Freight Inward charges were part and parcel of Purchase of Goods: ITAT deletes disallowance u/s 40(a)(ia) of Income Tax Act on non deduction of TDS [Read Order]

The Income Tax Appellate Tribunal (ITAT) Ahmedabad bench held that freight inward charges was part and parcel of the purchase of goods. Therefore, the bench deleted the disallowance made under Section 40(a)(ia) of the Income Tax Act, 1961 on non deduction of TDS.

Assessee, Kalpesh Ganpatlal Patel, engaged in the trading business of Gypsum Board. The Assessing Officer during the assessment proceedings has made the disallowance of Rs. 16,15,291/- representing the inward freight expenses on account of non deduction of TDS under Section 194C read with Section 40(a)(ia) of the Income Tax  Act and added to the total income of the assessee. 

Aggrieved by the order, assessee filed an appeal before CIT(A), who has also confirmed the order of the Assessing Officer by observing that the assessee has disclosed the expenses for the purchases and inward freight expenses separately in the financial statements.

Against the order revenue filed an appeal before the tribunal.

During the proceedings  Palak Pavagadhi, counsel for assessee argued that there was no separate and independent contract subsisting between the  assessee and the contractor for the freight charges incurred by the assessee

Further since in the purchase bills, the transportation charges were shown separately, therefore, the assessee recorded such transportation charges separately in the books of accounts but that does not mean that there was a separate contract between the assessee and the transporters.

Ashok Kumar Suthar, Counsel for Revenue supported the decision of the assessing officer.

It was observed by the tribunal that freight inward charges were part and parcel of the purchase of the goods. Therefore the provisions of the TDS cannot be attracted on the transaction of purchase and sale of the goods. Also there is no contract between assessee and the transporter.

Therefore in absence of any contract between the assessee and the transporter, assessee was not under the obligation to deduct TDS of inward freight expenses incurred for Rs. 16,15,291/- under the provisions of Section 194C of the  Income Tax Act.

After considering  the facts and circumstances, the two member bench of Waseem Ahmed (Accountant Member) and Suchitra Kamble (Judicial Member)  deleted the disallowance made under Section 40(a)(ia) of the Income Tax Act.

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