Whether hire of trucks without contract for carriage is covered under Sec 194C?

T L Verma & Co. Pvt. Ltd. (2011-TIOL-170-HC-P&H-IT)

Facts:

•        The assessee hired trucks and made payment for transportation. The AO held that the assessee was liable to deduct tax u/s 1 94C, in absence of which deductions had to be disallowed u/s 40(a)(ia)

•        The above view taken by the AO was upheld by the CIT(A) but the Tribunal decided the matter in favour of the assessee. As a result appeal was filed by Revenue before the High Court contending the that total freight payments exceeded the amount stipulated u/s 1 94C(3) and TDS was liable to be deducted.

Decision:

•        The provisions of Section 1 94C come into play only where either a written or oral contract between the parties for transportation and carriage of goods is established. A GR is equivalent to a contract which is envisaged for the purpose of Section 1 94C. However, in order to prove the applicability of Section 1 94C, it is further to be seen whether the contract in question has resulted in payment exceeding the prescribed limits in a financial year

•        There is no material on record brought by the AO to prove that there was any written or oral agreement between the assessee and the transporter for carriage of goods. There is no material to establish that any payment exceeded the prescribed limits during the financial year. As per the decision of the HC in case of United Rice Mill Ltd (322 ITR 594) laid down that Section 194C cannot be invoked to hold the assessee liable for deduction of tax only on the assumption that assessee was having agreement with the parties through whom transportation of goods was carried out.

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4. Section 194C of Income-tax Act does not stipulate existence of a written contract as a condition precedent for payment of TDS
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