Intermediary company in tripartite freight arrangement not liable for TDS default under sections 201(1) and 201(1A)

The ITAT Chandigarh held that an assessee company acting as intermediary in a tripartite freight arrangement was not liable for TDS default under sections 201(1) and 201(1A). The assessee facilitated coordination between a truck operator union and the principal company, raising invoices and collecting payments on behalf of the union. The tribunal determined that TDS responsibility under section 194C rested with the principal company making freight payments, not the intermediary assessee who merely collected and disbursed payments. The Revenue's appeal was dismissed.

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Issues Involved:
1. Non-deduction of TDS on freight payments under Section 194C.
2. Claim of refund of TDS deducted by PIH.
3. Validity of the order under Section 201(1)/201(1A) regarding a tripartite agreement.

Summary:

Issue 1: Non-deduction of TDS on freight payments under Section 194C:
The Revenue contended that the assessee failed to deduct TDS on freight payments made to the Truck Operator Union, as required under Section 194C. The AO initiated proceedings under Section 201(1) and found that the Truck Operator Union did not show freight receipts in its books or offer them to tax. The AO held that the assessee should have deducted TDS, as the Truck Operator Union did not qualify for exemptions under Sections 12A or 10(24) and exceeded the truck limit under Section 194C(6).

Issue 2: Claim of refund of TDS deducted by PIH:
The assessee argued that it acted only as a commission agent for PIH and did not directly contract with the Truck Operator Union for freight services. The payments were routed through the assessee, but the responsibility for TDS deduction lay with PIH. The CIT(A) accepted this argument, noting that the assessee's role was limited to monitoring and reporting, and the primary responsibility for TDS deduction was with PIH.

Issue 3: Validity of the order under Section 201(1)/201(1A) regarding a tripartite agreement:
The CIT(A) analyzed the tripartite agreement effective from 01/01/2016 and found that the agreement supported the assessee's role as an intermediary. The CIT(A) relied on the Delhi High Court's decision in CIT Vs. Hardarshan Singh, which held that intermediaries are not liable for TDS under Section 194C. The CIT(A) quashed the order under Section 201(1)/201(1A), stating that the assessee was not liable to deduct TDS on payments made to the Truck Operator Union.

Conclusion:
The Tribunal upheld the CIT(A)'s findings, confirming that the assessee acted as an intermediary and was not responsible for TDS deduction under Section 194C. The appeal of the Revenue was dismissed.

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