2018 (2) TMI 1457 - AT - Income Tax

Disallowance u/s 40(a)(ia) - payments to transport contractors without fulfilling the conditions laid down in sections 194(6) and 194(7) - assessee did not furnish in the prescribed format the details of those contractors where no TDS was made to the prescribed authority - Held that - We find that the assessee made payments to transport contractors amounting to ₹ 80,23,971/- whereas the assessee has provided the details and PAN only in respect of nine transporters to the tune of ₹ 67,24,412/- during the course of assessment proceedings. As per provisions of Section 194C(6) if the transport contractors furnish the details in respect of their PAN to the person paying or crediting to such contractors TDS need not be deducted. In the case in hand we can see from the assessment order that the assessee has provided details of PAN only in respect of nine contractors amounting to ₹ 67,24,412/- and no details have been furnished in respect of balance amount of ₹ 12,99,559/-. Even if we say that the assessee has complied with provisions of Section 194C(6) it is only to the extent of ₹ 67,24,412/-. Therefore, since the assessee has not furnished the details of PAN in respect of other contractors, the assessee has not complied with the provisions of Section 194C(6) at least to the tune of ₹ 12,99,559/-. Therefore, in our view the said amount is liable to be disallowed under Section 40(a)(ia) of the Act as the assessee did not furnish PAN details to the AO and the assessee was under the obligation to deduct TDS on this amount. - Decided partly in favour of revenue

Summary

Issues:
- Disallowance made under Section 40(a)(ia) of the Income Tax Act, 1961 for failure to comply with conditions specified in sections 194C(6) and 194C(7).

Analysis:
1. The Revenue filed an appeal against the order of the CIT(A)-28, Mumbai for A.Y. 2011-12, specifically challenging the deletion of disallowance under Section 40(a)(ia) of the Income Tax Act, 1961. The AO disallowed payments made to transport agencies amounting to &8377; 80,23,971, stating that the assessee failed to comply with conditions in sections 194C(6) and 194C(7) of the Act, which are considered cumulative.

2. The CIT(A) held that provisions of Section 194C(6) are independent of Section 194C(7) based on a decision of the Hyderabad Bench. The assessee argued that compliance with Section 194C(6) was met by submitting PAN details of contractors to the AO, even though no prescribed format or authority existed under Section 194C(7) at that time. The Kolkata Bench's decisions were cited to support this argument.

3. The Tribunal noted that the AO requested reasons for non-TDS deduction on transportation charges, and the assessee provided PAN details of transporters. The AO contended that failure to submit details in the prescribed format to the prescribed authority under Section 194C(7) led to disallowance under Section 40(a)(ia). The Tribunal agreed with the CIT(A) and the Kolkata Bench that Sections 194C(6) and 194C(7) are independent, and non-compliance with Section 194C(7) does not attract disallowance under Section 40(a)(ia).

4. The Tribunal found that while the assessee provided PAN details for some contractors, details for others were missing, resulting in partial compliance with Section 194C(6). As the assessee did not furnish PAN details for all contractors, a partial disallowance of &8377; 12,99,559 was upheld under Section 40(a)(ia). The Tribunal directed the AO to adjust the disallowance accordingly, partially allowing the Revenue's appeal.

5. In conclusion, the Tribunal held that Sections 194C(6) and 194C(7) are independent, and failure to comply with Section 194C(7) does not automatically lead to disallowance under Section 40(a)(ia). The decision was based on precedents from various Tribunal benches, emphasizing the importance of fulfilling statutory requirements for TDS compliance.