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Income Tax Appellate Tribunal, “C’’BENCH: BANGALORE
Before: SHRI B. R. BASKARAN & SMT. BEENA PILLAI
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The assessee has filed this appeal challenging the order dated 13.2.2019 passed by Ld. CIT(A)-9 Bengaluru and it relates to assessment year 2013-14. The assessee is aggrieved by the decision of Ld. CIT(A) in confirming the addition of Rs.9.21 crores made by the A.O. u/s 40(a)(ia) of the Income-tax Act,1961 ['the Act'
Page 2 of 6 for short] for non-deduction of tax at source u/s 194C of the Act from the payments made towards hire charges of vehicles.
The assessee is a travel agent and tour operator. The A.O. noticed that the assessee has claimed a sum of Rs.9.21 crores as vehicle hire charges. He also noticed that the assessee has not deducted tax at source from the above said payments u/s 194C of the Act. Accordingly, he proposed to disallow the same u/s 40(a)(ia) of the Act. The assessee contended that all the hire charges have been paid during the year and nothing was payable as on 31.3.2013. Accordingly, by placing reliance on the decision rendered by special bench of ITAT, Visakhapatnam in the case of Merilyn Shipping Transport Company and also the decision rendered by Hon’ble High Court of Allahabad in the case of Vector Shipping Services Pvt. Ltd., the assessee contended that no disallowance u/s 40(a)(ia) of the Act is called for.
However, the A.O. noticed that the Hon’ble High Court of Kolkata has disapproved the decision rendered by special bench in the case of Merilyn Shipping Transport Company, in its decision rendered in the case of Crescent Export Syndicate. Identical view has been expressed by Hon’ble Gujarat High Court in the case of Sikander Khan & Others. Accordingly, the A.O. disallowed Rs.9.21 crores u/s 40(a)(ia) of the Act. Ld. CIT(A) also confirmed the same by following the decision rendered by Hon’ble Supreme Court in the case of Palam Gas Service Vs. CIT(2017) 81 Taxmann.com 43. Aggrieved, the assessee has filed this appeal before us.
The Ld. A.R. submitted that the assessee is engaged in the business of providing transportation services. Whenever there is shortage of vehicles, it has hired vehicle from the open market at the prevailing market rate without entering into any express or Page 3 of 6 implied contract with any persons. All these vehicles have been taken on temporary basis without any contractual obligation and these vehicles have been used by the assessee at its own cost and risk for executing the work of transportation. Accordingly, the Ld. A.R. submitted that mere hiring of vehicle cannot be termed as an activity of “carrying out any work” within the meaning of section 194C of the Act. In this regard, he placed his reliance on the decision rendered by coordinate bench in the case of Shri G.T. Viswanathan Vs. ITO (ITA No.1103/Bang/2009 dated 27.7.2010). He submitted that in the above said case, the Tribunal has held that hire charges paid for hiring vehicles at market rate does not result in entering into any contract within the meaning of section 194C of the Act. Further, the Ld. A.R. also placed his reliance on the decision rendered by Visakhapatnam bench of ITAT in the case of Kranti Road Transport Pvt. Ltd. (ITA No.358/Vizag/2008 dated 11.8.2011), wherein it was held as under:
“13. Having carefully examined the legal propositions laid down by the Tribunal in the aforesaid case and the provisions of section 194C of the Act, we are of the considered opinion that TDS as per section 194C is required to be deducted when the payments are made to the contractor for carrying out the work i.e. carriage of goods and passengers by any mode of transport other than by railways subject to other conditions prescribed u/s 194C of the Act but whenever the lorries and trucks are hired by the assessee for its own use in any manner under its own control and supervision, the TDS is not required to be deducted on payment made by the contractor to the lorry/truck owners. In the instant case, the assessee has hired the trucks/lorries for transporting of the consignment booked by it under its own supervision and control with all responsibility and liabilities. Therefore, the hiring of truck and lorries cannot be called to be the work as per definition given in explanation 3 of section 194C of the Act and consequent thereto, the assessee is not liable for deduction of TDS on payment to lorry/truck owners as per section 194C of the Act. We therefore, find no merit in the CIT(A)'s order and we set aside the same and direct the A.O. to allow the payment claimed by the assessee."
Page 4 of 6 The Ld. A.R. submitted that the facts of the present case are identical with the above said case and accordingly, prayed that the addition may kindly be deleted. In the alternative, he submitted that the payments made to some of the vehicles are within the minimum amount prescribed u/s 194C of the Act for deducting TDS.
The Ld. D.R., on the contrary, submitted that the assessee is taking new grounds before the Tribunal. She submitted that the assessee had contended before the tax authorities that all amounts have been paid during the course of the year and nothing remain payable at the year end and hence, provisions of section 40(a)(ia) of the Act was not applicable. The above said contention of the assessee is found to be not correct by Ld CIT(A) as per the decision rendered by Hon’ble Supreme Court in the case of Palam Gas Service (supra), wherein it was held that the provisions of sec40(a)(ia) shall apply in respect of expenditure paid by the assessee also. The Ld. D.R. submitted that the facts relating to the new contentions of the assessee are not available on record.
We heard the rival contentions and perused the record. Admittedly, the assessee is taking new contentions before the Tribunal, viz., (a) it has hired the vehicles from the market on the basis of available market rate and (b) the assessee itself has executed the contract undertaken by it under its own cost, risk, supervision and control with all responsibility and liability. Both the contentions get support from the decisions rendered by the co-ordinate benches (referred supra), which have been relied upon by Ld A.R.
In the case of G.T Vishwanathan (supra), the Tribunal has held that hire charges paid for hiring vehicles at market rate does not result in entering into any contract within the meaning of section 194C of the Act. The Visakhapatnam bench of ITAT, in the case of Kranti Road Transport Pvt. Ltd., has held that whenever the lorries and trucks are hired by the assessee for its own use in any manner under its own control and supervision with all responsibility and liability for carrying out any work, the TDS is not required to be deducted u/s 194C of the Act on the hire charges paid by the assessee to the lorry/truck owners. However, as pointed out by Ld. CIT(DR), the facts relating to the above said aspects are not available on record. If the facts prevailing in the instant case is having parity with the facts available in the above said two cases, we are of the view that impugned disallowance is liable to be deleted. Accordingly, in the interest of natural justice, we are of the view that the assessee should be provided with an opportunity to present the facts prevailing in the instant case. Accordingly, this issue requires fresh examination at the end of the A.O.
In view of the foregoing discussions, we set aside the order passed by Ld. CIT(A) and restore this issue to the file of the A.O. for examining it afresh in the light of principles discussed (supra). We also direct the assessee to furnish all the details and explanations that may be called for by the A.O.
Sree SLN Travels, Bangalore Page 6 of 6