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2017 (1) TMI 325 - ITAT HYDERABAD

2017 (1) TMI 325 - ITAT HYDERABAD - TMI - TDS u/s 194C - non deduction of tds on payments towards freight charges - Held that:- The assessee categorically submitted that the payment was made to M/s. Exim Services towards freight charges that too for carriage of goods by rail. This claim of the assessee is not disputed by the tax authorities except stating that the payment is not made directly to the railways but to the Agent. - In our considered opinion the opening part of Section 194C refe .....

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is meant for meeting the expenditure in the form of payment to the railways, it stands excluded from the provisions of Section 194C of the Act. Under these circumstances, we accept the plea of the assessee by holding that there was no need to deduct tax at source with respect to the impugned payment to the contractor. - - As in the case of ACIT, Central Circle-2, Hyderabad vs., M/s. Janapriya Properties Pvt. Ltd., Hyderabad [ 2015 (1) TMI 1208 - ITAT HYDERABAD] Section 40(a)(ia) cannot be .....

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grounds were urged before us : 1. The order of the Ld. CIT(A) confirming the order of the A.O. is erroneous both on law and in facts to the extent it is prejudicial to the assessee. 2. The Ld. CIT(A) erred in holding that provisions of section 194C is attracted even to the payments that are made to Railways through its agent and thereby erred in confirming the disallowance of ₹ 24,39,086 made u/s.40(a)(ia). 3. The Ld. CIT(A) failed to appreciate the fact that what is paid as railway freigh .....

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erred in confirming the disallowance. 5. Without prejudice to the above, the Ld. CIT(A) ought to have appreciated the fact that the amounts were already paid and were not payable and further the A.O. cannot hold the assessee as assessee in default u/s.201 and hence the provisions of section 40(a)(ia) are not attracted and thereby ought to have allowed the appeal on that count. 6. Any other ground that may be urged at the time of hearing. 2. Before going into the issue on hand it is necessary to .....

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made to a contractor for carriage of goods by rail is excluded from the provisions of Section 194C of the Act. 3. The A.O. as well as the CIT(A) rejected the contention of the assessee on the ground that the assessee engaged an Agent for transport of the material and thus the payment has to be treated as payment to the Agent and not to the railway authorities. Accordingly, the A.O. invoked the provisions of Section 194C of the Act and treated the assessee as in default. Consequently, disallowanc .....

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to the payment made to the contractors but when it is for transport of goods by rail it carves out an exception and thereby, there is no need for the assessee to deduct tax at source on payments made to the contractors. (b) In the alternative, it was submitted that the payment having already been made by the assessee Section 40(a)(ia) do not come into play since it applies only when an amount is payable . On this aspect the Learned Counsel appearing on behalf of the assessee, relied upon the dec .....

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der : 5. Having regard to the direction given by the Hon'ble High Court, the matter was posted for hearing. The learned counsel appearing on behalf of the assessee placed before us the following orders of the ITAT to submit that the Hon'ble Allahabad High Court in its decision in the case of CIT V/s. Vector Shipping Services Pvt. Ltd. (357 ITR 647) has taken a view on the issue in favour of the assessee in consonance with the view taken by the ITAT Visakhapatnam Special Bench in the case .....

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) Decision of Mumbai Bench A of the Tribunal in M/s. Arcadia Share & Stock Brokers Pvt. Ltd., Mumbai V/s. Dy. Commissioner of Income-tax, Range 4(1), Mumbai (ITA No.1871/Mum/2013 dated 22.12.2014) 6. The Learned Departmental Representative fairly agreed that the ITAT Hyderabad Bench considered an identical issue and followed the decision of the Special Bench in the case of Merylin Shipping and Transport (supra). 7. Upon hearing the rival submissions, we are of the view that the decision of t .....

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insofar as the above issue is concerned, are hereby dismissed. 5. On the other hand, the Ld. D.R. submitted that Section 194C would not be attracted only when the payment is made directly to the railways and not to the payment made to a middlemen. He also submitted that if tax has to be deducted at source, in the event of nonpayment of such TDS, Section 40(a)(ia) automatically comes into operation and also submitted that the Hon ble Calcutta High Court had taken a different view on this matter .....

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