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TMI Blog2017 (4) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract. Therefore, we set aside the order passed by the Commissioner of Income Tax (Appeals) and upheld the additions made by the Assessing Officer towards disallowance of hire charges under section 40(a)(ia), for failure to deduct tax at source under section 194-C of the Act, for both years. Difference in gross turnover as per the books of account and as per the TDS certificates - Held that:- The assessee claims that it is reconciled the difference, failed to explain how withheld amount has been excluded from the gross receipts with necessary calculations. On the other hand, the Assessing Officer has clearly brought out the facts to the effect that the amount mentioned in the TDS certificate and recoveries made towards TDS, withheld amount and other deductions is tallied with the gross amount certified by the contractees. Therefore, we are of the view that the Assessing Officer was right in making additions towards difference in turnover as per books of account and TDS certificates. The Commissioner of Income Tax (Appeals) without appreciating the facts, simply observed that the difference represents amount withheld earlier and released for payment now, but which was already o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income of ₹ 1,20,21,060/- by making additions towards disallowance of hire charges under section 40(a)(ia) of ₹ 18,17,833/- and the difference in gross receipts of ₹ 26,90,462/-. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), where assessee filed written submissions. In respect of disallowance of hire charges under section 40(a)(ia) of the Act, the assessee contended that the expenditure incurred under the head hire charges do not come under the purview of works contract defined under section 194-C, as the assessee has taken the tippers/tractors/water tankers on simply hire, which falls under the provisions of section 194-I of the Act. Since, the aggregate payments made to a single person, does not exceed the prescribed limits provided under section 194-I, the assessee has not deducted TDS, therefore, application of the provisions of section 194-C to the impugned payments is incorrect. In support of his arguments, relied upon the decision of the ITAT, Visakhapatnam Bench in the case of Kranthi Road Transport Pvt. Ltd. vs. ACIT in ITA No. 358/VIZ/2008. Insofar as the additions t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 194-C read with Explanation-(iv) work includes carriage of goods or passengers by any mode of transport other than by railways. The assessee has engaged tippers/tractors/water tankers for transport of goods and hence, the assessee is liable to deduct tax at source on such payments. Therefore, issued a show-cause notice and asked the assessee as to why the impugned payment shall not be disallowed under section 40(a)(ia) of the Act. for failure to deduct TDS under section 194-C of the Act. 7. In response to show-cause notice, the assessee submitted that we do not engage tippers/tractors/water tankers by awarding works contract to them for application of the provisions of section 194-C. The tippers/tractors/water tankers are hired without any contractual agreements but they are taken only on simple hire, therefore, the impugned payments are not liable for TDS under section 194C of the Act. It was further contended that the assessee has taken these equipments on hire for its own use and hence, the payments are falls under the provisions of section 194-I, but not under the provisions of 194-C of the Act. In support of his arguments, relied upon the decision of the ITAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned payments does not arise. The Commissioner of Income Tax (Appeals) after considering the relevant facts rightly deleted the additions made by the Assessing Officer and his order should be upheld. 10. We have heard both the parties and perused the material available on record. The Assessing Officer disallowed hire charges under section 40(a)(ia) of the Act, for failure to deduct tax at source under section 194-C of the Act. The Assessing Officer was of the opinion that the impugned payments are falls within the ambit of section 194-C of the Act. The Assessing Officer referring to the provisions of section 194-C read with Explanation-(iv), observed that the expression of work includes carriage of goods or passengers by any mode of transport other than by railways. The Assessing Officer was of the further opinion that since the provisions of section 194-C covers the transport contracts w.e.f. 01/07/1995, the assessee ought to have deducted the tax at source on such payments. Since the assessee failed to deduct tax at source under section 194-C, the Assessing Officer disallowed the impugned payments by invoking the provisions of section 40(a)(ia) of Act. It is the conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194-I and if the tippers/tractors/water tankers are taken on hire with driver and related maintenance expenditure, then the transaction would fall under the definition of works contract as defined under section 194-C of the Act. 12. In the present case, on perusal of the facts available on record, we find that the assessee is in the business of execution of work contract. In the process, the assessee has engaged tippers/tractors/ water tankers for execution of work as defined under section 194-C. The assessee fails to bring on record any evidence to prove that it is a simple hire of tippers/tractors/water tankers, but not work. Though, the Authorized Representative of the assessee pressed upon the findings of the Commissioner of Income Tax, in the revision proceedings, on perusal of the order of the Commissioner of Income Tax, we find that the Commissioner of Income Tax has not given any findings with regard to nature of transaction, to come to a conclusion that the payments are coming under section 194-I. Therefore, we are of the view that hire charges incurred by the assessee for hiring the tippers/tractors/ water tankers is coming within the meaning of term work as defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it relates. The Departmental Representative further submitted that the Commissioner of Income Tax (Appeals) erred in entertaining the additional evidence of reconciliation statements without making any reference to the Assessing Officer as per Rule 46-A of the I.T. Rules. Departmental Representative referring to the reconciliation filed by the assessee submitted that withheld amount is a part of gross turnover, on which the contractees have deducted TDS. Therefore, the assessee ought to have considered the gross receipts in the books of account, whereas the assessee has taken net amount excluding withheld amount which is contrary to the accepted principles of accounting. 15. On the other hand, Authorized Representative of the assessee strongly supported the order of the Commissioner of Income Tax (Appeals) and submitted that the Commissioner of Income Tax (Appeals) has rightly deleted the additions made by the Assessing Officer after considering the reconciliation statement filed by the assessee, wherein the assessee has explained the difference in turnover between the books of account and TDS certificates. The Authorized Representative of the assessee further submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby, there is a difference of ₹ 13,01,200/- . The assessee claims that the difference of ₹ 13,01,200/- represents payment of withheld amount from the bills dated 12/03/2010 for an amount of ₹ 6,09,124/- and ₹ 6,92,076/-. On further verification of the reconciliation statement, we find that the contractee has deducted retention amount from the gross receipts and deducted tax at source on gross amount including the amount withheld for retention money. We further observe that it is a usual practice in this line of business that the contractees would deduct TDS on gross amount before making any recovery including amount withheld for retention money. When retention money is released after successful completion of the contract period, the amount will be released without there being any deduction towards TDS. 18. In this case, the assessee claims to have executed withheld amount from the gross bills on the ground that the contractees have deducted TDS on net amount excluding TDS, which is quite contrary to the general procedure followed in this line of business. The Assessing Officer has brought out clear facts that as per the TDS certificate, the contractees ha ..... 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