Shri Kuldeep Kumar Sharma, New Delhi v. ITO, New Delhi

ITA 5672/DEL/2010 | 2007-2008
Pronouncement Date: 30-03-2012 | Result: Allowed

Appeal Details

RSA Number 567220114 RSA 2010
Assessee PAN APOPS2978E
Bench Delhi
Appeal Number ITA 5672/DEL/2010
Duration Of Justice 1 year(s) 3 month(s) 15 day(s)
Appellant Shri Kuldeep Kumar Sharma, New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 30-03-2012
Date Of Final Hearing 20-03-2012
Next Hearing Date 20-03-2012
Assessment Year 2007-2008
Appeal Filed On 15-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A NO. 5672/DEL/10 ASSTT. YEAR 2007-08 KULDEEP KUMAR SHARMA PROP. M/S. K.S. FREIGHT CARRIER D-386 GALI NO. 9 BHAJANPURA NEW DELHI 110 092 APOPS2978E VS. ITO WARD-34 (3) NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SALIL AGARWAL ADVOCATE SHAILESH GU PTA CA RESPONDENT BY: D.K. MISHRA DR ORDER PER RAJPAL YADAV JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 23 RD AUGUST 2010 PASSED FOR ASSTT. YEAR 2007-08. THE G ROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF ITAT RULES. THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NA TURE. IN BRIEF THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ` 6 77 46 176/- ON T HE GROUND THAT ASSESSEE FAILED TO DEDUCT THE TDS WHILE MAKING PAYM ENTS TO THE TRANSPORTERS. HENCE THE EXPENSES DESERVES TO BE DIS ALLOWED U/S 40(A) (IA) OF THE INCOME TAX ACT 1961. ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVIDUAL. HE IS RUNNING A PROPRIETORSHIP CONCERN IN THE NAME AND ST YLE OF M/S K.S. FREIGHT CARRIER. HE HAS FILED HIS RETURN OF INCOME ON 29.10 .2007 DECLARING TOTAL INCOME OF ` 4 70 700/-. THE CASE OF THE ASSESSEE WA S SELECTED FOR SCRUTINY ASSESSMENT A NOTICE U/S 143(2) WAS ISSUED ON 17 TH SEPTEMBER 2008 WHICH WAS DULY SERVED UPON THE ASSESSEE. ON SCRUTIN Y OF THE ACCOUNTS IT REVEALED TO THE AO THAT ASSESSEE HAS CLAIMED FREIGH T PAID AT ` 6 77 46 176/- IN THE TRADING ACCOUNT. THE AO HAD IS SUED A QUESTIONNAIRE ON 8 TH OCTOBER 2009 INVITING EXPLANATION OF THE ASSESSEE TO FILE DETAILS TO WHOM THE PAYMENT OF FREIGHT WAS MADE AND MODE OF SU CH PAYMENT SHOULD ALSO BE DISCLOSED. HE ALSO DIRECTED THE ASSE SSEE TO EXPLAIN WHETHER TDS HAS BEEN DEDUCTED ON FREIGHT PAID AND IF YES TH EN THE PROOF OF DEPOSIT OF SUCH TAX BE ALSO SUBMITTED. IN RESPONSE TO THE Q UERY OF THE AO IT WAS CONTENDED BY THE ASSESSEE THAT HE IS A TRANSPORT C ONTRACTOR FOR M/S. JAIPRAKASH ASSOCIATE LTD. AND M/S. JAIPRKASH HYDRA POWER LTD. THE ASSESSEE HAS ENCLOSED PHOTO STATE COPY OF REGISTER OF TRADE ACCOUNT DETAILED GR NO. TRUCK NO. STATION CONSIGNORS NAME AND ADDRESS CONSIGNEES NAME AND ADDRESS FOR THE READY REFERENC E OF AO. HE ALSO ENCLOSED COPIES OF THE ORIGINAL GR AND SUBMITTED TH AT PAYMENTS MADE TO TRUCK OWNER AND DRIVER BY M/S. JAI PRAKASH ASSOCIAT E LTD. ON BEHALF OF K S. FRIGHT CARRIER WAS MADE AFTER DEDUCTING THE TDS. TH E ASSESSEE HAS ALSO PRODUCED CERTIFICATE FROM M/S. J P ASSOCIATE INDICA TING THAT PAYMENTS MADE TO TRUCK OWNER OR DRIVER WHOSE TRUCKS WERE HIR ED BY THE ASSESSEE WERE MADE AFTER DEDUCTING THE TAX. LD. AO DID NOT F IND MERIT IN THE ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 3 CONTENTION OF THE ASSESSEE. HE WAS OF THE OPINION T HAT ASSESSEE ASSIGNED THE CONTRACT TO OTHER TRUCK DRIVER AND THEREFORE H E OUGHT TO HAVE DEDUCTED THE TDS WHILE MAKING PAYMENT TO THE DRIVER S OF THE TRUCKS WHICH WERE HIRED BY THE ASSESSEE. 3. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIE F TO THE ASSESSEE. 4. LD. COUNSEL FOR THE ASSESSEE WHILE IMPUGNING TH E ORDER OF LD. CIT(A) TOOK US THROUGH THE CONFIRMATION GIVEN BY M/S. J P ASSOCIATE LTD. AVAILABLE ON PAGE 55 OF THE PAPER BOOK WHEREIN M/S. JP ASSOC IATE LTD. HAS CONFIRMED THAT PAYMENT WAS MADE TO THE DRIVERS ON B EHALF OF THE TRANSPORTERS I.E. M/S. K S FRIGTHT CARRIER AND TAX HAS BEEN DEDUCTED AT SOURCE. ON THE STRENGTH OF THIS DOCUMENT IT WAS CO NTENDED THAT PAYMENT OF THE TRANSPORTERS WHOSE TRUCK WERE HIRED HAS BEEN MADE AFTER DEDUCTION OF TAX. REFERRING TO SECTION 40(A)(IA) HE POINTED OUT THAT PERUSAL OF THIS SECTION WOULD REVEAL THAT DISALLOWANCE UNDER IT CAN BE MADE ONLY IN RESPECT OF AMOUNTS PAYABLE TO CONTRACTOR OR SUB CON TRACTOR FOR CARRYING OUT ANY WORK ON WHICH TAX IS DEDUCTIBLE UNDER CHAPT ER XVII B AND SUCH TAX HAS NOT BEEN DEDUCTED OR PAID DURING THE PREVIOUS Y EAR OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PERIO D PRESCRIBED U/S 200 (1) OF THE ACT. HE POINTED OUT THAT DISALLOWANCE CA N THEREFORE BE MADE ONLY IN RESPECT OF PAYMENTS WHICH CONSTITUTES AMOUN T PAYABLE TO A CONTRACTOR OR SUB CONTRACTOR FOR CARRYING OUT ANY W ORK AS PROVIDED U/S 194C OF THE INCOME TAX ACT. ACCORDING TO THE LD. CO UNSEL THE ALLEGED SUM OF ` 6 77 46 176/- REPRESENTING THE PAYMENTS TO VARIOUS TRUCK OWNERS ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 4 DO NOT REPRESENT PAYMENTS LIABLE TO DEDUCT TAX AT SOURCE U/S 194C OF THE ACT. HE ALSO TOOK US THROUGH SECTION 194(C) AND PO INTED OUT THAT THIS SECTION CONTEMPLATES THAT THERE MUST BE A CONTRACT BETWEEN THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT AND THE CONTRACT OR. THE CONTRACT MUST BE OF SUPPLY OF LABOUR OR FOR CARRYING OUT ANY WORK. THE CONTRACTOR MUST HAVE ENGAGED SUB CONTRACTOR FOR CARRYING OUT T HE WHOLE OR ANY PART OF THE WORK UNDERTAKEN OR SUPPLY OF LABOUR. HE EMPH ASIZED THAT IN THIS CASE THERE IS NO MATERIAL EVIDENCE TO ALLEGE OR HOL D THAT ASSESSEE HAD ENGAGED VARIOUS TRUCK OWNERS FOR CARRYING OUT THE W HOLE OR ANY PART OF THE WORK. ACCORDING TO THE LD. COUNSEL THE AO FAILED TO APPRECIATE THE REAL NATURE OF THE BUSINESS OF THE ASSESSEE. HE POINTED OUT THAT THIS ISSUE HAS COME UP FOR CONSIDERATION BEFORE THE ITAT WELL AS B EFORE HONBLE HIGH COURT ON A NUMBER OF OCCASION. HE RELIED UPON THE D ECISION OF HONBLE HIMACHAL PRADESH HIGH COURT RENDERED IN THE CASE OF CIT VS. AMBUJA DARLA KASHLOG MANGU TRANSPORT CO-OP. SOCIETY REPORTED IN 31 DTR (HP) 49. BY WAY OF THIS JUDGMENT HONBLE HIGH COURT HAS DISPOSE D OFF FIVE APPEALS OF DIFFERENT SOCIETIES WHICH WERE REGISTERED SOCIETIES