2010 (12) TMI 753 - AT - Income Tax

Addition u/s 40(a)(ia) - TDS u/s 194C - assessee has made payment of Rs.39,14,620/- to fourteen parties on account of bus hiring charges. It is also noted by the AO that the assessee has not deducted TDS from this payment and hence, deduction on this account is not allowable - it has to be accepted that the payment by the assessee on account of hiring charges of buses cannot be a payment by a contractor to a sub-contractor - Since in the present case, the payments in question are not to subcontractor, this proviso is not applicable and hence, as per the provisions of sec. 194C, the assessee was not required to deduct TDS from these payments and hence, the provisions of sec. 40(a)(ia) are not applicable for these payments - Decided in favour of the assessee

Summary

Issues:
Interpretation of sec. 40(a)(ia) of the I.T. Act, 1961 regarding TDS deduction by an individual on hiring charges for buses.

Analysis:
The appeal before the Appellate Tribunal ITAT, New Delhi involved the interpretation of sec. 40(a)(ia) of the I.T. Act, 1961 in a case concerning the deduction of TDS by an individual on hiring charges for buses. The revenue challenged the order of the ld. CIT(A) for AY 2006-07, specifically focusing on the deletion of an addition of Rs.39,14,620 made by the Assessing Officer due to non-deduction of TDS. The key contention was whether the assessee, being an individual, was liable to deduct TDS on the hiring charges, despite the provisions being applicable from AY 2008-09. The AO disallowed the amount for non-compliance with sec. 40(a)(ia), leading to the appeal.

The Tribunal analyzed the provisions of sec. 194C applicable during the relevant period and noted that the hired buses were used by the assessee in her transport business, not falling under the category of a contractor-subcontractor relationship. The Tribunal highlighted that the amendment requiring TDS deduction by an individual from payments to a contractor was effective from 1.6.07, as per the findings of the ld. CIT(A). The Tribunal emphasized the importance of the proviso to sec. 194C(2), clarifying that it pertains to sums paid to subcontractors, which was not the case here. Consequently, the Tribunal upheld the ld. CIT(A)'s decision, stating that the provisions of sec. 40(a)(ia) did not apply to the payments in question, as the assessee was not obligated to deduct TDS based on the factual circumstances.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the decision of the ld. CIT(A) and ruling in favor of the assessee. The judgment provided a detailed analysis of the relevant legal provisions, emphasizing the specific requirements for TDS deduction by individuals under sec. 194C and the applicability of sec. 40(a)(ia) in the context of the case.