Royal Impex Vs DCIT (ITAT Chennai)
ITAT directs AO to reconsider Rs.80.65 lakh transport expenses disallowed u/s 40(a)(ia), holding substantive compliance under Sec.194C(6) prevails over procedural lapse under Sec.194C(7). A procedural lapse in filing Form 26Q cannot justify a disallowance u/s 40(a)(ia).
ITAT Reinforces Distinction Between Substantive and Procedural TDS Rules
The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has delivered a significant ruling in the case of Royal Impex Vs DCIT, reinforcing the legal distinction between substantive compliance and procedural reporting under the TDS provisions for transport contractors. The tribunal held that sections 194C(6) and 194C(7) of the Income Tax Act, 1961, operate independently. Consequently, a failure to file a procedural statement cannot invalidate the exemption from TDS deduction when the primary condition of obtaining the transporter’s PAN has been met. The matter was remanded to the Assessing Officer (AO) for re-verification.
The case pertains to the assessment year 2020-21, where the assessee, Royal Impex, had its transportation expenses of ₹80,65,019 disputed. The tax authorities had disallowed 30% of these expenses, amounting to ₹32,95,300, by invoking Section 40(a)(ia) of the Act. This section penalizes non-deduction or non-payment of Tax Deducted at Source (TDS). The disallowance was made not because the assessee failed to deduct tax, but because it allegedly failed to comply with a related reporting requirement.
