ITA Nos. 351 & 352/Nag/2015. IN INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. Nos.351 & 352/Nag/2015 Assessment Years : 2013-14 & 2014-15. Income-tax Officer, M/s Raymond UCO Denim Pvt. Ltd. (TDS), Ward-1(4), Wardha. Vs. (Fabric Division)-C1, MIDC, Lohara, Dist. Yavatmal. TAN NGPUO1513B. Appellant. Respondent. Appellant by : Smt. Agnes P. Thomas. Respondent by : Shri P.M. Gandhi. Date of Hearing : 26-09-2016 Date of Pronouncement : 30th Sept., 2016 ORDER These are Revenues appeals against common order of learned CIT(Appeals) dated 09-10-2015 for concerned assessment years. 2. common issues raised read as under : 1. Whether on facts and circumstances of case, Ld.CIT(A) is justified in deleting demand of Rs. 26,49,147/- for A.Y. 2013-14 & Rs. 19,03,716/- for AY. 2014-15 raised u/s 201/201(lA)of Act? 2. Whether on facts and circumstances of case, Ld.CIT (A) is justified in not appreciating that phrase in section 194C (6) "during course of plying, hiring and leasing of goods carriages" does not apply to contractor only but to both parties i.e. Principal as well as contractor? 3. Whether on facts and circumstances of case, Ld.CIT(A) is justified in holding that only contractor should be in line of business of plying, 2 ITA Nos. 351 & 352/Nag/2015. hiring and leasing of goods carriages whereas section 194C(6) nowhere mention that only contractor should be in business of plying, hiring and leasing of goods carriages? 4. Whether on facts and circumstances of case Ld.CIT(A) is justified in ignoring true spirit in which section 194C(6) was brought to statute w.e.f. 1-10-2009 particularly when prior to introduction of this section TDS was being made on identical payments to transporters? 5. Whether on facts and circumstances of case Ld.CIT(A) is justified in not appreciating that by virtue of amendment to section 194C (6) w.e.f. 1- 6-2015 exemption has been provided to transporters owning up to 10 goods carriages and prior to that date, there was no exemption provided u/s 194C (6) of Act from TDS to any person? 6. Whether on facts and circumstances of case Ld.CIT(A) is justified in not appreciating fact that circular no.5/2010 dated-3.06.2010 is irrelevant in assessee's case as almost all payments were made to big transporters who are out of purview of section 44AE ? 7. Whether on facts and circumstances of he case Ld CIT(A) is justified in admitting fresh grounds regarding double taxation without giving opportunity to A.O., since said grounds were not raised before A.O. during proceedings u/s 201/201A ? 8. Whether on facts and circumstances of case Ld CIT(A) is justified in not appreciating ruling of 1st proviso to section 201(1) and holding that onus is on revenue to demonstrate that taxes have not been recovered from person who had primary liability to pay tax i.e. contractor? 3. Brief facts of case are that tax deductor assessee is company registered under Companies Act, 1956 and is engaged in business of manufacturing of Cotton Yarn, Denim Fabrics and allied activities having its manufacturing facilities at Yavatmal and Captive power plant. transportation of raw material and consumables from vendors to factory premises are made through various road transporters. company has not deducted tax at source (TDS) from payments made to such transporters who have furnished their Permanent Account Number (PAN) in view of provisions of sub-section (6) of section 194C of Act. 3 ITA Nos. 351 & 352/Nag/2015. 4. There was survey in assessee s premises and it was enquired as to why TDS has not been deducted at source from payments made to transport operators. assessee responded as under : " We are in receipt of above Show Cause Notice asking us to justify why no tax is deducted at source u/s 194C of Income Tax Act 1961 by Company on freight charges paid to contractors who are engaged in goods carriages for F. Y. 2012-13, FY. 2013-14 and from April 2014 to November 2014. In this regard, we would like to state as under- As per Sec. 194C of Income Tax Act 1961 any person responsible for paying any sum to any resident contractor for carrying out any work in pursuance of contract between specific person and resident contractor, is required to deduct tax at source. By virtue of explanation (iv), expression "work" shall also include among other things carriage of goods and/ or passengers by any mode of transport other than by rai/ways. As per section 194C (6) of Income Tax Act 1961 "no deduction shall be made from any sum credited or paid or likely to be credited or paid during previous year to account of contractor during course of business of plying, hiring or leasing goods carriages on furnishing of Permanent Account Number to .. . person paying or crediting such sum" From above reading of Sec. 194C of Income Tax Act 1961, it is very ;:;:-..:.:;;:?' clear that if assessee pays to transport contractor who has submitted to him Permanent Account Number, then there is no liability on deductor to deduct tax u/s 194C of Income Tax Act 1961. We would like to submit that company has not deducted tax on transport contractor who has submitted Permanent Account Number. Thus there is no non- companies of TDS provisions by us while making payments to transport contractor u/s 194C of Income-tax Act, 1961. 