Commissioner Of Income Tax,(Tds) Chandigarh v. M/S United Rice Land Limited.vill. Samana Bahu, Karnal

ITA No.633 of 2007 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.633 of 2007Date of decision:12.5.2008 Commissioner of Income tax,(TDS) Chandigarh ......Appellant Versus M/s United Rice Land Limited.Vill. Samana Bahu, Karnal ......Respondent CORAM:-HON'BLE MR.JUSTICE RAJIVE BHALLAHON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present:Mr. Sanjeev Kaushik, Advocate for the appellant-revenue. * * * Rakesh Kumar Garg, J . The revenue has filed the present appeal under Section 260-Aof the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) againstthe order dated 26.12.2006 passed by the Income Tax Appellate Tribunal,Delhi Bench “I” New Delhi in TDS No.127/Del/2004 and has sought to raisethe following substantial questions of law:- “Whether on the facts and in the circumstances of thecase, the Ld. ITAT was right in law in upholding theorder of the CIT(A), deleting the demand created by theAssessing Officer under Section 201(1) and 201(1A) ofthe Income-tax Act, 1961, as the assessee failed todeduct tax at source as per the provisions of Section194C of the Act?” The assessee is a limited company engaged in the businessof manufacture and export of rice. During the course of export activity, ricewas transported from Samana Bahu to Kandla Port. Whenever there was need for transportation of goods from business premises to Kandla Port,the assessee used to engage trucks through transporters. These truckswere provided by the transporters who were having links with the truckoperators and their consideration for providing such services was aboutRs.200/- per truck. This consideration was charged by the transporter fromthe truck owners/operators. The hire charges were paid by the assesseedirectly to the truck owners/drivers or through transporters. The assesseewas also maintaining records regarding ownership of the truck, registrationnumber, photo of drivers etc. There was no repetition of payments to thesame truck owners or truck operators for any specified period. Thus, therewas no contract with any of the local transporters or truck owners. In caseof non-availability of trucks with any of the local transporters or truckowners at the place of assessee's business at Pipli, the assessee used toarrange these trucks from Delhi, for which services of M/s East West CargoMovers, New Delhi were availed. This concern was arranging trucks,trailers for transportation of goods of the assessee. Under these situations,payment was made to the truck operators by the East West Cargo Moverson behalf of the assessee, and the assessee in turn reimbursed theamount of M/s East West Cargo Movers. In each case, the payment wasless than Rs.20,000/-. During the course of assessment under Section 143(3)of the Act, separate GR/Bills/documents were obtained showing thereinthe weight amount destination truck number etc. each GR value i.e.transportation charges to Kandla Port were of the value less thanRs.20,000/- each and that the assessee should have deducted tax atsource on the amount paid to M/s East West Cargo Movers. TheAssessing Officer also found that similar payment has been made by theassessee to another clearing and forwarding agent, namely, LeeladharPasoo Forwarders (P) Ltd. and to some of the transporters but no tax hasbeen deducted at source under Section 194C of the Act. He, therefore, treated the assessee in default for short deduction of tax at Rs.2,18,230/-under Section 201 of the Act and also levied interest under Section 201(1A) of the Act. treated the assessee in default for short deduction of tax at Rs.2,18,230/-under Section 201 of the Act and also levied interest under Section 201(1A) of the Act. Aggrieved against this order, the assessee filed an appealbefore the Commissioner of Income-tax (Appeals) [(for short the 'CIT(A)']which was allowed partly vide order dated 27.2.2004. In his order the CIT(Appeals) observed that there was neither any oral, nor written agreementbetween the assessee and these transporters or clearing agents forcarriage of the goods and that it has not been proved that any moneyregarding freight charges was paid to them, in pursuance of a contract forspecific period, quantity or price. He, therefore, held that the assessee wasnot liable to deduct any tax on the freight charges paid to truckowners/operators. However, in respect of other payments made by theassessee to these two concerns, the CIT (Appeals) upheld the order of theAssessing Officer regarding liability of the assessee for deduction of tax.Accordingly, he recomputed the short deduction of tax and interestthereon. Aggrieved by the said order of the CIT(A), the revenue filedappeal before the Tribunal. The Tribunal vide the impugned order dated26.12.2006 dismissed the appeal of the revenue. The relevant part of theorder is reproduced: “We have considered the rival contentions,carefully gone through the orders of the authoritiesbelow and also material placed on record. As perprovisions of Section 194C any personresponsible for paying any sum to any resident forcarrying out any work in pursuance of a contractshall at the time of credit of such sum or at thetime of payment thereof in cash or by cheque deduct a tax thereon at prescribed rate. However,no deduction of tax at source is required to bemade, if the sum paid or credited do not exceedrupees twenty thousand. In the instant casepayment of transportation charges paid to truckowners/forwarding agents were considered by theAssessing Officer as liable for deduction of tax atsource. This decision of Assessing Officer wasbased on question and answers No.6, 9 and 30 ofCBDT Circular No.715 issued with reference toapplicability of provisions of TDS under Section194-C and 194-J. In the instant case, we foundthat each payment of transportation charges wasnot exceeding Rs.20,000/-. The Assessing Officerhad held the assessee liable for deduction of taxunder Section 194-C of the Act, only on theassumption that assessee was having agreementwith the parties through whom trucks werearranged for transportation of goods. Whereas,as per the finding recorded by the CIT(Appeals)and which has not been controverted by theDepartment, there was neither any oral or writtenagreement between the assessee andtransporters for carriage of goods. Nor it has beenproved that any sum of money regarding freightcharges was paid to them in pursuance of acontract for specific period, quantity or price. Wehave also carefully gone through the certificatesfurnished by M/s East West Cargo Movers and M/s Leeladhar Pasoo Forwarders, as placed onthe record, according to which these concernswere arranging the shipment i.e. arranging thevessels/ship, loading in the ship and clearing theport dues and were covering handling charges forproviding these services. Similarly other allegedtransporters were not transporting the goods ofthe assessee, but merely arranging a truck forwhich service charges of Rs.250-200 wascollected from the truck owners/operators.Whatever truck charges were instructed by theassessee, were paid by them to the truck ownersafter ensuring that goods reached to them in fullquantity. Thus, the assessee was just reimbursingwhat these parties have paid as per theinstructions of the assessee and on its behalf. Butin no case single payment to one truckowner/operator was exceeding Rs.20,000/-. Evenas per question No.6 of Circular No.715, CBDTdated 8.8.1995, the pre-requisite condition fordeduction of tax is that there must be contract forcarriage of goods. Thus, the payment made tothese C & F agents has to be seen in the light ofquestion No.6 itself. Tax was required to bededucted from the payments made to these C & Fagents for carriage of goods if there is a contractfor carriage of goods. Similarly, even as perquestion No.9 of Circular No.715 of CBDT., andits reply, it is clear that normally each GR should be treated as separate contract, but if the goodsare transported continuously in pursuance of acontract for specific period or quality, all GRsrelating to that party or quantity should beaggregated for the purpose of the TDS. It is veryevident from the answer to both these questionsthat what is most important is a contract for aspecific period or quantity for carriage of thegoods. Undisputedly, in the instant case, nothinghas been brought on record by the AssessingOfficer to prove that there was any written or oralagreement between the assessee and the allegedparties for carriage of the goods.” Feeling not satisfied with the impugned order, the revenue hasfiled the present appeal raising the substantial question of law as referredto above.We have heard Mr. Sanjeev Kaushik, learned counsel for therevenue and have perused the record. As per provisions of Section 194C of the Income Tax Act, anyperson responsible for paying any sum to any resident for carrying out anywork in pursuance of a contract shall at the time of credit of such sum orat the time of payment thereof incash or by cheque deduct a tax thereonat a prescribed rate. However, no such deduction at source is required tobe made, if the sum paid or credited do not exceed Rs.20,000/-. In thepresent case, the Assessing Officer had held the assessee liable fordeduction of tax only on the assumption that assessee was havingagreement with the parties through whom trucks were arranged fortransportation of goods. However, the CIT(A) has recorded a finding offact that there was neither any oral or written agreement between the assessee or transporters for carriage of goods nor it has been proved thatany sum of money regarding freight charges was paid to them inpursuance of a contract for specific period, quantity or price. This finding offact was recorded by the CIT(A) after considering the certificate furnishedby the transporters. The Tribunal has also recorded a finding of fact thatthe Department has not controverted the said finding of the CIT(A) evenbefore the Tribunal. While recording this finding of fact, the Tribunal hasclearly stated that nothing has been brought on record by the AssessingOfficer to prove that there was no written or oral agreement between thealleged parties for carriage of the goods. In view of the above, we are not inclined to interfere in thefinding of fact recorded by the Tribunal. The appeal being without merit isdismissed. (RAKESH KUMAR GARG) JUDGE May 12, 2008ps (RAJIVE BHALLA) JUDGE