2020 (4) TMI 24 - AT - Income Tax

TDS u/s 194C - disallowance u/s 40(a)(ia) on account of freight charges - HELD THAT - Assessee having obtained the PAN of the concerned transport contractor was eligible for immunity provided u/s 194C(6) of the Act as it is stood prior to the amendment in 2015 and he was, therefore, not liable to deduct tax at source from the impugned payments made to the transport contractor. The disallowance made by the AO u/s 40(a)(ia) and confirmed by the Ld. CIT(A) for the alleged failure of the assessee to deduct tax at source thus is not sustainable and deleting the same, allow this appeal of the assessee.

Summary

Issues involved: Disallowance of freight charges under section 40(a)(ia) for failure to deduct tax at source.

Analysis:
1. Background: The appeal was filed by the assessee against the order of Ld. CIT(A) regarding the disallowance of &8377; 8,42,479/- under section 40(a)(ia) on account of freight charges.

2. Assessee's Business: The assessee, a partnership firm dealing in marble stones and sanitary tiles, filed its income tax return declaring a total income of &8377; 15,230/- for the relevant year.

3. Disallowance by AO: During assessment, it was found that the assessee made payments exceeding &8377; 20,000/- towards freight charges without deducting tax at source as required by section 194C of the Act. The AO disallowed &8377; 8,42,479/- under section 40(a)(ia).

4. Submission by Assessee: The assessee contended that the transporters had provided their PAN details, and as per section 194(C)(6), tax deduction was not required. However, the AO disagreed, stating that the PAN details should have been intimated to the Income Tax Department within the specified period.

5. Decision of CIT(A): The Ld. CIT(A) upheld the disallowance made by the AO, leading the assessee to appeal to the Tribunal.

6. Tribunal's Decision: The Tribunal considered the pre-amendment provisions of section 194C(6) and a previous case law where it was held that furnishing PAN of payee-transporters was sufficient for TDS immunity. As the assessee had obtained PAN details, the disallowance under section 40(a)(ia) was deemed unsustainable. The appeal was allowed, overturning the disallowance.

7. Conclusion: The Tribunal ruled in favor of the assessee, allowing the appeal and setting aside the disallowance of freight charges under section 40(a)(ia) for failure to deduct tax at source.

Judgment: The appeal was allowed by the Tribunal, and the disallowance under section 40(a)(ia) was overturned, emphasizing the sufficiency of PAN details for TDS immunity under the pre-amendment provisions of section 194C(6).