COMMISSIONER OF INCOME TAX-I, LUDHIANA vs. M/S TRUCK OPERATOR UNION,

This appeal has been preferred by the appellant-revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 24.2.2010, Annexure A.III passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh (for brevity, “the Tribunal”) in ITA No.761/CHD/2009 for the assessment year 2006-07 claiming following substantial question of law:- i) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in law in holding that the provisions of section 194CV are not GURBAX SINGH 2016.02.15 12:23 integrity of this document High Court Chandigarh applicable to the payments made by the assessee to the truck operators on account of transportation charges ignoring the fact that the payments were of sub contractual nature? ii)Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in law in deleting the addition of ` 63,10,197/- made in view of the provisions of section 40(a)(ia) of the Income Tax Act, 1961 as no tax at source was deducted by the assessee on sub contractual payments, as required under section 194C of the Income tax Act, 1961? iii)Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in law in holding that the assessee was not liable to deduct tax at source on payments made to truck operators as there was no liability to apply for TAN and also for furnishing Form No.15-I?”

Briefly, the facts as narrated in the appeal may be noticed. The respondent-assessee is a firm which derives income by taking tenders from various food agencies for transferring the bags of food-grains from their godowns to other palaces. It filed its return of income for the assessment year in question on 12.9.2006 declaring Income of ` 2,56,680/- which was processed under section 143(1) of the Act on 3.7.2007. During the relevant period as per profit and loss account, the assessee received ` 85,19,255/- as transportation charges. As per TDS certificates, the contractual receipts from various government agencies were shown at ` 84,92,855/-. According to the Assessing Officer, these payments were covered under Section 194C of the Act. Out of this payment, the assessee further debited ` 78,77,384/- as transportation expenses. Payment of ` 79,77,384/- was made to 174 transporters involved in the work carried out by the assessee. The Assessing Officer considered the payments made by the assessee to the truck operators GURBAX SINGH 2016.02.15 12:23 integrity of this document High Court Chandigarh as sub contractual payments and thus provisions of Section 194C of the Act were held to be applicable. It was pleaded before the Assessing Officer that all the truck operators owned not more than two trucks and hence no tax was deductible. With regard to second proviso to sub section 3 of Section 194C of the Act, it was pleaded before the Assessing Officer that the assessee was not eligible for obtaining TAN and hence could not file Form 15-J before the Commissioner of Income Tax after obtaining 15-I Form from the truck operators. The assessee was eligible for obtaining TAN only when it had deducted tax as it could apply for the same within one month after deduction of tax as prescribed under section 203A read with Rule 114A(3) of the Income Tax Rules, 1962. After considering the reply submitted by the assessee, the Assessing Officer concluded that the assessee was required to deduct tax at source as per the provisions of section 194C of the Act on sub contractual payments made to the truck operators which it failed and therefore, the entire sub contractual payments in excess of ` 50,000/- which worked out to ` 63,10,197/- were disallowed in view of the provisions of section 40(a)(ia) of the Act. Thus, an addition of ` 63,10,197/- was made to the income of the assessee. Assessment was completed under section 143(3) of he Act vide order dated 11.11.2008, Annexure A.1 at income of ` 65,66,877/-. An addition of ` 63,10,197/- was made by the Assessing Officer under section 40(a)(ia) of the Act by disallowing the payments made to the Truck operators in excess of ` 50,000/- treating these payments as sub contractual payments on which no tax was deducted at source by the assessee as required under Section 194C of the Act. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who vide order dated GURBAX SINGH 2016.02.15 12:23 integrity of this document High Court Chandigarh 11.5.2009, Annexure A.II allowed the appeal holding that provisions of section 194C of the Act were not applicable to the payments made by the assessee to the truck operators and deleted the disallowance of ` 63,10,197/- made under section 40(a)(ia) of the Act. Dissatisfied with the order passed by the CIT(A), the revenue filed appeal before the Tribunal. Vide order dated 24.2.2010, Annexure A.III, the Tribunal dismissed the appeal and confirmed the order passed by the CIT(A). Hence the instant appeal by the revenue.