2017 (10) TMI 61 - AT - Income Tax

TDS u/s 194C - freight and services charges and airport expenses without deducting TDS - Held that - We find that payments made to Skyways Air Services Pvt. Ltd. and Indair Carriers Pvt. Ltd. and since the assessee was acting as their subagent, which fact is supported by the confirmations/TDS certificates of these two parties being lATA agents, and there being no contract between the assessee and the above lATA agents, and on the contrary, the lATA agents treating the assessee as their sub-agent, she was not required to deduct TDS u/s 194C of the Income-tax Act and consequently no disallowance u/s. 40(a)(ia) could be made. Writing the books in a form which does not reflect mere commission but enters the receipts from the exporters on one side and the payments to the lATA agents on the other side in the profit & loss account also do not come in a way to adjudicate the applicability of section 194C between the assessee and the lATA agents. What is important to be seen is whether the assessee has appointed the lATA agents as their contractors, which in this case is missing. On the contrary it is the lATA agents who have appointed the assessee as their sub agent. On the similar ground the remarks of the auditor that no tax has been deducted cannot come in a way to hold that the TDS has not been deducted on the payments made to lATA agents. That could be only partly true in the case of other payments, barring the payments to two lATA agents as the details for the same have not been furnished on the grounds of the assessee having gone out of the business and bed ridden due to acute illness. Therefore, CIT(A) has rightly gave the relief in part, hence, we uphold the same and reject the ground raised by the Revenue.

Summary

Issues:
Appeal against deletion of addition for non-deduction of TDS on payments made to IATA agents.

Analysis:
The Revenue filed an appeal against the deletion of an addition made by the AO for non-deduction of TDS on payments to IATA agents. The assessee declared income of ?2,95,960 and was engaged in freight services. The AO noted expenses without TDS deduction and assessed income at ?69,18,660. The CIT(A) partly allowed the appeal, leading to the Revenue's appeal before the Tribunal. The Tribunal considered payments to IATA agents, totaling ?50,90,546, and found the assessee acted as a sub-agent, not required to deduct TDS under section 194C. The Tribunal noted the absence of a contract between the assessee and IATA agents, who treated the assessee as their sub-agent. The Tribunal upheld the relief of ?50,90,546 and confirmed a balance disallowance of ?15,03,584. The appeal by the Revenue was dismissed, and the Tribunal's decision was upheld.

In summary, the Tribunal held that the assessee, acting as a sub-agent for IATA agents, was not required to deduct TDS on payments made to them. The absence of a contractor relationship between the assessee and IATA agents, along with the agents treating the assessee as their sub-agent, supported the decision. The Tribunal found the CIT(A) rightly granted relief on the disputed amount and confirmed a partial disallowance. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the decision of the CIT(A) regarding TDS deduction on payments to IATA agents.