2010 (8) TMI 756 - AT - Income Tax

ITAT rules TDS not taxable income, emphasizing distinction between TDS and actual taxable income.

Income-tax Officer, Ward-4 (3), Ahmedabad Versus Hans Road Carriers (P.) Ltd.

The ITAT dismissed the revenue's appeal, ruling that the TDS amount did not constitute taxable income for the assessee. The judgment emphasized the ... Accrual of income - difference in the Truck Hire charge receipts shown in the Profit & Loss account as against the same shown in the TDS certificate - whether receipts shown as per the TDS certificate as the income of the assessee to be taxed wholly without any adjustments? - CIT(A) deleted the addition as income of the appellant cannot be artificially enhanced there being no corresponding debit in the profit and loss account. No doubt the TDS receipts have to be reconciled but once the same is explained with verifiable ledger accounts then no separate addition could be made when the explanation are verifiable with reference to contra entries in the respective accounts - HELD THAT:- Facts have revealed that the TDS was deducted on the whole amount of freight on trucks supplied through assessee but said amount had an over-riding right of the Truck-owners therefore directly diverted to their respective accounts. On careful examination of the statutory provisions to answer this legal question, it is evident that the deduction of tax at source is not a levy of tax unless and until it is followed by an assessment order making a charge of tax. Even this is also a settled position that the deduction of tax at source in no way expressly indicates that ipso facto the assessee is entitled for the refund or adjustment of tax of the TDS amount against the income mentioned therein. The provisions relating to Tax Deduction at Source are not the provisions for the computation of income. An income of a taxpayer is not required to be computed merely with reference to the TDS Certificate but assessment of an income is altogether an independent exercise. With this understanding of law if we compare the facts of the case, and then it is evident that the amount which was certified on the TDS Certificate could or could not have been subject to tax in the hands of the assessee-recipient. The deductor had chosen a safe procedure of deduction of tax on the entire amount of freight. Otherwise the freight was to be paid to the truck owners and not to the assessee-company, who is only a conduit in arranging the hiring of the trucks. The freight was to be passed on to the truck owners, therefore, the freight was not subject to tax in the hands of the assessee. Nevertheless, accounts of the assessee have also demonstrated the same. With the result, the amount on which the TDS was deducted had not matched with the figures of the income disclosed by the assessee in respect of those transactions. Such a business transaction can be dealt with in two ways; i.e., either to be treated as the receipts with overriding liability or secondly that the freight receipts were subject to the expenditure of freight charges to be paid to the truck-owners. On appreciation of the facts, the transaction in question had fallen in first category. In view of above observation, the ground of the revenue has no legal stand, therefore, deserves to be rejected. As decided in SHUSHILADEVI ANILKUMAR SINGHAL VERSUS INCOME TAX OFFICER [2007 (9) TMI 651 - ITAT AHMEDABAD] case only dispute is that the assessee instead of showing receipt of full freight and then showing the freight paid to truck operators/owners, has shown only the difference between the aforesaid two amounts as here income as because the payments of freight were directly collected by the truck drivers. In our considered opinion, this is simply a matter of presentation of accounts and merely for not presenting in the accounts, the amount of the gross freight and then freight paid to truck operator/owner separately, the claim of TDS cannot be denied to the assessee - Appeal of the revenue is dismissed. Issues:1. Discrepancy in truck hire charge receipts between Profit & Loss account and TDS certificate.Analysis:The appeal concerns a discrepancy in truck hire charge receipts between the Profit & Loss account and the TDS certificate. The Assessing Officer noted a variance between the receipts shown by the assessee and the TDS certificate amount. The assessee explained that the TDS amount was on the entire freight, whereas they received only a commission per truck. The CIT (Appeals) examined the ledger accounts and confirmed that the income declared by the assessee was accurate, considering contra entries that balanced out. The Assessing Officer's addition was deemed baseless, and the deletion of the addition was directed.The legal issue revolved around whether the receipts as per the TDS certificate constituted income to be fully taxed without adjustments. The ITAT analyzed the nature of the assessee's transportation business, distinguishing between hire charges for their trucks and commission-based arrangements for customer trucks. It was clarified that TDS deduction does not automatically indicate taxable income, and discrepancies may arise due to differing accounting methods. The deduction of tax at source is a collection method, not a declaration of taxable income. The ITAT concluded that the TDS amount did not represent taxable income for the assessee, as the freight was ultimately paid to truck owners, not the assessee. Citing relevant case law, the ITAT dismissed the revenue's claim, emphasizing that TDS provisions are for tax collection facilitation, and the presentation of accounts does not affect TDS eligibility.In light of the above analysis, the ITAT dismissed the revenue's appeal, upholding the decision that the TDS amount did not constitute taxable income for the assessee. The judgment emphasized the distinction between TDS collection and actual taxable income, highlighting that the TDS deduction does not automatically translate to taxable income for the recipient. The decision was supported by legal principles and case law, affirming that the revenue's claim lacked legal merit.