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TMI Blog2015 (6) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... d vehicles. Therefore, if the assessee has made the payment for hiring the goods carried vehicles, the provisions of section 194C are clearly applicable. In our opinion, the ld. CIT(Appeals) was not correct in law that the assessee will be liable to deduct the TDS if the amount of a single contract exceeds ₹ 20,000/-. The contract has to be looked into party-wise not on the basis of the individual GR. In our opinion, all the payment s made to a t ruck owner throughout the year are to be aggregated to ascertain the applicability of the TDS provision as all the payments pertain to a contract. Thus the order of the ld. CIT(Appeals) has to be reversed. Also find force in submission of the ld. A.R.that the 2nd proviso to section 40(a)(ia) as inserted by Finance Act, 2012 would apply in the case of the assesse. As relying on Santosh Kumar Kedia Versus Income-tax Officer, Wd-56 (1) , Kolkata [2015 (6) TMI 123 - ITAT KOLKATA we restore this issue to the file of the Assessing officer with the direction that the assessee shall provide all the details to the Assessing Officer with regard to the recipients of the income and taxes paid by them. The Assessing Officer shall carry out ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,77,025/- NIL 6. A.S.M. Enterprise 13,80,075/- NIL 7. Md. Sahabuddin 13,68,475/- NIL 8. S.A. Enterprise 12,37,925/- NIL TOTAL 1,07,21,525/- The Assessing officer, therefore, invoked the provisions of section 40(a)(ia) and disallowed the same. The assessee went in appeal before the ld. CIT(Appeals). 5. Ld. CIT(Appeals) took the view that the Assessing Officer has to bring on record the material to prove that there existed written or oral agreement between the parties for carriage of goods. Definite terms and conditions for executing the work of transporter has to brought on record by Assessing officer to prove that such transporter was engaged pursuant to contract between the assessee and transporter. Since there was no specific finding as regard to the existence of contract between the parties, the ld. CIT(Appeal s) deleted the disallowance. 6. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed 17[thirty] thousand rupees : Provided 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 18[seventy-five] 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. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han such customer. ] 7. A plain reading of this Section makes it clear that any person responsible for paying any sum to any resident (hereafter in this sect ion referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person is required to deduct tax at source under sect ion from the amounts so paid or payable. There is no doubt that the assessee in this case has made the payment s as transportation charges in the nature of hiring charges for goods carried vehicles. The main contention of the assessee is, however, that the payments have not been made in pursuance of a contract between the assessee and the transporters. Now the question arises before us, whether there is contractual relationship between the assessee and the persons to whom the assessee had made the payment s in the nature of hiring charges for goods carried vehicles. In our opinion, a contract need not be in writing; even an oral contract is good enough to invoke the provisions of Section 194 C. As Hon ble Karnataka High Court has observed in the case of Smt J Rama Vs CIT (236 CTR 105), Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in terms of the second proviso to section 40(a)(ia). We find force in the said submission of the ld. A.R. We noted that the submissions of the ld. A.R. are duly covered by the decision of this Tribunal ( SMC Bench) in ITA No. 1905/Kol/2014 for the assessment year 2007-08, in which this Tribunal vide order dated 04.03.2015 has held as under:- 5. I have heard rival contentions and gone through the facts and circumstances of the case. I find from first argument made by Ld. counsel for the assessee that the second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2012 would apply in the instant case. According to him, the second proviso is curative in nature intended to supply an obvious omission, take care of an unintended consequence and make the section workable. Section 40(a)(ia) without the second proviso resulted in the unintended consequence of disallowance of legitimate business expenditure even in a case where the payee in receipt of the income had paid tax. According to him, it has for long been the legal position that if the payee has paid tax on his income, no recovery of any tax can be made from the person who had failed to deduct the income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made subject to deduction and payment of tax at source. However, in a case where the deductee/payee has paid tax and as such the person responsible for paying is no longer required to deduct or pay any tax, legitimate business expenditure would stand disallowed since the situation contemplated by the first proviso viz. deduction and payment of tax in a subsequent year would never come about. Such unintended consequence has been sought to be taken care of by the second proviso inserted in section 40(a)(ia) by the Finance Act, 2012. There can be no doubt that the second proviso was inserted to supply an obvious omission and make the section workable. The insertion of second proviso was explained by Memorandum Explaining The provision in Finance Bill, 2012, reported in 342 ITR (Statutes)234 at 260 261, which reads as under:- E.RATIONALIZATION OF TAX DEDUCTION AT SOURCE (TDS) AND TAX COLLECTION AT SOURCE (TCS) PROVISIONS I. Deemed date of payment of tax by the resident payee. Under the existing provisions of Chapter XVII-B of the Income-tax Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified thres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnishing of return of income by such resident payee. Amendments on similar lines are also proposed to be made in the provisions of section 206C relating to TCS for clarifying the deemed date of discharge of tax liability by the buyer or licensee or lessee. These amendments will take effect from 1st July, 2012. II. Disallowance of business expenditure on account of non-deduction of tax on payment to resident payee. A related issue to the above is the disallowance under section 40(a)(ia) of certain business expenditure like interest, commission, brokerage, professional fee, etc. due to non-deduction of tax. It has been provided that in case the tax is deducted in subsequent previous year, the expenditure shall be allowed in that subsequent previous year of deduction In order to rationalize the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, it is proposed to amend section 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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