ITO, Jalgaon V. Shri Bhaurao Gambhir Patil., Jalgaon

ITA 2461/PUN/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93835 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE: SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO. 2461 /PN/20 12 ASSESSMENT YEAR : 20 0 9 - 10 INCOME TAX OFFICER, WARD 1(1), JALGAON VS. SHRI BHAURAO GAMBHIR PATIL, PROP. OF SHRI SAMARTH TOURS & TRAVELS, 21, RANCHOD NAGAR, JILHA PETH, JALGAON (APPELLANT) (RESPONDENT) PAN NO. AAMPP1451A ITA NO. 2462/PN/2012 ASSESSMENT YEAR : 200 9 - 10 INCOME TAX OFFICER, WARD 1(1), JALGAON VS. SMT. JYOTI MANOJ PATIL, PROP. SWAMI SAMARTH TRAVELS, 21, RANCHOD NAGAR, JILHA PETH, JALGAON (APPELLANT) (RESPONDENT) PAN NO. AIWPP7844B ITA NO. 2519/PN/2012 ASSESSMENT YEAR : 2009 - 10 SHRI BHAURAO GAMBHIR PATIL, PROP. OF SHRI SAMARTH TOURS & TRAVELS, 21, RANCHOD NAGAR, JILHA PETH, JALGAON VS. INCOME TAX OFFICER, WARD 1(1), JALGAON (APPELLANT) (RESPONDENT) PAN NO. AAMPP1451A ITA NO. 2520/PN/2012 ASSESSMENT YEAR : 2009 - 10 SMT. JYOTI MANOJ PATIL, PROP. SWAMI SAMARTH TRAVELS, 21, RANCHOD NAGAR, JILHA PETH, JALGAON VS. INCOME TAX OFFICER, WARD 1(1), JALGAON (APPELLANT) (RESPONDENT) PAN NO. AIWPP7844B 2 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 ASSESSEE BY: SHRI NIKHIL PATHAK REVENUE BY: SHRI P.S. NAIK DATE OF HEARING : 10-06-2015 DATE OF PRONOUNCEMEN T : 30-06-2015 ORDER PER VIKAS AWASTHY, JM:- THESE ARE SET OF FOUR APPEALS, TWO ARE BY THE REVENUE A ND ONE EACH BY TWO ASSESSEES, RELATED TO EACH OTHER. ITA NO. 2461/PN/2012 BY THE REVENUE AND ITA NO. 2519/PN/2012 BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- II, NASHIK DATED 10-10-2012 FOR THE ASSESSMENT YEAR 2009-10. I N ITA NO. 2462/PN/2012 THE REVENUE HAS CHALLENGED THE ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS)-II, NASHIK DATED 10-10-2012 FOR T HE ASSESSMENT YEAR 2009-10 IN THE CASE OF SECOND ASSESSEE; SMT. JYOTI MANOJ PAT IL. THE ASSESSEE HAS FILED CROSS APPEAL IN ITA NO. 2520/PN/2012 IMPUGNING THE SAME ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). SINCE, THE FACTS IN ALL THE APPEALS ARE SIMILAR, THE APPEALS ARE TAKEN UP TOGET HER FOR ADJUDICATION. 2. THE FACTS AS EMANATING FROM RECORDS ARE : THE ASSESS EES ARE ENGAGED IN THE BUSINESS OF PROVIDING VEHICLES TO VARIOUS C OMPANIES LIKE RELIANCE NEXT-LINK PVT. LTD., IDEA CELLULAR LTD., CHINA PETROLEU M PIPE LINE, ETC. ON CONTRACT. THE ASSESSEES DO NOT OWN ANY VEHICLE OF TH EIR OWN BUT ARE ARRANGING THE VEHICLES FROM VARIOUS TRANSPORTERS . THE VEHICLES ARE PROVIDED BY THE ASSESSEES TO THE COMPANIES IN ACCO RDANCE WITH THE CONTRACT AGREEMENT EXECUTED BETWEEN THE ASSESSEES A ND THE CONTRACTEE COMPANIES. IN LIEU OF SERVICES PROVIDED BY THE ASSESSEES, THE COMPANIES MAKE PAYMENT AFTER DEDUCTING TAX AT SOURCE. THE ASSES SEES FURTHER MAKE PAYMENTS TO THE THIRD PARTIES FROM WHOM THE VEHICLE S ARE ARRANGED. ON THE SAID PAYMENTS, THE ASSESSEES DID NOT DEDUCT TAX AT 3 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 SOURCE (TDS). THE ASSESSEES IN THEIR RESPECTIVE RETURN OF INCOME SHOW THE RECEIPTS FROM CONTRACTEE COMPANIES AS COMMISSION. 3. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESS ING OFFICER HELD THAT THE ASSESSEES ARE PROVIDING VEHICLES TO THE CO MPANIES UNDER CONTRACT AGREEMENT THEREFORE, THEY ARE CONTRACTORS. T HE ASSESSING OFFICER FURTHER HELD THAT, THE ASSESSEES HIRED VEHICLES FROM VARIOUS PERSONS AND MAKE PAYMENTS TO THEM WITHOUT DEDUCTING T DS. THE RELATIONSHIP BETWEEN THE ASSESSEES AND THE PERSONS FROM WHOM VEHICLES ARE HIRED ARE IN THE NATURE OF SUB-CONTRACT. THEREFORE, THE ASSESSEES ARE LIABLE TO DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF SE CTION 194C/194I OF THE ACT ON THE PAYMENTS MADE FOR HIRING THE VEHICLES. SINCE, THE ASSESSEES HAVE VIOLATED THE PROVISIONS OF SECTION 194C/19 4I OF THE ACT, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.70,45,194/- U/S. 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER FURTHER OBSERVED THAT T HE ASSESSEE HAS DEBITED VEHICLE EXPENSES OF RS.89,650/-. NO PROPER BILLS AN D VOUCHERS WERE MAINTAINED BY THE ASSESSEE IN SUPPORT OF SUCH EXPE NSES. THE ASSESSING OFFICER MADE 20% DISALLOWANCE OF THE SAID EXPENSES I.E. RS.17,930/-. IN THE CASE OF SMT. JYOTI MANOJ PATIL, I.E. ITA NOS. 2462 & 2520/PN/2012, THE ASSESSING OFFICER DISALLOWED RS.1,36,71,346/- U/S. 40(A)(IA) AND MADE AD-HOC ADDITION OF RS.50,453/- ON ACCOUNT OF DECREASE IN NET PROFIT IN IMPUGNED ASSESSMENT YEAR AS CO MPARED TO THE PREVIOUS ASSESSMENT YEAR. AGGRIEVED BY THE ADDITIONS/DISALLOWANCE MADE BY THE ASSES SING OFFICER, THE ASSESSEES FILED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) IN THEIR RESPECTIVE CASES. THE COMMISSIONER O F INCOME TAX (APPEALS) AFTER APPRECIATING THE FACTS OF THE CASE HELD THAT THE ASSESSEES ARE CONTRACTORS AND NOT COMMISSION AGENTS AS CLAIMED. THE 4 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 COMMISSIONER OF INCOME TAX (APPEALS) FURTHER HELD THAT, TH E VEHICLES HIRED BY THE ASSESSEES FROM THIRD PERSONS AMOUNTS TO S UB-CONTRACT. THEREFORE, THE ASSESSEES WERE LIABLE TO DEDUCT TDS ON TH E PAYMENTS MADE TO OWNERS OF THE HIRED VEHICLES. THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ACTION OF ASSESSING OFFICER IN MAKING DISALLO WANCE U/S. 40(A)(IA) OF THE ACT. HOWEVER, THE COMMISSIONER OF INCOM E TAX (APPEALS) RESTRICTED THE DISALLOWANCE U/S. 40(A)(IA) TO THE SUM S PAYABLE BY FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF M/S. MERILYN SHIPPING & TRANSPORT CO. 70 DTR (VISAKHA) (SB) ( TRIB) 81. THUS, IN THE CASE OF FIRST ASSESSEE I.E. ITA NOS. 2461 & 25 19/PN/2012, THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DIS ALLOWANCE U/S. 40(A)(IA) TO RS.25,36,242/-. SIMILARLY, IN THE CASE OF SE COND ASSESSEE I.E. SMT. JYOTI MANOJ PATIL, IN ITA NOS. 2462 & 252 0/PN/2012 THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE D ISALLOWANCE U/S. 40(A)(IA) TO RS.35,63,173/-. IN RESPECT OF DISALLOWANCE OF V EHICLE EXPENSES, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THA T THE ASSESSEE HAS NOT BEEN ABLE TO FULLY SUBSTANTIATE THE GR OUND RAISED IN THE APPEAL, THEREFORE, THE DISALLOWANCE WAS RESTRICTED TO RS.10,0 00/-. IN RESPECT OF ADDITION OF RS.50,453/- ON ACCOUNT OF TRADING RE SULT, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE SAME, AS THE ADDITION WAS MADE MERELY ON ASSUMPTIONS WITHOUT REJECTING OR RA ISING ANY SUSPICION OVER THE BOOKS OF ACCOUNT. AGAINST THESE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS), BOTH, THE REVENUE AND THE ASSESSEES HAVE COM E IN APPEAL BEFORE THE TRIBUNAL. 4. SHRI P.S. NAIK APPEARING ON BEHALF OF THE REVENUE SUBMIT TED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY COME TO THE CONCLUSION THAT THE VEHICLE OWNERS WHO HAD SUPPLIED VEHICLE S TO THE CONTRACTEE COMPANIES ACCORDING TO THE INSTRUCTIONS OF TH E ASSESSEE WERE 5 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 IN FACT SUB-CONTRACTEES OF THE ASSESSEE. THUS, THE PAY MENTS MADE TO THEM WERE SUBJECT TO TDS U/S. 194C OF THE ACT. HOWEVE R, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN APPLYING THE RATIO OF DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORT C O. (SUPRA). THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIK ANDAR KHAN N. TUNVAR REPORTED AS 357 ITR 312 AND THE HON'BLE CALCUT TA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE REPORTED AS 216 TAXMAN 258 HAVE HELD THAT THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORT CO. (SUPRA) IS NOT A GOOD LAW. THUS, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRE D IN RESTRICTING THE DISALLOWANCE U/S. 40(A)(IA) ON THE DISTINCTION OF PAID AND PAYABLE. THE LD. DR FURTHER SUBMITTED THAT THE COMMISSIONER OF INCO ME TAX (APPEALS) HAS ERRED IN RESTRICTING THE ADDITION OF RS.17,930/ - ON ACCOUNT OF DISALLOWANCE OF VEHICLES EXPENSES TO RS.10,000/-. THE LD. D R FURTHER IMPUGNED THE ACTION OF COMMISSIONER OF INCOME TAX (APPEALS ) IN DELETING THE ADDITION OF RS.50,453/-. 5. ON THE OTHER HAND SHRI NIKHIL PATHAK APPEARING ON BEH ALF OF THE ASSESSEES SUBMITTED THAT THE ASSESSEES ARE MERELY CH ARGING COMMISSION FOR SUPPLYING VEHICLES. THE ASSESSEES DO NOT OWN ANY V EHICLES OF THEIR OWN FOR SUPPLYING THEM ON HIRE. THE ASSESSEES ARE HIRING VEHICLES FROM THIRD PARTIES AND ARE PROVIDING THE SAME TO THE COMPANIE S. THERE IS NO CONTACT OR SUB-CONTRACT BETWEEN THE ASSESSEES AND T HE THIRD PARTIES FROM WHOM VEHICLES ARE HIRED. THEREFORE, THE PROVISIONS OF SECTI ON 194C WILL HAVE NO APPLICATION VIZ-A-VIZ ASSESSEES AND THE OWNERS O F THE VEHICLES. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. CIT VS. MUKESH TRAVELS COMPANY; 108 DTR 396 (GUJ). II. KRANTI ROAD TRANSPORT (P.) LTD. VS. ACIT; 18 TAXMANN.COM 1 24 (VISAKHA.). 6 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 III. ITO VS. M/S. GAURIMAL MAHAJAN & SONS; ITA NO. 1852/PN/20 12 DECIDED ON 06-01-2014. IV. VICKY ROADWAYS VS. JCIT; ITA NO. 38/AGRA/2013 DECIDED ON 31-10-2013. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF BOTH SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORIT IES BELOW. WE HAVE ALSO EXAMINED THE DECISIONS ON WHICH THE LD. AR HAS P LACED RELIANCE. THE CASE OF THE ASSESSEES IS, THAT THE ASSESSE ES ARE PROVIDING TRANSPORT VEHICLES TO THE COMPANIES ON THE TERMS AND C ONDITIONS SET OUT BY THE COMPANIES AND ACCEPTED BY THE ASSESSEES. FOR THE SERVICES RENDERED BY THE ASSESSEES, THE COMPANIES MAKE PAYMEN T AFTER DEDUCTING TAX AT SOURCE. ACCORDING TO THE ASSESSEES THE AMOUNT RECEIVED BY THEM IS A COMMISSION. ON THE PAYMENTS MADE BY ASSESSEES TO THIRD PARTIES FOR SUPPLY OF VEHICLES THE ASSESSEES ARE NOT LIABLE TO DEDUCT TAX AT SOURCE, AS IT IS NOT A CASE OF CONTRACT/SUB-CONTRACT. ON THE OTHER HAND THE CASE OF THE REVENUE IS THAT THE ASSESSEES ARE PROVIDING VEHI CLES TO THE COMPANIES UNDER SPECIFIED TERMS AND CONDITIONS OF CONTRACT AGREEMENT. THE ASSESSEES HAVE ENTERED INTO SUB-CONTRACT BETWEEN THE VEHICLE OWNERS FOR PROVIDING VEHICLES TO THE CONTRACTEE COMPANIES . THE PAYMENTS MADE BY THE ASSESSEES TO THE SUPPLIER OF THE VEHICLES ARE SUBJECT TO TDS PROVISIONS U/S. 194C. SINCE, THE ASSESSEE S HAVE NOT COMPLIED WITH THE PROVISIONS OF SECTION 194C, THE PAYMENTS MADE BY THE ASSESSEES ARE DISALLOWED U/S. 40(A)(IA) OF THE ACT. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) GR ANTED PARTIAL RELIEF TO THE ASSESSEES BY PLACING RELIANCE ON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN S HIPPING & TRANSPORT CO. (SUPRA). 7 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 7. BEFORE WE PROCEED FURTHER, LET US FIRST ASCERTAIN, WHETH ER THE ASSESSEES ARE PROVIDING VEHICLES TO THE COMPANIES UNDER CONTRACT? A SAMPLE PURCHASE ORDER, AND TERMS AND CONDITIONS ATTACHE D THERETO FOR VEHICLE HIRE SERVICES BY IDEA CELLULAR LTD. IS PLACED ON REC ORD AT PAGE 27 OF THE PAPER BOOK. THE TERMS AND CONDITIONS AS SET OUT THEREIN ARE AS UNDER: 1. THE VALIDITY OF THIS CONTRACT IS FROM 01 ST JULY, 2008 TO 30 TH JUNE, 2009. 2. THE ABOVE RATES ARE INCLUSIVE OF FUEL AND MAINTENAN CE CHARGES OF THE VEHICLES. 3. THE READINGS IN FOR DISTANCE AND TIME (KILOMETRES & HRS.) WILL BE MEASURED FROM OUR OFFICE AT BEED. VEHICLE WILL BE PROVIDED FOR 24 HOURS SERVICE. 4. THIS CONTRACT CAN BE TERMINATED BY GIVING THIRTY (3 0) DAYS PRIOR NOTICE IN WRITING WITHOUT ASSIGNING ANY REASON BY IDEA CELLUL AR LIMITED. 5. THE DRIVER UNDER NO CIRCUMSTANCES WOULD BE TREATED AS OUR EMPLOYEE, HOWEVER YOU SHALL ENSURE THAT ALL STATUTORY OBLIGAT ION IN ANY CONSEQUENT TO THAT EMPLOYMENT ARE FULLY COMPLIED BY YOU AT YOUR C OST. 6. YOU SHALL PROVIDE THE VEHICLE AS REQUIRED AND INTIM ATED TO YOU BY OUR OFFICE AT BEED FOR USE OF IDEA CELLULAR LIMITED PERSONNEL W ITHIN 1 HOUR OF INTIMATION. 7. YOU SHALL PROVIDE VEHICLE IN EXCELLENT CONDITION WI TH GOOD UPHOLSTERY. NO VEHICLE SHALL BE MORE THAN SIX (6) MONTHS OLD. 8. IN CASE OF BREAK DOWN, YOU HAVE TO PROVIDE STANDBY VEHICLE WITH ONE (1) HOUR IN BEED AND WITHIN TWELVE (12) HOURS IN PLACES OTHER THAN JALGAON, FORM THE TIME OF REPORTING OF BREAK DOWN. 9. DRIVERS SHALL BE PROPERLY DRESSED AND WELL BEHAVED AND THEY SHALL NOT BE INTOXICATED WHILE ON DUTY. 10. YOU SHALL MAINTAIN THE VEHICLES IN EXCELLENT CONDIT ION AT YOUR COST AND EXPENSE. 11. YOU SHALL PROVIDE THE VEHICLES WITH UP TO DATE RTO PAPERS, INSURANCE & POLLUTION CONTROL CERTIFICATES AND ANY SUCH STATUTO RY DOCUMENTS. 12. YOUR DRIVERS MUST CARRY THE VALID DRIVING LICENSE W HILE ON DUTY AND SHALL BE PROFICIENT IN DRIVING. 8 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 13. ALL THE VEHICLES SHALL HAVE GOOD CONDITION STEPNEY AND NECESSARY TOOK KIT FOR THE PURPOSE OF MINOR MAINTENANCE/REPAIR AS AND WHEN REQUIRED. 14. ALL VEHICLES SHALL BE WITH PROPER INTERIOR WORK AND SHALL HAVE GOOD QUALITY MUSIC SYSTEM & AUDIO CASSETTES. 15. THE INSURANCE FOR VEHICLE REQUIREMENT AND ITS UTILI ZATION SHALL BE GIVEN TO YOU BY OUR APPOINTED REPRESENTATIVE. 16. YOU SHALL SUBMIT YOUR BILLS TO OUR BEED OFFICE. TH E PAYMENT WILL BE MADE WITHIN FIFTEEN (15) DAYS FROM THE DATE OF SUBMISSIO N OF BILLS DULY CERTIFIED. CONTACT PERSON :- MR. RAMMOHAN REDDY, MOBILE [phone]. THE RATES GIVEN ARE INCLUSIVE OF ALL TAXES, TDS SHA LL BE DEDUCTED AS PER INCOME TAX ACT AND RULES. HOWEVER, SERVICE TAX AS APPLICABLE OF THE TOTAL BILL AMOUNT SHALL BE PAID EXTRA. 18. ALL INCIDENTAL EXPENSES SUCH AS PENALTY DUE TO TRAF FIC RULES VIOLATION OR ANY OTHER DUTIES SHALL BE AT YOUR COST. 19. PLEASE SIGN THE DUPLICATE COPY OF THIS CONTRACT AS A TOKEN OF YOUR ACCEPTANCE OF ALL THE TERMS AND CONDITIONS GIVEN AB OVE. 8. A PERUSAL OF THE TERMS AND CONDITIONS OF THE CONTRACT SHOWS THAT IT IS THE RESPONSIBILITY AND LIABILITY OF THE ASSESSEES TO PROVIDE VEHICLES IN GOOD CONDITION AS AND WHEN REQUIRED BY THE COMPANY. TH E ASSESSEES HAVE TO ENSURE ALL COMPLIANCES VIZ PAYMENT OF ROAD TAXES, INSURANCE, POLLUTION CONTROL ETC. WITH RESPECT TO THE VEHICLES. IN CAS E OF ANY BREAK DOWN THE ASSESSEES HAVE TO PROVIDE ALTERNATE VEHICLE W ITHIN SPECIFIED TIME, FROM THE TIME OF REPORTING OF BREAK DOWN. IT IS THE DUTY OF ASSESSEES TO MAINTAIN THE DRIVERS. THUS, FROM THE TERM S AND CONDITIONS MENTIONED ABOVE, IT IS EVIDENT THAT IT IS THE DUTY, RESPONS IBILITY AND LIABILITY OF THE ASSESSEES TO PROVIDE THE VEHICLES WITH DRIVE RS TO THE CONTRACTEE COMPANIES. A PERUSAL OF THE TERMS AND CONDIT IONS MAKE IT AMPLY CLEAR THAT IT IS A CONTRACT BETWEEN THE COMPANY AND THE ASSESSEES FOR PROVIDING VEHICLES. THEREFORE, THE CONTENTION OF THE ASS ESSEES THAT THEY ARE NOT CONTRACTORS BUT COMMISSION AGENTS IS NOT TENABLE. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER ANALYZING SIMILAR AGREEMENT 9 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 ENTERED INTO BETWEEN THE ASSESSEES AND CHINA PETROLEUM PIPE LINE HAD COME TO THE CONCLUSION THAT THE ASSESSEES ARE CONTRAC TORS AND NOT COMMISSION AGENTS AS CLAIMED. THUS, WE CONCUR WITH THE FIN DINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN COMING TO SUCH A CONCLUSION. 9. NOW, THE QUESTION BEFORE US IS: I. WHETHER THE SERVICE RELATION BETWEEN THE ASSESSEES AND THE THIRD PARTIES/OWNER OF VEHICLES IS OUT OF CONTRACT/SUB-CONTRACT?; AND II. WHETHER THE ASSESSEES ARE LIABLE TO DEDUCT TAX ON THE PAYMENTS MADE TO THE THIRD PARTIES/OWNER OF VEHICLES UNDER THE PR OVISIONS OF SECTION 194C FOR SUPPLY OF VEHICLES?; 10. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER HOLDING T HAT THE ASSESSEES ARE CONTRACTORS FOR SUPPLYING VEHICLES TO TH E CONTRACTEE COMPANIES HAS HELD THAT THE ASSESSEES ENTERED INTO SUB -CONTRACT WITH THIRD PARTIES/OWNER OF VEHICLES FOR SUPPLY OF VEHICLES ON BE HALF OF THE ASSESSEES TO CONTRACTEE COMPANIES. HOWEVER, IN COMING T O SUCH A CONCLUSION NO DOCUMENT HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE ASSESSEES HAVE PASSED ON THE STRINGS OF RESPONSIBILITY AN D LIABILITY TO VEHICLE OWNERS FROM WHOM VEHICLES ARE HIRED. THE REVENUE HAS NOT BROUGHT ON RECORD ANY DOCUMENT TO SHOW THAT THE ASS ESSEES HAVE ENTERED INTO A SUB-CONTRACT WITH THE VEHICLE OWNERS FOR PROVIDING SUCH SERVICE. THE ASSESSEES SIMPLY HIRED THE VEHICLES ON PAYM ENT OF HIRE CHARGES AND PROVIDED THE SAME TO THE CONTRACTEE COMP ANIES IN PURSUANCE OF CONTRACT AGREEMENT. FOR INVOKING THE PRO VISIONS OF SECTION 194C(2), THE ESSENTIAL CONDITION IS THAT THERE SHOULD BE A SUB-CONTRACT FOR CARRYING OUT THE WHOLE OR ANY PART OF THE WORK UNDE RTAKEN BY THE CONTRACTOR AND THE PAYMENT SHOULD BE MADE FOR CARRYING OUT THE WHOLE OR ANY PART OF SUCH WORK. IT IS A WELL ACCEPTED PRINCIPLE OF LAW THAT THE CONTRACT CAN EITHER BE ORAL OR WRITTEN. IN THE PRESENT CASE, THE REVENUE 10 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 HAS NOT BEEN ABLE TO ESTABLISH THE EXISTENCE OF ANY CONT RACT BETWEEN THE ASSESSEES AND THE INDIVIDUAL VEHICLE OWNERS. THEREFORE, IN THE FACTS OF THE CASE WE HOLD THAT THE ASSESSEES HAVE NOT ENTERED INTO ANY SUB- CONTRACT WITH INDIVIDUAL VEHICLE OWNERS FOR SUPPLYING VEHICLES TO THE CONTRACTEE COMPANIES. 11. SINCE, THE FIRST QUESTION HAS BEEN ANSWERED IN NEGATIV E, THE PAYMENTS MADE BY THE ASSESSEES TO THE THIRD PARTIES/IN DIVIDUAL VEHICLE OWNERS DO NOT FALL WITHIN THE AMBIT OF SECTION 194C. THUS, W E HOLD THAT THE PAYMENTS MADE BY THE ASSESSEES ARE NOT SUBJECT TO TDS PROVISIONS. HENCE, THE ASSESSEES HAVE NOT VIOLATED THE PROVISIONS OF SECTION 1 94C. 12. OUR VIEW IS FURTHER FORTIFIED BY THE DECISION OF HON'BLE G UJARAT HIGH COURT IN THE CASE OF CIT VS. MUKESH TRAVELS COMPANY (SUPRA). WHEREIN, UNDER SIMILAR CIRCUMSTANCES WHERE NO SUB-CONTRA CT WAS ESTABLISHED BETWEEN THE ASSESSEE AND TRANSPORTERS, THE TRIBUNAL DELETED THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. THE REVENUE WENT IN APPEAL BEFORE THE HON'BLE HIGH COURT. THE HON'BLE HIGH COURT UP HELD THE FINDINGS OF THE TRIBUNAL AND DISMISSED THE APPEAL OF THE REVENUE. 13. THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF KRANTI ROAD TRANSPORT (P.) LTD. VS. ACIT (SUPRA) HAS HELD THAT WHE RE ASSESSEE HAS HIRED LORRIES/TRUCKS FOR HIS OWN USE AND ARE UNDER H IS OWN CONTROL AND SUPERVISION, TDS IS NOT REQUIRED TO BE DEDUCTED ON P AYMENTS MADE TO TRUCK/LORRY OWNERS. IN THE SAID CASE THE ASSESSEE HAD HIRED THE TRUCKS/LORRIES FOR TRANSPORTING OF THE CONSIGNMENT BOOKED BY IT UNDER ITS OWN SUPERVISION AND CONTROL WITH ALL RESPONSIBILITY AND LIABILITIES . THE TRIBUNAL HELD THAT THE ASSESSEE IS NOT LIABLE FOR DEDUCTION OF TDS FOR LORRY/TRUCK OWNERS AS PER SECTION 194C. IN THE PRESEN T CASE ALSO THE LIABILITY AND RESPONSIBILITY OF PROVIDING VEHICLES AS PER AGREED TERMS AND 11 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 CONDITIONS HAS NOT BEEN PASSED ON TO THE INDIVIDUAL VEHICLE OWNERS. THEREFORE, IT IS NOT A CASE OF SUB-CONTRACT. 