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TMI Blog2009 (1) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... -contractor' would mean any person who enters into a contract with the contractor for carrying out or for the supply of labour for carrying out the whole or part of the work undertaken by the contractor under a contract with any of the authorities named above or for the supply in terms of his contract with any of the aforesaid authorities. As per the provisions of s. 194C(2), the sub-contractor should carry out the whole or any part of the work undertaken by the assessee. The dictionary meaning of the words carry out is to 'carry into practice'; 'to execute'; 'to accomplish' . It signifies a positive involvement in the execution of the whole or any part of the main work by spending his time, money, energy, etc. and further taking the risks in carrying on the said activity. In the instant case, there is no material to suggest that the other lorry owners involved themselves in carrying out any part of the work undertaken by the assessee by spending their time, energy and by taking the risks associated with the main contract work. In the absence of the abovesaid characteristics attached to a sub-contract in the instant case, the payment made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received on the lorries owned by the assessee and the commission received from the truck owners whose lorries were hired by the assessee. In the P L a/c filed along with the return, the assessee credited a sum of Rs. 32,31,509 towards freight receipt which comprises of receipts pertaining to own lorries, i.e., Rs. 17,14,696 and commission of Rs. 15,16,813. During the course of scrutiny proceedings, the AO noticed from the tax audit report in Form 3CD that the gross turnover of the assessee on account of freight receipts was Rs. 1,38,41,187. Since there is variation between the turnover declared in the P L a/c and the gross turnover reported in tax audit report, the assessee was called upon to explain the reasons as to why the entire gross receipts have not been credited to the P L a/c. The case of the assessee was that it had engaged lorries belonging to other persons as an agent, apart from using its own lorries and on the hired lorries the assessee raised bill of Rs. 1,21,52,612 which was earned by other parties, the assessee was entitled to only commission and the same having been declared in the P L al c, there is no need for claiming any deduction separately In the P L a/c tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source. 5.1 Learned CIT(A), by placing his reliance on the decision of Hon'ble Supreme Court in the case of CIT vs. British Paints India Ltd. (1991) 91 CTR (SC) 108 : (1991) 188 ITR 44 (SC), held that it is the duty of the AO to consider whether or not the books of account disclose true state of accounts and correct income. In the instant case, since the assessee has not routed through the P L a/c, the entire freight receipts as well as the payment made for vehicles hired, the AO is justified in recasting the P L a/c of the assessee by crediting the entire contract receipts and correspondingly debiting the payments made to vehicle owners from whom vehicles were hired. 5.2 The assessee also contended before learned CIT(A) that the provisions of s. 40 would be attracted only if an expenditure is debited to the P L a/c and in the instant case, the payments made for hired lorries have since not been debited to the P L a/c, s. 40 would not apply. Learned CIT(A) rejected this contention of the assessee by placing reliance on the decision of Hon'ble apex Court in the case of Chowringhee Sales Bureau (P) Ltd. vs. CIT 1973 CTR (SC) 44 : (1973) 87 ITR 542 (SC), wherein it was held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lorry owners for hiring their tank lorries for the purposes of the execution of the contract. The tank lorries taken on hire were utilized for the purposes of the business of the execution of the contract during the entire contract period. The tank lorry owners from whom they were hired were paid the amounts after the receipt of the bills from the contractees by the appellant after retaining his share of profit which is termed as commission. Therefore, these tank lorry owners enabled the appellant to execute the contract work. Hence, the same is clearly in the nature of a sub-contract within the meaning of the said work as stated earlier and any payment made to such tank lorry owners comes within the purview of s. 194C. By not deducting tax on such payments made to the tank lorry owners the appellant violated the provisions contained in s. 40(a)(ia)." 6. The learned counsel for the assessee advanced his arguments before us on the following lines, viz.: (a) The tanker lorries used for the purpose of transportation of bitumen are specially designed lorries with heating arrangements. The assessee is under obligation to deploy sufficient number of lorries to ensure uninterrupted s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .63 lakhs. The dictionary meaning of the word "payable" is 'must be paid'. The Hon'ble Bombay High Court in the case of Abdulgafar A. Nadiadwala vs. Asstt. CIT (2004) 188 CTR (Bom) 232 : (2004) 267 ITR 488 (Bom) has held that in the absence of there being anything contrary to the context, the language of a statute should be interpreted according to the plain dictionary meaning of the terms used therein. While interpreting the taxing statutes, there is no scope for importing into the statute words which are not there as held by Hon'ble apex Court in the case of Smt. Tarulata Shyam Ors. vs. CIT 1977 CTR (SC) 275 : (1977) 108 ITR 345 (SC). In any case, it is a well-settled principle that if two alternative views are possible, the view in favour of the assessee has to be adopted. (e) All the vehicle owners, except one, have already filed their respective IT returns. The Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. vs. CIT (2007) 211 CTR (SC) 545 : (2007) 293 ITR 226 (SC) has held that if the tax has already been paid by recipient of income, the tax could not be recovered once again from the deductor-assessee. The Department has not initiated any procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided if we answer following question: "Whether the vehicles hired by the assessee in execution of the transport contract can be termed as a 'sub-contract' and consequently the assessee is liable to deduct tax from the payment made for such vehicles under s. 194C(2) of the Act?" In the instant case, the AO has invoked the provisions of s. 40 (a)(ia) to disallow the payments made for hired lorries as according to him, such payments represent payment to 'sub-contractors' liable for TDS under s. 194C(2) of the Act and the assessee has failed to deduct TDS under s. 194C(2). Sec. 194C(2) of the Act, which is relevant in this context, reads as under: "Any person (being a contractor and not being an individual or an HUF) responsible for paying any sum to any resident (hereafter in the section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of the business of the execution of the contract during the entire contract period. (b) The tanker lorry owners were paid only after receipt of the bills from the contractees, after retaining the commission. (c) The tanker lorry owners enabled the appellant to execute the contract work. 8.4 The assessee has placed a copy of work order dt. 12th Feb., 2005 issued by a company named "RBM-Pati Joint Venture". We have gone through the said work order and notice the following points: (a) The scope of work includes loading of Bitumen 60/70 at Vizag, transportation and delivering at RBMP camp site at 56 kms. and 35 kms. on NH-6. As such three types of work are included in the scope of work. (b) Tanker lorry shall have proper heating arrangement. The company reserves the right to arrange any other means of transportation in case of non-placement/delay in placement of lorry. Any extra payment made for execution of such work will be recovered from the assessee. (c) The assessee shall not engage and/or allow its personnel in any fraudulent activity in performing the work order. The company is at liberty to deduct any reasonable amount, if any fraud or cheating is ..... 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