2017 (4) TMI 350 - AT - Income Tax

TDS u/s 194C or 194I - disallowance on hire charges paid for tippers/tractors/water tankers under section 40(a)(ia) - Held that - The assessee fails to bring on record any evidence to prove that it is a simple hire of tippers/tractors/water tankers, but not work. Though, the Authorized Representative of the assessee pressed upon the findings of the Commissioner of Income Tax, in the revision proceedings, on perusal of the order of the Commissioner of Income Tax, we find that the Commissioner of Income Tax has not given any findings with regard to nature of transaction, to come to a conclusion that the payments are coming under section 194-I. Therefore, we are of the view that hire charges incurred by the assessee for hiring the tippers/tractors/ water tankers is coming within the meaning of term work as defined in Explanation-(iv) of section 194-C of the Act. The Commissioner of Income Tax (Appeals) without any reason, simply observed that the impugned payments are made for hire of tippers/tractors/ water tankers etc. and such payments are not made for execution of works contract. Therefore, we set aside the order passed by the Commissioner of Income Tax (Appeals) and upheld the additions made by the Assessing Officer towards disallowance of hire charges under section 40(a)(ia), for failure to deduct tax at source under section 194-C of the Act, for both years. Difference in gross turnover as per the books of account and as per the TDS certificates - Held that - The assessee claims that it is reconciled the difference, failed to explain how withheld amount has been excluded from the gross receipts with necessary calculations. On the other hand, the Assessing Officer has clearly brought out the facts to the effect that the amount mentioned in the TDS certificate and recoveries made towards TDS, withheld amount and other deductions is tallied with the gross amount certified by the contractees. Therefore, we are of the view that the Assessing Officer was right in making additions towards difference in turnover as per books of account and TDS certificates. The Commissioner of Income Tax (Appeals) without appreciating the facts, simply observed that the difference represents amount withheld earlier and released for payment now, but which was already offered to tax as part of gross receipts. Therefore, we set aside the order passed by the Commissioner of Income Tax (Appeals) and upheld the additions made by the Assessing Officer towards difference in turnover as per books of account and TDS certificates.

Issues Involved:
1. Disallowance of hire charges under section 40(a)(ia) for failure to deduct TDS under section 194-C.
2. Difference in gross turnover as per books of account and TDS certificates.

Issue-wise Detailed Analysis:

1. Disallowance of hire charges under section 40(a)(ia) for failure to deduct TDS under section 194-C:

The first issue concerns the disallowance of hire charges paid for tippers/tractors/water tankers under section 40(a)(ia) of the Income Tax Act, 1961, due to the failure to deduct tax at source under section 194-C. The Assessing Officer (AO) observed that the assessee incurred expenditure towards hire charges but did not deduct TDS under section 194-C, which includes carriage of goods or passengers by any mode of transport other than railways. The AO issued a show-cause notice to the assessee, who contended that the hire charges did not fall under section 194-C but rather under section 194-I, as the equipment was taken on simple hire without any contractual agreements. The AO, relying on the Supreme Court decision in Associated Cement Company Ltd., held that the transport contract falls within section 194-C, and therefore, disallowed the payments under section 40(a)(ia).

The Commissioner of Income Tax (Appeals) (CIT(A)) held that the payments made for the hire of tippers/tractors/water tankers did not fall within the purview of section 194-C, as they were not made for the execution of any part of work. Consequently, the CIT(A) directed the AO to delete the disallowance. However, upon appeal, it was determined that the hire charges incurred by the assessee for hiring tippers/tractors/water tankers fell within the meaning of 'work' as defined in Explanation-(iv) of section 194-C. The CIT(A)'s order was set aside, and the additions made by the AO towards disallowance of hire charges under section 40(a)(ia) were upheld.

2. Difference in gross turnover as per books of account and TDS certificates:

The second issue pertains to the difference in gross turnover as per the books of account and as per the TDS certificates. The AO observed a discrepancy and called upon the assessee to reconcile the difference. The assessee contended that the difference represented withheld amounts refunded by the contractee, which were accounted for on an accrual basis and shown as receivable in the balance sheet. The AO, however, added the difference of ?26,90,462/- to the returned income, arguing that the gross receipts should have included the withheld amounts.

The CIT(A) accepted the assessee's reconciliation statement, which explained that the difference in turnover was due to the withheld amounts being considered as receipts in earlier periods on an accrual basis, while the contractees deducted TDS on these amounts on a payment basis. The CIT(A) directed the AO to delete the additions made towards the difference in gross receipts.

Upon appeal, it was found that the AO had brought out clear facts showing that the contractees deducted TDS on the gross amount, including the withheld amount. The assessee failed to provide necessary calculations to explain the exclusion of the withheld amount from the gross receipts. The AO's additions towards the difference in turnover were upheld, and the CIT(A)'s order was set aside.

Conclusion:

The appeals filed by the Revenue were allowed, with the disallowance of hire charges under section 40(a)(ia) and the additions towards the difference in gross turnover as per the books of account and TDS certificates being upheld. The judgment emphasized the importance of proper TDS deduction under section 194-C and accurate reconciliation of gross receipts in accordance with TDS certificates.

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