M/s. Sri Balaji Prasanna Travels, Bengaluru V. Assistant Commissioner Of Income Tax, Circle- 6(3)(1), Bengaluru

ITA 2078/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2693 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-11-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 27-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Assessee Lawyers: V. SRINIVASAN
• Keywords: Business expenditure; Retrospective amendment; Non-deduction of tax; TDS; Fuel Charges
• Section: 142(1); 234B; 40(a)(ia); 194C; 201(1); 201; 143(2); 191; 44AB; 13; 22; 20

Judgement Text

ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.2078/BANG/2019 ASSESSMENT YEAR: 2015-16 M/S. SRI BALAJI PRASANNA TRAVELS HEMANTH COMPLEX 1 ST FLOOR, AMRUTHALLI MAIN ROAD BYTARAYANAPURA, B.B. ROAD BENGALURU-560 092 PAN NO : ABMFS2721F VS. ACIT, CIRCLE-6(3)(1) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, A.R. RESPONDENT BY : SHRI PRIYADARSHI MISHRA, D.R. DATE OF HEARING : 24.11.2020 DATE OF PRONOUNCEMENT : 25.11.2020 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER OF THE CIT(A) DATED 30.7.2019. THE ASSESSEE HAS RA ISED FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS TH EY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, W EIGHT OF EVIDENCE PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDING TH E DISALLOWANCE TO THE EXTENT OF RS.1,04,44,105/- MADE U/S.40[A][IA] OF THE ACT FOR THE ALLEGED FAILURE OF THE APPELLANT ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 2 OF 18 TO DEDUCT TAX AT SOURCE U/S. 194C OF THE ACT IN RES PECT OF THE HIRE CHARGES PAID TO THIRD PARTY VEHICLE OWNERS UND ER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 2.1 THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED TH AT THE PROVISIONS OF SECTION 194C HAD NO APPLICATION TO TH E AFORESAID PAYMENTS DISCURSIVELY LABELED AS HIRE CHARGES IN AS MUCH AS THESE PAYMENTS REPRESENTED THE REVENUE SHARED BY TH E APPELLANT WITH THIRD PARTY VEHICLE OWNERS FOR PROVIDING THEIR VEHICLES TO THE APPELLANT TO DISCHARGE THE APPELLANT'S CONTRACT UAL OBLIGATIONS WITH M/S.ORIX INFRASTRUCTURE PVT. LTD., UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S C ASE. 2.2 THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED TH AT THERE WAS A CONTRACT FOR TRANSPORTATION OF EMPLOYEES BETW EEN M/S ORIX INFRASTRUCTURE INDIA PVT. LTD. AND THE APPELLA NT AND THERE WAS NO CONTRACT, EITHER WRITTEN OR ORAL BETWEEN THE APPELLANT AND THE THIRD PARTY VEHICLE OWNERS FOR TRANSPORTATI ON AND HENCE, THE PROVISIONS OF SECTION 194C OF THE ACT WA S NOT APPLICABLE. THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THAT T HE SUBSTANCE OF THE ARRANGEMENT / TRANSACTION HAD TO B E CONSIDERED AND IT WAS APPARENT THAT THE APPELLANT HAD BORNE TH E FUEL CHARGES FOR THE VEHICLES PROVIDED BY THIRD PARTY VE HICLE OWNERS AND THE REVENUE RECEIVED BY THE APPELLANT WAS SHARE D BETWEEN THE APPELLANT AND THE THIRD PARTIES VEHICLE OWNERS AND THE SAID PAYMENTS MADE COULD NOT BE REGARDED AS A PAYMENT MA DE FOR CARRYING OUT WORK IN TERMS OF SECTION 194C OF THE A CT. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THAT THE PAYMENTS MADE BY THE APPELLANT AS HIRE CHARGES WOULD, IF AT ALL REQUIRE DEDUCTION OF TAX AT SOURCE, COME WITHIN THE AMBIT OF THE PROVISI ONS OF SECTION 1941 OF THE ACT AND IN AS MUCH AS NONE OF T HE PAYMENTS MADE EXCEEDED THE PRESCRIBED LIMIT OF RS. 1,80,000/ - TO EACH PAYEE, THERE WAS NO LIABILITY TO DEDUCT TDS EVEN IN TERMS OF THE SAID PROVISIONS OF THE ACT AND HENCE, NO DISALLOWAN CE WAS WARRANTED UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 4. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HON'BLE CCIT/DG, THE APPELLANT DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST U/S. 234A, 234B AND 234D OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APP ELLANT'S CASE DESERVES TO BE CANCELLED. ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 3 OF 18 5. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF THE APPELLANT, YOUR APPELLAN T HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RE NDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING T HE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FE ES A PART OF THE COSTS. 