Gujarat H.C : Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income-tax (Appeals) in deleting the order passed under section 201(1) read with section 194C(1)

High Court Of Gujarat

CIT (TDS) vs. Shree Mahalaxmi Transport Co

Assessment Year : 2007-08

Section : 194C, 194J And 201

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

Tax Appeal No. 1038 Of 2009

January 11, 2011

JUDGMENT

Ms. Harsha Devani, J. – The appellant-Revenue in this appeal under section 260A of the Income-tax Act, 1961 (the Act), has challenged the order dated December 20, 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 Commissioner of Income-tax (Appeals) in deleting the order passed under section 201(1) read with section 194C(1) of the Income-tax Act of Rs. 17,74,378 ?”

2. The assessment year is 2007-08. The assessee is engaged in the business of transportation of building material, salt, black trap, iron, etc. During the course of verification, it was found that the assessee had taken dumpers on hire/rent from various parties. During the year under consideration, the assessee had paid Rs. 1,18,29,647 as rent for hiring of dumpers and deducted TDS at the rate of 1.12 per cent. which comes to Rs. 1,33,627 which, according to the Assessing Officer, was not correct as the assessee has taken dumpers on hire/rent and such payments were governed under section 194-I of the Act. The Assessing Officer accordingly held that the assessee had short deducted TDS of Rs. 17,74,378 and accordingly passed an order under section 201(1) read with section 194C(1) of the Act holding the assessee to be an assessee in default within the meaning of the provisions of section 194-I in respect of tax amounting to Rs. 17,74,378. Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals) who held that the assessee was not in default of deduction of tax and that the levy of interest under section 201(1A) of the Act was not justified. The Revenue carried the matter in appeal before the Tribunal who dismissed the appeal.

3. Heard Mr. M. R. Bhatt, learned senior advocate appearing on behalf of the appellant, who has assailed the impugned order of the Tribunal by reiterating the findings recorded by the Assessing Officer.

4. As can be seen from the impugned order of the Tribunal, the Tribunal has merely concurred with the findings recorded by the Commissioner (Appeals) and has dismissed the appeal by placing reliance upon a decision of the Kerala High Court in the case of CBDT v. Cochin Goods Transport Association [1999] 236 ITR 993 / 103 Taxman 29. In the circumstances it would be necessary to advert to the findings recorded by the Commissioner (Appeals).

5. The Commissioner (Appeals) upon appreciation of the evidence on record has found that the assessee had given sub-contracts of transportation of goods from one place to another. To prove the nature of contracts, the assessee had produced various bills issued by such sub-contractors to show that the contracts were mainly carried out for shifting of goods from one place to another. The Commissioner (Appeals) also found that the charges were collected by sub-contractors on the basis of the quantity of goods transported and the number of trips carried out ; the assessee had not acquired dumpers on rent or lease ; and that the possession and control of vehicles was with the sub-contractors, who only provided services of shifting of goods from one place to another place. It was noted that evidence in support of the above was submitted to the Assessing Officer during assessment proceedings. In the background of the aforesaid findings of fact recorded by him, 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 contracts would be covered as works contracts and the provisions of section 194C would be applicable. According to the Commissioner (Appeals), since the assessee had given sub-contracts for transportation of goods and not for the renting out of machineries or equipment, such payments could not be termed as rent paid for the use of machinery and the provisions of section 194-I of the Act would not apply to such contracts. The Commissioner (Appeals) accordingly held that the assessee has rightly deducted TDS under section 194C of the Act ; that there was no default on the part of the assessee under the TDS provisions and as such there was no short deduction of tax and set aside the levy of interest under section 201(1A) of the Act.

6. Chapter XVII of the Income-tax Act, 1961, makes provision for collection and recovery of tax. Part B thereof makes provision for deduction at source and is comprised of sections 192 to 206AA. Section 194C bears the heading “Payments to contractors” and lays down that any person 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 shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to the percentage specified thereunder of such sum as income-tax on income comprised therein.

7. Section 194-I of the Act which bears the heading “Rent” provides that any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of cheque or by draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate specified thereunder.

8. Thus, section 194C of the Act makes provision for deduction of tax at source in respect of payments made to contractors whereas section 194-I makes provision for deduction of tax at source in respect of income by way of rent.

9. Examining the facts of the present case in the light of the aforesaid statutory provisions, from the findings of fact recorded by the Commissioner (Appeals) it is apparent that the assessee has not taken the dumpers on hire/rent from the parties in question. The assessee has given contracts to the said parties for the transportation of goods and has not taken machineries and equipment on rent. In the circumstances, the Commissioner (Appeals) was justified in holding that the transactions in question being in the nature of contracts for shifting of goods from one place to another would be covered as works contracts, thereby attracting the provisions of section 194C of the Act. That since the assessee had given sub-contracts for transportation of goods and not for the renting out of machineries or equipment, such payments could not be termed as rent paid for the use of machinery and the provisions of section 194-I of the Act would not be applicable. The Tribunal was, therefore, justified in upholding the order passed by the Commissioner (Appeals).

10. In view of the above discussion, it is not possible to state that the Tribunal has committed any legal error so as to warrant interference. No question of law, much less, a substantial question of law can be stated to arise out of the impugned order of the Tribunal. The appeal is, accordingly, dismissed.

[Citation : 339 ITR 484]

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