Sh. Parminder Singh, New Delhi V. ITO, New Delhi

ITA 3729/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3331 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 08-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K JIWANI
• Section: 194C; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO. 3 729 /DEL/201 7 [A.Y. 20 07 - 08 ] SHRI PARMINDER SINGH VS. THE I . T .O [THROUGH SHRI RASIK MAKKAR , CA] WARD 28(1) N 59, GREATER KAILASH - I NEW DELHI NEW DELHI PAN : A BLPS 1699 F [ ASSESSEE ] [RESPONDENT] DATE OF HEARING : 2 2 . 0 2 .201 8 DATE OF PRONOUNCEMENT : 09 .0 3 .201 8 ASSESSEE BY : SHRI V.K. SABHARWAL , SHRI RASHIK MAKKAR , C A REVENUE BY : SHRI V.K. JIWANI , SR. DR ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF LD. CIT(A) - 16, NEW DELHI VID E ORDER DATED 31.03.2017 FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE ASSESSEE HAS PRESSED ONLY GROUND NO.3 & 9 WHICH ARE RELEVANT AND ARE REPRODUCED HEREUNDER: 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A), NEW DELHI, HAD ERRED IN LAW, FACTS AND EQUITY IN NOT 2 ITA NO. 3729 /DEL/201 7 DELETING THE ADDITIONS MADE BY THE ITO OF RS.9,09,580/ - UNDER SECTION 40(A)9IA) OF THE INCOME - TAX ACT, 1961 ON ACCOUNT OF NON DEDUCTION OF TDS ON HIRE OF EQUIPMENTS IN FORM OF CRANES, TRACTORS AND HYDRA WITHOUT CONSIDERING THE SUBM ISSIONS AND EVIDENCES FILED DURING THE COURSE OF THE CASE. 9. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A), NEW DELHI, HAD ERRED IN LAW, FACTS AND EQUITY BY CONSIDERING THE PAYMENT OF FREIGHT OF RS.2,24,300/ - AS PAYMENT MADE TO SUB - CONTR ACTORS REQUIRING DEDUCTION OF TDS UNDER SECTION 194C(2) OF THE INCOME TAX ACT, 1961 WHILE THE PAYMENT OF FREIGHT WAS NORMAL EXPENDITURE OF THE APPELLANT COVERED UNDER 194C(1) OF THE INCOME TAX ACT, 1961 AND THUS, NOT REQUIRING TDS. 3. THE BRIEF FACTS OF T HE CASE ARE THAT THE ASSESSEE HAS PAID HIRE CHARGES OF CRANE AND TRACTORS BUT NO TDS DEDUCTED. AFTER CONSIDERING THE FACTS OF CASE REPLY OF ASSESSEE DID NOT F IND ANY MERITS ON THE FOLLOWING POINTS: I . THE ASSESSEE DID NOT HAVE ANY WRITTEN AGREEMENT OF ABOVE HIRING OF CRANE AND TRACTORS, WHICH CAN PROVE THAT IT WAS RENT FOR HIRING OF TRACTORS AND CRANES. II . MOREOVER, IF THE ASSESSEE TAKEN THE THESE EQUIPMENTS ON RENT THAN HE SHOULD HAVE TO BEAR THE FUEL EXPENSES AND REPAIR & MAINTENANCE EXPENSES, WHICH IS NOT 3 ITA NO. 3729 /DEL/201 7 BORNE BY ASSESSEE AS EVIDENT FROM PROFIT AND LOSS ACCOUNT. III . REGARDING THE CARRIAGE AND FREIGHT EXPENSES THE ASSESSEE HAS NOT PRODUCE THE BILLS OF ABOVE EXPENSES AND NOTHING SAID IN THIS REGARDS. WHICH CLEARLY SHOW THAT THE ASSESSEE EITHER NOT HAVING PROPE R BILLS OR PAID TO SOME PARTIES TO WHOM PAYMENT IS OF RS.50,000/ - OR MORE THIS FACTS IS BETTER NON TO ASSESSEE. HENCE, IT IS PRESUMED THAT THE ASSESSEE PAID THE ABOVE AMOUNT WITHOUT TDS AND IT WAS DISALLOWED U/S 40(A)(IA) OF INCOME TAX ACT, 1961. IV . AS PER PREVAILING SYSTEMS IN THE CONTRACTOR BUSINESS THE TRACTORS AND CRANES SUPPLIER WERE GIVEN SUB - CONTRACT ON THE BASIS OF QUANTITY OF WORKS AND ACCORDINGLY CONTRACT IS GIVEN TO THEM. KEEPING IN VIEW OF ABOVE FACTS THE REPLY OF ASSESSEE IS NOT TENABLE AND WAS REJECTED BY THE AO. THE ABOVE PAYMENT IS TREATED AS PAYMENT BY CONTRACTOR TO SUB CONTRACTOR AND THE ASSESSEE WAS REQUIRED TO DEDUCT THE TDS ON THE ABOVE. HENCE, THE ABOVE PAYMENT WAS DISALLOWED U/S 40(A)(IA) OF INCOME TAX ACT, 1961 AND ADDED IN THE INCO ME OF ASSESSEE, WHICH COMES TO RS.11,33,880/ - . 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO. 4 ITA NO. 3729 /DEL/201 7 5. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. ON ARGUMENTS OF PARTIES AND SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, IT WAS FO UND THAT THE ASSESSEE HIRES THE TRACTORS AND CRANES (EQUIPMENTS) FOR MOVING/SHIFTING AND INSTALLING THE ELECTRIC POL ES, TRANSFORMERS, FOR CARRYING CABLES, ACCESSORIES AND OTHER SIMILAR MATERIALS TO COMPLETE THE WORK AS PER HIS CONTRACT WITH HIS CONTRACTEES . FOR CARRYING OUT SUCH WORK THE ASSESSEE NEEDS TO H I RE THE EQUIPMENTS AS HE CANNOT BUY SUCH EQUIPMENTS DUE TO HEAVY COST INVOLVED AND THE VOLUME OF WORK DONE BY THE ASSESSEE DOES NOT ALLOW HIM TO ACQUIRE HEAVY MACHINERY. THE EQUIPMENTS ARE TAKEN ON HIRE FROM VARIOUS VENDORS NEAR THE SITE WHERE THE ASSESSEE WORKS. THE VENDOR SUPPLIES THE EQUIPMENTS ON DAY TO DAY OR MONTHLY BASIS. THE DIESEL EXPENSES FOR THE EQUIPMENTS ARE TO BE FILLED BY THE ASSESSEE, AND AT TIMES IT IS FILLED BY THE SUPPLIERS TOO AND T HE COST OF THE EQUIPMENT ITSELF EMBEDS THE DIESEL COST IN SUCH CASE. THESE EQUIPMENTS ARE KEPT AT SITE BY THE ASSESSEE AND RETURNED TO THE SUPPLIERS AFTER THE COMPLETION OF WORK. 6. THE ASSESSEE FOR HIS BUSINESS HAD TAKEN ON RENT THE TRACTORS AND CRANES FROM VARIOUS PARTIES, FOR THE PURPOSE OF LIFTING, SHIFTING & INSTALLING ELECTRICAL POLES. THE VENDORS CHARGES RENT FOR THESE 5 ITA NO. 3729 /DEL/201 7 EQUIPMENTS ON DAILY/WEEKLY/MONTHLY BASIS. THE CRANES WERE MOSTLY PROVIDED WITH AN OPERATOR, WHO OPERATED THE CRANES AND THE TRACTO RS WERE TAKEN MOSTLY WITHOUT THE DRIVERS AS THE ASSESSEES OWN EMPLOYEES USE TO DRIVE THE TRACTORS. NO WORK WAS DECIDED TO BE UNDERTAKEN BY THE TRACTORS AND THE CRANE OWNERS. WHETHER THE TRACTORS/CRANES WERE USED OR NOT THE PAYMENT HAD TO BE MADE ON DAIL Y/TIME BASIS AND AS SUCH THE HIRING OF TRACTORS/CRANES DID NOT COME WITHIN THE PURVIEW OF WORK CONTRACT AS ENVISAGED IN SECTION 194C. 7. THE