TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 1251
X X X X Extracts X X X X
X X X X Extracts X X X X
....incurred an amount of Rs. 14,37,81,491/- under the head "freight expenses" and the assessee was asked to explain whether it has done TDS on such payment. In its reply, the assessee referring to the provision of section 194C stated that it has not deducted TDS as provisions of section 194C(6) provides that no deduction is required to be made on sum paid or credited where the transporters have furnished their respecticve PANs to the assessee. The Assessing Officer referring to the provisions of section 194C(6) and 194C(7) stated that while this provision grants relief to transporters, it puts an onus on the person paying or crediting such sum, to furnish this information in the prescribed form to the prescribed Income Tax authority. The Assessing Officer held that for availing the benefit of section 194C(6) and 194C(7) and inter alia not to attract the disallowance envisaged u/s 40(a)(ia), the assessee firm was bound by law to furnish the information, in respect of the transporters whose services it had availed, to the prescribed Income Tax authority. This condition cannot be constructed to be technical condition, since the very ethos of these provisions of TDS envisages cross-linkin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers at the time of the payment of freights has to be accepted. The ld. CIT(A) further held that in terms of provisions of section 194(C)(6) of the Act, once the transporters have provided the PAN details to the deductor then no deduction is required to be made on freight payment to such transporters as per section 194C(6) of the Act. Regarding non filing of TDS return and whether it would attract provision of section 40(a)(ia) of the Act, referring to the provision of section 40(a)(ia) of the Act, the ld. CIT(A) held that no tax required to be deductible on payment made to the transporters if the condition prescribed in section 194C(6) is satisfied and the provisions of section 40(a)(ia) are not applicable. Regarding provision of section 194C(6) & 194C(7) and whether they are interdependent or can be applied independently, the ld. CIT(A) referred to the decision of Coordinate Bench in case of Soma Rani Ghosh Vs. DCIT, Kolkata (ITA No. 1420/KOL/2015) held that the provisions of section 194C(6) and 194C(7) are independent of each other and when conditions as mentioned in section 194C(6) have been satisfied, then no deduction of tax u/s 194C of the Act is required to be made by the pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value of material, if such valu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to him. The primary onus is thus on the recipient to furnish his PAN to the payer and the payer, on receipt of such PAN number, is under statutory obligation not to deduct TDS on such payments. Further, the payer is also under a statutory obligation to furnish the said information in prescribed forms to the Income tax authority. To our mind, the statutory obligation to furnish the information regarding receipt of PAN and nondeduction of TDS is a fall out of and consequent of the first statutory obligation to not deduct TDS on receipt of PAN. However, merely because there is non-compliance on part of the assessee to furnish the prescribed information to the Revenue authorities, the same cannot lead to a conclusion that the assessee has not complied with the first statutory obligation. There are separate penal provisions for non-compliance thereof and the AO has infact invoked those penal provisions whereby show-cause has been issued to the assessee u/s 234E /271H dated 28.01.2019. In the instant case, once the assessee is in receipt of PAN and has not deducted TDS, it has complied with the first statutory obligation cast upon him and the assessee cannot be penalized for non-deduct....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad been very much in existence under proviso 2 and 3 to Section 194C(3) of the Act. Placing such provisions in juxtaposition in the following chart makes it clear that they are very much analogous and the difference is that only in respect of requirement of a declaration and furnishing the particulars to the to the prescribed income-tax authorities under the provisos 2 and 3 of pre-amended section 194C(3) is being replaced by the Permanent Account Number under present Sections 194C(6) and (7) respectively. 194C prior to Amendment by Finance Act, (N0.2) 2009 ) 194C(3) No deduction shall be made under sub-section (1) or sub-section (2) from- ... ... ... ... ... ... Provided that .... ... Provided further that no deduction shall be made under sub-section (2), from the amount of any sum credited or paid or likely to be credited or paid during the previous year to the account of the subcontractor during the course of business of plying, hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum, in the prescribed form and verified in the prescribed manner and within such time as may be prescribed, if such sub-contract....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d invalid. He submitted that the Courts and Tribunals consistently held that on obtaining of either the declaration contemplated under second proviso to the pre-amended section 194C(3) or the PAN details under the present section 194C(6), the assessee was not required to make any deduction at source on the payments made to the contractor or sub-contractor, irrespective of the fact whether or not such information was furnished to the authorities as prescribed under third proviso to the amended section 194C(3) or the present section 194C(7). 29. In CIT v. Valibhai Khambhai Mankad [2013] 216 Taxman 18/[2012] 28 taxmann.com 119 (Guj.), it is held by the Hon'ble Gujarat High Court at Ahmedabad that :- "(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-section (2)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of tax at source. Any such failure therefore cannot be visualized by adverse consequences provided under section 40(a)(ia) of the Act. (10) When on the basis of the record it is not disputed that the requirements of further proviso were fulfilled, the assessee was not required to make any deduction at source on the payments made to the sub-contractors. If that be our conclusion, application of section 40(a)(ia) would not arise since, as already noticed, section 40(a)(ia) would apply when there is a requirement of deduction of tax at source and such requirement is either not fulfilled or having deducted tax at source is not deposited within prescribed time". 30. In CIT v. Marikamba Transport Co. [2015] 379 ITR 129/231 Taxman 84/57 taxmann.com 273, Hon'ble Karnataka High Court has formulated a question as to whether non-filing of Form No. 15I/J within the prescribed time is only a technical default or the provisions of section 40(a)(ia) of the Act are attracted? and proceeded to answer the same as under:- 'Section 40 (a)(ia) and Section 194C(3) of the Act reads thus: "Section 40(a)(ia) : Any interest, commission or brokerage, rent, royalty, fees for professional ser....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns make it clear that if there is any breach of requirements of Section 194C(3), the question of applicability of Section 40(a)(ia) arises. The exclusion provided in Sub-Section(3) of Section 194C from the liability to deduct tax at source under sub-section(2) would be complete, the moment the requirements contained therein are satisfied. Once, the declaration forms are filed by the subcontractor, the liability of the assessee to deduct tax on the payments made to the sub-contractor would not arise. As we have examined, the sub-contractors have filed Form No. 1Sl before the assessee. Such being the case, the assessee is not required to deduct tax under Section 194C(3) of the Act and to file Form No.15]. It is only a technical defect as pointed out by the Tribunal in not filing Form No.15J by the assessee. This matter was extensively considered by the ITAT, Ahmedabad Bench in Valibhai Khanbhai Mankad's case (supra) and the said Judgment has been upheld by the High Court of Gujarat reported in (2013) 216 Taxman 18 (Guj) wherein it is held that once the conditions of Section 194C(3) were satisfied, the liability of the payee to deduct tax at source would cease and accordingly, app....