[2016] 74 taxmann.com 90 (Kolkata – Trib.) Soma Rani Ghosh vs. DCIT A.Y.: 2012-13 Date of Order: 9th September,2016

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.