2025 (2) TMI 916 - AT - Income Tax

TDS not required on material supply contracts to steel authority for railway track supply

Dy Commissioner of Income Tax (TDS), Lucknow Versus M/s. Lucknow Metro Rail Corporation Ltd

ITAT Lucknow upheld CIT(A)'s deletion of TDS addition for payments made to steel authority for railway track supply, ruling no TDS liability exists for ... Addition made on account of short deduction of TDS - payments were made to M/s Steel Authority for supply of railways tracks in terms of contracts or for purchase of goods - CIT(A) deleted addition - HELD THAT:- We are in agreement of the finding of the Ld. CIT(A) that no liability for deduction of tax arises in respect of the contract related to supply of the material. As there is no provision of the Act that mandates for deduction of tax on the payment made for supply of material during the relevant year, we hold accordingly. However, in respect of the short deduction of deduction and interest, it is the case of the assessee that short deduction was due to exclusion of the service tax component as per the CBDT Circular. This fact is required to be verified at the end of the assessing authority. Therefore, the impugned order on the short deduction of tax is set aside and the issue is restored to the AO who would verify from the accounts of the assessee whether the short deduction was due to the exclusion of the service tax component and if so, same shall be decided in the light of the CBDT Circular No. 01/2014 dated 13.01.2014 (F.No 275/59/20124T(B). All the grounds of appeal of the Revenue are disposed off in the terms of the above. The appeal before the Appellate Tribunal involved the Revenue challenging the order of the Commissioner of Income-tax (Appeals) regarding the assessment year 2016-17. The Revenue raised multiple grounds of appeal related to the deletion of additions made due to short deduction of TDS on various payments. The key issues considered in this case were:1. Whether the short deduction of TDS on payments made to different entities was justified.2. Whether the exclusion of the service tax component in calculating TDS was in accordance with the law.The Tribunal analyzed each issue as follows:The assessing authority found discrepancies in the TDS deductions made by the assessee on payments to different entities. The assessing officer calculated the liability of the assessee for non-deduction/short deduction of tax at source. The Commissioner of Income-tax (Appeals) allowed the appeal of the assessee and deleted the additions. The Revenue appealed to the Tribunal.The Revenue argued that the assessing officer's findings should be upheld, emphasizing that the assessee treated some payments as contractual payments and had already deducted tax on them.The assessee's counsel contended that the assessing officer failed to understand the agreements properly. She argued that payments made for the supply of materials did not require TDS deduction as per the agreement with M/s. Steel Authority of India Ltd. Regarding the TDS deductions on consultancy charges, the counsel asserted that TDS was deducted and deposited correctly, and any discrepancy was due to the exclusion of the service tax component.The Tribunal considered the arguments and the findings of the Commissioner of Income-tax (Appeals). It noted that no liability for TDS deduction arose for payments related to the supply of materials, as there was no statutory requirement for such deductions. However, regarding the short deduction of TDS and interest, the Tribunal found that the exclusion of the service tax component needed verification by the assessing authority. The Tribunal set aside the order on short deduction of tax and directed the assessing officer to verify whether the short deduction was due to the exclusion of the service tax component, as claimed by the assessee, in line with the CBDT Circular No. 01/2014.In conclusion, the Tribunal partly allowed the appeal of the Revenue for statistical purposes, directing a further examination of the issue of short deduction of TDS in accordance with the CBDT Circular.This judgment clarifies the requirements for TDS deductions on different types of payments and emphasizes the importance of compliance with relevant circulars and agreements in determining tax liabilities.