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2014 (7) TMI 456 - AT - Income TaxFreight charges u/s 40(a)(ia) of the Act Failure to deduct TDS u/s 194C of the Act - Held that - The decision in Commissioner of Income-tax-I Versus Valibhai Khanbhai Mankad 2012 (12) TMI 413 - GUJARAT HIGH COURT followed - The requirements of section 194C(3), principally, are that the sub-contractor, recipient of the payment produces a necessary declaration in the prescribed format and further that such sub-contractor does not own more than two goods carriages during the entire previous year. - once the conditions of further proviso of section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease - The requirement of payee to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under subsection (2) of section 194C of the Act - It may be that failure to comply requirement by the payee may result into some other adverse consequences if so provided under the Act - fulfilment of requirement cannot be linked to the declaration of tax at source - any such failure therefore cannot be visualized by adverse consequences provided under section 40(a)(ia) of the Act - the assessee had collected Form15-I from different truck owners and the list was furnished for an amount totaling ₹ 3,58,61,008/- which was duly acknowledged by the AO thus, the order of the CIT(A) is upheld Decided against Revenue. Undisclosed receipt treatment of income on the basis of TDS certificates - Held that - CIT(A) rightly held that the entire receipt cannot be treated his income as per settled legal preposition - It is only the income component out of it which can be legally said to be appellant s undeclared and undisclosed income - TDS deducted out of such receipt as appearing in ITS details has to be given credit since the same was not claimed and corresponding income is if included in total income - The same credit has to be given thus, there is no reason to interfere in the order of the CIT(A) Decided against Revenue.
Issues Involved:
1. Deletion of addition made on account of freight charges under Section 40(a)(ia) of the Income Tax Act. 2. Deletion of addition made on account of undisclosed receipts. Detailed Analysis: Issue 1: Deletion of Addition Made on Account of Freight Charges under Section 40(a)(ia) of the Income Tax Act Background: The Revenue raised an issue regarding the deletion of additions made on account of freight charges for the Assessment Years (A.Y.) 2008-09 and 2009-10. The Assessing Officer (AO) had noted that the assessee, engaged in the transport business, failed to deduct Tax Deducted at Source (TDS) on freight expenses, leading to disallowance of the expenditure under Section 40(a)(ia) of the Income Tax Act. Assessee's Explanation: The assessee explained that the freight charges were paid directly to truck owners, and as per Section 194C of the Act, no TDS was required if the contractor did not own more than two goods carriages during the previous year and had submitted Form No. 15-I. First Appellate Authority's Findings: The Commissioner of Income Tax (Appeals) [CIT(A)] examined the issue, including a remand report from the AO. CIT(A) concluded that even if Form No. 15-J was not filed, the assessee was excluded from disallowance under Section 40(a)(ia) as the necessary conditions were met. CIT(A) relied on various judicial precedents, including the Special Bench decision in the case of Marilyn Shipping & Transport, and directed the AO to allow the expenses, deleting the addition of Rs. 3,72,34,228/- for A.Y. 2008-09. Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision, citing the Gujarat High Court's ruling in the case of Valibhai Khanbhai Mankad, which clarified that the requirement of furnishing Form No. 15J was not related to the liability to deduct tax at source. The Tribunal noted that the assessee had collected Form 15-I from truck owners and furnished the list to the authorities, covering an amount of Rs. 3,58,61,008/-. As such, the Tribunal dismissed the Revenue's ground, confirming that the disallowance under Section 40(a)(ia) was not justified. Issue 2: Deletion of Addition Made on Account of Undisclosed Receipts Background: The AO observed discrepancies in the assessee's freight memo and bills, leading to an addition of undisclosed receipts amounting to Rs. 24,13,280/- for A.Y. 2008-09 and Rs. 6,23,499/- for A.Y. 2009-10. The AO contended that the assessee had not disclosed these receipts as income. First Appellate Authority's Findings: CIT(A) partially accepted the assessee's contention that only the income component from the receipts should be treated as undisclosed income. CIT(A) calculated the income component at 0.6% of the total receipts, based on the assessee's disclosed commission/brokerage rate, resulting in an addition of Rs. 15,000/- for A.Y. 2008-09 and Rs. 6,700/- for A.Y. 2009-10. The balance additions were deleted. Tribunal's Decision: The Tribunal reviewed the factual background and the nature of the assessee's business. It agreed with the CIT(A)'s findings and confirmed the deletion of the balance additions. The Tribunal dismissed the Revenue's grounds, affirming that only the income component should be treated as undisclosed income. Cross Objections by the Assessee: The assessee filed cross objections challenging the applicability of Section 194C. However, during the hearing, the assessee's representative stated that if relief was granted on the alternate grounds decided in favor of the assessee by CIT(A), the cross objections need not be pressed. The Tribunal found no merit in the cross objections and dismissed them. Conclusion: The Tribunal dismissed both the Revenue's appeals and the assessee's cross objections, upholding the CIT(A)'s decisions to delete the additions made on account of freight charges and undisclosed receipts.
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