Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently held that when transport charges are initially incurred by the suppliers and subsequently reimbursed by the assessee there is no need of Tax Deducted at Source (TDS) under the Income Tax Act 1961.
Assessee in the instant case is an individual, who is engaged in the business of wholesale trading of pulses and other cereals has duly filed his return of income for the relevant assessment year declared a total income of Rs.11,91,052.
During the assessment proceedings the Assessing Officer (AO) has noticed that a sum of money was debited in the profit & loss account of the assesee on account of transport charges. After verification, he found that the assessee was liable to deduct tax at source from the payments made on account of on account of transport charges aggregating to Rs.35,64,445 as per the provisions of section 194C of the Income Tax Act 1961 and also invoked provisions of section 40(a)(ia) and made a disallowance of the said amount.
On appeal the CIT (A) deleted the disallowance made by the AO holding that section 194C of the Act is applicable only if there is a contractual relationship between the two involved parties. the CIT(A) was of the opinion that if this ingredient is absent, then the said section cannot be invoked.
The Tribunal bench comprising of Judicial Member S.S. Viswanethra Ravi and Accountant Member (P.M. Jagtap has upheld the order of the CIT (A) and observed that the transport charges were paid by the suppliers and the same were subsequently reimbursed by the assessee. Thus it is clear that there being no contractual relationship between the assessee and the concerned transporters, the provisions of section 194C were not applicable.
After verifying the available documentary evidences, it was observed that the transport charges were initially paid by the suppliers and the same were subsequently reimbursed by the assessee. “It is thus established by the assessee on evidence that there was no contract between him and the concerned transporters and there was no requirement of deduction of tax at source as per the provisions of section 194C,” the bench said.
Subscribe Taxscan Premium to view the Judgment
