1. Since common issue is involved in all these appeals, the same are being disposed of by the common order for the sake of convenience.
2. The only issue arising in these appeals, relates to Tax Deducted at Source (TDS) under Section 194C read with Section 201 (A) of the Income Tax Act, 1961 (Act) as well as charging of interest under Section 201 (1 A) of the Act.
3. Briefly stated the facts are these : The assessee is a firm engaged in transporting goods mainly for Asian Paints Ltd. and its sister concern Hindustan Mineral Products from their factories at Ankleshwar to any place in India, mainly south India. The assessee firm does not own any trucks but hires the same from different parts for the purpose of transporting goods of the above parties. A survey was conducted at the premises of the assessee but books of account were not found since, according to the assessee, the books were lying in their branch office in Ankleshwar. Accordingly, the assessee was asked to produce books of account along with other details for which summons under Section 131 of the Act was also issued and served on the assessee. In response to the same, some of the books of account and ledgers were produced before the assessing officer and requested for time to produce other details.
Subsequently, assessee furnished other details called for such as ledger accounts of the parties from whom payments have been received during the year. The assessee also clarified that tax has been deducted by these companies while making the payments. The modus operandi of the assessee was explained in the letter dated 26-12-2002 as under: Each payment of freight paid is treated separately, as freight is fixed for each consignment (lorry) at the time of dispatch of goods.
There are no fixed lorries or transporters. At the time of actual dispatch lorries are contacted. We maintain addresses of each lorry through which goods are dispatched. However, such addresses are maintained for 6 months or maximum for a year, because, if there is any claim by Asian Paints, that will be made within period of maximum one year. Hence after one year such addresses are destroyed.
The explanation of the assessee regarding non-deduction of tax at source was that, freight is decided for each lorry at the time of actual dispatch of goods and no payment exceeds Rs. 20,000 at a time.
Hence, the provisions of Section 194C were not attracted. The assessing officer again asked the assessee to show cause as to why no TDS has been deducted. The assessee, vide letter dated 17-1-2003, submitted before the assessing officer as under : Whenever the need arises, we approach the owners of trucks /tankers/ trailers and the rates are negotiated at that point of time with the truck owners/drivers, which vary from time to time due to fluctuations in demand and supply. From the seized register you will see that the rates for the trucks supplied by the various other transporters for a particular destination on the same day vary from Rs. 100 to Rs. 200 per trip depending upon the market conditions because we have not entered into any specific contract for any specific period at any specified agreed rate with any of the truck owner/supplier. Further the scrutiny of the seized register will show that the freight rate charged by us to our customers is without any variance while the rates if freight paid by us to various transporters vary each time depending upon the demand and supply conditions. In the absence of any oral/written agreement/ understanding, the said truck suppliers are not bound to supply trucks for any specified period or for any specified quantity or any pre-agreed /specified rate, hence each trip is a separate contract and if the transportation charged paid are less than Rs. 20,000, the same are exempt from TDS as per the provision of Section 194C(3).
The very fact different rates of transportatiodarc paid to same transporters in any given financial years shown there cannot be a continuous contract for that year since in that case, the rates would be fixed for that financial year. Hence, the rates fixed with any transporter would be restricted to any single trip only, after which a fresh rate would be negotiated depending upon prevailing market conditions, and the firm may or may not hire the said transporter again depending on the rate quoted by him.
You have asked us to show cause as to why in the case of certain transporters (as per ledger accounts submitted by us) there should not be treated as continuous contract since they are doing our work for a substantial part of the financial year or whole financial year. We have already explained our stand that these are continuous contracts and merely because we have transactions with such parties for any length of time, it does not make it a continuous contract in view of the fact that the rate differs every time and is renegotiated based on market conditions. In such scenarios, please note that CBDTs Circular No. 715 states that each GR is a separate contract even if payments of more that one GR are made altogether.
Hence, you are requested not to treat is as a continuous contract.
The assessee also relied on the CBDT Circular No. 715, dated 8-8-1995.
However, the assessing officer was not satisfied with the explanation of the assessee. He was of the view that Board Circular was not applicable since it lays down that if the goods are transported continuously in pursuance of a contract for a specified period or quantity, each GR will not be a separate contract and all the GRs relating to that period or quantity will be aggregated for the purpose of TDS. According to him, the transaction between the transporters and the assessee firm were carried on throughout the year and merely because the assessee took the stand that the rate of transportation differs for each trip and the same has to be re-negotiated based on the market conditions, the case of the assessee could not be taken out from the ambit of Section 194C. On perusal of the details, the assessing officer found that the sum of Rs. 3,34,800 was paid to a truck owner bearing truck No. MH-04-H-6304 in the assessment year 1999-2000.
