South India Freight Carriers , Bangalore v. The Income Tax Officer Ward-3(2)(4), Bangalore

ITA 2586/BANG/2018 | 2015-2016
Pronouncement Date: 27-11-2019 | Result: Allowed

Appeal Details

RSA Number 258621114 RSA 2018
Assessee PAN ACOFS5498L
Bench Bangalore
Appeal Number ITA 2586/BANG/2018
Duration Of Justice 1 year(s) 2 month(s) 13 day(s)
Appellant South India Freight Carriers , Bangalore
Respondent The Income Tax Officer Ward-3(2)(4), Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 27-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 27-11-2019
Last Hearing Date 07-03-2019
First Hearing Date 20-08-2019
Assessment Year 2015-2016
Appeal Filed On 14-09-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL ABENCH : BANGALORE BEFORE SHRI B.R BASKARAN ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE JUDICIAL MEMBER ITA NO.2586/BANG/2018 ASSESSMENT YEARS : 2015-16 SOUTH INDIA FREIGHT CARRIERS C 306 MANTRI TRANQUIL APARTMENT GUBALAKANAKPURA ROAD BENGALURU-560 061. PAN ACOFS 5498 L VS. THE INCOME-TAX OFFICER WARD-3(2)(4) BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI SUDHEENDRA B.R ADVOCATE RESPONDENT BY : SHRI SUNIL KUMAR AGARWAL ADDL. CIT DATE OF HEARING : 26.09.2019 DATE OF PRONOUNCEMENT : 27.11.2019 O R D E R PER B.R. BASKARAN ACCOUNTANT MEMBER THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 31-07-2018 PASSED BY LD CIT(A)-3 BENGA LURU AND IT RELATES TO THE ASSESSMENT YEAR 2015-16. THE ASSESS EE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN PARTIALLY CONFIRMIN G THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) OF THE ACT. 2. THE FACTS RELATING TO THE ISSUE ARE SET OUT IN BRIEF. THE ASSESSEE HAS UNDERTAKEN A TRANSPORT CONTRACT FOR TR ANSPORTATION OF TWO WHEELERS FROM M/S HONDA MOTORCYCLE AND SCOOTER INDIA P LTD AND RECEIVED A SUM OF RS.15.57 CRORES DURING THE YE AR UNDER ITA NO.2586/BANG/2018 PAGE 2 OF 20 CONSIDERATION. FOR CARRYING OUT THE TRANSPORTATION BUSINESS IT HAD HIRED VEHICLES FROM A CONCERN NAMED M/S SFIC LOGIST ICS P LTD AND PAID A SUM OF RS.14.95 CRORES AS TRANSPORT CHARGES. THE ASSESSEE OBTAINED PERMANENT ACCOUNT NUMBER (PAN) OF M/S SFIC LOGISTICS P LTD AND ACCORDINGLY IT DID NOT DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO THE ABOVE SAID COMPANY. THE CASE OF THE ASSESSEE WAS THAT IT IS NOT REQUIRED TO DEDUCT TAX AT SOURCE IN TERMS OF SEC.194C(6) OF THE ACT IF IT OBTAINS PAN OF THE PAYEE. IT IS PERTINENT TO NOTE THAT THE PROVISIONS OF SEC.194C(6 ) HAS UNDERGONE CHANGE FROM TIME TO TIME. THE APPLICABLE PROVISION FOR THE YEAR UNDER CONSIDERATION READS AS UNDER:- 194C(6) NO DEDUCTION SHALL BE MADE FOR ANY SUM CR EDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PR EVIOUS YEAR TO THE ACCOUNT OF A CONTRACTOR DURING THE COURSE OF BU SINESS OF PLYING HIRING OR LEASING GOODS CARRIAGES ON FURNI SHING OF HIS PERMANENT ACCOUNT NUMBER TO THE PERSON PAYING OR C REDITING THE SUM. 3. THE AO NOTICED THAT THE EXPRESSION GOODS CAR RIAGE USED IS SEC. 194C(6) OF THE ACT HAS BEEN DEFINED AS UNDER IN THE EXPLANATION TO SEC.194C:- GOODS CARRIAGE SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO SUB-SECTION (7) OF SECTION 44AE. THE AO NOTICED THAT THE PROVISIONS OF SEC.44AE IS A SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF THE PE RSONS ENGAGED IN THE BUSINESS OF PLYING