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

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ITA/120/2012HC Punjab & HaryanaPHHC01099184201207 August 2012Bench: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE GURMEET SINGH SANDHAWALIA1 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose from the ITAT's order. The Court noted that the Revenue's counsel fairly accepted that a similar issue for an earlier assessment year concerning the same assessee had been decided against the Revenue by the High Court in Commissioner of Income Tax v. Truck Operators' Union, (2011) 339 ITR 532. In that decision, the High Court had held that Section 194C(2) of the Act was not applicable when the union was 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. The High Court also referred to a similar view taken by the Himachal Pradesh High Court in CIT v. Ambuja Darla Kashlog Mangu Transport Co. Op. Society and others, (2009) 31 DTR (HP) 49, where the SLP was dismissed by the Supreme Court. Therefore, the appeal was dismissed.

What were the facts?

The Revenue (Commissioner of Income Tax-I, Ludhiana) has appealed against an order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2008-09. The assessee, M/s Truck Operator Union, derives income by undertaking tenders for food-grain transportation. The Assessing Officer (AO) made an addition of ₹91,03,093 under Section 40(a)(ia) of the Income Tax Act, 1961, disallowing payments made to truck operators exceeding ₹50,000, treating them as sub-contractual payments on which tax was not deducted at source as required by Section 194C. The CIT(A) deleted this addition, relying on the ITAT's decision in the assessee's own case for assessment year 2006-07. The ITAT upheld the CIT(A)'s order, leading to the present appeal by the Revenue.

What were the issues?

1. Whether the ITAT was justified in deleting additions made by the AO under Section 40(a)(ia) of the IT Act, 1961, by relying on its own decision for AY 2006-07, despite the payments being of a sub-contractual nature? 2. Whether the ITAT was justified in deleting additions made by the AO under Section 40(a)(ia) of the IT Act, 1961, as no tax was deducted at source by the assessee on sub-contractual payments as required under Section 194C? 3. Whether the ITAT was justified in deleting additions made by the AO under Section 40(a)(ia) of the IT Act, 1961, by holding that the assessee was not liable to deduct tax at source on payments to truck operators, as there was no liability to apply for TAN and furnish Form No. 15-I? Assessee's Contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, the ITAT's decision, upheld by the High Court, implies that the assessee argued that Section 194C was not applicable to payments made to truck operators, and consequently, Section 40(a)(ia) was not attracted. Revenue's Contentions: The Revenue contended that the payments made to truck operators were of a sub-contractual nature, and therefore, the assessee was liable to deduct tax at source under Section 194C. Failure to do so attracted the disallowance under Section 40(a)(ia). The Revenue argued that the ITAT erred in relying on its own decision for AY 2006-07 without considering the sub-contractual nature of the payments.

Which sections of the Income-tax Act were involved?

Section 260A,Section 40(a)(ia),Section 194C,Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No. 120 of 2012

Date of decision: 07.08.2012

Commissioner of Income Tax-I, Ludhiana.

-----Appellant

Vs.

M/s Truck Operator Union, Adda Jodhan Mandi, Ludhiana

----Respondent

CORAM:- HON’BLE MR. JUSTICE AJAY KUMAR MITTAL

HON'BLE MR. JUSTICE GURMEET SINGH SANDHAWALIA

Present:- Mr. Rajesh Katoch, Advocate for the appellant.

Ajay Kumar Mittal,J.

1.

This appeal has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 5.1.2012 passed by the Income Tax Appellate Tribunal, Chandigarh (for brevity, “the Tribunal) in ITA No.1057/CHD/2011 for the assessment year 2008-09, claiming following substantial questions of law:-

Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in deleting the additions made by the AO under section 40(a)(ia) of the IT Act, 1961 relying upon its own decision in assessee's own case for the assessment year 2006-07 vide which it was held that the provisions of Section 194C were not applicable to the payments made by the assessee to the truck operators, ignoring the facts that the payments were of sub-contractual nature?

Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in deleting the additions made by the AO under section 40(a)(ia) of the I.T.Act, 1961 relying upon its own decision in assessee's own case for the assessment year 2006-07 vide which it was held that the provisions of section 40(a)(ia) of the IT Act, 1961 as no tax at source was deducted by the assessee on sub contractual payments, as required under section 194C of the IT Act?

Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in deleting the additions made by the AO under section 40(a)(ia) of the IT Act, 1961 relying upon its own decision in assessee's own case for the assessment year 2006-07 vide which it was held 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?

2.

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 its godowns and other places. Assessment was completed under section 143(3) of the Act on 20.12.2010, Annexure A-I. An addition of ` 91,03,093/- 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 5.8.2011, Annexure A-II deleted the addition of ` 91,03,093/- by relying upon the decision of the Tribunal in assessee's own case for the assessment year 2006-07. Dissatisfied with the order passed by the CIT(A), the revenue filed appeal before the Tribunal. Vide order dated 5.1.2012, Annexure A-III, the Tribunal dismissed the appeal by relying upon its order in assessee's own case for the assessment year 2006-07. Hence this appeal.

3.

Learned counsel for the revenue has very fairly accepted that similar issue involved in respect of the same assessee for the earlier assessment year has been decided against the revenue by this Court in Commissioner of Income Tax v. Truck Operators' Union, (2011) 339 ITR 532, wherein it was held as under:-

“5. Learned counsel for the Revenue fairly states and we are also of the same view that section 194C(2) of the Act had no application in the circumstances of the case when the union was merely acting in representative capacity and there was no separate contract between the union and its members for performance of the work as required for applicability of section 194C(2) of the Act. In such circumstances, section 40(a)(ia) of the Act was not applicable, as rightly held by the CIT(A) and the Tribunal. Learned counsel for the Revenue also points out that same view has been taken by the High Court of Himachal Pradesh in its order dated 20th October 2009 in IT Appeal No.30 of 2005 CIT v. Ambuja Darla Kashlog Mangu Transport Co. Op. Society and others, (2009) 31 DTR (HP) 49 against which SLP was dismissed by the Hon'ble Supreme Court on 17th January 2011 being SLP (Civil.../2011 CC 259 of 2011 CIT v. Ambuja D.Mangu Transport Cooperative Society.”

4.

In view of the above, no substantial question of law arises.

5.

The appeal is dismissed.

(Ajay Kumar Mittal)

Judge

August 07, 2012 (Gurmeet Singh Sandhawalia)

'gs' Judge

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