2013 (10) TMI 1229 - HC - Income Tax

TDS to be deducted u/s 194C - payment to contractor during the course of business of plying, hiring or leasing goods carriages in the event the contractor furnishes his Permanent Account Number - The Income Tax Officer (TDS) relying on Section 44AE, in particular second explanation there-under, has held that the petitioner, in law, will have to be treated as owner and was, therefore, liable to set apart the requisite amount as has been demanded in terms of order dated 28th March, 2013. Held that - Since the demand is in respect of subsequent period after 1st October, 2009, prima-facie, there can be no difficulty in accepting the stand of the petitioner that the petitioner was bound by the provisions of Section 194C(6) of the Act. Reliance, placed by the department on Section 44AE, seems to be inapposite as that provision is independent provision and moreso the non-obstante clause is with reference to Sections 28 to 43C and not 194C(6) of the Act as such - Section 194C(6) is an independent provision which was binding on the petitioner and prohibition from deducting the amount from the account of the contractor

Summary

Issues:
Challenge to the decision of Commissioner of Income Tax regarding payment liability under Section 194C(6) of the Income Tax Act.

Analysis:
The petitioner contested the directive by the Commissioner of Income Tax (TDS) to pay an additional 10% of the demand, in addition to the already recovered amount. The petitioner argued that Section 194C(6) of the Income Tax Act prohibits deducting any amount if the contractor furnishes their Permanent Account Number. The Income Tax Officer relied on Section 44AE to hold the petitioner liable as an owner, demanding the requisite amount. However, the order pertained to financial years 2009-10 and 2010-11, with no indication of failure to make deductions before the enforcement of Section 194C(6) on 1st October, 2009. The court found merit in the petitioner's stance, emphasizing that Section 194C(6) is a binding provision prohibiting deduction from the contractor's account.

The court concluded that the petitioner should not be held liable to pay the demanded amount, staying the operation of the demand notice and the decision of the Income Tax Officer until the appeal is resolved. The court directed the respondents not to take any coercive action based on the demand notice. The pending appeal before the Appellate Authority was urged to be expedited for a swift resolution. The court clarified that its observations did not constitute a final opinion on the interpretation of Section 194C(6) or Section 44AE, leaving all questions open for the Appellate Authority to decide. The petition was disposed of on these terms, along with any pending applications.

This judgment highlights the importance of statutory provisions in determining tax liabilities and the necessity for adherence to the specific requirements outlined in the Income Tax Act. The court's decision to stay the demand notice showcases the significance of procedural fairness and the opportunity for a thorough review of the matter by the Appellate Authority.