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Ballabh Das Agarwal, Versus Income Tax Officer

2015 (5) TMI 1066 - ITAT KOLKATA

TDS u/s 194C - payment to the truck owners - non deduction of tds - disallowance under section 40(a)(ia) - whether the assessee has duly received the Form No. 15-I from the t ruck owners but could not deposit the same before the ld. CIT(Appeals)? - Held that:- Restore the issue to the file of the Assessing Officer with the direction that the assesese shall file all these forms 15-I which has been received by him. The Assessing Officer will duly examine these forms and in case he finds that these .....

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Income Tax (Appeals)-XXXVI, Kolkata dated 02.08.2011 for the assessment year 2008-09 by taking the following revised grounds of appeal:- (I) For that ld. AO and CIT(A) failed to appreciate that payment to the truck owners, by the appellant was not made under any sub-contract requiring deduction of tax at source under section 194C of I.T. Act, 1961 resulting in disallowance under section 40(a)(ia) of the said Act and thus the addition of ₹ 1,28,20,814/- is not legal and valid. (II) For that .....

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6/- allowed by AO was not legal and valid. (IV) For that ld. CIT(A) was not justified in upholding the charging of interest of ₹ 13,86,714/- under section 234B of I.T. Act, 1961. 2. We have heard the rival submissions and carefully considered the same along with the order of tax authorities below. We noted that the assessee is engaged in the business of transport of goods belonging to business houses. The assessee during the previous year incurred an expenditure of ₹ 1,31,04,000/- to .....

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(ia) and disal lowed the same. 3. The provisions of section 40(a)(ia) are very clear i f the assessee fails to deduct the tax at source or after deduction has not paid before the due date specified in sub-section (1) of section 139, the same will not be allowed in computing the income under the head profit and gains of business or profession . The contention of the assessee, however, is that the provisions of section 194C are not applicable on the facts as there is no agreement or contrac t betw .....

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r or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub .....

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g the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from th .....

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ll be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particul .....

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using accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act .....

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year in which such sum is credited or paid to the account of the contractor; (ii) goods carriage shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE; (iii) contract shall include sub-contract; (iv) work shall include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or .....

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ng out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person is requi red to deduct tax at source under sect ion from the amounts so paid or payable. There is no doubt that the assessee in this case has made the payment s as transportation charges in the nature of hiring charges for goods carried vehicles. The main contention of the assessee is, however, that the payment s have not been made in pursuance of a cont .....

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not stipulate the existence of a written contract as a condition precedent for (invoking the provisions of Section 194 C with respect to) payment of TDS . The transporters have received the payments from the assessee towards the t ransportation charges, therefore, the presumption normally be that one would proceed on the basis that there was a contract for hiring of goods carried vehicles. Therefore, if the assessee has made the payment for hiring the goods carried vehicles, the provisions of se .....

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ot be in writing. It may infer from the conduct of the parties. It may be oral also. Our aforesaid view is duly supported by the decision of ITAT, A Bench, Kolkata in the case of DCIT -vs.- Kamal Kr. Mukherjee & Co. in ITA No. 199/Kol/2010. We also noted that under section 194C, subsect ion (5) proviso thereto, the aggregate amount of all the payments or credited should exceed only ₹ 50,000/-, then the assessee shall be liable to deduct income-tax at source. 5. But before us, the ld. A .....

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d paid tax, and, therefore, he took the plea that the second proviso although inserted w.e.f. 1s t April, 2013 but being curative in nature has retrospective effect and accordingly contended that the issue be restored to the file of the Assessing Officer so that the assessee can provide all the detail s in terms of the second proviso to section 40(a)(ia). 6. We find force in the said submission of the ld. A.R. We noted that the submissions of the ld. A.R. are duly covered by the decision of this .....

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o supply an obvious omission, take care of an unintended consequence and make the section workable. Section 40(a)(ia) without the second proviso resulted in the unintended consequence of disallowance of legitimate business expenditure even in a case where the payee in receipt of the income had paid tax. According to him, it has for long been the legal position that if the payee has paid tax on his income, no recovery of any tax can be made from the person who had failed to deduct the income tax .....

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yees concerned directly, there cannot be any question of further realisation of tax as the same income cannot be taxed twice. If the tax has been realised once, it cannot be realised once again, but that does not mean that the assessee will not be liable for payment of interest or any other legal consequence for their failure to deduct or to pay tax in accordance with law to the revenue. (emphasis supplied) That such was the legal position was accepted by the Central Board of Direct Taxes in its .....

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paid the tax, no recovery can be made from the person responsible for paying of income from which he failed to deduct tax at source. In a case where the deductee/payee has paid the tax on such income, the person responsible for paying the income is no longer required to deduct or deposit any tax at source. In the similar circumstances, I find that the first proviso to section 40(a)(ia) inserted by the Finance Act, 2010, which has been held to be curative and therefore, retrospective in its oper .....

