2015 (10) TMI 1372 - AT - Income Tax

Appellate Tribunal rules no tax deduction required for transportation charges in association payments.

The Income Tax Officer, Ward V (4), Ludhiana Versus Truck Operator Union

The Income Tax Officer, Ward V (4), Ludhiana Versus Truck Operator Union - [2014] 32 ITR (Trib) 181 (ITAT [Chand]) Issues:1. Disallowance of transportation charges under section 40(a)(ia) of the Income-tax Act, 1961 for non-deduction of tax at source.Analysis:The appeal before the Appellate Tribunal ITAT Chandigarh concerned the disallowance of transportation charges by the Assessing Officer due to the failure of the assessee to deduct tax at source under section 194C(2) of the Income-tax Act, resulting in an addition of Rs. 19,71,922. The Commissioner of Income-tax (Appeals) had deleted this addition, which led to the appeal by the Revenue. The issue revolved around whether the assessee was required to deduct tax at source from transportation charges paid to its members, as per the provisions of section 40(a)(ia) of the Act.The authorized representative for the assessee contended that the issue was settled in favor of the assessee by previous tribunal orders and high court judgments. The Tribunal noted that a similar issue had been addressed in the assessee's earlier case for the assessment year 2006-07, where it was held that the assessee was not obligated to deduct tax at source under section 194C of the Act. The Tribunal referred to the provisions of section 194C and the cumulative payment threshold of Rs. 50,000, emphasizing the nature of the association of persons and the payments made to truck operators.Additionally, the Tribunal cited the judgment of the Himachal Pradesh High Court in a similar case, where it was held that payments made by an association of persons to truck owners were not subject to tax deduction at source under section 194C. The Tribunal also mentioned a judgment by the Punjab and Haryana High Court, which clarified that section 194C(2) did not apply when the union was acting in a representative capacity without a separate contract with its members. The High Court further explained that the society formed by transporters was a conglomeration of truck operators and not a separate entity, thereby not liable to deduct tax at source.Based on the precedents set by the High Courts and the Tribunal's previous decisions, the Appellate Tribunal upheld the deletion of the addition by the Commissioner of Income-tax (Appeals). The Tribunal concluded that the assessee was not required to deduct tax at source from payments to its members, dismissing the appeal filed by the Revenue.In summary, the judgment clarified the applicability of tax deduction at source provisions under section 194C in the context of payments made by an association of persons to its members for transportation services. The decision relied on previous rulings and interpretations by the High Courts and the Tribunal to determine that the assessee was not liable for disallowance under section 40(a)(ia) of the Income-tax Act.