J.rama v. Commissioner Of Income Tax Andanother’ Reported In(2012) 344 Itr 608 (Karn.)Where It Was Held As Under

IN THB HIGH COURT OF KARNATAKA AT BENGALURU DATBD THIS THE 19[th]DAY OF JANUARY 2015 PRESENT THER HON’BLE MR. JUSTICE N.KUMARAN 1 THER HON’BLE MR. JUSTICE B.VBEBRAPP I.T.A. NO.365/2009 BETWEEN: 1.|The Commissioner | of Income-tax,C.R.Building, |Queens Road,C.R.Building, |Queens Road, Bangalore. oD The Asst. Commissioner of Income-tax, Circle-11(5),| C.R.Building, Queens Road, Bangalore. ... APPELLANTS (By Sri.K.V.Aravind, Adv.) AND :. M/s.Janani Tours & Resorts (P) Ltd., No.26, Reddy Building, Tumkur Road, -9O-. T.Dasarahalli, Bangalore. ... RESPONDENT (By Sri.S.Parthasarathi & smt.Jinita Chatterjee, Advs.) | . . . . This I.T.A. is filed under Section ZJO0OA of thIncome Tax Act, 1961, arising out of order dated13.02.2009 passed in ITA No.491/BNG/2008, for the)Assessment Year 2000-2006, praying to: 3$4formulate the substantial questions of lawstated therein, ©stated therein, © 3$$4Allow the appeal and set-aside the orderpassed by the Income Tax Appellate Tribunal,Bangalore in I.T.A. No.491/BNG/2008 dated13.02.2009, confirming the order of theAppellate Commissioner and confirm theorder passed by the Assistant Commissionerof Income Tax, Circle-11(5), Bangalore in theinterest of justice and equity.passed by the Income Tax Appellate Tribunal,Bangalore in I.T.A. No.491/BNG/2008 dated13.02.2009, confirming the order of theAppellate Commissioner and confirm theorder passed by the Assistant Commissionerof Income Tax, Circle-11(5), Bangalore in theinterest of justice and equity. This I.T.A. coming on_ forhearing,this day,N.Kumar J., delivered the following: JUDGMENT The revenue has preferred this appeal against the order passed by the Tribunal holding that hiring of cabs. for the purpose of carrying on its business by theassessee, do not amount to contract to carry out thework and accordingly, thehire charges paid is notcovered by the provisions of Section 194C of theIncome-lTaxActandaccordingly,|thereWaSTlOObligation on the part of the assessee to deduct taxunder Section 194C ot the Act. 2. The assessee is engaged in the business of)operation of tourist taxies. The assessee also had hiredtaxies from the owners, to carry on its business. Theassessee had deducted tax on payments made to suchtaxi owners. The said TDS deduction was remitted,according to the Assessing Officer, beyond the due date.The assessee furnished the particulars of the paymentsmade. Still the assessing authority disallowed theexpenses of Rs.6,/8,28,696/- under Section 4O(a)(ia) ofthe Act. 3. Aggrieved by the said order, the assesseepreferred an appeal to the Commissioner of Income-tax(Appeals). It was contended before the First AppellateAuthority by the assessee that the remittance of TDS.amount was made well before the completion of theassessment year and therefore, no dis-allowance undersection 4QO(a)(ia) of the Act was called for. The FirstAppellate Authority negated the contention of theassessee that there was no obligation on the part of theassessee to deduct at source and therefore, the.disallowance by the assessing authority of the saidamount paid to customers is unjustified. 4. The assessee preferred an appeal to theTribunal. The Tribunal has found favour with the said|argument and it held that the assessee had hired thecabs for the purpose of carrying on its business and itcannot be said by any stretch of imagination that there was a contract to carry out the work and accordingly,the hire charges paid, were not covered under theprovisions of Section 194Cof the Act. In coming to thesaid conclusion, the Tribunal has relied on thejudgment of the Madras High Court. © o. Aggrieved by the said order, the revenue is inappeal. The following two substantial questions of lawwere framed for consideration at the time of admission: 4. The assessee preferred an appeal to theTribunal. The Tribunal has found favour with the said|argument and it held that the assessee had hired thecabs for the purpose of carrying on its business and itcannot be said by any stretch of imagination that there was a contract to carry out the work and accordingly,the hire charges paid, were not covered under theprovisions of Section 194Cof the Act. In coming to thesaid conclusion, the Tribunal has relied on thejudgment of the Madras High Court. © o. Aggrieved by the said order, the revenue is inappeal. The following two substantial questions of lawwere framed for consideration at the time of admission: (i)Whether the Tribunal was correct inholding that the assessee is not bound to|deduct IDS as the provisions of Section|194C are not attracted as no agreement|was entered into by the assessee with|the other operators, when the assessee|has admitted applicability of Section|194C and tax was deducted at source?holding that the assessee is not bound to|deduct IDS as the provisions of Section|194C are not attracted as no agreement|was entered into by the assessee with|the other operators, when the assessee|has admitted applicability of Section|194C and tax was deducted at source? (it)Whether the Tribunal was correct in'proceeding to examine the applicability ofsection 194C of the Act when _ thproceeding to examine the applicability ofsection 194C of the Act when _ th -6-. controversy was with resp/ect to thedisallowance under Section 40/(a)(ta) ofthe Act? 6. We have heard the learned counsel for theparties. This Court had an occasion to consider thesaid substantial question of law in he case of,Sme., J.Rama Vs. Commissioner of Income Tax andAnother’ reported in(2012) 344 ITR 608 (Karn.)where it was held as under: €8In|ordertoappreciatetherivalcontentions, it is necessary to bear in mind|the admitted facts: The assessee ts an individual deriving income|from hiring of vehicles. Under a _ writtenagreement the assessee 1s providing vehicles|to one of its customers, M/s.Mahindra|Transport Solutions Group. Clause 5 of the|written agreement entered into between them|stipulates that the provision of services wouldinvolve providing vehicles owned by_ theassessee or associates of assessee or agents, a a fortransportationof|theEmployeesof|Thomson Corporation (Internations) (P) Ltd. |The material on record discloses that the'assessee is owning a fleet of vehicles. Thattsnot sufficient to meet their obligations.|Therefore, the assessee hired vehicles from|the owners of the vehicles. There is no|written agreement entered into between the|assessee aqnd such individual owners. It Is)those vehicles hired in the aforesaid manner|which are utilized for performing the contract|entered into betiween the assessee and titcustomers. In the absence of any material|placed by the assessee, the only inferencethat can be drawn from the facts of this case|is that the assessee has utilized the vehicles|taken on lease to perform the written contract|entered into bettween the assessee andvarious customers. Out of the transportation|charges received under the aforesaid writeen|contract, a substantial portion has been paidto the various owners of the vehicles towards|transportation charges. Though a ground is| taken that such payment is not in excess of|Rs.20,000and.therefore,there1sTLOobligation to deduct TDS, the material on|record discloses that total amount paid|towards transportation charges 1s_ roughlyabout Rs.79,45,225. In the absence of any|particulars, it cannot be said that there was.no liability to deduct tax on that score. Law|does not stipulate the existence of a written|contract as a condition precedent for payment|of TDS. The contract may be in writing or it|may be oral but the liability to pay tax arises|when the recipient of the said amount|receives payment in excess of Rs.20,000. |Proviso (2) to s. 194C which ts attracted to the|facts of this case makes it very clear thatwhen an individual or HUF whose total sales|from the business or profession carried on byhim is in excess of the monetary lmit|specified under cl.(a) or cl.(b) of s.44AB during|the financial year immediately preceding the|financial year in which such sum ts creditedor paid to the account of the sub-contractor,| Shall be liable to deduct income-tax under the|sub-section. It is not in dispute that the|CTUTNOVETof|the|aASsSSCSSexceedsthemonetary limit specified under cl.(a) or cl.(b) ofSs. 44AB. Therefore, the liability to deduct taxarises under the said proviso to the sub-contractor from whom the vehicles are hired|and the said amount payable to the sub-contractor.1S|in.eCXCeCSof|Rs.20,000. |Therefore,thethree|authoritieshave|concurrently held that the transaction in|question is a transport contract. The liabilityto deduct out of the money paid to the sub-contractors does arise. Immediately, TDS 1s|not deducted and the said amount ts not paid|to the authorities. Therefore, the claim for|deduction under s.40 (aj(ia) is not attracted|and.the|authoritiesLwverjustifiedin.disallowing the said deduction and treating|the said amount as the income of_ theassessee and claiming tax on that amount.” 7. It is submitted that the Special Leave Petitionpreferredagainstthesaid judgment,has|beendismissed. In the light of the aforesaid judgment, theorder of the Tribunal cannot be sustained. Accordingly,it is hereby set-aside. The material on record disclosesthat the said plea is only an alternative plea. It furthershows that the TDS was deducted and paid to theDepartment belatedly. That was the reason for notallowing deduction. 8 The learned counsel for the assessee submitsthat it has been paid within the time prescribed beforethe due date for filing the return, which is permissiblein law. Unfortunately, none of the authorities have goneinto this question. Therefore, it is necessary to remitthe matter back to the assessing authority to find outwhether the payment of TDS paid by the assessee iswithin the time prescribed under the law. If it is within - |] -. time, then the assessee is entitled to the relief.| Accordingly, we pass the following order: 3+4Appeal isallowed 3B4substantial questions of law are answered in favour of the Revenue and against the aSSECSSEC. 3)4The matter is remitted back to the assessingauthority to find out whether TDS payment iswithin time and assessee is entitled for thebenefit in accordance with law.authority to find out whether TDS payment iswithin time and assessee is entitled for thebenefit in accordance with law. Ordered accordingly. Sd/-|JUDGE Sd/-|JUDGE SPS