COMMISSIONER OF INCOME-TAX, PATIALA vs. TRUCK OPERATORS' UNION PATIALA

ITA/865/2010HC Punjab & HaryanaPHHC01093843201023 March 2011Author: MR. JUSTICE SURINDER GUPTA,MR. JUSTICE ASHUTOSH MOHUNTA4 pages
AI SummaryDismissed

What were the facts?

The Revenue (Commissioner of Income Tax) appealed against an order of the Income Tax Appellate Tribunal (ITAT) which had confirmed the deletion of an addition of Rs. 6,30,32,453/-. This addition was made by the Assessing Officer (AO) under Section 40(a)(ia) of the Income Tax Act, 1961, due to the alleged failure of the assessee, a Truck Operators' Union, to deduct tax at source under Section 194C(2) of the Act. The AO contended that payments made by the Union to its truck operator members were for sub-contracting. The Commissioner of Income Tax (Appeals) had previously set aside this addition, finding no violation. The ITAT upheld the CIT(A)'s order, leading to the Revenue's appeal to the High Court.

What did the High Court hold?

The High Court held that Section 194C(2) of the Act had no application in the circumstances of the case. The Court agreed with the assessee that the Union was merely acting in a representative capacity and there was no separate contract between the Union and its members for the performance of work, which is a prerequisite for the applicability of Section 194C(2). Consequently, Section 40(a)(ia) was not applicable, and the disallowance made by the AO was rightly deleted by the CIT(A) and confirmed by the ITAT. The Court also noted that the High Court of Himachal Pradesh had taken the same view in a similar case, and an SLP against that decision was dismissed by the Supreme Court. Therefore, no substantial question of law arose, and the appeals were dismissed.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the ITAT was justified in confirming the order of the CIT(A) deleting the addition of Rs. 6,30,32,453/- on account of disallowance made under Section 40(a)(ia) of the Income Tax Act, 1961, without appreciating that payments by the Truck Operators’ Union to the truck operator members were covered within the meaning of Section 194C of the Act, being payment to a sub-contractor? 2. Whether on the facts and in the circumstances of the case, the ITAT was justified in confirming the order of the CIT(A) deleting the addition of Rs. 6,30,32,453/- by relying on the decision of the High Court of Himachal Pradesh in CIT vs. Ambuja Darla Kashlog Mangu Transport Co-op. Society (2009) 31 DTR 49, when the said decision had not attained finality due to the approval of filing an SLP by the CBDT? Assessee's Contention: The assessee union was formed by truck operators to obtain bigger contracts. The union's main income was booking charges, and its function was to arrange contracts for its members. The freight received belonged to the member truck operators who performed the contracts. The union did not give sub-contracts to its members, and therefore, was not liable to deduct tax under Section 194C(2), making Section 40(a)(ia) inapplicable. Revenue's Contention: The payments by the Union to its members were in the nature of payments to sub-contractors, thus attracting the provisions of Section 194C(2) and consequently Section 40(a)(ia). The reliance on the Himachal Pradesh High Court decision was questioned due to the pending SLP.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194C(2),Section 194C,Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date of decision: 23.3.2011 Commissioner of Income Tax. -----Appellant. Vs. Truck Operators’ Union. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. T.K. Joshi, Standing Counsel for the appellant. --- ADARSH KUMAR GOEL, J.

1.

This order will dispose of I.T.A. Nos.865 and 866 of 2010 which are said to involve the same issue.

2.

I.T.A. No.865 of 2010 has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, Chandigarh dated 31.3.2010 in ITA No.866/CHD/2009 claiming following substantial question of law:- “(i) Whether on the facts and in the circumstances of the case, the ITAT was justified in confirming the order of the CIT(A) deleting the addition of Rs.6,30,32,453/- on a/c of disallowance made u/s 40(a)(ia) of the Income Tax Act, 1961, without appreciating that payments by the Truck Operators’ Union to the truck operator members were covered within the meaning of Section 194C of the Act, being payment to a sub-

The order continues below.

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