VENDORS RAISES THEIR BILLS IN THIS RESPECT WHICH IN THE ABSENCE OF A SEPARATE AGREEMENT IS TO BE TREATED AS A DEEM ED AGREEMENT. IT IS DECIDED BY VARIOUS COURTS THAT IN THE ABSENCE OF ANY EXPLICIT AGREEMENT BETWEEN PERSONS, THE SUPPORT HAS TO BE TAKEN FROM SURROUNDING CIRCUMSTANCES TO SEE WHETHER ANY AGREEMENT EXISTED OR NOT. THE BILLS ISSUED BY THE SUPPLIERS OF THE T RACTORS AND CRANES ARE IN RESPECT OF RENTING OF EQUIPMENTS AND THUS THE BILLS ARE DEEMED AGREEMENTS. THUS, THE CONTENTION OF THE LD. ITO THAT THERE IS NO WRITTEN RENT/HIRE AGREEMENT WITH THE SUPPLIERS FOR HIRING OF CRANES AND TRACTORS IS REBUTTED CLEARLY AS THE BILLS/INVOICES RAISED BY THE SUPPLIERS ARE IMPLIED AGREEMENTS. 6 ITA NO. 3729 /DEL/201 7 8. IT WAS SUBMITTED BY ASSESSEE REGARDING APPLICABILITY OF SECTION 194C THAT : A ) THESE RENTALS/HIRING OF EQUIPMENTS DID NOT INVOLVE ANY DEDUCTION OF TAX (I.E. TDS) AS SUCH PAYMENTS WERE NOT COVERED WITHIN THE PURVIEW OF SECTION 1940 OR 1941. THE REASONS FOR THE SAME ARE AS UNDER: - B ) THE APPELLANT IS AN INDIVIDUAL AND AS PER SECTION 194C OF THE ACT RELEVANT TO ASSESSMENT YEAR 2007 - 08, THE INDIVIDUALS/HUFS WERE NOT SUPPOSED TO DEDUCT TDS ON ANY CONTRACT PAYMENTS MADE DURING F.Y. 2006 - 07. THE ACT WAS AMENDED W.E.F. 1.6.2007 (F.Y. 2007 - 08) WHEREIN SUB SECTION (1) OF SECTION 194C WAS SUBSTITUTED AND A NEW SUB - SECTION WAS INSERTED. A NEW SUB CLAUSE (K) WAS ADDED WHEREBY THE INDIVIDUALS AND HUF WAS MADE LIABLE TO DEDUCT TDS ON THE PAYMENTS MADE TO CONTRACTORS ONLY WHEN THEY ARE SUBJECT TO TAX AUDIT (EXTRACT OF SECTION 194 C AS APPLICABLE FOR FY 2006 - 07 AND POST FY 2006 - 07 IS ENCLOSED AS ANNEXURE 1). C ) FURTHER, AS PER CIRCULAR 681 (ENCLOSED AS ANNEXURE 2) DATED 08.03.1994 THE PROVISION OF SECTION 194C DOES NOT APPLY IN RELATION TO PAYMENTS MADE FOR HIRING OR RENTING EQUIPMENTS ETC. THIS CIRCULAR IS CLARIFICATORY IN NATURE AND HAD BEEN ISSUED AFTER THE JUDGMENT OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF ASSOCIATED CEMENT CO. LTD. VS CIT ([1993] 201 ITR 435). D ) HOWEVER, SO AS TO GET THE EXPENSE OF HIRING OF EQUIPMENTS COVERED UNDER SECTION 194C, THE LD. ITO CONTENDED THAT AS PER THE PREVAILING SYSTEMS IN THE CONTRACTOR BUSINESS, THE 7 ITA NO. 3729 /DEL/201 7 TRACTORS, HYDR A AND CRANES SUPPLIERS WERE GIVEN SUB - CONTRACT. IN THIS REGARD, IT IS SUBMITTED THAT THE ASSESSEE ONLY RENTED/HIRED THE EQUIPMENTS TO CARRY OUT THE CONTRACT ON HIS OWN. NO PART OF THE WORK WAS SUBCONTRACTED OR OUTSOURCED TO ANY PARTY BY THE ASSESSEE. TH E FACT THAT NO SUB - CONTRACTING WAS DONE BY THE ASSESSEE IS EVIDENT FROM THE NARRATIONS PROVIDED IN THE SAMPLE INVOICES OF THE SUPPLIERS, WHO HAD CHARGED THE MONEY ON TIME BASIS (ENCLOSED AS ANNEXURE 3). E ) THE LD. ITO HAS FAILED TO APPRECIATE THAT THE ASSESSE E WAS ONLY HIRING THE EQUIPMENTS FROM THE SUPPLIERS ON TIME BASIS AND HAD USED HIS OWN LABOUR IN ERECTING, SHIFTING OR TRANSPORTING THE ELECTRIC POLES. ALL THEE ACTIVITIES INVOLVED SPECIAL LABOUR, AND THE SAME WAS THE PERSONAL LABOUR OF THE ASSESSEE. THE EQUIPMENT SUPPLIERS ONLY GIVE THEIR CRANES OR TRACTORS AND ARE BOTHERED ONLY FOR THE DAILY/MONTHLY/QUARTERLY RENTAL AND NOTHING ELSE. THE APPELLANT TOOK THE ENTIRE RESPONSIBILITY FROM ANY SUPPLIER WHICH IS USUALLY THE CASE FOR SUB - CONTRACTING AS SUB - CONT RACTS USUALLY INVOLVE SHIFTING THE LIABILITIES FROM THE MAIN CONTRACTOR TO THE SUB - CONTRACTOR. F ) TO QUALIFY THE HIRING OF THE EQUIPMENTS AS WORKS UNDER SECTION 194C, THE PAYMENTS MADE TO THE OWNERS/SUPPLIER OF THE TRACTORS/CRANES HAS TO BE CO - RELATED TO T HE WORK DONE BY THEM FOR THE ASSESSEE. EVERY MACHINE IS TAKEN ON HIRE TO DO SOME WORK BUT CANNOT BE SAID TO BE WORKS CONTRACT COVERED UNDER SECTION 194C UNLESS THE PAYMENT FOR THE MACHINES CAN BE CORRELATED WITH THE OUTPUT OF THE WORK. THE PAYMENT WAS IN THE NATURE OF HIRING OF MACHINERY ON WHICH NO TDS WAS TO BE 8 ITA NO. 3729 /DEL/201 7 DEDUCTIBLE U/S 194C AND THUS SUCH AN EXPENDITURE CANNOT BE DISALLOWED UNDER SECTION 40(A)(IA). G ) SIMILAR ISSUE HAD COME BEFORE THE DELHI ITAT IN THE CASE OF ASSISTANT COMMISSIONER INCOME TAX, CIRCL E 2, MEERUT V SANJAY KUMAR, 120111 15 TAXMANN.COM 230 (DELHI), WHEREIN THE ITAT HAD RULES THAT IN CASE THE QUIPMENTS ARE TAKEN ON HIRE ON TIME BASIS AND THE PAYMENT TO THE SUPPLIERS HAS NO CO - RELATION WITH THE WORK TO BE DONE WITH THOSE EQUIPMENTS, THEN U SE OF SUCH EQUIPMENTS WILL NOT AMOUNT TO WORKS UNDER SECTION 194C OF THE ACT (THE COPY OF THE JUDGMENT IS ENCLOSED AS ANNEXURE 4A). 9. THE OTHER JUDGMENTS ON SIMILAR POINTS ARE AS FOLLOWS: ( I ) DY. CIT V SATISH AGGARWAL & CO. [2010] 122 ITD 35 AMRITSAR (COPY OF JUDGMENT IS ENCLOSED AS ANNEXURE 4B) ( II ) MYTHRI TRANSPORT CORPN. VS ACIT [2010] 124 ITD 40 (VISAKHA) (COPY OF JUDGMENT IS ENCLOSED AS ANNEXURE 4C) H) THE LD. ITO HAS ALSO RAISED ONE POINT THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE ON THE DIESEL/PETROL. IN THIS REGARD, IT IS SUBMITTED THAT THE LD. ITO DID NOT CLEARLY READ THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, WHEREIN THE ASSESSEE HAS DEBITED RS.1,81,145/ - AS EXPENDITURE ON DIESEL (COPY OF LEDGER ACCOUNT OF DIESEL/PETROL EXPENSES ALONGWITH EXTRACTS OF FINAL ACCOUNTS OF THE ASSESSEE IS ENCLOSED AS ANNEXURE. 9 ITA NO. 3729 /DEL/201 7 10. THESE EXPENSES WERE IN THE NATURE OF DIESEL EXPENSES ON THE TRACTORS, CRANES AND HYDRAS RENTED BY THE ASSESSEE. IN SOME CASES, THE SUPPLIERS THEMSELVES FILL THE DIESEL IN SUCH EQUIPMENTS AND THE HIRING COST OF THE EQUIPMENT ITSELF EMBEDS THE DIESEL COST IN SUCH CASE. THUS, AS PER THE ABOVE REASONS GIVEN BY THE ASSESSEE, IT IS CLEAR THAT THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE ON THE ASSESSEE DUE TO THE FOLLOWING BRIEF REASONS: I. NON - APPLICABILITY OF SECTION 194C ON ANY CONTRACTUAL PAYMENTS MADE BY INDIVIDUALS AND HUFS WHETHER OR NOT SUBJECT TO TAX AUDIT IN FY 2006 - 07. II. INDIVIDUALS/HUUFS WERE LIABLE TO DEDUCT TDS ONLY ON SUB - CONTRACTOR PAYMENTS IN FY 2006 - 07 BUT THE SAME WAS NOT THE CASE OF THE ASSESSEE. III. CIRCULAR 681 OF 1994 CLEARLY LAYS CLOWN THE FACT THAT SECTION 194C WOULD NOT BE APPLICABLE IN CASE OF PAYMENTS MADE FOR HIRING/RENTING OF EQUIPMENTS, ETC. WITH REGARD TO FREIGHT AND CARTAGE, IT WAS SUBMITTED THAT - A ) BESIDES DISALLOWANCE ON ACCOUNT OF HIRE CHARGES PAID FOR TRACTORS AND CRANES, THE ITO MADE A DISALLOWANCE OF FREIGHT & CARTAGE EXPENSES ON ACCOUNT OF NON DEDUCTION OF TDS U/S 194C. B ) THE ASSESSEE PAID RS.2,24,300/ - AS FREIGHT CHARGES ON WHICH THE LD. ITO POINTED OUT THAT THE ASSESSEE HAD NOT DEDUCTED TDS. AS EXPLAINED ABOVE, INDIVIDUALS WERE NOT LIABLE TO 10 ITA NO. 3729 /DEL/201 7 DEDUCT TDS ON PAYMENTS MADE FOR FREIGHT UNDER 194C IN F.Y. 2006 - 07, THUS THE ASSESSEE MADE NO DEDUCTION OF TDS IN THE FY. THUS THERE IS NO QUESTION OF ANY DISALLOWANCE U/S 40(A)(IA). C ) THE COPY OF ACCOUNT OF FREIGHT AND CARTAGE ALONGWITH THE VOUCHERS OF FREIGHT AR E ENCLOSED AS ANNEXURE 7. THE SAME WERE PRODUCED BEFORE THE SAID ITO DURING THE ASSESSMENT PROCEEDINGS TOO AND RESUBMITTED TO YOUR PREDECESSOR. 11. ALL THE ABOVE SUBMISSIONS WERE PROVIDED TO BOTH THE LD. ITO AT THE TIME OF THE RESPECTIVE ASSESSMENT/APPEL LATE PROCEEDINGS. LEGALLY SPEAKING THE PROVISIONS OF TDS WERE NOT APPLICABLE ON THE ASSESSEE DUE TO THE REASONS PROVIDED IN DETAIL HEREINABOVE AND ACCORDINGLY, THE DEMAND WAS RAISED BY THE ITO BY WAY OF PROVIDING NUMEROUS REASONS WITHOUT APPLICATION OF MI N D AND WITHOUT PAYING HEED TO THE PROVISIONS OF THE ACT. 12. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN HANDED OVER THE REMAND REPORT DATED 20.07.2016, WHEREIN THE LD. ITO, WARD 46(1), NEW DELHI, HAS STATED THAT THE AS PER THE RESPONSE SUBMITTED B Y THE THREE PARTIES INVOLVED IN PROVIDING SERVICES OF FREIGHT & SERVICES TO THE ASSESSEE, THEY HAVE CONFIRMED THE FREIGHT SERVICES PROVIDED BY THEM TO THE ASSESSEE, THUS PROVING THE GENUINENESS OF THE TRANSACTION. 11 ITA NO. 3729 /DEL/201 7 13. THE ASSESSEE HAS USED THE SERVICES OF THREE PARTIES, NAMELY M/S. GUJJAR TRANSPORT MOVERS, M/S. RANDHIR TRANSPORT AND M/S. QUICK TRANSPORT SERVICE FOR FREIGHT AND CARTAGE OF THE GOODS. THE ASSESSEE PAID RS.2,24,300/ - AS FREIGHT CHARGES ON WHICH THE LD. ITO POINTED OUT IN THE ASSTT. ORDER THAT: REGARDING THE CARTAGE AND FREIGHT EXPENSES THE ASSESSEE HAS NOT PRODUCED THE BILLS OF ABOVE EXPENSES AND NOTHING SAID IN THIS REGARDS. WHICH CLEARLY SHOW THAT THE ASSESSEE EITHER NOT HAVING PROPER BILLS OR PAID TO SOME PARTIES TO WHOM PAYMENT IS OF RS. 50,000/ - OR MORE THUS FACTS IS BETTER NON TO ASSESSEE. HENCE, IT IS PRESUMED THAT THE ASSESSEE PAID THE ABOVE AMOUNT WITHOUT IDS AND IT WAS DISALLOWED U/S 40(A)(IA) OF THE I.T. ACT, 1961. THUS TWO REASONS WERE ADVANCED BY THE LD. ITO IN THE ASSTT. ORDER FOR DISALLOWING THE EXPENSES ON FREIGHT & CARTAGE: A) BILLS NOT PRODUCED AND B) PAYMENT TO SOME PARTIES ABOVE RS.50,000/ - ON WHICH TDS HAS NOT BEEN DEDUCTED, WITHOUT POINTING OUT WHETHER THE FAULT WAS U/S SECTION 194C(1) OR 194C(2). AS REGARDS SECTION 19 4C (RELEVANT TO F.Y.2006 - 07) HAD THREE SUB - SECTIONS WHEREIN SUB - SECTION 1 DEALT WITH THE CONTRACT BETWEEN PRINCIPAL AND THE CONTRACTOR, SUB - SECTION 2 DEALT WITH THE CONTRACT BETWEEN THE CONTRACTOR AND THE SUB - CONTRACTOR AND SUB - SECTION 3 DEALT WITH THE MON ETARY LIMITS BEYOND WHICH THE TDS IS TO BE DEDUCTED UNDER THE SECTION. 12 ITA NO. 3729 /DEL/201 7 THE PAYMENTS MADE TO THE FREIGHT PERSONS WERE COVERED UNDER SUB - SECTION 1 OF SECTION 194C, AS THE ASSESSEE WAS THE PRINCIPAL AND THE FREIGHT MOVERS WERE THE CONTRACTORS. AS PER SUB - SEC TION 1, THE INDIVIDUALS WERE NOT COVERED IN F.Y. 2006 - 07, AND ON 01.06.2007 (F.Y. 2007 - 08) THE INDIVIDUALS GOT COVERED IN SUB - SECTION 1 WHEN SUB CLAUSE (K) WAS ADDED TO THE SECTION 1940. THE CONTRACT FOR FREIGHT WITH THESE PARTIES WERE ON PRINCIPAL TO AGE NT BASIS, I.E. THE FREIGHT MOVERS WERE NOT GIVEN ANY SUB - CONTRACT FOR MOVEMENT OF THE GOODS. THUS THE PROVISIONS OF SECTION 194C(1) APPLIED TO ALL THE CONTRACTS OF FREIGHT ENTERED BY THE ASSESSEE AND AS EVIDENT FROM THE FREIGHT INVOICES TOO. HOWEVER THE INDIVIDUALS ARE NOT LIABLE TO DEDUCT TDS ON PAYMENTS MADE FOR FREIGHT UNDER 194C IN F.Y. 2006 - 07, THUS THE ASSESSEE MADE NO DEDUCTION OF TDS IN THE FINANCIAL YEAR. THUS THERE IS NO QUESTION OF ANY DISALLOWANCE U/S 40(A)(IA) . 14. IN THIS CIRCUMSTANCES AN D FACTS OF THE CASE NO DISALLOWANCE ON THIS ACCOUNT CAN BE MADE AND DISALLOWANCE SO MADE IS DIRECTED TO BE DELETED. THUS GROUND NO.3 AND 9 OF THE ASSESSEE ARE ALLOWED. 13 ITA NO. 3729 /DEL/201 7 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.3729/DEL/2017 IS ALLOWED. TH E ORDER IS PRO NOUNCED IN THE OPEN COURT ON 09 . 0 3 .201 8 . SD/ - [B.P. JAIN] ACCOUNTANT MEMBER DATED: 09 TH MARCH, 2018 VL/ COPY FORWARDED TO: 1 . ASSESSEE 2 . RESPONDEN T 3 . CIT ASSISTANT REGISTRAR 4 . CIT(A) ITAT, NEW DELHI 5 . DR