HIRING OR LEASING GOODS CAR RIAGES WHO OWN NOT MORE THAN TEN GOODS CARRIAGE DURING THE RELEVAN T PREVIOUS YEAR. SINCE SECTION 44AE IS REFERRED TO IN SEC.194C OF TH E ACT FOR ITA NO.2586/BANG/2018 PAGE 3 OF 20 UNDERSTANDING THE MEANING OF GOODS CARRIAGES THE AO TOOK THE VIEW THAT THE PROVISIONS OF SEC.194C AND SEC.44AE S HOULD BE READ TOGETHER AND ACCORDINGLY TOOK THE VIEW THAT THE PRO VISIONS OF SEC.194C(6) SHALL APPLY ONLY TO THOSE CONTRACTORS W HO OWN AND OPERATE NOT MORE THAN TEN GOODS CARRIAGES DURING TH E PREVIOUS YEAR. THE AO NOTICED THAT M/S SFIC LOGISTICS P LTD HAS OW NED 167 HEAVY DUTY GOODS CARRIAGES AND ACCORDINGLY TOOK THE VIEW THAT THE ASSESSEE CANNOT TAKE SUPPORT OF SEC.194C(6) OF THE ACT. ACCORDINGLY HE TOOK THE VIEW THAT THE ASSESSEE SHOULD HAVE DEDU CTED TAX AT SOURCE FROM THE PAYMENTS MADE TO M/S SFIC LOGISTICS P LTD AND SINCE THE ASSESSEE HAS FAILED TO DO SO THE AO DISA LLOWED THE TRANSPORT CHARGES PAYMENT OF RS.14.95 CRORES BY INV OKING THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT. 4. THE LD CIT(A) NOTICED THAT THE PROVISIONS OF SEC.194C(6) EXTRACTED ABOVE WAS AMENDED W.E.F. 01.10.2009 BY FI NANCE (NO.2) ACT 2009. THE ITS SCOPE OF AMENDMENT WAS EXPLAINED BY THE CBDT IN CIRCULAR NO.5 DATED 03-06-2010 AS UNDER:- 49.3 PROVISIONS FOR PAYMENTS AND TAX DEDUCTED AT S OURCE TO TRANSPORTERS: - A) UNDER SECTION 194C TAX IS REQUIRED TO BE DEDUC TED ON PAYMENTS TO TRANSPORT CONTRACTORS ENGAGED IN THE BU SINESS OF PLYING HIRING OR LEASING GOODS CARRIAGES. HOWEVER IF THEY FURNISH A STATEMENT THAT THEY DO NOT OWN MORE THAN TWO GOODS CARRIAGES TAX IS NOT TO BE REQUIRED DEDUCTED AT SOU RCE. TRANSPORT OPERATORS ARE REPORTING PROBLEM IN OBTAIN ING TDS CERTIFICATES AS THESE ARE NOT ISSUED IMMEDIATELY BY CLIENTS AND ITA NO.2586/BANG/2018 PAGE 4 OF 20 THEY ARE NOT ABLE TO APPROACH THE CLIENT AGAIN AS T HEY MAY HAVE TO MOVE ACROSS THE COUNTRY FOR THEIR BUSINESS. B) IT IS THEREFORE THE ACT HAS BEEN AMENDED TO E XEMPT PAYMENTS TO TRANSPORT OPERATORS (AS DEFINED IN SECT ION 44AE) FROM THE PURVIEW OF TDS. HOWEVER THIS WOULD ONLY APPLY IN CASES WHERE THE OPERATOR FURNISHES HIS PERMANENT AC COUNT NUMBER (PAN) TO THE DEDUCTOR. DEDUCTORS WHO MAKE P AYMENTS TO TRANSPORTERS WITHOUT DEDUCTING TDS (AS THEY HAV E QUOTED PAN) WILL BE REQUIRED TO INTIMATE THESE PAN DETAILS TO THE INCOME TAX DEPARTMENT IN THE PRESCRIBED FORMAT. BASED ON THE ABOVE SAID CIRCULAR LD CIT(A) ALSO TO OK THE VIEW THAT THE PROVISIONS OF SEC.194C(6) SHALL APPLY ONLY TO T HOSE TRANSPORT OPERATORS WHO ARE COVERED BY THE PROVISIONS OF SEC. 44AE OF THE ACT. THE LD CIT(A) ALSO EXPRESSED THE VIEW THAT THE PROV ISIONS OF SEC.194C(6) SHALL APPLY ONLY TO INDIVIDUAL OWNERS O F GOODS CARRIAGES SINCE THE EXPRESSION HIS PERMANENT ACCOUNT NUMBER IS USED IN SEC.194C(6) OF THE ACT. 5. THE LD CIT(A) FURTHER NOTICED THAT THE PROV ISIONS OF SEC.194C(6) HAS BEEN AMENDED W.E.F. 1.6.2015 BY FIN ANCE ACT 2015 RESTRICTING THE APPLICABILITY OF THIS PROVISIO N TO THOSE TRANSPORT CONTRACTORS WHO OWN NOT MORE THAN 10 GOODS CARRIAGE S. THE PURPOSE OF AMENDMENT WAS EXPLAINED BY THE CBDT IN I TS CIRCULAR NO.19/2015 DATED 27-11-2015 AS UNDER:- 43.2 THE FINANCE (NO.2) ACT. 2009 SUBSTITUTED E:'!I ON 194( OF THE INCOME-TAX ACT WITH EFFECT FROM 1.10.2009 W HICH INTER ITA NO.2586/BANG/2018 PAGE 5 OF 