14. THE REVENUE IN ITS APPEAL HAS ASSAILED THE ORDER OF CO MMISSIONER OF INCOME TAX (APPEALS) IN RESTRICTING THE DISALLOWANCE U/S. 4 0(A)(IA) BY APPLYING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORT CO. (SUPRA). SINCE, WE H AVE ALREADY HELD THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE IN DIVIDUAL VEHICLE OWNERS ARE NOT ARISING OUT OF ANY SUB-CONTRACT, THEREFO RE, THE PROVISIONS OF SECTION 194C WILL NOT BE APPLICABLE ON SUCH PAYMENTS. SINCE, NO TDS IS TO BE DEDUCTED ON THE SAID PAYMENTS, THERE IS NO QUE STION OF MAKING ANY DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. IN VIEW OF OUR ABO VE FINDINGS, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS ALLOWED. 15. THE REVENUE IN ITS APPEAL IN ITA NO. 2461/PN/2012 HA S RAISED SECOND GROUND WITH RESPECT TO RESTRICTING OF DISALLOWANCE ON VEHICLE EXPENSES. THE ASSESSING OFFICER HAD MADE AN AD-HOC DISALLO WANCE OF RS.17,930/- @ 20% OF TOTAL VEHICLES EXPENSES. THE COMMISS IONER OF INCOME TAX (APPEALS) HAS RESTRICTED THE SAME TO RS.10,000 /-. IN THE ABSENCE OF ANY COGENT MATERIAL, WE FIND NO REASON TO DISTU RB THIS FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, T HIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 16. IN ITA NO. 2462/PN/2012 THE SECOND GROUND RAISED BY THE REVENUE IN APPEAL IS AGAINST THE DELETING OF ADDITION OF RS .50,453/- ON ACCOUNT OF FALL IN NET PROFIT. THE ASSESSING OFFICER HAS MADE ADDITION OF RS.50,453/- MERELY ON GROUND THAT THERE HAS BEEN FALL IN NET PROFIT IN T HE CURRENT ASSESSMENT YEAR AS COMPARED TO PREVIOUS ASSE SSMENT YEAR. THE ASSESSING OFFICER IN AN ARBITRARY MANNER INCREASED THE NET PROFIT BY 12 ITA NOS. 2461, 2462, 2519 & 2520/PN/2012, A.Y. 2009 -10 0.25% ON GROSS RECEIPTS. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE SAME WITH FOLLOWING OBSERVATIONS: 14. AS REGARDS ADDITION OF RS.50,453/- ON ACCOUNT OF FALL IN NP, I FIND THAT AO HAS MADE THE ADDITION ON ADHOC BASIS (INCRE ASED NP BY 0.25%) WITHOUT GOING INTO MERITS OF THE CASE. HE HAS FAIL ED TO BRING ANY MATERIAL ON RECORD WHICH COULD WARRANT INCREASE IN NP BY 0.2 5%. AO WAS NOT JUSTIFIED IN DISTURBING THE BOOK RESULTS WITHOUT AS SIGNING ANY SPECIFIC DEFECT. IN VIEW OF THE ABOVE ADDITION OF RS.50,453 /- IS DELETED. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. 17. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISS ED AND THE APPEALS OF THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 30 TH DAY OF JUNE, 2015 AT PUNE SD/- SD/- (R.K. PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH JUNE, 2015 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I I, NASHIK 4 THE CIT - I I, NASHIK 5 6 THE DR, ITAT, A BENCH, PUNE. GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE