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TMI Blog2015 (7) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by lower Authorities will have no consequences. Accordingly, we direct the Assessing Officer to delete the disallowance u/s. 40(a)(ia) r.w.s. 194C of the Act.- Decided in favour of assessee. - ITA No. 961/PN/2014 - - - Dated:- 24-6-2015 - Shri R.K. Panda and Shri Vikas Awasthy, JJ. For the Petitioner : Shri Achal Sharma For the Respondent : Shri S.N. Doshi ORDER PER VIKAS AWASTHY, JM:- The appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-IT/TP, Pune dated 18-03-2014 for the assessment year 2007-08. The assessee has assailed the order of Commissioner of Income Tax (Appeals) primarily on two grounds: 1. Ad-hoc disallowance of 2% of transport expenses amounting to ₹ 14,39,315/-. 2. Disallowance of ₹ 2,83,27,080/- u/s. 40(a)(ia) r.w.s. 194C of the Income Tax Act, 1961. 2. The brief facts of the case as emanating from records are: The assessee is a transporter and is carrying on business under the name and style of M/s. Jeetsons Transport Co. The assessee is primarily engaged in the transportation of molasses from different sugar factories. The assessee owns trucks and on several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02-2006 (at page 12 of Paper Book) from the Managing Director of one of the sugar mills that had assigned the task of transportation of molasses to the assessee. The ld. AR submitted that a perusal of the letter would show that the responsibility and liability of transportation of molasses solely lies on the assessee. The assessee uses his owns trucks and in case more number of trucks are required, the assessee hires the trucks from other transporters. The responsibility of transporting molasses remains on the assessee and is not shifted to the owner or drivers of the hired truck. The ld. AR further submitted that incidentally the trucks were hired from the truck owners who owned less than two trucks. There is no oral or written contract between the assessee and the owner/driver of the hired trucks for transportation of molasses. Thus, the provisions of section 194C are not attracted. In support of his submissions the ld. AR placed reliance on the following decisions: i. CIT Vs. United Rice Land Ltd. 174 Taxman 286 (P H). ii. CIT Vs. Poompuhar Shipping Corpn. Ltd. 153 Taxman 486 (Mad). iii. R.R. Caryying Corporation Vs. ACIT 126 TTJ 240 (CTK). iv. Mythri Transport Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fects were pointed out by the Assessing Officer but the Assessing Officer did not make disallowance. The Commissioner of Income Tax (Appeals) after affording opportunity of hearing to the assessee made disallowance in accordance with the law. The ld. DR further submitted that the payments made by the assessee for hiring trucks were in the nature of Sub-contract. Therefore, the argument of the ld. AR that the provisions of section 194C are not attracted, does not hold good. With regard to disallowance of 2% on transportation expenses the ld. DR submitted that, the expenditure claimed by the assessee as transport expenses were not supported by documentary evidence. It is not necessary that the Assessing Officer has to mention about rejection of books of account before making addition where the expenditure claimed is not supported by any documentary evidence. The ld. DR prayed for dismissing the appeal of the assessee. 5. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. We have also examined the decisions on which the ld. AR has placed reliance. The addition has been made in the income returned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, is using his own trucks as well as hired trucks. The Revenue has not been able to show that there was a contract/sub-contract between the assessee and owners of the hired trucks for transportation of molasses. The hired trucks were always under the control and command of the assessee. The responsibility and liability to transport molasses never shifted to the owners/drivers of the hired trucks. Therefore, it cannot be interfered that there was any written or oral contract/sub-contract between the assessee and the owners of the hired trucks. 7. The Hon'ble High Court of Madras in the case of CIT Vs. Poompuhar Shipping Corpn. Ltd. (supra) while dealing with a similar issue held that where the ships are simply hired on payment of hire charges for utilizing the same in the business, payment of hire charges would not fall within the provisions of section 194C and hence, no tax could be deducted on said payments. In the said case the assesseecompany was engaged in the business of transportation of coal entered into a contract with the State Electricity Board for transporting coal. Since the ships owned by the assessee were not sufficient to carry out the said contract, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the other argument of counsel was, section 194C was amended with effect from 1-7-1995, incorporating the Explanation and the said Explanation clarifies the existing provision of section 194C of the Act. Hence, it would be applicable retrospectively. We are concerned with the assessment year 1994-95. In a recent judgment, the Supreme Court in the case of Sedco Forex International Drill Inc. v. CIT [2005] 279 ITR 310, considering the scope of the Explanation, held that there is no principle of interpretation which would justify reading the Explanation as operating retrospectively, when the Explanation comes into force with effect from a future date. In this case, the Explanation introduced is with the effect from 1-7-1995. Hence, it will be applicable only for the future assessment orders and it will not be applicable to the assessment year in consideration. The Tribunal also considered the fact that the shipping companies which received the hire charges are also income-tax assessees and they had shown the hire charges in their respective income-tax returns and paid the taxes on the same. The said fact was also not disputed by the revenue. So, we are of the view that the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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