Provisions of Section 194C (6) do not depend upon Section 194C (7)
The Income Tax Tribunal at Kolkata in the case of Soma Rani Ghosh vs. Deputy Commissioner of Income Tax numbered as I.T.A. No. 1420 /Kol./ 2015 has held that provisions of Section 194C (6) do not depend upon the provisions of Section 194C (7). It has been categorically held that both the sections cannot be read together to attract dis-allowance under the provisions of section 40(a) (ia) of the Act.
It has been further held that no dis-allowance under section 40(a)(ia) of the Act can be allowed, even if the provisions of Section 194C(7) of the Act are violated.
The Judgement was passed on 9.09.2016 with reference to the Assessment Year 2012-13.
The second ground of dis-allowance that was stated by the learned CIT was that Section 194C (6) and 194C (7) should always be read together and if after getting PAN from the Transporters, the particulars obtained from the Transporters are not filed before the Authority as per the provisions of section 194C (7), deduction and dis-allowance under the provisions of section 40(a) (ia) would not apply.
The provisions of Section 194C (6) before the amendment of by Finance Act, 2015 states that during the relevant Assessment year, if the sub-contractors provide their PAN to the person making payments for hiring of vehicles during the business, then the person making payment shall not deduct any tax.
Under the provisions of Section 194C (6), as it was before the amendment to get immunity from the obligation of TDS, filing of PAN of the Transporter was only sufficient. In such case no confirmation letter was required by the learned CIT.
The provisions of Section 194C (6) provides exemption from the application of the provisions of sectiontion194C if the condition stated therein is fulfilled that is, the appellant obtains the PAN of the transporters.
The liability to deduct TDs is exempted as soon as the appellant obtains the PAN of the contractors. The liability cannot be treated to be reinstated if there is a non- compliance of the provisions of section 194C (7) at a later stage.
Features of Section 194C of the Act:
Section provided that no TDS on payment to contractor during the business of plying, hiring or leasing vehicles, where such contractor is the owner of 10 or less goods vehicles during the previous financial year and provides a declaration along with his PAN to the person making the payment.
For the purposes of the section the words “goods carriage” shall have the meaning provided in the Explanation to sub-section (7) of section 44AE of the Act.
It was stated that no TDS is required upon payment to Contractor if the sum is credited or paid to the account of the contractor is up to Rs. 35000 /-
It was however provided that TDS on payment to Contractor shall be deducted if the total amounts credited or paid during the financial year is more than Rs. 75000/-
TDS on payment to Contractor shall be deducted at the rate of 1% of such sum where the payment is being made to an individual or a HUF.
Amendment of section 194C by the Finance Act of 2016:
The amendment of section 194C of the Income Tax Act by the Finance Act of 2016, states that the words “seventy-five thousand rupees” shall be substituted by the words “one lakh rupees” with effect from the 1.6.2016.
Through the amendment a slight change had been introduced as to the procedure, by replacing “declaration” with the term “Permanent Account Number” as has to be obtained from the Transporter.
It was held by the Tribunal that the provisions of Section 194C (6) and 194 C (7) are similar to the Proviso (2) and (3) of Section 194C (3) prior to amendment, and accordingly it was examined whether Section 194C (6) and 194C (7) should be read together to apply section 40(a) (ia) of the Act.
After marking an analogy between the section 194C (3) and the present amended section 194C (6) and 194C (7), the Learned AR urged that even earlier when the declaration obtained from the Transporter under Second Proviso was not submitted before the Commissioner of Income Tax as is provided in Form 15J under the third proviso of Section 194C (7), the Department tried to make additions, but such additions have been set aside later on.
He further submitted that the Courts and Tribunals have held that on obtaining a declaration under second proviso to section 194C (3) prior to the amendment or the PAN details under the current section 194C (6), the assessee was not required to deduct TDS for the payments made to the contractor, irrespective of the fact whether such information was furnished to the authorities as prescribed under the amended section 194C (3) or the present section 194C (7) or not.
The Income Tax Tribunal at Hyderabad in the case of ACIT, Circle-1, Kurnool vs. Mr. Mohammed Suhail, Kurnool being ITA.No.1536/Hyd/2014 in connection with Assessment Year 2010-2011 has passed a judgment on similar terms.
The hearing of the said appeal was heard on 05.02.2015 and the judgment was pronounced on 13.02.2015 by the bench comprising of Shri B. Ramakotaiah , accountant member and Shri Sukriti Dey, Judicial Member.