2011 (10) TMI 253 - AT - Income Tax

Assessee wins appeal as Tribunal rejects IT Act sections, deleting Rs. 33,27,188. Court distinguishes prior ruling.

The Tribunal ruled that Sections 194C(1) and (2) of the IT Act did not apply to the assessee for the assessment year 2006-07. Consequently, the addition ... Tax Deductible at Source - cable transmission - Payment made by Individuals to Contractors - assessee submitted that assessee is an individual and in the case of the assessee, the assessee is a person responsible for paying any sum to the contractor. The contractor is, therefore, payee. He has submitted that provisions of section 194 C (1) of the IT Act are applicable only in respect of contractor and the provisions of section 194 C (2) of the IT Act are applicable in respect of sub-contractor. He further submitted that the provisions of section 194 C (1) of the IT Act, as stood for the assessment year under appeal do not apply to the cases of individual. - Held That:- Where only two parties are involved than payment made by one to another cannot be refereed to be made to sub contractors and Individuals were included in purview of 194C from A/Y 06-07 only therefore no TDS is to be deducted on such payments. Decided in favour of assessee. Issues Involved:1. Applicability of Section 194C of the IT Act to the assessee.2. Whether the assessee's payments to Devshree Network Pvt. Ltd. required TDS deduction under Section 194C(2).3. The impact of the amendment effective from 01-06-2007 on the assessee's liability for TDS deduction.4. Interpretation of 'payable' versus 'paid' amounts under Section 40(a)(ia) of the IT Act.Issue-Wise Detailed Analysis:1. Applicability of Section 194C of the IT Act to the Assessee:The primary issue was whether the provisions of Section 194C of the IT Act were applicable to the assessee, who is an individual and proprietor of Balaji Cable Network. The assessee argued that as an individual, they were not liable to deduct TDS under Section 194C(1) for the assessment year 2006-07. The Tribunal noted that the amendment to Section 194C(1) that included individuals under sub-clause (k) was effective from 01-06-2007 and did not apply to the assessment year in question. Therefore, for the assessment year 2006-07, the contract between the contractor and an individual did not require TDS deduction.2. Whether the Assessee's Payments to Devshree Network Pvt. Ltd. Required TDS Deduction Under Section 194C(2):The Tribunal examined whether the assessee, by paying Devshree Network Pvt. Ltd. for cable transmission, acted as a sub-contractor. It was concluded that the assessee was not a sub-contractor but a contractor in this case. The Tribunal referenced the ITAT Ahmedabad Bench decision in Prashant H. Shah v. Asstt. CIT, which clarified that the provisions of Section 194C(2) did not apply to individuals for the assessment year under consideration as the assessee did not act as a sub-contractor.3. The Impact of the Amendment Effective from 01-06-2007 on the Assessee's Liability for TDS Deduction:The Tribunal emphasized that the amendment to Section 194C(1), which included individuals and HUFs, was effective from 01-06-2007. Since the assessment year under appeal was 2006-07, this amendment was not applicable. Thus, the assessee, being an individual, was not obligated to deduct TDS on payments made to Devshree Network Pvt. Ltd. during the relevant assessment year.4. Interpretation of 'Payable' Versus 'Paid' Amounts Under Section 40(a)(ia) of the IT Act:The Tribunal addressed the argument that Section 40(a)(ia) applies only to amounts 'payable' and not to amounts already 'paid.' The CIT(A) had dismissed this argument, stating that 'payable' includes 'paid' and that the scheme of TDS expects tax deduction at the time of payment. However, the Tribunal found that since the assessee was not liable to deduct TDS under Section 194C for the assessment year in question, the disallowance under Section 40(a)(ia) was not justified.Conclusion:The Tribunal concluded that the provisions of Section 194C(1) and (2) did not apply to the assessee for the assessment year 2006-07. Consequently, the addition of Rs. 33,27,188/- was deleted, and the appeal of the assessee was allowed. The decision of the Hon'ble Punjab & Haryana High Court in the case of Kurukshetra Darpans (P) Ltd. was distinguished on the grounds that it did not apply to the facts of the assessee's case.