2024 (5) TMI 633 - AT - Income Tax

TDS u/s 194C - Tripartite agreement - Payment of freight charges w/o deducting TDS on behalf of third party - payment made to the Truck Operator Union (through the assessee company) - Assessee in default u/s 201(1) r.w.s 201(1A) - As per AO information furnished by the Truck Operator Union reveals that the Truck Operator Union has done the business of plying, hiring or leasing goods carriage having 892 trucks of its members and has not shown freight receipts received from the assessee in its books of account as well as not offered the same to tax in its return of income - HELD THAT - We are in agreement with the contention advanced by the ld AR that in the instant case, the understanding has been that the Truck Operator Union will provide the requisite trucks for transport of goods belonging to M/s Pepsico India Holding Pvt. Ltd. and the assessee company will facilitate and provide the necessary coordination and the logistical support as well as raise necessary invoices on behalf of the Truck Operator Union and collect freight payment and disburse the same subsequently to the Truck Operator Union. We are of the view that the person responsible for making the freight payment and the responsibility to deduct TDS u/s 194C for freight payment made to the Truck Operator Union (through the assessee company) is that of the M/s Pepsico India Holding Pvt. Ltd. and not that of the assessee company. The provisions of Section 194C are not attracted where the assessee subsequently raises the invoices on behalf of the Truck Operator Union and collects and disburse the freight payment received from M/s Pepsico India Holding Pvt. Ltd to the Truck Operator Union. Appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Non-deduction of TDS on freight payments under Section 194C.
2. Claim of refund of TDS deducted by PIH.
3. Validity of the order under Section 201(1)/201(1A) regarding a tripartite agreement.

Summary:

Issue 1: Non-deduction of TDS on freight payments under Section 194C:
The Revenue contended that the assessee failed to deduct TDS on freight payments made to the Truck Operator Union, as required under Section 194C. The AO initiated proceedings under Section 201(1) and found that the Truck Operator Union did not show freight receipts in its books or offer them to tax. The AO held that the assessee should have deducted TDS, as the Truck Operator Union did not qualify for exemptions under Sections 12A or 10(24) and exceeded the truck limit under Section 194C(6).

Issue 2: Claim of refund of TDS deducted by PIH:
The assessee argued that it acted only as a commission agent for PIH and did not directly contract with the Truck Operator Union for freight services. The payments were routed through the assessee, but the responsibility for TDS deduction lay with PIH. The CIT(A) accepted this argument, noting that the assessee's role was limited to monitoring and reporting, and the primary responsibility for TDS deduction was with PIH.

Issue 3: Validity of the order under Section 201(1)/201(1A) regarding a tripartite agreement:
The CIT(A) analyzed the tripartite agreement effective from 01/01/2016 and found that the agreement supported the assessee's role as an intermediary. The CIT(A) relied on the Delhi High Court's decision in CIT Vs. Hardarshan Singh, which held that intermediaries are not liable for TDS under Section 194C. The CIT(A) quashed the order under Section 201(1)/201(1A), stating that the assessee was not liable to deduct TDS on payments made to the Truck Operator Union.

Conclusion:
The Tribunal upheld the CIT(A)'s findings, confirming that the assessee acted as an intermediary and was not responsible for TDS deduction under Section 194C. The appeal of the Revenue was dismissed.