2015 (10) TMI 825 - HC - Income Tax

TDS u/s 194C - Disallowance under Section 40(a)(ia) - payment of transportation of goods - sub-contracting - scope of the term Work - payments made to each lorry owner exceeded 50, 000 - whether the provisions of Section 194C of the Act can be invoked only if any single payment exceeds 50, 000/- or can be invoked if the aggregate of payment in an assessment year exceeds 50, 000/-? - ITAT deleted the addition - Held that - The Tribunal gravely erred in holding that the assessee/appellant had made out a case because the revenue failed to place any material before it contraverting the vague and mere oral assertion of the assessee. The said reasoning is contrary to all known cannons of the law of evidence logic and law mandates that the burden and onus is on the person who alleges a fact to prove the said fact. The assessee has pleaded that the entries freight paid is on account of a mistake committed by their accountant and they have come up with the excuse very belatedly. This being the factual issue the Tribunal did not deem it necessary to call upon the assessee to demonstrate the said fact but proceeded to accept the statement as a proven fact. It appears that the Tribunal has diverted itself from addressing the core issue that is whether the assessee has paid any sums the aggregate of which exceeds 50, 000/- in the assessment year to any single entity. The Tribunal has not addressed itself to any of the findings of fact rendered by the Assessing Authority. In particular several instances of the aggregate of payments have exceeded 50, 000/- in the assessment year have been placed on record. It does not render any reasoning to unsettle the finding of the original authority that even the agreement can also be an oral and that the transactions with the lorry owners/transporters is within the purview of the provisions of the Act as it amounts to carriage of goods other than the railways. The transportation of goods was from its premises to the port and in the course of its export. In the present case the facts and details are not only hazy but are obfuscated due to lack of clarity. Apart from stating that the ore was required to be transported from point (a) to point (b) no details are provided as to whether the point (b) was a licenced or registered place where minerals could be stored there etc. It is seen that a huge sum amounting to 5 00 crorers is spent merely for transportation of iron ore from point (a) to point (b) no details are forth coming whether the transportation is in the course of business or is being transported to the hands of end user. In such situation this Court finds it hard to believe the version put out by the assessee. On the other hand the Tribunal ought to have adversely inferred against the assessee for having failed to place material to substantiate its oral assertion. Consequently the order of the Tribunal is vitiated and requires to be interfered with - Decided in favour of the revenue.

Summary

Issues Involved:
1. Deletion of addition under Section 40(a)(ia) of the IT Act due to non-deduction of TDS on payments exceeding Rs. 50,000.
2. Interpretation of "Work" under Section 194C and its applicability to sub-contracts.
3. Applicability of TDS provisions to part-subcontracted work under Section 194C(2).

Detailed Analysis:

1. Deletion of Addition under Section 40(a)(ia):
The core issue is whether the ITAT was correct in deleting the addition made under Section 40(a)(ia) of the IT Act due to non-deduction of TDS on payments exceeding Rs. 50,000. The Revenue argued that the assessee made aggregate payments exceeding Rs. 50,000 to various truck owners without deducting TDS, as mandated under Section 194C. The assessee contended that these payments were hire charges and not freight charges, and the term "freight paid" was a misnomer due to an accountant's error. However, the Assessing Officer (AO) and Commissioner (Appeals) found that the payments were indeed freight charges and not hire charges, as evidenced by the vouchers and the nature of transactions. The High Court upheld the AO's and Commissioner (Appeals)'s findings, concluding that the payments were subject to TDS under Section 194C, and the Tribunal erred in deleting the addition.

2. Interpretation of "Work" under Section 194C:
The second issue concerns the interpretation of "Work" under Section 194C and its applicability to sub-contracts. The Revenue argued that the ITAT overlooked the definition of "Work" under Explanation III to Section 194C, which includes the carriage of goods. The ITAT's decision was based on the premise that the entire work was not subcontracted, which the High Court found to be incorrect. The High Court clarified that even partial subcontracting attracts TDS provisions under Section 194C(2), and the Tribunal's interpretation was flawed.

3. Applicability of TDS Provisions to Part-Subcontracted Work:
The third issue is whether TDS provisions apply to part-subcontracted work under Section 194C(2). The Revenue contended that the ITAT failed to appreciate that even part-subcontracting attracts TDS. The High Court agreed with the Revenue, stating that the Tribunal misdirected itself by not considering that the payments made to truck owners/operators were for the carriage of goods, thus falling within the ambit of Section 194C. The High Court emphasized that the Tribunal erred in requiring written sub-contracts to invoke TDS provisions, as oral contracts and implied agreements are also covered under the Act.

Additional Issue - Tribunal's Approach:
The High Court also addressed an additional issue regarding the Tribunal's approach. The Tribunal was criticized for relying on broad principles without reference to critical facts. The High Court found that the Tribunal's decision was based on assumptions and inferences without substantial evidence. The Tribunal's acceptance of the assessee's oral assertions without corroborative evidence was deemed contrary to the law of evidence. The High Court highlighted that the burden of proof lies with the assessee to substantiate their claims, and the Tribunal failed to hold the assessee accountable for this burden.

Conclusion:
The High Court set aside the Tribunal's order, reinstating the AO's original assessment. The Court concluded that the payments made by the assessee were indeed subject to TDS under Section 194C, and the Tribunal's decision to delete the addition was erroneous. The questions of law were answered in favor of the Revenue, and the appeal was disposed of accordingly.