2013 (1) TMI 314 - HC - Income Tax

Non deduction of TDS - Lorry Booking Income - Addition invoking Section 40(a)(ia) - ITAT deleted the addition - Held that - The assessee collects freight charges from the clients who intended to transport their goods through separate transporters. The entire amount collected from the clients is paid to the transporters after deducting commission from the said amount. Relying on case of CIT v. Cargo Linkers 2008 (3) TMI 619 - DELHI HIGH COURT the assessee was not the person responsible for making payment in terms of Section 194C. The contract was actually between the exporter and the airline and the assessee was only an intermediary and, therefore, it was not the person responsible for deduction of tax at source in terms of Section 194C - in favour of assessee.

Summary

Issues:
1. Interpretation of Section 40(a)(ia) of the Income Tax Act, 1961.
2. Determining whether the assessee was liable to deduct TDS under Section 194C of the Income Tax Act.
3. Analysis of the role of the assessee as a facilitator or intermediary in the contract for carriage of goods.

Issue 1: Interpretation of Section 40(a)(ia) of the Income Tax Act, 1961
The revenue challenged an order regarding the addition of Rs. 8,51,43,744/- under Section 40(a)(ia) for the assessment year 2007-08. The assessee argued that this addition was erroneous. The assessee was involved in both lorry booking and own booking businesses. The dispute arose regarding the income derived from lorry booking, with the assessee claiming it was a booking commission and not subject to TDS. The Assessing Officer and Commissioner disagreed, but the Tribunal ruled in favor of the assessee, stating the assessee acted as an intermediary.

Issue 2: Determining TDS Liability under Section 194C
The main issue was whether the assessee was obligated to deduct TDS under Section 194C. The Tribunal found that the assessee was not liable as it acted as a facilitator or intermediary without a direct contract for carriage of goods with clients. The revenue contended that the assessee was the 'person responsible' for payment under Section 194C, but the Tribunal's factual findings favored the assessee's position.

Issue 3: Role of Assessee as Facilitator or Intermediary
The case drew parallels with a previous judgment, Cargo Linkers, where the assessee was deemed an intermediary between exporters and airlines. Similarly, the present assessee collected payments from clients for transportation services and paid transporters, deducting a commission. The Tribunal found the assessee acted as a facilitator, not a party to the carriage contract. The court upheld this finding, emphasizing the factual nature of the contract between parties.

In conclusion, the Tribunal's decision aligned with the assessee's position, emphasizing the facilitator role over direct contractual obligations. The judgment dismissed the appeal, citing the precedent set by Cargo Linkers and the factual nature of the contractual relationships involved.