20 ALIA PROVIDED TO: NON- DEDUCTION OF TAX FROM PAYME NTS MADE TO THE CONTRACTOR DURING THE COURSE OF PLYING. HIRING AND LEASING GOODS CARRIAGE IF THE CONTRACTOR FURNIS HES HIS PERMANENT ACCOUNT NUMBER (PAN) TO THE PAYER. THE MEMORANDUM EXPLAINING THE PROVISIONS OF FINANCE (NO .2) BILL 2009 INDICATES THAT THE INTENTION WAS TO EXEM PT ONLY SMALL TRANSPORT OPERATORS (AS DEFINED IN SECTION 44 AE OF THE ACT) FROM THE PURVIEW OF TDS ON FURNISHING OF PERMA NENT ACCOUNT NUMBER (PAN). THUS. THE INTENTION WAS TO RE DUCE THE COMPLIANCE BURDEN ON THE SMALL TRANSPORTERS. HO WEVER THE LANGUAGE OF SUB- SECTION (6) OF SECTION 194C OF THE INCOME-TAX ACT DID NOT CONVEY (LIE DESIRED INTENTIO N AND AS A RESULT ALL TRANSPORTERS IRRESPECTIVE OF THEIR SI ZE WERE CLAIMING EXEMPTION FROM TDS UNDER THE EXISTING PROV ISIONS O/SUB-SECTION (6) OF SECTION 194C OF THE INCOME-TAX ACT DID NOT COVEY THE DESIRED INTENTION AND AS A RESULT ALL TRANSPORTERS IRRESPECTIVE OF THEIR SIZE WERE CLAI MING EXEMPTION FROM TDS UNDER THE EXISTING PROVISIONS OF SUB- SECTION (6) OF SECTION 194C OF THE INCOME-TAX ACT B Y FURNISHING THEIR PAN. 43.3 AS THERE IS NO RATIONALE FOR EXEMPTING PAYMENT TO ALL TRANSPORTERS IRRESPECTIVE OF THEIR SIZE FROM THE PURVIEW OF TDS THE PROVISIONS OF SECTION '94C(6) OF THE INCO ME-TAX ACT HAVE BEEN AMENDED SO AS TO EXPRESSLY PROVIDE TH AT THE RELAXATION UNDER SUB-SECTION (6) OF SECTION 194C OF THE INCOME-TAX ACT FOR NON-DEDUCTION OF/AX SHALL ONLY B E APPLICABLE TO THE PAYMENT IN THE NATURE OF TRANSPOR T CHARGES ITA NO.2586/BANG/2018 PAGE 6 OF 20 (WHETHER PAID BY A PERSON ENGAGED IN THE BUSINESS O F TRANSPORT OR OTHERWISE) MADE TO A CONTRACTOR WHO I S ENGAGED IN THE BUSINESS TRANSPORT I.E. PLYING HIRI NG OR LEASING GOODS CARRIAGE AND WHO IS ELIGIBLE TO COMPU TE INCOME AS PER THE PRO VISIONS OF SECTION 44.4E OF T HE INCOME-TAX ACT (I.E A PERSON WHO IS NOT OWNING MORE THAT? 10 GOODS CARRIAGES AT ANY TIME DURING THE PREVIOUS YEAR) AND WHO HAS ALSO FURNISHED A DECLARATION TO THIS C/ FRET ALONG WITH HIS PAN. TO THE PERSON PAYING SUCH SUM. 43.4 FURTHER THIS EXEMPTION FROM TDS IS APPLICABL E ONLY IN RESPECT OF TRANSPORT CHARGES RECEIVED BY PLYING HI RING OR LEASING OF GOODS CARRIAGES (S) OWNED BY THE TRANSP ORTER. THERE/ORE IF A PERSON RECEIVES PAYMENT IN RESPECT OF PLYING HIRING OR LEASING OF GOODS CARRIAGE (S) WHICH ARE N OT OWNED BY HIM HE SHALL NOT BE ENTITLED TO CLAIM EXEMPTIO N FROM TDS IN RESPECT OF THESE PAYMENTS. 43.5 THE CONDITION OF NOT OWNING MORE THAN TEN GOOD S' CARRIAGES BY THE TRANSPORTER IS REQUIRED TO BE FUL FILLED ON THE DALE ON WHICH THE AMOUNT IS CREDITED OR PAID WHICHE VER IS EARLIER. IN CASE A TRANSPORTER DOES NOT OWN TEN GOO DS CARRIAGES ON THE DATE ON WHICH THE AMOUNT IS CREDIT ED OR PAID BUT BECOMES OWNER OF TEN GOODS CARRIAGES LATER IN THE PREVIOUS YEAR THE PAYER SHALL NOT BE REQUIRED TO D EDUCT TAX FROM THE PAYMENT MADE TO THE TRANSPORTER DURING TH E PERIOD OF THE PREVIOUS YEAR WHEN HE WAS NOT MINING MORE TH AN TEN GOODS- CARRIAGES. HOWEVER THE TAX SHALL BE REQUIRE D TO BE ITA NO.2586/BANG/2018 PAGE 7 OF 20 DEDUCTED FROM THE PAYMENT MADE DURING THAT PART OF THE PREVIOUS YEAR DURING WHICH THE TRANSPORTER OWNED MO RE THOU TEN GOODS CARRIAGES. ACCORDINGLY THE LD CIT(A) TOOK THE VIEW THAT THE AM ENDMENT WAS MADE IN SEC.194C(6) BY FINANCE