2013 (12) TMI 663 - AT - Income Tax

Disallowance made u/s 40(a)(ia) Held that - The Assessing Officer has wrongly treated the assessee as contractor in respect of buses taken on hire by the assessee - All the owners of the buses from whom the assessee has hired them on monthly rent have confirmed the balance of the assessee through confirmations / affidavits - They have confirmed that their buses have been given on monthly rent to the assessee - The Assessing Officer has not examined any of them and none of them have ever stated that the assessee is a contractor and they have given their buses to him - Section 194C is not applicable in the case of the assessee in respect of hire charges paid to the owners of the buses. Disallowance made u/s 40A(3) Held that - None of the single payment is made in contravention of section 40A(3) - All such payments are less than Rs. 20,000 Decided against Revenue.

Summary

Issues:
1. Disallowance under section 40(a)(ia) for non-deduction of TDS
2. Disallowance under section 40A(3) for cash payments exceeding the limit

Issue 1: Disallowance under section 40(a)(ia) for non-deduction of TDS:
The appeal concerned the disallowance of Rs. 43,24,081 under section 40(a)(ia) for non-deduction of TDS. The Assessing Officer contended that the assessee, engaged in hiring buses, failed to deduct tax at source on hire charges paid. The Assessing Officer argued that since parties like Hindustan Zinc Ltd., Nuclear Power Corporation India, R.S.M.M. Ltd., and Airport Authority of India deducted tax on payments, the assessee should also deduct tax on payments made to bus owners. However, the assessee maintained that TDS provisions did not apply as there was a distinction between contracts executed by the assessee and the nature of payments. The Assessing Officer, despite previous acceptance of similar arguments, concluded that TDS was applicable under section 194C. The CIT(A) reversed this decision, noting the absence of evidence of a contract between the assessee and bus owners. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of evidence supporting the Assessing Officer's stance and the consistency in treatment with the previous assessment year.

Issue 2: Disallowance under section 40A(3) for cash payments exceeding the limit:
The second ground of appeal pertained to the disallowance of Rs. 2,76,682 under section 40A(3) for cash payments exceeding the prescribed limit. The Assessing Officer found that the assessee made cash payments exceeding Rs. 20,000 to various entities. However, the CIT(A) analyzed each payment separately and determined that none exceeded the limit, thereby deleting the disallowance. The Tribunal concurred with the CIT(A)'s findings, stating that no single payment contravened section 40A(3) as all payments were below the threshold. Consequently, the second ground of appeal was dismissed.

In conclusion, the Tribunal upheld the CIT(A)'s decisions on both issues, dismissing the revenue's appeal. The judgment emphasized the importance of evidence and consistency in interpreting tax provisions, ultimately leading to the rejection of the revenue's claims.