2017 (8) TMI 1436 - HC - Income Tax

TDS u/s 194C - difference between the amounts shown by the assessee and the IRCTC in their books of accounts - Held that - In plain terms section 194C does not cover the present situation where the assessee was making payment of licence fee to the IRCTC for catering service. In that view of the matter we see no reason to interfere. However this may not be seen as our confirmation of the Tribunal s view that IRCTC was a government body and therefore also requirement of deducting tax at source did not arise or that proviso to sub-section (1) of Section 201 may have retrospective effect. See PR. COMMISSIONER OF INCOME TAX-6 VERSUS HAKMICHAND D AND SONS 2017 (10) TMI 484 - GUJARAT HIGH COURT

Summary

Issues:
1. Reopening of assessment within four years from the end of the assessment year.
2. Deducting tax at source on payments made by the assessee to IRCTC.
3. Applicability of Section 194C of the Income Tax Act.
4. Disallowance under section 40(a)(ia) of the Act.

The High Court considered the tax appeals filed by the Revenue challenging the Income Tax Appellate Tribunal's judgment. The first issue revolved around the reopening of the assessment within four years from the end of the assessment year. The Court noted the lack of clarity on whether the deduction of tax at source by the assessee on payments to IRCTC was examined during the scrutiny assessment. However, in a separate order related to the same assessee, the Court observed that the provisions of Section 194C of the Act, which require the deduction of tax at source on payments to contractors, did not apply in the present case. The Court agreed with the Tribunal's view that Section 194C would apply when a contractor pays a contractee, not vice versa. As the payment in question was made by the contractee to the contractor, Section 194C was deemed inapplicable. The Court dismissed the tax appeals on this ground.

The second issue pertained to the deducting tax at source on payments made by the assessee to IRCTC. The Court analyzed the nature of the payment, which was a license fee for catering services, and concluded that the provisions of Section 194C did not cover the situation where the assessee made payments to IRCTC. The Court upheld the Tribunal's decision, stating that there was no requirement to interfere. However, the Court left open the questions regarding whether IRCTC was a government body and the retrospective effect of certain provisions.

Regarding the third issue, the Court addressed the disallowance under section 40(a)(ia) of the Act. The Tribunal had deleted the disallowance, which was confirmed by the CIT(A). The Court noted that the confirmed disallowance was in respect of the difference between the amounts shown by the assessee and IRCTC in their books of accounts. Ultimately, the Court dismissed the tax appeals based on the grounds discussed, providing detailed reasoning and analysis for each issue raised in the appeal.

In conclusion, the High Court's judgment provided a comprehensive analysis of the issues raised in the tax appeals, focusing on the reopening of assessment, deduction of tax at source, applicability of Section 194C, and the disallowance under section 40(a)(ia) of the Act. The Court's decision was based on a thorough examination of the relevant provisions of the Income Tax Act and the specific circumstances of the case, ultimately leading to the dismissal of the tax appeals.