2013 (11) TMI 1644 - AT - Income Tax

TDS u/s 194C - Addition made u/s 40(a)(ia) - payment incurred out of transport charges - assessee huf - Held that - The assessee in the instant case, a HUF and according to clause (k) to section 194C(1) introduced by Finance Act 2007 is applicable to the individual and HUF which states that there is a requirement of deduction of TDS w.e.f 01.06.2007. The specific amendment bringing HUF within the provision of section 194C (1) is made only from the said date and this implies that HUF are excluded from section 194C before 01.06.2007 and the same is not applicable in the case of the assessee during the year under consideration i.e. 2005-06. Secondly, the ITAT in the case of Nasib Singh (2012 (4) TMI 396 - ITAT CUTTACK) has held that where an assessee who is in the business of transportation engages his own trucks and the trucks owned by the others, provisions of section 194C (1) as to the requirement of deducting tax at source would not apply in respect of payments made to the truck owners whose trucks the assessee has engaged. The said proposition is supported by the decision of the ITAT in the case of Mythri Transport Corporation (2009 (1) TMI 337 - ITAT VISAKHAPATNAM ). In the instant case also the facts are similar to that of the said decision of the ITAT in the case of Mythri Transport Corporation. In view of the fact that the Ld.CIT(A) has correctly relied on the decisions while deleting the disallowance/addition made by the AO, we do not find any justifiable reason to interfere with the impugned decision of the Ld.CIT(A) and therefore the same is upheld. - Decided against revenue

Summary

Issues:
1. Disallowance of expenditure under section 40(a)(ia) for non-deduction of TDS on transport charges.
2. Applicability of section 194C(1) to HUFs.
3. Interpretation of provisions regarding TDS deduction in the case of transportation business.

Analysis:
1. The appeal by the Revenue challenged the deletion of an addition made by the AO under section 40(a)(ia) amounting to Rs. 84,21,178/- for non-deduction of TDS on transport charges by the assessee. The Ld.CIT(A) had deleted this addition, leading to the appeal before the ITAT.

2. The assessee, a HUF engaged in the transport business, had claimed an expenditure of Rs. 84,21,178/- against transport receipts of Rs. 3,40,52,168/- for the year. The AO disallowed this expenditure under section 40(a)(ia) for failure to deduct TDS as per section 194C. However, the Ld.CIT(A) relied on precedents like Nasib Singh case and Mythri Transport Corporation case to support the deletion of the addition.

3. During the proceedings, the Ld.DR argued based on the AO's reasoning, while the Ld.AR of the assessee referred to section 194C(1) and relevant decisions supporting the Ld.CIT(A)'s decision. The ITAT noted that the Finance Act 2007 included HUFs under section 194C(1) from 01.06.2007, implying exclusion before that date. Citing Nasib Singh and Mythri Transport Corporation cases, the ITAT held that TDS deduction is not required for payments to truck owners engaged by the assessee in the transportation business.

4. The ITAT upheld the Ld.CIT(A)'s decision to delete the disallowance/addition, stating that the HUF in this case was not covered by section 194C(1) for the relevant assessment year. Relying on precedents and the specific circumstances of the case akin to the decisions in Nasib Singh and Mythri Transport Corporation, the ITAT found no reason to interfere with the Ld.CIT(A)'s decision, ultimately dismissing the Revenue's appeal.

5. In conclusion, the ITAT dismissed the Revenue's appeal, affirming the Ld.CIT(A)'s decision to delete the addition made by the AO under section 40(a)(ia) regarding TDS deduction on transport charges, based on the specific applicability of section 194C(1) to the HUF assessee and relevant precedents in the transportation business context.