (7) TMI 933
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....f TDS u/s40(a)(ia), read with section 194C. The Explanation III to section 194C was applicable to the assessment year-in-question. However, it would not apply to the facts of the instant case. This was so because the provisions of section 194C are applicable to payments for carrying out any work in pursuance of a contract. In the case of CIT v. Poompuhar Shipping Corpn, Ltd. [2006] 282 ITR 3/153 Taxman 486 (Mad.), it was held that under section 194C, tax was to be deducted when a contract was entered into for carrying out any work. In the instant case, like therein, there was no contract between the appellant and the owners of the trucks to carry out any work. The appellant' had hired the trucks belonging to the truck owners for a fixed period on payment of hire charges. The hired trucks were utilized by the appellant for running them on hire. There was no agreement for carrying out any worker to transport any goods or passengers from one place to another. Like in CIT v. Poompuhar Shipping Corpn. Ltd.ts case (supra), with instant case also, it was not the case of the department that the appellant had entered into any contract with the truck owner for transportation of goods or ....
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....r the Explanation, carriage of goods and passengers by any mode of transport other than by railways. The Explanation cannot apply to a situation not amounting to a contract for carrying out any work as contemplated in section 194C, and entering into a contract for hiring of trucks is not equivalent to entering into a contract for carrying out any work. Therefore the Explanation III to section 194C was not attracted to the facts of the instant case. It is also noted that the Sec 194C is applicable only in case of any person responsible for paying any sum to any resident (hereafter referred to as the 'contractor') for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a 'specified person' will be liable to deduct tax at source at the prescribed rates. The term 'contract' will include a sub-contract also. The 'specified person' include such person who is liable to audit of accounts under clause (a) or (b) of Sec 44AB during the financial. Year immediately preceding the financial year in which the sum is credited or paid to the account of the contractor. The appellant had pai....
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....ng, hiring or leasing goods' carriages, provided the said contractor furnished has Permanent Account Number (PAN) to the person paying or crediting such sum, The payer shall furnish to the prescribed income-tax authority or the person authorized by such authority, such particulars in such form and within such time as may be prescribed. In the instant case the appellant informed the PAN details of the payees to the concerned income tax. authority by filling quarterly Form - 27 A belatedly and thereby complied the conditions laid down therein, Hence, the disallowance of Hire Charges paid for the period from 01.10.2009 to 31.03.2010 aggregating to Rs. 1,52,81,163/- is deleted." 3. We have given our thoughtful consideration to the rival submissions. Mr.Dasgupta, Addl. CIT(DR) vehemently contends that the Assessing Officer had rightly made the impugned disallowance on account of assessee's failure in deducting TDS upon the impugned hire charges of various lorries engaged for transporting of goods in question. We find no substance in Revenue's instant grievance. It seeks to apply section 194C of the Act to treat the assessee's hire charges in question to be contractual pa....
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....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 fulfilled then the provisions of this section will not be applicable at all. Here in this case, the contract for carrying out the work was between the BPCL and the appellant. The appellant alone had risk and responsibility for carrying out the contract work as per the agreement entered into by it with its principal i.e. BPCL. There is no material on record to suggest that there was any contract or ITA No : 3536/Mum/2011 M/s. Bhail Bulk Carriers sub-contract whether written or oral with the outside tank owners and the appellant, whereby the risk and responsibility which is associated with a contract has also been passed on to these outside parties. Once the CIT(Appeals) has accepted the fact that the outside tank owners do not had any responsibility 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....
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....ered into the said contract with the shipping company for transport of coal from one place to another. The hiring of ships for the purpose of using the same in the assessee's business would not amount to a contract for carrying out any work as contemplated in section 194C. The term "hire" is not defined in the Incometax Act. So, we have to take the normal meaning of the word "hire". Normal hire is a contract by which one gives to another temporary possession and use of the property other than money for payment of compensation and the latter agrees to return the property after the expiry of the agreed period. Therefore, in our view, when the assessee entered into a contract for the purpose of taking temporary possession of ships in the shipping company it could not be construed as if the assessee entered into any contract for carrying out any work, and when the contract is not for carrying out any work, the Revenue cannot insist the assessee ought 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 exis....
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.... 5. The Revenue's second substantive grievance seeks to revive the Assessing Officer's action disallowance assessee's repair and maintenance charges of Rs. 58,52,497/- as deleted during the course of lower appellate proceedings as under :- "6.1. The appellant has stated the following in his submission :- "Claim of Repairs & Maintenance Rs. 58,52,497/- Most of the repairing expenses were made on the road side small repairing workshop with a cash payment of below Rs. 20,000/- in each case. Hence the question of deduction of TDS need not required at all (copy of ledger enclosed marked as 7). Moreover, out of the above, an amount of Rs. 32,71,562/- were paid to M/s Bhandari Motors (P)Ltd/French Motor Car Co.(P)Ltd/Appolo Motors (P)Ltd/Saini Engineering/Mazhar Khan/Rabindranath Samanta /Munuzir Hussin/S.D.Udyog for purchase of Spare Parts the details of which are as follows : Date Amount (Rs.) Paid to 21.4.09 1,00,000/- Bhandari Motors (P)Ltd. 27.4.09 1,17,343/- Bhandari Motors (P)Ltd. 18.6.09 50,000/- Bhandari Motors (P)Ltd. 20.6.09 1,00,000/- Bhandari Motors (P)Ltd. 25.6.09 1,00,000/- Bhandari Motors (....
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....sts that an amount of Rs. 32,71,562/- represents assessee's spare parts on outright sale purchase basis which does not require any TDS deduction since not attracting any of the specified clauses in Chapter XVII of the Act. Learned Departmental Representative fails to dispute that all the remaining payments are very well below the threshold limit of Rs. 20,000 in each case wherein the relevant TDS provision does not apply. The assessee's ledger enclosed as marked -A7 to this effect has nowhere been rebutted during the course of hearing before us. We therefore see no reason to disturb the CIT(A)'s reasoning under challenge on both the components hereinabove. The second instant substantive ground is also declined. 7. Learned Departmental Representative then invites our attention to the Revenue's third substantive ground raised in the instant appeal seeking to revive the Assessing Officer's action adding the salary paid to drivers and khalas amounting to Rs. 20,85,000/- and Rs. 2,76,000/- respectively. Its case is that the CIT(A) has not considered the Assessing Officer's remand report before accepting the assessee's arguments as follows :- "4.1. The appellant has made the ....
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....76,000/- on account of salary to khalasi has escaped assessment and added them back . This is of course based on surmise and estimate by the AO . The Appellant has all along been stating that since these drivers and khalasis were employed on temporary basis,their expenses were clubbed under the head 'trip expenses '. The AO has thus estimated and guessed that salary must have also been paid to 32 drivers and khalasis since the assessee owned 32 trucks that year. There is no basis for this assumption, more so when the appellant has steadfastedly been claiming that they had only 11 permanent drivers and 5 permanent khalasis . Hence the addition by the AO is deleted. " 8. It therefore emerges that the Assessing Officer has made both these two components of addition of salaries to drivers and khalas on mere estimation. We afforded ample opportunity to the Revenue to indicate about any actual sums being paid as per assessee's books of accounts. It has come on record that the assessee had been having 11 permanent drivers and 5 khalas. It explained to have engaged them on make shift basis as clubbed in trip expenses. We thus decline the Revenue's instant third substantive ground as wel....