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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the Revenue. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-28, [in short ‘CIT(A)’] Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The ground raised by the Revenue in this appeal is against the order of the Ld. CIT(A) holding that the provisions of section 194C(6) are independent of section 194C(7).
Briefly stated, the facts of the case are that the Assessing Officer (AO) found during the course of assessment proceedings, on verification of books of accounts, that the assessee had paid Rs.45,89,188/- to M/s Sushil Transport Agency (in short ‘STA’) towards transportation charges. However, the assessee had not made tax deduction at source (TDS) to STA. In response to a query raised by the AO, the assessee submitted that the payment of Rs.45,89,188/- to STA was done without TDS as they were having Permanent Account Number (PAN) and the same is covered u/s 194C(6) of the Act. The AO noted that as per para 49.3 of Explanatory Circular for Finance (No.2) Act, 2009 regarding provisions for payments and tax deducted at source to transporters, the Act has been amended to exempt payments to transport operators (as defined in section 44AE) from the purview of TDS. However, this would only apply in cases where the operator furnishes his PAN to the deductor. Deductors who make payments to transporters without deducting TDS (as they have quoted PAN) will be required to intimate these PAN details to the I.T. Department in the prescribed format. However, the applicability of provision of section 194C(6) for non-deduction is not complete without the fulfilment of conditions laid down u/s 194C(7) of the Act. Hence section 194C(7) further provides that the “payer” mentioned in sub- section (6) “shall” furnish to the prescribed Income Tax Authority or the person authorized by it such particulars as may be prescribed. As per Rule 31A(4)(vi), the deductor at the time of preparing statements of tax deducted shall furnish particulars of amount paid or credited on which tax was not deducted in view of the compliance of provisions of sub- section (6) of section 194C by the payee. In view of this, the AO held that it is very clear that merely collecting the PAN of the transporter will not absolve the appellant from the default of not deducting the tax. The AO accordingly disallowed the sum of Rs.45,89,188/- and added it to the total income of the assessee.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) followed the order of the ITAT, Hyderabad Bench in the case of ACIT v. Mohammed Suhail in wherein it is held that the provisions of section 194C(6) are independent of section 194C(7) and mere non-compliance to the procedure laid down in section 194C(7) would not trigger a disallowance. Thus the Ld. CIT(A) deleted the disallowance made by the AO.
Before us, the Ld. DR relies on the order passed by the AO and submits that section 194C(7) specifically refers to section 194C(6) for the purpose of applicability of the provisions which should be read in conjunction with each other.
On the other hand, the Ld. Counsel of the assessee supports the order passed by the Ld. CIT(A) and relies on the order of the Tribunal in Mohammed Suhail (supra).
We have heard the rival submissions and perused the relevant materials on record. In Mohammed Suhail (supra) the Tribunal held:
After considering the rival submissions and perusing the submissions and notifications issued in this regard, we are of the opinion that there is no need to deviate from the order of Ld. CIT(A). Even though new provisions were introduced and assessees were made liable to deduct tax on the payments made to transporters, provisions of section 194C(6) gives exemption to the persons not to deduct the amount, in case they obtain/furnish the PAN. Assessee has complied with these provisions. Therefore, there is no need to deduct any tax and disallowance under section 40(a)(ia) does not arise. Even though it was stated in sub section (7) that 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 within such time as may be prescribed, this provision was not made applicable for the impugned assessment year as the relevant notification was not issued immediately. In fact, the Board has given notification on 15.10.2010, which was made effective for the forthcoming second quarter statement due on 15th October, 2010. Since CBDT itself has issued notification in a later year, assessee's contention that in the impugned assessment year, no such prescribed authority was stated has to be accepted. Even otherwise, as rightly pointed out by the Ld. CIT(A) provisions of section 194C(6) are independent of section 194C(7). Just because there is violation of provisions of section 194C(7), disallowance under section 40(a)(ia) does not arise, if assessee complies with the provisions of section 194C(6). In view of this, we do not find any merit in Revenue appeal.
7.1 The same view has been taken by the ITAT ‘A’ Bench Kolkata in the case of ACIT v. Deepak Gupta (ITA No. 443/Kol/2014) for the AY 2010-11. Facts being identical, we follow the above order of the Tribunal and uphold the order of the Ld. CIT(A).