Where the assessee was hiring trucks from an open market on individual and need basis and payments had not been made to any sub-contractor since the assessee did not have any contract with the truck owner and therefore the question of TDS did not arise in respect of payments towards lorry hire charges
52. Dineshbhai Bhavanbhai Bharwad vs. ITO [2022] 96 ITR(T) 429 (Ahmedabad – Trib.) ITA No.:1488 (Ahd.) of 2016 A.Y.:2007-08 Date: 31st March, 2022 Section: 194C r.w.s 40(a)(ia)
Where the assessee was hiring trucks from an open market on individual and need basis and payments had not been made to any sub-contractor since the assessee did not have any contract with the truck owner and therefore the question of TDS did not arise in respect of payments towards lorry hire charges.
FACTS
During the year under consideration, the assessee had debited sum of Rs. 10,41,14,765 as ‘Lorry Hire Charges’.
In the course of the assessment proceedings, the assessee was asked to furnish the complete details and copy of account of said expenses. The assessee had produced all the ledger accounts of the said expenses and submitted that as individual payments do not exceed Rs. 20,000, no TDS was deducted. On going through the ledger accounts, it was noticed by the AO that the assessee ought to have deducted tax at source u/s 194C of the Act, since in a number of individual cases the payment exceeded Rs. 50,000. The AO partly disallowed lorry hire charges u/s 40(a)(ia), since the assessee failed to deduct tax at source u/s 194C in individual cases where payment exceeded Rs. 50,000.
Against the order of the learned AO, the assessee preferred the first appeal before the CIT(A) who confirmed the action of the AO. Aggrieved by the order of CIT(A), the assessee filed a further appeal before the ITAT.
HELD
The assessee had submitted that he did not have any contract, and had hired trucks from the open market on individual and need basis. In support of his contentions, the assessee had filed truck numbers. It was observed by the ITAT that truck numbers as well as owners of all trucks were different.
Reliance was placed on the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Mukesh Travels Co.[2014] 367 ITR 706, wherein it was held that the vital requirement for invoking section 194C is the existence of relationship of contractor and sub-contractor between the assessee and the transporter. If the said relationship does not exist, then the liability to deduct tax at source u/s 194C does not arise.
The ITAT had considered the above decision of Jurisdictional High Court and concurred with the view of the assessee that the payments have not been made to any sub-contractor.
Accordingly, the ITAT held that the question of TDS u/s 194C does not arise. Consequently, the appeal filed by the assessee was allowed and the disallowance made u/s 40(a)(ia) was deleted.