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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMEBR & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR
PER MAHAVIR PRASAD, JM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-1, Ahmedabad (‘CIT(A)’ in short) vide Appeal No.
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CIT(A)-VI/ITO, Wd-1(3)/12/2014-15 Now 360/CIT(A)-1, dated 29.03.2016 arising in the assessment order dated 10.03.2014 passed by the Assessing Officer (AO) under s. 143(3) r.w.s. 254 of the Income Tax Act, 1961 (the Act) concerning AY. 2007-08.
The ground of appeal raised by the assessee reads as under:
“1. The learned CIT(A) erred in law and on facts in confirming the disallowance of Lorry Hire Charges of Rs.1,25,07,815/- under section 40(a)(ia) of the Income Tax Act, 1961, such disallowance is requested to be deleted.”
The brief facts of the case are that on going through the records, it is noticed that assessee has debited sum of Rs.10,41,14,765/- as "Lorry Hire Charges". Assessee was asked to furnish the complete details and copy of account of said expenses. In response to which assessee has produced all ledger accounts of the said expenses and submitted that as individual payment does not exceed 20,000/- no TDS was deducted. On going through the ledger accounts, it is noticed that in number of cases, despite of payment exceeded Rs,50,000/-. Since the payment on account of Lorry Hire Charges has exceeded Rs.50,000/- in an individual case, assessee ought to have deducted Tax U/S.194C of the Act. However, as the assessee has failed to deduct tax in cases where remittance exceeded Rs.50,000/- and no tax has been deducted.
Against the order of the learned AO, the assesse preferred first statutory appeal before the CIT(A) who confirmed the action of the AO.
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Now, assessee has come before us by way second statutory appeal.
We have gone through the relevant record and impugned order. In this case the assessee is in transport business and on need basis, he hires lorries from time-to-time. He hired Truck. Section 194C contemplated as under:
“— 194C. (1) Any person responsible for paying any sum to any resident(hereafter in this section referred to as the contractor) for carrying out any work_— (including supply of labour for carrying out any work) in pursuance of a contract between the contractor,— and— (a ) the Central Government or any State Government; or (b ) any local authority; or (c ) any corporation established by or under a Central. State or Provincial Act; or (d) any company; -[or] [(e) any co-operative -[society; or]] -[(f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h ) any trust; or (i) any University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); 5 [or] -[(j) any firm,]
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shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, -[deduct an amount equal to—
(i) one per cent in case of advertising,
(ii ) in any other case two per cent,
of such sum as income-tax on income comprised therein.]
(2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the subcontractor) in pursuance of a contract with the sub- contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub- contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income- tax on income comprised therein:
[Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44 A B during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the sub- contractor, shall be liable to deduct income-tax under this sub- section.]
[Explanation I.—For the purposes of sub-section (2), the expression "contractor" shall also include a contractor who is carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the Government of a foreign State or a foreign enterprise Or any association or body established outside India.]
- [_[ Explanation II].—For the purposes of this section, where any sum referred to in sub-section (1) or sub-section (2) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply! accordingly.]
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— [Explanation III.—-For the purposes of this section, the expression "work" shall also include— ]
(a) [advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting;
(c) carriage of goods and passengers by any mode of transport other than by railways;
(d) catering.] (3) No deduction shall be made under sub-section (1) or sub- section (2) from— _—[(i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or sub- contractor, if such sum does not exceed twenty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely tb be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (I) or, as the case may be, subsection (2) shall be liable to deduct income-tax J-2 [under this section:] — [Provided further that no deduction shall be made under sub- section (2), from the amount of any sum credited or paid or likely to be credited or paid during the previous year to the account of the sub-contractor during the course of business of plying, hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum, in the prescribed form and verified in the prescribed manner and within such time as may be prescribed, if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year: Provided also that the person responsible for paying any sum as aforesaid to the subcontractor referred to in the second proviso shall furnish to the prescribed income-tax authority or the person authorised by it such particulars as may be prescribed in such form and within such time as may be prescribed; or] (ii) any sum credited or paid before the 1st day of June, 1972: — [or] [(iii) any sum credited or paid before the 1st day of June, 1973. in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the sub-contractor in relation to any work (including supply of
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labour for carrying out any work) undertaken by the contractor for the co-operative society.] — [Explanation.—For the purposes of clause (i), "goods carriage" shall have the same meaning as in the Explanation to sub-section (7) of section 44AE.]”
He also cited judgment of Hon’ble Gujarat High Court in case of CIT vs. Mukesh Travels Company Tax Appeal No. 937 of 2013, order dated Jan 7, 2014, wherein it is held as under:
“Business Expenditure—Interest Commission Brokerage etc to Resident—Deletion of Disallowance u/s. 40(a)(ia)—Assessee undertaken contract of transporting employees of Institute of 'X' by supplying vehicles for purpose—Assessee hired certain vehicles from private agency and made payment of specified amount for such hiring charges—Assessee had not deducted tax at source so, such payment was\hit by provisions of S. 40(a)(ia)— AO made disallowance of specified amount derived from hiring charges on ground thai Assessee had not deducted tax from payrnent of specified amount derived from hiring charges— CIT(A) had upheld Order passed by AO—ITAT had deleted disallowance made by AO on grounds that work of transportation or part thereof was not assigned to Assessee —Held, entire task was assigned to Assessee by 'X' for transportation of its employees and guests and Assessee had to maintain certain number of vehicles in good working condition— Transportation was performed by contractor and was not assigned to sub- contractor without prior permission af 'X'—Revenue had not brought out any material to establish that owner of vehicles performed work of transportation— Assessee merely hired vehicles for performing its part of contract with 'X'—Work of transportation or part thereof was not assigned to sub- contractor—Assessee only availed services of such transporters for carrying out material to site—No relationship found between Assessee and transporters in capacity of subcontractors—Vtal requirement of relationship of contractor and sub-contractor between Assessee and transporters was missing—Tribunal was justified in holding that liability to deduct tax at source in present case had not aroused—Revenue’s Appeal dismissed.”
In this case, the assessee did not have any sub-contract and he was hiring Trucks from open market on individual and need basis and in support of its contention, assessee has filed
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Truck Nos. as well different Truck numbers and owners of all trucks are different. In this case, payments have not been made to the any sub-contractor, therefore, question of TDS does not arise. In view of the above, respectfully following the Jurisdictional High Court’s order, we allow the appeal of the assessee.
In the result, appeal filed by the Assessee is allowed.
This Order pronounced in Open Court on 31/03/2022
Sd/- Sd/- (ANNAPURNA GUPTA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 31/03/2022 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।