2015 (7) TMI 1341 - AT - Income Tax

TDS u/s 194C on deductee (RSAMB) as registered u/s 12A - CIT (A) held that the provisions of the section 194J were not applicable in respect of the payments made by the assessee to RSAMB, on account of statutory contribution, against which the assessee received professional and technical services from RSAMB - HELD THAT - In the instant case, there was no loss to the revenue as the deductee (RSAMB) was not liable to pay tax (the income being loss and RSAMB being registered u/s 12A). In view of the above, it is held that the assessee cannot be treated as an assessee in default. The A.O. is directed to delete the demand raised u/s 201(1) 201(1A).

Summary

Issues:
1. Whether the assessee was liable for TDS under section 194C of the Income Tax Act.
2. Whether the provisions of section 194J of the Income Tax Act were applicable to the payments made by the assessee to RSAMB.

Analysis:

1. The appeals were filed by the Revenue against orders passed by the CIT (A) for A.Y. 2006-07, 2009-10, and 2010-11. The Assessing Officer observed that the responsible person, KUMS, failed to deduct tax from payments made to RSAMB. The AO considered the responsible person as an assessee in default under sec. 201(1) for non-deduction of tax. The demand was calculated under sec. 201(1)/194C, sec. 201(1)/194J, and sec. 201(1A)/194C & 194J for the respective financial years, totaling to &8377; 31,50,160.

2. The assessee contended before the CIT (A) that the deductor cannot be treated as an assessee in default if taxes were paid directly by the recipient/deductee. RSAMB, being registered u/s 12A and having nil tax liability, the assessee argued that no tax could be recovered. The CIT (A) held that the contributions to RSAMB were statutory obligations and not subject to TDS. However, payments for construction and repair of roads were considered contractual and covered under sec. 194C. The CIT (A) referred to the explanation to sec. 191, stating that a deductor cannot be in default if taxes were directly paid by the deductee.

3. The Revenue appealed before ITAT Jaipur, arguing against the CIT (A) order. The Tribunal noted that a similar case involving Krishi Upaj Mandi Samiti, Baran, was decided in favor of the assessee by ITAT Jaipur Bench. Relying on the previous decision, the Tribunal upheld the CIT (A) order, dismissing the Revenue's appeals. The Tribunal found no infirmity in the CIT (A) orders and concluded that the assessee could not be treated as an assessee in default.

In conclusion, the ITAT Jaipur upheld the CIT (A) order, following the precedent set by a previous decision, and dismissed the Revenue's appeals. The Tribunal found that the deductor could not be treated as an assessee in default due to the direct payment of taxes by the deductee, RSAMB, and the statutory nature of the contributions made.