ACT 2015 IN ORDER T O REMOVE AMBIGUITY IN THE PROVISION OF SEC. 194C(6). THE LD CIT(A) ALSO TOOK SUPPORT OF THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF CUSTOMS (IMPORT) MUMBAI VS . M/S DILILP KUMAR AND COMPANY & ORS (CIVIL APPEAL NO.3327 OF 20 07 DATED JULY 30 2018 (2018-TIOL-302-SC-CUS-CB) TO OBSERV E AS UNDER:- .WHILE DISCUSSION THE ISSUE OF INTERPRETATION OF EXEMPTION PROVISIONS THE CONSTITUTION BENCH OF THE HON'BLE S UPREME COURT HELD THAT A PROVISION GIVING BENEFIT TO THE A SSESSEE NEEDS TO BE INTERPRETED STRICTLY AND IN CASE THERE IS AN AMBIGUITY IN THE PROVISION WHICH IS SUBJECT TO STR ICT INTERPRETATION THE BENEFIT OF SUCH AMBIGUITY CANNO T BE CLAIMED BY THE ASSESSEE AND IT MUST BE INTERPRETED IN FAVOUR OF THE REVENUE. ACCORDINGLY THE LD CIT(A) CONFIRMED THE DISALLOWAN CE MADE BY THE AO IN PRINCIPLE. BEFORE HIM THE ASSESSEE POINTED OUT THAT THE AO HAS MADE DISALLOWANCE @ 100% OF PAYMENTS WHILE DIS ALLOWANCE IS REQUIRED TO BE RESTRICTED TO 30% OF THE PAYMENTS AS PER SEC.40(A)(IA) OF THE ACT. ACCORDINGLY THE LD CIT(A) SUSTAINED DI SALLOWANCE TO THE EXTENT OF 30% OF THE PAYMENTS I.E. 30% OF RS.14.9 5 CRORES AMOUNTING TO RS.4.48 CRORES. STILL AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. ITA NO.2586/BANG/2018 PAGE 8 OF 20 6. WE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE HAVE NOTICED EARLIER THAT THE RELAXATION PROVIDED FROM D EDUCTION OF TAX AT SOURCE FROM THE PAYMENTS MADE TO GOODS TRANSPORT OP ERATORS HAVE BEEN AMENDED FROM TIME TO TIME. PRIOR TO AMENDMENT BROUGHT OUT BY FINANCE ACT (NO.2) ACT 2009 THE RELAXATION WAS PROVIDED BY WAY OF PROVISO TO SEC. 194C(3) WHICH READS AS UNDER:- PROVIDED FURTHER THAT NO DEDUCTION SHALL BE MADE U NDER SUB- SECTION (2) FROM THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS Y EAR TO THE ACCOUNT OF THE SUB-CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING HIRING OR LEASING GOODS CARRIAGES ON PRODU CTION OF A DECLARATION TO THE PERSON CONCERNED PAYING OR CREDI TING SUCH SUM IN THE PRESCRIBED FORM AND VERIFIED IN THE PRE SCRIBED MANNER AND WITHIN SUCH TIME AS MAY BE PRESCRIBED I F SUCH SUB-CONTRACTOR IS AN INDIVIDUAL WHO HAS NOT OWNED M ORE THAN TWO GOODS CARRIAGES AT ANY TIME DURING THE PREVIOUS YEAR. PROVIDED ALSO THAT THE PERSON RESPONSIBLE FOR PAYIN G ANY SUM AS AFORESAID TO THE SUB-CONTRACTOR REFERRED TO IN T HE SECOND PROVISO SHALL FURNISH TO THE PRESCRIBED INCOME-TAX AUTHORITY OR THE PERSON AUTHORIZED BY IT SUCH PARTICULARS AS MAY BE PRESCRIBED IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. 7. THE LEGISLATURE BROUGHT AMENDMENT IN SEC. 19 4C OF THE ACT W.E.F. 1.10.2009 THROUGH FINANCE (NO.2) ACT 2009 B Y REPLACING THEN ITA NO.2586/BANG/2018 PAGE 9 OF 20 EXISTING SECTION WITH NEW SECTION. THE FOLLOWING SU B-SECTIONS OF NEW SECTION 194C ARE RELEVANT HERE: - 194C(6) NO DEDUCTION SHALL BE MADE FROM ANY SUM C REDITED 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 PERMANENT ACCOUNT NUMBER TO THE PERSON PAYING OR CREDITING SUCH SUM. 194C(7) THE PERSON RESPONSIBLE FOR PAYING OR CRED ITING ANY SUM TO THE PERSON REFERRED TO IN SUB-SECTION (6) SH ALL FURNISH TO THE PRESCRIBED INCOME TAX AUTHORITY OR THE PERSON A UTHORIZED BY IT SUCH PARTICULARS IN SUCH FORM AND WITHIN SU CH TIME AS MAY BE PRESCRIBED. AS PER EXPLANATION (II) GOODS CARRIAGE SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO SUB-SE CTION (7) OF SECTION 44AE. 8. THEREAFTER FINANCE ACT 2015 AMENDED SECTION 194C(6) W.E.F. 1.6.2015 BY SUBSTITUTING WORDS ON FURNISHING OF (HIGHLIGHTED ABOVE) WITH THE FOLLOWING WORDS:- WHERE SUCH CONTRACTOR OWNS TEN OR LESS GOODS CARRI AGES AT ANY TIME DURING THE PREVIOUS YEAR AND FURNISHES A D ECLARATION TO THAT EFFECT ALONG WITH. 9. A CAREFUL PERUSAL OF THE ABOVE SAID PROVISIO NS AS AMENDED FROM TIME TO TIME FOLLOWING POSITION EMERGES: - ITA NO.2586/BANG/2018 PAGE 10 OF 20 (A) UP TO 30.09.2009 TAX AT SOURCE NEED NOT BE DE DUCTED FROM THE PAYMENTS MADE TO THE GOODS TRANSPORT SUB- CONTRACTOR IF THE PAYEE IS AN INDIVIDUAL WHO HAS NOT OWNED MORE THAN TWO GOODS CARRIAGES AT ANY TIME DURING TH E PREVIOUS YEAR. (B) FROM 1.10.2009 ONWARDS AND UP TO 31.5.2015 N O DEDUCTION IS REQUIRED TO BE MADE FROM THE PAYMENTS MADE TO THE GOODS TRANSPORT CONTRACTOR IF HE FURNISHES HIS PERMANENT ACCOUNT NUMBER TO THE PERSON PAYING OR CREDITING SU CH SUM. (IT IS PERTINENT TO NOTE THAT THE STATUTE DOES NOT PROVIDE ANY RESTRICTION ON THE NUMBER OF GOODS CARRIAGES TO BE OWNED BY THE PAYEE AND ALSO THERE IS NO CONDITION THAT THE PAYEE SHOULD BE INDIVIDUAL.) (C) WITH EFFECT FROM 1.6.2015 THE RESTRICTION ON THE NUMBER OF GOODS CARRIAGES TO BE OWNED BY THE PAYEE HAS BEE N BROUGHT INTO THE STATUTE I.E. THE PAYEE SHOULD OWN TEN OR LESS GOODS CARRIAGES AT ANY TIME DURING THE PREVIOUS YEAR AND HE SHOULD FURNISH HIS PERMANENT ACCOUNT NUMBER. 10. THE YEAR UNDER CONSIDERATION IS ASSESSMENT YEAR 2015-16 AND THE CORRESPONDING PREVIOUS YEAR IS 1.4.2014 TO 31.3.2015. HENCE THE PROVISION AS AMENDED BY FINANCE (NO.2) AC T 2009 SHALL APPLY. HENCE POSITION EXPLAINED IN CLAUSE (B) ABOV E SHALL APPLY. ACCORDINGLY THE PAYER IS REQUIRED TO OBTAIN PERMA NENT ACCOUNT NUMBER ONLY FROM THE PAYEE FOR PAYING THE CHARGES WITHOUT DEDUCTION OF TDS. ITA NO.2586/BANG/2018 PAGE 11 OF 20 11. WE HAVE NOTICED EARLIER THAT THE EXPRESSION GOODS CARRIAGE USED IN SEC.194C(6) SHALL HAVE MEANING AS DEFINED I N SUB-SECTION (7) OF SECTION 44AE OF THE ACT. THE EXPLANATION U NDER SEC.44AE(7) READS AS UNDER:- EXPLANATION - FOR THE PURPOSES OF THIS SECTION - - (A) THE EXPRESSION GOODS CARRIAGE SHALL HAVE THE MEANING ASSIGNED TO IT IN SECTION 2 OF MOTOR VEHICL ES ACT 1988 (59 OF 1988); (B) AN ASSESSEE WHO IS IN POSSESSION OF A GOODS CARRIAGE WHETHER TAKEN ON HIRE PURCHASE OR ON INSTALMENTS AND FOR WHICH THE WHOLE OR PART OF THE AMOUNT PAYABLE IS STILL DUE SHALL BE DEEMED TO BE THE OWNER OF SUCH GOODS CARRIAGE. SO FAR AS SECTION 194C IS CONCERNED ONLY THE DEFIN ITION OF GOODS CARRIAGE AS GIVEN IN SEC.44AE IS REQUIRED TO BE CO NSIDERED. HENCE THE RESTRICTION PLACED UNDER SECTION 44AE OF THE AC T ON THE NUMBER OF VEHICLES IN OUR VIEW SHOULD NOT BE INVOKED OR APPLIED FOR THE PURPOSES OF SEC.194C OF THE ACT. THE RESTRICTION S O PLACED IN SECTION IS APPLICABLE ONLY TO TRANSPORT OPERATORS F OR COMPUTING PROFITS AND GAINS OF BUSINESS OF PLYING HIRING OR LEASING GOODS CARRIAGES. 