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TMI Blog2012 (9) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... ount was credited to the account of SML during the period 13.07.2006 to 02.11.2006 and certificate of tax exemption was granted u/s 197 by the competent tax authority permitting the deduction of tax at Nil rate in respect of charges credited after 03.11.2006 - Held that:- If there is neither the credit of income to the account of the payee nor payment thereof, the provisions of section 194-I cannot apply. Once the provisions of section 194-I are held to be not applicable, the question of disallowance u/s 40(a)(ia) is also ruled out. During the period 13.07.2006 to 02.11.2006, amount was neither credited to the account of SML nor were paid. Both the credit to the account as well as payment took place after 03.11.2006, being the date from which the assessee got certificate u/s 197 for deduction of tax at source at Nil rate. We, therefore, overturn the impugned order to the extent it sustained disallowance u/s 40(a)(ia) in respect of charter hire charges for the period 13.07.2006 to 02.11.2006 - Decided in favor of assessee - I.T.A. No.7297/Mum/2010 - - - Dated:- 6-7-2012 - Shri R.S.Syal and Shri Amit Shukla, JJ. Revenue by : Shri Subachan Ram (CIT-DR) Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer held the assessee liable for deduction of tax at source on the amount of Rs.3,10,20,000 u/s 194-I. In the absence of the assessee having made any deduction of tax at source, the AO held that the disallowance was called for u/s 40(a)(ia). Since the Assessing Officer did not accept the view taken by the Tribunal in earlier year as regards the nonapplicability of section 194C on the charter hire charges, it was held that such amount was in the nature of contract payment and the total amount payable to SML for the period from 01.04.2006 to 03.11.2006 totaling Rs.5.41 crore was liable to be disallowed u/s 40(a)(ia). 3. In the first appeal, the learned CIT(A) observed that section 194C could not be applied because of the view taken by the Tribunal in the preceding year. He however took note of the amendment carried out to the provisions of section 194-I. As Explanation extending the scope of Rs.Rent to machinery and plant etc. was inserted from 13.07.2006, the learned CIT(A) held that the assessee was not liable to deduct tax at source on charter hire charges paid to SML for the period 01.04.2006 to 12.07.2006 and consequently no disallowance was called for u/s 40(a)(ia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment to section 194-I can be applied only with effect from 13.07.2006. In that view of the matter the ground raised by the Revenue for extending the amount of disallowance u/s 40(a)(ia) to the amount paid during the period 01.04.2006 to 12.07.2006, is dismissed. 6. Insofar as the assessee s appeal is concerned, the dispute is for the sustenance of disallowance sustained u/s 40(a)(ia) for the period from 13.07.2006 to 02.11.2006. Page 1 of the paper book is certificate issued u/s 197 of the Act relating to deduction of tax at source which is dated 3rd November, 2006. As per this certificate the officer authorized the assessee to pay the rent payments payable by you on the under mentioned sums credited in the name of Samson Maritime Limited . at the rate of nil . From the above certificate it is clear that the assessee was directed to make rent payment without any deduction of tax at source with effect from 3rd November, 2006. The case of the assessee before us is for the period 13.07.2006 to 02.11.2006. The learned AR contended that neither any amount was credited to the account of SML during such period nor any payment was made against the charter hire charges and as such no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalysis of the ledger account of SML in the books of account of the assessee. From these pages it can be seen that the opening balance payable to SML as on 01.04.2006 was Rs.1.60 crore. The charter hire charges for the period 01.04.2006 to 12.07.2006 amounted to Rs.2.26 crore thereby making total liability at Rs.3.87 crore. The assessee made payments totaling Rs.3.66 crore from 03.04.2006 to 31.10.2006. The charter hire charges for the period 13.07.2006 to 02.11.2006 totaling Rs.2.48 crore were credited on or after 03.11.2006 and charter hire charges for the period from 03.11.2006 to 31.03.2007 amounting to Rs.3.27 crore were also credited during the respective period. From 04.11.2006 to 30.03.2007, the assessee made payment to the tune of Rs.3.22 crore. The above analysis of the account indicates that insofar as the charter hire charges for the period 13.07.2006 to 02.11.2006 are concerned, the same were neither credited to the account of SML during the said period nor were paid. Both the credit to the account as well as payment took place after 03.11.2006, being the date from which the assessee got certificate u/s 197 for deduction of tax at source at Nil rate. The order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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