TaxTMI 
TaxTMI 
2021 (4) TMI 438
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....was justified in treating the rental income received from M/s Larsen and Toubro Limited as 'Income from house property' as against of 'income from business or profession' taxed by the AO, without appreciating the material facts of the case. 4. On the facts and circumstances of the case and in law ld CIT(A) was justified in deleting the addition of Rs. 3,104/- out of printing and stationary expenses and Rs. 2,11,547/- out of workmen and staff welfare expenses, without supported with third party vouchers." 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. Rival contentions have been heard and record perused. The brief facts of the are that the assessee is engaged in the business of mining, transportation, crushing and renting of property. The assessee is working on behalf of L&T Ltd. and M/s Hi-tech Rock Products and Aggreagates Ltd. return of income was electronically filed by the assessee on 23/09/2015 declaring total income of Rs. 83,72,330/-. The case was selected for scrutiny and notice U/s 143(2) of the Income Tax Act, 1961 (in short, the Act) was issued on 25/08/2016. The A.O. after m....
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....AN of all the Contractors have been collected and duly submitted to the AO at the time of assessment proceedings and TDS return was also filed. The AO has not disputed the veracity of such PAN details. Only question he has raised is whether such PAN details were received at the time of payment of freights or not. The ld AR has further submitted that the Id. CIT(A) has thereafter given a finding that in absence of contrary evidence, the assessee's submission that such PAN details were provided by the transporters at the time of the payment of freights has to be accepted. He has submitted that the Id. 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. 8. The ld AR has submitted that Section 40(a)(ia) is not applicable at all, accordingly, disallowance made by the AO is illegal. Law does not allow the invocation of Section 40(a)(ia) for the cases of Section 194C(6) and 194C(7). In this he placed reliance on the judgement of ITAT Kolkata in the case of Soma Rani Ghosh ....
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.... transportation etc. besides rental income during the year under consideration. 2. That the appellant had paid an amount of Rs. 6,31,30,028/- to various transporters on account of freight. Out of this an amount of Rs. 4,80,46,176/- was found by the A.O where the TDS was liable to be deducted u/s 194C of the Act. 3. That the appellant has not deducted income tax on the freight paid to the transporters. 4. That the A.O has contended that the assessee is liable to deduct taxes under section 194C of the Act and non deduction of prescribed taxes attract provision of section 40(a)(ia) of the Act. 5. That the assessee has claimed that in view of provisions of section 194C(6) of the Act, no TDS is liable on the payments of freight as PAN details were submitted by the transporters. 6. That the A.O has further contended that the assessee had failed to submit TDS return within prescribed time giving the details of PAN of such transporters as is required under section 194C(7) of the Act. Accordingly, the amount of Rs. 1,44,13,853/- i.e 30% of the freight payments made, has been added to the income of the assessee under section 40(a)(ia) of the Act. ....
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.....O has raised the probability of such PAN details having been procured later and not at the time of making the payments to such transporters. However, the fact is that the A.O has not disputed the veracity of such PAN details. Only question he has raised is whether such PAN details were received at the time payment of freights or not. In absence of any contrary evidence, the appellant's submission that such PAN details were provided by the transporters at the time of the payment of freights has to be accepted. Additions cannot be made on mere conjectures, surmises and probability. 4.4.2 Whether after getting. the PAN details from the transporters the assessee was liable to deduct taxes u/s 194C of the Act? It is imperative to go into provisions of section 194C(6) of the Act as applicable for the A.Y:2015-16, (before an amendment was made effective from 01/06/2015 by the Finance Act) which says as follows; (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Per....
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....1H will be in addition to late filing fees prescribed under section 234E. 4.4.4 Whether non filing of TDS return alongwith PAN details would attract provision of section 40(a)(ia) of the Act holding the assessee in default of non deduction of TDS under the provision of section 40(a)(ia) of the Act? In order to bring clarity, it is imperative to go into the provisions of section 40(a)(ia) of the Act. The provision of the section is as follows: 40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) in the case of any assessee- (ia) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 : Provided that where in respect of any such sum, tax , has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of secti....
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.... Now the question arises whether the provision of section 194C(6) & 194C(7) of the Act is interdependent or independent of each other. The question has been addressed by various judgments. 1. Hon'ble ITAT, Kolkata bench in the case of Soma Rani Ghosh Vs DCIT, Kolkata ITA No. 1420/KOL/2015 has discussed threadbare the issue involved. The relevant part of the judgment is as s under; 26. On the aspect of observation of the learned CIT that Sections 194C(6) and Section 194C(7) have to be read together to extend the immunity from TDS, our attention is drawn to the fact that though the Finance Act, (NO.2) 2009 introduced, inter alia, Sec. 194C(6) and 194C(7), similar and analogous provision had 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 Se....
