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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI ANADEE NATH MISSHRA
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.
ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited.
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:
ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited. ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited. ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited. ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited. ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited. ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited. ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited.
”
(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
ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited. 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.
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.
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.
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 this the Impugned assessment orders for both the years are confirmed. The appeal of the appellant fails and is dismissed.”
(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 ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited. 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.
Written submissions filed before the Hon’ble Commissioner of Income Tax (Appeals)-1, Noida 2. Index of Paper Book filed before Hon’ble Commissioner of Income Tax (Appeals)-1, Noida during the course of appellate proceedings 3. Copy of notice dated 16.10.2014 issued by Income Tax Officer (TDS), Noida for verification of TDS for the financial year 2013-14 and 2014-15 4. Copy of letter dated 17.11.2014 filed before the Ld. AO alongwith the copy of Form 24Q and 26Q for the financial year 2013-14 and 2014-15 5. Copy of notice dated 23.02.2015 issued by the Income Tax Officer (TDS), Noida to furnish details of person and payment of freight and cartage / payment to transports. 6. Copy of letter dated 27.02.2015 filed before the Income Tax Officer (TDS), Noida in response to notice dated 23.02.2015 furnishing the details of payment of freight and cartage made to transport Operators by the appellant company for the financial year 2013-14. 7. Copy of letter dated 05.03.2015 filed before the Income Tax Officer (TDS), Noida in response to notice dated 23.02.2015 furnishing the details of payment of freight and cartage made to transport Operators by the appellant company for the financial year 2014-15 (upto Dec 2014). 8. Copy of annexures to the Form 26Q filed for the financial year 2013-14 and 2014-15 duly showing the name, pan of the transporters etc. and appellant has also mentioned “t” in the remark column evidencing that as the concern party is transporter and hence TDS has not been deducted in compliance to requirement u/s 194C(7) of the Income tax Act, 1961. 6. Additional evidence, if any (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.
ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited.
(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.
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 ITA No.- 4315 and 4316/Del/2016. M/s Varun Beverages Limited.
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.