2014 (5) TMI 809 - AT - Income Tax

Disallowance u/s 40(a)(ia) of the Act Non-deduction of TDS u/s 194C(1) of the Act Held that - Following Commissioner of Income-tax Versus Hatish Ramanlal Patel 2013 (8) TMI 241 - GUJARAT HIGH COURT - where no individual payment made to any subcontractor exceeded Rs.20,000 at a time nor total payments to an individual exceeded Rs.50,000 in a year, no TDS liability would arise u/s 194C - the assessee had produced copy of the accounts of carting paid during the year - the AO without discarding such stand of the assessee, proceeded to make disallowance u/s 40(a)(ia) of the Act on the premise that tax was not deducted at source - the assessee is not liable to deduct TDS u/s. 194C(1) of the Act, invocation of provision of section 40(a)(ia) of the Act is against the provisions of law the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues:
Appeal by revenue against CIT(A)'s order deleting disallowance for non-deduction of TDS u/s. 194C(1) by applying sec. 40(a)(ia) of the Act.

Analysis:
1. Delay Condonation: The appeal by revenue was time-barred by 47 days, and a condonation petition was filed. The delay was conceded by the assessee's counsel, leading to the condonation of the delay, and the appeal was admitted for hearing.

2. Disallowance of TDS: The main issue was the CIT(A)'s deletion of the disallowance made by the AO for non-deduction of TDS u/s. 194C(1) by invoking sec. 40(a)(ia) of the Act. The AO disallowed the entire labour charges of Rs.15,07,810 as TDS was not deducted. The CIT(A) deleted the disallowance based on the fact that individual payments did not exceed Rs.20,000 at a time or Rs.50,000 in a year to each labourer, as per sec. 194C(3)(i) and the proviso thereof.

3. CIT(A) Decision: The CIT(A) observed that the AO failed to provide material supporting the contention that there was a contractual obligation behind the payments. The CIT(A) highlighted the provisions of sec. 194C(3)(i) and the first proviso, stating that no deduction shall be made if payments do not exceed Rs.20,000 at once or Rs.50,000 annually to each party. The CIT(A) concluded that the appellant was not liable to deduct TDS under sec. 194C(1), making sec. 40(a)(ia) inapplicable.

4. Appellate Tribunal Decision: The Tribunal noted that the issue was covered in favor of the assessee by a Gujarat High Court judgment. As individual payments did not exceed Rs.20,000 at a time or Rs.50,000 annually to each labourer, the assessee was not liable to deduct TDS u/s. 194C(1). Therefore, the Tribunal confirmed the CIT(A)'s order in deleting the addition, dismissing the revenue's appeal.

5. Final Verdict: The Tribunal dismissed the appeal of the revenue, upholding the CIT(A)'s decision. The judgment was pronounced in the open court, affirming that the appellant was not required to deduct TDS under sec. 194C(1) based on the specific payment thresholds outlined in the Act.