2. AT THE TIME OF HEARING, GROUND NO.3 IS NOT PRESS ED. ACCORDINGLY, GROUND NO.3 IS DISMISSED AS NOT PRESSE D. 3. FACTS OF THE CASE ARE THAT THE APPELLANT FIRM, W HICH IS ENGAGED IN PROVIDING VEHICLES ON HIRE, FILED ITS RETURN OF INCOME FOR A.Y. 2015- 16 ON 14.9.2015, DECLARING INCOME OF RS.27,53,170/- . THE APPELLANTS CASE WAS SELECTED FOR SCRUTINY AND NOTI CES U/S 143(2) AND 142(1) WERE SERVED ON IT. DURING THE ASSESSMENT PR OCEEDINGS, THE A.R. SUBMITTED LEDGER EXTRACTS OF VEHICLE HIRE CHAR GES. THE A.O. OBSERVED FROM THE PROFIT AND LOSS ACCOUNT THAT THE APPELLANT HAD NOT INCURRED PAYMENT TOWARDS DRIVERS. THE A.O. THEREFO RE HELD THAT THE APPELLANT WAS HIRING THE CARS ALONG WITH THE DRIVER S AND ACCORDINGLY, THE PROVISIONS OF SECTION 194C AND NOT SECTION 194I WERE APPLICABLE IN THE APPELLANTS CASE. HOWEVER, AS THE APPELLANT HAD NOT DEDUCTED TDS ON PAYMENTS ABOVE RS.30,000/-, THE A.O. DISALLO WED 30% OF SUCH PAYMENTS TOTALING RS.4,22,22,161/-, INVOKING T HE PROVISIONS OF SECTION 40(A)(IA). ACCORDINGLY, THE A.O. MADE A DI SALLOWANCE OF RS.1,26,66,648/- BEING THE VEHICLE HIRE CHARGES ON WHICH TDS HAD NOT BEEN DEDUCTED. 4. ON APPEAL, CIT(A) OBSERVED THAT THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S 194C OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] ON THE VEHICLE HIRE CHARGES AND THE ASSESSEE FAILED TO DED UCT THE TDS HIRE CHARGES THE DISALLOWANCE U/S MADE BY AO U/S 40(A)(I A) OF THE ACT IS JUSTIFIED. AGAINST THIS, THE ASSESSEE IS IN APPE AL BEFORE US BY WAY OF ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 4 OF 18 ABOVE GROUNDS. THE LD. A.R. SUBMITTED THAT THE AP PELLANT FIRM CARRIES ON THE BUSINESS OF PROVIDING VEHICLES TO M/ S. ORIX INFRASTRUCTURE INDIA PVT. LTD., [HEREINAFTER FOR SH ORT 'ORIX COMPANY']. THE AFORESAID ORIX COMPANY IS ITSELF IN THE SAID BUSINESS I.E., PROVIDING VEHICLES ON HIRE TO THE EN D USER CORPORATE COMPANIES, WHO ARE THE ULTIMATE USERS OF THE SERVICE PROVIDED BY THE ORIX COMPANY. THE APPELLANT IS ONE OF THE VENDORS OF THE SAID COMPANY AND ENTERED INTO A TRAN SPORT SERVICE AGREEMENT WITH THE SAID COMPANY ON 30/07/20 14, A COPY OF WHICH IS PLACED AT PAGE 25 OF THE PAPER BOO K NO.2 FILED ALONGWITH THE WRITTEN SUBMISSIONS. 4.1 LD. A.R. FURTHER SUBMITTED THAT THE APPELLANT I S ALSO AN AGGREGATOR OF VEHICLES I.E., THE APPELLANT ITSELF D OES NOT OWN SUFFICIENT NUMBER OF VEHICLES REQUIRED BY IT FOR FU LFILLING ITS OBLIGATIONS UNDER THE SERVICE CONTRACT ENTERED WITH ORIX COMPANY. IT NECESSARILY HAS TO CO-OPT OTHER THIRD P ARTY VEHICLE OWNERS TO FULFILL ITS OBLIGATIONS UNDER THE SERVICE AGREEMENT AND ACCORDINGLY THE APPELLANT ENTERED INTO AN UNDER STANDING WITH SEVERAL VEHICLE OWNERS, WHO ARE INVARIABLY DRI VER-CUM- OWNERS, FOR FULFILLING ITS OBLIGATIONS UNDER THE SE RVICE CONTRACT MENTIONED ABOVE. THE AMOUNTS PAID TO SUCH THIRD PAR TY VEHICLE OWNERS AMOUNTED TO RS.5,75,07,494/- AND INSTEAD OF NETTING THE SAME FROM THE GROSS RECEIPTS OF VEHICLE HIRE CH ARGES RECEIVED, THE SAME WAS DISCURSIVELY DEBITED TO THE PROFIT & LOSS ACCOUNT AS 'VEHICLE HIRE CHARGES'. 4.2 LD. A.R. SUBMITTED THAT WHILE EXAMINING THE SAM E DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTE D THAT THE DRIVERS OF SUCH THIRD PARTY VEHICLES WERE NOT THE E MPLOYEES OF THE APPELLANT I.E., THE APPELLANT HAD INCURRED NO S ALARY EXPENDITURE TOWARDS THE SALARIES OF THE DRIVERS OF SUCH THIRD ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 5 OF 18 PARTY VEHICLES. THIS, ACCORDING TO THE A.O., IMPLIE D THAT THE APPELLANT HAD HIRED A CAR ALONGWITH A DRIVER, WHICH MEANT THAT THE PROVISIONS OF SECTION 194I OF THE ACT, WOULD NOT APPLY AND THAT INSTEAD, THE PROVISIONS OF SECTION 194C OF THE ACT, WOULD GET ATTRACTED. THEREAFTER, THE A.O. MADE AN ADDITIO N OF RS.1,26,66,648/- BEING 30% OF THE SUM OF RS.4,22,22 ,167/- BEING THE AMOUNT SPENT ON WHICH THE APPELLANT HAD FAILED TO DEDUCT TAX U/S.194C OF THE ACT. 4.3 LD. A.R. FURTHER SUBMITTED THAT IN THE STATEMEN T OF FACTS, THERE IS NO PRIVITY OF CONTRACT BETWEEN ORIX COMPAN Y AND SUCH THIRD PARTY