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TMI Blog2022 (11) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... ,498/- made by the AO u/s. 40(a)(ia) of the Act on account of non-deduction of TDS on carting expenses, without appreciating that assessee has failed to furnish the details of PANs of the carting parties before the AO during the original assessment proceedings and therefore failed to comply the provisions of sec. 194C(6) of the Act? 2. It is, therefore, prayed that the order of the Ld. CIT(A) maybe set aside and that of Assessing Officer may be restored to the above extent." 3. The facts necessary for disposal of the appeals are stated in brief. Assessee before us is a Private Limited Company and engaged in civil construction activities. The assessee-company filed its original return of income on 29.09.2011, declaring total income of Rs. 1,79,660/-. The scrutiny assessment under section 143(3) of the Act, was completed on 30.01.2014. However, later on, the Revenue Audit Party has raised an objection that assessee-company had failed to deduct Tax Deducted at Source (TDS) on carting payments given to two parties, during the year under consideration namely: (i) M/s. Patel Carting of Rs. 6,21,415/- and (ii) Shri Subash G. Mayani of Rs. 6,07,975/-. According to the audit party, as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us. 6. Learned Senior Departmental Representative (Ld. Sr. DR) for the Revenue, pleaded that Ld. CIT(A) allowed the appeal of assessee, holding that assessee-company has provided PAN details of these parties and therefore the assessee has complied with the provision of section 194C(6) of the Act and hence Ld. CIT(A) deleted the addition. The Ld. DR stated that decision of Ld. CIT(A) is not acceptable since the assessee-company had no PAN details of the parties at the time of payment and therefore assessee was required to deduct TDS at the time of payment to the payees. It is also pertinent to mention that assessee has not provided any details according to the provision of section 194C(6) or 194C(7) of the Act. During the course of re-assessment proceedings, the Assessing Officer has realized that at the time of payment, the company had no details of PAN of the two parties. Hence, assessee has failed to comply the provision of section 194C(6) of the Act and whatever payment made as carting expenses are liable for TDS as per section 40(a)(ia) r.w.s. 194C(6) of the Act. Accordingly, the Assessing Officer disallowed the payment u/s. 40(a)(ia) while finalizing the re-assessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed as expense towards Carriage Inward and Rs. 1,13,00,980/- claimed as expense towards Carriage Outward, treating such expense disallowable under section 40(a)(ia) of the Act. 8. Assessee contended before the learned CIT that because of the provision of Section 194C(6), she was not liable to deduct TDS on payments to transporters who had submitted their PAN, and those details of PAN and addressees of the transporters were filed during the course of scrutiny assessment before the AO. Relevant portion of the appellate order is as follows: "To decide the issue, we need to read the entire section 194C together to understand its true interpretation. 194C(1) reads as under: (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contractor 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 cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of transportation on furnishing of his PAN. Further, the provisions of Section 194C(6) and 194C(7) have to be read together. Section 194C(7) read as under: (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 authorised by it, such particulars, in such from and within such time as may be prescribed.". Thus, the benefits of Section 194C(6) can be availed only then the assessee fulfills the conditions laid down in Section 194C(7). However, in this case, the assessee has not fulfilled the conditions as she has not furnished the requisite particulars in such form to the prescribed income-tax authority within the stipulated time period. This logic is also indirectly confirmed by the order of ITAT Hyderabad in ITA No. 1536/Hyd/2014 in the case of Mr. Muhammad Suhail, on which the assessee had relied during the appellate proceedings. In this case, the relevant A.Y. is 2010-11 & the Hon'ble ITAT have held that provisions of Section 194C(7) are not applicable in this A.Y. but they are certainly applicable to subsequent assessment years. The relevant por ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther payment for hiring/leasing of vehicles during the course of his business then he would not deduct TDS if the sub-contractors have supplied their PAN details to the principal transporter. He further observed that Section 194C(6) will not apply to payments made by a person who himself is not a transporter, to another sub-contractor for plying, hiring or leasing goods carriage. Secondly, he stated that provisions of section 194C(6) and 194C(7) have to be read together and the benefit under section 194C(6) is available only when the assessee fulfills the conditions laid down in Section 194C(7) of the Act. On this aspect, he derives strength from the decision in the case of Muhammad Suhail. Now, we shall proceed to appreciate the rival contentions in the light of the provisions of the Act and the decisions rendered by different High Courts and Tribunal. 10. For proper appreciation of the finding of the learned CIT that the assessee is a contractor making payments to the transporter for carrying of goods and was thus liable to deduct TDS on such payment, it is necessary to look at the provisions of section 194C(1) of the Act. The said provision reads as follows: "194C. Payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person responsible for paying any sum" and "any resident (hereafter in this section referred to as the contractor)", appearing in Sec. 194C(1) and categorized the assessee as the Contractor. Having categorized the assessee as a contractor, the Ld. CIT(A) observed that the immunity from making TDS from the payment under section 194C(6) is available only to a transporter that procured the PAN of the Sub Contract Transporters. 14. The next question, therefore, that arises is whether the difference between "Contractor" and "Sub Contractor" has any impact on the liability to make TDS under Section 194C(1) of the Act. To understand this, it is necessary to refer to the position of law prior to and after amendment to Section 194C of the Act. 15. It is worth noticing that by means of Finance Act (No. 2), 2009, rather than introducing a few changes, the entire section of 194C had been substituted. Before Amendment it was reading like "(1) Any person responsible for paying any sum to any resident (hereinafter in this section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a contract between is concerned, even after amendment, Sec. 194C(1) had remained substantially the same. However, earlier "Contract" and "Sub-Contract" were covered by two different sub-sections, namely, Sec. 194C(1) and Sec. 194C(2) respectively. But, the Amendment, vide Finance Act, 2009 brought in the most significant change by obliterating the difference between Contract and Sub-Contract, by repealing Sec. 194C(2) which was dealing with sub-contractors and simultaneously introducing Sub-Section (7) with Explanation, Clause No. (iii) of which clarifies that "Contract shall include sub-contract". Now as the things stand, there remains no distinction between a Contract and Sub-Contract. Unlike pre-amendment scenario, the entire provision of Sec. 194C now applies alike to both the situations, namely, in relation to jobs assigned by a person to a Contractor and the jobs assigned by a Contractor to a Sub-Contractors in a similar manner. A plain reading of Sec. 194C(2), as it stands now, clearly states that a Contractor entrusted with any work under sec. 194C(1) while making payment to a Sub-Contractor is still under obligation to effect TDS as well. 17. Reference to Contractor an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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. 21. Now coming to the contention that under Sec. 194C(6) as it stands now, providing for immunity from TDS under sec. 194C(1) in relation to payments to transporters, applies only to a transporter making payment to another subcontractor submitting his PAN to the former, Section 194C(6) does not give any such indication. Section 194C(6) reads 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, 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 Permanent Account Number, to the person paying or crediting such sum. 22. Prior to the amendment by Finance Act, 2015 (w.e.f. 1-06-2015, it was reading 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec. 194C(6) made it plainly clear that from the A.Y. 2010-11 onwards, by virtue thereof when Transport Operators furnish their PAN to the person responsible for making payments to them, the Transport Operators would be outside the purview of TDS u/s. 194C. Needless to say that 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. 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 furnished to the prescribed Authority as provided U/S. 194C(7), deduction and for that matter disallowance, U/S. 194C and 40(a)(ia) would get attracted. On this aspect, as indicated above a reading of provisions of Section 194C(6), prior to the amendment of by Finance Act, 2015 (w.e.f. 1-06-2015), makes it clear that that during the relevant Assessment year, if the sub-contractors have supplied their PAN to the person making payments in respect of hiring/leasing/of vehicles during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us 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 authorized by it such particulars as maybe 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 contactor owns ten or less goods carriages at anytime during the previous year and furnishes a declaration to that effect along with"], 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 authorized by it, such particulars, in such form and within such time 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 format and further that such sub-contractor does not own more than two goods carriages during the entire previous year. The moment, such requirements are fulfilled, the liability of the assessee to deduct tax on the payments made or to be made to such subcontractors would cease. In fact he would have no authority 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 thousand rupees, the person responsible for paying such sums referred to in sub-s.(1) or as the case may be sub-s.(2) shall be liable to deduct income-tax under this section: Provided further that no deduction shall be made under subs. (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 business of plying hiring or leasing goods carriages, on production of a declara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as dismissed the appeal filed by the Revenue. We agree with the 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 vs. Kolli Brothers, order 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 M/s. Mahalaxmi Cargo Movers vs. ITO in ITA No. 6191/MUM/2013, order 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 CIT vs. Valibhai Khanbhai Mankad (supra) and CIT vs. Sri Marikamba Transport Co. in ITA No. 553 of 2013 reported in 379 ITR 129 (Karn.). 32. It is worth noticing that in ACIT vs. Mr. Mohammed Suhail, Kurnool in ITA No. 1536/Hyd/2014, order dated 13.02.2015, the Coordinate Bench of this Tribunal specifically held that the provisions of section 194C(6) are independent of section 194C(7), and just because there is violation of provisions of section 194C(7), disallowance under section 40(a)(ia) does not arise if the assessee complies with the provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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