The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that payment towards bus hire charges and wharf age charges are subject to Tax Deduction at Source under section 194 C of Income Tax Act 1961
Section 194C of Income Tax Act 1961 deals with payment to contractors and subcontractors, any person is responsible for paying any sum to resident persons who carry any contract work between the person and contractor is required to deduct TDS.
Assessee Jindal Saw Ltd and revenue filed various appeals before the ITAT.Among the appeal revenue challenged deletion of disallowance made under section 40(a)(ia) o f the Income Tax Act 1961.
In the course o f assessment proceedings, the Assessing Officer noticed that while making payment towards bus hire charges and whar fage, the assessee has deducted tax under section 194C instead of section 194I of the Act.
Referring to the order passed under section 201(1) and 201(1A) o f the Act, wherein, it was held that the assessee was required to deduct tax on these payments under Section 194-I of the of Income Tax Act 1961, the Assessing Officer made proportionate disallowance under section 40(a)(ia) of the of Income Tax Act 1961.against this order assesee filed appeal before Commissioner of Income Tax Appeal CIT (A).
After considering the submissions made by the assessee and revenue CIT(A) deleted the disallowance made by the Assessing Officer and observed that section 40(a) (ia) can be invoked in a case where no deduction of tax has been made but not in a case where there is short deduction of tax.Further revenue filed an appeal against the order of CIT(A) before ITAT.
Section 40(a)(ia) of the of Income Tax Act 1961 provides that f ay expenditure mentioned under the TDS that may paid to a resident and debited profit and loss account ,such expenditure will not be allowed as deduction while computing the income under the heads of Profit and Gains of Business or Profession.
Rohit Jain counsel for the assessee submits that, appropriate provision under which tax was required to be deducted is section 194C.
Sanjay Kumar appeared for the revenue .
After considering the contents of the both sides the division bench of G. S. Pannu, (President) and Saktijit Dey, (Judicial Member) dismissed the appeal filed by the revenue and confirmed the decision of CIT(A).
Further the bench observed that “payments made towards bus hire charges and wharfage required deduction of tax at source under section 194C o f the Act and accordingly, deleted the demand raised under sections 201(1) and 201(1A) of the Act. Admittedly, the assessee has deducted tax on both the payments applying the provisions of Section 194C of the Act”
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