03 February 2022
Dear sir, Our case is under scrutiny, we have not deducted TDS of Transporter as they have given us the declaration As per Sec 194(6) which is submitted to Income Tax Department. Now the Department has checked the transporter and found that he has filed return showing commission income and not under Sec 44AE. So on this basis they have show cause us why this expenditure should not be disallowed as you have taken wrong declaration. Since As per Sec 194(6) we have to only take declaration and nothing else duty is cast on us. Kindly guide are our stand not correct. As we are acting in good faith
06 July 2024
In your situation, the scrutiny from the Income Tax Department (ITD) raises a concern regarding the validity of the declaration provided by the transporter under Section 194(6) of the Income Tax Act, 1961. Here’s a detailed clarification on your stand and considerations moving forward:
### Understanding Section 194(6):
1. **Declaration Requirement**: Section 194(6) allows certain transporters (individuals or HUFs owning up to 10 goods carriages) to furnish a declaration to the payer (you) stating that provisions of TDS under Section 194C shall not apply to payments made to them.
2. **Payer's Responsibility**: As a payer, your responsibility is to deduct TDS under Section 194C unless a valid declaration under Section 194(6) is provided by the transporter. The declaration absolves you from the duty to deduct TDS.
### Challenges Faced:
1. **Discrepancy Identified**: The ITD has found that the transporter, despite providing a declaration under Section 194(6), has filed their income tax return showing income under a different head (commission income) rather than under Section 44AE (Presumptive Taxation for Goods Carriage Owners).
2. **ITD’s Show Cause Notice**: The ITD has issued a show cause notice to you, questioning why the expenditure should not be disallowed since the transporter's declaration may not be valid due to their actual income being reported differently.
### Your Stand and Legal Considerations:
1. **Good Faith Compliance**: You have acted in good faith by relying on the declaration provided by the transporter under Section 194(6). This declaration, if valid, legally exempts you from deducting TDS under Section 194C.
2. **Verification of Declaration**: Section 194(6) places the onus on the transporter to meet the eligibility criteria and provide an accurate declaration. Your obligation is limited to accepting the declaration at face value unless there are clear reasons to doubt its validity.
3. **Response Strategy**: - **Documentation**: Gather and retain all relevant documents, including the declaration under Section 194(6) provided by the transporter and correspondence with the transporter. - **Legal Guidance**: Seek advice from a tax advisor or legal expert who can review the specifics of your case. They can help formulate a response that addresses the ITD’s concerns while asserting your compliance with the law based on the information provided by the transporter.
4. **ITD Communication**: Respond to the show cause notice promptly, outlining your position that you relied on the transporter’s valid declaration under Section 194(6) and were not aware of any discrepancies at the time of payment.
5. **Negotiation and Resolution**: Engage with the ITD to clarify any misunderstandings and provide additional evidence or explanations if necessary to support the validity of the declaration.
### Conclusion:
While you have followed the procedures as per Section 194(6), the ITD’s scrutiny underscores the importance of ensuring the accuracy and validity of declarations received from payees. Your stance of acting in good faith is crucial, but resolving the issue may require detailed documentation and engagement with tax authorities to clarify any discrepancies and assert your compliance with the law based on the information provided to you.
CAclubindia
