9911796707
TMI Blog2015 (7) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar, the appeals are taken up together for adjudication. 2. The facts as emanating from records are : The assessees are engaged in the business of providing vehicles to various companies like Reliance Next-Link Pvt. Ltd., Idea Cellular Ltd., China Petroleum Pipe Line, etc. on contract. The assessees do not own any vehicle of their own but are arranging the vehicles from various transporters. The vehicles are provided by the assessees to the companies in accordance with the contract agreement executed between the assessees and the contractee companies. In lieu of services provided by the assessees, the companies make payment after deducting tax at source. The assessees further make payments to the third parties from whom the vehicles are arranged. On the said payments, the assessees did not deduct tax at source (TDS). The assessees in their respective return of income show the receipts from contractee companies as 'commission'. 3. During the course of scrutiny assessment, the Assessing Officer held that the assessees are providing vehicles to the companies under contract agreement therefore, they are contractors. The Assessing Officer further held that, the assessees hired vehicl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance u/s. 40(a)(ia) to Rs. 35,63,173/-. In respect of disallowance of vehicle expenses, the Commissioner of Income Tax (Appeals) held that the assessee has not been able to fully substantiate the ground raised in the appeal, therefore, the disallowance was restricted to Rs. 10,000/-. In respect of addition of Rs. 50,453/- on account of trading result, the Commissioner of Income Tax (Appeals) deleted the same, as the addition was made merely on assumptions without rejecting or raising any suspicion over the books of account. Against these findings of the Commissioner of Income Tax (Appeals), both, the Revenue and the assessees have come in appeal before the Tribunal. 4. Shri P.S. Naik appearing on behalf of the Revenue submitted that the Commissioner of Income Tax (Appeals) has rightly come to the conclusion that the vehicle owners who had supplied vehicles to the contractee companies according to the instructions of the assessee were in fact sub-contractees of the assessee. Thus, the payments made to them were subject to TDS u/s. 194C of the Act. However, the Commissioner of Income Tax (Appeals) has erred in applying the ratio of decision in the case of M/s. Merilyn Shipping & T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties for supply of vehicles the assessees are not liable to deduct tax at source, as it is not a case of contract/sub-contract. On the other hand the case of the Revenue is that the assessees are providing vehicles to the companies under specified terms and conditions of contract agreement. The assessees have entered into sub-contract between the vehicle owners for providing vehicles to the contractee companies. The payments made by the assessees to the supplier of the vehicles are subject to TDS provisions u/s. 194C. Since, the assessees have not complied with the provisions of section 194C, the payments made by the assessees are disallowed u/s. 40(a)(ia) of the Act. In first appeal, the Commissioner of Income Tax (Appeals) granted partial relief to the assessees by placing reliance on the decision of Special Bench of the Tribunal in the case of M/s. Merilyn Shipping & Transport Co. (supra). 7. Before we proceed further, let us first ascertain, whether the assessees are providing vehicles to the companies under contract? A sample purchase order, and terms and conditions attached thereto for Vehicle hire Services by Idea Cellular Ltd. is placed on record at page 27 of the Pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount shall be paid extra. 18. All incidental expenses such as penalty due to traffic rules violation or any other duties shall be at your cost. 19. Please sign the duplicate copy of this contract as a token of your acceptance of all the terms and conditions given above." 8. A perusal of the terms and conditions of the contract shows that it is the responsibility and liability of the assessees to provide vehicles in good condition as and when required by the company. The assessees have to ensure all compliances viz payment of road taxes, insurance, pollution control etc. with respect to the vehicles. In case of any break down the assessees have to provide alternate vehicle within specified time, from the time of reporting of break down. It is the duty of assessees to maintain the drivers. Thus, from the terms and conditions mentioned above, it is evident that it is the duty, responsibility and liability of the assessees to provide the vehicles with drivers to the contractee companies. A perusal of the terms and conditions make it amply clear that it is a contract between the company and the assessees for providing vehicles. Therefore, the contention of the assessees that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd parties/individual vehicle owners do not fall within the ambit of section 194C. Thus, we hold that the payments made by the assessees are not subject to TDS provisions. Hence, the assessees have not violated the provisions of section 194C. 12. Our view is further fortified by the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Mukesh Travels Company (supra). Wherein, under similar circumstances where no sub-contract was established between the assessee and transporters, the Tribunal deleted the disallowance u/s. 40(a)(ia) of the Act. The Revenue went in appeal before the Hon'ble High Court. The Hon'ble High Court upheld the findings of the Tribunal and dismissed the appeal of the Revenue. 13. The Visakhapatnam Bench of the Tribunal in the case of Kranti Road Transport (P.) Ltd. Vs. ACIT (supra) has held that where assessee has hired lorries/trucks for his own use and are under his own control and supervision, TDS is not required to be deducted on payments made to truck/lorry owners. In the said case the assessee had hired the trucks/lorries for transporting of the consignment booked by it under its own supervision and control with all responsibility a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
