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2019 (12) TMI 363 - AT - Income TaxTDS u/s 194C - Addition u/s 40(a)(ia) - transport contract for transportation of two wheelers - assessee obtained Permanent Account Number (PAN) of M/s SFIC Logistics P Ltd and accordingly it did not deduct tax at source from the payments made to the above said company - HELD THAT - In the instant case, there is no dispute with regard to the fact that the assessee herein has obtained PAN number of the payee. In view of the discussions made supra and following the decision rendered by the Kolkatta bench of Tribunal in the case of Soma Rani Ghosh 2016 (10) TMI 55 - ITAT KOLKATA , we hold that the assessee is not required to deduct tax at source from the payments to made and hence the question of invoking the provisions of sec.40(a)(ia) does not arise in the facts and circumstances of the case. - Decided in favour of assessee
Issues Involved:
1. Applicability of Section 194C(6) of the Income Tax Act. 2. Interpretation of "Goods Carriage" under Section 194C and Section 44AE. 3. Compliance with provisions of Section 40(a)(ia) and Section 194C(7). 4. Impact of amendments to Section 194C(6) by Finance Act 2015. 5. Judicial precedents and their applicability to the case. Detailed Analysis: 1. Applicability of Section 194C(6) of the Income Tax Act: The primary issue revolves around whether the assessee was required to deduct tax at source under Section 194C(6) from payments made to M/s SFIC Logistics P Ltd. The assessee argued that obtaining the Permanent Account Number (PAN) of the payee exempts them from this requirement. The Assessing Officer (AO) contended that the exemption under Section 194C(6) applies only to contractors owning not more than ten goods carriages, which was not the case for M/s SFIC Logistics P Ltd. 2. Interpretation of "Goods Carriage" under Section 194C and Section 44AE: The AO interpreted that the provisions of Section 194C(6) should be read in conjunction with Section 44AE, which limits the exemption to contractors owning not more than ten goods carriages. The CIT(A) supported this interpretation, emphasizing that the provision was intended to benefit small transport operators. The Tribunal, however, noted that the definition of "Goods Carriage" under Section 194C(6) should be taken as per Section 2 of the Motor Vehicles Act, 1988, without the restriction on the number of vehicles owned. 3. Compliance with provisions of Section 40(a)(ia) and Section 194C(7): The AO disallowed the transport charges under Section 40(a)(ia) due to non-deduction of TDS. The CIT(A) upheld this disallowance but reduced it to 30% of the payments. The Tribunal referenced judicial precedents, particularly the Kolkata Tribunal's decision in Soma Rani Ghosh vs. DCIT, which clarified that compliance with Section 194C(7) (filing of Form 26Q) is not mandatory for claiming exemption under Section 194C(6) if PAN is furnished. 4. Impact of amendments to Section 194C(6) by Finance Act 2015: The Tribunal examined the amendments to Section 194C(6) effective from 1.6.2015, which included the restriction on owning not more than ten goods carriages. Since the assessment year in question was 2015-16, the Tribunal concluded that the provisions prior to the amendment (which did not impose the restriction) were applicable. Therefore, the assessee was only required to obtain the PAN of the payee to claim exemption from TDS. 5. Judicial precedents and their applicability to the case: The Tribunal relied on several judicial precedents, including the Karnataka High Court's decision in CIT vs. Sri Marikamba Transport Co., which held that non-compliance with Section 194C(7) does not attract disallowance under Section 40(a)(ia) if the conditions of Section 194C(6) are met. The Tribunal also dismissed the revenue's reliance on the Supreme Court's decision in Commissioner of Customs (Import), Mumbai vs. M/s Dilip Kumar and Company, as it pertained to penalty provisions and not the interpretation of Section 194C. Conclusion: The Tribunal set aside the order passed by the CIT(A) and directed the AO to delete the disallowance made under Section 40(a)(ia) of the Act. The appeal of the assessee was allowed, emphasizing that the assessee complied with the applicable provisions of Section 194C(6) by obtaining the PAN of the payee, and thus, no TDS was required to be deducted.
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