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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 ..... ry obligation to not deduct TDS on receipt of PAN - merely because there is non-compliance on part of the assessee 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. Correct head of income - rental income received from M/s L T Ltd .- income from house property as against of income from business or profession taxed by the A.O. - HELD THAT:- We observe that the ld. CIT(A) has given relief to the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the ld. CIT(A), Alwar dated 11/07/2019 for the A.Y. 2015-16, wherein the Revenue has raised following grounds of appeal: 1. On the facts and circumstances of the case and in law ld. CIT(A) has erred in deleting the additions u/s 40(a)(ia) r.w.s. 194C of the IT Act of ₹ 1,44,13,853/- on account of freight expenses. 2. On the facts and circumstances of the case and in law ld. CIT(A) has erred in allowing expenditure in respect of freight charges as provisions of Section 194C(6) and Section 194C(7) are interconnected and assessee has not complied with the provisions of Section 194C(7) of the IT Act. 3. On the facts and circumstances of the case and in law ld. CIT(A) was justified in treating the rental income received from M/s Larsen 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 ₹ 3,104/- out of printing and stationary expenses and ₹ 2,11,547/- out of workmen and staff welfare expenses, without supported with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Shr Choudhary Transport Company Vs ITO (2020) 118 Taxmann.com 47 (SC) 7. On the contrary, the ld AR of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and has further submitted that the AO has disallowed the Freight Expenses of ₹ 1,44,13,853/- [30% of 4,80,46,176/-] by wrongly invoking the Section 40(a)(ia) of the Act. TDS return was filed delayed, due to which, the AO invoked the Section 40(a)(ia) r.w.s. 194C(6) and 194C(7) of the Act. He further submitted that Section 194C(6) provides that no deduction (TDS) is required to be made on sum paid or credited where the transporters have furnished their respective PANs to the assessee. Accordingly, PAN of all the Contractors have been collected and duly submitted to the AO at the time of assessment proceedings 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RH Bench. 10. We have heard the ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. The ld. CIT(A) has dealt with the issue from para 4.3 to 4.5 of his impugned and the same is reproduced as under: 4.3 I have perused the assessment order as well as submissions filed by the appellant including judicial citations given therein. Following facts have emerged; 1. That the assessee is engaged in the business of mining, crushing and transportation etc. besides rental income during the year under consideration. 2. That the appellant had paid an amount of ₹ 6,31,30,028/- to various transporters on account of freight. Out of this an amount of ₹ 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 Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained as to when the PANs were obtained by it from the transporters (against whose payments it has not deducted tax at source), whether it obtained PAN prior to making payments to transporters, or at the time of furnishing revised TDS return on 03-11-2017. The appellant had filed PAN details both at the time of assessment proceedings and during appellate proceedings and is part of the assessment order also. Thus, it is obvious that the appellant has filed the requisite details about the PANs of the transporters to whom freights were paid when the A.O demanded it during assessment proceedings. The A.O has raised the probability of such PAN details having been procured later and not at the time of making the payments to such transporters. However, the fact is that the A.O has not disputed the veracity of such PAN details. Only question he has raised is whether such PAN 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 proba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to pay, by way of fee, a sum of ₹ 200 for every day during which the failure continues. The amount of late fees shall not exceed the amount of TDS. 2. Penalty for late filing or Non filing of TDS statement U/s 271H: As per section 271H, where a person fails to file the statement of tax deducted/collect at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then assessing officer may direct such person to pay penalty under section 271H. Minimum penalty can be levied of ₹ 10,000 which can go upto ₹ 1,00,000. Penalty under section 271H will be in addition to late filing fees prescribed under section 234E. 4.4.4 Whether non filing of TDS return alongwith PAN details would attract provision of section 40(a)(ia) of the Act holding the assessee in default of non deduction of TDS under the provision of section 40(a)(ia) of the Act? In order to bring clarity, it is imperative to go into 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 chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of such payments. Since provision of section 194C(6) of the Act has given the exemption from deducting taxes if the transporters have furnished PAN details to the persons paying or crediting such sums. Therefore, the provision of section 40(a)(ia) of the Act is not applicable as the no tax is deductible on payments made to transporters if the conditions as prescribed in section 194C(6) of the Act is satisfied. 4.4.5 Whether the provision of section 194C(6) 194C(7) are interdependent or to be applied separately? Now the question arises whether the provision of section 194C(6) 194C(7) of the Act is interdependent or independent of each other. The question has been addressed by various judgments. 1. Hon'ble ITAT, Kolkata bench in the case of Soma Rani Ghosh Vs DCIT, Kolkata ITA No. 1420/KOL/2015 has discussed threadbare the issue involved. The relevant part of the judgment is as s under; 26. On the aspect of observation of the learned CIT that Sections 194C(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. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as may be prescribed. 27. From the above, it could be observed that only slight modification had been introduced as to the procedure by replacing declaration with the words Permanent Account Number as the thing to be obtained from the Transporter. We are, therefore, inclined to hold that the provisions of Section 194C(6) and 194C(7) are similar to the Proviso (2) and (3) of the pre-amended Section 194C(3), and on this premise we shall proceed examine whether Section I94C(6) and 194C(7) are to be read together to invoke provisions under section 40(a)(ia) of the Act. 28. After drawing an analogy between the pre-amended proviso between Clause (2) and Clause (3) of section 194C(3) and the present amended section 194C(6) and 194C(7), Learned AR submitted that even on earlier occasions when the declaration obtained in Form 151 (requirement similar to the PAN particulars under Sec. 194C(6)) obtained from the Transporter under Second Proviso is not submitted in Form 15J to the Commissioner of Income Tax 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 ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to make any such deduction. 8) The later portion of sub-section (3) which follow the further proviso is a requirement which would arise at a much later point of time. Such requirement is that the person responsible for paying such sum to the sub-contractor has to furnish such particulars as prescribed. We may notice that under Rule 29D of the Rules, such declaration has to be made by the end of June of the next accounting year in question. 9) In our view, therefore, once the conditions of further proviso of section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease. The requirement of such payee to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. In our view, therefore, the Tribunal was perfectly justified in taking the view in the impugned judgment. It may be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious 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 subcontractor referred to in the second proviso shall furnish to the prescribed IT 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 (ii) any sum credited or paid before the 1st day of June, 1972;. or (iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the sub-contractor 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of provisions of section 194C(7), disallowance under section 40(a)(ia) does not arise if the ussessee complies with the provisions of section 194C(6). 33. In view of the above and respectfully following the judicial reasoning delineated in the above judgments, we find that if the assessee complies with the provisions of section 194C(6), disallowance under section 40(a)(ia) does not arise just because there is violation of provisions of section 194C(7) of the Act. 34. From our above discussion it follows that,- i) in the context of Section 194C(1), person undertaking to do the work is the Contractor and the person so engaging the contractor is the contractee; ii) that by virtue of the Amendment introduced by Finance Act (No.2) 2009, the distinction between a contractor and a sub-contractor has been done away with and Cl. iii) of Explanation under 194C(7) now clarifies that contract shall include subcontract; iii) subject to compliance with the provisions of Section 194C(6), immunity from TDS under sec. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. 82 (1) Any person responsible for paying any sum 83 to any resident (hereafter in this section referred to as the contractor 83 ) for carrying out any work 83 (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person paying or crediting such sum. 8. On perusal of the above provisions, it is clear that all that is required for non-deduction of TDS on payment to the transporter is that the latter furnishes his PAN number to the person responsible for paying or crediting the amount to him. The primary onus is thus on the recipient to furnish his PAN to the payer and the payer, on receipt of such PAN number, is under statutory obligation not to deduct TDS on such payments. Further, the payer is also under a statutory obligation to furnish the said information in prescribed forms to the Income tax authority. To our mind, the statutory obligation to furnish the information regarding receipt of PAN and non-deduction of TDS is a fall out of and consequent of the first statutory obligation to not deduct TDS on receipt of PAN. However, merely because there is non-compliance on part of the assessee 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 infact invoked those penal provisions wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servation of the learned CIT that Sections 194C(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, (N0.2) 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, (N0.2) 2009 ) 194C as Amended by Finance Act, (N0.2) 2009 194C(3) No deduction shall be made under sub-section (1) or sub-section (2) from- Provided that . Provided further that no deduction shall be made under sub-section (2), from the amount of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained in Form 15I ( requirement similar to the PAN particulars under Sec. 194C(6)) obtained from the Transporter under Second Proviso is not submitted in Form 15J to the Commissioner of Income Tax 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 v. Valibhai Khambhai Mankad [2013] 216 Taxman 18/[2012] 28 taxmann.com 119 (Guj.), it is held by the Hon'ble Gujarat High Court at Ahmedabad that :- (6) Section 194C, as already noticed, makes provision where fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. In our view, therefore, the Tribunal was perfectly justified in taking the view in the impugned judgment. It may be 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 v. Marikamba Transport Co. [2015] 379 ITR 129/231 Taxman 84/57 taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) any sum credited or paid before the 1st day of June, 1972; or (iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the sub-contractor 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. 1Sl 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor and a sub-contractor has been done away with and Cl. (iii) of Explanation under 194C(7) now clarifies that contract shall include sub-contract; (iii) subject to compliance with the provisions of Section 194C(6), immunity from TDS under sec. 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. 35. Consequent to our findings in the preceding paragraphs, we reach a conclusion that the authorities below are not justified in treating the expense incurred by the assessee for Carriage in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the issue involved in detail. Therefore in view of several judgments which have gone into this aspects, the ld. CIT(A) has held that provision of section 194C(6) 194C(7) are independent of each other and when conditions as mentioned in Section 194C(6) have been satisfied then no deduction of tax u/s 194C of the Act is required to be made by the payee. Similar identical issue has also been decided by the Coordinate Bench of this Tribunal in the case of ACIT Vs M/s Arihant Trading Co. in ITA No. 1113/JP/2018 order dated 19/03/2019 in favour of the assessee and against the Revenue by observing that non-deduction of TDS on payment to the transporter is that the latter furnishes his PAN number to the person responsible for paying or crediting the amount to him. The primary onus is thus on the recipient to furnish his PAN to the payer and the payer, on receipt of such PAN number, is under statutory obligation not to deduct TDS on such payments. Further, the payer is also under a statutory obligation to furnish the said information in prescribed forms to the Income tax authority. To our mind, the statutory obligation to furnish the information regarding receipt of PAN and non-dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant has cited the provision of section 22 r.w.s 27(iiib) and to be read with section 269UA(f) of the Act to justify its claim for income to be assessed as income from house property. 5.4 I have considered the above mentioned facts of the case. It is imperative to go into provision of section 22, section 27(iiib) and section 269UA(f). The provisions of the Act are reproduced as under; 22. 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 Section23. (iiib) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (n of section 269UA, shall be deemed to be the owner of that building or part thereof; 269UA (d) immovable property means- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and the appellant's contention that sub-letting this land to L T is to be considered as 'income from house property' to my considered view, is justified. I have also taken into consideration the judicial rulings on the issue as per judgments reproduced as under; ITAT, Mumbai has suggested in case of Akola Trading Company V/s ITO (ITA No.6481/Mum/2013) that if the assessee is the owner of the said property within the meaning of Section 22 r.w.s. 27(iiib) and section 269UA(f), the amount received by the assessee on account of subletting the property is only income from house property and has to be treated as such. Similar view was taken by Hon'ble Karnataka High Court in case of CIT V/s Bhoopalam Commercial Complex and Industries Pvt. Ltd, (2003 130 TAXMAN 338 Kar.) The Hon'ble Supreme Court has established in case of The CIT Vs Poddar Cement Pvt Ltd (1997 Supp (1) SCR 394) that owner is a person who is entitled to receive income from the property in his own right. I have also taken into consideration the appellant's submission in distinguishing the facts of the case from the judicial rulings in the case of Karanpura Development Co. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tationary expenses and ₹ 2,11,547/- out of workmen and staff welfare expenses. The ld DR has relied upon the order of the A.O. and at the outset, the ld AR has reiterated the same arguments as were raised before the ld. CIT(A) and relied upon the order passed by the ld. CIT(A). 16. We have considered the rival contentions and carefully perused the material placed on record. We have also carefully perused the order of the ld. CIT(A) in this regard and we observe that the ld. CIT(A) has dealt with the issue in para 6.3 of the impugned order as under: 6.3 I have gone through the assessment order as well as submissions made by the appellant. An expenditure is allowed under section 37(1) of the Act only if such expenditures are incurred or expended wholly and exclusively for the purpose of business. In this regard, I agree with the A.0 that telephone expenses and travelling expenses do have an element of personal expenses but being a firm office expenses and expenditure related to printing and stationary, staff welfare etc is a reasonable business expenses. Accordingly, the disallowance of 10% expenditures related to telephone and travelling is sustained and disallowances ..... X X X X Extracts X X X X X X X X Extracts X X X X
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