THE COMMISSIONER OF INCOME TAX-XII vs. MR GURPREET SINGH

IN THE HIGH COURT OF DELHI AT NEW DELHI . ITA 463/2013 . . . THE COMMISSIONER OF INCOME TAX-XII ..... Appellant . Through: Mr.Puneet Gupta, Junior Standing . Counsel . versus . . . MR GURPREET SINGH ..... Respondent . Through: . . . CORAM: . HON'BLE MR. JUSTICE SANJIV KHANNA . HON'BLE MR. JUSTICE SANJEEV SACHDEVA . O R D E R . 09.10.2013 . 1. The respondent is a sole proprietor, Harmony Travels and is a contractor who provides vehicles with drivers to third parties. The respondent assessee had filed return of assessment year 2008-09 declaring income of Rs.5,93,390/-. No substantial addition to the income was made except an ad hoc addition of Rs.5,042/- on account of disallowance towards personal telephone expenses. . 2. However, Section 40(a)(ia) was invoked by the assessing officer to make an addition of Rs.1,42,95,000.51/-. The entire expenditure of Rs.1,42,95,000/- which was paid to car/taxi owners was disallowed by . the assessing officer for failure to deduct tax at source at 1% (i.e. Rs.1,42,950/-) under Section 194 C (2) of the Income Tax Act, 1961. The assessing officer rejected the contention of the assessee that he had only hired the vehicles; but the drivers, fuel etc. were paid by the assessee and thus Section 194C(2) was not applicable. Assessing officer held that substance and not form was relevant and determinative. . 3. The aforesaid observation of the assessing officer is contrary to Section 194 C(2) as the said section applies only when payment is made for carrying out or for supply of labour for carrying out whole or any part undertaken by the Contractor with labour. Labour is the essential component of a work/ contract under Section 194C(2) of the Act. The expression ?Work? defined in Explanation 3 refers to carriage of goods and passengers by any mode of transport other than railways. Taking a vehicle/taxi, without driver and fuel is not covered. The stand of the assessee which has been accepted by the Tribunal is that the respondent assessee had only hired the vehicles and thereafter the vehicles were run by drivers and the fuel expenses were paid directly by the respondent assessee. The vehicle owners had not provided for fuel and drivers. . 4. Section 194C(2) is applicable when conditions/stipulations mentioned in the section are satisfied and not otherwise. It is not in dispute that the expenditure of Rs.1,42,95,000.51/- was incurred/paid and is a genuine expenditure. . 5. Learned counsel for the appellant submits that Commissioner of Income Tax (Appeals) in his order has referred to car rentals paid to four parties between Rs.15,000 to Rs.24,000/- per month. Commissioner (Appeals) had referred to the agreement between the respondent and a third party and the amount payable under the said agreement in support of the findings that the drivers and fuel etc. were paid or provided by the taxi owners and not by the respondent assessee. . 6. The contention has to be rejected as the agreement between the respondent assessee and third parties as quoted by the Commissioner (Appeals) refers to various additional charges which have to be paid to the respondent assessee towards air conditioning charges, extra kilometres charges as well as payment on account of (A.A) charges. Neither the assessing officer nor Commissioner (Appeals) had orally examined or asked for written replies/computation from the car owners/taxi owners to verify and ascertain whether they had provided drivers and paid for fuel. The assessing officer had proceeded and accepted that drivers/fuel was directly provided/paid for by the respondent. The Tribunal, on the other hand, has specifically referred to the contention of the assessee and voluminous documents to establish that the respondent-assessee had paid for fuel and salary of the drivers. These documents referred to in the order of the Tribunal have not been placed before us in appeal paper book. . The appeal has no merit and is, accordingly, dismissed in limine. . . . SANJIV KHANNA, J . . . . . . . SANJEEV SACHDEVA, J . OCTOBER 09, 2013/sv . . . $ 2 .