Punjab & Haryana H.C : The ITAT was justified in confirming the order of the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 6,30,32,453 on account of disallowance made under section 40(a)(ia) of the Income-tax Act, 1961, without appreciating that payments by the truck operators’ union to the truck operator members were covered within the meaning of section 194C of the Act, being payment to a sub-contractor.

High Court Of Punjab & Haryana

CIT vs. Truck Operators’ Union

Section : 194C

Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.

IT Appeal Nos. 865 And 866 Of 2010

March 23, 2011

JUDGMENT

Adarsh Kumar Goel, J. – This order will dispose of I. T. A. Nos. 865 and 866 of 2010 which are said to involve the same issue.

2. I. T. A. No. 865 of 2010 has been preferred by the Revenue under section 260A of the Income-tax Act, 1961 (for short, “the Act”), against the order of the Income-tax Appellate Tribunal, Chandigarh, dated March 31, 2010, in I. T. A. No. 866/Chd/2009 claiming the following substantial questions of law :

“(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 6,30,32,453 on account of disallowance made under section 40(a)(ia) of the Income-tax Act, 1961, without appreciating that payments by the truck operators’ union to the truck operator members were covered within the meaning of section 194C of the Act, being payment to a sub-contractor.

(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 6,30,32,453 by relying on the decision of the hon’ble High Court of Himachal Pradesh at Shimla in the case of CIT v. Ambuja Darla Kashlog Mangu Transport Co-op. Society [2009] 31 DTR 49, when the said decision has not attained finality and filing of a special leave petition (SLP) challenging the said order has already been approved by the Central Board of Director Taxes (CBDT) in consultation with the Ministry of Law (MOL).”

3. The assessee is a truck operators’ union for procuring contracts for its members. During the assessment of its income, the Assessing Officer made an addition after disallowance under section 40(a)(ia) of the Act on the ground that it failed to deduct tax at source as required under section 194C(2) of the Act. On appeal, the Commissioner of Income-tax (Appeals) set aside the said addition holding that there was no violation as held by the Assessing Officer. The finding recorded in this respect is as under :

“3.5 Considering the facts of the case as explained in detail by the assessee’s counsel and after going through the relevant records of the Assessing Officer, I am convinced that the arguments of the counsel of the assessee have force and are duly supported by the decisions of the jurisdictional Bench of the Income-tax Appellate Tribunal, Chandigarh. I have, therefore, the least hesitation in holding that the assessee-union has been formed by truck operators as its members in order to obtain bigger contracts through it. It is, of course, entitled to booking charges received which constitute its main income and the main function of the assessee was to arrange contracts from different agencies for its member truck operators which were factually and collectively performed by such members. The freight received from the parties concerned belonged to the member truck operators by whose trucks the contracts were performed and as such, the same was disbursed to none else but them. The assessee-union did not give any sub-contract to its members as alleged by the Assessing Officer. Therefore, by no stretch of imagination the member truck operators can be said to be the sub-contractors of the assessee within the meaning of section 194C(2) and as such the assessee was not liable to deduct any tax out of freight belonging and disbursed to them. Hence, the provisions of section 40(a)(ia) were not at all attracted in this case and no disallowance could be made under that section.”

4. The appeal of the Revenue against order of the Commissioner of Income-tax (Appeals) was dismissed.

5. We have heard learned counsel for the appellant.

6. Learned counsel for the Revenue fairly states and we are also of the same view that section 194C(2) of the Act had no application in the circumstances of the case when the union was merely acting in a representative capacity and there was no separate contract between the union and its members for performance of the work as required for applicability of section 194C(2) of the Act. In such circumstances, section 40(a)(ia) of the Act was not applicable, as rightly held by the Commissioner of Income-tax (Appeals) and the Tribunal. Learned counsel for the Revenue also points out that the same view has been taken by the High Court of Himachal Pradesh in its order dated October 20, 2009, in I. T. A. No. 30 of 2005 CIT v. Ambuja Darla Kashlog Mangu Transport Co. Op. Society against which SLP was dismissed by the hon’ble Supreme Court on January 17, 2011, being SLP (Civil) . . . /2011, CC 259/2011 CIT v. Ambuja D. Mangu Transp. Co-op. Society. In view of the above, no substantial question of law arises.

7. The appeals are dismissed.

[Citation : 339 ITR 532]

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