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2021 (9) TMI 46 - HC - Income TaxTDS u/s 194C - non deduction of TDS on lorry hire payments - addition u/s 40(a)(ia) - vehicles hired from the sub-contractors - as per assessee there was no written contract nor any contract as presumed by the Department between the lorry owners/drivers and the assessee, and where ever it was feasible, TDS has been deducted, and only in cases where payments were made to the lorry owners, there is no feasibility of deducting any Tax at Source - HELD THAT - While testing the correctness of the stand taken by the assessee, the Court considered the factual position that the assessee is providing vehicles to one of its customers, M/s.Mahindra Group, and in Clause-5 of the written agreement between the parties, a condition has been stipulated that provision of services would involve providing vehicles owned by the assessee or associates of assessee or agents, for transportation of the employees of Thomson Corporation, and further, on facts, it was found that the assessee is owning a fleet of vehicles, which is not sufficient to meet the agreement entered into between the assessee and such individual owners. The Court held that there is no necessity for a written agreement between the parties. The facts before us are entirely different, as both the CIT(A) as well as the Tribunal have held on facts that the assessee hired vehicles from the drivers and there was nothing on record to infer any unwritten contract. Therefore, we are of the view that the decision in the case of J.Rama 2012 (6) TMI 645 - KARNATAKA HIGH COURT cannot be made applicable to the facts and circumstances of the case on hand. Tribunal was right in dismissing the appeal filed by the Revenue and granting full relief to the assessee - Decided against revenue.
Issues:
Interpretation of Section 194C of the Income Tax Act - Applicability to lorry hire payments Interpretation of Section 40(a)(ia) of the Income Tax Act - Applicability to contractual liability between assessee and lorry owners/drivers Existence of contractual liability between assessee and lorry owners - Implied contract consideration Analysis: The High Court of Madras heard Tax Case Appeals filed by the Revenue against the order of the Income Tax Appellate Tribunal regarding the Assessment Year 2009-10. The substantial questions of law revolved around the applicability of Section 194C and Section 40(a)(ia) of the Income Tax Act. The Assessing Officer disallowed lorry hire charges due to non-deduction of TDS, leading to scrutiny of the contractual relationship between the assessee and lorry owners/drivers. The CIT(A) partially allowed the appeal, acknowledging the absence of a written contract between the parties but restricted the disallowance based on the amount exceeding a threshold limit. The Tribunal later dismissed the Revenue's appeal and allowed the Cross Objection of the assessee, leading to the current appeals before the High Court. The Court examined whether there was a deemed sub-contract between the assessee and lorry drivers, emphasizing the lack of evidence supporting such an inference. It was noted that the absence of a formal contract did not automatically imply a sub-contractual relationship, especially given the specific nature of the transport services provided by the assessee. Regarding the disallowance restriction imposed by the CIT(A), the Court agreed with the Tribunal's decision, highlighting the amendment to Section 194C in 2009, which exempted TDS if PAN was furnished. Since the Assessment Year in question predated this amendment, the Court upheld the Tribunal's ruling based on the prevailing legal provisions at the time. In contrast to a precedent cited by the Junior Standing Counsel, the Court distinguished the facts of the current case from the case law presented, emphasizing the specific circumstances and findings of the CIT(A) and the Tribunal. Ultimately, the Court upheld the Tribunal's decision to dismiss the Revenue's appeal and ruled in favor of the assessee, concluding that the substantial questions of law were answered against the Revenue.
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