ACIT, CIRCLE, BHARATPUR vs. M/S. JAGDAMBE STONE COMPANY, BHARATPUR

4. Aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of both the parties and the judgment relied upon by the assessee, given part relief to 3 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company the assessee. Against which, the revenue is in further appeal before the ITAT by taking above mentioned grounds of appeal.

5. Grounds No. 1 and 2 of the appeal are interrelated and interconnected, therefore, we decide to deal with these issues by this consolidated findings. Grounds No. 1 to 3 of the appeal raised by the Revenue relates to challenging the order of ld. CIT(A) in deleting the addition U/s 40(a)(ia) r.w.s. 194C of the Act of Rs. 1,44,13,853/-.

6. The ld DR has relied on the order of the A.O. and submitted that the ld. CIT(A) has erred in deleting the additions U/s 40(a)(ia) r.w.s. 194C of the Act on account of freight expenses. She further submitted that the ld. CIT(A) has also erred in allowing expenditure in respect of freight charges as provisions of Section 194C(6) and Section 194C(7) of the Act are interconnected and assessee has not complied with the provisions of section 194C(7) of the Act. The ld DR has further submitted that the ld. CIT(A) has also erred in treating the rental income received from M/s L&T Ltd. as Income from house property instead of income from business or profession. The ld DR has relied on the following decisions:

(i) Karanpura Development Co. Ltd. Vs CIT (1962) 44 ITR 362 (SC) (ii) Palam Gas Service Vs CIT (2017) 81 taxmann.com 43 (SC)

4 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company (iii) 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 Rs. 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 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

5 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company to be made on freight payment to such transporters as per section 194C(6) of the Act.

(i) ACIT Vs Mr. Mohammed Suhail, Kurnool in (ii) Zuberi Engineering Company Vs Deputy Commissioner of Income ITA No. 977/JP/2018 (iii) Assistant Commissioner of Income vs M/S Arihant Trading Co, ITA No. 1113/JP/2018 — Jaipur ITAT (iv) M/s ACC Limited Vs ITO - ITA Nos. 634 to 637/Chd/2014 — ITAT CHANDIGARH Bench.

7 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company “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.

8 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 1. Whether the assessee had got PAN details from the transporters at the time of payment of freights? 2. Whether after getting the PAN details from the transporters the assessee was liable to deduct taxes u/s 194C of the Act? 3. Whether the assessee had filed TDS return alongwith the details of PAN received from the transporters? 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? 5. Whether the provision of section 194C(6) & 194C(7) are interdependent or to be applied separately? 4.4.1 Whether the assessee had got PAN details from the transporters at the time of payment of freights?

The appellant has claimed that the PAN details were furnished by the transporters at the time of payment of freights. The A.0 has raised this question during the assessment proceedings and the assessee had filed PAN details of all such transporters. However, the A.0 while accepting the PAN details has raised a doubt whether such PAN details were received at the time of payment of freights or later when such a query was raised during the assessment proceedings. The A .0 has mentioned about the probability of such PAN details having been procured later. The A.O in the assessment order has mentioned as under; It cannot be ascertained 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.

9 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 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 interpretation that the leeway given in section 194C(6) is actually meant to be for the benefit of the small and medium transporters is not entirely correct as the provision of the Act stand upto 01/06/2015 does not distinguish any class of transporters. An amendment made applicable from 01/06/2015 has made the distinction but prior to that no such distinction was provided in applicability of section 194C(6) of the Act.

10 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company Therefore as per the provision of the Act as applicable for KY: 201415, once the transporters has 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. 4.4.3 Whether the assessee had filed TDS return alongwith the details of PAN received from the transporters?

The appellant has not filed TDS return as is prescribed under Rule 31A (vi) of IT Rules, 1962 in the prescribed Form 26Q along with the PAN details of the deductee but the assessee had revised the TDS return on 03/11/2017. Implication of non-filing of TDS return: As the assessee has failed to file TDS return in prescribed form within stipulated time then the assessee is liable to the following provisions; No filing or Late filing of TDS returns or TDS statement shall invite 2 penal consequence 1. Fee for late filing U/s 234E: As per section 234E, where a person fails to file the TDS/TCS return on or before the due date prescribed in this regard, then he shall be liable to pay, by way of fee, a sum of Rs. 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 Rs. 10,000 which can go upto Rs. 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?

11 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 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 (1) ofsection 201, then, for the purpose of this sub- clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. Explanation.—For the purposes of this sub-clause,— (i) "commission or brokerage" shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii) "fees for technical services" shall have the same meaning as in Explanation2 to clause (vii) of sub-section (1) of section 9; (iii) "professional services" shall have the same meaning as in clause (a) of . the Explanation to section 194J; (iv) "work" shall have the same meaning as in Explanation III to section 194C; (v) "rent" shall have the same meaning as in clause (i) to the Explanation to section 194-I; 12 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company (vi) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of subsection (1) of section 9; The provision of the Act is very clear that 30% of the amount is not deductible u/s 30 to 38 of the Act, on the amount payable to a resident on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted. In this case the appellant has not deducted tax u/s 194C on the payment made to the transporters on account of freight citing the provision of section 194C(6) of the Act as the deductee transporters have provided PAN details 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 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. 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 13 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 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 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 '7, 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 authorised 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 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 14 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 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).

30. In CIT —vs.- Sri Marikamba Transport Co. in 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 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 (1) 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 16 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 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 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 (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 17 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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. A Coordinate Bench of this Tribunal in 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 (Kann.).

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 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 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 18 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 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 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.

4.5 In view of the discussions made above and on the basis of various judgments as cited above, it is my considered view that the A.O is not justified in applying provision of section 40(a)((ia) of the Act for non deduction of taxes u/s 194C(1) of the Act as the conditions mentioned in section 194C(6) have been satisfied. Accordingly, the addition of Rs.1,44,13,853/- is deleted.”

81 194C. 82(1) Any person responsible for paying any sum83 to any resident (hereafter in this section referred to as the contractor83) for carrying out any work83 (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 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 20 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company (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 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, 86[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. (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 form and within such time as may be prescribed.”

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 21 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 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 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 22 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company hiring/leasing/of vehicles during the course of his business, then such person making such payment shall not deduct any TDS. It is only by way of subsequent amendment by Finance Act, 2015 (w.e.f. 1-06-2015), the expression "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" was substituted in the place of "on furnishing of" thereby introducing the requirement of the declaration to the effect indicated by the amendment. Therefore, 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.

194C as Amended by Finance Act, (N0.2) 2009 194C prior to Amendment by Finance Act, (N0.2) 2009 )

194C(3) No deduction shall be made (6) No deduction shall be made from any sum under sub-section (1) or sub-section (2) credited or paid or likely to be credited or paid from— 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 Provided that …. … effect along with"], his Permanent Account Number, to the person paying or crediting such sum. Provided further that no deduction shall be made under sub-section (2), from the amount of any sum credited or paid or (7) The person responsible for paying or crediting likely to be credited or paid during the any sum to the person referred to in sub-section previous year to the account of the sub- (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such contractor during the course of business particulars, in such form and within such time as of plying, hiring or leasing goods carriages, on production of a declaration may be prescribed.

23 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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]

(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 sub-contractors 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 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 be linked to the declaration of tax at 25 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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".

28 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 is not deductible u/s 30 to 38 of the Act, on the amount payable to a resident on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted. In this case the assessee has not deducted tax u/s 194C on the payment made to the transporters on account of freight citing the provision of section 194C(6) of the Act as the deductee transporters have provided PAN details at the time of such payments. Since 29 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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. The ld. CIT(A) relied on the decision of Coordinate Bench ITAT, Kolkata bench in the case of Soma Rani Ghosh Vs DCIT, Kolkata wherein the Coordinate Bench has discussed threadbare 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, 30 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 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 31 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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 same arguments as were raised before the ld. CIT(A) and relied on the order of the ld. CIT(A).

14. 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 5.3 and 5.4 of his impugned order as under:

“5.3 I have perused the assessment order as well as submissions filed by the appellant including judicial citations given therein. Following facts have emerged;

2. That the appellant has given this land on rent to M/s L & T and earned rental income of Rs.1,06,94,680/-. The appellant has declared these receipts as income from house property and claimed deduction u/s 24 of the Act. 3. That the A.O has treated this receipt as income from business and not from the house property. 4. That the 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; 32 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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— (i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, 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",— 33 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company (i) in relation to any immovable property referred to in sub-clause (i) of clause (d), means transfer of such property by way of sale or exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882). Explanation. —For the purposes of this sub-clause, a lease which provides for the extension of the term thereof by a further term or terms shall be deemed to be a lease for a term of not less than twelve years, if the aggregate of the term for which such lease is to be granted and the further term or terms for which it can be so extended is not less than twelve years; In this case the appellant 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 Act. Therefore, for the purpose of section 22 of the Act, the appellant is the deemed owner of the land 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.

34 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 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. Ltd and Prestige Estate Projects Pvt. Ltd Vs DCIT (ITA No. 218/Bang/09 dated 11.09.2009) relied upon the A.0 in the assessment order.

I have also considered the submission of the appellant that preceding year case i.e A.Y: 2014-15 was also assessed u/s 143(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 35 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 27(iiib) and section 269UA(f) of the Act. Therefore, for the purpose of section 22 of the Act, the assessee is the deemed owner of the land and the assessee 's contention that sub-letting this land to L&T is to be considered as 'income from house property'. The ld. CIT(A) has further held that preceding year case i.e A.Y. 2014-15 was also assessed u/s 143(3) of the Act where the rent income received from the same tenant has been accepted by the department. 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, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, hence, we uphold the same.

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 of 10% expenses related to printing and stationary, staff welfare is deleted. Therefore, the addition is reduced to Rs.1,50,421/-. Appellant's ground of appeal on the issue is partly allowed.

From perusal of the impugned order, we observe that any expenditure is allowed under section 37(1) of the Act only if such expenditures are incurred or expended wholly and exclusively for business purposes. Telephone and travelling expenses come under the purview of personal expenses but being a firm office expenses and expenditure related to printing and stationary, staff welfare etc is a reasonable business expenses. Therefore, considering the totality of facts and circumstances of the case, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, hence, we uphold the same.

37 ITA 1171/JP/2019_ ACIT Vs M/s Jagdambe Stone Company 17. In the result, this appeal of the Revenue is dismissed.

Order pronounced in the open court on 12th March, 2021.

Sd/- Sd/- ¼foØe flag ;kno½ ¼lanhi x®lkÃa½ (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 12/03/2021 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- The A.C.I.T., Circle, Bharatpur. 1. izR;FkhZ@ The Respondent- M/s Jagdambe Stone Company, Bharatpur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 1171/JP/2019) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत