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TMI Blog2021 (4) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... arsen and Toubro Limited as 'Income from house property' as against of 'income from business or profession' taxed by the AO, without appreciating the material facts of the case. 4. On the facts and circumstances of the case and in law ld CIT(A) was justified in deleting the addition of Rs. 3,104/- out of printing and stationary expenses and Rs. 2,11,547/- out of workmen and staff welfare expenses, without supported with third party vouchers." 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. Rival contentions have been heard and record perused. The brief facts of the are that the assessee is engaged in the business of mining, transportation, crushing and renting of property. The assessee is working on behalf of L&T Ltd. and M/s Hi-tech Rock Products and Aggreagates Ltd. return of income was electronically filed by the assessee on 23/09/2015 declaring total income of Rs. 83,72,330/-. The case was selected for scrutiny and notice U/s 143(2) of the Income Tax Act, 1961 (in short, the Act) was issued on 25/08/2016. The A.O. after making enquiry and considering the details available with him assessed tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings and TDS return was also filed. The AO has not disputed the veracity of such PAN details. Only question he has raised is whether such PAN details were received at the time of payment of freights or not. The ld AR has further submitted that the Id. CIT(A) has thereafter given a finding that in absence of contrary evidence, the assessee's submission that such PAN details were provided by the transporters at the time of the payment of freights has to be accepted. He has submitted that the Id. CIT(A) further held that in terms of provisions of section 194(C)(6) of the Act, once the transporters have provided the PAN details to the deductor then no deduction is required to be made on freight payment to such transporters as per section 194C(6) of the Act. 8. The ld AR has submitted that Section 40(a)(ia) is not applicable at all, accordingly, disallowance made by the AO is illegal. Law does not allow the invocation of Section 40(a)(ia) for the cases of Section 194C(6) and 194C(7). In this he placed reliance on the judgement of ITAT Kolkata in the case of Soma Rani Ghosh Vs DCIT Kolkata, ITA No. 1420/KOL/2015. 9. The ld AR has further submitted that even PAN not submitted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s transporters on account of freight. Out of this an amount of Rs. 4,80,46,176/- was found by the A.O where the TDS was liable to be deducted u/s 194C of the Act. 3. That the appellant has not deducted income tax on the freight paid to the transporters. 4. That the A.O has contended that the assessee is liable to deduct taxes under section 194C of the Act and non deduction of prescribed taxes attract provision of section 40(a)(ia) of the Act. 5. That the assessee has claimed that in view of provisions of section 194C(6) of the Act, no TDS is liable on the payments of freight as PAN details were submitted by the transporters. 6. That the A.O has further contended that the assessee had failed to submit TDS return within prescribed time giving the details of PAN of such transporters as is required under section 194C(7) of the Act. Accordingly, the amount of Rs. 1,44,13,853/- i.e 30% of the freight payments made, has been added to the income of the assessee under section 40(a)(ia) of the Act. 4.4 I have considered the above mentioned facts of the case. The basic point involved in the case is the invocation section 40(a)(ia) of the Act in connection with the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AN details were received at the time payment of freights or not. In absence of any contrary evidence, the appellant's submission that such PAN details were provided by the transporters at the time of the payment of freights has to be accepted. Additions cannot be made on mere conjectures, surmises and probability. 4.4.2 Whether after getting. the PAN details from the transporters the assessee was liable to deduct taxes u/s 194C of the Act? It is imperative to go into provisions of section 194C(6) of the Act as applicable for the A.Y:2015-16, (before an amendment was made effective from 01/06/2015 by the Finance Act) which says as follows; (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. Thus the provision of the Act was very clear for any such payments made during F.Y: 2014-15. No deduction shall be made if the transporter furnishes his PAN to the person paying or crediting such sum. The A.O's interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisions of section 40(a)(ia) of the Act. The provision of the section is as follows: 40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) in the case of any assessee- (ia) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 : Provided that where in respect of any such sum, tax , has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, thirty per cent of such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid : Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4C(6) and Section 194C(7) have to be read together to extend the immunity from TDS, our attention is drawn to the fact that though the Finance Act, (NO.2) 2009 introduced, inter alia, Sec. 194C(6) and 194C(7), similar and analogous provision had been very much in existence under proviso 2 and 3 to Section 194C(3) of the Act. Placing such provisions in juxtaposition in the following chart makes it clear that they are very much analogous and the difference is that only in respect of requirement of a declaration and furnishing the particulars to the to the prescribed income-tax authorities under the provisos 2 and 3 of pre-amended section 194C(3) is being replaced by the Permanent Account Number under present Sections 194C(6) and (7) respectively. 194C prior to Amendment by Finance Act, (NO.2) 2009) 194C as Amended by Finance Act, (NO.2) 2009 194C(3) No deduction shall be made under subsection (1) or sub-section (2)from- ... ... Provided that .... ... Provided further that no deduction shall be made under sub-section (2), from the amount of any sum credited or paid or likely to be credited or paid during the previous year to the account of the sub-contractor during the course of bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x in Form 15J (requirement similar as is provided under the third proviso and equivalent to the requirement Sec. 194C(7), the Department made attempts to make additions, but such additions have been deleted and rendered invalid. He submitted that the Courts and Tribunals consistently held that on obtaining of either the declaration contemplated under second proviso to the pre-amended section 194C(3) or the PAN details under the present section 194C(6), the assessee was not required to make any deduction at source on the payments made to the contractor or sub-contractor, irrespective of the fact whether or not such information was furnished to the authorities as prescribed under third proviso to the amended section 194C(3) or the present section 194C(7). 29. In CIT -vs.- Valibhai Khanbhai Mankad (Tax Appeal No. 1182 of 2011, order dated 01.10.2012), it is held by the Hon 'ble Gujarat High Court at Ahmedabad that :"(6) Section 194C, as already noticed, makes provision where for certain payments, liability of the payee to deduct tax at source arises. Therefore, if there is any breach of such requirement, question of applicability of section 40(a)(ia) would arise. Despite such circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that failure to comply such requirement by the payee may result into some other adverse consequences if so provided under the Act. However, fulfilment of such requirement cannot be linked to the declaration of tax at source. Any such failure therefore cannot be visualized by adverse consequences provided under section 40(a)(ia) of the Act. 10) When on the basis of the record it is not disputed that the requirements of further proviso were fulfilled, the assessee was not required to make any deduction at source on the payments made to the sub-contractors. If that be our conclusion, application of section 40(a)(ia) would not arise since, as already noticed, section 40(a)(ia) would apply when there is a requirement of deduction of tax at source and such requirement is either not fulfilled or having deducted tax at source is not deposited within prescribed time". 30. In CIT -vs.- Sri Marikamba Transport Co. in ITA No. 553 of 2013 reported in 379 ITR 129 (Karn.), Hon'ble Karnataka High Court has formulated a question as to whether non-filing of Form No. 151/J within the prescribed time is only a technical default or the provisions of section 40(a)(ia) of the Act are attracted? and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society. " 4. The combined reading of these two provisions make it clear that if there is any breach of requirements of Section 194C(3), the question of applicability of Section 40(a)(ia) arises. The exclusion provided in Sub-Section(3) of Section 194C from the liability to deduct tax at source under sub-section(2) would be complete, the moment the requirements contained therein are satisfied. Once, the declaration forms are filed by the subcontractor, the liability of the assessee to deduct tax on the payments made to the sub-contractor would not arise. As we have examined, the sub-contractors have filed Form No. 1S1 before the assessee. Such being the case, the assessee is not required to deduct tax under Section 194C(3) of the Act and to file Form No.15]. It is only a technical defect as pointed out by the Tribunal in not filing Form No.15J by the assessee. This matter was extensively considered by the ITAT, Ahmedabad Bench in Valibhai Khanbhai Mankads case (supra) and the said Judgment has been upheld by the High Court of Gujarat reported in (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 194C(1) in relation to payments to transporters, applies transporter and non-transporter contractees alike; iv) under Sec. 194C(6), as it stood prior to the amendment in 2015, in order to get immunity from the obligation of TDS, filing of PAN of the Payee-Transporter alone is sufficient and no confirmation letter as required by the learned CIT is required v) Sections 194C(6) and Section 194C(7) are independent of each other, and cannot be read together to attract disallowance u/s 40(a)(ia) read with Section 194C of the Act; and vi) If the assessee complies with the provisions of Section 194C(6), no disallowance u/s 40(a)(ia) of the Act is permissible, even there is violation of the provisions of Section 194C(7) of the Act. 2. Similar views have been taken by Hon'ble ITAT Hyderabad Bench in the case of ACIT Circle(1) Vs Mohd Suhail ITA No. 1536/Hyd/2014 and Hon'ble ITAT, Mumbai Bench in the case of ITO Ward 17(3)(4) Vs M/s Sugarchem Kahamalaya ITA No. 2071/Mum/2016 Therefore in view of several judgments which have gone into this aspects, it is my considered view that provision of section 194C(6) & 194C(7) are independent of each other and when conditions as men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited 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 84[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 85[one lakh] rupees, the person responsible for paying such sums referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f and the AO has infact invoked those penal provisions whereby show-cause has been issued to the assessee u/s 234E /271H dated 28.01.2019. In the instant case, once the assessee is in receipt of PAN and has not deducted TDS, it has complied with the first statutory obligation cast upon him and the assessee cannot be penalized for non-deduction of TDS. The provisions of section 40(a)(ia) which are deeming fiction relating to non-deduction of TDS have to be read in the limited context of non-deduction of TDS and the same cannot be extended to ensure that even where the assessee complies with his statutory obligation not to deduct TDS on receipt of PAN, merely because the subsequent obligation in terms of filing of prescribed forms has not been complied with, the assessee should suffer thirty percent of disallowance of the expenditure. A similar view has been held by the Co-ordinate Bench in case of Soma Rani Ghosh (supra) wherein it was held as under: "25. Next ground of disallowance stated by the learned CIT is that Sec. 194C(6) and 194C(7) are to be read together, and if after obtaining PAN from the Transporters, the requisite particulars so obtained from the Transporters are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid or likely to be credited or paid during the previous year to the account of the sub-contractor during the course of business of plying, hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum, in the prescribed form and verified in the prescribed manner and within such time as may be prescribed, if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year: Provided also that the person responsible for paying any sum as aforesaid to the sub- contractor referred to in the second proviso shall furnish to the prescribed income-tax authority or the person authorised by it such particulars as may be prescribed in such form and within such time as may be prescribed; or] (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, 1["where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with"], his Permane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, if there is any breach of such requirement, question of applicability of section 40(a)(ia) would arise. Despite such circumstances existing, sub-section (3) makes exclusion in cases where such liability would not arise. We are concerned with the further proviso to sub- section (3), which provides that no deduction under sub-section (2) shall be made from the amount of any sum credited or paid or likely to be credited or paid to the sub-contractor during the course of business of plying, hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum in the prescribed form and verified it in the prescribed manner within the time as may be prescribed, if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year. (7) The exclusion provided in sub-section (3) of section 194C from the liability to deduct tax at source under sub-section (2) would thus be complete the moment the requirements contained therein are satisfied. Such requirements, principally, are that the sub-contractor, recipient of the payment produces a necessary declaration in the prescribed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm No. 15I/J within the prescribed time is only a technical default or the provisions of section 40(a)(ia) of the Act are attracted? and proceeded to answer the same as under:- 'Section 40 (a)(ia) and Section 194C(3) of the Act reads thus: "Section 40(a)(ia) : Any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub- section(i) of Section 139". Section 194C/3): No deduction shall be made under sub-section (1) or sub- section(2) from - (i) the amount of any sum credited or paid or likely to be credited or paid to the account of or to the contractor or sub-contractor, if such sum does not exceed twenty 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 fifty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered by the ITAT, Ahmedabad Bench in Valibhai Khanbhai Mankad's case (supra) and the said Judgment has been upheld by the High Court of Gujarat reported in (2013) 216 Taxman 18 (Guj) wherein it is held that once the conditions of Section 194C(3) were satisfied, the liability of the payee to deduct tax at source would cease and accordingly, application of Section 40(a)(ia) would also not arise. The Tribunal, placing reliance on the judgment of the ITAT, Ahmedabad Bench, has dismissed the appeal filed by the Revenue. We agree with die said propositions and hold that filing of Form No.15I/j is only directory and not mandatory.' 31. A Coordinate Bench of this Tribunal in ITA No. 86/VIZ/2013 in the case of ITO v. Kolli Bros, dated 11.12.2013 followed the decision of the Hon'ble High Court of Gujarat in the case of Valibhai Khanbhai Mankad (supra). In the case of Mahalaxmi Cargo Movers v. ITO [IT Appeal No. 6191 (MUM) of 2013, dated 09.12.2015], another Coordinate Bench of this Tribunal reached the same conclusion while following the decision of the Coordinate Bench in the case of Valibhai Khanbhai Mankad (supra) and Sri Marikamba Transport Co. (supra). 32. It is worth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Rs. 1,13,00,980/- claimed as expense towards Carriage Outward, and such additions shall stand deleted." 9. In light of above discussions and in the entirety of facts and circumstances of the case, we don't see any infirmity in the order of the ld CIT(A) and the same is hereby confirmed. The grounds of appeal taken by the Revenue are dismissed." 12. Having considered the rival contentions and after careful perusal of the record, we observe that the ld. CIT(A) has given relief to the assessee by observing that the assessee is engaged in the business of mining, crushing and transportation etc. besides rental income during the year under consideration. The assessee had paid an amount of Rs. 6,31,30,028/- to various transporters on account of freight. Out of this an amount of Rs. 4,80,46,176/- was found by the A.O where the TDS was liable to be deducted u/s 194C of the Act. The assessee has claimed that the PAN details were furnished by the transporters at the time of payment of freights. The A.O. has raised this question during the assessment proceedings and the assessee had filed PAN details of all such transporters. The provision of the Act is very clear that 30% of the amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to furnish the prescribed information to the Revenue authorities, the same cannot lead to a conclusion that the assessee has not complied with the first statutory obligation. There are separate penal provisions for non-compliance thereof and the AO has in fact invoked those penal provisions whereby show-cause has been issued to the assessee. We observe that the case laws relied on by the ld DR are not applicable in the facts of the present case. The ld. CIT(A) has passed a speaking and reasoned order discussing all the facts and circumstances as well as legal propositions of law therefore, considering the totality of facts and circumstances and case laws exactly similar to the facts and circumstances of the present case, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, hence, we uphold the same. 13. Ground No. 3 raised by the revenue relates to challenging the order of the ld. CIT(A) in treating the rental income received from M/s L&T Ltd. as income from house property as against of income from business or profession taxed by the A.O. In this regard, the ld DR has relied on the order of the A.O. and at the outset, the ld AR has reiterated the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery, plant, furniture, fittings or other things also. Explanation. -For the purposes of this sub-clause, "land, building, part of a building, machinery, plant, furniture, fittings and other things" include any rights therein ; (ii) any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, furniture, fittings or other things therein) which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building ; (e) "person interested", in relation to any immovable property, includes all persons claiming, or entitled to claim, an interest in the consideration payable on account of the vesting of that property in the Central Government under this Chapter ; (f) "transfer",- (i) in relation to any immovable property referred to in sub-clause (i) of clause (d), means transfer of such property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act where the rent income received from the same tenant has been accepted by the department. After taking into consideration facts and circumstances of the case as discussed above, in my considered view, the A.O's view of rental receipts of Rs. 1,06,94,680/- as business income is not tenable. Accordingly, the rental receipts of Rs. 1,06,94,680/- is held as 'income from house property' and subject to the taxation accordingly. Appellant's ground of appeal on this issue is allowed." From perusal of the impugned order, we observe that the ld. CIT(A) has given relief to the assessee by holding that the annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head "Income from house property" In this case the assessee had got lease right from the Rajasthan govt. on the land for a period of 20 years and therefore covered by the provision of section 27(iiib) and section 269UA(f) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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