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Thursday, October 18, 2012

No TDS liability u/s. 194C where the assessee, a transporter has made payments for hiring of trucks simplicitor and not for transportation of goods.


Lokesh Duggal
Income Tax Officer, Ward 35(3), Kolkata

Facts: The assessee is an individual, and is engaged in the business of transportation of goods. During the course of business carried on by him, the assessee had to take several trucks on hire, from middlemen or agents of the subcontractor, so as to meet his requirements. It is on these payments that the assessee did not deduct tax at source under section 194C, and, this non deduction of tax source from payments to the agents of the truck-owners, inter alia, resulted in the impugned disallowance under section 40(a)(ia). In appeal the CIT(A) has confirmed the disallowance.

Held that,-

"What follows from the above analysis, with which we are in considered agreement, that so far as pre June 2008 position is concerned, tax withholding obligations under section 194 C in respect of an individual only in cases where the payments were made to a sub contractor for carrying out a part off work, or the work itself, undertaken by the assessee and that too when such individual's turnover from business or profession exceeded threshold specified in section 44AB. That condition is clearly not satisfied in the present case. It is not the revenue's case that the payment is made for sub contracting the work, and, as we seen in the earlier discussion, there is nothing on record to even suggest so. That would have been the case, for example, when assessee received the goods for transportation and the assessee had made payment for such transportation of goods, not truck hire simplictor as is the case before us, to a third party. When it is not a case of sub contracting, it is wholly immaterial that assessee's turnover exceeded the specified threshold under section 44AB, which, as we have noted above, applied only in respect of sub contracting work at the relevant point of time. Clearly, therefore, the assessee did not have any tax withholding obligation in respect of truck hire payments in the pre-amendment period. Once we come to the conclusion that the assessee did not have any obligations to deduct tax at source under section 194C, the very basis of impugned disallowance ceases to be good in law. The disallowance must, therefore, stand deleted for this short reason alone. In these circumstances, we also see no need to address ourselves to other very erudite legal contentions put forward by the learned counsel. The impugned disallowance stands deleted."

In the result, the appeal was allowed. 

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