COMMISSIONER OF INCOME TAX Vs. GREWAL BROTHERS

JUDGEMENT

(1.) THIS appeal has been preferred by the Revenue under S. 260A of the IT Act, 1961 against order dt. 29th Jan., 2010 passed by the Tribunal, Chandigarh Bench 'A', Chandigarh in ITA No. 883/Chd/2009, for the asst. yr. 2006-07, claiming following substantial questions of law :

(2.) THE assessee is engaged in business of transport. It entered into a contract with Hindustan Petroleum Products and Indian Oil Corporation for carriage of LPG. From the payment made to it, the companies deducted tax. The assessee firm passed on the transportation work to its partners and made the payment received from the said companies to its partners after deducting 3 per cent commission as charges for the firm having secured the contract. The AO held that in giving of the contract of transportation by the firm to the partners there was a sub-contract and the firm was liable to deduct TDS out of the payment made to the partners as sub-contractors in absence of which the payment made to the partners was liable to be disallowed. On appeal, the CIT(A) upheld the plea of the assessee that there was only one contract of transportation to be executed by the partners for the companies and the firm only acted as an agent for securing the contract and earned 3 per cent commission and thus, there was no separate sub-contract between the firm and the partners. This view has been upheld by the Tribunal as under :

(3.) LEARNED counsel for the Revenue submits that since the firm and the partners were separate persons under the IT law and had separate income, the firm was liable to deduct tax on payment made to its partners as sub-contractors. There was a deemed oral agreement between the firm and the partners for execution of transportation contract by the partners and thus mere fact that the companies had made deduction of tax from the payment made to the firm was no justification for the firm for not deducting tax from the payment made to the partners who were in fact executing the work as sub-contractors.