Possession Of Transport Vehicles Is Sufficient Than Legal Ownership For S. 194C-TDS Exception: ITAT

The Jodhpur Bench of Income Tax Appellate Tribunal (ITAT) has held that the assessee, the legal owner, is not required to TDS under Section 194C, where a declaration under Section 194C(6) along with a PAN is obtained from the payees who are in possession of the vehicle, though they are not registered owners.

The bench of S. Seethalakshmi (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) has observed that for the purpose of Section 44AE of the Income Tax Act, the term owner means anyone in possession of the goods carriage and not the registered owner. This assumes importance in defining the term “owns” in Section 194C(6) because the taxation of the assessee transporter is squarely covered under the provisions of Section 44AE. The bench, while relying on the various judicial precedents on the issue, and the apex court have decided the question of ownership based on the intention of the legislature, namely “to give benefit or to tax the assessee.”

The appellant/assessee deductor is engaged in the business of transportation and logistic services. A survey was conducted at the business premises of the assessee deductor for verification of compliance with the provisions of Chapter XVII-B of the Income-tax Act, 1961. During the survey proceedings, it was found that the deductor had made transportation payments to various persons without deducting TDS on the basis of declarations obtained from the vehicle owners.

However, it is observed that in some cases, transportation charges paid to the person other than the owner of the vehicle on the basis of power of attorney, sahmati patra, and TDS have not been made on the payments.

The AO held that the declaration obtained by the assessee deductor cannot be considered a valid document in light of the provisions of Section 194C(6) of the Income Tax Act, 1961. Thus, the assessee has not fulfilled the basic condition laid down under Section 194C(6). Therefore, the assessee deductor is an assessee in default and also liable to pay interest. The order was affirmed by CIT (A).

The department contended that the vehicle owners do not have a PAN, and the person who filed the declaration is not the owner of the vehicle. Therefore, the assessee is liable to make TDS, and on account of such default, demand has rightly been confirmed in the case of the assessee.

The ITAT noted that transporters provide the declaration along with their permanent account number (PAN) to the payer to avoid TDS deduction. The Finance Act 2015 has approved an amendment to Section 194C(6) providing for deduction of tax at source unless the transporter, who is engaged in the business of playing, hiring, or leasing goods carriages, owns not more than goods carriages and furnishes a declaration to this effect along with a PAN to the payer. The amendment is applicable as of June 1, 2015. The meaning of the word 'owner' occurs in Section 194C(6) regarding the deduction of tax at source. Should the term “owns” be taken essentially to mean registered owner under the Motor Vehicles (MV) Act, or should it be read to mean beneficial owner? The term owner has occurred in the Income Tax Act, 1961, a number of times in a number of sections, providing for a charge on the income or giving a benefit to the assessee.

The ITAT held that since the declaration is already obtained by the assessee and the purpose of Section 194C(6), the term 'who owns” essentially means the one “who possesses,” and the assessee has paid to the person who filed the declaration.

Counsel For Appellant: Rajendra Jain

Counsel For Respondent: Nidhi Nair

Case Title: Adhunik Khanan VA Parivahan Theka Sahakari Samiti Limited Versus ITO

Case No.: ITA Nos. 177 to 180/Jodh/2023

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