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As per order passed by the ITO (TDS), he has issued show cause notice to know the reason why the assessee has not quoted the PAN of the deductee in Form No. 16 and 16A. But the assessee had not given any explanation before the ITO (TDS), even the assessee has also failed to appear before him on the date fixed.
Since the assessee only distributed the income in terms of the agreement and this did not amount to incurring of an expenditure nor the assessee claimed any, there was no infirmity in the findings of the Commissioner (Appeals) in deleting the disallowance under section 40(a)(ia).
There is no material evidence on record to show that the assessee had produced any reconciliation statement of interest and contractual receipts as per TDS certificate compared to turnover credited in the P & L Account as per the audited statement. In view of the provisions of Section 237 of the Income Tax Act and averments made in paragraphs 6 and 7 of the counter affidavit, it cannot be said that there is any laches on the part of opp. parties-Department in not granting refund to the petitioner as claimed in its return.
Assessing Officer has nowhere held in the impugned order that any concession was given by the employer to its employees and they have provided the accommodation on a concessional rates. Assessing Officer straightway applied Rule 3 without first establishing the case that the appellants have provided any concession in the shape of accommodation to its employees.
Given the definition of ‘lease or tenancy’ and the definition of ‘rent’ as appearing in Section 194 I Explanation, unless the payment is with reference to the use of any specified land or a building, payment made for availing of the services as in the nature landing or parking, as available in the present case before us, cannot be construed as ‘rent’.
The issue of certificate under Sub-section (1) of Section 197 of the Act is mandatory on fulfilment of conditions enumerated under the rules. For determining the existing and estimated liability of the assessee where tax deduction is from income other than dividends, the Assessing Officer is to be guided by Sub-rule (2) of Rule 28AA of the Rules.
In the instant case, the ITO(TDS) while going through the quarterly return in Form No.26Q, filed by the assessee noted that it has omitted to quote PAN/had quoted invalid PAN in 196 cases. As regards the reasonable cause,it was pleaded on behalf of the assessee that TDS was deducted and deposited in time in government Treasury. The default is only with regard to the wrong quoting of PAN of 196 of the deductees, such deductees quoted wrong PAN.
U/s 194-I, Income Tax is required to be deducted at source at the time of payment of any income by way of rent @’ 10% for the use of any machinery or plant or equipment. U/s 194C, tax is required to be deducted @’ 2% for carrying out any work which, inter alia, includes carriage of goods and passengers by any mode of transport other than by railways. Though generally speaking all types of machinery, plant and equipment given on hire get covered u/s. 194-I but hiring of transport vehicles get specifically covered u/s. 194-C as far as Tax Deduction at source is concerned. Transport vehicles used for carriage of goods and passengers are to be subjected to TDS provisions as per clause (c) of Explanation III of sub-section (2) of section 194C of the I.T. Act.
In the above ruling, fees paid to a resident of Canada as consideration for analysis of samples and ores conducted from technical lab was held as fees for technical services u/s.9(1)(vii) and Article 12 of the India-Canada Treaty. No arguments were made on the aspect of ‘make available’ requirement present in the definition of ‘fees for technical services’ under Article 12 of the Treaty and the AAR also did not consider this. Thus, the decision relied on by the learned Departmental Representative is distinguishable.
Section 40a(ia) provides that if any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139, then such expenses shall not be deducted in computing the income chargeable under the head “Profits and gains of business or profession.
