Sections 40(a)(ia), 194C – Since the assessee had, in the
course of assessment proceedings, submitted to the AO PAN and addresses of the transporters,
in respect of whose payments tax was not deducted at source, disallowance u/s.
40(a)(ia) is not called for.
Facts
The assessee,
an individual, carried
on proprietary export business in
export of Chemical, Surgical and Clinical
Goods. During the previous
year relevant to the assessment year under consideration
the assessee incurred transport charges by way of lorry hire Charges, both in relation to Purchases,
referred to as Carriage inward, and exports to Bangladesh referred to as
Carriage outward.
The
Assessing Officer (AO) on the premise that the assessee was required to deduct
tax at source under the provisions of section 194C of the act disallowed the
expenses of rs.1,63,78,648/- claimed towards Carriage inward and rs.1,13,00,980/- claimed as Carriage
outward by invoking the provisions of
section 40(a)(ia) of the act, since the
assessee had not deducted tax at source.
Aggrieved, the
assessee preferred an
appeal to the CIT(A) and contended
that because of
the provision of section 194C(6),
she was not liable to deduct tax at source on payments to transporters who had
submitted their Pan, and those details
of Pan and addressees of the transporters
were filed during the course of scrutiny assessment before the AO.
Aggrieved,
the assessee preferred
an appeal to the
CIT(A), who upheld the action of the AO.
Aggrieved, the
assessee preferred an
appeal to the Tribunal.
Held
The
Tribunal noted that the CIT(A) had
dismissed the appeal of the assessee on the ground that the assessee is a
contractor making payments to the transporter for carrying of goods and was
thus liable to deduct TDS on such payment. According to the CIT(A), section
194C(6) will not apply to payments made by a person who himself is not a transporter,
to another sub-contractor for plying, hiring or leasing goods carriage.
Further, the CIT(A) Held that provisions
of section 194C(6) and 194C(7) have to be read together and the benefit u/s.
194C (6) is available only when the assessee fulfils the conditions laid down
in s/s. 194C(7) of the act.
The
Tribunal Held that –
(a) in the context of section 194C (1), person
undertaking to do the work is the contractor and the person so engaging the
contractor is the contractee;
(b) by
virtue of the
amendment introduced by the
finance (no.2) act 2009, the distinction
between a contractor and a sub-contractor has been done away with and
clause(iii) of explanation u/s. 194C(7) now clarifies that contract shall
include sub-contract;
(c) subject to compliance with the provisions of
section 194C (6), immunity from TDS u/s. 194C (1) in relation to payments to
transporters applies transporter and non-transporter contractees alike;
(d) u/s. 194C (6), as it stood prior to the
amendment in 2015, in order to get immunity from the obligation of TDS, filing
of PAN of the payee transporter alone is sufficient and no confirmation letter
is required;
(e) Section 194C (6) and section 194C (7) are
independent of each other and cannot be read together to attract disallowance
u/s. 40(a) (ia) read with section 194C; and
(f) if
the assessee complies
with the provisions
of section 194C(6), no disallowance u/s. 40(a)(ia) is permissible, even
there is violation of the provisions of section 194C(7).
Therefore,
the payments made by the assessee to the transporters for carriage inward and
carriage outward were not disallowable u/s. 40(a)(ia).
The
Tribunal allowed the appeal filed by the assessee.