53. CIT vs. Shark Roadways Pvt. Ltd.; 405 ITR 78 (All): Date of order: 1st May, 2017: A. Y.: 2008-09 Sections 40(a)(ia) and 194C – TDS – Payments to contractors – Payment of hire charges – No contract between assessee and parties of hired vehicles on freight basis for transportation on behalf of principal – Transporters not contractors or sub-contractors – No liability to deduct tax at source

For the A. Y. 2008-09, the
Assessing Officer made additions to the assessee’s income on the ground that
the assessee was a transporter and not trader, and therefore, provisions of
section 194C of the Act were applicable to the hire charges paid by it to the
parties whom the lorries or trucks were hired.

The Commissioner (Appeals) called
upon the assessee to produce copies of challans and after verifying them found
that section 194C was not attracted. He found that for the fulfillment of its
transportation commitment to its principals, the assessee, besides using its
own trucks and lorries was also hiring trucks and lorries from other owners or
directly from the drivers available in the market through brokers on a random
basis as and when required on freight basis. He further found that the payments
of hire charges were made directly by the assessee to those transporters without
there being any written or oral contract, vis-à-vis its principal. He held that
the payment of lorry hire charges to individual transporters was part of the
direct costs attributable to the receipts of the assessee, computable u/s. 28
and that in the absence of any evidence, it could not be said that the
individual truck owners or drivers of transporters were contractors or
sub-contractors of the assessee. Consequently, he held that the payments made
to such transporters hired by the assessee were not in the nature of payments
to contractors or sub-contractors within the meaning of section 194C. The
Tribunal affirmed the findings of the Commissioner (Appeals) and held that the
provisions of section 194C did not apply.

On appeal by the Revenue, the
Allahabad High Court upheld the decision of the Tribunal and held as under:

“i)  The
learned counsel for the appellant (Department) could not show that the
Assessing Officer while taking the view against the assessee by reference to
section 194C recorded his findings based on any evidence whatsoever and we find
that it was only on assumption.

ii)  It
is for this reason the findings of the Assessing Officer have been reversed by
the Commissioner (Appeals) and the Tribunal. These are concurrent findings of
fact and when vouchers otherwise were verifiable, we find no reason to take an
otherwise view in the matter.

iii)  The question is answered against the appellant, i.e., the Revenue.
The appeal lacks merit.”