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....to invoke provisions under section 40(a)(ia) of the Act. 28. After drawing an analogy between the pre-amended proviso between Clause (2) and Clause (3) of section 194C(3) and the present amended section 194C(6) and 194C(7), Learned AR submitted that even on earlier occasions when the declaration obtained in Form 151 (requirement similar to the PAN particulars under Sec. 194C(6)) obtained from the Transporter under Second Proviso is not submitted in Form 15J to the Commissioner of Income Tax in Form 15J (requirement similar as is provided under the third proviso and equivalent to the requirement Sec. 194C(7), the Department made attempts to make additions, but such additions have been deleted and rendered 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 prov....
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....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 the payee may result into some other adverse consequences if so provided under the Act. However, fulfilment of such requirement cannot be linked to the declaration 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 a....
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....oresaid to the subcontractor referred to in the second proviso shall furnish to the prescribed IT 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. " 4. The combined reading of these two provisions 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 woul....
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....lows that,- i) in the context of Section 194C(1), person undertaking to do the work is the Contractor and the person so engaging the contractor is the contractee; ii) that by virtue of the Amendment introduced by Finance Act (No.2) 2009, the distinction between a contractor and a sub-contractor has been done away with and Cl. iii) of Explanation under 194C(7) now clarifies that "contract" shall include subcontract; iii) subject to compliance with the provisions of Section 194C(6), immunity from TDS under sec. 194C(1) in relation to payments to transporters, applies transporter and non-transporter contractees alike; iv) under Sec. 194C(6), as it stood prior to the amendment in 2015, in order to get immunity from the obligation of TDS, filing of PAN of the Payee-Transporter alone is sufficient and no confirmation letter as required by the learned CIT is required v) Sections 194C(6) and Section 194C(7) are independent of each other, and cannot be read together to attract disallowance u/s 40(a)(ia) read with Section 194C of the Act; and vi) If the assessee complies with the provisions of Section 194C(6), no disallowance u/s 40(a)(ia....
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....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 value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family sha....
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....ligation 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 non-deduction 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-deduction of TDS. The provisions of section 40(a)(ia) which are deeming fiction relating to non-deduction of TDS have to be read in the limited context of n....
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....wing 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 as Amended 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 sub-contractor 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-contractor is an individual who has not owned more than two goods carriages at any ....
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....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) shall be made from the amount of any sum credited or paid or likely to be c....
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.... 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 services or fees for ....
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....he combined reading of these two provisions 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 a....
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....rior to the amendment in 2015, in order to get immunity from the obligation of TDS, filing of PAN of the Payee-Transporter alone is sufficient and no confirmation letter as required by the learned CIT is required; (v) Sections 194C(6) and Section 194C(7) are independent of each other, and cannot be read together to attract disallowance u/s 40(a)(ia) read with Section 194C of the Act; and (vi) If the assessee complies with the provisions of Section 194C(6), no disallowance u/s 40(a)(ia) of the Act is permissible, even there is violation of the provisions of Section 194C(7) of the Act. 35. Consequent to our findings in the preceding paragraphs, we reach a conclusion that the authorities below are not justified in treating the expense incurred by the assessee for Carriage inward and carriage outward as disallowable under section 40(a)(ia) of the Act, and adding back Rs. 1,63,78,648/- claimed as expense towards Carriage Inward and Rs. 1,13,00,980/- claimed as expense towards Carriage Outward, and such additions shall stand deleted." 9. In light of above discussions and in the entirety of facts and circumstances of the case, we don't see any infirmity....
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....ded by the Coordinate Bench of this Tribunal in the case of ACIT Vs M/s Arihant Trading Co. in ITA No. 1113/JP/2018 order dated 19/03/2019 in favour of the assessee and against the Revenue by observing that non-deduction of TDS on payment to the transporter is that the latter furnishes his PAN number to the person responsible for paying or crediting the amount 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 non-deduction 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 n....
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....roduced as under; 22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head "Income from house property" Section23. (iiib) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (n of section 269UA, shall be deemed to be the owner of that building or part thereof; 269UA (d) "immovable property" means- (i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also. Explanation. -For the purposes of this sub-clause, "land, building, part....
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.... Trading Company V/s ITO (ITA No.6481/Mum/2013) that if the assessee is the owner of the said property within the meaning of Section 22 r.w.s. 27(iiib) and section 269UA(f), the amount received by the assessee on account of subletting the property is only income from house property and has to be treated as such. Similar view was taken by Hon'ble Karnataka High * Court in case of CIT V/s Bhoopalam Commercial Complex and Industries Pvt. Ltd, (2003 130 TAXMAN 338 Kar.) The Hon'ble Supreme Court has established in case of The CIT Vs Poddar Cement Pvt Ltd (1997 Supp (1) SCR 394) that owner is a person who is entitled to receive income from the property in his own right. I have also taken into consideration the appellant's submission in distinguishing the facts of the case from the judicial rulings in the case of Karanpura Development Co. Ltd and Prestige Estate Projects Pvt. Ltd Vs DCIT (ITA No. 218/Bang/09 dated 11.09.2009) relied upon the A.0 in the assessment order. I have also considered the submission of the appellant that preceding year case i.e A.Y: 2014-15 was also assessed u/s 143(3) of the Act where the rent income received from ....