MAHAVIR PRASAD SATISH CHANDRA,ALLAHABAD vs. INCOME TAX OFFICER WARD 1(3) , ALLAHABAD

This appeal by the assessee is directed against the order dated 15.03.2019 of ld. CIT(A)- Allahabad for the AY 2013-14. The assessee has raised the following grounds: “1- That in any view of the matter the assessment made on an income of Rs. 25,46,800/- by order dated 15-03-2016 passed u/s 143(3) of the Income Tax Act is bad both on the facts and in law and income declared in the return should have been accepted. 2- That in any view of the matter the addition of Rs. 22,73,457/-u/s 40(a)(ia) of the Act on account of freight payment to various truck drivers as made by the Assessing Officer and confirmed by CIT(A) is highly unjustified.

The only issue involved in this appeal is regarding disallowance of Rs.22,73,457/- made by the Assessing Officer u/s. 40(a)(ia) as the assessee has not deducted TDS in respect of the payment made to various transporters. The assessee is a partnership firm and engaged in the trading of consumable items as aata, maida, sugar and edible oil etc. During the scrutiny assessment, the Assessing Officer has noted that the assessee has shown a sum of Rs.22,73,457/- as freight paid without deduction of TDS. Accordingly the Assessing Officer proposed to disallow the said amount by invoking the provisions of Section 40(a)(ia) of the Act. The assessee submitted before the Assessing Officer that the freight payment was made to various truck drivers who brings goods to the assessee place. The payment was made at the time of delivery of goods and there is no contractual agreement between the assessee and the transporter or truck owner. Thus, the assessee has contended that the payment is not covered under the provisions of Section 194C of the Act and not liable to deduct tax at source. The Assessing Officer did not accept this contention of the assessee and has held that the payment made to the truck drivers towards freight charges is covered u/s. 194C of the Act and consequently the same is disallowable u/s. 40(a)(ia) of the 2

Before the Tribunal, the ld. Counsel for the assessee has submitted that the payment in question does not come within the ambit of Section 194C and therefore, there is no liability to deduct at TDS as per the provisions of Section 40(a)(ia) of the Act. He has further contended that the assessee made the payment of freight charges to various truck drivers, who brought goods to the assessee place. Each payment was less than Rs.15,000/- depending upon the item and load of truck. There is no contractual agreement between the assessee and the truck owner or the transporter hence the question of TDS does not arise. He has also referred to the assessment order passed u/s. 143(3) of the Act for the AY 2014-15 and submitted that the Assessing Officer has not made any disallowance u/s. 40(a)(ia) of the Act towards the freight payment to the transporter/truck driver. Ld. AR has also referred to the Tribunal order dated 20.01.2016 in case of M/s Lalji Vaish Dall Mill vs. ITO 141/Alld/2013 and submitted that the Tribunal has set aside the revision order passed u/s. 263 of the Act on an identical ground. He has also relied upon the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Shark Roadways (P) Ltd., (2017) 152 DTR 259 (Alld) as well as decision of the Hon'ble Gujarat High Court in the case of Pr. CIT vs. Swastik Construction [2018] 254 Taxman 163. Thus, the ld. AR has submitted that the disallowance made by the Assessing Officer by invoking the provisions of Section 40(a)(ia) is not justified and the same may be deleted.

On the other hand, ld. DR has submitted that there is no dispute that the assessee has paid the freight charges to the transporter without deducting TDS. He has referred to the provisions of Section 194C of the Act and submitted that there is amendment w.e.f. 01.06.2009 and as per the explanation the “term work” is defined inter alia carries of goods, passengers by any mode of transport other than by

I have considered the rival submissions as well as material available on record. There is no dispute regarding the fact that the assessee paid total sum of Rs.22,73,457/- towards freight charges to various transporters. The main contention of the assessee is that there is no contractual agreement between the assessee and the transporter and the payment was made to the truck drivers who brought goods to the place of the assessee. It is not necessary for the purpose of Section 194C that the contract must be in writing, if there is an oral contract between the parties then the payment made under such contract also falls in the ambit of Section 194C of the Act. In case of transport of goods, there is always a builty/consignment issued by the transporter in the name of the consignee the transporter builty/consignment bill in itself is a contract between the parties. As far as the payment made to the driver it is not the payment to the driver in person but the payment in substance made to the transporter through the driver. The driver is only receiver/collector on behalf of the transporter. Therefore, making the payment through driver to the transporter would not obliterate applicability of Section 194C or Section 40(a)(ia) of the Act. The decision of the coordinate Bench of this Tribunal as relied upon by the assessee in the case of Lalji Vaish Dall Mill (Supra) was against the revision order passed u/s. 263 and the Tribunal has set aside the said order on the ground that the issue is a debatable issue and the Assessing Officer has taken a possible view therefore the CIT was not justified in invoking the provisions of Section 263 of the Act. The decision of the Tribunal is purely based on the scope of jurisdiction and power of this Commissioner u/s. 263 of the Act. As regards the other decisions of Hon'ble jurisdiction High Court 4

In the result, appeal filed by the assessee is allowed for statistical purposes.