[2019] 104 taxmann.com 336 (Jaipur – Trib.)

IT: Where assessee made payments to transporters toward freight without deducting TDS on such payments, since assessee was in receipt of details about PAN of transporters at time of payment of freights and, thus, complied with provisions of section 194C(6), no disallowance could be made under section 40(a)(ia)

Section 194C, read with section 40(a)(ia), of the Income-tax Act, 1961 – Deduction of tax at source – Contractors/sub-contractors, payments to (Transporters) – Assessee made payments to transporters towards freight charges without deducting TDS on same on ground that transporters had furnished their respective PANs to assessee at time of payment of freights and, thus, in view of provisions of section 194C no deduction was required to be made on such payments – Assessing Officer was of view that assessee could not furnish PANs of transporter to prescribed Income tax authority as per requirement of section 194C(7); thus, disallowance was to be made under section 40(a)(ia) – Whether provisions of section 40(a)(ia) which are deeming fiction relating to non-deduction of TDS have to be read in limited context of non-deduction of TDS and same cannot be extended to ensure that even where assessee complies with his statutory obligation not to deduct TDS on receipt of PAN, merely because subsequent obligation in terms of filing of prescribed forms has not been complied with, assessee should suffer disallowance of expenditure – Held, yes – Whether, in instant case, once assessee was in receipt of PANs and had not deducted TDS, it had complied with statutory obligation cast upon him and assessee could not be penalized for non-deduction of TDS merely because there was non-compliance on its part to furnish said PANs to revenue authorities – Held, yes – Whether therefore, impugned disallowance under section 40(a)(ia) was to be set aside – Held, yes

Arihant Trading Co