2011 (3) TMI 1018 - HC - Income Tax

TDS - There was no written or oral agreement - The assessee hired trucks for its business and made payment for transportation - Held that - As there is no material to show that payments to a single transporter or GR issued by single transporter exceeded Rs.50,000/- in aggregate in the financial year - As held by the Tribunal individual payments did not exceed Rs. 20,000/- and total payment during the financial year did not exceed Rs. 50,000/- by a transporter, in which case, Section 194C of the Act will not apply - The appeal is dismissed

Summary

Issues:
Interpretation of Section 194C of the Income Tax Act, 1961 regarding the liability to deduct tax at source in absence of a written or oral contract for transportation services; Applicability of Section 40(a)(ia) of the Act for disallowance of deductions in case of non-compliance with TDS provisions.

Analysis:
The appeal before the High Court involved the interpretation of Section 194C of the Income Tax Act, 1961, concerning the liability to deduct tax at source in the absence of a written or oral contract for transportation services. The Revenue challenged the order of the Income Tax Appellate Tribunal, which had ruled in favor of the assessee, stating that the provisions of Section 194C come into play only when a contract for transportation and carriage of goods is established. The Tribunal considered whether individual payments exceeding Rs. 20,000 and total payments exceeding Rs. 50,000 were made to a transporter during the financial year, as per the requirements of the Act.

The Assessing Officer contended that the assessee was liable to deduct tax under Section 194C, failing which deductions would be disallowed under Section 40(a)(ia) of the Act. The CIT(A) upheld the Assessing Officer's view, but the Tribunal ruled in favor of the assessee. The Tribunal emphasized that the provisions of Section 194C apply only when a written or oral contract for transportation services is established between the parties. It further clarified that each Goods Receipt (GR) issued by the transporter could be considered a separate contract, but the aggregate payments to a single transporter exceeding Rs. 50,000 in a financial year would trigger the TDS provisions.

The High Court upheld the Tribunal's decision, emphasizing that individual payments did not exceed Rs. 20,000, and the total payment during the financial year did not exceed Rs. 50,000 by a transporter. Therefore, Section 194C of the Act was deemed not applicable in this case. The Court noted that the finding regarding the quantum of payment was a finding of fact, which was not challenged. Consequently, the Court dismissed the appeal, as no substantial question of law arose from the Tribunal's decision.