C I T vs. AMAR LAL

ITA No.633 of 2007 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.633 of 2007 Date of decision:12.5.2008 Commissioner of Income tax, ......Appellant (TDS) Chandigarh Versus M/s United Rice Land Limited. Vill. Samana Bahu, Karnal

......Respondent CORAM:- HON'BLE MR.JUSTICE RAJIVE BHALLA HON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present: Mr. Sanjeev Kaushik, Advocate for the appellant-revenue. * * * Rakesh Kumar Garg, J . The revenue has filed the present appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) against the order dated 26.12.2006 passed by the Income Tax Appellate Tribunal, Delhi Bench “I” New Delhi in TDS No.127/Del/2004 and has sought to raise the following substantial questions of law:- “Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in upholding the order of the CIT(A), deleting the demand created by the Assessing Officer under Section 201(1) and 201(1A) of the Income-tax Act, 1961, as the assessee failed to deduct tax at source as per the provisions of Section 194C of the Act?” The assessee is a limited company engaged in the business of manufacture and export of rice. During the course of export activity, rice was transported from Samana Bahu to Kandla Port. Whenever there was

ITA No.633 of 2007 2 need for transportation of goods from business premises to Kandla Port, the assessee used to engage trucks through transporters. These trucks were provided by the transporters who were having links with the truck operators and their consideration for providing such services was about Rs.200/- per truck. This consideration was charged by the transporter from the truck owners/operators. The hire charges were paid by the assessee directly to the truck owners/drivers or through transporters. The assessee was also maintaining records regarding ownership of the truck, registration number, photo of drivers etc. There was no repetition of payments to the same truck owners or truck operators for any specified period. Thus, there was no contract with any of the local transporters or truck owners. In case of non-availability of trucks with any of the local transporters or truck owners at the place of assessee's business at Pipli, the assessee used to arrange these trucks from Delhi, for which services of M/s East West Cargo Movers, New Delhi were availed. This concern was arranging trucks, trailers for transportation of goods of the assessee. Under these situations, payment was made to the truck operators by the East West Cargo Movers on behalf of the assessee, and the assessee in turn reimbursed the amount of M/s East West Cargo Movers. In each case, the payment was less than Rs.20,000/-. During the course of assessment under Section 143 (3)of the Act, separate GR/Bills/documents were obtained showing therein the weight amount destination truck number etc. each GR value i.e. transportation charges to Kandla Port were of the value less than Rs.20,000/- each and that the assessee should have deducted tax at source on the amount paid to M/s East West Cargo Movers. The Assessing Officer also found that similar payment has been made by the assessee to another clearing and forwarding agent, namely, Leeladhar Pasoo Forwarders (P) Ltd. and to some of the transporters but no tax has been deducted at source under Section 194C of the Act. He, therefore,

ITA No.633 of 2007 3 treated the assessee in default for short deduction of tax at Rs.2,18,230/- under Section 201 of the Act and also levied interest under Section 201 (1A) of the Act. Aggrieved against this order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) [(for short the 'CIT(A)'] which was allowed partly vide order dated 27.2.2004. In his order the CIT (Appeals) observed that there was neither any oral, nor written agreement between the assessee and these transporters or clearing agents for carriage of the goods and that it has not been proved that any money regarding freight charges was paid to them, in pursuance of a contract for specific period, quantity or price. He, therefore, held that the assessee was not liable to deduct any tax on the freight charges paid to truck owners/operators. However, in respect of other payments made by the assessee to these two concerns, the CIT (Appeals) upheld the order of the Assessing Officer regarding liability of the assessee for deduction of tax. Accordingly, he recomputed the short deduction of tax and interest thereon. Aggrieved by the said order of the CIT(A), the revenue filed appeal before the Tribunal. The Tribunal vide the impugned order dated 26.12.2006 dismissed the appeal of the revenue. The relevant part of the order is reproduced: “We have considered the rival contentions, carefully gone through the orders of the authorities below and also material placed on record. As per provisions of Section 194C any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract shall at the time of credit of such sum or at the time of payment thereof in cash or by cheque

