TaxTMI 
TaxTMI 
2012 (12) TMI 413
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....40(a) (ia)?" 2. For the assessment year 2006-07, above question arises in the following factual background:- 2.1 The respondent-assessee is engaged in the transport business. He also had other source of income, with which, we are not concerned. During the year under consideration, the assessee made payments of Rs. 11,21,09,788/- to sub-contractors-transporters. On such payments, the assessee had not deducted tax at source (hereinafter to be referred to as "TDS") for a sum of Rs. 3,27,75,595/- on the ground that such payments were made to individual transporters, which did not exceed Rs. 20,000/- at a time and Rs. 50,000/- in the aggregate during the year. He had also not deducted tax at source for payment of Rs. 7,91,02,011/- on the g....
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....ppeal. 3. We have heard the learned counsel for the Revenue as well as for the assessee. Section 194C of the Act, as is well known, pertains to payments to contractors. Sub-section (1) of section 194C, as it stood at the relevant time, required that any person responsible for paying any sum to any resident, contractor for carrying out any work in pursuance of a contract between the contractor and the specified entities, shall credit specified sum as income tax on income comprised therein. Likewise, sub-section (2) of section 194C required a person responsible for paying any sum to resident-sub-contractor to deduct tax at source under given circumstances. It is not in dispute that ordinarily the assessee was required to make such deductio....
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.... responsible for paying any sum as aforesaid to the sub-contractor referred to in the second proviso shall furnish to the prescribed income-tax authority or the person authorised by it such particulars as may be prescribed in such form and within such time as may be prescribed; or (ii) any sum credited or paid before the 1st day of June, 1972; or (iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the sub-contractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society. Explanation - For the p....
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.... where though tax was required to be deducted at source, is not deducted or where after such deduction, the same has not been paid on or before the due date. Thus for application of section 40(a)(ia) of the Act, the foremost requirement would be of tax deduction at source. 6. Section 194C, as already noticed, makes provision where for certain payments, liability of the payee to deduct tax at source arises. Therefore, if there is any breach of such requirement, question of applicability of section 40(a)(ia) would arise. Despite such circumstances existing, sub-section (3) makes exclusion in cases where such liability would not arise. We are concerned with the further proviso to sub-section (3), which provides that no deduction under sub-s....
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....hat under Rule 29D of the Rules, such declaration has to be made by the end of June of the next accounting year in question. 9. In our view, therefore, once the conditions of further proviso of section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease. The requirement of such payee to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. In our view, therefore, the Tribunal was perfectly justified in taking the view in the impugned judgment. It may be that failure to comply such requirement by th....