2007 (6) TMI 485 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of demand raised u/s 201(1) and 201(1A) of the Income-tax Act, 1961.
2. Applicability of section 194C to payments made to truck owners or agents.

Summary:

Issue 1: Deletion of demand raised u/s 201(1) and 201(1A) of the Income-tax Act, 1961.

The Department appealed against the order of the Commissioner of Income-tax (Appeals) for the assessment year 2002-03, objecting to the deletion of the demand raised u/s 201(1) and 201(1A). The Assessing Officer had concluded that the assessee-company failed to deduct taxes properly on payments made to truck owners or agents, estimating 90% of the payments as exceeding Rs. 20,000 each and computing tax liability accordingly. The Commissioner of Income-tax (Appeals) found that the provisions of section 194C were not applicable and deleted the demand, stating that the Assessing Officer's estimation was not permitted under section 194C and that each trip was a separate contract exempt from tax deduction as per section 194C(3).

Issue 2: Applicability of section 194C to payments made to truck owners or agents.

The Tribunal upheld the findings of the Commissioner of Income-tax (Appeals), noting that the payments were made directly to truck drivers/owners and not to suppliers. The Tribunal found that the contracts were with truck owners/drivers and not with agents or suppliers, and that no payment exceeding Rs. 20,000 was made without tax deduction. The Tribunal referred to the Central Board of Direct Taxes circular No. 715, which clarified that each GR can be treated as a separate contract if the goods are transported at one time. The Tribunal concluded that the provisions of section 194C were not applicable and confirmed the deletion of the demand.

Conclusion:

The appeal filed by the Department was dismissed, and the order of the Commissioner of Income-tax (Appeals) was upheld, confirming that the provisions of section 194C were not applicable to the payments made by the assessee. The Tribunal found no infirmity in the findings of the Commissioner of Income-tax (Appeals) and confirmed the deletion of the demand raised u/s 201(1) and 201(1A).