2025 (2) TMI 233 - AT - Income Tax

TDS u/s 194C - non-deduction of TDS on transport charges - HELD THAT - As gone through the section 194C(5) of the Act where it has been stated that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income tax under this section. As the assessee made payments below fifty thousand rupees assessee is entitled for an amount of Rs.1, 00, 524/-. Hence this ground raised by the assessee is allowed. Whether there is no direct contract between the assessee and the transport companies and the seller has made the arrangements? - It is an admitted fact that the entire amount of transport charges was paid by the assessee. Even as per the contention of the assessee that the seller has arranged the lorries on behalf of the assessee but the assessee has not produced any evidence to establish that the lorries were engaged by the seller. Moreover there is no mention u/s 194C that there should be a direct contract between the assessee and the transporters to deduct TDS u/s 194C of the Act. It is an admitted fact that the entire transportation amount was paid by the assessee to the transporters. Therefore there is a contract between the assessee and the transporters. Hence whatever the amount paid by the assessee is liable to deduct TDS. No hesitation to come to a conclusion that the TDS provision under section 194C is applicable to the present case on hand. Alternatively the plea of the assessee is that AO is not justified in disallowing the entire amount for non-deduction of tax at source. According to the amendment of the 1st proviso to section 40(a)(ia) of the Act wherein it has provided to restrict the disallowance to the tune of 30% of the amount of expenditure claimed as retrospectively applicable from 1st April 2015. However the assessee has not pleaded before the ld. Assessing Officer as well as ld. CIT(Appeals) about the amendment. Therefore remit the matter back to the file of ld. Assessing Officer to examine this issue afresh and pass a speaking order regarding the amendment vide Finance Act 2014 to the first proviso to section 40(a)(ia) - Alternative ground raised by the assessee is allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the delay of 35 days in filing the appeal by the assessee should be condoned.
• Whether the disallowance of expenses under section 40(a)(ia) of the Income Tax Act for non-deduction of TDS on transport charges under section 194C was justified.
• Whether the assessee is entitled to exemption on capital gains tax for the sale of agricultural land.
• Whether the assessee's payments to transporters below Rs. 50,000 should be exempt from TDS under section 194C(5).

ISSUE-WISE DETAILED ANALYSIS

1. Condonation of Delay

• Relevant Legal Framework and Precedents: The Tribunal considered the principles of condonation of delay, which generally require the appellant to demonstrate a sufficient cause for the delay.
• Court's Interpretation and Reasoning: The Tribunal was inclined to condone the delay, noting that the delay was not due to negligence on the part of the assessee and that sufficient cause was established.
• Conclusion: The delay of 35 days in filing the appeal was condoned.

2. Disallowance of Expenses under Section 40(a)(ia) for Non-Deduction of TDS

• Relevant Legal Framework and Precedents: Section 40(a)(ia) disallows certain expenses if TDS is not deducted as required under section 194C.
• Court's Interpretation and Reasoning: The Tribunal examined whether there was a direct contract between the assessee and the transporters, which would necessitate TDS deduction.
• Key Evidence and Findings: The assessee argued that the transport arrangements were made by the sellers, not directly by the assessee. However, the Tribunal noted that the payments were made by the assessee, indicating a contractual relationship.
• Application of Law to Facts: The Tribunal held that since the payments were made by the assessee, the provisions of section 194C applied, requiring TDS deduction.
• Treatment of Competing Arguments: The Tribunal acknowledged the assessee's contention about the absence of a direct contract but found it insufficient without evidence.
• Conclusion: The disallowance under section 40(a)(ia) was upheld, but the matter was remitted to the Assessing Officer to consider the applicability of the amendment to section 40(a)(ia) limiting disallowance to 30% of the expenditure.

3. Exemption on Capital Gains Tax

• Relevant Legal Framework and Precedents: The exemption was claimed on the sale of agricultural land.
• Court's Interpretation and Reasoning: The CIT(Appeals) allowed the exemption, and the Tribunal did not find reason to disturb this finding.
• Conclusion: The exemption on capital gains tax amounting to Rs. 6,25,000 was upheld.

4. Payments Below Rs. 50,000 to Transporters

• Relevant Legal Framework and Precedents: Section 194C(5) provides that payments below Rs. 50,000 are not subject to TDS.
• Court's Interpretation and Reasoning: The Tribunal found that the assessee made payments below Rs. 50,000 to certain transporters, which should not attract TDS.
• Key Evidence and Findings: Payments to M/s. Khandelwal Transport Co., M/s. Suman Agency Pvt. Ltd., and M/s. Alwar Assam Road Lines were below Rs. 50,000.
• Conclusion: The Tribunal allowed the assessee's claim for exemption from TDS for these payments, totaling Rs. 1,00,524.

SIGNIFICANT HOLDINGS

• The Tribunal condoned the delay in filing the appeal, emphasizing the absence of negligence on the part of the assessee.
• The Tribunal upheld the disallowance of expenses under section 40(a)(ia) for non-deduction of TDS but remitted the issue to the Assessing Officer to consider the amendment limiting disallowance to 30% of the expenditure.
• The Tribunal confirmed the exemption on capital gains tax for the sale of agricultural land.
• The Tribunal allowed the claim for exemption from TDS on payments below Rs. 50,000 to transporters, totaling Rs. 1,00,524.

Final Determinations on Each Issue

• The delay in filing the appeal was condoned.
• The disallowance under section 40(a)(ia) was upheld with a direction to the Assessing Officer to re-examine the issue in light of the amendment.
• The exemption on capital gains tax was upheld.
• The claim for exemption from TDS on certain transport payments was allowed.