2012 (11) TMI 1290 - AT - Income Tax

Summary

Issues involved:
The judgment addresses the disallowance of expenses incurred on hiring transporters for carrying out material transportation due to non-deduction of tax at source u/s.194C.

Issue 1: Non-deduction of tax at source and existence of contract:
The appellant, a transport contractor, hired trucks from truck owners without any explicit contract, relying on Form 15-I declarations for non-deduction of tax at source. The Assessing Officer disallowed expenses under section 40(a)(ia) for not deducting tax from truck owners. The appellant argued that on receiving Form 15-I, tax deduction was not required, citing precedents from ITAT Ahmedabad and High Court of Gujarat. The appellant contended that no contract existed with truck owners, supported by decisions from ITAT Cuttack. The learned Counsel argued that non-deductible tax precludes disallowance u/s. 40(a)(ia), seeking deletion of the disallowance.

Issue 2: Interpretation of facts and applicability of legal provisions:
The learned Counsel contended that the Assessing Officer misinterpreted facts, emphasizing that the payment was for reimbursement of expenses, not against a contract. The learned CIT(A) was urged to consider the case law cited and the requirement of obtaining Form 15-I. The learned DR opposed, highlighting the significance of Form 15-I filing and the need for substantiation with Form 15-J. The Tribunal held that the disallowance u/s.40(a)(ia) was unwarranted, as non-deduction of tax at source did not make the appellant defaulting under section 201. The judgment emphasized that the law did not mandate tax deduction in absence of a contract, directing deletion of the disallowance.

Separate Judgment:
The Appellate Tribunal, comprising Hon'ble K.S.S.Prasad Rao and Hon'ble K.K.Gupta, allowed the appeal of the assessee, setting aside the disallowance of expenses incurred on hiring transporters due to non-deduction of tax at source u/s.194C.