2010 (4) TMI 1229 - AT - Income Tax

Summary

Issues involved: Stay of demand of tax u/s 143(3) of the I T Act, disallowance of entire amount u/s 40(a)(ia) of the I T Act, prima facie case in favor of the assessee.

Stay of demand of tax u/s 143(3) of the I T Act: The assessee, engaged in goods transport, filed a petition for stay of tax demand of &8377; 16,20,685 out of total demand of &8377; 24,70,685. The AO disallowed the entire amount u/s 40(a)(ia) of the I T Act due to failure of TDS deduction on lorry hire charges u/s 194C(2) of the I T Act. The CIT(A) confirmed the AO's decision, leading the assessee to file a second appeal. The assessee argued that the hire charges were not liable for TDS u/s 194C as they merely hired lorries for goods transportation, not entering into contracts with lorry owners. The Tribunal found the assessee had a prima facie arguable case, paid &8377; 9 lakhs of the demand, and agreed to pay &8377; 50,000 monthly till appeal disposal. Consequently, the revenue was directed not to take coercive steps for recovery, with the stay in force till appeal disposal or 180 days from the stay date.

Disallowance of entire amount u/s 40(a)(ia) of the I T Act: The AO disallowed the entire amount of &8377; 1,78,74,023 paid as lorry hire charges by the assessee to sub-contractors u/s 40(a)(ia) of the I T Act for failure to deduct TDS u/s 194C(2). The assessee contended that hiring lorries for goods transportation did not constitute a contract for work u/s 194C, citing relevant case laws. The Tribunal acknowledged the assessee's argument, finding a prima facie case in their favor and allowing the stay petition based on partial payment and willingness to pay monthly till appeal disposal.

Prima facie case in favor of the assessee: The Tribunal recognized the assessee's prima facie arguable case regarding the non-liability of TDS on lorry hire charges u/s 194C of the I T Act. The assessee's submission, supported by case laws, highlighted that hiring lorries for business purposes did not fall under the purview of a work contract as per the Act. The Tribunal considered the partial payment made by the assessee, willingness to pay monthly, and directed the revenue not to take coercive recovery steps, granting a stay till appeal disposal or 180 days from the stay date.