Commissioner Of Income Tax v. Truck Operators’ Union

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.865 of 2010 Date of decision: 23.3.2011 Commissioner of Income Tax. Vs. Truck Operators’ Union. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. T.K. Joshi, Standing Counselfor the appellant. ---for the appellant. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of I.T.A. Nos.865 and 866 of2010 which are said to involve the same issue. 2. I.T.A. No.865 of 2010 has been preferred by therevenue under Section 260-A of the Income Tax Act, 1961 (forshort, “the Act”) against the order of the Income Tax AppellateTribunal, Chandigarh dated 31.3.2010 in ITA No.866/CHD/2009claiming following substantial question of law:- “(i)Whether on the facts and in the circumstancesof the case, the ITAT was justified in confirmingthe order of the CIT(A) deleting the addition ofRs.6,30,32,453/- on a/c of disallowance madeu/s 40(a)(ia) of the Income Tax Act, 1961,without appreciating that payments by the Truckof the case, the ITAT was justified in confirmingthe order of the CIT(A) deleting the addition ofRs.6,30,32,453/- on a/c of disallowance madeu/s 40(a)(ia) of the Income Tax Act, 1961,without appreciating that payments by the Truck Operators’ Union to the truck operator memberswere covered within the meaning of Section194C of the Act, being payment to a sub-contractor. (ii)Whether on the facts and in the circumstancesof the case, the ITAT was justified in confirmingthe order of the CIT(A) deleting the addition ofRs.6,30,32,453/- by relying on the decision ofthe Hon’ble High Court of Himachal Pradesh atShimla in the case of CIT vs Ambuja DarlaKashlog Mangu Transport Co-op. Society (2009)31 DTR 49, when the said decision has notattained finality and filing of a Special LeavePetition (SLP) challenging the said order hasalready been approved by the Central Board ofDirector Taxes (CBDT) in consultation with theMinistry of Law (MOL).” 2. The assessee is a truck operators union for procuring contracts for its members. During the assessment of its income,the Assessing Officer made addition after disallowance underSection 40(a)(ia) of the Act on the ground that it failed to deducttax at source as required under Section 194C(2) of the Act. Onappeal, the CIT(A) set aside the said addition holding that therewas no violation as held by the Assessing Officer. The findingrecorded in this respect is as under:- 3.5 Considering the facts of the case as explainedin details by the assessee’s counsel and after goingthrough the relevant records of the Assessing Officer,I am convinced that the arguments of the counsel ofin details by the assessee’s counsel and after goingthrough the relevant records of the Assessing Officer,I am convinced that the arguments of the counsel of contracts for its members. During the assessment of its income,the Assessing Officer made addition after disallowance underSection 40(a)(ia) of the Act on the ground that it failed to deducttax at source as required under Section 194C(2) of the Act. Onappeal, the CIT(A) set aside the said addition holding that therewas no violation as held by the Assessing Officer. The findingrecorded in this respect is as under:- 3.5 Considering the facts of the case as explainedin details by the assessee’s counsel and after goingthrough the relevant records of the Assessing Officer,I am convinced that the arguments of the counsel ofin details by the assessee’s counsel and after goingthrough the relevant records of the Assessing Officer,I am convinced that the arguments of the counsel of assessee have force and are duly supported by thedecisions of the jurisdictional Bench of ITAT,Chandigarh. I have, therefore, the least hesitation inholding that the assessee union has been formed bytruck operators as its members in order to obtainbigger contracts through it. It is, of course, entitled tobooking charges received which constitute its mainincome and the main function of the assessee was toarrange contracts from different agencies for itsmember truck operators which were factually andcollectively performed by such members. The freightreceived from the parties concerned belonged to themember truck operators by whose trucks thecontracts were performed and as such, the same wasdisbursed to none else but them. The assessee uniondid not give any sub-contract to its members asalleged by the Assessing Officer. Therefore, by nostretch of imagination the member truck operators canbe said to be the sub-contractors of the assesseewithin the meaning of section 194-C(2) and as suchthe assessee was not liable to deduct any tax out offreight belonging and disbursed to them. Hence theprovisions of section 40(a)(ia) were not at all attractedin this case and no disallowance could be made underthat section.” The appeal of the revenue against order of the CIT(A) wasdismissed. 3. We have heard learned counsel for the appellant.4. Learned counsel for the revenue fairly states and weare also of the same view that Section 194C(2) of the Act had no4. Learned counsel for the revenue fairly states and weare also of the same view that Section 194C(2) of the Act had no application in the circumstances of the case when the union wasmerely acting in representative capacity and there was noseparate contract between the union and its members forperformance of the work as required for applicability of Section194C(2) of the Act. In such circumstances, Section 40(a)(ia) ofthe Act was not applicable, as rightly held by the CIT(A) and theTribunal. Learned counsel for the revenue also points out thatsame view has been taken by the High Court of HimachalPradesh in its order dated 20.10.2009 in I.T.A. No.30 of 2005CIT v. M/sAmbuja Darla Kashlog Mangu Transport Co. Op.Society & ors.against which SLP was dismissed by the Hon’bleSupreme Court on 17.1.2011 being SLP(Civil)……/2011 CC259/2011 CIT Shimlav. M/s Ambuja D. ManguTransp. Coop. Society. 5. In view of above, no substantial question of law arises. The appeals are dismissed. A photocopy of this order be placed on the file of other connected case. (ADARSH KUMAR GOEL) JUDGE March 23, 2011ashwaniashwani ( AJAY KUMAR MITTAL ) JUDGE