12. THE LD A.R PLACED HIS RELIANCE ON THE DECISI ON RENDERED BY KOLKATTA BENCH OF TRIBUNAL IN THE CASE OF SOMA RANI GHOSH VS. DCIT (2016)(48 CCH 59). WE NOTICE THAT THE KOLKATT A BENCH OF ITA NO.2586/BANG/2018 PAGE 12 OF 20 TRIBUNAL HAS ALSO CONSIDERED AN IDENTICAL ISSUE IN THE ABOVE SAID CASE AND HAS EXPRESSED ITS VIEW AS UNDER:- 24 THE CIRCULAR WHILE REFERRING TO THE AMENDMEN T IN SECTION 194C(6) MADE IT PLAINTLY CLEAR THAT FROM TH E A.Y. 2010-11 ONWARDS BY VIRTUE THEREOF WHEN TRANSPORT O PERATOR FURNISH THEIR PAN TO THE PERSON RESPONSIBLE FOR MAK ING PAYMENTS TO THEM THE TRANSPORT OPERATORS WOULD BE OUTSIDE THE PURVIEW OF TDS U/S 194C. NEEDLESS TO SAY THAT SUBJECT TO COMPLIANCE WITH PROVISIONS OF SECTION 194C(6) IMMU NITY FROM TDS UNDER SEC.194C(1) IN RELATION TO PAYMENTS TO TRANSPORTERS APPLIES TRANSPORTER AND NON-TRANSPORT ER CONTRACTEES ALIKE. 25. NEXT GROUND OF DISALLOWANCE STATED BY THE LEA RNED CIT IS THAT SEC.194C(6) AND 194C(7) ARE TO BE READ TOGETHE R AND IF AFTER OBTAINING PAN FROM TRANSPORTERS THE REQUISIT E PARTICULARS SO OBTAINED FROM THE TRANSPORTERS ARE N OT FURNISHED TO THE PRESCRIBED AUTHORITY AS PROVIDED U /S 194C(7) DEDUCTION AND FOR THAT MATTER DISALLOWANCE U/S 194C AND 40(A)(IA) WOULD GET ATTRACTED. ON THIS AS PECT AS INDICATED ABOVE A READING OF PROVISIONS OF SECTION 194C(6) PRIOR TO THE AMENDMENT OF BY FINANCE ACT 2015 (W.E .F. 1-06- 2015) MAKES IT CLEAR THAT DURING THE RELEVANT ASSE SSMENT YEAR IF THE SUB-CONTRACTORS HAVE SUPPLIED THEIR PA N TO THE PERSON MAKING PAYMENTS IN RESPECT OF HIRING/LEASING OF VEHICLES DURING THE COURSE OF HIS BUSINESS THEN SU CH PERSON MAKING SUCH PAYMENT SHALL NOT DEDUCT ANY TDS. IT I S ONLY BY WAY OF SUBSEQUENT AMENDMENT BY FINANCE ACT 2015 (W. E.F. 1- ITA NO.2586/BANG/2018 PAGE 13 OF 20 06-2015) THE EXPRESSION WHERE SUCH CONTRACTOR OWN S TEN OR LESS GOODS CARRIAGES AT ANY TIME DURING THE PREVIOU S YEAR AND FURNISHES A DECLARATION TO THAT EFFECT ALONG WITH WAS SUBSTITUTED IN THE PLACE OF ON FURNISHING OF THER EBY INTRODUCING THE REQUIREMENT OF THE DECLARATION TO T HE EFFECT INDICATED BY THE AMENDMENT. THEREFORE 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 CONFIR MATION LETTER AS REQUIRED BY THE LEARNED CIT IS REQUIRED. 13. IN THE INSTANT CASE THERE IS NO DISPUTE WIT H REGARD TO THE FACT THAT THE ASSESSEE HEREIN HAS OBTAINED PAN NUMBER OF THE PAYEE. IN VIEW OF THE DISCUSSIONS MADE SUPRA AND FOLLOWING TH E DECISION RENDERED BY THE KOLKATTA BENCH OF TRIBUNAL IN THE C ASE OF SOMA RANI GHOSH (SUPRA) WE HOLD THAT THE ASSESSEE IS NO T REQUIRED TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS TO MADE AND HENCE THE QUESTION OF INVOKING THE PROVISIONS OF SEC.40(A)(IA ) DOES NOT ARISE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 14. THE LD CIT(A) HAS ALSO REFERRED TO SEC.194C( 7) OF THE ACT WHICH REQUIRED FILING OF A STATEMENT OF DEDUCTION O F TAX AT SOURCE (FORM 26Q) AS PER RULE 31A(4)(VI) OF INCOME TAX RUL ES. THOUGH THE LD CIT(A) DID NOT DISCUSS ABOUT THE REQUIREMENT OF SEC.194C(7) AS HE HAD REJECTED THE BENEFIT GIVEN U/S 194C(6) OF TH E ACT. ITA NO.2586/BANG/2018 PAGE 14 OF 20 15. IN THE CASE OF SOMA RANI GHOSH (SUPRA) THE K OLKATTA BENCH OF TRIBUNAL HAS ALSO DISCUSSED ABOUT THE EFFECT OF NON -COMPLIANCE OF SEC.194C(7) VIS--VIS SEC.40(A)(IA) OF THE ACT AS U NDER:- 30. IN CIT -VS.