Jay Bharat Roadlines, Surat V. The Income tax Officer,Ward-6(2), Surat

ITA 625/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85563 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 28-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: MANISH KR MALPANI
• Keywords: Business income
• Section: 143(3); 194C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUN TANT MEMBER JAY BHARAT ROADLINES 19-19, THEKEDAR HOUSE, ROYAL TOWNSHIP, SAROLI, SURAT PAN: AAFFJ 1082 N (APPELLANT) VS INCOME TAX OFFICER, WARD-6(2), SURAT (RESPONDENT) ASSESSEE BY: SHRI MANISH KR. MALPANI, A.R. REVENUE BY: SMT SONIA KUMAR, SR. D.R. DATE OF HEARING : 19-01-2015 DATE OF PRONOUNCEMENT : 06-02- 2015 / ORDER PER : MUKUL KR. SHRAWAT, JUDICIAL MEMBER:- THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATING FROM THE ORDER OF CIT(A)-IV, SURAT DATED 22-10-2010. THE MAIN GROUND S CONTESTED BEFORE US ARE REPRODUCED BELOW:- 1)A). THAT THE HONBLE CIT(A) HAS ERRED IN HOLDING THE VIEW THAT PAYMENT MADE TO PARTNER FOR USE OF HIS TRUCKS WAS C OVERED BY ITA NO. 625/AHD/2011 ASSESSMENT YEAR 2006-07 I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 2 SECTION 194C(2) OF THE ACT AND THAT PROVISIONS OF T DS WAS APPLICABLE ON THE SAME. B) THAT THE HONBLE CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE MADE IN RESPECT OF PAYMENT MADE TO PAR TNER OF RS. 11,07,400/- U/S. 40(A)(IA) OF THE ACT ON GROUND THA T TDS WAS NOT DEDUCTED ON IT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3) DATED 17-12-2008 WERE THAT THE A SSESSEE-FIRM HAS FILED THE RETURN DECLARING AN INCOME AT RS. 2,334/- THE FIRM IS ENGAGED IN THE BUSINESS OF TRANSPORTATION. IT WAS INFORMED THAT T HE ASSESSEE WAS NOT OWNING TRUCKS. THE TRUCKS ARE HIRED FROM THE OPEN MARKET. ON VERIFICATION OF THE BALANCE SHEET, IT WAS FOUND BY THE AO THAT N O TRUCKS WERE REFLECTED IN THE BALANCE SHEET. IT WAS CONFIRMED THAT THE AS SESSEE-FIRM WAS HIRING THE TRUCKS AND PAYING THE FREIGHT CHARGES TO THE TR UCK OWNERS. TOWARDS FREIGHT EXPENSES, AN EXPENDITURE OF RS. 16,6800/- W AS DEBITED. ON VERIFICATION OF THE DETAILS OF FREIGHT EXPENSE, IT WAS NOTED BY THE AO THAT THE ASSESSEE-FIRM HAD PAID FREIGHT EXPENSES ON FOUR TRU CKS AMOUNTING TO RS. 11,07,400/- TO ALLEGED SUB-CONTRACTORS WITHOUT DEDU CTING TDS. THE AO HAS INVOKED THE PROVISIONS OF SECTION 40(A)(IA) R.W .S. 194C OF IT ACT AND PROPOSED TO DISALLOW THE CLAIMED EXPENDITURE OF RS. 11,07,400/-. A SHOW CAUSE WAS ISSUED WHEREIN IT WAS INFORMED THAT THE I MPUGNED PAYMENT WAS MADE TO MR. MAHESHCHANDRA AGRAWAL. IN COMPLIANCE O F SHOW CAUSE NOTICE, THE ASSESSEE HAS SUBMITTED THE FOLLOWING RE PLY:- THE ASSESSEE HAS PAID/CREDITED PARTNERS ACCOUNT ON ACCOUNT OF FREIGHT. AS PER THE PROVISIONS OF SEC. 194C OF INC OME TAX ACT, THE ASSESSEE WAS LIABLE TO DEDUCT TDS AND DEPOSIT THE S AME TO THE CREDIT OF CENTRAL GOVERNMENT WITHIN SPECIFIED TIME. THE ASSESSEE M/S. JAY BHARAT ROADLINES IS A PARTNER SHIP FIRM, WHICH WAS FORMED ON 6 TH AUGUST, 2005, F.Y. 2005-06 WAS VERY FIRST YEAR OF OPERATION OF SAID FIRM. I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 3 SHRI MAHESH CHANDRA AGARWAL IS ONE PARTNER OF FIRM. HE IS ALSO OWNER OF 4 TRUCKS AND ALL THESE TRUCK ARE ENGA GED IN THE TRANSPORTATION BUSINESS OF THE FIRM DURING THE YEAR 2005-06. FREIGHT EXPENSES RELATED TO THESE 4 TRUCKS FOR THE YEAR ARE ASUNDER:- TRUCK REGISTRATION NO. FREIGHT EXPENSES FOR THE YE AR 2005-06 GJ-5UU-8068 RS. 272100/- GJ-5UU-8015 RS. 291000/- GJ-5UU-8016 RS. 280900/- GJ-5UU-8067 RS. 263400/- TOTAL.. RS. 1107400/- TOTAL FREIGHT EXPENSES FOR THE YEAR ARE RS. 16,06,8 00/-, OUT OF THIS FREIGHT EXPENSES RELATED TO TRUCKS OF SHRI MAH ESHCHANDRA AGRAWAL ARE RS. 11,07,400/- FREIGHT EXPENSES RELATE D TO SHRI MAHESHCHANDRA AGRAWAL ARE FROM THE AMOUNT ON WHICH ONCE THE TDS IS ALREADY DEDUCTED. ACCORDING TO SEC. 40(B)(I) ANY PAYMENT OF SALARY, B ONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED TO ANY PARTNER IS NOT SUBJECT TO TDS & PROVISION OF TDSS U /S. 194A ARE NOT APPLICABLE. FREIGHT EXPENSE OF RS. 11,07,400/- IS ALSO A PAYMENT TO PARTNER. IF FIRM WOULD HAVE DEDUCTED TDS ON THE PAYMENT OF R S. 11,07,400/- TO PARTNER, SAME WOULD HAVE BEEN ADJUST ED BY THE PARTNER FROM THE TAX PAYABLE BY HIM. SO BY LOOKING TO THE FACTS OF THE CASE, IT IS ESTABLISHED THAT NON DEDUCTION OF T AX BY FIRM FROM THE PAYMENT TO PARTNER HAS NOT MADE ANY LOSS TO REVENUE . 2.1 THE SAID REPLY WAS NOT ACCEPTABLE TO AO. ACCOR DING TO HIM, THE FREIGHT EXPENSES WERE PAID TO A SUB-CONTRACTOR HENC E IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) R.W.S. 194C IT WAS DISALLOWED BY THE AO. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, IT WAS REITERATED THAT SHRI MAHESHCHANDRA AGRAWAL WAS NOT A SUB-CONTRACTOR BUT PROVIDED HIS ASSETS TO THE FIRM TO BE USED FOR THE PURPOSE OF THE I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 4 BUSINESS ON WHICH RENT WAS RECEIVED BY HIM ON A FIX ED PER TRIP BASIS. IT WAS ALSO ARGUED THAT THERE WAS NOT A RELATIONSHIP O F SUB-CONTRACTOR AND CONTRACTOR, BUT IT WAS A RELATIONSHIP OF A PARTNER WITH THE FIRM. THE FIRM HAD INCURRED ALL THE EXPENSES OF RUNNING OF THE TRUCK A ND A FIXED RENT ON THE BASIS OF EACH TRIP WAS PAID HENCE IT WAS PLEADED TH AT THE PROVISIONS OF SECTION 194I WOULD HAVE BEEN ATTRACTED IF AT ALL TH AT TOO FROM A.Y. 2007-08. AN ANOTHER ARGUMENT HAS ALSO BEEN RAISED THAT THE P AYEE, MR. AGRAWAL, HAD ALREADY PAID THE TAX, THEREFORE, THERE WAS NO O BLIGATION ON THE ASSESSEE-FIRM TO AGAIN DEDUCT THE TAX. FOR THIS LE GAL PROPOSITION, RELIANCE WAS PLACED ON HINDUSTAN COCO COLA BEVERAGES LTD VS. CIT 293 ITR 226 (SC). 