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2016 (12) TMI 244 - ITAT NAGPUR

2016 (12) TMI 244 - ITAT NAGPUR - TMI - TDS u/s 194C - demands raised u/s 201/201(1A) - payments made by the assessee towards Carriage Inward and Carriage Outward - Held that:- TDS is not to be deducted from the payment made to transporters who furnished PAN. The Assessing Officer has wrongly interpreted that this provision is applicable to tax deducted by assessee who are engaged in transport business. This in my considered opinion is an erroneous interpretation not sustainable in law. In my co .....

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.T.A. Nos. 320 to 323/Nag/2015, I.T.A. Nos. 314 & 315/Nag/2015 - Dated:- 23-11-2016 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER For The Appellant : Shri A.R. Ninawe. For The Respondent : Shri Rajesh Loya.., Shri Rakesh Joshi, Shri K.P. Dewani ORDER. PER BENCH: These are appeals by the Revenue against respective orders of learned CIT(Appeals) for the concerned assessment years. Since the issues are connected, the appeals were heard together and these are being di .....

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₹ 1,70,89,532/- for A.Y 2012-13 raised u/s 201/201(lA) of the Act? 2. Whether on the facts and circumstances of the case, the Ld.CIT(A) is justified in not appreciating that the phrase in section 194C(6) "during the course Of plying, hiring and leasing of goods carriages" does not apply to contractor only but to both the parties i.e. Principal as well as contractor?' 3. Whether on the facts and circumstances of the case, the Ld.CIT(A) is justified in holding that only contra .....

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ments to transporters? 5. Whether on the facts and circumstances of the case the Ld.CIT(A) is justified in not appreciating that by virtue of amendment to section 194C (6) w.e.f. 1- 6-2015 an exemption has been provided to transporters ownin9 up to 10 goods carriages and prior to that date, there was no exemption provided u/s 194C (6) of the Act from TDS to any person? 6. Whether on the facts and circumstances of the case the Ld.CIT(A) is justified in not appreciating the fact that the circular .....

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stified in not appreciating the ruling of 1st proviso to section 201(1) and holding that onus is on revenue to demonstrate that taxes have not been recovered from the person who had primary liability to pay tax i.e. contractor? 9. Whether on the facts and circumstances of the case the Ld.CIT(A) is justified in allowing the assessee's plea that the order u/s 201/201A passed is beyond time limit eventhough the said order is passed within the time limit, 3. Since the orders in these cases are s .....

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. It was explained by the assessee that as per the provisions of section 194C(6) and as per clear explanation provided in circular No. 5/2010 dated 03-06-2010 issued by CBDT with regard to explanatory notes to the provisions of Finance Act, 2009, the assessee was not required to make any TDS if the transporter PAN is quoted. 5. The AO considered the various submissions of the assessee and also considered the provisions of the relevant section of the Act and came to the conclusion that the paymen .....

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194C of the Act and was, therefore, directed to pay the tax amounting to ₹ 1,70,89,532/-, ₹ 2,06,05,896/-, ₹ 1,71,95,647/- and ₹ 93,87,054/- u/s 201(1) of the Act for Assessment Years 2012-13 to 2015-16 respectively. 6. Upon assessee s appeal, learned CIT(Appeals) elaborately considered the issue and deleted the addition holding as under : 6. I have considered the facts of the case and submissions of the appellant. There is substantial force in the submissions made. The l .....

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n 194C(3) by Finance Act, 2005 to the effect that no deduction of TDS shall be made from any payment to a sub-contractor during the course of business of plying, hiring and leasing of goods carriage, if such subcontractor is an individual who has not owned more than two goods carriage at any time during the previous year. The proviso reads as follows: Provided further that no deduction shall be made under subsection (2), teem the amount of any sum credited or paid or likely to be credited or pai .....

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ance Bill, 2005 clearly explained that the provision has been introduced to give relief to small individual sub-contractor transporters who do not own more than two trucks. Subsequently the existing section 194C of the Act was completely replaced with a new section 194C by Finance (No.2) Act, 2009 and a specific sub section (6) contained therein provided in respect of payments to transporters as follows : "(6) No deduction shall be made from any sum credited or paid or likely to be credited .....

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s his PAN. The explanatory memorandum of Finance (No.2) Bill, 2009 explains the legislative intent behind the provisions as follows : "b. Provisions for payments and tax deducted at source to transporters: Under Section 194C, tax is required to be deducted on payments to transport contractors engaged in the business of plying, hiring or leasing goods carriages. However if they furnish a statement that they do not own more than two goods carriages, tax is not to be deducted at source. Transp .....

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sporters without deducting TDS (as they have quoted PAN) will be required to intimate these PAN details to the Income Tax Department in the prescribed format. These amendments will take effect from the 1st day of October, 2009 and will accordingly apply to transaction on or after such date. 6.3 It is pertinent to note that the amended provisions of Act in this regard have been explained by CBDT vide circular No. 05 of 2010 dated 03-06-2010 being explanatory notes to the provisions of the Finance .....

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ertificates as these are not issued immediately by clients and they are not able to approach the client again as they may have to move across the country for their business. a. It is, therefore, the Act has been amended to exempt payments to transport operators (as defined in section 44AE) from the purview of TDS. However, this would only apply in cases where the operator furnishes his Permanent Account Number (PAN) to the deductor. Deductors who make payments to transporters without deducting T .....

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other transporters up to 31-03-2010. The plain reading of the section 194C(6) w.e.f. 1-10-2009 along with the above explanatory notes do not leave any confusion in this regard and it is clear that any payment made to a transporter (contractor) is exempt from TDS if such transporter (contractor) provides his PAN to the deductor and the deductor furnishes details of such payment and PAN to Income Tax Department in prescribed format. In the case of the appellant it is not disputed that the method .....

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lacing Finance bill 2015 in the Lok Sabha vide explanatory memorandum for Provisions relating to direct taxes. It has been clarified in Clause 43 that though the intention was to reduce the compliance burden on the small transporters while making amendment in 2009, however, the existing language of sub section (6) of section 194C of the Act does not convey the desired intention and as a result all the transporters, irrespective of their size, are claiming exemption from TDS under the existing pr .....

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eligible to compute income as per the provisions of section 44AE of the Act and who shall also furnish a declaration to this effect along with his PAN. 6.7 It may be noted that only amendment proposed in section 194C(6) is substitution of existing words "on furnishing of" by "where such contractor owns ten or less goods carriage at any time during the previous year and furnishes a declaration to that effect along with". The amendment does not alter any position with regards t .....

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rpretation of Ld. ITO while treating the appellant as "assessee in default" for non deduction of tax while making freight payment to transport operators is not as per law to the extent it not only interprets the provision in an erroneous manner but also contrary to legislative intent and binding CBDT Circulars. In view of the above, the order passed by Id. AO u/s 201(1) and 201(lA) of the Act, holding the appellant as "assessee in default" in respect of transport charges paid .....

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er : Further, it has to be noted that the appellant had provided complete details in respect of each of the transport operators including their invoices, PAN etc. and hence it had duly discharged the onus cast upon it and that it cannot be treated as an assessee in default till it is found that deductees had also failed to pay such tax directly It is evident that the details of all the persons from whom tax was required to be deducted was available on record before the Ld. A.O. and the onus was .....

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ul observation, it is clearly seen that the ratio laid down by the Hon ble ITAT, Agra Bench, Agra and Hon ble Karnataka High Court squarely applies to the facts in the case of the appellant. The details of all the persons from whom tax was required to be deducted at source are available on record and with the Ld. AO. The permanent account numbers (PANs) of such parties are alsos available before the ld. AO. Respectfully following the decision of Hon ble ITAT, Agra Bench, Agra as well as Hon ble .....

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₹ 93,87,054/- u/s 201(1) of the Act for AY 2012- 13, AY 2013-14, AY 2014-15 & AY 2015-16 respectively is held to be erroneous and is therefore directed to be deleted. These grounds are therefore allowed. 9. Against the above order, Revenue is in appeal before us. 10. We have heard both the counsel and perused the records. Learned D.R. relied upon the orders of the AO. He pleaded that the AO has rightly interpreted the provisions of section 194C that to avail the benefit extended by the .....

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of appeal raised in the said appeals were similar and the adjudication by the authorities below were also similar. Hence learned counsel submitted that when on identical issue this Tribunal has upheld the learned CIT(Appeals) order, the same may be followed. Learned counsel further placed reliance upon the ITAT Kolkata Bench decision in the case of Soma Rani Ghosh in ITA No. 1420/KOL/2015 vide order dated Sept. 9, 2016. It was submitted that similar issue was also considered in the said appeal .....

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s. In this regard I may gainfully refer to section 194C(6) as under : No deduction shall 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, [where such contractors own ten or less goods carriages at any time during the previous year and furnish a declaration to that effect along with] his Permanent Account Number, to the person paying or creditin .....

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nterference. Accordingly I uphold the order of learned CIT(Appeals). 9. In the result, these appeals by the Revenue stand dismissed. Soma Rani Ghosh. (Head notes only). In CIT vs. Valibhai Khanbhai Mankad (Tax Appeal No. 1182 of 2011, order dated 01.10.2012), it is held by the Hon'ble Gujarat High Court at Ahmedabad that :- Section 194C, as already noticed, makes provision where for certain payments, liability of the payee to deduct tax at source arises. Therefore, if there is any breach of .....

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40(a)(ia) of the Act. (Para 29) In CIT vs. Sri Marikamba Transport Co. in ITA No. 553 of 2013 reported in 379 ITR 129 (Karn.), Hon'ble Karnataka High Court has formulated a question as to whether non-filing of Form No. 15I/J within the prescribed time is only a technical default or the provisions of section 40(a)(ia) of the Act are attracted and proceeded to answer the same. The combined reading of these two provisions make it clear that if there is any breach of requirements of Section 19,9 .....

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s held that once the conditions of Section 194C(3) were satisfied, the liability of the payee to deduct tax at source would cease and accordingly, application of Section 40(a)(ia) would also not arise. (Para 30) It is worth noticing that in ACIT -vs.- Mr. Mohammed Suhail, Kurnool in"ITA No. 1536.Hyd/2014, order dated 13.02.2015, the Coordinate Bench of this Tribunal specifically held that the provisions of section 194C(6) are independent of section 194C(7), and just because there is violati .....

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