Consequently, TDS liability was computed at Rs. 3,348 for which demand was created under Section 201(1) of the Act. In addition, interest of Rs. 2,276 was charged under Section 201(l A) of the Act. Thus, the total liability was created at Rs. 5,624. In the similar manner, the liability of Rs. 5,772, Rs. 10,613 and Rs. 3,606 was created in assessment years 2000-01 to 2002-03 respectively. On appeal, the orders of the assessing officer have been confirmed by the learned Commissioner (Appeals). Aggrieved by the same, the assessee has preferred these appeals before the Tribunal.
4. Both the parties have been heard at length. The learned counsel for the assessee has reiterated the stand of the assessee before the assessing officer and, therefore, need not be repeated since we have narrated the same in'detail while stating the facts. On the other hand, the learned D.R. has reiterated the reasons given by the assessing officer.
5. Rival submissions of the parties have been considered in the light of the relevant provisions, Board Circular and the facts of the case.
The perusal of the provisions of Section 194C reveals that tax is to be deducted at source where any sum is paid for carrying out any work in pursuance of a contract between the contractor and various persons mentioned in various clauses under Sub-section (1) of Section 194C.Sub-section (3) provides that no deduction shall be made where the amount to be paid or credited does not exceed Rs. 20,000. These provisions have been explained by the Board Circular No. 715 dated 8-8-1995. Question No. 9 and answer thereof, is relevant for this purpose. The same are being reproduced as under : Question 9 : In the case of payments to transporters, can each GR be said to be a separate contract, even though payments for several GRs are made under one bill Answer: Normally, each GR can be said to be a separate contract, if the goods are transported at one time. But if the goods are transported continuously in pursuance of a contract for a specific period or quantity, each GR will not be a separate contract and all GRs relating to that period or quantity will be aggregated for the purpose of the TDS.The above Circular clearly shows that each GR can be considered a separate contract if the goods are transported at one time. However, if the goods are transported continuously in pursuance of a contract either for specific period or for a specific quantity, then all the GRs under the said contract shall be aggregated and, therefore, if the amount so aggregated exceeds to Rs. 20,000, then the assessee is required to deduct tax at source.
The emphasis is on transportation of goods continuously in pursuance of a contract. So, the normal presumption is that, each GR is a separate contract. In the present case, it has always been the stand of the assessee that it does not own any truck and, therefore, it has to hire the lorries from the market as and when required. All the details have been furnished by the assessee before the assessing officer. More than 3,000 trips, as per the assessee, were made, out of which, few trips have been noted by the assessing officer where the assessee had made payments to the owner of a same lorry. The details of the same are placed in the Paper Book before us. The perusal of the same does not indicate that trips were made continuously under a contract. The assessing officer has not brought any material to prove that there existed any specific contract between the assessee and any of the truck owners. From the perusal of the details, we find that one truck bearing No. KA-22-A-8751 was hired five times in the financial year 1998-99 but in different months, for e.g., July, August, November, December and March. The gap is too large and it cannot be said that the transportation was made continuously under any specific contract. We also find that Truck No. 6304 was hired on many occasions in the financial year 1998-99. The frequency seems to be twice a month. It is a ground reality that where the assessee engaged in the transportation business does not own any truck, then it has to hire the truck from the market every time as and when there is a demand for the same. Merely because one particular truck was hired on certain occasions, it does not lead to conclusion that all the trips were made continuously under the specific contract. Admittedly, there is no specific contract brought on record. There is another important aspect which is noted from the details furnished before us that different freight is paid in respect of different trips even though the destination was the same Le., Bangalore. Had there been a single contract, then assessee would not have paid different amounts in respect of different trips. This circumstance shows that different contract existed on different occasions when the trucks were hired. Therefore, in the absence of any material to prove that all the trips were made under a single contract, we are of the view that provisions of Section 194C could not be invoked since payment for each trip was less than Rs. 20,000. In view of the same, the orders of the learned Commissioner (Appeals) cannot be sustained and consequently the same are set aside. The demand of tax and interest raised against the assessee for all the years are, therefore, cancelled. The assessee shall be entitled to refund if any amount is paid by it to the department.