Rakesh Garg, J. - (1.) THE Revenue has filed the present appeal under Section 260A of the IT Act, 1961 (hereinafter referred to as the 'Act'), against the order dt. 26th Dec, 2006, passed by the Tribunal, Delhi Bench "I", New Delhi, in TDS No. l27/Del/2004 and has sought to raise the following substantial question of law: Whether on the facts and in the circumstances of the case, the learned Tribunal was right in law in upholding the order of the CIT(A), deleting the demand created by the AO under Section 201(1) and 201(1A) of the IT Act, 1961, as the assessee failed to deduct tax at source as per the provisions of Section 194C of the Act?
(2.) THE assessee is a limited company engaged in the business of manufacture and export of rice. During the course of export activity, rice was transported from Samana Bahu to Kandla Port. Whenever there was need for transportation of goods from business premises to Kandla Port, the assessee used to engage trucks through transporters. These trucks were provided by the transporters who were having links with the truck operators and their consideration for providing such services was about Rs. 200 per truck. This consideration was charged by the transporter from the truck owners/operators. The hire charges were paid by the assessee directly to the truck owners/drivers or through transporters. The assessee was also maintaining records regarding ownership of the truck, registration number, photo of drivers etc. There was no repetition of payments to the same truck owners or truck operators for any specified period. Thus, there was no contract with any of the local transporters or truck owners. In case of non -availability of trucks with any of the local transporters or truck owners at the place of assessee's business at Pipli, the assessee used to arrange these trucks from Delhi, for which services of M/s East West Cargo Movers, New Delhi, were availed. This concern was arranging trucks, trailers for transportation of goods of the assessee. Under these situations, payment was made to the truck operators by the East West Cargo Movers on behalf of the assessee, and the assessee in turn reimbursed the amount of M/s East West Cargo Movers. In each case, the payment was less than Rs. 20,000. During the course of assessment under Section 143(3) of the Act, separate GR/bills/documents were obtained showing therein the weight, amount, destination, truck number, etc. Each GR value i.e., transportation charges to Kandla Port were of the value less than Rs. 20,000 each and that the assessee should have deducted tax at source on the amount paid to M/s East West Cargo Movers. The AO also found that similar payment has been made by the assessee to another clearing and forwarding agent, namely, Leeladhar Pasoo Forwarders (P) Ltd. and to some of the transporters but no tax has been deducted at source under Section 194C of the Act. He, therefore, treated the assessee in default for short deduction of tax at Rs. 2,18,230 under Section 201 of the Act and also levied interest under Section 201(1A) of the Act.
(3.) AGGRIEVED against this order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for short the 'CIT(A)'] which was allowed partly vide order dt. 27th Feb., 2004. In his order the CIT(A) observed that there was neither any oral nor written agreement between the assessee and these transporters or clearing agents for carriage of the goods and that it has not been proved that any money regarding freight charges was paid to them, in pursuance of a contract for specific period, quantity or price. He, therefore, held that the assessee was not liable to deduct any tax on the freight charges paid to truck owners/operators. However, in respect of other payments made by the assessee to these two concerns, the CIT(A) upheld the order of the AO regarding liability of the assessee for deduction of tax. Accordingly, he recomputed the short deduction of tax and interest thereon.;