OR AOP CONSTITUTED BY THE TRUCK OPERATORS. THESE SOCIETIES ENTER INTO CON TRACTS WITH THE COMPANIES SUCH AS CEMENT MANUFACTURE FOR TRANSPORT OF THE GOODS OF THE COMPANIES. THE COMPANY WHICH HAS ENTERED INTO CONTR ACTS WITH THE ASSESSEE DEDUCTED 2% OF THE AMOUNT PAID ON ACCOUNT OF TDS IN TERMS OF SECTION 194 (C) (1) OF THE INCOME TAX ACT 1961. THE REAFTER THE ASSESSEE SOCIETY PAID THE AMOUNT RECEIVED BY IT TO THE MEMBE RS OF THE SOCIETY WHO HAVE ACTUALLY CARRIED THE GOODS. THE SOCIETY OUT OF THE AMOUNT PAID A ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 5 NORMAL AMOUNT OF ` 10 OR ` 20 DEDUCTED FOR ADMINIST RATIVE EXPENSES OF RUNNING THE SOCIETY AND IT IS KNOWN AS PARCHI CHARG ES. THE SOCIETY DID NOT RETAIN ANY OTHER AMOUNT EXCEPT FOR THE PARCHI CHARG ES AND THE ENTIRE AMOUNT RECEIVED BY IT FROM THE SOCIETY IS PAID TO T HE MEMBERS. ACCORDING TO THE REVENUE THE ASSESSEE IS RELIABLE TO DEDUCT T HE TDS @ 1% FROM THE AMOUNT PAID TO THE MEMBERS OR TRUCK OPERATORS IN TE RMS OF SECTION 194 (C) (2) THE HONBLE HIGH COURT ON AN ANALYSIS OF T HE SECTION 194(C) (2) AND NATURE OF THE CONTRACT ARRIVED AT A CONCLUSION THAT SECTION 194(C) (2) OF THE ACT IS NOT ATTRACTED AND THE SOCIETY IS NOT LIABLE TO DEDUCT THE TAX AT SOURCE. LD. COUNSEL FOR THE ASSESSEE POINTED OUT TH AT FACTS OF THE ASSESSEES CASE ARE SIMILAR TO THIS. HE FURTHER RE LIED UPON THE ORDER OF THE ITAT IN THE CASE OF CHANDRAKANT THACKAR VS. ACIT REPORTED IN 129 TTJ (CTK) ( PAGE 1). HE PLACED ON RECORD COPY OF THE TR IBUNALS ORDER. IN THIS CASE TRIBUNAL HAS OBSERVED THAT LIABILITY FOR DEDUC TION OF TAX AT SOURCE OF A CONTRACTOR ARISES IF HE ALLOWS ANY OTHER PERSON TO CARRY ON WHOLE OR IN PART THE CONTRACT WORK UNDERTAKEN BY HIM AND ALSO FASTEN LIABILITY UPON THE LATTER AND NOT OTHERWISE. ACCORDING TO THE TRIBUNAL IN CASE A TRANSPORTER HIRES TRUCKS FROM ANY OTHER TRANSPORTER OR TRUCK OW NER ON THE DAY TO DAY REQUIREMENT BASIS SUCH AN ARRANGEMENT CANNOT SAID T O BE A RESULT OF WRITTEN OR ORAL CONTRACT. THE TRANSPORTER IS NOT LI ABLE TO DEDUCT TDS U/S 194C OF THE INCOME TAX ACT. THE NEXT JUDGMENT RELI ED UPON BY THE LD. COUNSEL FOR THE ASSESSEE IS OF ITAT VISAKHAPATNAM B ENCH IN THE CASE OF MYTHRI TRANSPORT CORPORATION VS. ACIT REPORTED IN 1 24 ITD 40. IN THIS CASE ALSO ASSESSEE IS A TRANSPORT CONTRACTOR. IT ENTERED INTO AN AGREEMENT WITH ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 6 PARTIES WHEREBY THE ASSESSEE UNDERTOOK TO TRANSPORT BITUMEN FROM THE PRINCIPALS TO VARIOUS POINTS AS PER THEIR DIRECTION S. FOR CARRYING OUT CONTRACT BUSINESS SO OBTAINED THE ASSESSEE CLAIMS TO HAVE NOT MAINTAINED SUFFICIENT NUMBER OF TANKER LORRIES AND ENGAGED THE LORRIES BELONGING TO VARIOUS PEOPLE APART FROM USING ITS OW N TANKER LORRIES. THE ISSUE AROSE WHETHER SECTION 194C (2) IS APPLICABLE ON THE PAYMENT MADE TO THE DRIVERS OF SUCH TRUCK OWNERS WHOSE SERVICES WERE AVAILED BY THE ASSESSEE FOR TRANSPORTING THE GOODS. TRIBUNAL OBSER VED THAT 194C(2) IS NOT APPLICABLE . THE NEXT JUDGMENT REPLIED UPON BY THE