TMI Blog2019 (3) TMI 1251X X X X Extracts X X X X X X X X Extracts X X X X ..... is in receipt of PAN and has not deducted TDS, it has complied with the first statutory obligation cast upon him and the assessee cannot be penalized for non-deduction of TDS. The provisions of section 40(a)(ia) which are deeming fiction relating to non-deduction of TDS have to be read in the limited context of non-deduction of TDS and the same cannot be extended to ensure that even where the assessee complies with his statutory obligation not to deduct TDS on receipt of PAN, merely because the subsequent obligation in terms of filing of prescribed forms has not been complied with, the assessee should suffer thirty percent of disallowance of the expenditure. As decided in case of Soma Rani Ghosh Vs. DCIT [2016 (10) TMI 55 - ITAT KOLKATA] if the assessee complies with the provisions of section 194C(6), disallowance under section 40(a)(ia) does not arise just because there is violation of provisions of section 194C(7) - 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 as required by the learned CIT is required. Sections 194C(6) and Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f TDS envisages cross-linking of information regarding transporters with their PANs so that no income accruing to sundry transporters escapes assessment. The Assessing Officer further held that the leeway given in section 194C (6) is actually meant to be for the benefit of the small and medium transporters, who had to provide a declaration to the deductor prior to 01.10.2009, i.e., before amendment to the provisions of section 194C. Hence, the onus was upon the assessee firm to furnish the information it was entrusted to collect on behalf of the Income Tax Department from the transporters, to remain free from the clutches of provisions of section 40(a)(ia) of the Act. The Assessing Officer held that the assessee firm could not furnish the requisite information i.e. PAN of the transporter whose services it had availed along with the other applicable TDS returns within the prescribed time or even till date. It cannot be ascertained as to when the PANs were obtained by it from the transporters, whether it obtained PAN prior to making payments to transporters, or at the time of furnishing the reply to query raised by this office and the latter is circumstantially true. The assessee fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act is required to be made by the payee. The ld. CIT(A) finally held that the AO was not justified in applying the provisions of section 40(a)(ia) for non deduction of tax as the conditions mentioned in section 194C(6) have been satisfied and as far as assessee s non-compliance with the provision of section 194C(7) of the Act are concerned, there are penal provisions as per section 234E of the Act and 271H which will have to be followed as per law by the A.O. 4. Against the aforesaid findings of the ld CIT(A), the Revenue is in appeal before us. During the course of hearing, the ld. DR vehemently argued the matter and submitted that provisions of section 194C(6) and 194C(7) are inter-dependent and given the non-compliance of filing of TDS returns by the assessee, the AO has rightly invoked the provisions of section 40(a)(ia) of the Act. Further, he relied on the finding of the Assessing Officer. 5. Per contra, the ld. AR supported the decision of the ld. CIT(A) and reiterated the submissions made before the ld CIT(A). The ld AR submitted that provisions of section 194C(6) and 194C(7) are not inter-dependent and given the non-compliance of filing of TDS returns by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be deducted at source- (i) on the invoice value excluding 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 the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed 84 [thirty] thousand rupees : Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds 85 [one lakh] rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in receipt of PAN and has not deducted TDS, it has complied with the first statutory obligation cast upon him and the assessee cannot be penalized for non-deduction of TDS. The provisions of section 40(a)(ia) which are deeming fiction relating to non-deduction of TDS have to be read in the limited context of non-deduction of TDS and the same cannot be extended to ensure that even where the assessee complies with his statutory obligation not to deduct TDS on receipt of PAN, merely because the subsequent obligation in terms of filing of prescribed forms has not been complied with, the assessee should suffer thirty percent of disallowance of the expenditure. A similar view has been held by the Coordinate Bench in case of Soma Rani Ghosh (supra) wherein it was held as under: 25. Next ground of disallowance stated by the learned CIT is that Sec. 194C(6) and 194C(7) are to be read together, and if after obtaining PAN from the Transporters, the requisite particulars so obtained from the Transporters are not furnished to the prescribed Authority as provided U/S 194C(7), deduction and for that matter disallowance, U/S 194C and 40(a)(ia) would get attracted. On this aspect, as indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on production of a declaration to the person concerned paying or crediting such sum, in the prescribed form and verified in the prescribed manner and within such time as may be prescribed, if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year: Provided also that the person responsible for paying any sum as aforesaid to the sub- contractor referred to in the second proviso shall furnish to the prescribed income-tax authority or the person authorised by it such particulars as may be prescribed in such form and within such time as may be prescribed; or] 194C as Amended by Finance Act, (N0.2) 2009 (6) 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, 1 [ where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with ], his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of applicability of section 40(a)(ia) would arise. Despite such circumstances existing, sub-section (3) makes exclusion in cases where such liability would not arise. We are concerned with the further proviso to sub- section (3), which provides that no deduction under sub-section (2) shall be made from the amount of any sum credited or paid or likely to be credited or paid to the sub-contractor during the course of business of plying, hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum in the prescribed form and verified it in the prescribed manner within the time as may be prescribed, if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year. (7) The exclusion provided in sub-section (3) of section 194C from the liability to deduct tax at source under sub-section (2) would thus be complete the moment the requirements contained therein are satisfied. Such requirements, principally, are that the sub-contractor, recipient of the payment produces a necessary declaration in the prescribed format and further that such sub-contractor does not ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as under:- 'Section 40 (a)(ia) and Section 194C(3) of the Act reads thus: Section 40(a)(ia) : Any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub- section(i) of Section 139 . Section 194C/3): No deduction shall be made under sub-section (1) or sub- section(2) from - (i) the amount of any sum credited or paid or likely to be credited or paid to the account of or to the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the ITAT, Ahmedabad Bench in Valibhai Khanbhai Mankad's case (supra) and the said Judgment has been upheld by the High Court of Gujarat reported in (2013) 216 Taxman 18 (Guj) wherein it is 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. The Tribunal, placing reliance on the judgment of the ITAT, Ahmedabad Bench, has dismissed the appeal filed by the Revenue. We agree with die said propositions and hold that filing of Form No.15I/j is only directory and not mandatory.' 31. A Coordinate Bench of this Tribunal in ITA No. 86/VIZ/2013 in the case of ITO v. Kolli Bros, dated 11.12.2013 followed the decision of the Hon'ble High Court of Gujarat in the case of Valibhai Khanbhai Mankad (supra). In the case of Mahalaxmi Cargo Movers v. ITO [IT Appeal No. 6191 (MUM) of 2013, dated 09.12.2015], another Coordinate Bench of this Tribunal reached the same conclusion while following the decision of the Coordinate Bench in the case of Valibhai Khanbhai Mankad (supra) and Sri Marikamba Transport Co. (supra). 32. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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