Sri D. Krishna Reddy, Prop. M/S. Ajay ... vs Department Of Income Tax
- CitationITA No.1099 of 2012 D. Krishna Reddy Nellore
Ratio decidendi
The rule this decision rests on
Where the assessee's claim that no TDS was deductible rests on payments to payees whose income fell below the taxable limit, that claim, raised for the first time before the CIT(A) without the Assessing Officer having had an opportunity to verify it, is to be remitted to the Assessing Officer for verification, and the disallowance under section 40(a)(ia) allowed only if the facts so established. Hire charges payable under a hire purchase arrangement are not interest within the meaning of section 194A, so that failure to deduct tax on such charges does not attract disallowance under section 40(a)(ia) by reference to that section.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
This is an appeal preferred by the Revenue directed against the order of the CIT (A) Guntur, dated 24.04.2012, passed for A.Y 2009-10 u/s 143(3) of the I.T. Act, 1961.
2. The Revenue has raised the following grounds of appeal:
"1. The order of the ld CIT (A) is erroneous both on facts and in law.
2. The ld CIT (A) erred in deleting the disallowance of freight charges of Rs.12,43,190 made u/s 40(a)(ia) on account of assessee's failure to make TDS u/s 194C.
3. The order of the ld CIT (A) is ex facie perverse on facts as his finding of fact that the payment of freight
Page 1 of 4 ITA No.1099 of 2012 D. Krishna Reddy Nellore
charges to none of the eleven payees during the previous year has exceeded the threshold limit attracting the provisions of TDS is contrary to the material available on record which shows that in all the eleven cases the payment exceeded the threshold limit of Rs.50,000 as laid down in the first proviso to section 194C(3)(i).
4. The ld CIT (A) erred in deleting the disallownce of hire purchases interst of Rs.72,000 made u/s 40(a)(ia) on account of assessee's failure to make TDS u/s 194A.
5. The ld CIT (A) ought to have placed reliance on Board's Circule No.760 to conclude that the finance charges paid to hire purchase company are either in the nature of interest if the transaction is a financing transaction in substance or in the nature of hire charges if the transaction is hire purchase transaction in substance and accordingly there is liability to make TDS either u/s 194A or 194I the failure in respect of which attracts disallowance u/s 40(a)(ia)"
3. In the Revenue's appeal the first ground is disallowance of Rs.12,43,190. The AO disallowed freight charges of Rs.12,43,190 u/s 40(a)(ia) on the ground of non deduction of tax. The assessee submitted that the amounts were paid to 11 people, whose income was less than the taxable limit and hence no tax was deductible.
4. In respect of one of the parties, Sandeep Jagadhama & Associates, Pune, paid a sub contract of Rs.1,50,000 and main contractor deducting tax of Rs.1,37,061. On appeal the CIT (A) found that the payment to 11 persons did not exceed the threshold limit of attracting the provision of TDS. As regards Sandeep Jagadhama & Associates, it would appear that sub
Page 2 of 4 ITA No.1099 of 2012 D. Krishna Reddy Nellore
contractor retained the commission amount after deducting TDS of Rs.12,939. Therefore, the CIT (A) found that the tax has been deducted at gross amount and hence there is no default of TDS. Further, all the amounts have been paid during the year and hence applying the decision of Special Bench in the case of Merilyn Shipping & Services vs. Add. CIT (16 CTR 1 Vizag SB), the CIT (A) deleted the disallowance.
5. On appeal before us it was submitted by the ld DR that the claim of the assessee was made for the first time before the CIT(A), that the amount paid to 11 persons did not exceed the threshold limit and that their income was below taxable limit which was accepted by the CIT (A) without giving an opportunity to the AO to verify the same. Hence, in these circumstances, we set aside the issue to the AO to verify whether the amounts were paid to 11 persons whose income was less than taxable limit and hence no tax was deductible and if so to allow the ground raised by the assessee.
6. The next ground is against the disallowance of Rs.72,000 payable to M/s Lakshmi General Finance towards hire charges. The hire charges not being in the nature of interest and loans, provision of section 194A is not applicable. The CBDT in their circular No.760 dated 13.1.1998 has also confirmed that payment of hire charges and hire purchase agreement is not in the nature of interest, provision of section 194A would not apply. We agree with the decision of the CIT (A) on the ground and
Page 3 of 4 ITA No.1099 of 2012 D. Krishna Reddy Nellore
confirm the order deleting the disallowance and rejecting the grounds of Revenue on this head.
7. In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the Open Court on 08th April, 2015.
Sd/- Sd/- (P.M. Jagtap) (Asha Vijayaraghavan) Accountant Member Judicial Member
Hyderabad, dated 08th April, 2015. Vnodan/sps Copy to:
1. Asstt. Commissioner of Income Tax, Circle 1 24-2-438 GNT Road, Dargamitta Nellore
2. Sri D. Krishna Reddy, Prop.M/s Ajay Constructions, Singapet Village, Alluru Mandal, Nellore Distt.
3. The CIT(A) Guntur
4. The CIT Guntur
5. The DR, ITAT, Hyderabad
6. Guard File
By Order
Page 4 of 4
This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.
Research this judgment with Miss Lucy
Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.
Try Miss Lucy free