The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that no disallowance shall be made under Section 40(a)(ia) of the Income Tax Act, 1961 on compliance with the Section 194C (6) of the Income Tax Act.
The assessee Quippo Oil & Gas Infrastructure Ltd filed return of income for the Assessment Year 2013-14 declaring loss. The passed on by disallowing the depreciation of on oil drilling rigs, unpaid provisions of leave encashment,the mobilisation of expenses under Section 40(a)(ia) of the Income Tax Act and further disallowed the capitalization and repair and maintenance expenses.
Regarding deletion of disallowance of mobilisation expenses under Section 40(a)(ia) of the Income Tax Act, the assessee had debited to profit & loss account a sum towards mobilisation expenses. The same had been disallowed by the AO on the ground that the payment debited to profit and loss account of mobilisation charges were not covered under the provisions of Section 194C(6) of the Income Tax Act as the payment were not made to contracts for playing, hiring or leasing goods carriages.
Under Section 194C(7) read with Rule 31A(4)(vi), the deductor is required to furnish particulars of amount paid or credited on which tax was deducted in view of compliance of provision of sub-section (6) of section 194C by the payer in its quarterly TDS statement In compliance of the same.
The assessee had filed the TDS return giving the details of payment made transporters on which TDS has not been made. Apart from the same as per provision of Section 194C (6), no tax needed to be deducted at the time of making payments to the transporters, if the transporter furnished his PAN to the person making the payment
Alka Arren, on behalf of the assessee submitted that even if there was violation of provisions of Section 194C (7) of the Income Tax Act, disallowance under Section 40(a)(ia) of the Income Tax Act would not arise, if assessee had complied with the provision of Section 194C(6) of the Income Tax Act.
In the instant case, the assessee had obtained PAN of the transporters and duly complied with the provisions of Sec. 194C (6) of the Income Tax Act. Therefore, TDS was not required to be deducted by the assessee.
The Division Bench of Pradip Kumar Kedia, (Accountant Member) and Yogesh Kumar U.S., (Judicial Member) deleted the appeal filed by the revenue referring to the judgement in Hon’ble Kolkata Tribunal in the case of Rani Ghosh vs. DCIT held that if the assessee comply with provision of Section 194C (6), the disallowance under Section 40(a)(ia) of the Income Tax Act would not arise just because there was a violation of provision of Section 194C (7) of the Income Tax Act. The Section 194C (6), 94C (7) and section 194C(7) of the Act were independent of each other and could not be read together to attract disallowance under Section 40(a)(ia) of the Act read with section 194C of the Income Tax Act.
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