2013 (10) TMI 1398 - AT - Income Tax

TDS u/s 194C - Demand u/s 201(1) - non deduction of tds - Held that - We are of the view that the assessing officer has failed to bring any material on record to show that the assessee is liable to deduct tax at source u/s 194C of the Act in respect of building construction. Under these circumstances in our view the Ld CIT(A) was not justified in confirming the demand raised u/s 201(1) and interest charged u/s 201(1A) of the Act in respect of building construction. The matter relating to deduction of tax at source from commission payments requires fresh examination at the end of the assessing officer. The Ld A.R also sought an opportunity to furnish necessary details before the AO. With regard to the rent payments also the Ld A.R sought an opportunity. Since the matter relating to the commission payments requires fresh examination in the interest of substantial justice the assessee may be given one more opportunity to furnish the details of rent payments also. Accordingly we set aside the orders passed by Ld CIT(A) in all the three years in respect of the above said two payments and restore them to the file of the assessing officer for making fresh examination. The assessee is also directed to furnish all the details that may be called for by the assessing officer failing which the AO is free to take decision on the basis of available facts.

Summary

Issues: Failure to deduct tax at source on commission payments, rent payments, and construction expenses.

Commission Payments:
The appellant, a transportation business, did not deduct tax at source from commission payments to franchisees as required by sec. 194H. The appellant argued that due to the nature of transactions, it was not feasible to deduct tax at source. The tribunal found a principal-agent relationship between the appellant and franchisees, requiring tax deduction based on the agreement terms. Lack of evidence and clarity led to the tribunal setting aside the order for fresh examination by the assessing officer.

Rent Payments:
The appellant failed to deduct tax at source on rent payments exceeding limits under sec. 194I. The tribunal noted the lack of evidence supporting the appellant's claim that payments to co-owners were within prescribed limits. The tribunal directed a fresh examination by the assessing officer with complete details provided by the appellant.

Construction Expenses:
The assessing officer presumed the appellant failed to deduct tax at source under sec. 194C for building construction expenses. However, the appellant contended that it self-constructed the building without engaging a contractor. Lack of evidence from tax authorities led the tribunal to set aside the demand raised under sec. 201(1) and interest charged under sec. 201(1A) for construction expenses.

Beneficial Amendment and Conclusion:
The appellant sought the benefit of a 2012 amendment to sec. 40(a)(ia) extended to sec. 201. The tribunal clarified that these provisions operate differently and the benefit was already available based on a Supreme Court decision. The tribunal allowed the appeals, setting aside the orders of the lower authority for fresh examination by the assessing officer, emphasizing the appellant's duty to provide necessary details for proper assessment.