VEHICLE OWNERS AND THUS, THERE CANNOT B E ANY SUB- CONTRACT TO INVOKE THE PROVISIONS OF SECTION 194C O F THE ACT. AS ALREADY EXPLAINED IN THE STATEMENT OF FACTS, THE RE VENUE DERIVED BY THE APPELLANT IS SHARED BETWEEN THE APPELLANT AN D SUCH THIRD PARTY VEHICLE OWNERS, WHO ARE THEMSELVES CARRYING O N THE BUSINESS OF TRANSPORT OPERATORS. THE ENTIRE BILL IS RAISED IN THE NAME OF THE APPELLANT ONLY SINCE THERE IS NO PRIVIT Y OF CONTRACT BETWEEN ORIX COMPANY AND SUCH THIRD PARTY VEHICLE O WNERS. HE SUBMITTED THAT THE ARRANGEMENT BETWEEN THE APPELLAN T AND SUCH THIRD PARTY VEHICLE OWNERS IS NEITHER IN THE N ATURE OF A SUB-CONTRACT NOR IN THE NATURE OF HIRE. IT IS MORE A CASE OF A JOINT VENTURE WHEREIN TWO PERSONS JOINTLY PERFORMIN G A WORK AND SHARE THE REVENUE RECEIVED BETWEEN THEM. HENCE, IT IS SUBMITTED THAT NEITHER THE PROVISIONS OF SECTION 19 4C NOR THE PROVISIONS OF SECTION 194I OF THE ACT WOULD BE ATTR ACTED TO THE FACTS OF THE APPELLANT'S CASE IN RESPECT OF THE PAY MENTS MADE BY THE APPELLANT TO SUCH THIRD PARTY VEHICLE OWNERS SI NCE THE AFORESAID PAYMENT HAVE BEEN MADE BY ONE JOINT VENTU RER TO ANOTHER. RELIANCE FOR THIS PROPOSITION IS PLACED ON THE DECISION OF THE HON'BLE 1TAT, HYDERABAD IN THE CASE OF MEIL- SEW- MAYTAS BHEL, A COPY OF WHICH IS PLACED AT PAGE 27 O F THE PAPER ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 6 OF 18 BOOK. RELIANCE IS ALSO PLACED ON THE DECISION OF TH E HON'BLE ITAT PUNE BENCH, IN THE CASE OF MUNICIPAL CORPORATION, A COPY OF WHICH IS PLACED AT PAGE 60 OF THE PAPER BOOK. AC CORDINGLY, THE LD. A.R. PRAYED THAT THE DISALLOWANCE MADE REQU IRES TO BE DELETED. 5. ON THE OTHER HAND, LD. D.R. SUBMITTED THAT ASSES SEE HAS PAID THE HIRE CHARGES TO THE VEHICLE OWNERS WHICH FALLS UNDER THE PURVIEW OF SECTION 194C OF THE ACT ON WHICH PAYMENT, ASSESS EE IS LIABLE TO DEDUCT TDS, WHICH IS NOT DEDUCTED BY THE ASSESSEE M AINLY THE APPLICABILITY OF SECTION 40(A)(IA) OF THE ACT IS JU STIFIED. ACCORDINGLY, INVOKING OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS JUSTIFIED IS SUPPORTED BY THE ORDER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE PROVISIONS OF SECTION 40(A)(IA) ARE VERY CLEAR IF THE ASSESSEE FAILS TO DEDUCT THE TAX AT SOURCE OR AFTER DEDUCTION HAS NOT PAID BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION ( 1) OF SECTION 139, THE SAME WILL NOT BE ALLOWED IN COMPUTING THE INCOM E UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. THE C ONTENTION OF TH E ASSESSEE, HOWEVER, IS THAT THE PROVISIONS OF SECTIO N 194C ARE NOT APPLICABLE ON THE FACTS AS THERE IS NO AGREEMENT OR CONTRACT BETWEEN THE ASSESSEE AND THE PERSONS FROM WHOM THE VEHICLES HAVE BEEN HIRED. THE PROVISION OF SECTION 194C LAYS DOWN AS U NDER:- 194C - PAYMENTS TO 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 F OR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN TH E CONTRACTOR AND A SPECIFIED PERSON SHALL, AT THE TIM E OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 7 OF 18 PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMO UNT EQUAL TO (I)ONE PER CENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO AN INDIVIDUAL OR A HINDU UNDIVIDED F AMILY; (II)TWO PER CENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO A PERSON OTHER THAN AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, OF SUCH SUM AS INCOME-TAX ON INCO ME COMPRISED THEREIN. (2) WHERE ANY SUM REFERRED TO IN SUB-SECTION (1) IS CREDITED TO ANY ACCOUNT, WHETHER CALLED SUSPENSE ACCOUNT OR B Y ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON L IABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE C REDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PRO VISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. (3) WHERE ANY SUM IS PAID OR CREDITED FOR CARRYING OUT ANY WORK MENTIONED IN SUB-CLAUSE (E) OF CLAUSE (IV) OF THE E XPLANATION, TAX SHALL BE DEDUCTED AT SOURCE (I)ON THE INVOICE VALUE EXCLUDING THE VALUE OF MATE RIAL, IF SUCH VALUE IS MENTIONED SEPARATELY IN THE INVOICE; OR (II) ON THE WHOLE OF THE INVOICE VALUE, IF THE VALU E OF MATERIAL IS NOT MENTIONED SEPARATELY IN THE INVOICE. (4) NO INDIVIDUAL OR