LD. COUNSEL FOR THE ASSESSE IS OF ITAT CUTTAK BENCH RENDERED IN THE CAS E OF R. R. CARRYING CORPORATION VS. ACIT REPORTED IN 126 TTJ 240. LD. C OUNSEL FOR THE ASSESSEE THEREAFTER PLACED ON RECORD COPY OF THE ORDER PASSE D BY ITAT CUTTAK BENCH IN THE CASE OF NASIB SINGH VS ACIT REPORTED I N 19 TAXMAN 160 (CUTTACK). ON THE STRENGTH OF THESE DECISIONS HE PO INTED OUT THAT PRINCIPAL WHILE MAKING THE PAYMENT TO THE TRUCK OWNER HAVE DE DUCTED THE TAX. THE ASSESSEE IS NOT OBLIGED TO DEDUCT IT AGAIN. 5. LD. DR ON THE OTHER HAND PLACED ON RECORD A WRIT TEN NOTE WHEREIN HE EMPHASIZED THAT COMMON THREAD BETWEEN ALL THE D ECISIONS REFERRED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT EITHER WRI TTEN OR ORAL CONTRACT BETWEEN THE ASSESSEE AND THE TRUCK OWNER WHOSE TRUC KS WERE HIRED BY HIM FOR TRANSPORTING THE GOODS IS MISSING. ACCORDIN G TO THE LD. DR THERE MAY NOT BE A WRITTEN CONTRACT BUT ORAL CONTRACT WOU LD ALWAYS BE THERE. THEREFORE IT CANNOT BE SAID THAT THERE WAS NO AGENC Y OF SUB CONTRACTOR- ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 7 SHIP BETWEEN THE ASSESSEE AND THE TRANSPORTERS. HE MADE REFERENCE TO THE CIRCULAR NO. 433 DATED 25.9.1985 AND THE DECISI ON OF HONBLE ALLAHABAD HIGH COURT REPORTED IN 2007 ITR 297. HE A LSO RELIED UPON THE ORDER OF ITAT COCHIN IN ITA NO. 705 / COCHIN 2010. THE LD. DR FURTHER RELIED UPON THE ORDER OF CIT(A). 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. SECTION 194C AND 40(A)(IA) HAVE T HE DIRECT BEARING ON THE CONTROVERSY. THEREFORE WE DEEM IT APPROPRIATE TO TA KE NOTE OF THE RELEVANT CLAUSES. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SE CTIONS 30 TO [38] THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED I N COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION (A) IN THE CASE OF ANY ASSESSEE XXXXXXXXX (IA) ANY INTEREST COMMISSION OR BROKERAGE [RENT ROYALTY] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) ON WHICH TAX IS DEDUCTI BLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDU CTED OR AFTER DEDUCTION [HAS NOT BEEN PAID. XXXXXXXXXX 194C. PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS. (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO AN Y RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTR ACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYI NG OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR A ND - .. ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 8 SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCO UNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CAS H OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER DEDUCT AN AMOUNT EQUAL TO (I) ONE PER CENT IN CASE OF ADVERTISING (II) IN ANY OTHER CASE TWO PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THERE IN. (2) ANY PERSON (BEING A CONTRACTOR AND NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY) 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 W HOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR OR FOR SUPPLY ING WHETHER WHOLLY OR PARTLY ANY LABOUR WHICH THE CONTRACTOR HA S UNDERTAKEN TO SUPPLY SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE SUB-CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVE R IS EARLIER DEDUCT AN AMOUNT EQUAL TO ONE PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN. 7. BARE PERUSAL OF SECTION 40 (A) (IA) WOULD SUGGES T THAT DISALLOWANCE UNDER THIS SECTION CAN BE MADE IN RESPECT OF AMOUNT S PAYABLE TO A CONTRACTOR OR SUB CONTRACTOR FOR CARRYING OUT ANY W ORK ON WHICH TAX IS DEDUCTIBLE UNDER CHAPTER 17B AND SUCH TAX HAS NOT B EEN DEDUCTED OR PAID DURING THE PREVIOUS YEAR OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PERIOD PRESCRIBED U/S 200 (1) OF THE ACT. SECTION 194C(2) PROVIDES THAT WHERE A CONTRACTOR NOT BEING AN IND IVIDUAL OR A HINDU UNDIVIDED FAMILY ENGAGED FOR CARRYING OUT ANY WORK OR FOR SUPPLYING LABOUR FOR CARRYING OUT SUCH WORK BY CENTRAL OR STA TE GOVERNMENT A LOCAL AUTHORITY OR A CORPORATION HAS IN TERMS ENGAGED AN Y SUB CONTRACTOR FOR CARRYING OUT THE WHOLE OR ANY PART OF THE WORK UNDE RTAKEN BY THE ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 9 CONTRACTOR OR FOR SUPPLY OF LABOUR UNDERTAKEN BY TH E CONTRACTOR TO SUPPLY HE WILL BE REQUIRED TO DEDUCT TAX AT SOURCE FROM TH E PAYMENT MADE TO THE SUB CONTRACTOR. THUS IT CONTEMPLATES THREE CONDITIO NS NAMELY 1) THERE MUST BE A CONTRACT BETWEEN THE PERSONS RESPONSIBLE FOR MAKING THE PAYMENT AND THE CONTRACTOR (B) THE CONTRACT MUST BE FOR SUPPLY OF LABOUR OR FOR CARRYING OUT ANY WORK (C) CONTRACTOR MUST HAVE ENGAGED A SUB CONTRACTOR FOR CARRYING OUT THE WHOLE OR ANY PART O F THE WORK UNDERTAKEN OR SUPPLY OF LABOUR. 8. IN OUR UNDERSTANDING IT IS NECESSARY TO TAKE COG NIGENCE OF THE CERTIFICATE GIVEN BY M/S. JAI PRAKASH ASSOCIATES LT D. WHICH READS AS UNDER :- THIS IS TO CERTIFY THAT M/S. K.S. FREIGHT CARRIERS (PROP. SHRI KULDEEP KUMAR SHARMA) IS DOING WORK OF TRANSPORTATI ON OF CEMENT AND OTHER MATERIALS FROM CHANDIGARH TO OUR S ITE IN KINNAUR DIST. OF HIMACHAL PRADESH. THE MATERIAL IS BOOKED ON FREIGHT TO PAY BASIS AND PAYMENT IS BEING MADE TO D RIVERS ON BEHALF OF THE TRANSPORTER I.E. M/S. K.S. FREIGHT CA RRIERS AS PER LORRY RECEIPT RAISED BY THEM. 9. THE CASE OF THE AO IS THAT ASSESSEE HAS AVAILED SERVICES OF THE TRUCK DRIVERS OR TRANSPORTERS FOR CARRYING OUT THE WORK O F M/S. JAI PRAKASH ASSOCIATES THUS THERE EXIST SUB CONTRACTOR SHIP AND THE ASSESSEE SHOULD HAVE DEDUCTED THE TAX. ON THE OTHER HAND CASE OF T HE ASSESSEE IS THAT HE HAS NOT ASSIGNED ANY SUB CONTRACTOR SHIP TO ANY OF THE TRANSPORTER. HE HAS SIMPLY HIRED THE TRUCKS FOR CARRYING OUT HIS CO NTRACT. THE PAYMENTS HAVE BEEN MADE BY M/S. JAI PRAKASH ASSOCIATES DIREC TLY TO THOSE DRIVERS SUCH PAYMENT IS TO BE CONSTRUED AS MADE TO THE ASSE SSEE. THE DRIVERS ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 10 WERE RECEIVING THE PAYMENT ON BEHALF OF THE ASSESSE E AND ON SUCH PAYMENT TDS HAS BEEN DEDUCTED. 10. THE CONFIRMATION SUGGEST THAT CONSTRUCTIVELY PA YMENTS WERE RECEIVED BY THE ASSESSEE. IT WAS RECEIVED AFTER DED UCTION OF TAX AT THE END OF M/S. JAI PRAKASH ASSOCIATES. THE NEXT AREA OF DI SPUTE IS WHETHER THERE EXIST A SUB CONTRACTOR SHIP BETWEEN THE ASSESSEE AN D THE TRANSPORTER WHOSE TRUCKS HAVE BEEN USED BY THE ASSESSEE WE FIND THAT THIS ISSUE HAS DIRECTLY BEEN DEALT MORE PRECISELY BY THE ITAT VISA KHAPATNAM BENCH IN THE CASE OF MYTHRI TRANSPORT CORPORATION. THE DISCU SSION MADE BY THE TRIBUNAL INCLUDING THE QUESTION READ AS UNDER :- 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E RECORD. THE ISSUE BEFORE US MAY BE DECIDED IF WE ANSWER FOLLOWI NG QUESTION: 'WHETHER THE VEHICLES HIRED BY THE ASSESSEE IN EXEC UTION OF THE TRANSPORT CONTRACT CAN BE TERMED AS A 'SUB-CONTRACT ' AND CONSEQUENTLY THE ASSESSEE IS LIABLE TO DEDUCT TAX FROM THE PAYME NT MADE FOR SUCH VEHICLES UNDER SECTION 194C(2) OF THE ACT?' IN THE INSTANT CASE THE ASSESSING OFFICER HAS INVO KED THE PROVISIONS OF SECTION 40(A)( IA) TO DISALLOW THE PAYMENTS MADE FO R HIRED LORRIES AS ACCORDING TO HIM SUCH PAYMENTS REPRESENT PAYMENT T O SUB- CONTRACTORS LIABLE FOR TAX DEDUCTION AT SOURCE UND ER SECTION 194C(2) OF THE ACT AND THE ASSESSEE HAS FAILED TO DEDUCT TDS 1 94C(2). SECTION 194C(2) OF THE ACT WHICH IS RELEVANT IN THIS CONTE XT READS AS UNDER : 'ANY PERSON (BEING A CONTRACTOR AND NOT BEING AN IN DIVIDUAL OR A HINDU UNDIVIDED FAMILY) RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER IN THE SECTION REFERRED TO AS THE SUB-CO NTRACTOR) 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 O R PARTLY ANY LABOUR WHICH THE CONTRACTOR HAS UNDERTAKEN TO SUPPLY SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE SUB-CONTRA CTOR 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.' ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 11 8.1 ACCORDING TO OUR UNDERSTANDING SECTION 194C(2) IS ATTRACTED IF ALL THE FOLLOWING CONDITIONS ARE SATISFIED. (A)THE ASSESSEE SHOULD BE A CONTRACTOR. (B)THE ASSESSEE IN HIS CAPACITY AS A CONTRACTOR S HOULD ENTER INTO A CONTRACT WITH A SUB-CONTRACTOR FOR CARRYING OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR. (C )THE SUB-CONTRACTOR SHOULD CARRY OUT THE WHOLE OR A NY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR. (D)PAYMENT SHOULD BE MADE FOR CARRYING OUT THE WHOL E OR ANY PART OF THE WORK. 8.2 AS STATED EARLIER THE ASSESSEE HEREIN IS A TRANSP ORT CONTRACTOR AND HAS ENTERED INTO AN AGREEMENT WITH PARTIES WHEREBY THE ASSESSEE UNDERTOOK TO TRANSPORT BITUMEN TO VARIOUS POINTS AS PER THEIR DIRECTIONS. ACCORDING TO THE ASSESSEE THE LORRIES USED FOR THE SAID PURPOSE ARE SPECIALLY DESIGNED WITH PROPER HEATING ARRANGEMENTS . THE CLAIM OF THE ASSESSEE IS THAT SINCE IT DID NOT HAVE REQUIRED NUM BER OF LORRIES IT HAD TO HIRE LORRIES FROM OTHERS WHO SIMPLY PLACED THE V EHICLES AT THE DISPOSAL OF THE ASSESSEE. THE ASSESSEE ALONE UNDER ITS CONTROL AND SUPERVISION HAS EXECUTED WHOLE OF THE CONTRACT. AC CORDING TO THE ASSESSEE THE INDIVIDUAL LORRY OWNERS HAVE NOT CARR IED OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE. X X X X X X X X X X X X 8.6 AS PER THE PROVISIONS OF SECTION 194C(2) AS EXPLA INED IN PARA 8.1 SUPRA THE SUB-CONTRACTOR SHOULD CARRY OUT THE WHOL E OR ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE DICTIONARY MEA NING OF THE WORDS 'CARRY OUT' IS TO CARRY INTO PRACTICE; TO EXECUT E; TO ACCOMPLISH. IT SIGNIFIES A POSITIVE INVOLVEMENT IN THE EXECUTION O F THE WHOLE OR ANY PART OF THE MAIN WORK BY SPENDING HIS TIME MONEY ENERGY ETC. AND FURTHER TAKING THE RISKS IN CARRYING ON THE SAID AC TIVITY. IN THE INSTANT CASE THERE IS NO MATERIAL TO SUGGEST THAT THE OTHE R LORRY OWNERS INVOLVED THEMSELVES IN CARRYING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE BY SPENDING THEIR TIME ENERGY AND BY TAKING THE RISKS ASSOCIATED WITH THE MAIN CONTRACT WORK. IN THE ABSE NCE OF THE ABOVE SAID CHARACTERISTICS ATTACHED TO A SUB-CONTRACT IN THE INSTANT CASE THE PAYMENT MADE TO THE LORRY OWNERS STANDS AT PAR WITH THE PAYMENTS MADE TOWARDS SALARIES RENT ETC. HENCE THE REASONIN G OF THE TAX AUTHORITIES WHICH IS STATED IN PARA 8.3 SUPRA TO HOLD THAT THE PAYMENT MADE FOR HIRED VEHICLES IS A SUB-CONTRACT PAYMENT IN OUR OPINION IS NOT CORRECT AND NOT BASED ON RELEVANT CONSIDERATIONS. H ENCE IN OUR CONSIDERED OPINION IT CANNOT BE SAID THAT THE PAYM ENTS MADE FOR HIRED VEHICLES WOULD FALL IN THE CATEGORY OF PAYMENT TOWA RDS A SUB-CONTRACT WITH THE LORRY OWNERS. IN THAT CASE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194 C(2) ON THE ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 12 PAYMENTS MADE TO THE LORRY OWNERS FOR LORRY HIRE. C ONSEQUENTLY THE PROVISIONS OF SECTION 40(A)( IA) SHALL NOT APPLY TO SUCH PAYMENTS. 8.7 AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE FOR THE REASONS STATED ABOVE IN OUR OPINION CONSIDERATION OF OTHER CONTENTIONS OF THE ASSESSEE AS WELL AS THE REVENUE IS NOT NECESSARY. 11. THE OTHER DECISION REFERRED BY THE LD. COUNSEL FOR THE ASSESSEE ARE TO THE SIMILAR EFFECT. LD. DR HAS EMPHASIZED ON THE POINT THAT THERE ALWAYS EXIST AN IMPLIED CONTRACT EITHER ORAL OR IN WRITING. BUT NEITHER IN THE ASSTT. ORDER NOR IN THE CITS ORDER IT IS DISCE RNABLE THAT ASSESSEE HAD ENTERED INTO A CONTRACT WITH THE ALLEGED TRUCK OWNE RS FOR PART PERFORMANCE OF ITS WORKS WITH JOINT LIABILITY. HE SIMPLY HIRED THE TRUCKS UNDER HIS OWN OBLIGATION. THEREFORE THERE ARE NO DISTINGUISHED F EATURE OF THE CASE OF ASSESSEE VIS A VIS 11 JUDGMENTS REFERRED BY THE LD. COUNSEL FOR THE ASSESSEE WHOSE COPIES HAVE BEEN PLACED ON THE PAP ER BOOK FROM PAGES NO. 130 TO 194. ON DUE CONSIDERATION OF ALL THESE ASPECTS WE ARE OF THE VIEW THAT AO IS NOT JUSTIFIED IN MAKING DISALLOWANC E U/S 40(A) (IA) OF THE ACT ON ACCOUNT OF NON DEDUCTION OF TDS U/S 194 C (2 ) OF THE INCOME TAX ACT. WE ALLOW THE APPEAL OF ASSESSEE AND DELETE THE DISALLOWANCE MADE BY THE AO. ORDER PRONOUNCED IN THE OPEN COURT ON 30.3.2012. SD/- SD/- [SHAMIM YAHYA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30.3.2012 VEENA ITA NO. 5672/DEL/10 ASSTT. YEAR 2007-08 13 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT