2016 (1) TMI 1447 - AT - Income Tax

TDS u/s 194C - default fur non-deduction of tax on payments made to the Bilaspur District Truck Operators Co-operative Transport Society Ltd here-in-after referred to as 'Transporter Society' - Whether CIT(Appeals) was not justified and grossly erred in holding that the 'Transporter Society' is not engaged in the business of plying, hiring or leasing of goods carriages as contemplated in Sec. 194C(6)? - HELD THAT - As M/s ACC Limit (Chandigarh Sales Unit), Chandigarh 2015 (10) TMI 2785 - ITAT CHANDIGARH CIT(A) has correctly held that clause (a) is applicable to both sections i.e. section 194C and 44 AE, clause (b) is applicable only to section 44AE, since for the benefit of presumptive taxation the assessee should not own more than ten goods carriages. Therefore, the assessee is not required to satisfy the ownership criteria as mentioned in clause (b) of Explanation to section 44AE (7). On a perusal of section 194C (6) read with Explanation (II) to section 194C, it is crystal clear that the transport contractor is not required to be the owner of goods carriage for applicability of section 194C(6) of the Act. At this stage, we may observe here that an amendment has been made vide Finance Act, 2015 in section 194C (6) wherein it is specifically stated that w.e.f. 1.6.2015, the benefit of non deduction of tax on payment made to transport contractors would be applicable only if the transport contractor owns ten or less goods carriages at any time of the previous year and a declaration to this effect is furnished. In our opinion, the Legislature has intentionally inserted the ownership condition for claiming the benefit of non deduction of tax which was not existing in the erstwhile section 194C(6) of the Act. In view of the above discussion, the assessee (Person responsible) cannot be treated as assessee in default for not deducting tax on the payments made to the Bilaspur District Truck Operators Co-operative Society thus, we do not find any infirmity in the order of CIT(A) and accordingly we uphold the same. The appeal of the Revenue is dismissed.

Summary

Issues Involved:

1. Whether the appellant was justified in not deducting tax under Section 194C on payments made to the Bilaspur District Truck Operators Co-operative Transport Society Ltd.
2. Whether the Transporter Society is engaged in the business of plying, hiring, or leasing of goods carriages as contemplated in Section 194C(6).
3. Whether the appellant can be treated as an assessee in default for non-deduction of tax under Section 194C.

Issue-wise Detailed Analysis:

1. Non-Deduction of Tax under Section 194C:

The appellant, a Public Limited Company engaged in the manufacture and sale of cement, was treated as an assessee in default by the Income Tax Officer (TDS), Palampur, for non-deduction of tax under Section 194C on payments made to the Bilaspur District Truck Operators Co-operative Transport Society Ltd. The appellant contended that the Transporter Society was engaged in the business of plying, hiring, or leasing goods carriages, and hence, tax was not required to be deducted as per Section 194C(6). The CIT(A) upheld the ITO's decision, stating that the society was not engaged in such business but acted as an agency for its members who were the actual operators.

2. Engagement in Business of Plying, Hiring, or Leasing Goods Carriages:

The appellant argued that the Transporter Society was engaged in the business of transporting goods, as evidenced by its registration under the Himachal Pradesh Cooperative Societies Act, 1968, and its by-laws. The CIT(A) rejected this, stating that the society merely facilitated the distribution of work among individual truck operators and did not itself engage in the business of plying, hiring, or leasing goods carriages. The Tribunal, however, found that the society's main object was to provide goods and passenger carriages on hire or lease, thus satisfying the conditions of Section 194C(6).

3. Treatment as Assessee in Default:

The Tribunal noted that similar issues were decided in favor of the appellant in the case of ACIT (TDS), Chandigarh Vs. M/s ACC Limited (Chandigarh Sales unit), where it was held that the transport contractor is not required to be the owner of the goods carriage for the applicability of Section 194C(6). The Tribunal emphasized that the conditions for non-deduction of tax under Section 194C(6) include the contractor being in the business of plying, hiring, or leasing goods carriages, furnishing PAN, and the deductor furnishing details to the Income Tax Authority. These conditions were met by the appellant.

Conclusion:

The Tribunal concluded that the CIT(A), Shimla, did not correctly appreciate the facts and law, and thus, the impugned order was set aside. The Tribunal allowed all the appeals of the appellant and deleted the demand created under Sections 201 and 201(1A) of the Act. The Tribunal's decision was based on the precedent set in the case of ACIT (TDS), Chandigarh Vs. M/s ACC Limited (Chandigarh Sales unit), where similar facts and issues were involved. The Tribunal pronounced the order in the open court on 29.01.2016, allowing the appeals of the appellant.