Legal ownership of Transport Vehicle is not required for Sec 194C TDS deduction: ITAT [Read Order]

Jodhpur Bench of Income Tax Appellate Tribunal ( ITAT ), ruled that in a cases where a declaration under Section 194C(6) and a PAN are received from payees who possess a vehicle even though they are not registered owners, the legal owner is exempt from TDS under Section 194C.

The assessee, Adhunik Khanan VA Parivahan Theka Sahakari Samiti Limited, is in the business of providing logistical and transportation services. An assessment was carried out at the assessee  place of business to confirm adherence to the guidelines in Chapter XVII-B of the Income-tax Act, 1961. It was discovered throughout the survey process that, based on statements collected from the owners of the vehicles, the assessee  had paid transportation expenses to a number of individuals without deducting TDS.

However it is observed that in some cases transportation charges paid to the person other than owner of the vehicle on the basis of power of attorney / sahmati patra and TDS has not been made on such payments.

The assessee deductor requested to provide details of transportation charges paid on the basis of power of attorney / sahamati patra in the particular format along with declaration form, copy of PAN, registration certificate of vehicle and other documents.

After examining the submission of assessee AO noted that  as per the provision of section 194C(6) of the I.T. Act, 1961, no deduction shall be made for any sum credited 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, where such contractor owns ten or less goods carriages at any time during the previous year and furnished a declaration to that effect along with his PAN, to the person paying or crediting such sum.

Subsequently the declaration obtained by the assessee deductor cannot be considered as valid documents in light of the provisions of section 194C(6) of the I. T. Act, 1961. Thus, the assessee has not fulfilled the basic condition laid down under section 194C(6) of the Act.

Aggrieved from the order of Assessing Officer, creating demand of TDS along with interest for an amount of Rs. 1,16,094/-, the assessee preferred an appeal before the  NFAC.As the assessee did not find any favor from the order of the  CIT(A), the assessee preferred the present appeal before the ITAT.

Assesee representative, Madhur Agrawal submitted that the assessee has not violated the provisions of section 194C(6) of I.T. Act as there was no liability for deduction of tax. Section 194C(6) clearly states that deduction should not be made in the contract during the course of ply, hiring and leasing good carriage and such contractor owns less than 10 goods carriage at any time during the year.

P.D. Chougule, the Department representative, argued that the vehicle owners are not having PAN and the person who filed the declaration is not the owner of the vehicle. Therefore, the assessee is liable to make TDS and on account of such default demand has rightly been confirmed in the case of the assessee.

After observing the submissions of both parties the ITAT bench noted  that the term “owner” here refers to anyone who is in possession of the goods carriage, not necessarily the registered owner.

Further the Transporters provide this declaration along with their Permanent Account Number ( PAN ) to the payer to avoid TDS deduction. The Finance Act 2015 has approved amendment to section 194C (6) providing for deduction of tax at source unless the transporter who is engaged in the business of playing, hiring or leasing goods carriage, owns not more than goods carriages and furnishes a declaration to this effect along with PAN to the payer. The amendment is applicable from 01-06-2015.

Therefore  the two member bench of Dr. S. Seethalakshmi, ( Judicial Member ) and Rathod Kamlesh Jayantbhai, ( Accountant Member ) who observed that Anyone in possession of the goods carriage, other than the registered owner, is considered the owner for the purposes of section 44AE. Since the assessee transporter's taxes are primarily governed by section 44AE, this becomes significant when defining the term "owns" in section 194C(6).

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates