M/S. VARUN BEVERAGES LTD.,UTTAR PRADESH vs. ITO (TDS), NOIDA

Per Anadee Nath Misshra, AM

(A) These two appeals have been filed by the assessee against the impugned

consolidated appellate order dated 30.05.2016 passed by Learned Commissioner of

Income Tax (Appeals)-I, Noida [in short, “Ld.CIT(A)”] pertaining to Assessment Years

2014-15 and 2015-16. These appeals are taken up together for the sake of convenience

and brevity; and are hereby disposed off through this Consolidated Order. Grounds

taken in these appeals are as under:

ITA No.- 4315/Del/2016

“1. The order passed by the Ld. CIT(A) is bad in law, wrong on facts and against the principles of natural justice. 2.(a) That the on the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the order of Income Tax Officer (TDS), Noida, treating the appellant as an assessee in default for non-deduction of TDS u/s 194C on payments made to the Transporters. (b) That the Ld. CIT(A) has failed to appreciate that the appellant assessee has complied the provisions of sub section 7 of Section 194C of Income Tax Act, 1961 and furnished prescribed Form No. 26Q to the Income Tax Officer (TDS) alongwith relevant details required by the law. The appellant craves leave to add, alter, amend, modify or forego any of the grounds of appeal before or at the time of hearing.”

ITA No.-4316/Del/2016

“1. The order passed by the Ld. CIT(A) is bad in law, wrong on facts and against the principles of natural justice.

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2.(a) That the on the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the order of Income Tax Officer (TDS), Noida, treating the appellant as an assessee in default for non-deduction of TDS u/s 194C on payments made to the Transporters. (b) That the Ld. CIT(A) has failed to appreciate that the appellant assessee has complied the provisions of sub section 7 of Section 194C of Income Tax Act, 1961 and furnished prescribed Form No. 26Q to the Income Tax Officer (TDS) alongwith relevant details required by the law. The appellant craves leave to add, alter, amend, modify or forego any of the grounds of appeal before or at the time of hearing.”

(B) Consolidated order dated 23.03.2015 was passed by the Assessing Officer (“AO”,

for short) under Section 201(1) / 201(1A) of Income Tax Act, 1961 (“I.T. Act”, for short)

read with Section 194C of I.T. Act for Financial Year 2013-14 (Assessment Year 2014-15)

and Financial Year 2014-15 up to December 2014 (Assessment Year 2015-16) wherein

demand amounting to Rs. 8,84,807/- for Financial Year 2013-14 and Rs. 19,07,235/- for

Financial Year 2014-15 was raised by the AO. The relevant portion of the aforesaid

consolidated order dated 23.03.2015 is reproduced as under for ease of reference:

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”

(C) The assessee filed appeals before the Ld. CIT(A), for Assessment Year 2014-15

and Assessment Year 2015-16, against the aforesaid consolidated order dated

23.03.2015 of the AO. Vide impugned consolidated appellate order dated 30.05.2016

passed by the Ld. CIT(A), the assessee’s appeals were dismissed on the ground [as

expressed in paragraph 4 and 5 of the impugned consolidated appellate order dated

30.05.2016 of the Ld. CIT(A);] that the assessee has not complied with requirements

under Section 194C(7) of I.T. Act. The relevant portion of the impugned consolidated

appellate order dated 30.05.2016 is reproduced as under:

“ 2. The dispute between the appellant and the Id. A.O. is fairly simple. There is no dispute on facts. Admittedly, the appellant has made payment to the transporters and has not Page 10 of 15

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deducted tax as was considered necessary by the Id. A.O. u/s. 194C of l.T. Act, 1961.The appellant has taken a view that after the amendment to the provisions of section 194C by the Finance Act No.2 of 2009 by which a new provision of sub-section 6 was inserted in Section 194C there was no requirement to deduct tax at source on payments to a contractor for plying good carriages etc., and as the payment under consideration were to such transporters only the appellant was correct in not deducting the tax on payment made to those contractors. The ld. A.O, is not disputing these facts. 3. However, the Id. A.O. has placed reliance on the Explanatory Circulars issued by the Government to explain the new provisions and whereunder a case was made out that the exemption provided In sub-section of section 194C was restricted to the small transporters who were covered under section 44AE of the I.T. Act, 1961 and relying upon the Circular No. 5 of 2010 the ld. A.O. has rejected the claims of the appellant and has held the same to be an assessee in default and passed the impugned order against the appellant. 4. The Explanatory Circular cannot take the position of law. In retrospect the Revenue has realized that there was a lacuna in the provisions of sub-section 6 of section 194C as it did not convey the meaning which was the intended purpose of the said sub-section and which was conveyed by the Circular No. 5 of 2010 dated 03/06/2010. If the law is not properly worded and because of such deficiencies is getting interpreted in more than one ways an assessee cannot be faulted for taking the interpretation more convenient to it. In view of this the reliance placed by the Id. A.O. on the Explanatory O.M. and not on the law is misplaced. There is no denying that the Legislature intended to mitigate the hardships face by a small transporters and not to grant an immunity from deducting tax at source to the transporters at large. But the drafting of sub-section 6 of section 194C failed to take care of the intent of the Legislature and created a situation where such an immunity got granted to every transporter irrespective of the size of its business. It was because of this that Finance Act, 2015 amended the provision of sub-section 6 of section 194C and removed the said deficiency w.e.f. 01/06/2015. In view of this the stand taken by the Id. A.O. is not sustainable in the eyes of the law. 4. However, having said as above, the provisions of sub-section 7 of section 194C were also brought on the statue by the Finance Act No.2 of 2009 and it is seen that the appellant appears not to have complied with the requirements of sub-section 7, The ld. A.O. though has not examined this issue specifically but the spirit of the law seems to have been complied with as the ld. A.O. has made enquiries about the status of the transporters and furnishing of PAN etc. by those transporters.

(C.1) The present appeals have been filed by the assessee against the aforesaid

impugned consolidated appellate order dated 30.05.2016 of the Ld. CIT(A). In the

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course of appellate proceedings in Income Tax Appellate Tribunal (“ITAT”, for short) a

Paper Book consisting the following particulars were filed from the assessee’s side.

(C.1.1) Also, a copy of the order in the case of Dilip Kumar vs. ACIT [2019] 111

taxmann.com 52 (Madras) was also filed from the assessee’s side during appellate

proceedings in ITAT.

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(D) At the time of hearing before us, the learned Authorized Representative of the

assessee submitted, with the help of the aforesaid Paper Book (referred in foregoing

paragraph (C.1) of this order] that the assessee had complied with the provision of

Section 194C(7) of I.T. Act, and relevant details were on the records of the Ld. CIT(A) as

well as the AO. The Ld. AR also placed reliance on the order in the case of Dilip Kumar

vs. ACIT (supra). The learned Departmental Representative (“Ld. DR”, for short) for

Revenue relied on the orders of the Ld. CIT(A) and the AO.

(E) We have heard both sides. We have also perused materials on record. The

contention made on behalf of the assessee, that the assessee had complied with

requirements under Section 194C(7) of I.T. Act and further, that the relevant particulars

were on the records of the Ld. CIT(A) and the AO; is contrary to the observation of the

Ld. CIT(A) in paragraph 4 and 5 of the impugned consolidated appellate order dated

30.05.2016. In the words of Ld. CIT(A): “… appellant appears not to have complied with

the requirements of sub-section 7. The ld. A.O. though has not examined this issue

specifically but the spirit of the law seems to have been complied with as the ld. A.O. has

made enquiries about the status of the transporters and furnishing of PAN etc. by those

transporters. 5. As the appellant has not complied with the requirement of sub section 7

of section 194C it is not entitled to the benefit of sub-section 6 though in the case of

lawful compliance of sub section 7 it would have been entitled for the same. ….” In view

of the foregoing, it will be in fitness of things to remit the matter to the file of the AO for

fresh order after due verification at the end of the AO whether the requirements under

Section 194C(7) have been complied with by the assessee. Accordingly, we set aside the

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impugned consolidated appellate order dated 30.05.2016 of the Ld. CIT(A) and the

aforesaid consolidated order dated 23.03.2015 of the AO and restore the issue in dispute

to the file of the AO for fresh order in accordance with law after due verification at his

end whether the requirements under Section 194C(7) of I.T. Act have been duly complied

with by the assessee. Needless to say, the AO will provide reasonable opportunity to the

assessee before passing fresh order, in order to substantiate the claim that requirements

under Section 194C(7) of I.T. Act have been duly complied with by the assessee.

(F) In the result, both the appeals are partly allowed for statistical purposes.

Order is pronounced in Open Court on 05/03/20.

Sd/- Sd/- (AMIT SHUKLA) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 05/03/20 Pooja/-