HINDU UNDIVIDED FAMILY SHALL BE LIABLE TO DEDUCT INCOME-TAX ON THE SUM CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR WHERE SUCH SUM IS CREDITE D OR PAID EXCLUSIVELY FOR PERSONAL PURPOSES OF SUCH INDIVIDUA L OR ANY MEMBER OF HINDU UNDIVIDED FAMILY. (5) NO DEDUCTION SHALL BE MADE FROM THE AMOUNT OF A NY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID T O THE ACCOUNT OF, OR TO, THE CONTRACTOR, IF SUCH SUM DOES NOT EXC EED 17[THIRTY] THOUSAND RUPEES : PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OF SUCH SUMS CREDITED OR PAID OR LIKELY TO BE CREDITED OR P AID DURING THE FINANCIAL YEAR EXCEEDS [SEVENTY FIVE] THOUSAND RUPEES, THE PERSON RESPONSIBLE FOR PAYING SUCH SUMS REFERRED TO IN SUB- SECTION (1) SHALL BE LIABLE TO DEDUCT INCOME-TAX UN DER THIS SECTION. ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 8 OF 18 (6) NO DEDUCTION SHALL BE MADE FROM ANY SUM CREDITE D OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOU S YEAR TO THE ACCOUNT OF A CONTRACTOR DURING THE COURSE OF BUSINE SS OF PLYING, HIRING OR LEASING GOODS CARRIAGES, ON FURNISHING OF HIS PERMANENT ACCOUNT NUMBER, TO THE PERSON PAYING OR C REDITING SUCH SUM. (7) THE PERSON RESPONSIBLE FOR PAYING OR CREDITING ANY SUM TO THE PERSON REFERRED TO IN SUB-SECTION (6) SHALL FUR NISH, TO THE PRESCRIBED INCOME-TAX AUTHORITY OR THE PERSON AUTHO RISED BY IT, SUCH PARTICULARS, IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (I)SPECIFIED PERSON SHALL MEAN, (A) THE CENTRAL GOVERNMENT OR ANY STATE GOVERNMENT; OR (B) ANY LOCAL AUTHORITY; OR (C) ANY CORPORATION ESTABLISHED BY OR UNDER A CENTR AL, STATE OR PROVINCIAL ACT; OR (D) ANY COMPANY; OR (E) ANY CO-OPERATIVE SOCIETY; OR (F) ANY AUTHORITY, CONSTITUTED IN INDIA BY OR UNDER ANY LAW, ENGAGED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPO SE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOW NS AND VILLAGES, OR FOR BOTH; OR (G) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REG ISTRATION ACT, 1860 (21 OF 1860) OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA; OR (H) ANY TRUST; OR (I) ANY UNIVERSITY ESTABLISHED OR INCORPORATED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT AND AN INSTITUTION DECLARED TO BE A UNIVERSITY UNDER SECTION 3 OF THE UNIVERSITY G RANTS COMMISSION ACT, 1956 (3 OF 1956); OR (J) ANY GOVERNMENT OF A FOREIGN STATE OR A FOREIGN ENTERPRISE OR ANY ASSOCIATION OR BODY ESTABLISHED OUTSIDE INDIA; OR (K) ANY FIRM; OR (L) ANY PERSON, BEING AN INDIVIDUAL OR A HINDU UNDI VIDED FAMILY OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUA LS, IF SUCH PERSON, (A) DOES NOT FALL UNDER ANY OF THE PRECEDING SUBCLA USES; AND ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 9 OF 18 (B) IS LIABLE TO AUDIT OF ACCOUNTS UNDER CLAUSE (A ) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATE LY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS C REDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR; (II)GOODS CARRIAGE SHALL HAVE THE MEANING ASSIGN ED TO IT IN THE EXPLANATION TO SUB-SECTION (7) OF SECTION 44AE; (III)CONTRACT SHALL INCLUDE SUB-CONTRACT; (IV)WORK SHALL INCLUDE (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTI ON OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; (D) CATERING; (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER. ] 6.1 A PLAIN READING OF THIS SECTION MAKES IT CLEAR THAT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HER EAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIE D PERSON IS REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION FROM THE AMOUNTS SO PAID OR PAYABLE. THERE IS NO DOUBT THAT THE ASSESSE E IN THIS CASE HAS MADE THE PAYMENTS AS HIRE CHARGES TO CAB OWNERS. TH E MAIN CONTENTION OF THE ASSESSEE IS, HOWEVER, THAT THE PA YMENTS HAVE NOT BEEN MADE IN PURSUANCE OF A CONTRACT BETWEEN THE AS SESSEE AND THE CAB OWNERS. NOW THE QUESTION ARISES BEFORE US, WHET HER THERE IS CONTRACTUAL RELATIONSHIP BETWEEN THE ASSESSEE AND T HE PERSONS TO WHOM THE ASSESSEE HAD MADE THE PAYMENTS IN THE NATU RE OF HIRING OF VEHICLES. IN OUR OPINION, A CONTRACT NEED NOT BE IN WRITING; EVEN AN ORAL CONTRACT IS GOOD ENOUGH TO INVOKE THE PROVISIO NS OF SECTION ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 10 OF 18 194C. AS HONBLE KARNATAKA HIGH COURT HAS OBSERVED IN THE CASE OF SMT J RAMA V S CIT (236 CTR 105), LAW DOES NOT STI PULATE THE EXISTENCE OF A WRITTEN CONTRACT AS A CONDITION PREC EDENT FOR (INVOKING THE PROVISIONS OF SECTION 194 C WITH RESPECT TO PAY MENT OF TDS. THE CAB OWNERS HAVE RECEIVED THE PAYMENTS FROM THE ASSE SSEE TOWARDS THE HIRING CHARGES, THEREFORE, THE PRESUMPTION NORM ALLY BE THAT ONE WOULD PROCEED ON THE BASIS THAT THERE WAS A CONTRAC T FOR HIRING OF VEHICLES. THEREFORE, IF THE ASSESSEE HAS MADE THE P AYMENT FOR HIRING THE VEHICLES, THE PROVISIONS OF SECTION 194C ARE CL EARLY APPLICABLE. THE CONTRACT HAS TO BE LOOKED INTO PARTY-WISE NOT O N THE BASIS OF THE INDIVIDUAL. IN OUR OPINION, ALL THE PAYMENTS MADE T O A CAB OWNER THROUGHOUT THE YEAR ARE TO BE AGGREGATED TO ASCERTA IN THE APPLICABILITY OF THE TDS PROVISION AS ALL THE PAYME NTS PERTAIN TO A CONTRACT. CONTRACT NEED NOT BE IN WRITING. IT MAY I NFER FROM THE CONDUCT OF THE PARTIES. IT MAY BE ORAL ALSO. WE ALS O NOTED THAT UNDER SECTION 194C, SUB-SECTION (5) PROVISO THERETO, THE AGGREGATE AMOUNT OF ALL THE PAYMENTS OR CREDITED TO A PERSON DURING A FINANCIAL YEAR SHOULD EXCEED ONLY RS.75,000, THEN THE ASSESSEE SHA LL BE LIABLE TO DEDUCT INCOME-TAX AT SOURCE. THE A.O. HAS TO VERI FY THE AGGREGATE PAYMENT MADE TO EACH PARTY IN THE LIGHT OF SECTION 194C(5) OF THE ACT AND DECIDE AFRESH. 6.2 THE LD. A.R. HAS ALSO TAKEN A SUBMISSION THAT THE 2 ND PROVISO TO SECTION 40(A) (IA) AS INSERTED BY FINANCE ACT, 2 012 WOULD APPLY IN THE CASE OF THE ASSESSEE. ACCORDING TO HIM, 2 ND PROVISO IS CURATIVE IN NATURE INTENDED TO SUPPLY AN OBVIOUS OMISSION, TAKE CARE OF A N UNINTENDED CONSEQUENCE AND MAKE THE SECTION WORKABL E. SECTION 40(A)(IA) WITHOUT THE SECOND PROVISO RESULTED IN TH E UNINTENDED CONSEQUENCE OF DISALLOWANCE OF LEGITIMATE BUSINESS EXPENDITURE EVEN IN A CASE WHERE THE PAYEE IN RECEIPT OF THE INCOME HAD PAID TAX, AND, THEREFORE, HE TOOK THE PLEA THAT THE SECOND PROVISO ALTHOUGH INSERTED ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 11 OF 18 W.E.F. 1ST APRIL, 2013 BUT BEING CURATIVE IN NATURE HAS RETROSPECTIVE EFFECT AND ACCORDINGLY CONTENDED THAT THE ISSUE BE RESTORED TO THE FILE OF THE ASSESSING OFFICER SO THAT THE ASSESSEE CAN P ROVIDE ALL THE DETAILS IN TERMS OF THE SECOND PROVISO TO SECTION 4 0(A)(IA). 6.3 WE FIND FROM FIRST ARGUMENT MADE BY LD. COUNSE L FOR THE ASSESSEE THAT THE SECOND PROVISO TO SECTION 40(A)(I A) OF THE ACT INSERTED BY THE FINANCE ACT, 2012 WOULD APPLY IN TH E INSTANT CASE. ACCORDING TO HIM, THE SECOND PROVISO IS CURATIVE IN NATURE INTENDED TO SUPPLY AN OBVIOUS OMISSION, TAKE CARE OF AN UNIN TENDED CONSEQUENCE AND MAKE THE SECTION WORKABLE. SECTION 40(A)(IA) WITHOUT THE SECOND PROVISO RESULTED IN THE UNINTEND ED CONSEQUENCE OF DISALLOWANCE OF LEGITIMATE BUSINESS EXPENDITURE EVEN IN A CASE WHERE THE PAYEE IN RECEIPT OF THE INCOME HAD PAID T AX. ACCORDING TO HIM, IT HAS FOR LONG BEEN THE LEGAL POSITION THAT I F THE PAYEE HAS PAID TAX ON HIS INCOME, NO RECOVERY OF ANY TAX CAN BE MA DE FROM THE PERSON WHO HAD FAILED TO DEDUCT THE INCOME TAX AT S OURCE FROM SUCH AMOUNT. IN GRINDLAYS BANK V CIT, (1992) 193 ITR 457 (CAL) DECIDED ON SEPTEMBER 5, 1989, IT WAS HELD BY THE HON'BLE CA LCUTTA HIGH COURT AS FOLLOWS AT PAGES 469-470 OF THE REPORTS: A POINT HAS BEEN MADE BY THE ASSESSEE THAT AS A RESULT OF THIS DEDUC TION THE DEPARTMENT IS REALIZING THE TAX TWICE ON THE SAME I NCOME. IT DOES NOT APPEAR THAT THIS POINT WAS AGITATED BEFORE THE TRIB UNAL. WE, HOWEVER, MAKE IT CLEAR THAT IF THE AMOUNT OF TAX HAS ALREADY BEEN REALISED FROM THE EMPLOYEES CONCERNED DIRECTLY, THERE CANNOT BE A NY QUESTION OF FURTHER REALISATION OF TAX AS THE SAME INCOME CANNO T BE TAXED TWICE. IF THE TAX HAS BEEN REALISED ONCE, IT CANNOT BE REA LISED ONCE AGAIN, BUT THAT DOES NOT MEAN THAT THE ASSESSEE WILL NOT B E LIABLE FOR PAYMENT OF INTEREST OR ANY OTHER LEGAL CONSEQUENCE FOR THEIR FAILURE TO DEDUCT OR TO PAY TAX IN ACCORDANCE WITH LAW TO T HE REVENUE. (EMPHASIS SUPPLIED) THAT SUCH WAS THE LEGAL POSITIO N WAS ACCEPTED ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 12 OF 18 BY THE CENTRAL BOARD OF DIRECT TAXES IN ITS CIRCULA R NO.275/201/95- IT(B) DATED JANUARY 29, 1997. REFERENCE IN THIS BEH ALF MAY ALSO BE MADE TO THE JUDGMENT OF THE HON'BLE SUPREME COURT I N HINDUSTAN COCA COLA BEVERAGE P. LTD. V CIT, (2007) 293 ITR 22 6 (SC) WHERE THE SAME VIEW WAS TAKEN. WE FIND THAT THE AFORESAID SET TLED POSITION IN LAW HAS ALSO BEEN LEGISLATIVELY RECOGNIZED BY INSER TION OF A PROVISO IN SUB-SECTION (1) OF SECTION 201 OF THE ACT BY THE FI NANCE ACT, 2012. THUS, THE SETTLED POSITION IN LAW IS THAT IF THE DE DUCTEE/PAYEE HAS PAID THE TAX, NO RECOVERY CAN BE MADE FROM THE PERS ON RESPONSIBLE FOR PAYING OF INCOME FROM WHICH HE FAILED TO DEDUCT TAX AT SOURCE. IN A CASE WHERE THE DEDUCTEE/PAYEE HAS PAID THE TAX ON SUCH INCOME, THE PERSON RESPONSIBLE FOR PAYING THE INCOME IS NO LONGER REQUIRED TO DEDUCT OR DEPOSIT ANY TAX AT SOURCE. IN THE SIMILAR CIRCUMSTANCES, WE FIND THAT THE FIRST PROVISO TO SECTION 40(A)(IA) IN SERTED BY THE FINANCE ACT, 2010, WHICH HAS BEEN HELD TO BE CURATIVE AND T HEREFORE, RETROSPECTIVE IN ITS OPERATION BY THE HON'BLE CALCU TTA HIGH COURT IN ITAT NO. 302 OF 2011, GA 3200/2011, CIT V VIRGIN CR EATIONS DECIDED ON NOVEMBER 23, 2011 PROVIDES FOR ALLOWANCE OF THE EXPENDITURE IN ANY SUBSEQUENT YEAR IN WHICH TAX HAS BEEN DEDUCTED AND DEPOSITED. THE INTENTION OF THE LEGISLATURE CLEARLY IS NOT TO DISALLOW LEGITIMATE BUSINESS EXPENDITURE. THE ALLOWANCE OF SUCH EXPENDI TURE IS SOUGHT TO BE MADE SUBJECT TO DEDUCTION AND PAYMENT OF TAX AT SOURCE. HOWEVER, IN A CASE WHERE THE DEDUCTEE/PAYEE HAS PAI D TAX AND AS SUCH THE PERSON RESPONSIBLE FOR PAYING IS NO LONGER REQUIRED TO DEDUCT OR PAY ANY TAX, LEGITIMATE BUSINESS EXPENDIT URE WOULD STAND DISALLOWED SINCE THE SITUATION CONTEMPLATED BY THE FIRST PROVISO VIZ. DEDUCTION AND PAYMENT OF TAX IN A SUBSEQUENT YEAR W OULD NEVER COME ABOUT. SUCH UNINTENDED CONSEQUENCE HAS BEEN SO UGHT TO BE TAKEN CARE OF BY THE SECOND PROVISO INSERTED IN SEC TION 40(A)(IA) BY THE FINANCE ACT, 2012. THERE CAN BE NO DOUBT THAT T HE SECOND PROVISO WAS INSERTED TO SUPPLY AN OBVIOUS OMISSION AND MAKE THE SECTION ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 13 OF 18 WORKABLE. THE INSERTION OF SECOND PROVISO WAS EXPLA INED BY MEMORANDUM EXPLAINING THE PROVISION IN FINANCE BILL , 2012, REPORTED IN 342 ITR (STATUTES)234 AT 260 & 261, WHI CH READS AS UNDER:- E.RATIONALIZATION OF TAX DEDUCTION AT SOURCE (TDS) AND TAX COLLECTION AT SOURCE (TCS) PROVISIONS I. DEEMED DATE OF PAYMENT OF TAX BY THE RESIDENT PA YEE. UNDER THE EXISTING PROVISIONS OF CHAPTER XVII-B OF THE INCOME- TAX ACT, A PERSON IS REQUIRED TO DEDUCT TAX ON CERT AIN SPECIFIED PAYMENTS AT THE SPECIFIED RATES IF THE PAYMENT EXCE EDS SPECIFIED THRESHOLD. IN CASE OF NON-DEDUCTION OF TA X IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER, HE IS DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) I N RESPECT OF THE AMOUNT OF SUCH NON-DEDUCTION. HOWEVER, SECTION 191 OF THE ACT PROVIDES THAT A PERSON SHALL BE DEEMED TO B E ASSESSEE IN DEFAULT IN RESPECT OF NON/SHORT DEDUCTION OF TAX ONLY IN CASES WHERE THE PAYEE HAS ALSO FAILED TO PAY THE TA X DIRECTLY. THEREFORE, THE DEDUCTOR CANNOT BE TREATED AS ASSESS EE IN DEFAULT IN RESPECT OF NON/SHORT DEDUCTION OF TAX IF THE PAYEE HAS DISCHARGED HIS TAX LIABILITY. THE PAYER IS LIABLE TO PAY INTEREST UNDER SECTION 2 01(1A) ON THE AMOUNT OF NON/SHORT DEDUCTION OF TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH THE PA YEE HAS DISCHARGED HIS TAX LIABILITY DIRECTLY. AS THERE IS NO ONE-TO-ONE CORRELATION BETWEEN THE T AX TO BE DEDUCTED BY THE PAYER AND THE TAX PAID BY THE PAYEE , THERE IS LACK OF CLARITY AS TO WHEN IT CAN BE SAID THAT PAYE R HAS PAID THE TAXES DIRECTLY. ALSO, THERE IS NO CLARITY ON THE IS SUE OF THE CUT- OFF DATE, I.E., THE DATE ON WHICH IT CAN BE SAID TH AT THE PAYEE HAS DISCHARGED HIS TAX LIABILITY. IN ORDER TO PROVIDE CLARITY REGARDING DISCHARGE OF TAX LIABILITY BY THE RESIDENT PAYEE ON PAYMENT OF ANY SUM RECEIVE D BY HIM WITHOUT DEDUCTION OF TAX, IT PROPOSED TO AMEND SECT ION 201 TO PROVIDE THAT THE PAYER WHO FAILS TO DEDUCT THE WHOL E OR ANY PART OF THE TAX ON THE PAYMENT MADE TO A RESIDENT P AYEE SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEALT IN RESPECT OF SUCH TAX IF SUCH RESIDENT PAYEE- ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 14 OF 18 (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTIO N 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME ; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PAYER FURNISHES A CE RTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. THE DATE OF PAYMENT OF TAXES BY THE RESIDENT PAYEE SHALL BE DEEMED TO BE THE DATE ON WHICH RETURN HAS BEEN FURN ISHED BY THE PAYER. IT IS ALSO PROPOSED TO PROVIDE THAT WHERE THE PAYER FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX ON THE PAYM ENT MADE TO A RESIDENT AND IS NOT DEEMED TO BE AN ASSESSEE I N DEFAULT UNDER SECTION 201(1) ON ACCOUNT OF PAYMENT OF TAXES BY THE SUCH RESIDENT, THE INTEREST UNDER SECTION 201(1A)(I ) SHALL BE PAYABLE FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTI BLE TO THE DATE OF FURNISHING OF RETURN OF INCOME BY SUCH RESI DENT PAYEE. AMENDMENTS ON SIMILAR LINES ARE ALSO PROPOSED TO BE MADE IN THE PROVISIONS OF SECTION 206C RELATING TO TCS FOR CLARIFYING THE DEEMED DATE OF DISCHARGE OF TAX LIABILITY BY THE BU YER OR LICENSEE OR LESSEE. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST JULY, 20 12. II. DISALLOWANCE OF BUSINESS EXPENDITURE ON ACCOUN T OF NON- DEDUCTION OF TAX ON PAYMENT TO RESIDENT PAYEE. A RELATED ISSUE TO THE ABOVE IS THE DISALLOWANCE U NDER SECTION 40(A)(IA) OF CERTAIN BUSINESS EXPENDITURE LIKE INTE REST, COMMISSION, BROKERAGE, PROFESSIONAL FEE, ETC. DUE T O NON- DEDUCTION OF TAX. IT HAS BEEN PROVIDED THAT IN CASE THE TAX IS DEDUCTED IN SUBSEQUENT PREVIOUS YEAR, THE EXPENDITU RE SHALL BE ALLOWED IN THAT SUBSEQUENT PREVIOUS YEAR OF DEDU CTION. IN ORDER TO RATIONALIZE THE PROVISIONS OF DISALLOW ANCE ON ACCOUNT OF NON-DEDUCTION OF TAX FROM THE PAYMENTS M ADE TO A RESIDENT PAYEE, IT IS PROPOSED TO AMEND SECTION 40( A)(IA) TO PROVIDE THAT WHERE AN ASSESSEE MAKES PAYMENT OF THE NATURE SPECIFIED IN THE SAID SECTION TO A RESIDENT PAYEE W ITHOUT DEDUCTION OF TAX AND IS NOT DEEMED TO BE AN ASSESSE E IN DEFAULT UNDER SECTION 201(1) ON ACCOUNT OF PAYMENT OF TAXES BY THE ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 15 OF 18 PAYEE, THE, FOR THE PURPOSE OF ALLOWING DEDUCTION O F SUCH SUM, IT SHALL BE DEEMED THAT THE ASSESSEE HAD DEDUCTED A ND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RE TURN OF INCOME BY THE RESIDENT PAYEE. THESE BENEFICIAL PROVISIONS ARE PROPOSED TO BE APPL ICABLE ONLY IN THE CASE OF RESIDENT PAYEE. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL, 2 013 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSM ENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT YEARS. 6.4 WE RESTORE THIS ISSUE TO THE FILE OF THE ASSES SING OFFICER WITH THE DIRECTION THAT THE ASSESSEE SHALL PROVIDE ALL THE D ETAILS TO THE ASSESSING OFFICER WITH REGARD TO THE RECIPIENTS OF THE INCOME AND TAXES PAID BY THEM. THE ASSESSING OFFICER SHALL CAR RY OUT NECESSARY VERIFICATION IN RESPECT OF THE PAYMENTS AND TAXES O F SUCH INCOME AND AL SO FILING THE RETURN BY THE RECIPIENT. IN CASE, THE ASSESSING OFFICER FINDS THAT THE RECIPIENT HAS DULY PAID THE TAX ES O N THE INCOME, THE ADDITION MADE BY THE ASSESSING OFFICER SHALL STAND DELETED. THUS THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 7. WITH REGARD TO DISALLOWANCE OF REIMBURSEMENT OF PETROL & DIESEL CHARGES ON HIRED VEHICLES, THE LD. A.R. SUBM ITTED THAT ASSESSEE SHOWN THESE EXPENSES AS REIMBURSEMENT OF PETROL AND DIESEL EXPENSES ON HIRED VEHICLES, WHICH DOES NOT HAVE ANY ELEMENT OF PROFIT AND PAID DIRECTLY TO THE PETROL BUNKS AND NOT TO TH E CAB OWNERS. THIS CANNOT BE SUBJECT TO TDS AND THERE IS NO APPLICABIL ITY OF SECTION 40(A)(IA) OF THE ACT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE HAS ARGUED THAT HE HAD NOT ENTERED INTO ANY CONTRACT WITH THE CAB OWNERS FOR THE VEHICLES A ND DRIVERS PROVIDED BY THEM AND THE INDIVIDUAL PAYMENTS MADE T O THEM WERE NOT REGULAR OR ROUTINE AND AS SUCH THE PROVISIONS O F SECTION 194C ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 16 OF 18 WERE NOT ATTRACTED. THIS ARGUMENT OF THE ASSESSEE I S WITHOUT ANY MERIT, AS THIS IS NOT A CASE WHERE THE PAYMENTS ARE BEING MADE ONCE IN A BLUE MOON TO A PARTICULAR CAN OWNER. FURTHER, THE ASSESSEE HAS NOT BROUGHT ON RECORD ANYTHING TO SHOW THAT THE PAY MENTS WERE NOT MORE THAN THE PRESCRIBED LIMIT OF RS.30,000 AT ANY INSTANCE OR RS.75,000 DURING THE FINANCIAL YEAR. IT IS AN UNDIS PUTED FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF VEHICLE HIRE AND TAKES VEHICLES ALONG WITH DRIVERS ON HIRE FROM VARIOUS PERSONS AND PAYS VEHICLE HIRE CHARGES AND PETROL AND DIESEL EXPENSES TO SUCH CAB OWNERS. WHEN THE ASSESSING OFFICER HAS CONFRONTED THE ASSESSEE O N THE ISSUE OF TAX DEDUCTION AT SOURCE, THE ASSESSEE HAS RELIED ON THE PROVISIONS OF SECTION 194C(6) OF THE ACT AND ARGUED THAT HE WAS N OT LIABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS AS HE HAD OBTAINED PA N OF THE PERSONS FROM WHOM VEHICLE WAS TAKEN ON HIRE AND THESE PERSO NS WERE REGULAR INCOME TAX PAYERS. THUS, THE FACT OF EXISTENCE OF A CONTRACT WITH THE CAB OWNERS WAS NOT DENIED BY THE ASSESSEE BUT HE AR GUED THAT THE PROVISIONS OF SECTION 194C(6) OF THE ACT ARE APPLIC ABLE TO HIS CASE. THE LEARNED DR FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT ACCEPTED THE ABOVE ARGUMENT OF THE ASSESSEE AS PROV ISIONS OF SECTION 194C(6) OF THE ACT DO NOT APPLY TO THE BUSINESS OF PLYING PASSENGER VEHICLES. THE LEARNED DR SUBMITTED THAT THE CLAIM O F THE ASSESSEE THAT PETROL AND DIESEL EXPENSES WERE IN NATURE OF R EIMBURSEMENT IS ALSO NOT ACCEPTABLE FOR THE REASON THAT THE PROVISI ONS OF TDS GET ATTRACTED EVEN IN THE CASE OF REIMBURSEMENT. THE AS SESSEE HAS TAKEN VEHICLE ON HIRE ALONG WITH THE DRIVERS AND THE PAYM ENT MADE TO THE CAB OWNERS INCLUDES THAT FOR PETROL AND DIESEL. THI S IS NOT THE CLAIM OF THE ASSESSEE THAT EXPENSES OF PETROL AND DIESEL ARE TO BE BORNE BY HIM AND HE IS JUST MAKING PAYMENT TO THE CAB OWNERS FOR FILLING PETROL / DIESEL IN THEIR VEHICLES. BESIDES THE ABOVE ARGUM ENT, THE LEARNED DR ALSO RELIED ON THE ORDERS OF THE INCOME TAX AUTH ORITIES. ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 17 OF 18 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT AS AGREED BY AND BETWEEN THE ASSESSEE AND THE CAB OWNERS, A VEHICLE WAS TO BE PROVIDED BY THE ASSESSEE TO THE PARTIES AND THUS, T HE ASSESSEE WAS TO BEAR THE VEHICLE EXPENSES ACTUALLY INCURRED BY T HE SAID CAB OWNERS AND WHICH WILL BE REIMBURSED BY THE PARTIES CONCERN ED. IF BILLS FOR SUCH EXPENSES INCURRED BY THE SAID CAB OWNERS WERE SEPARATELY RAISED BY THEM ON THE ASSESSEE IN ADDITION TO BILLS FOR HIRE CHARGES AND SINCE THE AMOUNT OF BILLS SO RAISED WAS TOWARDS THE ACTUAL EXPENSES INCURRED BY THEM, THERE WAS NO ELEMENT OF ANY PROFIT INVOLVED IN THE SAID BILLS. IT WAS THUS A CLEAR CAS E OF REIMBURSEMENT OF ACTUAL EXPENSES INCURRED BY THE ASSESSEE AND THE SAME, THEREFORE, WAS NOT OF THE NATURE OF PAYMENT COVERED BY SECTION 194C OF THE ACT REQUIRING THE ASSESSEE TO DEDUCT TAX AT SOURCE THER EFROM, WHERE BILLS WERE RAISED SEPARATELY BY THE CAB OWNERS FOR REIMBU RSEMENT OF ACTUAL EXPENSES INCURRED BY THEM. AS SUCH, CONSIDERING ALL THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE PROVISIONS OF SEC TION 194C OF THE ACT WERE NOT APPLICABLE TO THE REIMBURSEMENT OF ACTUAL EXPENSES AND THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FRO M SUCH REIMBURSEMENT. ACCORDINGLY, WE DIRECT THE A.O. TO V ERIFY THE CLAIM OF THE ASSESSEE IN THE LIGHT OF OUR ABOVE OBSERVATION. 10. FURTHER, THE SAME VIEW WAS TAKEN UP BY COORDINA TE BENCH IN ITA NO.785/BANG/2018 DATED 24.2.2020 IN THE CASE OF SRI SINGONAHALLI CHIKKAREVANNA GANGADHARAIAH VS. ACIT , BENGALURU BY BANGALORE BENCH. ITA NO.2078/BANG/2019 M/S. SRI BALAJI PRASANNA TRAVELS, BENGALURU PAGE 18 OF 18 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH NOV, 2020. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER BANGALORE, DATED 25 TH NOV, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.