TMI Blog2019 (12) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent : Shri SHRI Sunil Kumar Agarwal, Addl. CIT ORDER Per B.R. Baskaran,Accountant Member The appeal filed by the assessee is directed against the order dated 31-07-2018 passed by Ld CIT(A)-3, Bengaluru and it relates to the assessment year 2015-16. The assessee is aggrieved by the decision of Ld CIT(A) in partially confirming the disallowance made by the AO u/s 40(a)(ia) of the Act. 2. The facts relating to the issue are set out in brief. The assessee has undertaken a transport contract for transportation of two wheelers from M/s Honda Motorcycle and Scooter India P Ltd and received a sum of ₹ 15.57 crores during the year under consideration. For carrying out the transportation business, it had hired vehicles from a concern named M/s SFIC Logistics P Ltd and paid a sum of ₹ 14.95 crores as transport charges. The assessee obtained Permanent Account Number (PAN) of M/s SFIC Logistics P Ltd and accordingly it did not deduct tax at source from the payments made to the above said company. The case of the assessee was that it is not required to deduct tax at source in terms of sec.194C(6) of the Act, if it obtains PAN of the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leasing goods carriages. However, if they furnish a statement that they do not own more than two goods carriages tax is not to be required deducted at source. Transport operators are reporting problem in obtaining TDS certificates 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. B) 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 TDS (as they have quoted PAN) will be required to intimate these PAN details to the Income tax Department in the prescribed format. Based on the above said Circular, Ld CIT(A) also took the view that the provisions of sec.194C(6) shall apply only to those transport operators who are covered by the provisions of sec.44AE of the Act. The Ld CIT(A) also expressed the view that the provisions of sec.194C(6) shall apply only to individual owners of goods carriages, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not owning more that? 10 goods carriages at any time during the previous year) and who has also furnished a declaration to this c/fret along with his PAN. to the person paying such sum. 43.4 Further, this exemption from TDS is applicable only in respect of transport charges received by plying, hiring or leasing of goods carriages (s) owned by the transporter. There/ore, if a person receives payment in respect of plying, hiring or leasing of goods carriage (s) which are not owned by him, he shall not be entitled to claim exemption from TDS in respect of these payments. 43.5 The condition of not owning more than ten goods' carriages by the transporter is required to be fulfilled on the dale on which the amount is credited or paid whichever is earlier. In case a transporter does not own ten goods carriages on the date on which the amount is credited or paid but becomes owner of ten goods carriages later in the previous year, the payer shall not be required to deduct tax from the payment made to the transporter during the period of the previous year when he was not mining more than ten goods- carriages. However, the tax shall be required to be deducted from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, 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 authorized by it such particulars as may be prescribed in such form and within such time as may be prescribed. 7. The legislature brought amendment in sec. 194C of the Act w.e.f. 1.10.2009 through Finance (No.2) Act, 2009 by replacing then existing section with new section. The following sub-sections of new section 194C are relevant here: - 194C(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 , on furnishing of his Permanent Account Number, to the person paying or crediting such sum. 194C(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods carriage shall have the meaning assigned to it in section 2 of Motor Vehicles Act, 1988 (59 of 1988); (b) an assessee, who is in possession of a goods carriage,whether taken on hire purchase or on instalments and for which the whole or part of the amount payable is still due, shall be deemed to be the owner of such goods carriage. So far as section 194C is concerned, only the definition of goods carriage as given in sec.44AE is required to be considered. Hence the restriction placed under section 44AE of the Act on the number of vehicles, in our view, should not be invoked or applied for the purposes of sec.194C of the Act. The restriction so placed in section is applicable only to transport operators for computing profits and gains of business of plying, hiring or leasing goods carriages. 12. The Ld A.R placed his reliance on the decision rendered by Kolkatta bench of Tribunal in the case of Soma Rani Ghosh vs. DCIT (2016)(48 CCH 59). We notice that the Kolkatta bench of Tribunal has also considered an identical issue in the above said case and has expressed its view as under:- 24 The Circular, while referring to the amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise in the facts and circumstances of the case. 14. The ld CIT(A) has also referred to sec.194C(7) of the Act, which required filing of a Statement of deduction of tax at source (Form 26Q) as per rule 31A(4)(vi) of Income tax Rules. Though the Ld CIT(A) did not discuss about the requirement of sec.194C(7), as he had rejected the benefit given u/s 194C(6) of the Act. 15. In the case of Soma Rani Ghosh (supra), the Kolkatta bench of Tribunal has also discussed about the effect of non-compliance of sec.194C(7) vis- -vis sec.40(a)(ia) of the Act as under:- 30. In CIT -vs.- Sri Marikamba Transport Co. in ITA No. 553 of 2013 reported in 39 ITR 129 (Karn.), Hon'ble Karnataka High Court has formulated a question as to whether non-filing of Form No. 151/i 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns make it clear that if there is any breach of requirements of Section 194C(3), the question of applicability of Section 40(a)(ia) arises. The exclusion provided in Sub-Section(3) of Section 194C from the liability to deduct tax at source under subsection( 2) would be complete, the moment the requirements contained therein are satisfied. Once, the declaration forms are filed by the subcontractor, the liability of the assessee to deduct tax on the payments made to the sub-contractor would not arise. As we have examined, the sub-contractors have filed Form No. iS! before the assessee. Such being the case, the assessee is not required to deduct tax under Section 194C(3) of the Act and to file Form No.15]. It is only a technical defect as pointed out by the Tribunal in not filing Form No.15J by the assessee. This matter was extensively considered by 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 t: deduct tax at source would cease and accordingly, app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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