4 ITA Nos. 351 & 352/Nag/2015. However, AO was not satisfied. He held that deductor should be in business of plying, hiring or leasing goods carriage for benefit of section 194C(6) to be available. Assessing Officer concluded as under : Section 194C(6) has been introduced from 01.10.2009 replacing second Proviso to Section 194C(3)(i) of Income Tax Act, 1961. Prior to amendment position was that, if any person during course of plying, hiring or leasing goods carriages makes payment to sub- contractor, then TDS need not be made if such sub contractor furnishes declaration that he has not owned more than two trucks. Thus, person who is in business of plying, hiring or leasing goods carriages, had to make TDS in respect of payments made to sub-contractors who owned more than two trucks. Since this caused hardship to small operators, Act has been amended by introducing section 194C(6). In explanatory notes it is clearly mentioned that Act is amended to exempt payments to transport operators (as detailed in section 44AE) from purview of TDS. However, this would only apply in cases where operator furnishes his PAN to deductor. 5. Upon assessee s appeal, learned CIT(Appeals) elaborately discussed and considered issue. He concluded as under : 7. 6.6 Therefore, section has been proposed to be amended w.e.f 1st June 2015 to expressly provide that relaxation under sub section (6) of section 194C of Act from non-deduction of tax shall only be applicable to payment in nature of transport charges (whether paid by person engaged in business of transport or otherwise) made to contractor who is engaged in business of transport and who is eligible to compute income as per provisions of section 44AE of Act and who shall also furnish declaration to this effect along with his PAN. It may be noted that only amendment proposed in section 194C(6) is substitution of existing words "on furnishing of" by "where such contractor owns ten or less goods carriage at any time during previous year and furnishes declaration to that effect along with . amendment does not alter any position with regards to status of transport operator as recipient of transport charges for 6.8 With this amendment and clarification it is abundantly clear that non- deduction of tax while making payment to transport operators for transport charges 5 ITA Nos. 351 & 352/Nag/2015. w.e.f. 1-10-2009 is absolutely as per provisions of section 194C (6) and there cannot be any default in this regard if PAN of transporter has been collected and reported by deductor. 6.9 Therefore, interpretation of Ld. ITO while treating appellant as "assessee in default" for non deduction of tax while making freight payment to transport operators is not as per law to extent it not only interprets provision in erroneous manner but also contrary to legislative intent and binding CBDT Circulars. In view of above, order passed by Id. AO u/s 201(1) and 201(1A) of Act, holding appellant as "assessee in default" in respect of transport charges paid to transport operators without deduction of TDS in compliance with provisions of section 194C(6) is required to be cancelled. In such facts, action of Id. AO of raising demand for tax of Rs. 26,49,147/- & Rs. 19,03,716/- u/s 201(1) and interest to Rs. 6,86,816/- & Rs. 3,55,979/- u/s 201(lA) of Act for AY 2013-14 & AY 2014-15 respectively is held to be erroneous and is therefore directed to be deleted. 7. Further, it has to be noted that appellant had provided complete details in respect of each of transport operators including their invoices, PAN etc. and hence it had duly discharged onus cast upon it and that it cannot be treated as assessee in default till it is found that deductees had also failed to pay such tax directly. It is evident that details of all persons from whom tax was required to be deducted was available on record before Ld. A.O. and onus was on A.O. to ascertain facts related to payment of tax on income of transport contractors directly from recipient of such income. Reliance in this regard is placed on Hindustan Coca Cola Beverages Pvt. Ltd Vs CIT 293 ITR 226, JagranPrakashan Ltd Vs. DCIT 21 taxmann.com 489 and Agra ITAT judgment in case of Allahabad Bank Vs. ITO bearing ITA Nos.448 to 454/ Agra /2011. 6. Against above order Revenue is in appeal before ITAT. 7. I have heard both counsel and perused records. In this regard I may gainfully refer to section 194C(6) as under : No deduction shall be made from any sum credited or paid or likely to be credited or paid during previous year to account of contractor during course of business of plying, hiring or leasing goods carriages, [where such contractors own ten or less goods carriages at any time during previous year and furnish declaration to that effect along with] his Permanent Account Number, to person paying or crediting such sum. 8. From above it is clear that TDS is not to be deducted from payment made to transporters who furnished PAN. Assessing Officer has wrongly interpreted that this provision is applicable to tax deducted by assessee 6 ITA Nos. 351 & 352/Nag/2015. who are engaged in transport business. This in my considered opinion is erroneous interpretation not sustainable in law. In my considered opinion learned CIT(Appeals) has correctly appreciated law and facts of case and same does not need any interference. Accordingly I uphold order of learned CIT(Appeals). 9. In result, these appeals by Revenue stand dismissed. Order pronounced in Open Court on this 30th day of Sept., 2016. Sd/- ( SHAMIM YAHYA) ACCOUNTANT MEMBER. Nagpur, Dated: 30th Sept., 2016. Copy forwarded to : 1. M/s Raymond UCO Denim Pvt. Ltd. (Fabric Division, C1, MIDC Lohara, Dist. Yavatmal-445001. 2. I.T.O., (TDS), Ward-1(4), Wardha. 3. C.I.T.- 2, Nagpur. 4. CIT(Appeals), -II, Nagpur. 5. D.R., ITAT, Nagpur. 6. Guard File True Copy By Order Assistant Registrar, Income Tax Appellate Tribunal, Nagpur Bench, Nagpur. Wakode. Income-tax Officer (TDS), Ward-1(4), Wardha v. M/s Raymond UCO Denim Pvt. Ltd