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Before: SHRI O.P. KANT & SMT SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM
These two appeals are filed by the assessee against the order dated 24/6/2016 passed by CIT(A)-1, Noida.
The grounds of appeal are as under:-
I.T.A .No.-4403/Del/2016 (A.Y 2014-15)
“Based on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in:-
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Upholding the order passed by A.O even after noting disagreement with the reasons given by the A.O. 2. Passing the order based on presumptions of non-compliance with provisions of Section 194C (7) without undertaking/directing a thorough examination of facts. 3. Concluding that the benefit of non-deduction of tax u/s 194C (6) was not applicable to the assessee on account of the non-compliance of Section 194C(7). 4. Passing an ex-parte order by not following the principles of natural justice including but not limited to affording a reasonable opportunity of being heard.”
The grounds of appeal are as under:-
I.T.A .No.-4404/Del/2016 (A.Y 2015-16)
“Based on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in:- 1. Upholding the order passed by A.O even after noting disagreement with the reasons given by the A.O. 2. Passing the order based on presumptions of non-compliance with provisions of Section 194C (7) without undertaking/directing a thorough examination of facts. 3. Concluding that the benefit of non-deduction of tax u/s 194C (6) was not applicable to the assessee on account of the non-compliance of Section 194C(7). 4. Passing an ex-parte order by not following the principles of natural justice including but not limited to affording a reasonable opportunity of being heard.”
The deductor assessee is engaged in the business of executing EPC Project related to Transmission Lines and Sub Station Projects. The assessee gets contract from Power Grid Corporation of India/State Electricity Authorities and private players to Execute Transmission Line and Sub Station Projects. For Erection Portion, the assessee give sub contract to various parties to execute
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Foundation, tower erection & stringing work. In this case, in order to ascertain growth in TDS collection during the Financial Year 2014-15, a survey u/s 133A (2A) was conducted on 24/2/2015. A show cause notice u/s 201 (1)/201 (IA) read with Section 194C of Income tax Act, 1961 dated 25/2/2015 was issued to the deductor assessee for non deduction of tax at source relating to the heads Freight & Cartage /payment of transport operation & and ‘Raw Hide Cartridge’. In compliance to the summon, the deductor assessee filed reply along with documents. The Assessing Officer observed that the deductor is not making TDS on payments made to the transporters on the plea that the provisions of Section 194C (6) are applicable to these payments and therefore, TDS on these payments are not made, once the transporters submits his PAN to the deductor. The Assessing Officer held that prior to amendment of Section 194C w.e.f. 1/10/2009, the second proviso below Sub Section 3 of Section 194C granted exemption from deduction of tax at source on payment made to small transport operators who did not own more than two transport goods carriages. Transporter operators were reporting problems in obtaining TDS Service as these are not issued immediately by clients and they Assessment Year not able to approach the client gain as they may have to move across the country for their business and collect TDS Service from all over the country was a mammoth task. Thus, it was clear that even earlier big transport operators are regularly contract and business from big assessee’s were not covered within the ambit of non deduction of TDS on payment to transport operators. The explanatory not for amendment also mentions under heading “(b) provisions for payment and task deductor at source to transporters”. That the difficulties faced by small transporters was considered by CBDT and their difficulty was sought to be removed by introducing Sub Section 6 in Section 194C in view of erstwhile Section proviso below Sub Section 3 of Section 194C. The Assessing Officer while treating assessee deductor as defaulter u/s 201 (1) & 201 (1A) of the Act held that the deductor is not in the business of Plying, Hiring or Leasing Goods Carriages and, therefore, the provisions of Section 194C (6) of the Income tax Act are not applicable to the
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deductor and a deductor is liable to deduct TDS u/s 194C. Thus, the Assessing Officer held that the deductor failed to deduct TDS u/s 201(1) read with Section 194C and directed to deposit the TDS as per the provisions of Section 201(1) & 201(1A) read with Section 194C of the Act.
Being aggrieved by this, the assessee filed appeal before the CIT(A). The CIT(A) observed that the assessee has taken a view that after the amendment of the provisions of Section 194C by the Finance Act No. 2/2009 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 assessee was correct in not deducting the tax on payment made to those contractors. The CIT(A) observed that the Assessing Officer was not disputed these facts. But the overall Explanatory Circular and its effect and stand taken by the Assessing Officer on the same was not interfered by the CIT (A). The CIT (A) held that the provisions of Sub Section 7 of Section 194C was not complied and the same was not examined by the Assessing Officer and thus confirmed the order of the Assessing Officer.
The Ld. AR submits that merely non-compliance of Sub Section 7 of 194C cannot disregard the assessee’s claim for application of Sub Section 6 of 194C. The exemption is available to the assessee at that particular moment as well. The Ld. AR submitted case laws of the Kolkata ITAT and Hyderabad ITAT as well as Hon’ble Gujarat High Court and Karnataka High Court which are as under:-
• Soma-Rani-Ghose Vs. Deputy Commissioner of Income Tax [ITA No. 1420 (KOL) of 2015] • ACIT Vs. Mohammed Suhail, Kurnool [ITA No. 1536/Hyd/2014]
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• Commissioner of Income-tax Vs. Sri Marikamba Transport Co. [ITA No. 553 of 2015] • Commissioner of Income-tax 1 Vs. Valibhai Khanbhai Mankad [ITA No. 1182 of 2011]
In all these cases, the fundamental requirement for claiming exemption under Section 194C (6) of the Act was that, from the Assessment Year 2010-11 onwards when transport operators furnished their PAN to the personal responsible for making payments to them. The Transport Operator would be outside the purview of TDS u/s 194C the judicial forums held that if the assessee comply with the provisions of Section 194C (6) disallowance under particular Section does not arise just because there is violation of provisions of Section 194C (7) of the Act.
The Ld. DR submitted that the judgments relied upon by the Assessee that of the Kolkata Bench was dealing with Section 40A(1A) & not that of Section 201(1) even the Hyderabad Bench also dealing with the same. The Hon’ble High Courts’ judgments was also dealt with Section 40A(1A) of the Act.
We have heard both the parties and gone through the records. The Ld. AR is not complied with the requirements of Sub Section 7 of Section 194C while claiming benefit u/s 194C (6) of the Act. But the fact remains that the amendment in the year 2009 is applicable in assessee’s case which was not disputed by the CIT(A). The Assessing Officer disallowed this on the ground that the assessee is not engaged in the business of Plying, Hiring or Leasing Goods Carriages but does not discard the assessee’s benefit which was given to by the legislation under Section 194C(6) of the Act. The case laws cited though
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was related to 40A (1A) but more so it was dealt with the issue and the ambit of Section 194C of the Act itself. In-fact 40A(1A) of the Act has a hundred percent tax liability while tax liability u/s 201(1)/201(1A) of the Act is 2%. Thus, merely non compliance of Sub Section 7 of Section 194C will not disentitle the assessee for claiming benefit under Sub Section 6 of Section 194C of the Act.
In the result, appeals of the assessee are allowed.
Order pronounced in the Open Court on 14th December, 2016.
Sd/- Sd/- (O.P. KANT) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 14/12/2016 R. Naheed * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT
ASSISTANT REGISTRAR ITAT NEW DELHI
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Date 1. Draft dictated on 08/12/2016 PS 2. Draft placed before author PS 08/12/2016 3. Draft proposed & placed before .2016 JM/AM the second member 4. Draft discussed/approved by JM/AM Second Member. 5. Approved Draft comes to the 14.12.2016 PS/PS Sr.PS/PS 6. Kept for pronouncement on PS 7. File sent to the Bench Clerk 14.12.2016 PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order.