Tax Case v. Respondent M/S Pragati Construction

^K IN THE HIGH COURT OF JUDICATURE AT BILASPUR.CHHATTCSGARHs^lTAXCASENO.17APPELLANTIncome Tax Officer-1,Bhilai, District- Dur9 (C.G.)VERSUSRESPONDENT ^M/s PragatiConstruction,t ^'25, KadambariNagar,yW^""1burg, District-burg (C.G.)^s^-^^""^^•"""INCOME TAX APPEAL UNDER SECTEON 260-A OF THEINCOME TAX. 1961 HIGH COURT OF CHHATTISGARH AT BILASPUR CORAM:HON'BLE SHRI YATINDRA SINGH, C.J.HON'BLE SHRI SUNIL KUMAR SINHA, J. Tax Case No.37 of 2011AoDellantIncome Tax Officer-1VERSUSRespondentM/s Pragati Construction Income TAx Appeal under Section 260-A of the Income TaxAct. 1961 Appearance: Shri Anand Dadariya, counsel for the Appellant. Judaement(21stAugust, 2013) 1. This is a tax appeal by the Income Tax Department (the Department)under section 260-A of the Income Tax Act (the Act) against the orderdated 22.01.2010 passed by the income Tax Appellate Tribunal, Bilaspur(the Tribunal) in respect of Assessment Year (AY) 2006-07. THE FACTS 2. M/s Pragati Construction (the Assessee) is a civil contractor engagedin construction of bridges, roads and buildings of different departments ofChhattisgarh Government. In this process, it also transports gitty, bricks,cement and water for sprinkling over the roads.In order to do this, theAssessee aiso hires trucks and tankers. 3.In the relevant AY 2006-07 the Assessee debited ?31,05,0007- onaccount of vehicle hire charges and Rs.3,95,000/- in the head of tankerhire charges.Out of this amount, ?82,800/-, paid to two owners of thevehicles, was iess than ?:50,000/-.However, remaining amount namely?34,17,200/- paid to the vehicle owners was more than ?50,000/- each.But no tax at source was deducted. 4.The Assessing Officer (the AO) by his order dated 29.12.2008 heldthat in this case the provision of 194C of the Act was applicable and asthetaxwasnotdeductedatsource,heincludedpaymentof?34,17,200/- in the income ofthe Assessee under section 40(a)(ia) oftheAct. ..^^1^^1 '-^'s^"^m^ll^..1 '-^'s^"^m^ll^.. 5. Aggrieved by the aforesaid order, the Assessee filed an appeal beforethe Commissioner of Income Tax (Appeals), Raipur (the CIT-A).It wasallowed on 25.03.2009. 6. The Department filed an appeal before the Tribunal.It was dismissedon 22.01.2010. Hence, the present appeal by the Department. THE DECISION 7. We have heard counsel for the Depart:ment. 8. This appeal was admitted on 07.09.2011 on the following substantialquestion of law: 'Whether law and on the facts and in the circumstances of thecase, the ITAT was justified in law in upholding the order ofCIT(A) holding that the provisions of section 194C are notapplicable and as a consequence no disallowance under theprovisions of section 40(a)(ia) of the Income Tax Act arecalled for?' 9.The CIT-A as well as the Tribunal have held that section 194C wasnot applicable and as such, the amount could not be added in theincome of the Assessee under section 40(a)(ia) of the Act. 10. The section 194C of the Act is titled as 'Payment to contractors'.Itprovides for deduction of tax at source in respect of payment to thecontractors for carrying out work as defined in that section. The questionis, is this conclusion correct? 11. The counsel for the Department places reliance on sub-clause (c) ofExplanation III of section 194C {194C Explanation III (c)} of the Act andsubmits that the case ofAssessee is covered under this provision. 12. The relevant part of 194C of the Act is as follows: '194C Payments tocontractors and sub-contractors.(1)Any person responsible for paying any sum to any /f^i^^-—..'S.SF?&-a£,.I :%is& 1\^-y/ padma © resident (hereinafter in this section referred to as thecontractor) for carrying out any work (including supply oflabour for carrying out any work) in pursuance of acontract between the contractor Explanation III: For the purposes of this section, theexpression "work' shall also include- (c)carriage of goods and passengers by any mode oftransport other than by railways;' 11. The counsel for the Department places reliance on sub-clause (c) ofExplanation III of section 194C {194C Explanation III (c)} of the Act andsubmits that the case ofAssessee is covered under this provision. 12. The relevant part of 194C of the Act is as follows: '194C Payments tocontractors and sub-contractors.(1)Any person responsible for paying any sum to any /f^i^^-—..'S.SF?&-a£,.I :%is& 1\^-y/ padma © resident (hereinafter in this section referred to as thecontractor) for carrying out any work (including supply oflabour for carrying out any work) in pursuance of acontract between the contractor Explanation III: For the purposes of this section, theexpression "work' shall also include- (c)carriage of goods and passengers by any mode oftransport other than by railways;' 13. tn the present case, the Assessee is a civil contractor.It has notcontracted with anyone to carry gitty, bricks, cement and water. It hasmerely hired the trucks and tankers and carried the goods itself. 14. Section 194C Explanation III (c) of the Act is applicable only in thecase where the goods are carried by someone else ie the transporter isother than the Assessee. In the present case, the Assessee itself is thetransporter, it is carrying the goods for itself. 15.In view of above, the CIT-A as well as the Tribunal rightly held thatsection 194C of the Act was not applicable.In case194C of the Act wasnot applicable, then, admittedly the amount paid to the owners of thevehicles for hiring charges could not be included in the income of theAssessee under section 40(a)(ia) of the Act. 16. The Tax case has no merit. It is dismissed. Sd/-Sunil Kumar SinhaJudge Sd/- Chief Justice