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ax and as such the person responsible for paying is no longer required to deduct or pay any tax, legitimate business expenditure would stand disallowed since the situation contemplated by the first proviso viz. deduction and payment of tax in a subsequent year would never come about. Such unintended consequence has been sought to be taken care of by the second proviso inserted in section 40(a)(ia) by the Finance Act, 2012. There can be no doubt that the second proviso was inserted to supply an o .....

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specified payments at the specified rates if the payment exceeds specified threshold. In case of non-deduction of tax in accordance with the provisions of this Chapter, he is deemed to be an assessee in default under section 201(1) in respect of the amount of such non-deduction. However, section 191 of the Act provides that a person shall be deemed to be assessee in default in respect of non/short deduction of tax only in cases where the payee has also failed to pay the tax directly. Therefore, .....

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ty as to when it can be said that payer has paid the taxes directly. Also, there is no clarity on the issue of the cut-off date, i.e., the date on which it can be said that the payee has discharged his tax liability. In order to provide clarity regarding discharge of tax liability by the resident payee on payment of any sum received by him without deduction of tax, it proposed to amend section 201 to provide that the payer who fails to deduct the whole or any part of the tax on the payment made .....

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e shall be deemed to be the date on which return has been furnished by the payer. It is also proposed to provide that where the payer fails to deduct the whole or any part of the tax on the payment made to a resident and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the such resident, the interest under section 201(1A)(i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such reside .....

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ssion, brokerage, professional fee, etc. due to non-deduction of tax. It has been provided that in case the tax is deducted in subsequent previous year, the expenditure shall be allowed in that subsequent previous year of deduction. In order to rationalize the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, it is proposed to amend section 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section .....

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April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. 7. No contrary decision was brought to our knowledge by the ld. D.R. By respectfully following the said decision, we restore this issue to the file of the Assessing officer with the direction that the assessee shall provide all the details to the Assessing Officer with regard to the recipients of the income and taxes paid by them. The Assessing Officer shall carry out necessary ve .....

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efore the ld. CIT(Appeals). We noted that Hon ble ITAT, F Bench, Mumbai in the case of Shri Vipin P. Mehta -vs.- ITO in ITA No. 3317/Mum/2010 vide order dated 20.05.2011 on the similar issue has held as under:- "6. We have carefully considered the fact s and the rival contentions. Section 194A provides for deduction of tax from the interest paid by the assessee at the appropriate rate. Section 197A(1A) provides that notwithstanding anything contained in section 194A no deduction of tax shal .....

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tion submitted by the payee of the interest to the assessee on or before the seventh day of the month next following the month in which the declaration was furnished to him. If the person responsible for paying the interest (i.e. the assessee) does not comply with sub-section 2 of section 197A, he is liable to pay penalty of ₹ 100/- for every day during which the failure continues. Such penalty can be imposed only by the Commissioner or Chief Commissioner of Income Tax as stat ed in clause .....

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nterest under section 194A, and in the light of these declarations he had no option but to make the payment of interest without any tax deduction. If the claim is true then the contention must be accepted because under sub-section (lA) of section 197A, if such a declaration is filed by the payee of interest no deduction of tax shall be made by the assessee. The revenue authorities have doubted the assessee's version because according to them it is only when the Assessing Officer proposed the .....

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de. Without disproving the assessee's claim on the basis of other evidence e xcept by way of inference, it would not be fair or proper to discard the claim. The Assessing Officer has not recorded any stat ements from the payees of the interest to the effect that they did not file any declarations' with the assessee at the appropriate time or to the effect that they filed the declarations only at the request of the assessee in September/October, 2008. In the absence of any such direct evi .....

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ons filed by the loan cr editors and he was not expected to embark upon an enquiry as to whether the loan creditors really and in truth have no taxabl e income on which tax is payable. That would be putting an impossible burden on the assessee. Thai apart sub-section IA of Section 197A merely requires a declaration to be filed by the payee of the interest and once it is filed the payer of the interest has no choice except to desist from deducting tax from the interest. The sub-section uses the w .....

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to section 192, but which provides in sub-section (1A) that if the payee of the interest has filed the prescribed form to the effect that he is not liable to pay any tax in computing his total income, the payee shall not deduct any tax. The subsection does not impose any obligation on the payer to find out the truth of the declarations filed by the payee. Even if the assessee has delayed the filing of the declarations with the office of the CIT/CCIT (TDS) within the time limit specified in subs .....

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on the part of the assessee, who is the payer of the interest, to file the declarations given to him by the payees of the interest, within the time limit specified in subsection (2) to section 197 A is distinct and separate and merely because there is a failure on the part of the assessee to submit the declarations to the income-tax department within the time limit, it cannot be said that the assessee did not have declarations with him at the time when he paid the interest to the payees. That w .....

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