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TMI Blog2015 (12) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... ney collected from the assessee. Thus, the assessee has given work contract to intermediaries for hiring of transport for carriage of goods for the assessee which itself is a contract covered under Section 194C of the Act and in our considered view, the assessee was liable to deduct TDS u/s 194C of the Act on payments for carriage of goods through intermediaries as there was a contract covered u/s 194C of the Act between the assessee and these intermediaries - Hence , we set aside the orders of the CIT(A) and restore the orders of the AO. We accordingly uphold the orders passed by the A.O. - Decided against assessee. - I.T.A. No. 1687/Mum/2011 - - - Dated:- 30-11-2015 - Shri Amit Shukla, Judicial Member And Shri Ramit Kochar, Accountant Member For the Petitioner : Shri Abani Kanta Nayak, DR For the Respondent : None ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the Revenue, being ITA No. 1687/Mum/2011, is directed against the order dated 16-12-2010 passed by the learned Commissioner of Income Tax(Appeals) - 34, Mumbai (Hereinafter called the CIT(A) ), for the assessment year 2007-08 whereby the CIT(A) deleted the additions made by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prashant Sitaram Patil 14,61,810 13 Pravin Gavad 3,10,920 14 Pundalik Patil 1,26,660 15 Purnima Parekh 1,00,000 16 Shri Sai Stone Pvt Ltd. 6,60,840 17 Sikarwala Transport Co. 2,25,000 18 Trimurti Enterprises 3,50,000 19 Vishal Transport 1,00,000 20 B.D. Ahrawal Co. 1,00,000 It was observed by the A.O. that no tax has been deducted at source on the above mentioned transportation charges although the same are covered u/s 194C of the Act. The assessee was show caused about the default w.r.t. nondeduction of Tax at source on these transportation charges. The assessee , however, has not provided any detail before the AO for such default made. Accordingly, the transport charges payment of ₹ 94,61,762/- was disallowed and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f my knowledge and belief. The CIT(A) accepted the contentions of the assessee and held that the A.O. has not given any finding of fact as to whether there is any contract, written or oral between the assessee and the individual parties to whom the payment was made and hence in absence of such finding of the AO and also assertion of the assessee that there is no contract written or oral, between the assessee and the individual parties , the provisions of section 194C of the Act is not attracted in this case. The CIT(A) relied upon the judgment of Hon ble Punjab and Haryana High Court in the case of M/s United Rice Land Limited (supra) and held vide orders dated 16/12/2010 that there is no payment of freight charges in pursuance of a contract and the addition of ₹ 94,61,762/- is unjustified and not in accordance with law and deleted the same as in view of the CIT(A) there is no default of the assessee in not deducting tax at source u/s 194C of the Act. 5. Aggrieved by the orders of the CIT(A), the Revenue has preferred this appeal before the Tribunal. 6. At the time of hearing, none appeared on behalf of the assessee despite several opportunities been given to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee during the assessment year. On first appeal, the CIT(A) deleted the addition of ₹ 94,61,762/- holding that the A.O. has not given any finding of fact as to whether there is any contract, written or oral between the assessee and the individual parties to whom the payment was made and hence in absence of such finding of the AO and also assertion of the assessee that there is no contract written or oral, between the assessee and the individual parties , the provisions of section 194C of the Act is not attracted in this case. The assessee has filed an affidavit before the CIT(A) which is reproduced in the preceding para s whereby the main averment of the assessee is that the assessee has paid transportation charges to various parties(Hereinafter called the intermediaries ) who themselves are not transporter but rather they are arranging actual transporters independently from open market for carriage of goods for the assessee . The assessee has averred in the affidavit that these actual transporters are stranger to the assessee and the assessee has no contract written or oral with any of the person or actual parties in transport business. The assessee has also ave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly) responsible for paying any sum to any resident (hereafter in this 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 subcontractor 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: [Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the sub-contractor, shall be liable to deduct income-tax under this sub-section.] . .. [Explanation III.-For the purposes of this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation to sub-section (7) of section 44AE.] .. The consequences of non-deduction of TDS on payments covered u/s 194C of the Act are provided in Section 40(i)(ia) of the Act which stipulate that such amounts on which tax is not deducted at source shall not be allowed as deduction while computing income under head Profits and gains of business or profession . The relevant extract of Section 40(i)(ia) of the Act as applicable for the assessment year 2007-08 is reproduced below : Amounts not deductible. 40. Notwithstanding anything to the contrary in sections 30 to [38], the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession ,- (a) in the case of any assessee- .. .. (ia) any interest, commission or brokerage, [rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is contractual relationship between the assessee and the persons to whom the assessee had made the payments in the nature of transportation charges for carriage of goods for the assessee who in turn have independently arranged actual transporter from open market for carriage of goods for the assessee and these intermediaries have paid the actual transporters out of money collected from the assessee. We have given our anxious thought to the averments of the assessee and also kept in view the educational background and hardships of the assessee as averred in the affidavit. In our considered view , the word Contract has not been defined u/s 194C of the Act and in the absence of the definition of the word Contract in the Act , we have to refer to the meaning of contract as used in commercial parlance which drew its source from Indian Contract Act,1872 whereby it is stipulated according to Section 2 of the Indian Contract Act,1872 , every promise and every set of promises , forming the consideration for each other , is an agreement while contract as defined in the same section means an agreement enforceable by law. Section 9 of the Indian Contract Act , 1872 provides that contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transport for carriage of goods for the assessee for which payments are made by the assessee to these intermediaries who are not actual transporters but are arranging actual transporters independently from open market for carriage of goods for assessee and these payments made by the assessee to the intermediaries are consolidated payment which include two components/elements i.e. charges for actual transporters hired independently by the intermediaries for carriage of goods for the assessee and service charges of these intermediaries for arranging actual transporters from open market for carriage of goods for the assessee . These intermediaries have in-turn independently sub-contracted the work to actual transporters who transported the goods for the assessee. The word work in Explanation III to Section 194C of the Act is defined in an extensive manner as the law makers have used the words the expression work shall also include meaning thereby that the lawmaker intend to give extensive definition to the word work instead of giving narrower or restrictive definition (Reference Principles of Statutory Interpretation by Justice G.P.Singh 12th Edn.2010, Page 179-180). The co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndently appointed truck operators for the assessee therein rather it was the assessee therein who appointed truck operators while in the instant case the assessee has engaged the services of intermediaries who are not actual transporters themselves but who in turn engaged independently actual transporters for carriage of goods for the assesse and made payments to actual transporters out of money collected from the assessee . Thus, in the instant case under appeal, the assessee has given contract to these intermediary transporters in their independent capacity who have in turn hired independently the actual transporters as their subs-contractors for carriage of goods for the assessee while no such instructions was issued by the assessee to pay a certain amount to actual transporters who were hired by intermediaries independently and hence the case of United Rice Land Limited is clearly distinguishable. The next contention of the assesse as averred in the affidavit is that the assessee has not made any single payment on any day to any person for more than ₹ 20000/- in cash which contention again is devoid of merit as Section 194C of the Act as applicable for the relevant assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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