Case Law Details
IN THE ITAT COCHIN BENCH
Deputy Commissioner of Income-tax
Versus
Reez Karakkattil Raghavan
IT Appeal No. 312 (Coch.) of 2011
[Assessment year 2006-07]
NOVEMBER 16, 2012
ORDER
N.R.S. Ganesan, Judicial Member
This appeal of the revenue is directed against the order of Commissioner of Income-tax(A)-II, Kochi dated 24-01-2011 and pertains to assessment year 2006-07.
2. Shri Anil Kumar, the ld. DR submitted that the taxpayer hired lorries for carrying goods and paid hire charges. However, the taxpayer has not deducted tax a required u/s 194C of the Act. According to the ld. DR, hiring of lorry for carrying the goods amounts to work and the taxpayer is liable to deduct tax as provided in section 194C of the Act. The ld. DR has placed his reliance on the judgment of the Kerala High Court in CBDT v. Cochin Goods Transport Association [1999] 236 ITR 993. On a query from the bench, whether the taxpayer has simply hired the lorry or has entrusted the work of carrying the goods by the lorry owners, the ld. DR clarified that the taxpayer simply hired the lorry and the work of carrying the goods was not entrusted to the lorry owners. According to the ld. DR the taxpayer simply hired the lorry and paid hire charges. On a query from the bench, the ld. DR clarified that the provisions of section 194-I for deduction of tax in respect of hire charges is not applicable for the year under consideration since section 194-I was introduced subsequent to assessment year under consideration.
3. On the contrary, Shri Nityananda Kamath, the ld. representative for the taxpayer has submitted that the taxpayer is a transport contractor. In this case, the taxpayer has simply supplied trucks to M/s Logos Logistics Pvt Ltd on hire basis. Since the trucks owned by the taxpayer were not sufficient enough for giving them on hire to M/s Logos Logistics Pvt Ltd, the taxpayer hired lorries from other truck owners and gave them to M/s Logos Logistics Pvt Ltd for using in their business. According to the ld. representative, the taxpayer was not entrusted with the work of carrying any goods. The taxpayer has simply handed over the trucks on hire to M/s Logos Logistics (P) Ltd and received hire charges. M/s Logos Logistics Pvt Ltd used the lorry in their business of carriage of goods from one place to another. Therefore, the work of carriage of goods was neither entrusted to the taxpayer nor to the lorry owners from whom the lorries/trucks were taken on hire. There was no contract for carrying out any work. According to the ld. representative, the taxpayer is not liable to deduct tax u/s 194C of the Act. The ld. representative further submitted that the taxpayer paid bata to the drivers and also incurred expenditure for diesel. The lorry/truck owners have simply handed over their vehicles on payment of hire charges and they have nothing to do with any other work. In fact, M/s Logos Logistics (P) Ltd used the lorries/trucks for carriage of goods in their business. According to the ld. representative, at the best, it can be said that usage of vehicle on payment of hire charges. Admittedly the provisions of section 194-I of the Act is not applicable during the year under consideration. Therefore, the taxpayer is not liable to deduct tax. The ld. representative has placed his reliance on the decision of the Visakhapatnam Bench of this Tribunal in Mythri Transport Corpn. v. Asstt. CIT [2010] 124 ITD 40 (Visakhapatnam). The ld. representative for the taxpayer further submitted that even assuming for argument sake that the lorry owners are treated as a sub contractors even then the taxpayer is not liable to deduct tax. According to the ld. representative, the taxpayer is not the main contractor. The main contractor is admittedly M/s Logos Logistics Pvt Ltd. At the best, the taxpayer can be termed as sub contractor. Therefore, a transaction between sub contractor and another sub contractor would not attract provisions of section 194C at all. The ld. representative has placed his reliance on the decision of the Mumbai Bench of this Tribunal in HCC-L&T Purulia Joint Venture v. Jt. CIT [ITA No 1644/MUM/2010 & 3041/MUM/2010, dated 24th June, 2011], copy of which is available at page 38 of the paper book.
4. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the taxpayer has hired lorries/trucks from the lorry owners and gave them on hire to M/s Logo Logistics Pvt Ltd who used the same for carriage of goods. It is not the case of the revenue that the work of carriage of goods was entrusted with the lorry/truck owners from whom the lorries/trucks were taken on hire or the taxpayer. The work of carriage of goods remained with M/s Logos Logistics Pvt Ltd only. The taxpayer has simply supplied the trucks/lories to M/s Logos Logistics Pvt Ltd. Therefore, it is not a case of contractor for carrying out any work.
5. We have carefully gone through the provisions of section 194C of the Act. Section 194C of the Act would be applicable when a person responsible for paying any sum to any residents for carrying out any work including supply of labour for carrying out any work in pursuance of a contract at the time of payment or crediting the said amount. The legislature with effect from 01-04-1995 inserted Explanation 4(c) to include the term “work” – carriage of goods or passengers by any mode of transport other than by railways. Therefore, the contract shall be for carriage of goods or passengers other by railway. In this case, admittedly, the carriage of goods was not entrusted with the lorry/truck owners from whom the taxpayer has hired the lorries/trucks or with the taxpayer himself. Admittedly the responsibility of carriage of goods remains with M/s Logos Logistics Pvt Ltd. No work of carriage of goods was entrusted either with the taxpayer or with the lorry/truck owners from whom the taxpayer hired the lorries/trucks. Therefore, there is no contract for carriage of goods between the taxpayer and the lorry/truck owners from whom the trucks/lorries were hired. As such, this Tribunal is of the considered opinion that provisions of section 194C are not applicable to this transaction.
6. We have carefully gone through the decision of the Visakhapatnam Bench of this Tribunal in the case of Mythri Transport Corpn. (supra). In the case before the Visakhapatnam Bench of this Tribunal, the taxpayer, a contractor undertook to transport bitumen from one place to another. For carrying out the contract of transport of bitumen, the taxpayer engaged lorries from various other people. In these factual circumstances, the Visakhapatnam Bench of this Tribunal found that payment made for hire of vehicles would not fall within the category of payment towards sub contract with lorry owners. Therefore, the Visakhapatnam Bench of this Tribunal held that the taxpayer was not liable to deduct tax u/s 194C of the Act. One of us, the Accountant Member is a party to the decision of the Visakhapatnam Bench of this Tribunal.
7. We have also carefully gone through the judgment of the Kerala High Court in Cochin Goods Transport Association (supra). In the case before the Kerala High Court, the question arose for consideration was whether a transport contract for mere carriage of goods without loading and unloading facility would amount to carrying out any work within the meaning of section 194C(1) of the Act. The Kerala High Court, after analyzing various case laws including the judgment of the Apex court in Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435, found that a contract for carriage of goods without loading and unloading facility is a transport contract simplicitor, therefore, it would fall within the ambit of sub section (1) of section 194C of the Act. In the case before us, admittedly, there is no contractor for transport or carriage of goods. It is a mere hiring of vehicle for using the same in the carriage of goods by M/s Logos Logistics Pvt Ltd. The lorry/truck owners were not entrusted with any work of carriage of goods. The diesel bill and the bata to drivers are paid by the taxpayer. Therefore, it is not a case of contract for carriage of goods. Hence, the judgment of the Kerala High Court is not applicable to the facts of this case. In the admitted facts of the case it is a simple case of hiring the lorry/truck and payment of hire charges, therefore, at the best, it would fall u/s 194-I of the Act. Since the provisions of section 194-I is admittedly not applicable for the year under consideration, the taxpayer is not liable to deduct tax on payment of hire charges to the lorry/truck owners.
8. Moreover, the taxpayer has admittedly paid hire charges to lorry owners. The Special Bench of this Tribunal at Visakhapatnam in the case of Merlyn Shipping & Transporters v. Asstt. CIT [2012] 136 ITD 23 has elaborately considered this issue in respect of amount paid on or before the last day of the financial year and it was held that the amount which was already paid cannot be a subject matter of deduction u/s 40a(ia) of the Act. The Special Bench of this Tribunal found that the provisions of section 40(a)(ia) of the Act is applicable only in respect of the amount which remains to be paid at the end of the financial year and is not applicable to the amount already paid.
9. In view of the above, we uphold the order of the lower authority and the appeal of the revenue stands dismissed.
