2012 (12) TMI 892 - AT - Income Tax

Non deduction of TDS on lorry hire charges - disallowance u/s 40a(ia) - assessee contented that he has already made payments and remaining outstanding as on 31 st March, 2006 - Held that - As decided in Merilyn Shipping & Transports Versus Assistant Commissioner of Income-tax, Range-1, Visakhapatnam 2012 (4) TMI 290 - ITAT VISAKHAPATNAM section 40(a)(ia) is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which are already been paid during the previous year, without deducting tax at source - confirm the disallowance to the extent of Rs. 5,65,175/- the amount outstanding as on 31.03.2006 and direct the AO to delete the balance amount of Rs.61,66,953/- as already paid - partly in favour of assessee. Transportation hire charges - TDS u/s. 194C - Held that - Since the facts regarding assessee having contract with the transporters or truck owners is not examined by the lower authorities, this issue is restored back to the file of the AO. to decide the issue whether there exists any contract or not so as to attract TDS u/s. 194C on hire charges for carrying on the job - in favour of assessee by way of remand.

Summary

Issues:
1. Confirmation of addition u/s. 40a(ia) by CIT(A) for non-deduction of TDS.
2. Applicability of TDS u/s. 194C on transportation hire charges.

Analysis:

Issue 1: Confirmation of addition u/s. 40a(ia) by CIT(A) for non-deduction of TDS:
The appeal arose from the CIT(A)'s order confirming the addition u/s. 40a(ia) due to non-deduction of TDS by the assessee. The AO observed that the payments exceeding Rs.20,000 made by the assessee to subcontractors did not have TDS deducted. The AO relied on Section 194C(2) of the Income-tax Act, which mandates TDS deduction by the assessee. The AO issued a show cause notice to the assessee, who did not comply, leading to the addition of Rs.99,12,793 to the returned income u/s. 40a(ia). The CIT(A) partially allowed the appeal, directing deletion of a portion substantiated by forms 151 but confirming the balance disallowance. The ITAT, following the decision of a Special Bench, held that the disallowance should only apply to the outstanding payable amount as of 31st March, 2006. Accordingly, the ITAT confirmed the disallowance of Rs. 5,65,175 and directed the AO to delete the balance amount of Rs. 61,66,953.

Issue 2: Applicability of TDS u/s. 194C on transportation hire charges:
The second ground raised by the assessee was regarding the applicability of TDS u/s. 194C on transportation hire charges. Both parties agreed that this issue required further examination as the lower authorities had not assessed whether there existed a contract that would attract TDS u/s. 194C on the hire charges for transportation. Consequently, the ITAT restored this issue back to the AO for a detailed examination of the contract's existence to determine the applicability of TDS u/s. 194C.

In conclusion, the ITAT partly allowed the appeal for statistical purposes, confirming the disallowance of a specific amount under section 40a(ia) while directing the deletion of the remaining balance. The issue regarding the applicability of TDS u/s. 194C on transportation hire charges was remanded back to the AO for further examination.