3.1 HOWEVER LD. CIT(A) WAS NOT CONVINCED AND DECIDE D THE ISSUE AGAINST THE ASSESSEE AS UNDER. RELEVANT PORTION REP RODUCED BELOW:- 2.3 THE FACTS SHOW THAT SHRI MAHESHCHANDRA AGRAWAL , PARTNER OF THE FIRM HAD ACTED IN HIS INDIVIDUAL CAPACITY IN PR OVIDING HIS TRUCKS TO THE FIRM. THE TRUCKS ARE REGISTERED IN INDIVIDUAL NAME AND INCOME FROM THE SAID CONTRACTS HAS BEEN OFFERED BY HIM IN HIS INDIVIDUAL RETURNS OF INCOME UNDER THE HEAD PROFITS OF BUSINE SS. HE HAS THEREFORE NOT ACTED IN HIS CAPACITY AS A PARTNER OF THE FIRM BUT AS IN INDIVIDUAL, DISTINCT FROM THE FIRM, WHEN ENTERING I NTO TRANSACTIONS WITH THE FIRM. SHRI MAHESHCHANDRA AGARWAL IN HIS INDIVID UAL CAPACITY HAD A CONTRACTOR SUB CONTRACTOR RELATIONSHIP WITH THE F IRM. SECTION 194C(2) WERE THEREFORE APPLICABLE IN TRANSACTIONS OF THE APPELLANT FIRM WITH HIM. WORKS CONTRACT HAS BEEN DEFINED TO INCLUDE CARRIAGE OF GOODS AND PASSENGERS. SHRI MAHESHCHANDRA AGARWAL IS OWNER OF FOUR TRUCKS AND THEREFORE TDS HAD TO BE MADE FROM P AYMENTS MADE TO HIM. SUCTION 194C IS APPLICABLE EVEN, IF THE CON TRACTOR IS CARRYING OUT ONLY PART OF THE WORK CONTRACTED BY THE CONTRAC TOR. THE APPELLANT IS A CONTRACTOR AND PART OF THE WORK CONTRACTED HAS BEEN GIVEN TO THE PARTNER IN HIS INDIVIDUAL CAPACITY. THEREFORE PROVI SIONS OF SECTION 194C WERE APPLICABLE IN CASE OF THESE TRANSACTIONS. SINCE, NO TDS HAS BEEN MADE DESPITE THERE BEING A LIABILITY TO DE DUCT TAX AT SOURCE, THE APPELLANT IS CAUGHT WITHIN THE MISCHIEF OF SECTION 40(A)(IA) OF THE I.T. ACT. THE RELIANCE OF THE APPE LLANT IN THE CASE OF I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 5 HINDUSTAN COCA-COLA BEVERAGES P. LTD, IS MISPLACED AS IT WAS ON THE ISSUE OF APPLICABILITY OF SECTION 201 AND THERE FORE NOT RELEVANT TO THE CASE ON HAND. THE RELIANCE OF THE APPELLANT IN THE CASE OF DATTA DIGMBER SAHAKARI KAMGAR SANSTHA LTD. 83 LTD 148 (P UNE) IS ALSO MISPLACED AS IN THAT CASE TANKERS HAD BEEN TAKEN ON HIRE FROM THE MEMBERS OF THE CO-OPERATIVE SOCIETY AND PAYMENT HAD BEEN MADE ON PER TRIP BASIS AS IT WAS THOUGHT TO BE A MORE EQ UITABLE WAY THAN FIXED MONTHLY RENT. IN THE CASE OF APPELLANT, THE SUB-CONTRACT HAS NOT BEEN TAKEN ON SIMPLE HIRE. FURTHER APPELLANT HAS N OT BEEN ABLE TO SHOW THAT PAYMENTS HAVE BEEN MADE AT FIXED RATE ON PER TRIP BASIS. THE PARTNER AND THE PARTNERSHIP FIRM HAVE TO BE CON SIDERED AS TWO SEPARATE ENTITIES, AS TRANSACTION HAS BEEN ENTERED WITH THE FIRM BY THE PARTNER IN HIS INDIVIDUAL CAPACITY. THERE HAS B EEN VIOLATION OF SECTION 194C(2) OF THE ACT AND THIS FACT HAS BEEN A CCEPTED IN THE ASSESSMENT PROCEEDINGS ALSO. SINCE PROVISIONS OF SE CTION 194C HAS BEEN VIOLATED, THE EXPENDITURE HAS BEEN RIGHTLY HEL D AS INADMISSIBLE, U/S. 40(A)(IA) OF THE I.T. ACT BY THE A.O. THE ADD ITION IS UPHELD. THIS GROUND NO. 1(A) OF APPELLANT FAILS. 3.2 LD. CIT(A) HAS ALSO MENTIONED THAT THE HONBLE MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS OF INDIA LTD 185 TA XMAN 438 (MAD.) AND FURTHER PUNJAB AND HARYANA HIGH COURT IN THE CASE O F RAKESH KUMAR & CO. 178 TAXMAN 481 (P & H) HAS UPHELD THE VALIDITY OF SECTION 40(A)(IA) OF THE ACT. AT THIS JUNCTURE IT IS WORTH TO MENTION T HAT WE HAVE PERUSED THESE TWO PRECEDENTS AND NOTED THAT ONLY THE CONSTITUTION AL VALIDITY WAS CHALLENGED; BUT IN THE PRESENT APPEAL THE QUESTION IS ABOUT THE APPLICABILITY OF THE PROVISIONS OF SEC. 40(A)(IA) TO BE DECIDED I N THE LIGHT OF FEW LATEST DECISIONS. 4. FROM THE SIDE OF THE APPELLANT LD. AR, SHRI MANI SH KR. MALPANI, APPEARED AND PLEADED THAT MR. AGRAWAL WAS NOT A SUB -CONTRACTOR BUT HE HAS PROVIDED HIS ASSETS TO THE FIRM AS A PARTNER AN D IN LIEU RECEIVED A FIXED RENT ON THE BASIS OF TRIPS UNDERTAKEN. IT WAS NOT AN AGREEMENT AS A CONTRACTOR OR SUB-CONTRACTOR HENCE THERE WAS NO QUE STION OF DEDUCTION OF TDS. IT WAS NOT A CONTRACT PAYMENT BUT IT WAS A RE NT PAYMENT HENCE THE I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 6 PROVISIONS OF SECTION 194I COULD BE ATTRACTED BUT N OT FOR THE YEAR UNDER CONSIDERATION. HE HAS ALSO PLEADED THAT THE SAID P ARTNER HAD ALREADY FILED THE INCOME TAX RETURN AND PAID TAX THEREON. IN SUP PORT, HE HAS FURNISHED A COPY OF INCOME TAX RETURN OF SHRI MAHESHCHANDRA AGR AWAL FOR A.Y. 2006- 07. HE HAS ALSO DRAWN OUR ATTENTION THAT THE PARTI CULARS OF THOSE FOUR TRUCKS WERE DULY INFORMED ALONG WITH THE RETURN. L D. AR HAS ALSO INFORMED THAT THE BUSINESS INCOME FROM TRUCKS WAS OFFERED AS PRESCRIBED U/S. 44AE OF IT ACT. IN SUPPORT OF THESE CONTENTIONS, HE HAS ALSO PLACED ON RECORD:- 1. DATTA DIGAMABER SAHAKARI KAMGAR SANSTHA LTD VS. ACIT (2002) 77 TTJ 540 (PUNE) 2. BHAIL BULK CARRIERS VS. ITO (2012) 148 TTJ 31 (M UMBAI) (UO) 3. CIT VS. GREWAL BROS. (2011) 11 TAXMANN. COM 174 (P&H) 4. HINDUSTAN RATNA JV VS. ITO (2014) 42 TAXMANN.COM 107 (HYD-TRIB) 5. CIT VS. SIRMOR TRUCK OPERATORS (2010) 236 CTR (H P) 550 5. FROM THE SIDE OF THE REVENUE LD. DR, SMT. SONIA KUMAR, APPEARED AND PLACED RELIANCE ON THE FINDINGS OF THE CIT(A) A ND PLEADED THAT MR. AGRAWAL IN INDIVIDUAL CAPACITY WAS A SUB-CONTRACTOR HENCE SECTION 194C WAS RIGHTLY INVOKED. THE ASSESSEE HAS NOT ESTABLIS HED THAT THERE WAS A FIXED RENT FOR EACH TRIP. THE PAYMENT WAS MADE AS H IRE CHARGES FOR TRANSPORTATION OF THE GOODS. LD. DR HAS ALSO PLEAD ED THAT THE ASSESSEE HAS DISCLOSED THE RETURN BY ADOPTING SECTION 44AE, THEREFORE, THE TOTAL RENTAL INCOME RECEIVED WAS NOT SHOWN AS BUSINESS IN COME BY MR. AGRAWAL. 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE PERUSED THE MATERIAL AVAILABLE BEFORE US. AS FAR AS FACTS OF THE CASE ARE CONCERNED, I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 7 THAT THE ASESSEE-FIRM IS IN THE BUSINESS OF HIRING OF TRUCK TO BE USED IN THE BUSINESS OF TRANSPORTATION WERE NOT IN DISPUTE. TH E ASSESSEE HAS USED THE TRUCKS OF ONE OF THE PARTNER NAMELY, SHRI AGRAWAL, HOWEVER, AS PER THE AO NO TAX WAS DEDUCTED. THE AO HAS HELD THAT IN VIEW OF THE PROVISIONS OF SECTION 194C ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRAC T SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF CONTRACTOR OR AT THE TIME OF PAYMENT DEDUCT AN AMOUNT OF TAX, IN CASE OF INDIVIDUAL OR H UF IT IS 1% REQUIRED TO BE DEDUCTED. AS PER EXPLANATION ANNEXED TO SECTION 194C THE DEFINITION OF WORK INCLUDES CARRIAGE OF GOODS. HOWEVER ASSESS EES MAIN CONTENTION IS THAT THERE WAS NO RELATIONSHIP OF CONTRACTOR AND SUB-CONTRACTOR BECAUSE ONE OF THE PARTNER HAS PROVIDED HIS TRUCKS FOR THE BUSINESS OF THE ASSESSEE-FIRM. DUE TO THIS REASON, THE ASSESSEE-FI RM HAS INCURRED THE RUNNING EXPENDITURE OF THE TRUCK SUCH FUEL EXPENSES , SALARY EXPENSES ETC. THERE WAS ONE MORE VEHEMENT ARGUMENT IS THAT MR. AG RAWAL HAS PAID THE TAX ON TRUCKS GIVEN ON HIRE TO THE ASSESSEE-FIRM. SINCE THE PAYEE HAD ALREADY DEPOSITED THE TAX BY FILING HIS RETURN, THE REFORE, THERE WAS NO RESPONSIBILITY OF THE ASSESSEE TO AGAIN DEDUCT THE TAX AS HELD IN THE CASE BY HINDUSTAN COCO COLA BEVERAGES 293 ITR 226 (SC). IN SUPPORT OF THIS ARGUMENT, OUR ATTENTION HAS BEEN DRAWN ON AN ORDER OF ITAT AHMEDABAD BENCH C PRONOUNCED IN THE CASE OF PRASHANT H. SHA H VS. ACIT 21 TAXMANN.COM 263/52 SOT 69, AHMEDABAD WHEREIN IT WAS HELD AS UNDER:- 7.1 ON ACCOUNT OF THE ABOVE DISCUSSION, THE ISSUE CONFINES TO THE RESIDUAL SUB-SECTION I.E. THE APPLICABILITY OF PROV ISIONS OF SUB-SECTION (2) OF SECTION 194C OF THE ACT. THE PECULIARITY OF THIS CASE IS THAT A CONTRACT WAS AWARDED TO M/S. PETRONET LNG LTD. NEW DELHI FOR CONSTRUCTION WORK OF PERIPHERAL AND APPROACH ROADS AT LNG TERMINAL DAHEJ. THEREAFTER, THE SAID CONTRACTOR HAD ENTERED INTO A SUB- CONTRACT WITH M/S. A.N.S. CONSTRUCTION LTD., WHO IN TURN, HAD ENTERED INTO AN ANOTHER SUB-CONTRACT WITH THE ASSESSEE. TH E WORK TO BE CARRIED OUT BY THE ASSESSEE, THEREFORE PERTAINED TO CONSTRUCTION OF I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 8 PERIPHERAL APPROACH ROADS. THE CARRY OUT THE ABOVE WORK, THE ASSESSEE HAD TO PURCHASE CONSTRUCTION MATERIEL, VIZ . SAND, GRAVELS, ETC. IN ORDER TO BRING THE CONSTRUCTION MATERIAL A T THE CONSTRUCTION SITE AT DAHEJ, THE ASSESSEE HAS AVAILED THE SERVICE S OF SEVERAL TRANSPORTERS. THE ASSESSEE HAD MADE PAYMENT UNDER THE HEARD TRANSPORT CHARGES. THE VIEW OF THE AO WAS THAT O N PAYMENT OF TRANSPORT CHARGES, THE ASSESSEE BEING A SUB-CONTR ACTOR WAS REQUIRED TO DEDUCT THE TAX AT SOURCE AS PRESCRIBED UNDER SUB-SECTION (2) OF SECTION 194C OF THE ACT. ON THE OTHER HAND, THE ASSESSEES CONTENTION IS THAT ALTHOUGH THE ASSESSEE COULD BE A SUB-CONTRACTOR M/S. A.N.S CONSTRUCTION LTD., BUT VIS--VIS TRANSPO RTERS, THE ASSESSEE HAS NOT ACTED AS A SUB-CONTRACTOR BUT ONLY AS A CONTRACTOR. AS PER ASSESSEES CONTENTION IT WAS A PRINCIPAL TO PRINCIPAL ARRANGEMENT OF TRANSPORTATION OF GOODS, SO NOT COVE RED BY ANY OF THE SAID CONTRACTS. IN SUPPORT OF THIS SUBMISSION, THE ASSESSEE HAS PLACED RELIANCE ON A BOARDS CIRCULAR NO. 715 DATED 8-8-1995 [215 ITR (STATUTE 12)] WHEREIN THE CHANGES INTRODUCED IN THE PROVISIONS REGARDING TAX DEDUCTION AT SOURCE HAVE BEEN CLARIFI ED AND THEREIN ONE OF THE QUESTIONS WAS ABOUT THE PAYMENT TO TRANS PORTS AND THE CLARIFICATION WAS AS UNDER:- QUESTION 9: IN CASE OF PAYMENTS TO TRANSPORTS, CAN EACH GR BE SAID TO BE AS A SEPARATE CONTRACT, EVEN THOUGH P AYMENTS FOR SEVERAL GRS ARE MADE UNDER ONE BILL? ANSWER: NORMALLY, EACH GR CAN BE SAID TO BE A SEPAR ATE CONTRACT, IF THE GOODS ARE TRANSPORTED AT ONE TIME. BUT IF THE GOODS ARE TRANSPORTED CONTINUOUSLY IN PURSUANCE OF A CONTRACT FOR A SPECIFIC PERIOD OF QUANTITY, EACH GR WILL NOT BE A SEPARATE CONTRACT AND ALL GRS RELATING TO THAT PERI OD OR QUANTITY WILL BE AGGREGATED FOR THE PURPOSE OF THE TDS. 8. IN THE CONTEXT OF ABOVE CLARIFICATION ISSUED BY THE CBDT, IF WE EXAMINE THE ISSUE IN HAND, THEN IN TERMS OF PROVISI ONS OF SECTION 194C(2) OF THE ACT CONDITIONS TO BE SATISFIED ARE ( I) THAT THE ASSESSEE SHOULD BE A CONTRACTOR, (II) THAT THE ASSESSEE SHOU LD ENTER INTO A CONTRACT WITH A SUB-CONTRACTOR, (III) THAT THE SUB- CONTRACTOR SHOULD CARRY OUT ANY PART OF THE WORK UNDERTAKEN BY THE CO NTRACTOR AND (IV) THAT THE PAYMENT SHOULD BE MADE FOR THE WORK DONE. IN A CASE, WHEN A 'CONTRACT' IS ASSIGNED, GENERALLY THE CLAUSES ARE STRINGENT THAT THE CONTRACTOR IS TO BE RESPONSIBLE FOR ALL THE ACTS AN D DEFAULTS COMMITTED. IN THE PRESENT CASE AS WELL, WHEN THE M/ S A.N.S. CONSTRUCTION LTD. HAD GRANTED SUB-CONTRACT DATED 30 -1-2006 TO M/S, SAKHI CONSTRUCTION,( PROP. APPELLANT) THEN VIDE CLA USE (1) THE I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 9 ASSESSEE WAS TO DEPLOY HIS AWN RESOURCES IN TERMS M ANPOWER & MACHINERY. FURTHER VIDE CLAUSE (2) ASSESSEE HAD UND ERTAKEN THE RESPONSIBILITY OF ANY LEGAL OR FINANCIAL LIABILITY. THE ASSESSEE HAS INDEMNIFIED THE FIRST PARTY, I.E. M/S. A.N.S. CONST RUCTION LTD. AGAINST ANY LEGAL OR FINANCIAL LIABILITY IF ARISE IN FUTURE PERTAINING TO THE SAID CONTRACT. ASSESSEE WAS MADE SOLELY RESPONSIBLE FOR THE EXECUTION OF THE JOB. THESE CLAUSES, THEREFORE, SUGGESTED THA T THE ASSESSEE WAS WHOLLY AND EXCLUSIVELY RESPONSIBLE FOR THE ACTS AS ALSO FOR THE DEFAULTS, IF COMMITTED. ON THE OTHER HAND, THE LORR Y OWNERS OR THE TRANSPORTERS WHO HAD BEEN GIVEN 'TRANSPORTATION CHA RGES' HAVE NOT BEEN FASTENED WITH ANY OF ABOVE LIABILITIES, MEANIN G THEREBY THE TRANSPORTERS WERE NOT THE PART OF THE SAID AGREEMEN T AND THE ASSESSEE HAD AN INDEPENDENT ARRANGEMENT WITH THEM. IN OTHER WORDS, PECULIARITY OF THIS CASE IS THAT THE SUB-CON TRACT WHICH WAS ASSIGNED TO THIS ASSESSEE WAS NOT FURTHER SUB-CONTR ACTED TO THE LORRY OWNERS. IN A SUB-CONTRACT, A PRUDENT CONTRACTOR GEN ERALLY INCLUDE THE CLAUSES OF LIABILITY WHICH WERE UNDERTAKEN BY HIM W HILE ACCEPTING THE EXECUTION OF THE WORK FROM THE MAIN CONTRACTOR. WE MAY LIKE TO CLARITY THAT A CONDITION OF PASSING OF THE LIABILIT Y CANNOT EXHAUSTIVE AND CANNOT BE SAID TO BE THE ONLY CRITERIA TO DECID E WHETHER THERE IS AN EXISTENCE OF CONTRACT OR SUB-CONTRACT. THE CATAL OG OF CRITERION MUST INCLUDE CERTAIN OTHER CLAUSES AS WELL YET IN T HIS CASE THIS CRITERIA CAN BE DETERMINATIVE CONSIDERING THE NATURE OF WORK ASSIGNED BY THE ASSESSEE TO TRANSPORTERS. IT IS NOT THE CASE OF THE A.O. THAT HE HAPPENED TO BE IN POSSESSION OF SOME MATERIAL TO AL LEGE THAT THERE EXISTED A SPECIFIC CONTRACT BETWEEN THE ASSESSEE AN D THE TRANSPORTERS. WHETHER THE GOODS WERE TRANSPORTED IN PURSUANCE OF ANY SUB-CONTRACT SO AS TO APPLY THE PROVISIONS OF S ECTION 194C(2)? NOTHING HAS BEEN BROUGHT ON RECORD. SO IT WAS NOT E STABLISHED THAT THE LORRY OWNERS HAVE UNDERTAKEN ANY PART OF THE IM PUGNED SUB- CONTRACT WHICH WAS FOUND TO BE RISK ASSOCIATED VIDE LICET THIS ASSESSEE. WE, THEREFORE, CONCLUDE THAT IN THE ABSEN CE OF TRANSFER OR PASS-OVER OF ANY CONTRACTUAL RESPONSIBILITY TO TRAN SPORTERS AS A SUB- CONTRACTOR, THE ASSESSEE BEING AN INDIVIDUAL WAS NO T RESPONSIBLE FOR THE DEDUCTION OF TAX AT SOURCE AS PRESCRIBED U/S. 1 94C(2) OF THE IT ACT. CONSEQUENCE THEREUPON THE PROVISIONS OF SECTI ON 40(A)( IA) OF THE ACT WERE INCORRECTLY INVOKED, HENCE THE VIEW TA KEN BY THE AUTHORITIES BELOW ARE HEREBY REVERSED. GROUND IS AL LOWED. 6.1 AN ANOTHER ORDER OF ITAT PUNE BENCH IS CITED VI Z. DATTA DIGMBAR SAHAKARI KAMGAR SANSTHA LTD 83 ITD 148 WHEREIN ASSE SSEES SOCIETY WAS I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 10 A TRANSPORT CONTRACTOR AND TO CARRY OUT TRANSPORT W ORK USED THE VEHICLES OF ITS MEMBERS. ON FACTS IT WAS NOTED THAT THE TANKER OWNER HAD ENTRUSTED HIS TANKER WITH THE ASSESSEE SOCIETY AND THE ASSESS EE SOCIETY HAD UNDERTAKEN ALL WORK RELATING TO THE EXECUTION OF TR ANSPORT CONTRACT. THERE WAS NO SUB-CONTRACT BETWEEN ASSESSEE SOCIETY AND TH E TANKER OWNERS (MEMBERS). ON THOSE FACTS, IT WAS HELD THAT IN THE ABSENCE OF ANY ELEMENT OF SUB-CONTRACT, THE ASSESSEE-SOCIETY WAS NOT REQUI RED TO DEDUCT TAX AT SOURCE U/S. 194C(2) OF IT ACT. 6.2 ONE MORE ORDER OF ITAT MUMBAI IS PLACED BEFORE US VIZ. BHAIL BULK CARRIERS VS ITO BULK CAREERS 20 TAXMANN.COM 87/50 S OT 622 (MUMBAI) WHEREIN IT WAS FOUND THAT FOR FULFILLING ITS TRANSP ORTATION COMMITMENT THE ASSESSEE BESIDES USING ITS OWN TANKERS HAS ALSO HIR ED TANKERS FROM OUTSIDE PARTIES AS AND WHEN REQUIRED BUT NO TDS WAS DEDUCTED ON PAYMENT OF FREIGHT CHARGES. IT WAS FOUND THAT THE ASSESSEE ALONE WAS AT RISK AND RESPONSIBILITY FOR CARRYING OUT CONTRACT W ORK WAS AS PER AGREEMENT ENTERED BY THE ASSESSEE WITH THE MEMBER I.E. BPCL. IT WAS ALSO FOUND THAT THERE WAS NO MATERIAL ON RECORD TO SUGGEST THA T THERE WAS ANY CONTRACT OR SUB-CONTRACT, WRITTEN OR ORAL WITH THOSE TANK OW NERS. THE RISK AND RESPONSIBILITY WAS ASSOCIATED WITH THE ASSESSEE AS PER THE CONTRACT AND NO RESPONSIBILITY HAD PASSED ON TO THOSE OUTSIDE TANK OWNERS. ON FACTS, IT WAS HELD THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS U/S. 40(A)(IA). 6.3 UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANC ES OF THE CASE AND FOLLOWING THESE DECISIONS AND THE DECISION OF THE S UPREME COURT PRONOUNCED IN THE CASE OF HINDUSTAN COCO COLA BEVER AGES PVT. LTD (SUPRA), WE HEREBY HOLD THAT THE PROVISIONS OF SECT ION 194C R.W.S. 40(A)(IA) WERE NOT APPLICABLE ON THE ASSESSEE HENCE THE DISAL LOWANCE OF I.T.A NO. 625/AHD/2011 A.Y. 2006-07 PAGE NO JAY BHARAT ROADLINES VS. ITO 11 EXPENDITURE WAS NOT WARRANTED. THEREFORE, WE HERE BY DIRECT TO DELETE THE SAME. 7. RESULTANTLY, GROUNDS RAISED BY THE ASSESSEE ALLO WED. APPEAL ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 06/02/2015 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,