Failure to comply u/s 194C(7) does not resurrect liability u/s 194C(6), Section 194C(7) and section 194C(6) are independent to each other
ABCAUS Case Law Citation:
ABCAUS 3040 (2019) (06) ITAT
Important Case Laws Cited/relied upon by the parties:
ACIT vs Mohammed Suhail
The instant appeal was filed by the Revenue against an order passed by the Commissioner of Income Tax (Appeals) in deleting the disallowances u/s 40a(ia) on account of non-compliance with the provision of section 194C(6) and 194C(7) of the Income Tax Act, 1961 (the Act).
During the previous year relevant to the relevant assessment year, the assessee company had claimed expenses on account of “lorry hire charges”. During the course of the assessment proceedings the assessee company was asked to provide the break-up and prove with supporting documents of such expenses claimed.
The Assessing Officer (AO) noticed that the assessee had not submitted details on a party wise basis. According to the AO, the onus for party wise identification with name, PAN, vehicle no. and complete address of each such party or lorry owner lied with the assessee. The AO noted that in the absence of such party wise identification such expenses remained unsubstantiated, unverified and unproven.
Moreover, according to the AO this was also in contravention of the provisions as u/s 194C(6) , 194C(7), 40a(ia) of the Act. The AO noticed that the assessee company had sought exemption under section 194C(6) on account of transporters declarations. However, AO was of the opinion that the said exemption is allowable only when the assessee had complied with the provisions of section 194C(7) of the Act which requires furnishing such particulars to the prescribed income-tax authority.
Since the assessee company has not filed any evidence of complying with the provisions of Section 194C(7), the AO disallowed the lorry hire charges u/s 40(a)(ia) on account of non-compliance with the provisions of section 194C(6) & 194C (7) of the Act.
Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the CIT(A) who deleted the addition made by the Assessing Officer. Aggrieved the Revenue was in appeal before the Tribunal.
The Tribunal noted that the AO had made the disallowance on the premises that the exemption from deduction of TDS u/s 194C(6) of the Act is available only when a compliance is made to the provision of section 194C(7) of the Act.
The Tribunal observed that the AO had noted that the appellant did not report nil deduction from transporter in Form-26Q. The AO had rejected the appellant’s contention that TDS was not deductible in cases where PANs of transporter payees are furnished as he thought that non- furnishing of PANs in respect of payee transporters in Form-26Q disqualified him from the benefit of section 194C(6) of the Act.
The Tribunal noted that the Co-ordinate Bench of the Tribunal had held that once the appellant obtained PAN of the deductees, he was not required to deduct tax as per section 194C(6} of the Act even when the appellant fails to furnish details in Form-26Q in terms of section 194C(7) of the Act.
The Tribunal further noted that the requirement u/s 194C(7) of the Act happens later in time after the liability u/s 194C(6) of the Act arises. According to the decisions relied upon, section 194C(7) and section 194C(6) of the Act are independent to each other. Failure to comply u/s 194C(7) of the Act does not resurrect the liability u/s 194C(6) of the Act, which did not exist once the transporter deductees furnished PANs to the appellant.
The Tribunal opined that the liability to deduct tax u/s 194C goes away once PANs are furnished to the appellant. Deducting TDS in the face of furnishing of PANs would have been illegal. Later default of not filing details in Form 26Q does not resurrect the liability to deduct TDS.
Accordingly, following the judgment of the Coordinate Bench, the Tribunal dismissed the ground of appeal.