ITA No.633 of 2007 4 deduct a tax thereon at prescribed rate. However, no deduction of tax at source is required to be made, if the sum paid or credited do not exceed rupees twenty thousand. In the instant case payment of transportation charges paid to truck owners/forwarding agents were considered by the Assessing Officer as liable for deduction of tax at source. This decision of Assessing Officer was based on question and answers No.6, 9 and 30 of CBDT Circular No.715 issued with reference to applicability of provisions of TDS under Section 194-C and 194-J. In the instant case, we found that each payment of transportation charges was not exceeding Rs.20,000/-. The Assessing Officer had held the assessee liable for deduction of tax under Section 194-C of the Act, only on the assumption that assessee was having agreement with the parties through whom trucks were arranged for transportation of goods. Whereas, as per the finding recorded by the CIT(Appeals) and which has not been controverted by the Department, there was neither any oral or written agreement between the assessee and transporters for carriage of goods. Nor it has been proved that any sum of money regarding freight charges was paid to them in pursuance of a contract for specific period, quantity or price. We have also carefully gone through the certificates furnished by M/s East West Cargo Movers and

ITA No.633 of 2007 5 M/s Leeladhar Pasoo Forwarders, as placed on the record, according to which these concerns were arranging the shipment i.e. arranging the vessels/ship, loading in the ship and clearing the port dues and were covering handling charges for providing these services. Similarly other alleged transporters were not transporting the goods of the assessee, but merely arranging a truck for which service charges of Rs.250-200 was collected from the truck owners/operators. Whatever truck charges were instructed by the assessee, were paid by them to the truck owners after ensuring that goods reached to them in full quantity. Thus, the assessee was just reimbursing what these parties have paid as per the instructions of the assessee and on its behalf. But in no case single payment to one truck owner/operator was exceeding Rs.20,000/-. Even as per question No.6 of Circular No.715, CBDT dated 8.8.1995, the pre-requisite condition for deduction of tax is that there must be contract for carriage of goods. Thus, the payment made to these C & F agents has to be seen in the light of question No.6 itself. Tax was required to be deducted from the payments made to these C & F agents for carriage of goods if there is a contract for carriage of goods. Similarly, even as per question No.9 of Circular No.715 of CBDT., and its reply, it is clear that normally each GR should

ITA No.633 of 2007 6 be treated as separate contract, but if the goods are transported continuously in pursuance of a contract for specific period or quality, all GRs relating to that party or quantity should be aggregated for the purpose of the TDS. It is very evident from the answer to both these questions that what is most important is a contract for a specific period or quantity for carriage of the goods. Undisputedly, in the instant case, nothing has been brought on record by the Assessing Officer to prove that there was any written or oral agreement between the assessee and the alleged parties for carriage of the goods.” Feeling not satisfied with the impugned order, the revenue has filed the present appeal raising the substantial question of law as referred to above. We have heard Mr. Sanjeev Kaushik, learned counsel for the revenue and have perused the record. As per provisions of Section 194C of the Income Tax Act, any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract shall at the time of credit of such sum or at the time of payment thereof in cash or by cheque deduct a tax thereon at a prescribed rate. However, no such deduction at source is required to be made, if the sum paid or credited do not exceed Rs.20,000/-. In the present case, the Assessing Officer had held the assessee liable for deduction of tax only on the assumption that assessee was having agreement with the parties through whom trucks were arranged for transportation of goods. However, the CIT(A) has recorded a finding of fact that there was neither any oral or written agreement between the

ITA No.633 of 2007 7 assessee or transporters for carriage of goods nor it has been proved that any sum of money regarding freight charges was paid to them in pursuance of a contract for specific period, quantity or price. This finding of fact was recorded by the CIT(A) after considering the certificate furnished by the transporters. The Tribunal has also recorded a finding of fact that the Department has not controverted the said finding of the CIT(A) even before the Tribunal. While recording this finding of fact, the Tribunal has clearly stated that nothing has been brought on record by the Assessing Officer to prove that there was no written or oral agreement between the alleged parties for carriage of the goods. In view of the above, we are not inclined to interfere in the finding of fact recorded by the Tribunal. The appeal being without merit is dismissed. (RAKESH KUMAR GARG) JUDGE May 12, 2008

(RAJIVE BHALLA) ps

JUDGE