2013 (1) TMI 567 - AT - Income Tax

Non deduction of TDS u/s 194C - hiring of lorry for carrying the goods - Held that - The legislature with effect from 01-04-1995 inserted Explanation 4(c) to Section 194C to include the term work - carriage of goods or passengers by any mode of transport other than by railways. Therefore, the contract shall be for carriage of goods or passengers other by railway. As in the present case, admittedly, the carriage of goods was not entrusted with the lorry/truck owners from whom the taxpayer has hired the lorries/trucks or with the taxpayer himself. Admittedly the responsibility of carriage of goods remains with M/s Logos Logistics Pvt Ltd. No work of carriage of goods was entrusted either with the taxpayer or with the lorry/truck owners from whom the taxpayer hired the lorries/trucks. Therefore, there is no contract for carriage of goods between the taxpayer and the lorry/truck owners from whom the trucks/lorries were hired. As such provisions of section 194C are not applicable to this transaction. See Mythri Transport Corpn. case (2009 (1) TMI 337 - ITAT VISAKHAPATNAM), Cochin Goods Transport Association (1998 (10) TMI 68 - KERALA HIGH COURT) & Associated Cement Co. Ltd. v. CIT 1993 (3) TMI 1 - SUPREME COURT Moreover, the taxpayer has admittedly paid hire charges to lorry owners. Thus as decided in Merlyn Shipping & Transporters v. Asstt. CIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM in respect of amount paid on or before the last day of the financial year and it was held that the amount which was already paid cannot be a subject matter of deduction u/s 40a(ia) - in favour of assessee

Summary

Issues:
1. Whether taxpayer is liable to deduct tax u/s 194C of the Act for hiring lorries?
2. Whether provisions of section 194C are applicable to the transaction in question?
3. Whether taxpayer is responsible for deducting tax on payment of hire charges to lorry owners?
4. Whether the taxpayer is liable under section 40(a)(ia) of the Act for already paid hire charges?

Analysis:
1. The appeal concerns whether the taxpayer is obligated to deduct tax u/s 194C for hiring lorries. The revenue argues that hiring lorries for carrying goods constitutes work, necessitating tax deduction. However, the taxpayer contends they are a transport contractor who merely supplied trucks on hire basis, not entrusted with carrying goods. The Tribunal found that the taxpayer did not undertake work of carrying goods, as the responsibility remained with the entity using the trucks. Thus, the taxpayer is not liable under section 194C.

2. Section 194C's applicability to the transaction was scrutinized. The Tribunal determined that since the taxpayer did not have a contract for carrying goods with the lorry owners, and the responsibility for carriage of goods lay with another entity, section 194C did not apply to this scenario. The absence of a work contract between the taxpayer and lorry owners led to the conclusion that the provisions of section 194C were not relevant in this case.

3. The issue of tax deduction on hire charges paid to lorry owners was deliberated. The Tribunal noted that the taxpayer had simply hired lorries and paid charges, without being responsible for the carriage of goods. As section 194-I was not applicable for the relevant year, the taxpayer was not obligated to deduct tax on the hire charges paid. The Tribunal also referenced a decision where it was established that tax deduction is not required for amounts already paid before the end of the financial year.

4. Lastly, the question of the taxpayer's liability under section 40(a)(ia) for already paid hire charges was addressed. The Tribunal upheld that the provisions of section 40(a)(ia) apply only to amounts remaining unpaid at the end of the financial year, not to amounts already disbursed. Consequently, the Tribunal affirmed the lower authority's decision, dismissing the revenue's appeal.