2022 (6) TMI 1192 - AT - Income Tax

TDS u/s 194C - Disallowance of Lorry Hire Charges u/s 40(a)(ia) - assessee is in transport business and on need basis, he hires lorries from time-to-time - HELD THAT - In this case, the assessee did not have any sub-contract and he was hiring Trucks from open market on individual and need basis and in support of its contention, assessee has filed Truck Nos. as well different Truck numbers and owners of all trucks are different. In this case, payments have not been made to the any sub-contractor, therefore, question of TDS does not arise. In view of the above we allow the appeal of the assessee.

Summary

Issues:
Disallowance of Lorry Hire Charges under section 40(a)(ia) of the Income Tax Act, 1961.

Analysis:
1. The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of Lorry Hire Charges under section 40(a)(ia) of the Income Tax Act, 1961. The appeal pertained to the assessment order for AY 2007-08.

2. The assessee had debited a sum as "Lorry Hire Charges" without deducting TDS as required under Section 194C of the Act. Despite payments exceeding Rs. 50,000 in individual cases, the assessee failed to deduct tax. The CIT(A) upheld the AO's decision.

3. The Tribunal noted that the assessee was in the transport business and hired lorries on a need basis from the open market. Citing Section 194C, the Tribunal highlighted a judgment of the Gujarat High Court regarding a similar case where the disallowance was deleted as the work of transportation was assigned to the assessee, not subcontractors.

4. The Tribunal observed that in the present case, the assessee did not have any sub-contract and hired trucks from the open market based on individual needs. Payments were made to different truck owners, ruling out the existence of a sub-contractor relationship. As no sub-contract was involved, the requirement for TDS deduction did not arise.

5. Relying on the precedent set by the Gujarat High Court judgment, the Tribunal allowed the appeal of the assessee, stating that the liability to deduct tax at source did not arise in this case due to the absence of a subcontractor relationship.

6. Consequently, the Tribunal allowed the appeal filed by the assessee, overturning the disallowance of Lorry Hire Charges under section 40(a)(ia) of the Income Tax Act, 1961.

This detailed analysis of the judgment highlights the key legal issues, the facts of the case, relevant legal provisions, and the reasoning behind the Tribunal's decision to allow the appeal of the assessee.