Madras High Court
Commissioner Of Income Tax vs P.Sumathi on 18 August, 2021
T.C.A.Nos.30 and 31 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 18.08.2021
CORAM :
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE SATHI KUMAR SUKUMARA KURUP
T.C.A. Nos.30 and 31 of 2015
Commissioner of Income Tax,
Madurai. ... Appellant
in both appeals
Vs.
P.Sumathi
Prop. of Shri Manikandan Transport
No.21, Pereira Street,
Tuticorin. ... Respondent
in both appeals
Tax Case Appeals preferred under Section 260A of the Income Tax
Act, 1961, against the common order, dated 25.04.2014, passed by the
Income Tax Appellate Tribunal, Chennai, “C” Bench, in
I.T.A.No.2229/Mds/2013 and C.O.No.6/Mds/2014 in I.T.A.No.2229/Mds/
2013, for the Assessment Year 2009-10.
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T.C.A.Nos.30 and 31 of 2015
For Appellant : Mrs.S.Premalatha
Junior Standing Counsel
in both appeals
For Respondent : Mr.A.S.Sriraman
in both appeals
COMMON JUDGMENT
(Judgment was delivered by T.S. SIVAGNANAM, J.)
These Tax Case Appeals filed by the Revenue under Section 260-A of
the Income Tax Act, 1961 (“the Act” for brevity) are directed against the
common order, dated 25.04.2014, passed by the Income Tax Appellate
Tribunal, Chennai, “C” Bench, in I.T.A.No.2229/Mds/2013 and
C.O.No.6/Mds/2014 in I.T.A.No.2229/Mds/2013, for the Assessment Year
2009-10.
2.The appeals were admitted on 23.02.2015 to decide the following
substantial questions of law :
“1.Whether on the facts and circumstances of the case,
the Income Tax Appellate Tribunal was right in holding that
the provision of Section 194C of the Income Tax Act will not be
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T.C.A.Nos.30 and 31 of 2015
applicable in respect of the payment made by the assessee
towards transport of goods by way of hiring the vehicle?
2.Whether on the facts and circumstances of the case,
the Income Tax Appellate Tribunal was right in holding that
the provision of section 40(a)(ia) will not be applicable to the
assessee case by holding that there is no contractual liability
between the assessee and lorry owners/drivers?
3.Whether on the facts and circumstances of the case,
the Income Tax Appellate Tribunal was right in holding that
there is no contractual liability between the assessee and the
lorry owners without considering that there is an implied
contract?”
3.We have elaborately heard Mrs.S.Premalatha, learned Junior
Standing Counsel for the appellant/Revenue and Mr.A.S.Sriram, learned
counsel for the respondent/assessee.
4.The assessee is the Proprietor of a concern, namely, Shri
Manikandan Transport, which is engaged in the transport of Salt and
Gypsum from the Salt Pans in Tuticorin to Chettinad Cement Factory at
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T.C.A.Nos.30 and 31 of 2015
Karaikal and Ariyalur. The assessee filed her return of income on
23.02.2010 for the Assessment Year under consideration, i.e., AY 2009-10,
declaring an income of Rs.18,73,240/-. The return was initially processed
under Section 143(1) of the Act and subsequently, the case was selected for
scrutiny under Section 143(2). During the course of assessment, the
Assessing Officer observed that the assessee has shown certain amounts as
lorry hire receipts and the assessee was called upon to explain as to whether
lorry hire payments would attract the provisions of Section 194C of the Act
and whether the assessee had deducted TDS as required under the said
section, and if not, the provisions of Section 40(a)(ia) of the Act would stand
attracted and the entire payment for hire of lorries would be disallowed. The
assessee submitted her reply contending that the provisions of Section
40(a)(ia) of the Act would not be attracted to the assessee's case. Certain
other factual aspects were also placed and more particularly to state that,
there was no written contract nor any contract as presumed by the
Department between the lorry owners/drivers and the assessee, and where
ever it was feasible, TDS has been deducted, and only in cases where
payments were made to the lorry owners, there is no feasibility of deducting
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T.C.A.Nos.30 and 31 of 2015
any Tax at Source. The Assessing Officer was not convinced with the reply
given by the assessee and accordingly, completed the assessment by order
dated 24.12.2011, disallowing the payments with regard to lorry hire
charges.
5.Aggrieved by the same, the assessee preferred an appeal before the
Commissioner of Income Tax (Appeals), Madurai (“CIT(A)” for brevity).
The said appeal was partly allowed, i.e., to state that there was no written
contract between the assessee and the lorry owners/drivers and the question
of deducting Tax at Source would not arise. However, after making the said
observation, the assessee was called upon to furnish the details of the amount
exceeding Rs.50,000/- during the Assessment Year under consideration and
on 13 such transactions having been disclosed, the disallowance under
Section 40(a)(ia) was restricted to Rs.11,24,684/-, since the amount paid to
the lorry drivers/owners exceeded the threshold limit of Rs.50,000/- per year.
6.Aggrieved by the order passed by the CIT(A), dated 25.07.2013, the
Revenue filed an appeal before the Tribunal, in which, the assessee filed her
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T.C.A.Nos.30 and 31 of 2015
Cross Objections as against the portion of the order passed by the CIT(A)
restricting the disallowance to Rs.11,24,684/-. The appeal filed by the
Revenue has been dismissed and the Cross Objection filed by the assessee
has been allowed by common order, dated 25.04.2014, which is impugned in
these appeals.
7.Firstly, the Assessing Officer, while considering the stand taken by
the assessee, notes that the assessee is deducting TDS on lorry transport
payments and the assessee has not deducted TDS while making payments to
certain persons who are admittedly lorry drivers. Thus, the question would
be as to whether the Assessing Officer was justified in inferring that there is
deemed to have been a sub-contract between the assessee and the lorry
drivers. Admittedly, there is no material available on record before the
Assessing Officer to come to such a conclusion or even come to such a
prima facie conclusion. The Assessing Officer proceeded to hold that there
should have been an agreement between the assessee and the lorry drivers
and it is not necessary to have any written agreement, because there was an
agreement between the assessee and the Cement Company for transportation
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T.C.A.Nos.30 and 31 of 2015
of Salt and Gypsum from Tuticorin. The correctness of the said stand was
examined by the CIT(A) and it was found that there was no material on
record to draw any such inference against the respondent/assessee. The
correctness of the said finding was tested by the Tribunal and the Tribunal
rejected the appeal filed by the Revenue.
8.Insofar as the order of the CIT(A) restricting the disallowance to
Rs.11,24,684/- is concerned, the Tribunal, in our view, rightly interfered with
the said order, because, no issue would be as to whether at all there is sub-
contract agreement between the assessee and lorry drivers and in the absence
of any such contract, the question of deducting Tax at Source would not arise
and therefore, the restriction of disallowance to Rs.11,24,684/- was held to
be erroneous. Further, the Assessing Officer failed to take note of a very
important factor, which was placed before the Assessing Officer for
consideration, stating that Section 194C of the Act was substituted in 2009
by Finance Act (2) of 2009 with effect from 01.10.2009, which has done
away with TDS if PAN is furnished, in terms of Section 194C(6). It is seen
that the Assessment Year under consideration, namely, AY 2009-10, was the
last year when the unamended provisions were in vogue. Thus, considering
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the factual position, the Tribunal rightly affirmed the order passed by the
CIT(A).
9.Mrs.S.Premalatha, learned Junior Standing Counsel, placed reliance
on the decision of the High Court of Karnataka in J.Rama v. Commissioner
of Income Tax [Income Tax Appeal No.418 of 2009 dated 19.07.2010]. In
the said case, the contention of the assessee was that, there was no written
contract and there is no duty on the part of the assessee to deduct Tax at
Source. Per contra, the Department/Revenue contended that the material on
record clearly discloses that the vehicles are hired by the assessee from the
various owners of the vehicles only to discharge the obligation under the
contract between the assessee and other customers. On facts, the Court
found that the assessee therein had entered into a contract to supply vehicles
to M/s.Mahindra and many other companies under written contract on
various dates and only to perform the obligation under the said contracts, he
had hired vehicles from the sub-contractors under the written contract and
the liability to deduct TDS arises under Section 194C(2) of the Act.
Furthermore, while testing the correctness of the stand taken by the assessee,
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T.C.A.Nos.30 and 31 of 2015
the Court considered the factual position that the assessee is providing
vehicles to one of its customers, M/s.Mahindra Group, and in Clause-5 of the
written agreement between the parties, a condition has been stipulated that
provision of services would involve providing vehicles owned by the
assessee or associates of assessee or agents, for transportation of the
employees of Thomson Corporation, and further, on facts, it was found that
the assessee is owning a fleet of vehicles, which is not sufficient to meet the
agreement entered into between the assessee and such individual owners.
Considering these facts, the Court held that there is no necessity for a written
agreement between the parties. The facts before us are entirely different, as
both the CIT(A) as well as the Tribunal have held on facts that the assessee
hired vehicles from the drivers and there was nothing on record to infer any
unwritten contract. Therefore, we are of the view that the decision in the
case of J.Rama (supra) cannot be made applicable to the facts and
circumstances of the case on hand.
10.For all the above reasons, we find that the Tribunal was right in
dismissing the appeal filed by the Revenue and granting full relief to the
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T.C.A.Nos.30 and 31 of 2015
assessee. In the result, these Tax Case Appeals are dismissed and the
substantial questions of law are answered against the Revenue. No costs.
(T.S.S., J.) (S.S.K., J.)
18.08.2021
mkn
Internet : Yes
Index : Yes / No
Speaking order / Nonspeaking order
To
1.The Income Tax Appellate Tribunal,
Chennai, “C” Bench.
2.The Commissioner of Income Tax,
Madurai.
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T.C.A.Nos.30 and 31 of 2015
T.S. SIVAGNANAM, J.
and
SATHI KUMAR SUKUMARA KURUP, J.
mkn
T.C.A. Nos.30 and 31 of 2015
18.08.2021
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