- SRI MARIKAMBA TRANSPORT CO. IN IT A NO. 553 OF 2013 REPORTED IN 39 ITR 129 (KARN.) HON'BLE KARNATAKA HIGH COURT HAS FORMULATED A QUESTION AS T O WHETHER NON-FILING OF FORM NO. 151/I WITHIN THE PRE SCRIBED TIME IS ONLY A TECHNICAL DEFAULT OR THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE ATTRACTED? AND PROCEEDED T O ANSWER THE SAME AS UNDER:- SECTION 40(A)(IA) AND SECTION 194C(3) OF THE ACT R EADS THUS: 'SECTION 40(A)(IA) : ANY INTEREST COMMISSION OR BR OKERAGE RENT ROYALTY FEES FOR PROFESSIONAL SERVICES OR FE ES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT OR AMOUNT S PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR BEING RE SIDENT FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR F OR CARRYING OUT ANY WORK) ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XII-B AND SUCH TAX HAS NOT BEEN DEDUC TED OR AFTER DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB- SECTION(I) OF SECTION 139'. SECTION 194C/3): NO DEDUCTION SHALL BE MADE UNDER S UB- SECTION (1) OR SUB- SECTION(2) FROM - ITA NO.2586/BANG/2018 PAGE 15 OF 20 (I) THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKEL Y TO BE CREDITED OR PAID TO THE ACCOUNT OF OR TO THE CONTRA CTOR OR SUB-CONTRACTOR IF SUCH SUM DOES NOT EXCEED TWENTY THOUSAND RUPEES: PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OF SUCH SUMS CREDITED OR PAID OR LIKELY TO BE CREDITED OR P AID DURING THE FINANCIAL YEAR EXCEEDS FIFTY THOUSAND RUPEES T HE PERSON RESPONSIBLE FOR PAYING SUCH SUMS REFERRED TO IN SUB -S.(L) OR AS THE CASE -RAY BE SUB-S.(2) SHALL BE LIABLE TO DE DUCT INCOME-TAX UNDER THIS SECTION: PROVIDED FURTHER THAT NO DEDUCTION SHALL BE MADE UN DER SUBS. (2) FROM THE AMOUNT OF ANY SUM CREDITED OR PA ID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS Y EAR TO THE ACCOUNT OF THE SUB-CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING HIRING OR LEASING GOODS CARRIAGES ON PRO DUCTION OF A DECLARATION TO THE PERSON CONCERNED PAYING OR CRE DITING 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 TIME DURING THE PREVIOUS YEAR. PROVIDED ALSO THAT THE PERSON RESPONSIBLE FOR PAYIN G ANY SUM AS AFORESAID TO THE SUBCONTRACTOR REFERRED TO I N THE SECOND PROVISO SHALL FURNISH TO THE PRESCRIBED IT A UTHORITY OR THE PERSON AUTHORIZED BY IT SUCH PARTICULARS AS MAY BE ITA NO.2586/BANG/2018 PAGE 16 OF 20 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 O F JUNE 1973 IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRA CTOR AND A CO-OPERATIVE SOCIETY OR IN PURSUANCE OF A CON TRACT BETWEEN SUCH CONTRACTOR AND THE SUB-CONTRACTOR IN R ELATION TO ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYIN G OUT ANY WORK) UNDERTAKEN BY THE CONTRACTOR FOR THE CO-OPERA TIVE SOCIETY. 4. THE COMBINED READING OF THESE TWO PROVISIONS MAK E IT CLEAR THAT IF THERE IS ANY BREACH OF REQUIREMENTS O F SECTION 194C(3) THE QUESTION OF APPLICABILITY OF SECTION 4 0(A)(IA) ARISES. THE EXCLUSION PROVIDED IN SUB-SECTION(3) OF SECTION 194C FROM THE LIABILITY TO DEDUCT TAX AT SOURCE UND ER SUB- SECTION(2) WOULD BE COMPLETE THE MOMENT THE REQUIR EMENTS CONTAINED THEREIN ARE SATISFIED. ONCE THE DECLARAT ION FORMS ARE FILED BY THE SUBCONTRACTOR THE LIABILITY OF TH E ASSESSEE TO DEDUCT TAX ON THE PAYMENTS MADE TO THE SUB-CONTRACT OR WOULD NOT ARISE. AS WE HAVE EXAMINED THE SUB-CONTR ACTORS HAVE FILED FORM NO. IS! BEFORE THE ASSESSEE. SUCH B EING THE CASE THE ASSESSEE IS NOT REQUIRED TO DEDUCT TA X 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 I N NOT FILING ITA NO.2586/BANG/2018 PAGE 17 OF 20 FORM NO.15J BY THE ASSESSEE. THIS