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TMI Blog2017 (1) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... ear from the facts on record that the risk and responsibility for carrying out the contract work was solely that of the assessee. There is no material to suggest that there was any contract or sub contract written or oral with the outside truck owners and the assessee. It is in these circumstances that when these outside truck owners do not have any responsibility or liability towards the Ambuja Cement or other principals then in absence of any privity the obligation to deduct the tax at source was not that of the assessee. Since we have already held that the provisions of section 40(a)(ia) were not attracted inasmuch as no amount was payable as on the close of the year as well as in absence of any contracts, there was no obligation on the part of the assessee to deduct the tax at source - Decided in favour of assessee. - I.T.A. No. 310/Nag/2014 - - - Dated:- 28-12-2016 - Shri Shamim Yahya, Accountant Member And Shri Ram Lal Negi, Judicial Member Appellant by : Shri A.R. Ninawe Respondent by : Shri K.P. Dewani ORDER Per Shamim Yahya, A. M. This appeal by the Revenue is directed against the order of learned CIT(Appeals) dated 07-03-2014. The grounds of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 17th June, 2005 and had come into effect on the same date, all the forms pertaining to any date prior to that date were straightaway rejected by the AO as being bogus. Further, he found that the forms had been written by the same person, as evidenced from the handwriting. He also found that most of the forms did not contain either the complete address or the Permanent Account Number or the date or a combination of these factors. He also found that the title of most of the forms clearly stated that they had to be used during FY 2008- 09. The AO accordingly concluded that the forms filed before him were not genuine and were an afterthought. The assessee was then asked to show cause as to why the entire transport expenses should not be disallowed under section 40(a)(ia) of the Act. In its reply, the assessee stated that in its line of business, one has to deal with illiterate and uneducated owners of trucks who might not have filled up the forms properly. As regards filing of forms for date prior to 17th Jun, 2006, the assessee stated that it was under the wrong impression about the date in question. As regards the mention of FY 2008-09, the assessee blamed the typist who had commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Chandrapur could not be confirmed from the office of that ITO. On the other hand, the AR emphasized that no adverse view should be taken in this regard, he having produced a copy of the acknowledgement of the office of ITO Ward-3, Chandrapur evidencing receipt of the same, the same also having been filed before the AO. After careful consideration, I am satisfied that the forms in question had indeed been filed be the ITO concerned. 5.2At this stage, it would be instructive to understand how the trucking business operates. It was explained in detail by the AR. The requirements of transportation of the large manufacturing concerns are clearly vast and well quantified. For instance, a cement manufacturer like Mls Maratha Cement Works, which is a division of Mls Ambuja Cements Ltd., with a large cement-producing factory at Chandrapur, would regularly need dozens if not hundreds of trucks daily to transport its cement output to faraway locations. The companies would naturally prefer to deal with one or at the most two large operators with whom they end up by having contractual agreements. The truck trade is essentially a fragmented business, in that there are literally thousands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 t the ime of credit of such sum to the account of the sub-contractor or the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever nis earlier, deduct an amount equal to one per cent of such sum as income-tax on income comprised therein. Provided..... 5.4 After harmoniously reading both the provisions as above, it would become clear in the context of this appeal that provisions of section 194C(2) of the Act would b attracted in the case of the appellant if the following three conditions are satisfied cumulatively. a) The appellant should be a contractor. b) In his capacity as contractor, the appellant should have entered into a contract with a sub-contractor for carrying out the whole or any part of of the work undertaken by the appellant as contractor. c) The sub-contractor should carry out the whole or part of the work undertaken by the contractor and payment should be made for carrying out the whole or part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transporting. All that is of importance in such matters is the loading and the unloading points as also the transit route. In fact, there can be no certainty of pricing either, simply because the rates go up or come down on the basis of the shortage or the glut in the market. In these circumstances, there is simply no question of any formal contractual arrangement between the appellant and the small or individual truck-owners. As such I find that there is no relationship of a contractor and a sub-contractor between the appellant and the small or individual truck-owners. 5.7 At this stage, it would be relevant to advert to the decisions relied upon by the appellant. The multiple judicial pronouncements relied upon have a common ratio, viz. The absence of a relationship of a contractor and a sub-contractor results in the non-applicability of the provisions of section 40(a)(ia) read with section 194C of the Act the existence of a sub-contract being crucial for invoking these provisions, such sub-contract being evidenced by the fastening of the duties and the liabilities of the contractor on the sub-contractors, though on a proportionate basis. 6. Thereafter the learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid contracts provide for various stipulations which are to be strictly adhered by assessee being terms and conditions of contracts. The payment received by assessee are contract payments as envisaged in section 194C(1) of I.T. Act 1961. TDS is properly deducted on transportation receipts received by assessee. Contracts of transportations. C) On certain occasions assessee has to hire trucks from open market in the vicinity of various factories located for transportation of goods. The assessee has no regular contract of hiring of trucks for continuous transportation of various goods and in fact assessee has no oral or written agreement for hiring trucks for transportation of goods to perform contractual obligation undertaken by virtue of various agreements with corporate clients. D) The assessee alone under its control and supervision has executed whole of contract. The individual lorry owners have not carried out any part of the work undertaken by assessee. The payments made by assessee to various drivers of trucks are on each trip basis. In view of above facts payment made by assessee for hiring of trucks is not in the nature of payment made to sub contractors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961. Reliance on : ITAT order, SMC Bench, ahmedabad in case of M/s Amruta Quarry Works in ITA No. 1481/Ahd/2013 vide order dated 19/07/2013. 10. Upon careful consideration we find that identical issue was considered by this Tribunal in the case of M/s Chadda Transport (supra). The Tribunal in the aforesaid case has observed as under : 12. We have carefully considered the submissions and perused the records. First we deal with the issue on the ground that the provisions of section 40(a)(ia) are not attracted inasmuch as the entire freight expenditure is paid and nothing is payable as on 31-03-2007. The facts in this regard are undisputed. The assessee s plea is that the entire freight amount was paid and nothing is payable as on 31-03-2007, and that this is duly reflected by a perusal of the balance sheet/profit loss account where no amount is payable as on 31-03-2007. In this regard learned counsel of the assessee has placed reliance upon CIT vs. Vector Shipping Services (P) Ltd. 357 ITR 642 (All.). In the said case Hon ble Allahabad High Court has upheld the finding that when the expenses incurred by the assessee is totally paid and not remained payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has contended that there was no regular contract of hiring of the trucks for continue transportation of various goods with the trucks/lorry owners. That there was no oral or written agreement for hiring trucks for transportation of goods to perform a contractual obligation by virtue of various agreements with corporate clients. That the assessee alone is liable and under its control and supervision has executed the whole of contracts on behalf of various corporate entities, namely, Ambuja Cement, Manigarh Cement and Maratha Cement etc. Hence it is the plea of the assessee that hiring of trucks in this case is not in the nature of payment made to sub contractors on which there is obligation to deduct the tax at source u/s 94C of the I.T. Act. In this regard learned counsel of the assessee s contention is that the issue is squarely covered in favour of the assessee by the decision of Hon ble Bombay High Court in ITA No. 1219 of 2012 in the case of M/s Bhail Bulk Carriers vide order dated 12- 11-2014. In this case Hon ble Bombay High Court has upheld the decision of Mumbai ITAT in the case of Bhail Bulk Carriers vs. ITO 50 SOT 0622. In this case the ITAT has discussed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sibility or liability towards the principal, then it cannot be held that these outside parties were privity to the contract between the appellant and its principal Thus the payment made to the outside parties do not come or fall within the purview of section 194C, as the carrying out any work indicates doing something to conduct the work in pursuance of contract and here in this case, it was solely between appellant and its principal. Thereafter the Tribunal had referred the decision of Hon ble Madras High Court in the case of CIT vs. Pompuhar Shipping Corporation Ltd. and concluded as under : Thus in view of the findings given above and the law laid down by the Hon ble High Court as above, we are of the considered opinion that the appellant was not liable to deduct TDS u/s 194C(1) for payments made to the outside parties and consequently the disallowance made u/s 40(a)(ia) by the authorities below are deleted. The appellant thus gets relief of 56,03,210/-. This order of the ITAT was subject matter of appeal before the Hon ble jurisdictional High Court in Income Tax Appeal No. 1219 of 2012 vide order dated 12th Nov., 2014. The Hon ble High Court hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, Manigarh Cement, Maratha Cement etc. The assessee received freight charges from these companies. The contract with these companies shows that the assessee was responsible for transportation of cement from one destination to other. The contractual liability was discharged by transporting cement through assessee w own trucks and also from hired trucks belonging to outside parties. It is clear from the facts on record that the risk and responsibility for carrying out the contract work was solely that of the assessee. There is no material to suggest that there was any contract or sub contract written or oral with the outside truck owners and the assessee. It is in these circumstances that when these outside truck owners do not have any responsibility or liability towards the Ambuja Cement or other principals then in absence of any privity the obligation to deduct the tax at source was not that of the assessee. 16. In view of the aforesaid discussion, we find that the facts of the case are fully in consonance with the decision of Hon ble jurisdictional High Court in the case of Bhail Bulk Carriers (supra). Accordingly we hold that the learned CIT(Appeals) s order does not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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