The Raipur bench of the Income Tax Appellate Tribunal (ITAT) has held that the provisions relating to tax deduction at source (TDS) is not applicable on the purchase of spare parts.
An order was passed against the assessee-Company with regard to the non-deduction of TDS on payment of Rs.1,47,153/- to Jaika Automobiles, on payment of interest on car loan amounting to Rs.1,18,830/-, etc.
The assessee contended that the major component of cost involved supply of spare parts for repair of car engine for which separate invoice was raised. With regard to the interest paid towards car loan, it was contended that the interest was paid to Bank of India as interest on car loan and not to Magma finance as misunderstood by PCIT. The ledger copy of Bank of India Car loan account was relied upon.
The Tribunal bench comprising Judicial Member N K Chaudhary and Accountant Member Pradip Kumar Kedia observed that “thus, where interest has been actually paid to Bank, no obligation for deduction of TDS under s.194A of the Act would arise. With reference to TDS on brokerage amounting to Rs.8010/- and Rs.7980/- without deducting TDS, it is the case of the assessee that the allegation made for non-deduction of TDS is untrue. The TDS was actually deducted for which payment proof was placed on record.”
While disposing the appeal in favour of the assessee, the Tribunal held that “as regards non deduction of TDs on payment of Rs.1,47,153/- to Jaika Automobiles, it is the case of the assessee that the major component of cost involved supply of spare parts for repair of car engine for which separate invoice was raised. Hence, liability under s.194C of the Act does not arise on purchase of spare parts. We find that the assessee hasgiven a plausible reply in the revisional proceedings on all these points. The PCIT has not rebutted any of the submissions of the assessee while coming to adverse conclusion. Such course is not permissible while fixing serious consequences and thus cannot be endorsed. Hence, the action of the PCIT on this issue is set aside and action of the AO is restored.”
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