The judgment of the court was delivered by
N. Kumar J.-The Revenue has preferred this appeal against the order passed by the Tribunal holding that hiring of cabs for the purpose of carrying on its business by the assessee, do not amount to contract to carry out the work and, accordingly, the hire charges paid is not covered by the provisions of section 194C of the Income-tax Act, 1961, and accordingly, there was no obligation on the part of the assessee to deduct tax under section 194C of the Act.
2. The assessee is engaged in the business of operation of tourist taxies. The assessee also had hired taxies from the owners, to carry on its business. The assessee had deducted tax on payments made to such taxi owners. The said TDS deduction was remitted, according to the Assessing Officer, beyond the due date. The assessee furnished the particulars of the payments made. Still the assessing authority disallowed the expenses of Rs. 6,78,28,696 under section 40(a)(ia) of the Act.
3. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). It was contended before the first appellate authority by the assessee that the remittance of TDS amount was made well before the completion of the assessment year and, therefore, no disallowance under section 40(a)(ia) of the Act was called for. The first appellate authority negated the contention of the assessee that there was no obligation on the part of the assessee to deduct tax at source and, therefore, the disallowance by the assessing authority of the said amount paid to customers is unjustified.
4. The assessee preferred an appeal to the Tribunal. The Tribunal has found favour with the said argument and it held that the assessee had hired the cabs for the purpose of carrying on its business and it cannot be said by any stretch of imagination that there was a contract to carry out the work and, accordingly, the hire charges paid, were not covered under the provisions of section 194C of the Act. In coming to the said conclusion, the Tribunal has relied on the judgment of the Madras High Court.
5. Aggrieved by the said order, the Revenue is in appeal. The following two substantial questions of law were framed for consideration at the time of admission :
"(i) Whether the Tribunal was correct in holding that the assessee is not bound to deduct TDS as the provisions of section 194C are not attracted as no agreement was entered into by the assessee with the other operators, when the assessee has admitted the applicability of section 194C and tax was deducted at source ?
(ii) Whether the Tribunal was correct in proceeding to examine the applicability of section 194C of the Act when the controversy was with respect to the disallowance under section 40(a)(ia) of the Act ?"
6. We have heard the learned counsel for the parties. This court had an occasion to consider the said substantial question of law in the case of Smt. J. Rama v. CIT reported in [2012] 344 ITR 608 (Karn) where it was held as under (page 611) :
"In order to appreciate the rival contentions, it is necessary to bear in mind the admitted facts :
The assessee is an individual deriving income from hiring of vehicles. Under a written agreement, the assessee is providing vehicles to one of its customers, M/s. Mahindra Transport Solutions group. Clause 5 of the written agreement entered into between them stipu lates that the provision of services would involve providing vehicles owned by the assessee or associates of the assessee or agents, for transportation of the Employees of Thomson Corporation (International) P. Ltd. The material on record discloses that the assessee is owning a fleet of vehicles. That is not sufficient to meet their obli gations. Therefore, the assessee hired vehicles from the owners of the vehicles. There is no written agreement entered into between the assessee and such individual owners. It is those vehicles hired in the aforesaid manner which are utilised for performing the contract entered into between the assessee and its customers. In the absence of any material placed by the assessee, the only inference that can be drawn from the facts of this case is that the assessee has utilised the vehicles taken on lease to perform the written contract entered into between the assessee and various customers. Out of the transportation charges received under the aforesaid written contract, a substan tial portion has been paid to the various owners of the vehicles towards transportation charges. Though a ground is taken that such payment is not in excess of Rs. 20,000 and, therefore, there is no obligation to deduct TDS, the material on record discloses that total amount paid towards transportation charges is roughly about Rs. 79,45,225. In the absence of any particulars, it cannot be said that there was no liability to deduct tax on that score. Law does not stipu late the existence of a written contract as a condition precedent for payment of TDS. The contract may be in writing or it may be oral but the liability to pay tax arises when the recipient of the said amount receives payment in excess of Rs. 20,000. Second proviso to section 194C which is attracted to the facts of this case makes it very clear that when a individual or a Hindu undivided family whose total sales from the business or profession carried on by him in excess of the monetary limit specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the sub-con tractor, shall be liable to deduct Income-tax under the sub-section. It is not in dispute that the turnover of the assessee exceeds the monetary limit specified under clause (a) or clause (b) of section 44AB. Therefore, the liability to deduct tax arises under the said proviso to the sub-contractor from whom the vehicles are hired and the said amount payable to the sub-contractor is in excess of Rs. 20,000. Therefore, the three authorities have concurrently held that the transaction in question is a transport contract. The liability to deduct out of the money paid to the sub-contractors does arise. Immediately, TDS is not deducted and the said amount is not paid to the authorities. Therefore, the claim for deduction under section 40(a)(ia) is not attracted and the authorities were justified in disallowing the said deduction and treating the said amount as the income of the assessee and claiming tax on that amount."
7. It is submitted that the special leave petition preferred against the said judgment has been dismissed. In the light of the aforesaid judgment, the order of the Tribunal cannot be sustained. Accordingly, it is hereby set- aside. The material on record discloses that the said plea is only an alternative plea. It further shows that the TDS was deducted and paid to the Department belatedly. That was the reason for not allowing the deduction.
8. The learned counsel for the assessee submits that it has been paid within the time prescribed before the due date for filing the return, which is permissible in law. Unfortunately, none of the authorities have gone into this question. Therefore, it is necessary to remit the matter back to the assessing authority to find out whether the payment of TDS paid by the assessee is within the time prescribed under the law. If it is within time, then the assessee is entitled to the relief. Accordingly, we pass the following order :
(a) The appeal is allowed.
(b) Substantial questions of law are answered in favour of the Revenue and against the assessee.
(c) The matter is remitted back to the assessing authority to find out whether TDS payment is within time and the assessee is entitled for the benefit in accordance with law.
Ordered accordingly.