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TMI Blog2012 (4) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in favor of assessee. Higher rate of depreciation - lease out of trucks - held that:- as the assessee has clearly hired them out by way of a sub-contract its machinery and equipments which income has been returned by the assessee therefore could not be said to have been reduced from the expenditures incurred for hiring out the vehicles of the other truck owners. - The word "hired" used by the law was to only indicate that some income should be rendered to taxation by utilization of those assets and not that assets which can only be hired out can be used for claiming higher depreciation. The fact that the assessee chose to lease out the trucks does not on that score disentitle higher rate of depreciation. - - Decided in favor of the assessee - IT APPEAL NO. 440 (CTK.) OF 2011 - - - Dated:- 13-1-2012 - K.K. GUPTA, K.S.S. PRASAD RAO, JJ. S. Bandapadhya for the Appellant. Smt. Paramita Tripathy for the Respondent. ORDER K.K. Gupta, Accountant Member This appeal by the assessee agitates the confirmation of disallowance computed by the Assessing Officer invoking the provisions of Section 194C r.w.s. 40(a)(ia) of the Income-tax Act,1961. In consequence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee owned 4 tippers and 2 excavators and purchased new loaders in the impugned year which fully justifies that the Assessing Officer was not within his jurisdiction either to invoke the provisions of Section 40(a)(ia) on assuming jurisdiction for reasons to believe that the assessee had not shown income from hiring its trucks and excavators which income had been shown in the Profit Loss account in the impugned Assessment Year. The learned CIT(A) considered the case of the assessee by holding a view that the payments were for the purpose of having entered into a contract when hire charges were paid to tipper owners whose tippers and excavators were engaged in assessee's work. The assessee therefore, ought to have explained why the payments to them which five contractors as inscribed in the assessment order were not subjected to TDS for whole of the amount when amount partly paid was subjected to TDS and deposited. It was explained by the assessee that all these persons to whom the payments were made were not to be subjected to TDS as they were not under obligation in view of the assessee having contractual obligation with Shri Sarat Chandra Nayak for whom he is to execute th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 194C for consequent consideration u/s. 40(a)(ia). The learned Counsel for the assessee relied no the decision of Hon'ble P H High Court in the case of CIT v. United Rice Land Ltd. [2008] 174 Taxmann 286 (Punj. Har.) which clearly opines that an assessee engaging truck owners for executing his carrying out the sub-contract and the transportation charges were paid by the assessee directly to the truck owners or operators there being no oral or written contract entered into by the assessee and transporters whether the assessee is liable to deduct tax at source was not applicable insofar as there was no agreement between Sri Sarat Chandra Nayak and the actual payees. The assessee being a sub-contractor itself could not have entered into another contract for the purpose of making payments to the five parties who had utilised their trucks for the assessee's business. He submitted that all the expenses that were incurred by the assessee for the purpose of executing the sub-contract was for utilising the 4 tippers and the excavators which fell short of executing the sub-contract therefore cannot be further held for subjected to deduction of tax at source u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture without giving any findings to the fate of tax deducted at source. The learned Counsel submitted, as alternate argument, that the assessee is merely hiring the trucks of other truck owners and never indulged in sub-contracting. The other truck owners merely let out their trucks for some fixed and temporary purpose and their duties would be limited to the extent of carrying out the goods from one point to another. They are never confronted with the main contractee of the assessee nor do they step in the shoes of the assessee before them. Thus, even if it be considered that there were some contracts between the assessee and the other truck owners, that would lead to the finding that they were independent contractors in respect of particular jobs allotted to them and not at all, the sub-contractors on behalf of the assessee in respect of the main contract undertaken by the assessee from the main contractor. For this proposition, the learned Counsel relied on the decision of ITAT, Visakhapatnam Bench in the case of Mythri Transport Corporation v. Asstt. CIT [2010] 124 ITD 40 wherein the characteristic of a 'sub-contract' has been spelt out clearly. In that case the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 40(a)(ia) of the Act to the present case. The disallowance, therefore, made under that section, is clearly illegal and thus, deserves to be deleted in full. 5. On the second issue, the learned Counsel has relied on the proposition that the word of "hired out" has been misconstrued by the authorities below. The assessee was given a sub contract for hire its vehicles being tippers and excavators. Various judicial pronouncements interpreted the law governing the law for claim of depreciation at a higher rate when the assets are used for the purpose of earning income by hiring them out. There is no qualitative difference between lease of the vehicle for a specified period for consideration and letting the vehicle on hire for short duration on payment of hire charges. The fact that the assessee chose to lease out the trucks does not on that score disentitle him to claim the benefit of the higher rate of depreciation. He relied on the decision of the Hon'ble Madras High Court in the case of CIT v. Madan Co. [2002] 254 ITR 445/[2003] 128 Taxman 116 (Mad.). In another decision of Hon'ble Delhi High Court in the case of CIT v. M.G.F (India) Ltd. [2006] 285 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws cited at Bar. It was not a change of stand taken by the assessee insofar as the part deduction was not to be taken as contravening the provisions of Section 194C r.w.s. 40(a)(ia). The assessee being a transport contractor having executed whole of the contract for transportation by hiring lorries from other lorry owners who simply placed the vehicles at the disposal of the assessee without involving themselves for carrying any part of the work undertaken by the assessee could not be said to have made the payments for his business involving deduction of tax at source to another contractor. The work contract as defined exclude payments for hiring out lorries therefore could not be subjected to consider the issue of claiming of higher depreciation also. The assessee owns those assets which are leased out for the purpose of hiring out and the nature of business clearly entitles the assessee to claim higher depreciation when the assessee for the volume of work hires other trucks from other truck owners for executing its contract. The learned Counsel for the assessee has supplied a Paper Book wherein the payment to the truck owners clearly indicate that they have not been made as par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore did not give a finding to sustain the disallowance assessed by the Assessing Officer u/s. 40(a)(ia) to suggest that there was any contract between the assessee and those individual by way of a composite contract for labour as well as hiring of the vehicles and equipments etc. In this view of the matter, we have no hesitation to set aside the orders of the authorities below on this issue and direct the Assessing Officer to delete the disallowance of Rs. 65,24,800 made u/s. 40(a)(ia). 7. On the sustenance of the disallowance of the claim of higher depreciation as have been deliberated by us on the issue, we are inclined to hold the contention of the learned Counsel for the assessee appropriate insofar as the assessee has clearly hired them out by way of a sub-contract its machinery and equipments which income has been returned by the assessee therefore could not be said to have been reduced from the expenditures incurred for hiring out the vehicles of the other truck owners. The word "hired" used by the law was to only indicate that some income should be rendered to taxation by utilization of those assets and not that assets which can only be hired out can be used for claimin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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