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2015 (12) TMI 399 - AT - Income TaxTDS u/s 194C - Addition made by the AO u/s 40(a)(ia) - non deduction of tds on the transportation charges - CIT(A) deleted the addition - Held that - The contracts envisages in Section 194C of the Act are not limited to written contracts and all payments made in pursuance of written, oral, implied or quasi contracts are covered u/s 194C of the Act. Thus, a contract need not be in writing; even an oral , implied or quasi contract is good enough to invoke the provisions of Section 194C of the Act. The contract also include sub-contract as it could be seen from coverage of payments to subcontractors by contractors within the ambit of Section 194C of the Act . In the instant case under appeal, the contractors i.e. intermediaries are transporting the goods by carriage for the assessee not themselves but through appointing sub-contractors independently i.e. actual transporters who are hired independently by contractors as sub-contractor for transporting the goods by carriage for the assessee and these sub-contractors are paid for by the intermediaries out of money collected from the assessee. Thus, the assessee has given work contract to intermediaries for hiring of transport for carriage of goods for the assessee which itself is a contract covered under Section 194C of the Act and in our considered view, the assessee was liable to deduct TDS u/s 194C of the Act on payments for carriage of goods through intermediaries as there was a contract covered u/s 194C of the Act between the assessee and these intermediaries - Hence , we set aside the orders of the CIT(A) and restore the orders of the AO. We accordingly uphold the orders passed by the A.O. - Decided against assessee.
Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) under Section 40(a)(ia) of the Income Tax Act, 1961, due to non-deduction of Tax Deducted at Source (TDS) under Section 194C. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 40(a)(ia) due to Non-Deduction of TDS under Section 194C: Facts of the Case: The assessee, engaged in the transportation business under the name M/s Express Transport, was called upon by the AO to provide details of transportation charges paid and TDS deducted. The AO observed that no TDS was deducted on transportation charges amounting to Rs. 94,61,762/-, which led to the disallowance of the same under Section 40(a)(ia) of the Act. Assessee's Argument: The assessee contended before the CIT(A) that the payments were not made "in pursuance of a contract" within the meaning of Section 194C. The assessee relied on the judgment of the Punjab & Haryana High Court in CIT (TDS) vs. M/s United Rice Land Limited, which held that there was no contract between the assessee and the transporters. The assessee submitted an affidavit stating that the payments were made to intermediaries who arranged transporters from the open market without any written or oral contract with the assessee. CIT(A)'s Decision: The CIT(A) accepted the assessee's contentions, noting that the AO did not provide any finding of fact regarding the existence of a contract between the assessee and the individual parties. Consequently, the CIT(A) held that Section 194C was not applicable and deleted the addition of Rs. 94,61,762/-. Revenue's Argument: The Revenue appealed against the CIT(A)'s decision, arguing that the payments were made in pursuance of a contract and thus covered under Section 194C. The Revenue relied on the Tribunal's decision in ITO v. Rajesh A Boricha, asserting that the AO rightly disallowed the amount for non-deduction of TDS. Tribunal's Analysis: The Tribunal examined the provisions of Section 194C and the definition of "contract" under the Indian Contract Act, 1872. It concluded that contracts could be written, oral, implied, or quasi-contracts. The Tribunal noted that the assessee engaged intermediaries who independently arranged actual transporters, indicating an implied contract for transportation services. Conclusion: The Tribunal held that the payments made by the assessee to intermediaries for transportation services constituted a contract under Section 194C. Therefore, the assessee was liable to deduct TDS on these payments. The Tribunal set aside the CIT(A)'s order and restored the AO's disallowance of Rs. 94,61,762/- under Section 40(a)(ia) for non-deduction of TDS. Final Decision: The appeal filed by the Revenue was allowed, and the order pronounced in the open court on 30th November 2015.
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