2016 (10) TMI 322 - AT - Income Tax

TDS u/s 194C - non deduction of tds on transportation charges - disallowance u/s 40(a)(ia) - Held that - The issue is squarely covered by the decision of coordinate bench of this Tribunal, in the case of Mythri Transport Corporation vs. ACI 2009 (1) TMI 337 - ITAT VISAKHAPATNAM wherein under similar circumstances, held that hiring of trucks and lorries cannot be called to be the work as per the definition given in explanation 3 to section 194C of the Act and consequently the assessee is not liable for deduction of TDS on payment to lorry/truck owners as per the provisions of section 194C of the Act. - Decided in favour of assessee

Summary

Issues:
1. Whether the transportation charges incurred by the assessee are liable for TDS under section 194C of the Income Tax Act.
2. Whether the payments made to lorry owners come within the definition of works contract as defined under section 194C of the Act.
3. Whether the CIT(A) was justified in deleting the additions made under section 40(a)(ia) of the Act.

Analysis:

Issue 1:
The Revenue filed an appeal against the CIT(A) order for the assessment year 2007-08, challenging the disallowance of transportation charges of ?2,59,52,945 under section 40(a)(ia) of the Act due to non-deduction of TDS under section 194C. The A.O. passed a fresh assessment order based on CIT's direction under section 263, disallowing the said charges for non-compliance with TDS provisions.

Issue 2:
The assessee contended that the agreement with lorry owners was not a works contract under section 194C, as it involved hiring trucks for transportation, not a sub-contract. The CIT(A) agreed with the assessee, citing precedents from ITAT Visakhapatnam, and directed the A.O. to delete the additions under section 40(a)(ia) of the Act.

Issue 3:
The Revenue argued that the CIT(A) erred in not applying the TDS provisions under section 194C to payments exceeding ?20,000, as the conditions of explanation 3 to section 194C were met. They claimed the arrangement was a contract between the assessee and lorry owners, falling under the definition of works contract. However, the A.R. for the assessee supported the CIT(A)'s order, emphasizing that hiring trucks did not constitute a works contract as per precedents from ITAT Visakhapatnam.

Judgment:
The Tribunal, after hearing both parties and reviewing the facts, upheld the CIT(A) order. Citing the decision in Mythri Transport Corporation vs. ACIT, the Tribunal concluded that mere hiring of trucks did not amount to a works contract under section 194C, hence not liable for TDS. As the CIT(A)'s decision aligned with this legal position, the Tribunal dismissed the Revenue's appeal, affirming the deletion of additions under section 40(a)(ia) of the Act.

This detailed analysis of the judgment addresses the issues raised, the arguments presented by both parties, and the legal reasoning behind the Tribunal's decision.