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TMI Blog2012 (7) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of sec. 194C of the Act – In favor of assessee - ITA No.22 & 23/Vizag/2011 - - - Dated:- 26-12-2011 - D Manmohan, B R Baskaran, JJ. For Appellant: Shri C Subrahmanyam, CA For Respondent: Shri T Lucas Peter, CIT(DR) ORDER Per: B R Baskaran: The appeals filed by the assessee is directed against the common order dated 05.01.2011 passed by the Ld. CIT(A), Rajahmundry and they relate to the assessment years 2005-06 2006-07. Since the issues urged in these two appeals are identical in nature, they were heard together and are being disposed of by this common order. 2. The grounds raised by the assessee in these two years give rise to the following two issues: (a) Validity of re-opening of assessment of the years under consideration. (b) Applicability of provisions of sec.40(a)(ia) of the Act on the freight charges paid on the lorries hired by the assessee. 3. The facts relating to the issues are stated in brief. The assessee firm is carrying on transport business by undertaking transport contracts from various concerns, the major customer being M/s Triveni Glass Limited. The assessments of the two years under consideration were initially com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 ITR 193 (Delhi)) With regard to the reason to believe, the Ld D.R drew support from the decision of Hon ble Supreme Court in the case of Rajesh Jhaveri (291 ITR 500 (SC) . 6. We have heard the rival contentions and perused the record. On a perusal of the assessment orders passed in the regular assessment proceeding, we find that there is no evidence to suggest that the Assessing Officer did examine about the applicability of the provisions of sec. 194C of the Act. Hence, we find merit in the contentions of Learned D.R in this regard. In these circumstances, in our view, there is no reason to presume that the impugned notices issued by the Assessing Officer u/s 148 of the Act are on account of change of opinion. Hence we do not find merit in the contentions of the Learned A.R and accordingly uphold the order of Ld CIT(A) on this issue. 7. The assessee also contested the addition made by the Assessing Officer under section 40(a)(ia) of the Act before Learned CIT(A), but could not succeed. Hence the assessee is before us on this issue also. The assessee contended before the assessing officer that he has arranged the lorries on behalf of his principal by charging commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relied upon the order dated 18th December 2009 passed by Hyderabad bench of ITAT in the case of K.Srinivasa Naidu in ITA No.719/Hyd/2009 . He further submitted that the hiring of vehicle does not fall in the category of Carrying of any work and hence the provisions of sec. 194C(1) also do not apply and in support of this proposition, he relied upon the order dated 11-08-2011 passed by the Visakhapatnam bench of ITAT in the case of Kranti Road Transport Pvt. Ltd in ITA No.358/Vizag/2008 . 9. On the contrary, the Learned D.R submitted that there existed a contract between the assessee and the lorry owners and hence the provisions of sec. 194C shall apply to the assessee. Accordingly he submitted that, if there is failure on the part of the assessee to deduct tax at source u/s 194C of the Act on the payments made to the lorry owners, the same is liable to be disallowed u/s 40(a)(ia) of the Act. In this regard, the Learned D.R relied upon the following case law: (a) J.Rama (194 Taxmann 37) (b) Sree Choudhry Transport Co. (225 CTR 125 (Raj)) (c) Vellapalli Bros. (196 Taxmann 269) (d) V.M.Sankar (127 ITD 316) 10. We have heard the rival con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract with the sub-contractor for carrying out or for the supply of carrying out the whole or any part of the work undertaken by the contractor shall at the time of credit of such sum to the account of the sub-contractor or at the time of payment thereof in cash or by issue of cheque or draft or any other note is required to deduct the TDS at a particular percentage. In both the provisions the word work has been used and the said word work has been defined under explanation 3 according to which the expression work includes advertising, broadcasting telecasting carriage of goods and passengers by any mode of transport other than by railways and catering. For the purpose of impugned controversy, the carriage of goods and passengers by any mode of transport other than by railways is considered to be the work which can be assigned to the contractor or sub-contractor for its carrying out. 12. In the instant case, the assessee is a transporter and books the consignment of different parties for its transportation. Sometimes, the assessee hires the trucks and lorries of others for the transportation of the consignment booked by it. The assessee has made out a case that he has simp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income tax on income comprised therein. 8.1 According to our understanding, section 194C (2) is attracted if all the following conditions are satisfied. a) The assessee should be a contractor b) The assessee, in his capacity as a contractor, should enter into a contract with a sub contractor for carrying out the whole or any part of the work undertaken by the contractor. c)The sub-contractor should carry out the whole or any part of the work undertaken by the contractor. d)Payment should be made for a carrying out the whole or any part of the work. After considering the reasoning given by the AO as well the Ld CIT (A), the tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inguish the facts of the instant case with the facts available in the case of M/s Mythri Transport Corporation viz., identifying the vehicle at the stage of bidding process itself, mode of payment of hire charges or the sharing of advantage in the contract, in our opinion, are not determinative of the nature of relationship between the assessee and the tanker owners. There is no assurance that the assessee, on identifying the tankers at the stage of bidding process, would automatically get the contract. As rightly contended by the Ld AR such identification may be one of the qualification required even for participating in the tender process. So also there are many ways of compensating the tanker owners for using the vehicle and the methodology followed by the assessee to pass on the entire hire charges, including Diesel escalation charges, except retaining a commission of 5% is one of the modes of payment. Hence the above said factors can not support the case of the revenue. As pointed out in the case of M/s Mythri Transport corporation, what is required to be seen is whether the tanker owners have made a positive involvement in the execution of whole or any part of the main contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Having carefully examined the legal propositions laid down by the Tribunal in the aforesaid case and the provisions of section 194C of the Act, we are of the considered opinion that TDS as per section 194C is required to be deducted when the payments are made to the contractor for carrying out the work i.e. carriage of goods and passengers by any mode of transport other than by railways subject to other conditions prescribed u/s 194C of the Act but whenever the lorries and trucks are hired by the assessee for its own use in any manner under its own control and supervision, the TDS is not required to be deducted on payment made by the contractor to the lorry/truck owners. In the instant case, the assessee has hired the trucks/lorries for transporting of the consignment booked by it under its own supervision and control with all responsibility and liabilities. Therefore, the hiring of truck and lorries cannot be called to be the work as per definition given in explanation 3 of section 194C of the Act and consequent thereto, the assessee is not liable for deduction of TDS on payment to lorry/truck owners as per section 194C of the Act. We therefore, find no merit in the CIT(A) s or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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