MATTER WAS EXTENS IVELY CONSIDERED BY THE ITAT AHMEDABAD BENCH IN VALIBHAI KHANBHAI MANKAD'S CASE (SUPRA) AND THE SAID JUDGMEN T HAS BEEN UPHELD BY THE HIGH COURT OF GUJARAT REPORT ED IN (2013) 216 TAXMAN 18 (GUJ) WHEREIN IT IS HELD THAT ONCE THE CONDITIONS OF SECTION 194C(3) WERE SATISFIED THE L IABILITY OF THE PAYEE T: DEDUCT TAX AT SOURCE WOULD CEASE AND ACCORDINGLY APPLICATION OF SECTION 40(A)(I WOULD A LSO NOT ARISE. THE TRIBUNAL PLACING RELIANCE ON THE JUDGME NT OF THE ITAT AHMEDABAD BENCH HAS DISMISSED THE APPEAL FILE D BY THE REVENUE. WE AGREE WITH DIE SAID PROPOSITIONS AN D HOLD THAT FILING OF FORM NO.151/J IS ONLY DIRECTORY AND NO: MANDATORY.' 31. A COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 86/VIZ/2013 IN THE CASE OF ITO - /VS.- KOLLI BROTHE RS ORDER DATED 11.12.2013 FOLLOWED THE DECISION OF THE HON'B LE HI COURT OF GUJARAT IN THE CASE OF VALIBHAI KHANBHAI M ANKAD (SUPRA). IN THE CASE OF M/S MAHA!AXMI CARGO MOVERS -VS.- ITO IN ITA NO. 6191/MUM/2013 ORDER DATE: 09.12.201 5 ANOTHER COORDINATE BENCH OF THIS TRIBUNAL REACHED T HE SAME CONCLUSION WHILE FOLLOWING THE DECISION OF THE COORDINATE BENCH IN THE CASE OF CIT -VS.- VALIBKHAN BHAI MANKAD (SUPRA) AND CIT -VS.- SRI MARIKAMBA TRANSPOR T CO. IN ITA NO. 553: 2013 REPORTED IN 379 ITR 129 (KARN. ). 32. IT IS WORTH NOTICING THAT IN ACIT -VS.- MR. MOH AMMED SUHAIL KURNOOL IN ITA NO. 1536.HYD/2014 ORDER DAT ED ITA NO.2586/BANG/2018 PAGE 18 OF 20 13.02.2015 THE COORDINATE BENCH OF THIS TRIBUNAL SPECIFICALLY HELD THAT THE PROVISIONS OF SECTION 19 4C(6) ARE INDEPENDENT OF SECTION 194C(7) AND JUST BECAUSE TH ERE IS VIOLATION OF PROVISIONS OF SECTION 194C (7) DISALL OWANCE UNDER SECTION 40(A)(IA) DOES NOT ARISE IF THE ASSES SEE COMPLIES WITH THE PROVISIONS OF SECTION 194C(6). 33. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE JUDICIAL REASONING DELINEATED IN THE ABOVE JUDGMENT S WE FIND THAT IF THE ASSESSEE COMPLIES WITH THE PROVISI ONS OF SECTION 194C(6) DISALLOWANCE UNDER SECTION 40(A)(I A) DOES NOT ARISE JUST BECAUSE THERE IS VIOLATION OF PROVIS IONS OF SECTION 194C(7) OF THE ACT. 16. THE LD CIT(A) HAS ALSO REFERRED TO THE DECI SION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER O F CUSTOMS (IMPORT) MUMBAI VS. M/S DILIP KUMAR AND COMPANY & OR (CIVIL APPEAL NO.3327 OF 2007 DATED JULY 30 2018)(2018-TI OL-302-SC- CUS-CB). THE ABOVE SAID DECISION WAS RENDERED BY H ON'BLE SUPREME COURT IN THE CONTEXT OF PENALTY PROVISIONS WHERE AS IN THE INSTANT CASE THE ISSUE IS ABOUT INTERPRETATION OF PROVISIONS OF SEC.194C OF THE ACT AS APPLICABLE TO THE YEAR UNDER CONSIDERATION. HENCE WE ARE OF THE VIEW THAT THE REVENUE CANNOT TA KE SUPPORT OF THE DECISION RENDERED BY HON'BLE SUPREME COURT REF ERRED ABOVE. ITA NO.2586/BANG/2018 PAGE 19 OF 20 17. IN VIEW OF THE FOREGOING DISCUSSIONS WE SE T ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO DELETE THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. 18. IN THE RESULT THE APPEAL OF THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER 2019. SD/- (PAVAN KUMAR GADALE) JUDICIAL MEMBER SD/- (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE DATED 27 TH NOVEMBER 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT BANGALORE. ITA NO.2586/BANG/2018 PAGE 20 OF 20 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED