M/s. Mayur Roadways, Baroda V. The Income tax Officer, Ward-3(1), Baroda

ITA 3357/AHD/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94438 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 21-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Section: 234B; 194C; 201(1); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, MANISH BORAD, AM. ITA NO. 3357/AHD/2009 ASST. YEAR 2005-06 M/S MAYUR ROADWAYS, 10, DIVYALOK PARK, SOCIETY, OPP. SBI, CHHANI JAKAT NAKA, BARODA. VS INCOME-TAX OFFICER, WARD-2(3), BARODA. (APPELLANT) (RESPONDENT) PA NO.AACFM 7521L APPELLANT BY MS. URVASHI SHODHAN, AR RESPONDENT BY SHRI D. C. MISHRA, SR. DR DATE OF HEARING: 19/8/2015 DATE OF PRONOUNCEMENT: 11/09/2015 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER O F CIT(A)-II, BARODA DATED 8.10.2009 PASSED FOR AY 2005-06. IT E MERGES OUT FROM THE ASSESSMENT FRAMED BY THE AO UNDER SECTION 143(3 ) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE ORDER DATED 28.12.2007. THE ONLY ISSUE CHALLENGED IN THIS APPEA L IS CONFIRMATION OF ADDITION OF RS.1,38,30,000, WHICH WAS MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF EXPENSES UNDE R SECTION 40(A)(IA) OF THE ACT READ WITH SECTION 194C(2) OF THE ACT, ON THE GROUND THAT PAYMENTS TO VARIOUS TRUCK OWNERS ON ACC OUNT OF FREIGHT ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 2 WAS MADE WITHOUT TDS. IT IS ALSO PERTINENT TO TAKE NOTE OF SPECIFIC GROUNDS RAISED BY THE ASSESSEE. THEY READ AS UNDER: - 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONF IRMING ADDITION MADE BY AO OF RS.1,38,30,000/- ON ACCOUNT OF DISALL OWANCE OF EXPENSES U/S 40(A)(IA) OF THE ACT. LD. CIT(A) FAILE D TO APPRECIATE PROVISIONS OF NEWLY INTRODUCED SECTION I N ITS PROPER PERSPECTIVE AND FURTHER NOT TAKING INTO CONSIDERATI ON SUBMISSIONS, ARGUMENTS AND JUDGMENTS RELIED UPON BY THE APPELLANT. LD. CIT(A) OUGHT TO HAVE DELETED DISALLO WANCE. IT BE SO HELD NOW. 2. LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE AP PELLANT DID NOT OWN ANY TRUCKS OF ITS OWN AND HENCE TO FULFILL CONT RACT OF TRANSPORTATION OF GOODS WITH BPCL AND HINDUSTAN COC A COLA HIRED TRUCKS FROM OTHER OWNERS EARNING COMMISSION I NCOME ONLY. LD. CIT(A) ERRED IN HOLDING THEM TO BE SUB-CO NTRACTORS OF THE APPELLANT IN ABSENCE OF ANY ORAL OR WRITTEN CON TRACT WITH TRUCK OWNER. LD. CIT(A) OUGHT TO HAVE HELD THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TAX U/S 194C OF THE ACT. I T BE SO HELD NOW. 3. INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT I S NOT JUSTIFIED. 4. LEVY OF INTEREST U/S 234B, 234C & 234D OF THE AC T IS NOT JUSTIFIED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS DERIVING INCOME FROM TRANSPORT OPERATIONS, CARRYING LPG CYLINDERS A ND SOFT-DRINK BOTTLES. IT HAD FILED RETURN OF INCOME ON 31/10/200 5 DECLARING TOTAL INCOME AT RS.2,66,150/- THE ASSESSEE WAS SERVED WIT H NOTICE UNDER SECTION 143(2) AND U/S.142(1) IN RELATION TO ASSES SMENT PROCEEDINGS THE AO. ON SCRUTINY OF ACCOUNTS, IT REVEALED TO THE LD. AO THAT THE ASSESSEE SHOWED INCOME OF RS.14,43,070 ON ACCOUNT O F COMMISSION INCOME. HOWEVER, ON VERIFICATION OF TDS CERTIFICATE FURNISHED ALONG WITH THE RETURN OF INCOME IT WAS FOUND BY THE AO TH AT ASSESSEE HAS ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 3 RECEIVED RS.1,06,61,104 FROM HINDUSTAN COCA COLA BE VERAGE PVT. LTD. (HCCL) AND RS.42,90,619 FROM BHARAT PETROLEUM CORPORATION LTD. (BPCL) ON ACCOUNT OF CONTRACTUAL RECEIPT. IN A GGREGATE THE RECEIPT AS PER THE TDS CERTIFICATE WAS AMOUNTING T O RS.1,49,51,723/- AS AGAINST RS.14,43,070 SHOWN IN THE PROFIT AND LOS S ACCOUNT BY THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS THE ASS ESSEE STATED THAT HE WAS HAVING BUSINESS OF TRANSPORT OPERATION, CARRYING LPG CYLINDERS, SOFT-DRINK BOTTLES ON CONTRACT BASIS WIT H BPCL. AND HCCL AND DURING THE YEAR UNDER APPEAL THE GROSS RECEIPT FROM THESE TWO COMPANIES TOTALED AT RS.1,49,51,723/- AND FROM THIS AMOUNT THE ASSESSEE HAS TO PAY MONEY TO THE TANKER/TRUCK OWNER S ON ACCOUNT OF TRANSPORTATION OF MATERIALS. THE ASSESSEE HAS DEBIT ED ALLEGED SUB- CONTRACTUAL PAYMENT OF RS.1,38,30,000/- IN AGGREGAT E TO 46 TRANSPORTERS (AS PER LIST ON PAGE 3 OF THE ASSESSME NT ORDER) WHEREIN PAYMENTS TO EACH TRANSPORTER WAS IN EXCESS OF RS.50 ,000/-. OUT OF THE TOTAL SUB-CONTRACT PAYMENT PAYABLE OF RS.1,38,3 0,000/- THE ASSESSEE HAD MADE PAYMENT OF RS.1,24,47,000/- TO TH E TRANSPORTERS THROUGH WHOM GOODS WERE TRANSPORTED. AS THE ASSESSE E HAS NOT DEDUCTED TDS UNDER SECTION 194C(2) OF THE ACT, THE AO DISALLOWED THE CLAIM OF EXPENSES OF RS.1,38,30,000/-. IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) READ WITH SECTION 194C(2) OF THE ACT. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). 3. DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT( A) THE LD. AR OF THE ASSESSEE SUBMITTED THAT THERE WAS NO CONTRAC T BETWEEN THE ASSESSEE AND THE TRUCK OWNERS NOR THE ASSESSEE RECE IVED ANY REMUNERATION FOR PROVIDING TRUCKS TO BPCL AND HCCL. THE CONTRACT WAS BETWEEN THE ASSESSEE AND THE CONTRACT AWARDER C OMPANIES ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 4 NAMELY BPCL AND HCCL AND FOR FULFILLING THE CONTRAC T FOR TRANSPORT OF GOODS IT HAD TO HIRE TRUCKS. BUT THE TRUCKS WERE NO T CALLED CONTINUOUSLY FROM ONE TRUCK OWNER NEITHER THE DESTI NATION OF THE TRUCK WAS FIXED. SEPARATE LORRY RECEIPT/CHALLAN WAS RECEI VED FOR HIRING EACH TRUCK AND SEPARATE PAYMENT ON SUCCESSFUL DELIVERY O F THE GOODS WAS MADE. HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED WIT H THE SUBMISSIONS OF LD. AR OF THE ASSESSEE AND HE CONFIR MED THE ACTION OF AO FOR DISALLOWING THE PAYMENT OF RS.1,38,30,000/- AND GAVE FOLLOWING FINDINGS:- 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHORISED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFIC ER. THE APPELLANT HAD ENTERED INTO CONTRACTS WHICH IS EVIDE NCED BY THE CONTRACT AGREEMENT WITH HCCL FILED AND ALSO THE TDS CERTIFICATES WHEREIN THE PAYMENT RECEIVED BY THE AP PELLANT IS IN ACCORDANCE WITH THE CONTRACT WITH HCCL AND BPCL. HE NCE ITS STANDS ESTABLISHED THAT THE ASSESSEE WAS A CONTRACT OR AS FAR AS HCCL AND BPCL ARE CONCERNED. WHEN ENTERING INTO THE CONTRACT WITH BOTH THESE COMPANIES, THE ASSESSEE WA S WELL AWARE OF THE FACT THAT HE DID NOT OWN ANY TRANSPORT VEHICLES. HENCE AT THE TIME OF THE AGREEMENT ITSELF THE APPEL LANT WAS CLEAR THAT HE WOULD HAVE TO SUB-CONTRACT THE AGREEM ENT FOR ITS SUCCESSFUL EXECUTION. WITHOUT SUB-CONTRACTING THE A GREEMENT THE APPELLANT WAS NOT IN A POSITION TO CARRY THE GO ODS AND MATERIALS OF THE FIRST PARTY TO VARIOUS DESTINATION S IN AN EFFICIENT AND DILIGENT MANNER. HE COULD NOT AGREE TO BE LIABL E FOR ANY LOSS OR SHORTAGE OF ANY GOODS OR MATERIALS TRANSPOR TED UNDER THIS CONTRACT AND RECOVERED FROM THE CHARGES PAYABL E TO THE SECOND PARTY WITHOUT PASSING ON THE SAME CONDITION TO THE VEHICLE OWNER. IN THE CASE OF AN ACCIDENT OR THEFT IS THE VEHICLE OWNER/DRIVER WHO WAS RESPONSIBLE FOR LODGING THE FI R. THE CONDITIONS OF THE CONTRACT WITH HCCL HAVE BEEN LAID OUT CLEARLY AND SCRUPULOUSLY ADHERED TO BY THE ASSESSEE. THE AP PELLANT CANNOT AGREE TO BE LIABLE FOR ANY LOSS OR SHORTAGE OF ANY GOODS AND MATERIAL TRANSPORTED WITHOUT PASSING ON THIS LI ABILITY TO THE TRUCK OWNERS. THE APPELLANT HAD FILED COPIES OF THE LEDGER ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 5 ACCOUNT OF SOME OF THE TRANSPORT VEHICLE OWNERS. IT IS SEEN THAT THE APPELLANT RECEIVED 10% OF THE AMOUNT RECEIVED F ROM THE HCCL/BPCL. THEREFORE, THE APPELLANT HAS CLAIMED 10% COMMISSION INCOME ON THE AMOUNTS RECEIVED FROM THE CONTRACTING COMPANY. IT WOULD BE APPRECIATED THAT T HE AMOUNT RECEIVED FROM THE CONTRACTING COMPANY WOULD BE THE NET AMOUNT AFTER CONSIDERING ALL THE DEDUCTIONS AS BROU GHT OUT IN THE CONTRACT, IF APPLICABLE. THEREFORE, THE APPELLA NT AS WELL AS THE TRUCK DRIVER WOULD BE EQUALLY LIABLE FOR ANY LO SS INCURRED. HENCE IT IS OBVIOUS THAT THE TRUCK DRIVERS HAVE ALS O BEEN FASTENED WITH THE LIABILITIES CLAUSES IN THE AGREEM ENT ENTERED INTO BY THE APPELLANT WITH THE SUB-CONTRACTOR. FROM THE MODUS OPERANDI AS BROUGHT OUT BY THE LD. AR AS STATED ABO VE, THERE EXISTS AN ORAL AGREEMENT WITH THE TRANSPORT OWNERS. THE TERMS AND CONDITIONS ARE CLEARLY LAID DOWN. WITHOUT THE T RUCKS THE APPELLANT COULD NOT BE IN ANY POSITION TO EXECUTE A NY PART OF THE CONTRACT LET ALONE THE WHOLE CONTRACT. IN VIEW OF T HE ABOVE IT CAN BE CONCLUDED THAT A) THE APPELLANT IS A CONTRACTOR FOR HCCL AND BPCL B) HE DOES NOT OWN ANY TRANSPORT VEHICLE C) HE PROCURES VEHICLES FOR THE PURPOSE OF EXECUTIN G THE CONTRACT D) THE WORK OF CARRYING OUT THE TRANSPORTATION OF G OODS IS DONE BY THE TRANSPORTERS E) THE APPELLANT HAS AN ORAL AGREEMENT WITH THE TRU CK OWNERS F) THE APPELLANT RECEIVES TRANSPORTATION CHARGES FR OM THE CONTRACTING COMPANIES AFTER THE COMPANIES HAVE DEDU CTED ANY LOSS DUE TO DAMAGES G) FROM THIS AMOUNT THE APPELLANT CLAIMS 10% AS COM MISSION THEREBY ESTABLISHING THAT THE LIABILITY IS BOTH HIS AND THE TRUCK OWNERS. SECTION 194C(2) STATES THAT THE SUB-CONTRACTOR SHO ULD HAVE CORRECT OUT THE WHOLE OR ANY PART OF THE WORK. ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 6 (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-C ONTRACTOR) 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 T HE WORK UNDERTAKEN BY THE CONTRACTOR OR FOR SUPPLYING WHETHER WHOLLY OR P ARTLY ANY LABOUR WHICH THE CONTRACTOR HAS UNDERTAKEN TO SUPPLY SHALL, AT T HE 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, WHICH IS EARLIER, DEDUCT AN AMOUNT EQUAL TO ONE PERCENT OF S UCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN. PROVIDED THAT AN INDIVIDUAL OR A OR A HINDU UNDIVIDED FAMIL Y WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDE R CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMED IATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAI D TO THE ACCOUNT OF THE SUB-CONTRACTOR, SHALL BE LIABLE TO DEDUCT INCOME-TA X UNDER THIS SUB-SECTION (C) CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS.L IN THE INSTANT CASE THE TRUCK OWNERS PHYSICALLY EX ECUTED THE CONTRACT. THE DECISION OF THE PUNE ITAT IS NOT APPL ICABLE, SINCE THE TUCK OWNERS AND THE APPELLANT HAVE NOT FORMED A SOCIETY AND ARE NOT COVERED BY THE CONCEPT OF MUTUALITY. T HE APPELLANTS CASE DIFFERS FROM THE CASE IN THE VISHA KHAPATNAM ITAT. SINCE THE APPELLANT HAS ALSO FASTENED HIS CON TRACTUAL LIABILITIES TO THE TRUCK OWNERS. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER WAS JU STIFIED IN HOLDING THAT THE APPELLANT HAD A RELATIONSHIP OF A SUB-CONTRACTOR WITH LORRY OWNERS AND WAS THEREFORE REQUIRED TO DED UCT TAX AT SOURCE AT THE PRESCRIBED RATE. SINCE HE FAILED TO D O SO, THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE PAYMENT OF RS.1,38,30,000/-. THE ADDITION IS THEREFORE CONFIRM ED. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRI BUNAL. 4. THE LD. AR MADE SUBMISSION THAT THERE WAS NO CON TRACTUAL RELATIONSHIP BETWEEN THE ASSESSEE FIRM AND THE VEHI CLE OWNERS. THE QUESTION OF DEDUCTION OF TDS FROM TRANSPORTATION PA YMENT WHICH WAS ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 7 RECEIVED BY THE ASSESSEE AS AN ARRANGER ON BEHALF O F BPCL AND HCCL, DOES NOT ARISE AND SUBMITTED AS UNDER :- - ASSESSEE FIRM IS DOING BUSINESS OF ARRANGEME NT OF TRANSPORTATION ON COMMISSION BASIS. - ASSESSEE FIRM DOES NOT HAVE ANY TRANSPORT VEHICLE OF ITS OWN. - THE PERSON WITH WHOM TRANSPORT VEHICLES ARE AVAIL ABLE AND WHO ARE DESIROUS OF GIVING IT TO THE ORGANIZATION ON CO NTINUOUS BASIS APPROACHES THE INTERMEDIARY LIKE ASSESSEE FIRM. - ASSESSEE FIRM HAS CONTACTS WITH VARIOUS ORGANIZAT IONS THAT NEED TRANSPORT VEHICLE ON CONTINUOUS BASIS. - IN THIS TYPE OF ARRANGEMENT THOUGH THE ENTIRE PAY MENT WILL BE RECEIVED BY THE ASSESSEE FIRM AS ARRANGER, IT WILL BE CREDITED TO TRANSPORT OWNERS ACCOUNT IN THE BOOKS OF ACCOUNT M AINTAINED BY ASSESSEE FIRM. THUS, THE ASSESSEE FIRM ACTS AS T RUSTEE LIKE A MEMBER OF STOCK EXCHANGE RECEIVES FUNDS IN HIS NAME AND THEM IN TURN IT IS PASSED ON TO THE CUSTOMER WHO HA S SOLD THE SHARES. - THE OPERATING COST OF THE TRANSPORT VEHICLE REST WITH THE TRANSPORT VEHICLE OWNER ONLY. ON VERIFICATION OF TH E BOOKS OF ACCOUNTS AND THAT TO EACH TRANSPORT VEHICLE ACCOUNT IT WILL NOTICED THAT EXPENSE LIKE REMUNERATION TO DRIVER, T RIP EXPENSES AND ROUTINE REPAIRING EXPENSES ARE PAID FROM THE AC COUNTS IN THE BOOKS OF ASSESSEE FIRM. - FOR RENDERING THIS SERVICE, ASSESSEE FIRM GETS A FLAT COMMISSION OF 10% OF TRANSPORT CHARGES RECEIVABLE BY THE TRANS PORT VEHICLE OWNER. - THE ASSESSEE FIRM IS NEITHER RESPONSIBLE FOR COST OF OPERATION NOR ANY DAMAGES TO BE PAID TO THE ORGANIZATION WHO REQUIRES TRANSPORT VEHICLES ON ACCOUNT OF ANY VIOLATION OF C ONDITION OF SUPPLY OF VEHICLES OR SHORTAGES IN DELIVERY. ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 8 - IT IS NOT THE CASE, WHERE ASSESSEE FIRM TAKES TRA NSPORT VEHICLE OF ITS OWN FROM THE OPEN MARKET AND THEN SUPPLIES T O THE ORGANIZATION WITH WHOM THE ARRANGEMENT IS MADE. - THE PAYMENT WILL BE GIVEN TO THE TRANSPORT VEHICL E OWNER ONLY AFTER RECEIVING IT FROM THE ORGANIZATION WHICH HAS ENTERED INTO AN ARRANGEMENT WITH THE ASSESSEE FIRM. - HAD IT BEEN THE CASE OF CONTRACT BEING ENTERED IN TO FOR TRANSPORT VEHICLE ON ITS OWN BY THE ASSESSEE FIRM THEN THE VE HICLE OWNER WOULD HAVE DEMANDED THE COST OF TRANSPORT CHARGES A S AGREED WITH ASSESSEE FIRM IRRESPECTIVE OF PAYMENT RECEIVED FROM THE ORGANIZATION WHO HAS ENTERED INTO AN ARRANGEMENT. IN VIEW OF THE ABOVE, THERE IS NO CONTRACTUAL RELAT IONSHIP BETWEEN VEHICLE OWNER AND ASSESSEE FIRM FOR PROVIDING TRANS PORT VEHICLES. THUS, ASSESSEE FIRM DOES NOT HAVE ANY CONTRACTUAL R ELATIONSHIP AND HENCE, THERE IS NO EXISTENCE OF CONTRACTOR-CONTRACT EE RELATIONSHIP. UNDER THE CIRCUMSTANCES, WHEN THERE IS NO EXISTENCE OF CONTRACTUAL RELATIONSHIP FOR ARRANGEMENT OF TRANSPORTATION, QUE STION OF DEDUCTION OF TDS FROM TRANSPORTATION PAYMENT RECEIVED AS ARRA NGER, PAID BY THE ASSESSEE FIRM DOES NOT ARISE. FOR YOUR READY REFERENCE, WE ARE REPRODUCING HEREWI TH THE CHARGING PROVISO OF SECTION 194C(1) AS UNDER :- [PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS. 194C.[(1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRA CT BETWEEN THE CONTRACTOR AND . (I) ANY FIRM; OR THUS, ON PLAIN READING OF THE BOLD PORTION OF THE P ROVISO, IT WILL BE APPRECIATED THAT THERE HAS TO BE A CONTRACT BETWEEN CONTRACTOR AND A FIRM FOR APPLICABILITY OF CHARGING SECTION 194C(1) OF THE INCOME-TAX ACT, 1961]. ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 9 IN VIEW OF THE SAME, IT IS HUMBLY REQUESTED THAT TH E ADDITION BE NOT MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA ) OF THE INCOME-TAX ACT, 1961. FURTHER THE LD. COUNSEL OF THE ASSESSEE HAS QUOTED VARIOUS DECISIONS OF HIGH COURTS AND THE TRIBUNAL IN THE PA PER BOOK FILED BEFORE US. 5. ON THE OTHER HAND, THE LD. DR HAS RELIED ON THE ORDERS OF LOWER AUTHORITIES AND ALSO EMPHASIZED THAT EVEN IF THERE IS NO AGREEMENT BETWEEN THE ASSESSEE AND THE TRUCK OWNERS BUT THERE IS ALWAYS EXISTENCE OF AN ORAL AGREEMENT BETWEEN THE TWO. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS VARIOUS CA SE LAWS AND DOCUMENTS REFERRED TO IN ALL THE PAPER BOOKS FILED BY THE ASSESSEE. THE MAIN POINT OF EXAMINATION IN THIS APPEAL IS, WH ETHER THERE IS AN EXISTENCE OF CONTRACTUAL RELATIONSHIP FOR ARRANGEME NT OF TRANSPORTATION BETWEEN THE ASSESSEE AND THE TRUCK OWNERS WHICH CAN BE COVERED WITHIN THE DEFINITION OF WORK AS REFERRED IN SECT ION 194C OF THE ACT. IN THE CASE OF MYTHRI TRANSPORT CORPORATION VS. ACIT, ITAT VISAKHAPATNAM BENCH IN ITA NO.183/VIZAG/2008 AY 200 5-06 HAS DEALT WITH THE ISSUE AND MOST OF THE FACTS ARE IDEN TICAL TO THE APPAL PRESENTLY BEFORE US. IT WAS IN THIS CASE ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 10 HELD : SECTION 194C(2) IS ATTRACTED IF ALL THE FOLLOWING CONDITIONS ARE SATISFIED (A) THE ASSESSEE SHOULD BE A CONTRACTEE, (B) THE ASSESSEE I N HIS CAPACITY AS A CONTRACTOR, SHOULD ENTER INTO A CONTRACT WITH A SUB-CONTRACTOR FOR CAR RYING OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR, (C) THE SUB-CONT RACTOR SHOULD CARRY OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR, (D) PAYMENT SHOULD BE MADE FOR CARRYING OUT THE WHOLE OR ANY PART OF THE WORK. THE STRINGENT CLAUSES IN THE WORK ORDER SUGGEST THAT THE ASSESSEE IS SOLELY RESPONSIBLE FOR ALL THE ACTS AND DEFAULTS COMMITTED BY THE ASSESSEE AND/OR ITS EMPLOYEES. IT IS NOT ESTABL ISHED BY THE REVENUE THAT OTHER LORRY OWNERS, FROM WHOM THE VEHICLES WERE HIRED HAVE ALSO BEEN FASTENED WITH ANY OF THE ABOVE SAID LIABILITIES. IN A SUB-CONTRACT, A PRUDEN T CONTRACTEE WOULD INCLUDE ALL THE LIABILITY CLAUSES IN THE AGREEMENT ENTERED INTO BY HIM WITH THE SUB-CONTRACTOR. THE ASSESSEE HAS ALSO CLAIMED BEFORE THE TAX AUTHORITIE S THAT THE RESPONSIBILITY IN THE WHOLE PROCESS LIES WITH IT ONLY. THOUGH THE PASSING OF LI ABILITY IS NOT THE ONLY CRITERIA TO DECIDE ABOUT THE EXISTENCE OF SUB-CONTRACT YET THIS CONTEN TION OF THE ASSESSEE READ WITH THE LIABILITY CLAUSES OF THE WORK ORDER SUPPORTS ITS SU BMISSION THAT THE INDIVIDUAL VEHICLE OWNERS ARE SIMPLE HIRERS OF THE VEHICLES. AS PER TH E PROVISIONS OF S.194C(2), THE SUB- CONTRACTOR SHOULD CARRY OUT THE WHOLE OR ANY PART O F THE WORK UNDERTAKEN BY THE ASSESSEE. THE DICTIONARY MEANING OF THE WORDS CARRY OUT IS TO CARRY INTO PRACTICE; TO EXECUTE; TO ACCOMPLISH. IT SIGNIFIES A POSITIVE INVOLVEMENT IN THE EXECUTION OF 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 ACTIVITY. IN THE INST ANT CASE, THERE IS NO MATERIAL TO SUGGEST THAT THE OTHER 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 ABOVESAID 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 SALARI ES, RENT, ETC. HENCE THE REASONING OF THE TAX AUTHORITIES TO HOLD THAT THE PAYMENT MADE F OR HIRED VEHICLES IS A SUB-CONTRACT PAYMENT IS NOT CORRECT AND NOT BASED ON RELEVANT CO NSIDERATIONS. HENCE IT CANNOT BE SAID THAT THE PAYMENTS MADE FOR HIRED VEHICLES WOULD FAL L IN THE CATEGORY OF PAYMENT TOWARDS 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 S.194C(2) ON THE P AYMENTS MADE TO THE LORRY OWNERS FOR LORRY HIRE. CONSEQUENTLY THE PROVISIONS OF S.40(A)( IA) SHALL NOT APPLY TO SUCH PAYMENTS. CONCLUSION: ASSESSEE IS A TRANSPORT CONTRACTEE, HAVING ITSELF EXECUTED THE WHOLE OF THE CONTRACT FOR TRANSPORTATION OF BITUMEN BY HIRING LO RRIES FROM OTHER LORRY OWNERS WHO SIMPLY PLACED THE VEHICLES AT THE DISPOSAL OF THE A SSESSEE WITHOUT INVOLVING THEMSELVES IN CARRYING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE, IT CANNOT BE SAID THAT THE PAYMENTS MADE FOR HIRING OF VEHICLES FELL IN THE CA TEGORY OF PAYMENTS TOWARDS SUB- CONTRACTS AND THEREFORE, ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF S.194C(2) FROM THE PAYMENTS MADE TO T HE LORRY OWNERS AND CONSEQUENTLY PROVISIONS OF S.40(A)(IA) WERE NOT APPLICABLE TO SU CH PAYMENTS. 7. FURTHER IN ITA NO.351/AHD/2009 & 255/AHD/2010 FO R AY 2008- 09 IN THE CASE OF PARISHRAM TRANSPORT VS. ITO, IDEN TICAL ISSUES HAVE ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 11 BEEN DEALT. IN THIS CASE ALSO THERE WAS AN AGREEMEN T BETWEEN M/S HINDUSTAN PETROLEUM CORPORATION AND THE APPELLANT F OR TRANSPORTATION OF LPG CYLINDERS AND AN ADDITION UNDER SECTION 40(A )(IA) WAS MADE ON THE PAYMENTS MADE TO TRANSPORTS. THE TRIBUNAL AL LOWED THE APPEALS IN FAVOUR OF THE ASSESSEE DELETING THE ADDI TIONS U/S 40(A)(IA) R.W.S. 194C(2) BY OBSERVING AS UNDER :- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIAL ON RECORD. FROM THE FACTS OF THE CASE IT IS APPAREN T THAT THE ASSESSEE WAS HIRING TRUCKS FOR THE PURPOSE OF HIS BUSINESS OF PR OVIDING TRANSPORTATION SERVICES TO HIS CLIENT M/S. HPCL. SECTION 194C OF T HE ACT MAKES IT CLEAR THAT TDS IS DEDUCTIBLE ONLY IN THE CASE WHEN THE RECIPIE NT CONTRACTORS RENDERS THE WORK OF CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN RAILWAYS. IN THE CASE BEFORE US, IT IS EVIDENT THAT THE ASSESSEE HAD ONLY HIRED OUT THE VEHICLES AND RENDERED THE SERVICES OF TRANS PORTATION OF GOODS I.E. LPG CYLINDERS BY ITSELF AT ITS OWN RISK AND REWARD. AT THIS JUNCTURE WE MAY PEEP INTO THE DECISION OF THE HONBLE MADRAS HIGH C OURT IN THE CASE OF CIT VS POOMPUHAR SHIPPING CORPORATION LTD. [2006] 282 I TR 3 (MAD). THE GIST OF THE AFORESAID DECISION IS REPRODUCED HEREIN UNDE R: UNDER SECTION 194C OF THE INCOME-TAX ACT, 1961, TH E TAX IS TO BE DEDUCTED WHEN A CONTACT IS ENTERED INTO FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE ENTITIES ME NTIONED IN SUB-SECTION (1) OF SECTION 194C. THE TERM HIRE IS NOT DEFINED IN THE INCOME-TAX ACT. SO, WE HAVE TO TAKE THE NORMAL MEANING OF THE WORD HIR E. NORMAL HIRE IS A CONTRACT BY WHICH ONE GIVES TO ANOTHER TEMPORARY PO SSESSION AND USE OF PROPERTY OTHER THAN MONEY FOR PAYMENT OF COMPENSATI ON AND THE LATTER AGREES TO RETURN THE PROPERTY AFTER THE EXPIRY OF T HE AGREED PERIOD. THE EXPLANATION TO SECTION 194C WAS INTRODUCED WITH EFFECT FROM JULY 1, 1995. THERE IS NO PRINCIPLE OF INTERPRETATION WHICH WOULD JUSTIFY READING THE EXPLANATION AS OPERATING RETROSPECTIVELY, WHEN THE EXPLANATION COMES INTO FORCE WITH EFFECT FROM A FUTURE DATE. THE ASSESSEE, A TAMIL NADU GOVERNMENT UNDERTAKING, WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF COAL FROM THE SPORTS OF HALDIA, VISAKHAPATNAM AND PARADEEP TO CHENNAI AND TUTICORIN UNDER CONTRAC TS EXECUTED WITH THE ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 12 TAMIL NADU ELECTRICITY BOARD. THE ASSESSEE OWNED TH REE SHIPS. SINCE THREE SHIPS WERE NOT SUFFICIENT TO CARRY OUT THE CONTRACT S ENTERED INTO BY THE ASSESSEE WITH TAMIL NADU ELECTRICITY BOARD, THE ASS ESSEE HIRED SHIPS BELONGING TO OTHER SHIPPING COMPANIES AND PAID HIRE CHARGES TO THE OTHER SHIPPING COMPANIES FOR USING THEIR SHIPS. THE ASSE SSEE, HOWEVER, DID NOT DEDUCT TAX UNDER SECTION 194C OF THE INCOME-TAX ACT BEFORE MAKING PAYMENT OF HIRE CHARGES TO THE SHIPPING COMPANIES. THE ASSE SSING OFFICER TREATED THE ASSESSEE AS IN DEFAULT AND DIRECTED THE ASSESSEE TO PAY THE TAX UNDER SECTION 201(1) OF THE INCOME-TAX ACT AND ALSO LEVIED INTERE ST UNDER SECTION 201(1A). THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HELD TH AT SECTION 194C WAS NOT APPLICABLE. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEAL, THAT THE PAYMENT OF HI RE CHARGES FOR TAKING TEMPORARY POSSESSION OF THE SHIPS BY THE ASSESSEE-C OMPANY WOULD NOT FALL WITHIN THE PROVISION OF SECTION 194C AND HENCE NO T AX WAS REQUIRED TO BE DEDUCTED. THE HIRING OF SHIPS FOR THE PURPOSE OF USING THEM I N THE ASSESSEES BUSINESS DID NOT AMOUNT TO A CONTRACT FOR CARRYING OUT ANY W ORK AS CONTEMPLATED IN SECTION 194C. 8. FROM THE ABOVE DECISION IT IS EVIDENT THAT THE P ROVISIONS OF SECTION 194C OF THE ACT WILL NOT BE APPLICABLE WHEN VEHICLES ARE HIRED OUT FOR CONDUCTING ONES BUSINESS OF TRANSPORTATION BY ITSELF AND WHEN NO WORK OF TRANSPORTATION IS ASSIGNED TO THE OWNERS OF THE VEHICLES. THE OWNE R OF THE VEHICLES ROLE EXTENDS ONLY TO THE LIMITED FUNCTION OF PROVIDING T HE VEHICLES ALONG WITH STAFF TO THE APPELLANT FOR HIRE CHARGES. THE MOVEME NTS OF THE VEHICLES WITH THE GOODS ARE AT THE COMMAND OF THE APPELLANT. THE APPELLANT ALSO UNDERTAKES THE RISK INVOLVED IN THE WORK OF TRANSPORTATION IT RENDERS WITH THE HELP OF THE HIRED VEHICLES. ALL THESE FACTS CAN BE CLEARLY ESTA BLISHED IN THE PRESENT CASE BEFORE US FROM THE CONTRACT EXECUTED BETWEEN THE AP PELLANT AND M/S. HPCL CONTAINED IN PAGE NO.2 TO 27 OF THE PAPER BOOK. THI S CONTRACT IN PARA 9 ALSO SPECIFICALLY PROVIDES THAT THE APPELLANT SHALL NOT SUB-LET ANY WORK ENTRUSTED TO HIM. FURTHER, RELEVANT INGREDIENTS IN THE CONTRA CT TO ESTABLISH THAT THE APPELLANT IS ASSIGNED THE JOB OF TRANSPORTATION AND IT HAD PERFORMED THE JOB OF TRANSPORTATION BY ITSELF CAN BE SUMMARIZED AS UNDER :- ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 13 ITEM NO.1 VEHICLE FOR TRANSPORTATION :- THE APPELLANT IS ASSIGNED WITH THE WORK OF TRANSPOR TATION BY M/S. HPCL AND IT HAS TO PROVIDE THE DETAILS OF THE VEHICLES PRESS ED FOR THE OPERATION. THE APPELLANT HAS TO TRANSPORT THE CYLINDERS ACCORDING TO THE SCHEDULE AND ROUTE STIPULATED BY M/S. HPCL. THE APPELLANT HAS TO ENSU RE THAT THE TRUCKS PROVIDED FOR TRANSPORTATION OF LPG CYLINDERS SHALL COMPLY WITH ALL LEGAL FORMALITIES. THE APPELLANT SHALL ALSO ARRANGE FOR T HE APPLICABLE INSURANCE POLICIES. THE APPLICANT SHALL ALSO ENSURE THE DRIVE RS OF THE VEHICLES HAVE PROPER AUTHORIZATION TO DRIVE THE TRUCKS WITH SUCH HAZARDOUS PRODUCTS AS PER THE MOTOR VEHICLES ACT. THE APPELLANT SHALL ALSO EN SURE THAT THE TRUCKS PRESSED FOR OPERATION ARE ROAD-WORTHY COMPLYING WIT H ALL SPECIFICATIONS FOR PERFORMING SUCH HAZARDOUS WORK. ITEM NO.2 DELIVERY CARRIAGE OF GOODS: THE APPELLANT SHALL MAKE ARRANGEMENT FOR DELIVERY O F THE CYLINDERS WITHIN THE STIPULATED TIME AND SHALL DELIVER THE CYLINDERS ACCORDING TO THE INSTRUCTIONS OF M/S. HPCL. ALL THE SPECIFICATIONS D IRECTED BY M/S. HPCL SHALL BE FOLLOWED BY THE APPELLANT. ITEM NO.3 OPERATION OF TRUCKS: THE APPELLANT SHALL OBTAIN THE REQUISITE ROAD PERMI TS AND OTHER PERMITS APPLICABLE FOR TRANSPORTATION OF GOODS. THE APPELLA NT SHALL BEAR THE ENTIRE OPERATIONAL COST OF THE TRUCKS ETC. ITEM NO. 4 LOSS/DAMAGES OF CYLINDERS THE APPELLANT SHALL BE SOLELY RESPONSIBLE FOR THE S AFE CUSTODY OF THE CYLINDERS. ITEM NO.5: UTILIZATION OF TRUCKS THE APPELLANT SHALL OPERATE ALL THE TRUCKS FOR ALL THE STATIONS AWARDED TO IT AND IT SHALL INFORM M/S. HPCL IF ANY TRUCK IS WITHD RAWN. ITEM NO.6: LOADING/UNLOADING/HANDLING OF CYLINDERS LOADING/UNLOADING OF THE CYLINDERS SHALL BE PERFORM ED BY THE APPELLANT. ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 14 ITEM NO.7: TRANSSHIPMENT THE APPELLANT SHALL UNDERTAKE THE MOVEMENT OF THE P RODUCE ENTRUSTED TO HIM BY M/S. HPCL WITHOUT TRANSSHIPPING. HOWEVER, IS THE TRANSSHIPMENT IS INEVITABLE, THE TRANSPORTER SHALL ADVISE M/S. HPCL BEFOREHAND AND ALSO ENSURE THAT ADEQUATE CARE AND PRECAUTION IS TAKEN T O ENSURE THE SAFE HANDLING OF THE PRODUCT. NO ADDITIONAL CHARGE WILL BE PAID B Y M/S. HPCL FOR TRANSSHIPMENT. ITEM NO.8: SECURITY DEPOSIT/BANK GUARANTEE THE APPELLANT IS TO PROVIDE TO M/S. HPCL BANK GUARA NTEE FOR A SPECIFIC AMOUNT FOR A SPECIFIC PERIOD IN ORDER TO COVER LOSS ES, DAMAGES, EXPENSES ETC. ARISING OUT OF THE APPELLANTS NEGLIGENCE TO OBSERV E ANY TERMS AND CONDITIONS IN THE CONTRACT. ITEM NO.9: SUBLETTING THE APPELLANT SHALL NOT SUBLET ANY WORK ENTRUSTED T O HIM EXCEPT WITH THE WRITTEN CONSENT OF M/S. HPCL. 8. THUS, FOLLOWING THE DECISION OF THE HONBLE MADR AS HIGH COURT REFERRED SUPRA AND BASED ON OUR ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT IN THE PRESENT CASE BEFORE US, IT IS CLEARLY E STABLISHED THAT THE APPELLANT HAD PERFORMED THE WORK OF TRANSPORTATION BY ITSELF BY HIRING OF VEHICLES AND WITHOUT SUBLETTING THE WORK AND THEREFORE, THE PROV ISIONS OF SECTION 194C OF THE ACT IS NOT APPLICABLE AND ACCORDINGLY PROVISION S OF SECTION 40(A) (IA) OF THE ACT CANNOT BE INVOKED. THE REVENUE HAS NOT BROU GHT OUT ANY MATERIAL TO ESTABLISH THAT THE OWNER OF THE VEHICLES HAVE PERFO RMED ANY WORK OTHER THAN HIRING THEIR VEHICLES TO THE APPELLANT. FOR THE ABO VE SAID REASONS WE ALLOW THE APPEAL OF THE ASSESSEE IN ITS FAVOUR AND DELETE THE ADDITION OF RS. 1,05,83,555/- MADE BY THE LEARNED AO WHICH WAS FURT HER CONFIRMED BY THE LEARNED CIT(A). 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 15 ITA NO.255/AHD/2010 (ASSESSEES APPEAL FOR AY: 2006-07) 9. THIS APPEAL HAS ARISEN DUE TO RECALLING OF THE O RDER OF THE TRIBUNAL DATED 26-12-2011 IN ITA NO.255/AHD/2010 BY ALLOWING THE M ISC. APPLICATION NO.63/AHD/2012 VIDE ORDER DATED 01-06-2012. ON THE EARLIER OCCASION THE TRIBUNAL HAD DISMISSED THE APPEAL FOR WANT OF PROSE CUTION VIDE ORDER DATED 26/12/2011. 10. THE ASSESSEE HAS IN THIS APPEAL HAS TAKEN SEVEN ELABORATE GROUNDS, WHEREIN GROUNDS NO. 6 AND 7 ARE GENERAL IN NATURE A ND DOES NOT SURVIVE FOR ADJUDICATION. THE CRUX OF THE ISSUE INVOLVED IN THE SURVIVING GROUNDS NO.1, 2, 3, 4 AND 5 RELATES TO THE LEARNED CIT(A)S CONFI RMATION OF ADDITION OF RS.1,50,77,604/- MADE BY THE LEARNED AO U/S 40 (A) (IA) OF THE ACT. 11. AT THE TIME OF HEARING BEFORE US, BOTH THE PART IES SUBMITTED THAT THE ISSUE INVOLVED IN BOTH THE APPEALS OF THE ASSESSEE FOR AY 2005- 06 AND AY 2006- 07 ARE IDENTICAL AND SIMILAR AND THEREFORE IT WAS P RAYED THAT THE DECISION OF THE TRIBUNAL TAKEN IN THE CASE OF THE ASSESSEE FOR AY 2005-06 MAY BE FOLLOWING WHILE DECIDING THE APPEAL OF THE ASSESSEE FOR AY 2006-07. 12. ON PERUSAL OF THE ORDERS OF THE REVENUE AND THE MATERIALS PRODUCED BEFORE US, IT IS APPARENT THAT THE SUBMISSIONS OF B OTH THE PARTIES ARE ACCEPTABLE. ACCORDINGLY, BY FOLLOWING OUR DECISION IN THE CASE OF THE ASSESSEE FOR AY 2005-06 SUPRA, WE ALLOW THE APPEAL OF THE ASSESSEE FOR AY 2006-07 AND DELETE THE ADDITION OF RS.1,50,77,604/- MADE BY THE LEARNED AO U/S 40 (A) (IA) OF THE ACT WHICH WAS FURTHER CONFIR MED BY THE LEARNED CIT(A). 13. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. 8. IF WE EXAMINE THE FACTS OF THE PRESENT CASE IN T HE LIGHT OF ABOVE DECISION OF ITAT THEN IT WILL REVEAL THAT THERE IS NO DISPARITY ON FACTS ALSO. IT IS QUITE CLEAR THAT HCCL AND BPCL ENTERED INTO CONTRACT SOLELY WITH THE ASSESSEE. ALL THE RESPONSIBILITY FOR THE T RANSPORTATION OF GOODS WAS ON THE ASSESSEE AND ASSESSEE DID NOT ENTE R INTO ANY SUB- CONTRACT WITH THE TRANSPORT AGENCIES AND USED TO TA KE ON THE TRUCKS AS ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 16 AND WHEN REQUIRED FOR THE DESTINATION AS AND WHERE REQUIRED. THE SEPARATE LORRY RECEIPT/CHALLAN AND SEPARATE PAYMENT S WERE MADE ON SUCCESSFUL DELIVERY OF THE GOODS. THERE IS NO MATER IAL TO SUGGEST THAT THE OTHER LORRY OWNERS INVOLVED THEMSELVES IN CARRY ING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE FOR SPENDING TH EIR ENERGY, TIME, EXPENSES ON RUNNING TRUCKS AND BY TAKING THE RISKS ASSOCIATED WITH THE MAIN CONTRACT. IN THE REASONING OF THE AO THAT THE PAYMENT MADE FOR THE HIRED VEHICLES COMES UNDER THE CATEGORY OF SUB-CONTRACT IS NOT CORRECT AND NOR IT IS BASED ON ANY RELEVANT CONSIDE RATION. THEREFORE, IN OUR OPINION IT CANNOT BE SAID THAT THE PAYMENTS MADE FOR HIRING VEHICLES WOULD FALL IN THE CATEGORY OF PAYMENT TOWA RDS A SUB-CONTRACT AND AS SUCH THE ASSESSEE IS NOT LIABLE TO DEDUCT TA X AT SOURCE AS PER PROVISIONS OF SECTION 194C(2) AND CONSEQUENTLY THE PROVISIONS OF SECTION 40(A)(IA) WILL NOT APPLY ON SUCH PAYMENTS. THE FINDING OF CIT(A) IS NOT SUSTAINABLE, THEREFORE, WE SET ASIDE THE FINDINGS OF BOTH THE AUTHORITIES ON THIS ISSUE AND DELETE THE DISALL OWANCE. THE GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE ARE ALLOWED. 9. IN THE NEXT GROUND OF APPEAL ASSESSEE CHALLENGES INITIATION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. TO OUR MIND IT IS A PREMATURE GROUND OF APPEAL. THE ASSESSEE WILL GET A N OPPORTUNITY TO PUT ITS DEFENCE WHEN PENALTY PROCEEDINGS WOULD BE S TARTED BY ISSUANCE OF A SHOW CAUSE NOTICE. AT THIS STAGE IT H AS NO GRIEVANCE. HENCE THIS GROUND OF APPEAL IS REJECTED BEING PREMA TURE. 10. IN THE NEXT GROUND OF APPEAL THE GRIEVANCE OF T HE ASSESSEE RELATES TO CHARGING OF INTEREST UNDER SECTIONS 234B , 234C & 234D OF ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 17 THE ACT. THIS GROUND OF APPEAL IS CONSEQUENTIAL AND NO ARGUMENTS WERE ADDRESSED AT THE TIME OF HEARING. HENCE THIS G ROUND OF APPEAL IS REJECTED. 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/9/2015 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 11/9/2015 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD ITA NO.3357/AHD/2009 ASST. YEAR 2005-06 18 1. DATE OF DICTATION: 26/8/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 2/9/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 11/9/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: