THE COMM. OF IT-I, CHD vs. M/S T.L. VERMA AND CO. PVT. LTD

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.892 of 2010 Date of decision: 23.3.2011 The Commissioner of Income Tax -----Appellant. Vs. M/s T.L. Verma & Co. (P) Ltd. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Ms. Urvashi Dhugga, Sr. Standing Counsel for the appellant. --- ADARSH KUMAR GOEL, J. 1. This appeal 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 30.6.2010 in ITA No.222/CHD/2010 for the assessment year 2006-07 claiming following substantial question of law:- “Whether on the facts and circumstances of the case, the Hon’ble ITAT was right in holding, that assessee was not liable to deduct the TDS as there was no written or oral agreement between the alleged parties; even in the light of amendment in the statute w.e.f. 01.10.2004 in section 194C(3) as per which tax is required to be deducted where total payments made

I.T.A. No.892 of 2010 to a person during a financial year for work contract exceeds Rs.50,000/-, and it does not matter whether there is single contract or multiple contract.” 2. The assessee hired trucks for its business and made payment for transportation. The Assessing Officer held that the assessee was liable to deduct tax under Section 194C of the Act, in absence of which deductions had to be disallowed under Section 40(a)(ia) of the Act. The view taken by the Assessing Officer was upheld by the CIT(A) but on further appeal, the Tribunal decided the matter in favour of the assessee as under:- “9. Undoubtedly, the provisions of Section 194C of the Act prescribing for deduction of tax at source comes into play only where either a written or oral contract between the parties for transportation and carriage of goods is established. The CIT (Appeals), in this case has concluded that between the parties a contract for transportation and carriage of goods is established. The CIT (Appeals), in this case has concluded that there was an agreement between the transporter and the assessee because the GRs have been issued by the transporter. As per the CIT (Appeals), the transporter issues a GR for the consignor (i.e., the assessee), a contract is established and any payment made in pursuance of that, cannot escape the provision of Section 194C of the Act. In our view, the CIT (Appeals) is correct in concluding that a GR is equivalent to a contract which is envisaged for the purpose of Section 194C of the Act. So, however, in order to prove the applicability of Section 194C, it is further to be seen whether the 2

I.T.A. No.892 of 2010 contract in question has resulted in payment exceeding Rs.20,000/- or in case of more than one payment, the aggregate should have exceeds Rs.50,000/- in a financial year. Normally, each GR is to be treated as a separate contract, but if the goods are transported continuously in pursuance of a contract for specific period of quantity, all GRs relating to that party or quantity should be aggregated for the purposes of deduction of tax at source. This aspect has also been clarified so by the CBDT Circular No.715 dated 08.08.1995. As per the said circular, the pre-requisite condition for deduction of tax at source is that there must be a contract for the carriage of goods. As per the CBDT Circular, what is most important is a contract for a specific period or quantity for carriage of goods. Undisputedly, in the instant case, there is no material on record brought by the Assessing Officer to prove that there was any written or oral agreement between the assessee and the transporter for carriage of goods. It is only on presumptions that the Assessing Officer has concluded in para 7.3 that there was relationship of contractor and contractee between the transporter and the assessee. The aspect brought out by the CIT (Appeals) that each GR is a Contract, is correct. However, the assessee has furnished details of truck- wise payment which does not show that each payment exceed Rs.20,000/- and it also does not show that in aggregate in a financial year truck-wise payments exceed Rs.50,000/-. Therefore, even if each GR is to be taken as a separate contract as concluded by the CIT(Appeals) and which is also clarified by the CBDT in its Circular No.715 (supra) 3

I.T.A. No.892 of 2010 yet, there is no material to establish that any payment of individual GR has exceeded Rs.20,000/- or in aggregate the payments to same transporter has exceeded Rs.50,000/- in the financial year. Therefore, in this background, we have to consider the ratio of the decision of the Hon’ble Jurisdictional High Court in the case of United Rice Mill Ltd. (supra). The Hon’ble High Court laid down that Section 194C of the Act cannot be invoked to hold the assessee liable for deduction of tax only on the assumption that assessee was having agreement with the parties through whom transportation of goods was carried out. The Hon’ble High Court noted the fact position in that case that there was no contract for a specific period or quantity for continuous carriage of goods even when individual GRs are liable to be considered as a contract, because there is no material to show that payment in pursuance to each GR exceeded Rs.20,000/- or payments to one transporter exceeds Rs.50,000/- in the financial year. The Assessing Officer acted only on assumptions that the assessee was having agreement with the parties for continuous transportation/carriage of goods for a specific period or quantity. 10. At this point, we may also refer to para 32 of the order of the CIT(Appeals), where it is observed that “assessee was liable to deduct TDS on these payments where GRs issued by the transporters aggregate more than Rs.50,000/-“. Certainly, where the GRs issued by a single transporter exceed Rs.50,000/- in a financial year, provisions of Section 194C are attracted. So, however, factually in this case, there is no material to show that payments to a 4

I.T.A. No.892 of 2010 single transporter or GR issued by single transporter exceeded Rs.50,000/- in aggregate in the financial year.” 4. We have heard learned counsel for the appellant. 5. Learned counsel for the revenue submits that total freight payments exceeded the amount stipulated under Section 194C(3 ) of the Act and in such a situation, the assessee was liable to deduct TDS, as held by the Assessing Officer and the CIT(A). 6. We are unable to accept the submission. 7. As held by the Tribunal individual payments did not exceed `20,000/- and total payment during the financial year did not exceed `50,000/- by a transporter, in which case, Section 194C of the Act will not apply. The finding about the quantum of payment is a finding of fact and has not been challenged. Once the finding of the Tribunal is not liable to be interfered with, no substantial question of law arises.

The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE March 23, 2011 ( AJAY KUMAR MITTAL ) ashwani JUDGE 5