Gujarat H.C : The order passed by the CIT(A) in deleting the order passed under section 201(1) read with section 194C(1)

High Court Of Gujarat

CIT (TDS) vs. Swayam Shipping Services (P.) Ltd.

Assessment Year : 2007-08

Section : 194C, 194-I, 201

Ms. Harsha Devani And H.B. Antani, JJ.

Tax Appeal No. 1037 Of 2009

January 11, 2011

ORDER

Ms. Harsha Devani, J. – The appellant-revenue in this appeal under section 260A of the Income-tax Act, 1961 (the Act) has challenged order dated 2-12-2008 made by the Income-tax Appellate Tribunal (the Tribunal) proposing the following question :—

“Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting the order passed under section 201(1) read with section 194C(1) of the Income-tax Act of Rs. 6,33,353?”

2. The assessment year is 2007-08. The facts stated briefly are that during the course of TDS verification, it was found that the assessee had taken cranes/trailers on rent from various transport companies and handling agents. According to the Department, though the cranes and trailers were taken on hire, TDS under section 194C of the Act was made from such payment whereas the same was required to be made under section 194-I. Accordingly, the Assessing Officer passed an order under section 201 read with section 194-I of the Act and raised a demand of Rs. 6,33,353 which had been short deducted at source on amount of rental payment of Rs. 31,36,030. Being aggrieved, the assessee preferred appeal before the Commissioner (Appeals) who vide order dated 29-11-2007 deleted the demand raised under section 201 of the Act. Revenue carried the matter in appeal before the Tribunal but did not succeed.

3. Assailing the impugned order of the Tribunal, Mr. M.R. Bhatt, learned senior advocate, appearing on behalf of the appellant invited attention to the order made under section 201 of the Act, and more particularly to the part where reference is made to the CBDT Circular No. 715, to submit that the assessee had taken on hire vehicles which are covered under section 194-I of the Act and that it was accordingly liable to deduct tax at source at the rate provided under the said provision. It is submitted that the Tribunal has erred in holding that the assessee had given sub-contracts for transportation of goods and not for renting out of machineries or equipment.

4. The facts are not in dispute. As can be seen from the order made by the Commissioner (Appeals), the Commissioner (Appeals) upon appreciation of the evidence on record has found that the assessee was engaged in the business of clearing and forwarding and had carried out freight and goods works contracts with three parties and these parties had transported goods belonging to the assessee and its clients to various places through their vehicles. To prove the nature of contracts, the assessee had produced various bills which showed that the contracts were mainly carried out for shifting of goods from one place to another. Charges were collected on the basis of the quantity of goods transported and number of trips carried out. It was also the case of the assessee that it had not acquired dumpers on rent or lease and that the possession and control of the vehicles was with the parties and not with the assessee. The parties had only provided services of shifting the goods from one place to another. In the aforesaid backdrop, after considering the facts of the case in the light of the provisions of section 194C of the Act, the Commissioner (Appeals) was of the view that when the transportation contract was in the nature of shifting of goods from one place to another, such contract would fall within the ambit of work contracts and as such the provisions of section 194C would be applicable. Since the assessee had given sub-contracts for transportation of goods and not for renting out of machineries and equipments, therefore, such payment could be termed as rent paid for use of machinery and the provisions of section 194-I of the Act would not apply. The Commissioner (Appeals), accordingly was of the view that the assessee had rightly deducted TDS under section 194C of the Act and as such there was no short deduction of tax. He, accordingly, held that the assessee was not an assessee in default in respect of such tax under section 201 of the Act and therefore, levy of interest under section 201(1A) of the Act was not justified.

5. The Tribunal, in the impugned order has concurred with the findings recorded by the Commissioner (Appeals).

6. The facts are not in dispute. The assessee has carried out freight and transportation works contracts with three transporters who transported the goods belonging to the assessee and its clients to various places through their vehicles. The assessee had not taken the trailers/cranes on hire or rent from the said parties. The assessee has given sub-contracts to the said parties for the transportation of goods and not for renting out of machineries and equipments. Section 194-I of the Act makes provision for deduction of tax at source where any person who is responsible for paying to a resident any income by way of rent where as section 194C of the Act makes provision for deduction of tax at source where any person is responsible for paying any sum to any resident for carrying out any work including supply of labour for carrying out any work in pursuance of a contract between the contractor and a specified person. In the facts of the present case, there is nothing to indicate that the assessee has taken trailers/cranes on rent so as to attract the provisions of section 194-I of the Act. The assessee had given sub-contracts for transportation of goods. In the circumstances, the said transactions would fall within the purview of section 194C of the Act as the assessee was responsible for paying the amount in question for carrying out work in pursuance of contracts between the assessee and the transporters and as such was required to deduct tax at source at the rate prescribed under the said section. The Commissioner (Appeals) was, therefore, justified in holding that the assessee was not an assessee in default within the meaning of the said expression as contemplated under section 201 of the Act and consequently, the Tribunal was justified in confirming the order passed by the Commissioner (Appeals).

7. In view of the above discussion, there being no legal infirmity in the impugned order of the Tribunal the same does not give rise to any question of law, much less, a substantial question of law so as to warrant interference by this Court. The appeal is, accordingly, dismissed.

[Citation : 339 ITR 647]

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