The Pune bench of Income Tax Appellate Tribunal (ITAT) has recently held that warehouse charges paid without deducting Tax Deduction at Source shall be disallowed under Section 40(a)(ia) of Income Tax Act, 1961.
Section 40 (a)(ia) of Income Tax Act provides that any interest, fee, royalty, rent commission or brokerage, any amount payable to a resident contractor shall not be considered for deduction in the previous year in which expenses are incurred. It shall be considered for computing income under the head of profit and gains of business or profession.
Assesee Vandana Dinehkumar Inani, is a CommissionAgent and General Merchant. While passing the assessment order, the assessing officer held that the assessee has made payments to certain warehouses without deducting TDS and hence disallowed Rs.69,27,693/- under Section 40(a)(ia) of the Income Tax Act.
Aggrieved assessee filed appeal before CIT(A). CIT(A) upheld the addition. Thereafter the assessee filed appeal before the ITAT.
M.M.Kulkarni counsel for the assessee submitted that assessee procures food grains from Dinesh Kumar Inani and some other persons. assessee sold the grains to various parties who got delivery of the grains directly from the warehouses. The purchaser directly paid the warehousing charges and then debited it to the assessee.
The assessee has shown sale of grains in the Profit and Loss account and also debited warehouse charges to P&L account. Further, the provisions of Section 40(a)(ia) are not applicable in the case of the assessee as the amounts have been paid by the purchaser directly to the warehouse.
M.G.Jasnani counsel for the revenue submitted that assessee has admittedly debited the amounts paid to warehouses and claimed as expenditure. Once the assessee had claimed it as expenditure, the assessee was mandatorily required to deduct Tax at source under Section194-I of the Income Tax Act.
The tribunal observed that assessee stored the grains in the warehouses for which assessee was liable to pay certain charges. As per Section 194I of the Income Tax Act, this is rent. Therefore, the assessee was liable to deduct tax at source. But the assessee failed to deduct the tax at source. Hence as per Section 40(a)(ia), the amount needs to be disallowed.
The two member bench of. S.S.Godara,( Judicial Member)and Dr. Dipak P. Ripote, (Accountant Member) dismissed the appeal filed by the assessee and upheld the addition made by the assessing officer.
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