The Commissioner Of Income Tax v. M/S T.l. Verma & Co. (P) Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.892 of 2010 Date of decision: 23.3.2011 The Commissioner of Income Tax Vs. M/s T.L. Verma & Co. (P) Ltd. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Ms. Urvashi Dhugga, Sr. Standing Counselfor the appellant. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue underSection 260-A of the Income Tax Act, 1961 (for short, “the Act”)against the order of the Income Tax Appellate Tribunal,Chandigarh dated 30.6.2010 in ITA No.222/CHD/2010 for theassessment year 2006-07 claiming following substantial questionof law:- “Whether on the facts and circumstances of the case,the Hon’ble ITAT was right in holding, that assesseewas not liable to deduct the TDS as there was nowritten or oral agreement between the alleged parties;even in the light of amendment in the statute w.e.f.01.10.2004 in section 194C(3) as per which tax isrequired to be deducted where total payments made to a person during a financial year for work contractexceeds Rs.50,000/-, and it does not matter whetherthere is single contract or multiple contract.” 2. The assessee hired trucks for its business and madepayment for transportation. The Assessing Officer held that theassessee was liable to deduct tax under Section 194C of the Act,in absence of which deductions had to be disallowed underSection 40(a)(ia) of the Act. The view taken by the AssessingOfficer was upheld by the CIT(A) but on further appeal, theTribunal decided the matter in favour of the assessee as under:- “9. Undoubtedly, the provisions of Section 194C ofthe Act prescribing for deduction of tax at sourcecomes into play only where either a written or oralcontract between the parties for transportation andcarriage of goods is established. The CIT (Appeals),in this case has concluded that between the parties acontract for transportation and carriage of goods isestablished. The CIT (Appeals), in this case hasconcluded that there was an agreement between thetransporter and the assessee because the GRs havebeen issued by the transporter. As per the CIT(Appeals), the transporter issues a GR for theconsignor (i.e., the assessee), a contract isestablished and any payment made in pursuance ofthat, cannot escape the provision of Section 194C ofthe Act. In our view, the CIT (Appeals) is correct inconcluding that a GR is equivalent to a contract whichis envisaged for the purpose of Section 194C of theAct. So, however, in order to prove the applicability ofSection 194C, it is further to be seen whether the contract in question has resulted in paymentexceeding Rs.20,000/- or in case of more than onepayment, the aggregate should have exceedsRs.50,000/- in a financial year. Normally, each GR isto be treated as a separate contract, but if the goodsare transported continuously in pursuance of acontract for specific period of quantity, all GRs relatingto that party or quantity should be aggregated for thepurposes of deduction of tax at source. This aspecthas also been clarified so by the CBDT CircularNo.715 dated 08.08.1995. As per the said circular,the pre-requisite condition for deduction of tax atsource is that there must be a contract for thecarriage of goods. As per the CBDT Circular, what ismost important is a contract for a specific period orquantity for carriage of goods. Undisputedly, in theinstant case, there is no material on record brought bythe Assessing Officer to prove that there was anywritten or oral agreement between the assessee andthe transporter for carriage of goods. It is only onpresumptions that the Assessing Officer hasconcluded in para 7.3 that there was relationship ofcontractor and contractee between the transporterand the assessee. The aspect brought out by the CIT(Appeals) that each GR is a Contract, is correct.However, the assessee has furnished details of truck-wise payment which does not show that eachpayment exceed Rs.20,000/- and it also does notshow that in aggregate in a financial year truck-wisepayments exceed Rs.50,000/-. Therefore, even ifeach GR is to be taken as a separate contract asconcluded by the CIT(Appeals) and which is alsoclarified by the CBDT in its Circular No.715 (supra) yet, there is no material to establish that any paymentof individual GR has exceeded Rs.20,000/- or inaggregate the payments to same transporter hasexceeded Rs.50,000/- in the financial year.Therefore, in this background, we have to considerthe ratio of the decision of the Hon’ble JurisdictionalHigh Court in the case of United Rice Mill Ltd. (supra).The Hon’ble High Court laid down that Section 194Cof the Act cannot be invoked to hold the assesseeliable for deduction of tax only on the assumption thatassessee was having agreement with the partiesthrough whom transportation of goods was carriedout. The Hon’ble High Court noted the fact position inthat case that there was no contract for a specificperiod or quantity for continuous carriage of goodseven when individual GRs are liable to be consideredas a contract, because there is no material to showthat payment in pursuance to each GR exceededRs.20,000/- or payments to one transporter exceedsRs.50,000/- in the financial year. The AssessingOfficer acted only on assumptions that the assesseewas having agreement with the parties for continuoustransportation/carriage of goods for a specific periodor quantity. 10.At this point, we may also refer to para 32 of theorder of the CIT(Appeals), where it is observed that“assessee was liable to deduct TDS on thesepayments where GRs issued by the transportersaggregate more than Rs.50,000/-“. Certainly, wherethe GRs issued by a single transporter exceedRs.50,000/- in a financial year, provisions of Section194C are attracted. So, however, factually in thiscase, there is no material to show that payments to a single transporter or GR issued by single transporterexceeded Rs.50,000/- in aggregate in the financialyear.” 4. We have heard learned counsel for the appellant. 5. Learned counsel for the revenue submits that totalfreight payments exceeded the amount stipulated under Section194C(3 ) of the Act and in such a situation, the assessee wasliable to deduct TDS, as held by the Assessing Officer and theCIT(A). single transporter or GR issued by single transporterexceeded Rs.50,000/- in aggregate in the financialyear.” 4. We have heard learned counsel for the appellant. 5. Learned counsel for the revenue submits that totalfreight payments exceeded the amount stipulated under Section194C(3 ) of the Act and in such a situation, the assessee wasliable to deduct TDS, as held by the Assessing Officer and theCIT(A). 6. We are unable to accept the submission. 7. As held by the Tribunal individual payments did notexceed `20,000/- and total payment during the financial year didnot exceed `50,000/- by a transporter, in which case, Section194C of the Act will not apply. The finding about the quantum ofpayment is a finding of fact and has not been challenged. Oncethe finding of the Tribunal is not liable to be interfered with, nosubstantial question of law arises. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE March 23, 2011ashwani ( AJAY KUMAR MITTAL ) JUDGE