2021 (3) TMI 391 - AT - Income Tax

TDS u/s 194C - non deduction of TDS in respect of the payment made to various transporters - assessee is a partnership firm and engaged in the trading of consumable items as aata, maida, sugar and edible oil etc - main contention of the assessee is that there is no contractual agreement between the assessee and the transporter and the payment was made to the truck drivers who brought goods to the place of the assessee - HELD THAT - It is not necessary for the purpose of Section 194C that the contract must be in writing, if there is an oral contract between the parties then the payment made under such contract also falls in the ambit of Section 194C. In case of transport of goods, there is always a builty/consignment issued by the transporter in the name of the consignee the transporter builty/consignment bill in itself is a contract between the parties. As far as the payment made to the driver it is not the payment to the driver in person but the payment in substance made to the transporter through the driver. The driver is only receiver/collector on behalf of the transporter. Therefore, making the payment through driver to the transporter would not obliterate applicability of Section 194C or Section 40(a)(ia). The decision of the coordinate Bench of this Tribunal as relied upon by the assessee in the case of Lalji Vaish Dall Mill was against the revision order passed u/s. 263 and the Tribunal has set aside the said order on the ground that the issue is a debatable issue and the AO has taken a possible view therefore the CIT was not justified in invoking the provisions of Section 263 of the Act. The decision of the Tribunal is purely based on the scope of jurisdiction and power of this Commissioner u/s. 263 of the Act. As regards the other decisions of Hon'ble jurisdiction High Court as well as the decision of Hon'ble Gujarat High Court those decisions are not directly on the point of payment made to the transporter for transportation of the goods of the assessee. Therefore, those decisions would not help the case of the assessee. Since the assessee has pointed out that the AO for the AY 2014-15 has not made any disallowance u/s. 40(a)(ia) in respect of the payment made to the transporters towards freight charges therefore, that crucial fact is required to be verified and considered. Accordingly, the matter is set aside to the record of the AO to reconsider this issue after verification of the fact whether the payment made by the assessee towards freight charges without deduction of TDS was allowed/accepted by the Assessing Officer for the AY 2014-15. - Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
Disallowance of payment made to transporters without TDS deduction under Section 40(a)(ia) of the Income Tax Act.

Detailed Analysis:

1. The only issue in this appeal pertains to the disallowance of a payment of ?22,73,457 made by the assessee to various transporters without deducting TDS, as per Section 40(a)(ia) of the Income Tax Act. The Assessing Officer disallowed this amount, citing non-compliance with TDS provisions. The assessee, a partnership firm engaged in trading consumable items, argued that the payments were made to truck drivers without any contractual agreement, thus not falling under Section 194C. The Assessing Officer and CIT(A) disagreed with this contention, leading to the appeal.

2. The assessee's representative argued before the Tribunal that the payments were not covered under Section 194C as there was no formal agreement with the transporters. They highlighted that similar payments in the previous year were not disallowed. Referring to relevant case law, they contended that the disallowance was unjustified. On the other hand, the Department's representative emphasized the applicability of Section 194C to the payments made for transportation services. They pointed out the absence of TDS deduction and the subsequent amendment to the Act.

3. The Tribunal considered both arguments and noted that the lack of a written contract does not exempt payments from TDS obligations under Section 194C. The Tribunal clarified that even oral agreements are covered, and the consignment bill acts as a contract in transportation cases. The Tribunal also highlighted that payments made to drivers were essentially payments to the transporters, thus falling under TDS requirements. The Tribunal directed the Assessing Officer to verify if similar payments were allowed in the previous year before making a fresh decision, ensuring the assessee's right to a hearing.

4. Ultimately, the Tribunal allowed the appeal for statistical purposes, indicating that further verification and consideration were needed regarding the previous year's treatment of similar payments. The decision emphasized the importance of complying with TDS provisions and assessing each case based on the specific circumstances, setting a precedent for future assessments in similar cases.

(Order pronounced on 21/01/2021 at Allahabad in the open Court)